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The WPP (LSE:WPP) share worth has confirmed to be what buyers name a ‘falling knife’. Firstly of 2025, it had already slumped 30% since early 2022. Buyers who thought it secure to take a position at 827p have been rewarded with an additional 35% fall by April.
Certainly, this was the underside at 500p, proper? Mistaken. It then misplaced one other 30% between April and the beginning of October!
Buyers shopping for the inventory at first of this month might need thought they have been lastly getting in close to the underside at simply 370p. However the WPP share worth nosedived one other 16.4% at present (30 October) to simply 301p.
For context, the advert group’s market cap was £24bn in 2017. Now it’s simply £3.3bn, which may quickly see it relegated to the FTSE 250. It has been within the FTSE 100 since 1998.
One other revenue warning
WPP was once the world’s greatest promoting group. Its businesses have lengthy dealt with work for among the most recognisable manufacturers round, together with Coca-Cola and Dove (Unilever). These long-standing shopper relationships are undoubtedly a key power.
Lately, nonetheless, the corporate’s income and earnings have been underneath large strain. Some shoppers have been leaving, whereas AI is disrupting beforehand profitable elements of the promoting world (like inventive).
New CEO Cindy Rose got here in from Microsoft in September to regular the ship and get issues again on a fair keel. Sadly, her first replace to buyers at present wasn’t nice. WPP’s Q3 income was down 8.4% to £3.26bn, whereas like-for-like (LFL) income fell 3.5%.
Income much less pass-through prices (a key metric) was 11.1% decrease (or 5.9% on a LFL foundation). Yr-to-date income of £9.9bn was down 8%.
And for the total yr, WPP expects income to fall 5.5% to six% (beforehand 3% to five%). The headline working revenue margin is about to be round 13% (simply under its beforehand guided vary).
Clearly these are worrying numbers, and to be truthful Rose didn’t mince her phrases, calling them “unacceptable“. But she said the team were taking measures to address this performance. “We have strong foundations and the ingredients needed to succeed”. she added.
A turnaround inventory?
Beneath is one other (longer) extract from the Q3 buying and selling replace, which I feel is value mentioning.
To ship efficiency enhancements, we’ll place our providing to be a lot easier, extra built-in, powered by information and AI, effectively priced and designed to ship development and enterprise outcomes for our shoppers. We are going to considerably enhance our execution, strengthening our go-to-market and dramatically simplifying how we organise ourselves internally, in addition to constructing a high-performance staff tradition.
This language of “dramatically simplifying” issues and constructing a “high-performance team culture” jogs my memory a bit of of Rolls-Royce when CEO Tufan Erginbilgiç got here in at a time of disaster. He known as the engineering group a “burning platform” and mentioned the tradition wanted to vary drastically.
And everyone knows what occurred to Rolls-Royce inventory after that!
Would possibly WPP turn into one other Rolls-Royce? I’m not satisfied. One rapid factor Erginbilgiç did was efficiently renegotiate contracts to enhance margins (a show of pricing energy).
Trying on the wording above, although, pricing its providing extra “efficiently” for the age of AI feels like one thing else. There’s an excessive amount of uncertainty for me to take a position. I’ll search for alternatives elsewhere.
