WPP plc Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Market Environment: Challenging macro environment with tariff uncertainty; clients' focus on AI remains undiminished.
• Strategic Progress:
  • Drive WPP Open adoption: 60% of client-facing users, aiming for all to use by year-end.
  • GroupM simplification: Moving to client-centric model, leveraging AI/data/tech, with progress on 5 key priorities.
  • InfoSum acquisition: Enhances data intelligence, enabling access to premium media environments and privacy-compliant AI models.
• Segment Details: GroupM's growth step down in Q1, U.S. performance improved, Hogarth returned to strong growth, VML and Burson showed new business momentum.

Segment Performance

• Global Integrated Agencies: Like-for-like revenue less pass-through costs declined 2.8%. GroupM saw a 0.9% decline, with U.S. growth offset by Europe and China's performance. Other global integrated creative agencies fell 4.4%, but Hogarth returned to high single-digit growth.
• Public Relations: Like-for-like revenue less pass-through costs declined 6.2% due to European discretionary spend challenges, but North America new business momentum improved.
• Specialist Agencies: Like-for-like revenue less pass-through costs grew 1.2%, led by strong growth from CMI Media Group.
• Regional Performance: North America declined 0.1%, U.K. down 5.5%, Western Continental Europe down 4.5%, Rest of World down 3.8% (China down 17.4%), India up 5.5%, Central and Eastern Europe up 2%.
• Client Sectors: CPG saw 0.3% growth, Technology up 4.5%, Healthcare flat, Automotive 5% growth, Financial Services 2.6% growth, Telecoms weak, Retail down 2.9%. Top 25 clients grew 2.5%.

Guidance

• Full year like-for-like range remains flat to minus 2%, with FX impact now expected to be a drag of 2% for the year.
• GroupM simplification expected to be P&L neutral in 2025, with benefits seen in 2026.
• Margin expected to be flat excluding FX, supported by structural cost savings and disciplined cost management.
• New business impact: H1 expected to be a drag, with H2 benefiting from ramp-up of recent new business wins.

Risks

• Macro environment uncertainty impacting client spending priorities.
• Tariff impact on clients' ability to prioritize advertising and promotion investments.
• GroupM's continued performance challenges in Europe.
• Competitive pressures in certain segments like creative agencies.

Q: On GroupM, acceleration of simplification and cost efficiencies?

A: Cost efficiencies from simplification, P&L neutral in 2025, benefits in 2026.

Q: Net new business impact in Q1 and phasing?

A: Q1 slightly down, H1 drag, H2 benefit from new wins.

Q: Margin decline in H1?

A: H1 margin impact from GroupM simplification and top line performance.

Q: Thoughts on ad market vs economy link?

A: Ad spend linked to economy, clients' investments with WPP tied to overall ad spending, with discretionary spend under pressure.

Q: AKQA's weak performance?

A: AKQA had good new business wins in Q1, expected to improve over the year, not ready to dispose of asset.

Q: Visibility into revenues?

A: Vast majority of large global clients have multiyear contracts, but macro changes can impact spending; good visibility into next quarter and net new business pipeline.