WPP’s creative agencies experienced a 1.6% decline in organic revenue in 2023 but the group was bolstered by strong performance from Group M, which grew 4.9%.
WPP's preliminary results reported full-year organic (like-for-like) revenue growth (minus pass-through costs) of 0.9% to £11.9bn, a figure in line with a pre-results announcement made in January. Q4 revenues grew just 0.3%.
While WPP's media planning and buying business fared well, creative agencies faced falling spend from clients. The group noted that Ogilvy was the exception among its creative shops, thanks to wins from SC Johnson and Verizon, which drove single-digit growth.
AKQA and VML suffered from lower spend from US tech clients as well as delays in tech projects and client losses in retail and healthcare.
WPP is expected to make job cuts as part of a £125m restructuring charge but it would not give an indication of the scale of any staff reductions. However, by the end of 2023, the total number of people in WPP was 114,173, down 1,300 from the end of 2022.
Mark Read, WPP's chief executive, spoke to Campaign but declined to give a breakdown of the relative revenue performances of Ogilvy and the other creative agencies, such as Wunderman Thompson and AKQA.
"Ogilvy have done well because Devika [Bulchandani, the chief executive] and her team have really driven a renaissance in the business in the United States. But they also grew well in Europe and other parts of the world, and I think it demonstrates the power of creativity," he said.
"There's no doubt that VML and Wunderman Thompson and AKQA are more technologically-focused and project-driven businesses and are much stronger with tech clients in their portfolio so, to some extent, it shouldn't surprise us that they were impacted by the decisions by those [tech] companies [to reduce spend in 2023]."
Last week, WPP confirmed that VML would officially launch in Canada with the merger of Wunderman Thompson and Taxi in Toronto and Vancouver, though Taxi would continue to operate for WPP in Montreal and New York.
Read said WPP's client list includes three of the world's four largest tech companies and he was optimistic that they would continue to invest in advertising and marketing.
Meanwhile, group operating profit was up 0.5% to £1.75bn, with a profit margin of 14.8%, while pre-tax profit was down 4.8% to £1.53bn.
The UK, which accounts for 14% of WPP's revenues, experienced continuing growth (of 5.6%) thanks to strong performance from CPG (consumer packaged goods) and healthcare clients, and had strong Q4 growth of 12% – also thanks to strong media performance from Group M.
North America, which counts for 38% of WPP's revenues, saw revenues fall by 2.7% for the year to £4.6bn. However, Canada saw like-for-like revenue growth (less pass through costs) of 1.4% in Q4, up from a 2.2% drop in Q3, but also below the 2.3% growth in Q4 2022.
While Canada was up, the U.S. was down 4.5% in Q4.
Continental Western Europe experienced revenue growth of 1.8%, while APAC, Latin America, Africa, Middle East and Central and Eastern Europe grew organic revenues by 3.7% to £3.3bn.
WPP's global integrated agencies, housing VML, Ogilvy, AKQA and Group M, grew organic revenues by 1.3% to £9.8bn; PR agencies were up 1.4% to £1.2bn; and specialist agencies (including healthcare agency CMI Media Group and branding consultancies Landor and Design Bridge) were down 3.4% to £872m.
WPP generated net new business of $4.5bn (£3.6bn) in 2023, compared with $5.9bn in 2022, driven by major new assignments with clients such as Allianz, Krispy Kreme, Mondelēz, Nestlé, PayPal and Verizon.
Read reiterated how AI, data and technology would be key to WPP's strategy. He said in a statement: "While 2023 was more challenging than we expected due to cuts in spending by technology clients, we delivered a resilient performance for the year with 0.9% like-for-like growth and a 0.2 point improvement in our headline operating margin at constant currency. This was driven by disciplined cost control, while continuing to invest in AI, data and technology...
"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."
Earlier this month, Interpublic Group reported an organic revenue decline of 0.1% after Publicis and Omnicom both reported mid-single-digit growth for 2023 and said they were targeting up to 5% growth in 2024.
WPP's full-year preliminary results come in the wake of January's announcement that it was taking a £125m restructuring hit to enable it to save £125m in 2025 (around half in 2024) through consolidation across the group. It is targeting a further £175m in gross savings from "efficiencies" in "back office and commercial delivery."
Origially published by Campaign UK, with files from Campaign Canada
