WPP experienced more ‘challenging’ trading conditions last year as technology sector clients cut back on spending.
Tech sector growth has slowed amid higher interest rates, while spending has also been diverted towards artificial intelligence development.
As tech companies have shed employees and scaled back investment plans, the advertising industry has borne a subsequent knock-on effect.
Tech rollback: Advertising giant WPP experienced tougher trading conditions last year following reduced spending by technology clients
WPP, the world’s largest advertising agency, saw its like-for-like revenues decline by 2.7 per cent in North America, the group’s largest territory by sales.
Its overall turnover still rose by 3.2 per cent to £14.5billion last year thanks partly to bumper demand from consumer goods packaging firms and healthy double-digit growth in India during the second half of the period.
In the UK, comparable revenue grew by 5.6 per cent to £2.6billion on account of strong results at Ogilvy and its media planning and buying business GroupM.
However, WPP gained far less new business with $4.5billion of billings against $5.9billion in 2022, as widespread economic pressures caused many companies to reduce their advertising budgets.
Pre-tax profit plunged by 70.1 per cent to £346million because of property impairments and the ‘accelerated amortisation of intangible assets’ related to the creation of VML.
Mark Read, chief executive of WPP, said: ‘While 2023 was more challenging than we expected due to cuts in spending by technology clients, we delivered a resilient performance for the year.
‘We are optimistic about the strategic opportunities ahead of us and are confident that we can deliver accelerated and increasingly profitable growth over the medium term.’
To help reach its targets, WPP is boosting spending on artificial intelligence, with around £250million planned for this year alone.
The FTSE 100 firm also intends to exploit its ‘deep partnerships’ with US tech giants such as Google, Microsoft, and Nvidia and is investing in its AI-driven platform WPP Open.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: ‘There will be some trepidation surrounding exactly when these hefty investments will bear meaningful fruit, but it’s a step in the right direction.
‘Ultimately, WPP is an economic bellwether, which will struggle to really thrive until corporate purse strings are a bit more fast-and-loose. The version of WPP waiting in the wings for that moment is in a much better position to capture demand.’
WPP shares were 2.8 per cent down at 758.2p on Thursday morning and have slumped by around a quarter over the past 12 months.
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