WPP halves dividend and launches strategic review as profits plunge

Britain’s largest advertising group WPP is embarking on a strategic review and has slashed its dividend payout in half after reporting a pronounced deterioration in financial performance. Amid continued weakened marketing spend and the departure of high-profile clients, underlying revenue less pass-through costs fell by 5.8 per cent in the second quarter, accelerating from a 2.7 per cent drop in the first three months of the year.

The interim dividend has been cut by 50 per cent to 7.5p, with incoming chief executive Cindy Rose—currently a Microsoft executive and serving as a non-executive director at WPP since 2019—set to lead a review of strategy and future capital allocation on her arrival in September. Mark Read, who is stepping down after over seven years at the helm, described the dividend reduction as vital to provide flexibility for investment aligned with the new strategy.

WPP’s full-year guidance remains for a 3 to 5 per cent contraction in revenue and a 50 to 175 basis point reduction in headline operating margin. Despite this outlook remaining unchanged, operating cashflow forecasts have been downgraded to between £1.1 billion and £1.2 billion from £1.4 billion previously cited. Pre-tax profits plummeted 71 per cent to £98 million which included a £116 million goodwill impairment related to the unwinding of the AKQA and Grey agency merger and significant restructuring costs. Over the past year, headcount has been reduced by 7,000 to 106,000 and further reductions could follow as the company realigns its staffing with revenues.

Challenging external economic conditions are feeding volatility in client budgets. Mark Read cited global trade tensions, escalating cocoa prices impacting confectionery clients and softer luxury spending as material headwinds. The pressure on WPP is exacerbated by the drive from rivals such as Publicis, which increased organic revenue by nearly 6 per cent in the first half of the year and has been fiercely competitive in North America, especially after the return of Brian Lesser to lead WPP Media.

WPP has been grappling with notable client losses and industry turbulence, coupled with the disruptive rise of artificial intelligence in creative industries. The firm’s share price has fallen 44 per cent in the last year and dipped 2.6 per cent further to 392p following the update. Mark Read, reflecting on his tenure, maintained that the company has the foundations necessary for future success and expressed confidence in Cindy Rose’s ability to build on those foundations through business simplification and strategic asset sales, including the disposal of a significant stake in Kantar.

Following this challenging period, the advertising giant is under significant pressure to regain investor confidence and stabilise performance amid a rapidly changing global advertising landscape.