Former WPP boss Sir Martin Sorrell is a big shareholder in WPP (about two per cent but there are a lot of shares) as he isn’t slow to remind us. Sorrell’s stake is worth around £300m, about a third less than it was 18 months ago.
New CEO Mark Read has also been dabbling in WPP shares, buying 10,000 last Friday at an average cost of £1.145, a total value of £114,500. Read’s in the money already as this morning (Monday) the shares were trading at £1.174.
Read (below) doubtless had WPP shares already and stands to receive a lot more if he hits his targets. Read’s basic salary is £975,000, not that much more than he was earning as head of WPP Digital. New CEOs are expected to show their support for the company.
But the modest recovery in WPP’s share price is welcome for everyone at WPP (especially Read) as the shares fell 6.5 per cent on his results presentation. Some analysts took fright as he lowered WPP’s margin expectations although only by a bit, to slightly over 13 per cent.
This is still pretty challenging in a market dominated by client cutbacks at a time when WPP wants to invest in talent and new tech businesses. The dividend was held (unlike in the go-go Sorrell era), substantial acquisitions have more or less dried up and share buybacks are being reined in.
All of this makes WPP shares a hard sell and, potentially, leaves it vulnerable to a break-up bid. Its market value of £15bn is pretty small beer for a big private equity company, media owner or consultancy (Accenture is valued at nearly $100bn).
For the time being Read has bought some time (most analysts have the shares as ‘hold’ or ‘buy’) but he needs to pull a rabbit or two from the hat as he finalises his review of the company, due to be unveiled before year end. So far £675m has been realised from disposals although the lost income from these stakes impacts WPP’s earnings.
PS One of the external rivals for Read’s job was reported to be Tim Armstrong, head of Oath the Verizon-owned business that includes Armstrong’s AOL. Armstrong was said to prefer life at Oath to WPP but now he’s leaving too.
CEOs are paid ridiculous money these days at a time when their employees are making do with low pay increases at best, amid a seemingly constant round of redundancies. But CEO shelf life seems to be getting shorter, not least among ad agencies. The temptation to make hay is obvious.