WPP inches back to growth but revenue and profit both down

WPP, now helmed by CEO Mark Read, reported its first quarter of like-for-like growth since the first quarter of 2017 today, 0.7 per cent in the second quarter of 2018 making 0.3 per cent for the year so far.

Hardly an excuse to hang out the bunting but a decided step forward and, presumably, a reason for Read’s elevation from joint COO.

Reported revenue for the half year was down 2.1 per cent at £7.5bn. Headline profit before tax was down 7.4 per cent, reflecting currency “headwinds” according to WPP. Overall profit was boosted by £676m of exceptional items including the disposal of WPP’s stakes in AppNexus and Globant.

Billings were £26.6bn, down one per cent, up four per cent in constant currencies.

Read says: “The second quarter of 2018 was WPP’s first quarter of like-for-like growth since Q1 2017, and the company has performed strongly in terms of winning and retaining business over the period.

“At our first quarter trading update we said there was no standing still, and in the last few months we have made progress in a number of important areas.

“We have focused our efforts on providing more effectively integrated solutions to clients and, in competitive pitches, we have won or grown business with clients including Adidas, Hilton, Mars, Mondelez, Shell and T-Mobile.

“We have looked at our offering and begun to focus our portfolio through 15 disposals and divestments, including Globant and AppNexus, generating cash proceeds of £676 million so far this year, which will also strengthen our balance sheet and improve our average net debt to EBITDA ratio.

“And we have accelerated initiatives that will simplify our organisation, making it easier for us to manage and clients to access, with, for example, co-locations opened or announced in New York, Kuala Lumpur, Prague and Toronto.

“The mix of performance by geography and function and a decision to invest in the growing areas of our business resulted in a slightly lower headline PBIT margin.

“As Chief Executive, my focus will be on invigorating our company and returning the business to stronger, sustainable growth. Our review of strategy is underway, addressing our structure, our under-performing operations, particularly in the United States, and how we position the company for the future. We will provide an update by the year end.”

The US remains WPP’s biggest problem with revenue down five per cent, reflecting the loss of a number of big media accounts.

Quite how Read and co. deal with this remains to be seen: one option is clearly the appointment of a North America country manager although this would mean handing over a degree of autonomy to someone in the company’s biggest market, which might undermine Read.

WPP kept the dividend, a big reason why investors hold the stock, at 22.7p and share buy-backs, which boost the stock, were a relatively modest £200m.

So the share price might come under pressure; if it does so will Read. But he’ll be hoping that the market buys into his story of better operating performance, some client wins and a steady programme of cost reduction.


WPP’s share price was down 6.5 per cent today in a falling market as some dealers took fright when it cut its target for profits margins. But, as Read later said, this was just about spending £20m or so on more incentives for managers and staff.

Some WPP agencies are run ridiculously tightly. Someone told me the other day that an account manager, despatched to the West country, had to borrow £500 from a freelance to hire a car at short notice because he had no company card and only a few quid in his bank account.

Yet its former CEO was earning £13.9m in his last, bad, year.

Hardly a full service, as clients have noticed. If Read’s spending more on the troops he should be applauded.

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