• Net Revenue Growth: -1%, at the lower end of guidance range.
• Top 25 Clients Growth: 2% growth.
• Headline Operating Margin: 15%, up 40 basis points year-on-year.
• Operating Cash Flow Conversion: Improved to 86%.
• Year-End Net Debt: GBP1.7 billion, reduced by GBP0.8 billion year-on-year.
• Reported Revenue Less Pass-Through Costs: GBP11.4 billion, a decrease of 4.2% year-on-year.
• Net Finance Costs: GBP280 million, increased due to higher interest rates.
• Effective Tax Rate: Increased by 1 percentage point to 28%.
• Headline Diluted EPS: 88.3p, down 5.9% on a reported basis.
• Total Dividend for 2024: 39.4p, flat compared to 2023.
• Global Integrated Agencies Like-for-Like Decline: 0.8% for the year.
• GroupM Growth: 2.7% for the full year.
• Public Relations Like-for-Like Decline: 1.7% for 2024.
• Specialist Agencies Like-for-Like Decline: 2.3% for the year.
• North America Revenue Decline: 0.7% for 2024.
• United Kingdom Revenue Decline: 2.7% for 2024.
• China Revenue Decline: 20.8% for the year.
• CPG Growth: 5.1% for 2024.
• Technology Client Sector Growth: 2.5% in Q4.
• Automotive Client Sector Growth: 1.3% for the full year.
• Structural Cost Savings: GBP85 million, contributing to margin improvement.
• Average Adjusted Net Debt: GBP3.5 billion, slightly down from 2023.
• Guidance for 2025: Like-for-like range of flat to -2%.

• Warning! GuruFocus has detected 4 Warning Signs with WPP.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• WPP PLC (NYSE:WPP) achieved a stronger headline operating margin of 15%, up 40 basis points year-on-year.
• The company made significant progress in strategic transformation, particularly with investments in WPP Open and AI.
• WPP PLC (NYSE:WPP) improved its operating cash flow conversion to 86%, benefiting from strong working capital management.
• The company reduced its year-end net debt by GBP0.8 billion, ending at GBP1.7 billion.
• GroupM saw an improved new business performance in the second half, with wins from Amazon and J&J.

Negative Points

• WPP PLC (NYSE:WPP) reported a like-for-like revenue decline of 1% for the full year 2024.
• The company faced challenging trends in China, resulting in an 80-basis point drag on performance.
• Q4 performance was particularly soft, impacting the full year results and taking them to the lower end of guidance.
• The company experienced a decline in project-based work, affecting agencies like AKQA and Landor.
• WPP PLC (NYSE:WPP) faced increased net finance costs of GBP280 million due to higher interest rates.

Q & A Highlights

Q: Why is WPP not guiding for an improvement in organic growth for 2025 despite better account wins in 2024? A: Joanne Wilson, CFO, explained that the guidance range of flat to minus 2% reflects caution due to macroeconomic uncertainties and the impact of net new business. The first half of 2025 will see the runoff of historical client losses before recent wins ramp up. The macro environment remains challenging, particularly affecting project-based and discretionary spending.

Q: How will WPP deliver flat margins with negative growth, and will staff incentives remain low? A: Joanne Wilson stated that despite softer top-line performance, WPP aims to maintain flat margins through structural cost savings and disciplined cost management. Staff incentives were held flat as a percentage of net sales in 2024, and the company will continue to focus on efficiencies to fund investments in AI and data.

Q: Does WPP need to acquire a data set like its competitors have done? A: Brian Lesser, GroupM CEO, emphasized that WPP is focused on moving from ID to AI, leveraging predictive models using disparate data sources rather than relying solely on traditional CRM databases. The company is not currently focused on acquiring a legacy database but is open to acquisitions that enhance its modeling capabilities.

Q: What were the main drags on WPP's performance in 2024, and how did they impact like-for-like growth? A: Joanne Wilson highlighted three main factors: net new business and client losses, particularly a healthcare client assignment, which had a 1% impact; an 80-basis point drag from China; and an 80-basis point drag from project-based spend. These factors collectively contributed to a 250-basis point drag on 2024 performance.

Q: What is the rationale behind the increased investment in AI, and how is it expected to impact WPP's business? A: Mark Read, CEO, explained that the increased investment in AI is driven by its potential to enhance client conversations and business growth. The investment is balanced between OpEx and CapEx, and it aims to leverage AI to transform marketing processes, improve efficiency, and drive new business success.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.