WPP plc Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: Net revenue growth was minus 1%, consistent with lower end of guidance. Robust performance in top 25 clients (+2%), but China had an 80 basis point drag. Headline operating margin 15%, up 40 bps. Invested GBP 250M in AI/data, GBP 30M incremental. Strategic progress, better new business in second half, better cash conversion.
• Financial Results: Like-for-like revenue less pass-through costs fell 1% full year. Headline operating margin 15%, up 40 bps. Operating cash flow conversion 86%. Reported revenue less pass-through costs GBP 11.4B, down 4.2% y-o-y. Headline diluted EPS 88.3p, flat like-for-like. Dividend 39.4p, flat with 2023.
• 2025 Priorities: WPP Open leading in AI, augmenting human creativity. GroupM focus on data, technology, innovation, collaboration, org design. Structural cost savings of GBP 85M in 2024 helped margin and cash flow.

Segment Performance

• Global Integrated Agencies: Like-for-like decline of 0.8% in 2024.
• GroupM: Grew 2.7% full year, with 2.4% growth in Q4. Achieved wins like Amazon and J&J, and a successful outcome from the Unilever review.
• Global Integrated Creative Agencies: Like-for-like decline of 3.9% in 2024, 6.5% in Q4. Impacted by loss of healthcare client, China challenges, and weakness in project-based work. Hogarth had mid-single-digit like-for-like growth.
• Public Relations: Like-for-like decline of 1.7% in 2024. FGS had 11 months of good growth, but Burson faced mid-single-digit decline due to healthcare client loss and challenging discretionary spend.
• Specialist Agencies: Like-for-like revenue less pass-through costs declined 2.3% in 2024. CMI Media Group grew strongly, while Landor, Design Bridge, and Partners declined.
• Region-wise: North America declined 0.7%, UK declined 2.7%, Western Continental Europe had growth (Germany declined 1% but Q4 grew 4%), Rest of World declined 2.6% (China declined 20.8% in 2024).
• Client Sectors: CPG grew 5.1% in 2024 but was down in Q4; Technology grew 2.5% in Q4; Healthcare and Retail impacted by 2023 client losses; Automotive declined 3.3% in Q4.

Guidance

• Like-for-like: Flat to minus 2% for 2025. Expect H1 China performance challenging, H2 improvement.
• Profit: Headline operating margin flat excluding FX, with structural cost savings offsetting AI/data investment and FGS sale impact.
• Cash: Adjusted operating cash flow before working capital around GBP 1.4B, cash restructuring costs to GBP 110M.

Risks

• China macroeconomic pressures and client assignment losses impacting performance.
• Soft client discretionary spend, particularly in Q4.
• Complexity in network consolidation and simplification initially impacting new business performance.

Question and Answer

• Q: Midpoint of 2025 guidance same as 2024, why no improvement?

A: Cautious macro, client discretionary spend, net new business sequencing.

• Q: How to deliver flat margins with negative growth?

A: Structural cost savings, back-office efficiencies, funding AI/data investment.

• Q: Correlation between CPG discretionary spend cut and P&G in-housing?

A: In-housing in marketing services is an outlier, AI and integrated services seen as opportunity.

• Q: Need for AI acquisition?

A: Focus on AI and data connectivity, not legacy databases, using disparate data sources.

• Q: Where GroupM is in go-to-market journey?

A: Simplifying organization, competing effectively, winning pitches, evolving with client expectations.