By Sarah Young and Paul Sandle
LONDON (Reuters) -Ad group WPP slashed its annual profit guidance on Wednesday after clients cut spending in June, raising concerns about the group’s ability to deal with the technological change driven by AI at a time of intensifying economic uncertainty.
The downgrade from the world’s second-largest advertising group, which operates in more than 100 countries through agencies including Ogilvy, VML and WPP Media, sent its shares down 15% to a 16-year-low of 448 pence in early Wednesday trade.
Shares in France’s Publicis, which overtook WPP last year as the global leader, were down 2%.
WPP Chief Executive Mark Read, who will step down before the end of the year, said clients had become more cautious, both about the economy and their own prospects.
“We’re seeing fewer opportunities. Opportunities tend to be smaller,” he said, adding that pitches this year at media buying agency WPP Media, previously GroupM, were a third of the level of last year.
WPP in May relaunched GroupM as WPP Media, aiming to streamline operations, bring teams from different agencies together and put AI at the centre of its offering.
“The implementation of the new strategy for WPP Media is going well, but we’re clearly not yet seeing that translate into better business performance,” Read said on an analyst call.
WPP says its Media unit manages more than $60 billion in annual media investment and works with more than 75% of the world’s leading advertisers in over 80 markets.
WPP blamed intensifying macroeconomic pressures and a struggle to win new business for the downgrade.
It now expects its full-year net sales measurement – organic revenue less pass-through costs – to fall by 3% to 5%, with a decline in operating margin of 50 to 175 basis points.
It had previously expected net sales to be between flat and down 2%, with a roughly flat headline operating profit margin.
The group said it also expected the tougher pattern of trading to continue into the second half of the year.
Over the last year, WPP has been hit by client losses and a greater exposure to China than rivals, while AI, which gives clients the tools to create and manage more of their own marketing campaigns, has also hit demand.
Read said in June he would leave at the end of 2025 following a seven year stint in which competition, new technologies and challenges in key geographies led its share price to halve.
(Reporting by Sarah Young. Editing by Paul Sandle and Mark Potter)
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