Shareholders support Sorrell’s £43m pay but the Mad Men are still beating the Math Men at WPP

As usual at WPP’s AGM CEO Sir Martin Sorrell’s pay grabbed the headlines (last year it was £43m) with 19.4 per cent per cent of shareholders voting against his humungous pay package, 77.6 per cent evidently thinking it good value for money.

Which, arguably, it is as WPP’s profits and share price have risen strongly over the past three years.

If nothing changes Sorrell’s rewards will be even higher next year, as his old share price-related deal (now renegotiated rather belatedly) is still in place. If he gets £70m next year will that stick?

Something’s got to give. Maybe the £274,000 he charges for carting Lady Sorrell around the world. Maybe she has lots of hats.

All of which detracted somewhat from WPP’s trading update for the first four months of the year, which the company highlighted thus:

*Reported revenue for first four months up 8.0% at £3.776 billion in sterling, down 1.9% at $5.698 billion in dollars and up 21.4% at €5.129 billion in euros

*Constant currency revenue up 7.1%, like-for-like revenue up 5.0%

*Constant currency net sales up 4.8%, like-for-like net sales up 2.3%

*Positive impact of exchange rates on reported revenue 0.9% in first four months

*First four months like-for-like revenue, net sales and profits well ahead of last year

*Net sales margin also well ahead of last year and target

*Constant currency average net debt in first four months of 2015 up by £224 million over same period in 2014 mainly reflecting increased acquisition spending

Which sounds pretty good although like-for-like sales growth in April slowed rather a lot, bringing the number down from Q1’s 2.5 per cent to 2.3 per cent for the four months. May not be so hot in May either as ad spending in the UK (WPP’s strongest market along with the US) suffered because of worries about that month’s General Election.

Best and worse performing activities were advertising and media buying and ‘data investment management,’ as WPP calls what we used to call research respectively.

On ads and media outgoing chairman Phil Lader had this to say:

In constant currencies, advertising and media investment management revenue grew by 12.8%, with like-for-like growth of 9.9%, slightly lower than the first quarter, and still the strongest performing sector. Net sales grew 5.9% in constant currency, with like-for-like growth of 3.5%, similar to the first quarter figures of 5.7% and 3.8% respectively. Growth in the Group’s media investment management businesses was consistently strong throughout 2014 and this has continued into the first four months of 2015.

On the same subject he turned his attention to the current spate of mega media reviews:

There has been some commentary recently on the significant number of media investment management reviews, particularly, in the United States, which we believe has been driven primarily by clients’ desire to optimise their media spending, in an increasingly digital media environment. These reviews total approximately $20 billion in billings. Your Company is particularly well positioned to compete in these pitches as it is an incumbent in less than a quarter of these reviews and in addition has the advantages of greatest global scale (according to RECMA 2014), and the only integrated data investment management capability and unique technology and content resources.

Did you write that Phil? Note the reference to ‘integrated data investment management capability.’

On the aforementioned data investment management (the worst performing WPP activity) he said:

On a constant currency basis, data investment management net sales grew 1.9%, with like-for-like growth of 0.6% in the first four months, a reduction on the first quarter like-for-like growth of 1.2%, partly the result of weaker custom research in North America. All regions, except North America and the United Kingdom were up in the first four months, with stronger growth in Asia Pacific, Latin America and Africa.

So research, as we know it, still fails to fly for WPP’s huge Kantar division. It has failed to unseat Nielsen as the provider of choice in the US (partly, surely, because media owners don’t want a company with big media agency interests to be in charge of the numbers) and WPP’s last big purchase – £1.2bn researcher TNS/Sofres just prior to the financial crisis – still looks a bummer. Which may lead shareholders to doubt if forking out somewhere north of £1bn for Tesco’s Dunnhumby business is a good idea.

Sorrell would argue that this huge investment in data helps the media business (as in Lader’s quote above). But it still looks as though the Mad Men (well-informed by the data geeks, no doubt) are beating the ‘Math Men’ at WPP.

Could all change of course. But so could lots of things at WPP.

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