ii view: WPP shares rocket 28% on unfolding recovery plan

First-half (H1) and Q2 results to 30 June

• Q2 adjusted revenues down 2.8%
• H1 adjusted operating profit down 3.4% to £398 million
• H1 operating profit margin up 0.2% to 8.4%
• Interim dividend unchanged at 7.5p per share
• Average adjusted net debt of £3.3 billion, down from £3.4 billion as of late December

Guidance:

• Continues to expect an improving trajectory for adjusted revenues with a decline of low to mid-single digits in the second half
• Continues to expect annual operating profit margin of 12-13% versus 13% in 2025

Chief executive Cindy Rose OBE said:

“We are firmly on track with Phase 1 of our Elevate28 plan to stabilise the business. Our objective for the first half was to put in place the building blocks of the new organisational structure and this is now complete.

“Organic growth remains our North Star. While the turnaround of our financial performance will take time to fully flow through, our strong new business wins and improved client retention, as well as progress on cost savings and portfolio actions, demonstrate that we are building a simpler, more competitive and higher-performing WPP.”

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ii round-up:

WPP (LSE:WPP) today reported better-than-expected profit, with the global advertising company continuing to pursue a recovery transformation plan under former Microsoft executive Cindy Rose.

Staff cuts fed into first-half operating profit of £398 million, a 3.4% decline from last year but ahead of analyst forecasts for nearer £351 million. Adjusted revenue at its biggest 25 clients fell 3.2% in Q2, an improvement from a first-half decline of 6.3%.

Shares in the FTSE 250 company soared as much as 28% in UK trading having come into these latest results down by around 25% over the last year. Rival Publicis Groupe SA (EURONEXT:PUB) is up by about that amount. The FTSE 250 index has risen by 12% over the last year.

WPP’s services include core communication such as media buying and planning, public relations services, as well as specialist agencies focused on industries such as healthcare.

The group’s transformation plan, known as Elevate28, looks to stabilise the business in 2026, build momentum in 2027, and deliver accelerating, high-quality growth from 2028 onwards.

Management reiterated a forecast for an improving trajectory in adjusted revenues during the second half, as well as maintaining a forecast for a full-year profit margin of between 12% and 13%. That’s a potential fall from last year’s 13% outcome.

An interim dividend of 7.5p per share payable to eligible shareholders on 2 November is unchanged from a year ago. Management continues to target a maintained annual dividend of 15p per share  in 2026.

Further progress made under Elevate28 included moving from a complex holding company to a single integrated one, as well as expanding data partnerships with Google owner Alphabet Inc Class A (NASDAQ:GOOGL), Meta Platforms Inc Class A (NASDAQ:META), and Amazon.com Inc (NASDAQ:AMZN) owned AWS to integrate advanced predictive and generative AI tools to help clients act ahead of shifting consumer trends.

A third-quarter trading update is likely late October.

ii view:

WPP was started in 1971 as a maker of wire baskets and teapots called Wire and Plastic Products. Today, it is a constituent of the FTSE 250 index. Global integrated agencies generated most sales during 2025 at 88%, followed by specialist agencies at 7% and public relations the balance of 5%.

Geographically, North America accounted for most 2025 sales at 37%, with the UK significant at 15%, Europe 21%, and the rest of the world the balance of 27%.

For investors, the advantage of tech companies pushing ad services and able to develop their own AI coding such as Google owner Alphabet and Meta, warrants high consideration. Uncertainties regarding the outlook for the economy and the precise impact of AI on media viewing persist. Raised geopolitical tensions now including a war in the Middle East have hindered client demand, while average adjusted net debt of £3.3 billion compares to a stock market value of around £4 billion.

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More favourably, a transition or recovery plan continues to be pursued by the relatively new CEO. Investment in AI and data was already being made under former CEO Mark Read. A simplified business portfolio could see proceeds from business sales returned to shareholders via share buybacks, while increased financial flexibility given the previous cut to the dividend still leaves the shares offering a dividend yield of over 5%.  

For now, and while profit growth is yet to be achieved, an ongoing transformation plan and attractive dividend are likely to see this former media star remain on the radar of more speculative investors.

Positives:

• Diversified product and geographical offering
• Attractive dividend (not guaranteed)

Negatives:

• Advertising demand is historically cyclical
• Currency movements can hinder

The average rating of stock market analysts:

Hold