Moody's Downgrades WPP's Credit Rating#
Moody's Ratings has downgraded WPP Plc's credit rating from Baa2 to Baa3. This decision is based on the company's ongoing struggles with its operating performance and high levels of debt. Additionally, the ratings agency has also lowered the ratings for WPP's backed senior unsecured debt and short-term commercial paper.
Reasons for the Downgrade#
The downgrade reflects concerns about WPP's operating performance, particularly in 2026, where there is uncertainty regarding when a recovery might occur. Moody's projects that WPP's gross debt to EBITDA ratio—an important measure of financial health—will remain between 4.2x and 4.5x over the next year. This is largely due to weak earnings and significant restructuring costs. In 2025, WPP experienced a 5.4% decline in revenue when adjusted for pass-through costs, underperforming compared to its industry peers.
Challenges Ahead#
WPP's management has indicated that 2026 will be a tough year, with client losses negatively impacting revenue. They do not expect a return to significant revenue growth until 2027. The company is facing execution risks as it works to rebuild client trust. To address these challenges, WPP is implementing its Elevate28 strategy, which includes a £500 million cost-saving initiative over three years.
Financial Position and Outlook#
Despite these challenges, WPP has a solid liquidity position, with around £2.7 billion in cash and short-term deposits as of the end of 2025. The company also has access to a $2.5 billion revolving credit facility, which is undrawn and matures in February 2031, with no financial covenants. Moody's stable outlook suggests that they expect WPP to gradually improve its operating performance starting in 2027, provided the company successfully executes its strategic plans and achieves its cost-saving goals. However, any further decline in revenues or operating profits could lead to additional downward pressure on its rating.