Shares in ad group WPP plunge on China weakness and US uncertainty

By Paul Sandle

LONDON (Reuters) - Ad group WPP expects its revenue and profit to be flat at best this year because of a weak Chinese market and uncertainty in the United States, it said on Thursday, as its shares hit a four-year low following disappointing results.

For 2024, WPP reported a 1.0% fall in organic revenue, missing analysts forecasts of a 0.4% drop. Its shares fell 16%.

Advertising is typically one of the first victims of company cost-cutting in difficult times and CEO Mark Read said there were many reasons for caution, especially the threat of U.S. tariffs.

"The new administration wants to get America growing strongly, but there's no doubt that tariffs and subsequent inflation is making people nervous," Read said in an interview.

Overall, Read called it a "tough market" but one possible growth area for the business is the X platform owned by Elon Musk, who has a prominent role in President Donald Trump's administration.

Over the last two years, advertising on X had fallen out of favour, but Read said usage of the platform was rising and clients were recognising that they needed to use it given the role it plays in world politics.

In China, where WPP has a big presence in the luxury and automotive sectors, Read saw little sign of improvement for advertisers.

WPP, founded by ad executive Martin Sorrell in 1985, and the owner of agencies GroupM, Ogilvy and VML, was long the world's largest advertising holding company but it lost its crown to French rival Publicis last year.

It will fall to third place when U.S. rivals Omnicom and Interpublic Group, complete an agreed $13.25 billion all-share merger later this year, pushing Publicis into second.

For this year, WPP said it expected organic revenue to be between flat and down 2% this year, with performance improving in the second half. It expected its headline operating margin to also be flat after reaching 15% in 2024.

Read has restructured the group internally to prepare for the widening use of AI in the sector, which should bring benefits in the future but is unlikely to provide any immediate boost.

"The medium-term target is for like-for-like growth of 3% and an improvement in margins to 16-17%, which at the moment feels a long way off," Edison analyst Fiona Orford-Williams said.

($1 = 0.7898 pounds)

(Editing by Sarah Young, Tomasz Janowski and Barbara Lewis)