This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/2018/oct/25/wpp-ceo-will-not-sugarcoat-reality-of-sales-slump-as-shares-plunge
The article has changed 7 times. There is an RSS feed of changes available.
| Version 3 | Version 4 |
|---|---|
| WPP 'will not sugarcoat reality' of sales slump as shares plunge | WPP 'will not sugarcoat reality' of sales slump as shares plunge |
| (about 2 hours later) | |
| WPP’s share price plummeted more than 20% in early trading on Thursday after investors were left stunned by a big miss in expected sales and the slashing of its full-year guidance. | |
| The City had expected the embattled marketing and advertising group, which is struggling to get back on track after the abrupt departure of its founder and chief executive Sir Martin Sorrell in April, to report 0.3% growth in net sales for the third quarter. Instead, WPP reported a fall of 1.5% after growth of 0.7% in the second quarter. | The City had expected the embattled marketing and advertising group, which is struggling to get back on track after the abrupt departure of its founder and chief executive Sir Martin Sorrell in April, to report 0.3% growth in net sales for the third quarter. Instead, WPP reported a fall of 1.5% after growth of 0.7% in the second quarter. |
| Shares fell to their lowest level since 2012, wiping almost £3bn off the market value of WPP, which lost its mantle last week as the world’s most valuable advertising group to its US rival Omnicom. WPP’s share price rallied later in the day but still closed down almost 14%, at 911p. | |
| The company also cut its guidance for full-year net sales, saying they could fall as much as 1%. It had told investors three months ago that sales would grow by 0.3% this year. | |
| “WPP has delivered a proper profit warning,” said Thomas Singlehurst, an analyst at Citi. | “WPP has delivered a proper profit warning,” said Thomas Singlehurst, an analyst at Citi. |
| 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 1.3% and Interpublic Group’s 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 1.3% and Interpublic Group’s 5.4%. |
| “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.” | “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.” |
| The firm also announced it was seeking a buyer for the bulk of the 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 firm also announced it was seeking a buyer for the bulk of the research group Kantar, which is valued at about £3bn, but said it intended to “remain a share owner with strategic links” to the business. |
| It said it had sold 16 businesses so far this year, including stakes in the IT and software company Globant and the tech firm AppNexus, raising £704m to strengthen its balance sheet. | It said it had sold 16 businesses so far this year, including stakes in the IT and software company Globant and the tech firm AppNexus, raising £704m to strengthen its balance sheet. |
| Of most concern will be the deteriorating situation in the US, 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% in the first half od the year. | Of most concern will be the deteriorating situation in the US, 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% in the first half od the 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% in the first half of the 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% in the first half of the 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 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. | 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 Ford, which it 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,” he said. “It will take time to improve our performance and we are realistic about the short-term issues that we face.” | Read said Ford, which it 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,” he said. “It will take time to improve our performance and we are realistic about the short-term issues that we face.” |
| WPP, which employs 130,000 people globally, has traditionally sought to cut staff numbers in line with its growth performance. Read said the company would look to control staff costs primarily by slowing its hiring rate, as opposed to launching a major redundancy programme. | WPP, which employs 130,000 people globally, has traditionally sought to cut staff numbers in line with its growth performance. Read said the company would look to control staff costs primarily by slowing its hiring rate, as opposed to launching a major redundancy programme. |
| “We hire 3,000 people a month as a group,” he said. “So I think really we are looking to adjust staff costs primarily by managing our hiring. There may be occasions we need to make more difficult decisions but mainly we will try to get back in line doing that.” | “We hire 3,000 people a month as a group,” he said. “So I think really we are looking to adjust staff costs primarily by managing our hiring. There may be occasions we need to make more difficult decisions but mainly we will try to get back in line doing that.” |
| WPP said the group’s finance director, Paul Richardson, who worked side by side with Sorrell for decades, would leave the company next year after 22 years. | WPP said the group’s finance director, Paul Richardson, who worked side by side with Sorrell for decades, would leave the company next year after 22 years. |
| WPP | WPP |
| WPP | WPP |
| (Media) | (Media) |
| Advertising | Advertising |
| Marketing & PR | Marketing & PR |
| news | news |
| Share on Facebook | Share on Facebook |
| Share on Twitter | Share on Twitter |
| Share via Email | Share via Email |
| Share on LinkedIn | Share on LinkedIn |
| Share on Pinterest | Share on Pinterest |
| Share on Google+ | Share on Google+ |
| Share on WhatsApp | Share on WhatsApp |
| Share on Messenger | Share on Messenger |
| Reuse this content | Reuse this content |