WPP flatlined in the first quarter of 2018 with like-for-like revenues less pass through costs down 0.1 per cent (net sales as was), which would have been seen as a problem had Sir Martin Sorrell still been in charge but, under new COOs Mark Read and Andrew Scott (below) might be seen as stopping the rot.
Even though the two of them, plus newly-anointed executive chairman Roberto Quarta, weren’t officially in charge during this period (Sorrell was) the new emphasis on reshaping the group, including reducing its mountainous debt pile now up to nearly £5bn, means this might be seen as the start of a recovery rather than a further decline.
At the same time, according to the FT, WPP has been in talks with research rival Nielsen to combine its Kantar operation with Neilsen to create a research giant, valuing Kantar at up to a rather improbable £4.3bn. These talks seem to have foundered although private equity outfit CVC Partners is reported to have entered the fray with Kantar CEO Eric Salama also exploring the option of a £3.5bn management buyout. Kantar makes about £350m a year.
This seems to contradict Read and Scott’s repeated mantra that the group is better together although such speculation will provide a welcome support for the share price.
In terms of specifics WPP’s creative agencies (chiefly Grey, JWT, Ogilvy and Y&R) are giving some cause for concern, under-performing the rest of the group, especially in Western continental Europe and the US. The US was the worst performing region with like-for-like revenue down 2.3 per cent although the decline there seems to be slowing.
It’s not clear which agencies struggled most although JWT’s travails in the US in the wake of l’affaire Martinez can hardly have helped.
The main problem for the new triumvirate at WPP is where to spend WPP’s money to get the business back to growth. Its market value has fallen from over £20bn to about £14bn in just over a year, leaving it little headroom to make acquisitions given its debt pile.
Selling Kantar would help considerably, provided WPP retains access to the data its media agencies, said to be performing strongly, need. The company may also, in a post-Sorrell world, be open to selling one of its creative agency networks although that could lead to painful write-offs given the high prices paid for them in the first place. But new managements can get away with such moves.