S&P Global revises WPP outlook to negative amid growth challenges

Investing.com -- S&P Global Ratings has revised its outlook on advertising holding group WPP (LON:WPP) PLC to negative from stable, while affirming its ’BBB’ rating, citing weak growth and strategic uncertainty.

The outlook change follows WPP’s July 9 trading update, which reported an organic decline of 4.2%-4.5% in revenue less pass-through costs for the first half of 2025. The company also lowered its full-year 2025 guidance, now expecting negative growth of 3% to 5% and reduced profit margins.

S&P forecasts WPP’s total revenue to decline by approximately 8% in 2025, reflecting limited recovery in client spending, loss of several large contracts, completed disposals, and negative currency impacts.

The rating agency noted that while all advertising agencies face challenges from global economic uncertainty, WPP’s underperformance compared to peers indicates company-specific issues. These include higher exposure to emerging markets and China, client concentration in the slow-recovering technology sector, and weak performance of WPP Media, particularly in North America.

Recent contract losses, including global media accounts with Mars and Paramount, and Coca-Cola (NYSE:KO) in North America, will impact revenue in 2025-2026. Lower net new business wins are also expected to reduce growth rates in the near term.

Adding to uncertainty, WPP announced on July 10 that Cindy Rose will succeed Mark Read as CEO effective September 1, 2025. S&P believes this leadership change may trigger a strategy review that could require additional investment and restructuring costs.

S&P projects WPP’s adjusted leverage will increase to around 2.6x in 2025-2026, with free operating cash flow to debt temporarily falling below 10% in 2025 before recovering toward 15% in 2026.

The negative outlook reflects expectations that over the next 24 months, WPP will face weak organic revenue growth and profitability amid strategic uncertainty. S&P could lower the rating if adjusted debt to EBITDA exceeds 2.75x or if free operating cash flow to debt remains below 20%.

A return to stable outlook would require WPP to achieve sustainable organic revenue growth, improve adjusted EBITDA toward industry-average levels of about 15%, maintain adjusted debt to EBITDA below 2.75x, and improve free operating cash flow to debt toward 20% from 2026.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.