BREAKINGVIEWS-WPP’s new CEO embodies existential challenge

By Jennifer Johnson

LONDON, July 10 (Reuters Breakingviews) - WPP WPP.L gave investors the bad news first. On Wednesday, the 4.7-billion-pound advertising group issued a profit warning that sent its shares plummeting by nearly 20% at their lowest point. On Thursday morning it followed up with a bit of good news: it has found a replacement for CEO Mark Read, who announced he was stepping down last month. Microsoft executive Cindy Rose will take up the top job in September – but while her tech credentials mean she may be able to better steer the group through AI disruption than Read was, a lack of ad industry experience could create new problems.

Rose inherits a company in a precarious position. The shares are down by around 40% in the past year, with a tariff-driven economic slowdown and high-profile client losses, including Mars and Coca-Cola, weighing on investors’ minds. Those fears were crystallised on Wednesday when WPP radically cut its full-year guidance. The group now expects 2025 net sales – revenue less the costs that can be passed on to customers – to fall between 3% and 5%. Meanwhile, its operating margin will decline by between 50 and 175 basis points to as low as 13.3%. The group previously said net sales would fall no more than 2%, while the margin would be flat.

A bigger concern hanging over WPP is the potential impact of artificial intelligence, which will allow technology groups like Meta Platforms META.O to offer clients the tools to create adverts and plan campaigns at much lower cost. Read tried to counter the threat by creating WPP Open, an AI-powered marketing platform, and increasing investment in the technology to 300 million pounds annually. Rose, formerly Microsoft’s chief operating officer for global enterprise, will need to take that forward. But WPP is a relative laggard – its operating margin last year was just 15%, below peer Publicis PUBP.PA on 18% – and lower profitability could constrain future investments.

Rose has options. She could scrap the dividend, sell off non-core businesses and cut costs. She may have to do all three, potentially irking investors who crave payouts. What’s less clear is whether clients will come flocking to an agency group run by a tech executive. The heads of major rivals, such as Publicis’ Arthur Sadoun or Omnicom’s John Wren, have had storied careers in the industry. Recent performance clearly led WPP to cast the net wider. That may be a smart move, but it’s also a risky one.

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CONTEXT NEWS

WPP said on July 10 that it had appointed Cindy Rose, the chief operating officer for global enterprise at Microsoft, as its next CEO. She will succeed Mark Read, who stepped down last month after seven years as the head of the agency group, from September 1.

Rose has served as a non-executive director on WPP’s board since 2019, and has held senior executive positions at Vodafone and Virgin Media.

As of 1220 GMT, WPP shares were trading at 4.39 pounds, up 2.5%. They closed down 19% on July 9.