As expected, WPP Q1 25 organic sales momentum was soft (-2.7%), impacted by business loss, persistent weakness in China and decrease in project-based work. However, the group reiterated its FY 25 guidance, as the initial projection was conservative and management has not seen any shift in client spending so far. After a soft H1, management expects a rebound in H2 helped by better net new business impact, improvement at GroupM and benefits from cost efficiencies. We reduce 2025 estimates by c.-3% to reflect stronger FX headwinds on topline and adj. EBIT margin. While valuation multiples look attractive relative to peers, we think the soft underlying momentum and weaker positioning rel. to peers will likely limit investor interest in the near term. Remain Neutral; TP to 600p.
Trends remained soft in Q1 25, with OSG down -2.7%
Q1 25 organic sales declined -2.7% due to negative net new business at GroupM, pressure on project-based work and softness for the PR business. Trends in the US improved (flat from -1.2% in Q4), but this was more than offset by weakness in UK (-5.5%) and continental Europe (-4.5%).
Group reiterates its FY 25 guidance at cc, but FX is now a stronger headwind
The group reiterated its FY 25 guidance (-2%/0% OSG, flat margin excl. FX) as the initial projection was conservative and management has not seen any shift in client spending so far. However, FX deteriorated, and the impact is now expected at -2% on topline and -20bp on adj. EBIT margin. Since Q2 organic trend is expected to be in line with Q1 (c.-2.7%), the FY guidance implies c.-1%/+3% OSG in H2 helped by better net new business.
QandA main takeaways
(1) Clients'' tone: no shift in spending so far. Of WPP''s top 25 clients, 5 are directly exposed to tariffs, 10 indirectly exposed, and those 10 would have minor impact. (2) GroupM: happy with progress made on the 5 key priorities; Infosum addition will strengthen GroupM data offering and competitive positioning. (3) Pitch...
