Stock prices for WPP decline once more due to reduced dividend and announced strategic reevaluation
WPP Announces Strategic Review Amidst Plunging Profits and Stagnant Revenue
In a significant move, advertising giant WPP has announced a strategic review to be led by incoming CEO Cindy Rose. This decision comes amidst falling profits and stagnant revenue, signalling a company reset that could involve a comprehensive reassessment of WPP's business strategy, cost structures, and resource allocation.
The strategic review is expected to address WPP's revenue decline, down 5.8% in Q2 2025, and nearly halved operating profit. Cindy Rose's plan aims to address these issues through a combination of cost reduction, portfolio optimization, and enhancing capabilities in data and technology to reposition the company for sustainable growth.
Cost-cutting Measures and Structural Simplification
WPP has already implemented cost control measures, reducing its global workforce by about 7,000 in the past year, cutting staff incentives by 60%, and lowering freelancer budgets by 13%. These efforts are likely to continue as part of the strategic review.
Reassessing Business Portfolio
The "strategic review" announcement strongly suggests WPP is considering disposals or restructuring parts of its agency network to focus on growth areas and improve profitability.
Focus on Technology and Data Capabilities
Prior initiatives such as acquiring InfoSum and launching Open Intelligence underline WPP's intentions to strengthen digital, data, and technology-driven offerings. Cindy Rose may expand or reprioritize these initiatives in the new strategy.
Dividend and Shareholder Returns Cuts
WPP has halved its dividend, reflecting reduced profitability and a tighter financial stance while restructuring proceeds.
Shift in Leadership Approach
Outgoing CEO Mark Read has deferred setting strategy to Cindy Rose, indicating a fresh leadership vision will drive the company’s future direction and possibly transform its operational model.
WPP's performance has been an outlier to the downside in the advertising industry. The company has shed over half its market capitalization this year alone, is currently 67% down from its post-pandemic high of 1,183p, and is nearly 80% below its all-time high of 1,900p in early 2017.
The rapid ascent of artificial intelligence is expected to upend advertisers' models, and WPP, like many in the industry, has been affected by a confluence of disruptive forces, including the proliferation of digital and social media behemoths selling advertising space directly to advertisers.
Neil Wilson, from Saxo Markets, described WPP as battling "huge structural storms in the ad industry". The company has lost several marquee clients, including the Coca-Cola media account in North America and Mars' $1.7bn integrated marketing work, to ascendant French rival Publicis. WPP's flagship creative agency Grey was'realigned' under Ogilvy in May.
Mark Read, former CEO of WPP, announced he was stepping down earlier this summer. The strategic review announced by Cindy Rose is a significant step towards repositioning WPP for the future, with a focus on technology, data, and cost-cutting measures. The outcome of this review will be closely watched by the advertising industry.
In the strategic review announced by Cindy Rose, WPP intends to addressissues through a combination of cost reduction, portfolio optimization, and enhancing capabilities in technology and data to reposition the company for sustainable growth.
The strategic review also strongly suggests WPP is considering disposals or restructuring parts of its agency network to focus on growth areas and improve profitability, possibly impacting their business portfolio.
