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WPP CEO 'will not sugarcoat reality' of sales slump as shares plunge WPP 'will not sugarcoat reality' of sales slump as shares plunge
(35 minutes later)
WPP’s share price plummeted more than 20% after investors were left stunned by a big miss in expected sales and the slashing of its full-year guidance. WPP’s share price plummeted by more than 20% after investors were left stunned by a big miss in expected sales and the slashing of its full-year guidance.
The embattled marketing and advertising group, which is struggling to get back on track following the abrupt departure of the founder and chief executive Sir Martin Sorrell in April, had been expected by the City to report net sales growth of 0.3% for the third quarter. Instead, WPP rocked investors by revealing a big miss, with net sales down 1.5%. It followed growth of 0.7% in the second quarter. The embattled marketing and advertising group, which is struggling to get back on track after the abrupt departure of the founder and chief executive Sir Martin Sorrell in April, had been expected by the City to report0.3% growth in net sales for the third quarter. Instead, WPP reported a fall of 1.5%. It followed growth of 0.7% in the second quarter.
Shares fell to the lowest level since 2012, wiping almost £3bn off the market value of WPP, which last week lost its mantle as the world’s most valuable advertising group to US rival Omnicom. Shares fell to the lowest level since 2012, wiping almost £3bn off the market value of WPP, which last week lost its mantle as the world’s most valuable advertising group to its US rival Omnicom.
The company also cut its guidance for full-year net sales, saying they could fall as much as 1% – only three months ago WPP told investors sales would grow by 0.3% this year. WPP also cut its guidance for full-year net sales, saying they could fall as much as 1% – only three months ago the firm told investors sales would grow by 0.3% this year.
“WPP has delivered a proper profit warning,” Thomas Singlehurst, an analyst at Citi, said. “WPP has delivered a proper profit warning,” said Thomas Singlehurst, an analyst at Citi.
The company’s performance is all the worse, given its rivals all reported strong third-quarter revenue growth: Omnicom rose 2.9%, France’s Publicis Groupe rose 1.3% and Interpublic Group rose 5.4%. The company’s performance is all the worse given that its rivals have all reported strong third-quarter revenue growth: Omnicom’s rose 2.9%, Publicis Groupe’s rose 1.3% and Interpublic Group’s rose 5.4%.
“Clearly we have underperformed our competition in the third quarter,” Mark Read, WPP’s new chief executive, said. “We are not going to sugarcoat the reality.” “Clearly we have underperformed our competition in the third quarter,” said Mark Read, WPP’s new chief executive. “We are not going to sugarcoat the reality.”
WPP also officially announced that it is seeking a buyer for the bulk of research group Kantar, which is valued at about £3bn, but said that it intends to “remain a share owner with strategic links” to the business. WPP also announced it was seeking a buyer for the bulk of research group Kantar, which is valued at about £3bn, but said it intended to “remain a share owner with strategic links” to the business.
The company said so far this year it has sold 16 businesses, including Globant and a stake in AppNexus, raising £704m to strengthen its balance sheet. The company said had sold 16 businesses so far this year. These included stakes in the IT and software company Globant and in the tech firm AppNexus, raising £704m to strengthen its balance sheet.
Of most concern will be the deteriorating situation in the US market, the world’s biggest advertising market by some distance, where WPP’s revenues fell 5.3% in the third quarter. North American revenues, which account for 36% of WPP’s total revenues, were down 2.9% at the half-year. Of most concern will be the deteriorating situation in the US market, the world’s biggest advertising market by some distance, where WPP’s revenues fell 5.3% in the third quarter. North American revenues, which account for 36% of the group’s total revenues, were down 2.9% at the half-year.
The UK, which accounts for 13% of WPP’s business, also went into reverse, with revenues down 2% in the third quarter. They were up 1.5% at the half-year. The UK, which accounts for 13% of its business, also went into reverse, with revenues down 2% in the third quarter. They were up 1.5% at the half-year.
“Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach,” Read said. “The slowdown primarily reflects a further weakening of the performance of our businesses in North America and in our creative agencies.“Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach,” Read said. “The slowdown primarily reflects a further weakening of the performance of our businesses in North America and in our creative agencies.
“As previously stated, our industry is facing structural change, not structural decline, but in the past we have been too slow to adapt, become too complicated and have underinvested in core parts of our business.”“As previously stated, our industry is facing structural change, not structural decline, but in the past we have been too slow to adapt, become too complicated and have underinvested in core parts of our business.”
WPP’s balance sheet is set to get worse, having lost a string of major clients in the last week, including a sizeable chunk of Ford – its biggest client and on the books of its JWT subsidiary for 75 years – American Express, United Airlines, Pepsi, Bayer, Opel, GlaxoSmithKline and part of Daimler. WPP’s balance sheet is expected to get worse, having lost a string of major clients in the last week, including a sizeable chunk of Ford – its biggest client and on the books of its JWT subsidiary for 75 years – American Express, United Airlines, Pepsi, Bayer, Opel, GlaxoSmithKline and part of Daimler.
Read said that Ford, which it still retains significant global business with, will still be WPP’s biggest client next year. Read said Ford, which it still retains significant global business with, will still be WPP’s biggest client next year.
“WPP has grown into a large and complex organisation, with many strengths but also challenges,” Read said. “It will take time to improve our performance and we are realistic about the short-term issues that we face.”“WPP has grown into a large and complex organisation, with many strengths but also challenges,” Read said. “It will take time to improve our performance and we are realistic about the short-term issues that we face.”
WPP also said that the group finance director, Paul Richardson, who worked side by side with Sorrell for decades, is to leave the company next year after 22 years. WPP said the group finance director, Paul Richardson, who worked side by side with Sorrell for decades, would leave the company next year after 22 years.
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