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Investing.com -- WPP (LON:WPP) stock fell 3.5% after the advertising giant reported second-quarter results that matched lowered expectations but showed significant cash flow deterioration and included a dividend cut.
The world’s largest advertising company posted a 5.8% organic decline in net sales for the second quarter, slightly worse than consensus expectations of a 5.6% drop. Reported net revenues fell 12.6% YoY to £2,544 million, impacted by currency headwinds (-3.5%) and M&A activity (-3.3%).
WPP’s cash flow position deteriorated significantly, with adjusted free cash flow after working capital reaching -£1,272 million compared to -£845 million in the same period last year. Working capital outflows were approximately £300 million larger than the previous year.
The company reduced its interim dividend to 7.5p from 15p last year, ahead of a strategic review and future capital allocation policy to be led by the incoming CEO.
Performance varied across business segments, with Global Integrated Agencies declining 6.0% organically in Q2. GroupM posted a 4.7% drop, worsening from a 0.9% decline in Q1, while other integrated creative agencies fell 7.2%. The PR segment saw a 7.8% organic decline, and Specialist Agencies decreased 1.9%.
Geographically, the U.S. market declined 2.4% in the first half, while the UK fell 6.0%. China showed the steepest drop at 16.6%.
WPP maintained its full-year guidance for organic net revenue growth of -3% to -5% and for headline operating profit margins to decline between 50 and 175 basis points year-over-year.
"Neutral reaction given results are in-line with the July trading update and no further operating downgrades. Cash-flow weakness is a key negative. The dividend cut was likely to have been expected," UBS analysts noted.
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