Testing time for WPP as half-year results loom

PR firm valuation raises issues about value of whole

WPP’s releases its interim, half-yearly numbers in the first week of August and, rather worryingly, one big bank UBS is forecasting a -08% decline in organic revenues, the measure most analysts follow. It’s also expecting margins to drop below 11.2%, lower thaqn most forecasts.

WPP itself has forecast only 1% growth at best for 2024, so -0.8% isn’t that dramatic but it won’t help CEO Mark Read’s cause.

Especially as WPP rejected an opening bid form KKR to gain a majority stake in big financial PR firm FGS Global (KKR currently has 30%, WPP 55%) valuing the whole reportedly at more than the $1.425bn it was when KKR invested last year. The whole of WPP is currently valued at about $10bn, which makes FCS worth a seventh of the total, pretty toppy for a business with revenue of $455m in 2023 (according to PR Week.)

Two issues come to mind. One, is WPP just waiting for a sweetened offer. Two, if FGS is worth that how come the rest is so undervalued (WPP’s total revenue is about $18bn.)

A break-up bid is always on the cards for WPP. It has some great assets: Ogilvy for one, the various media agencies in GroupM maybe another although, by the standards of recent years, they’re struggling somewhat. But shareholders, so far, seem to have resisted its attractions. FGS may make some think differently. In any case, does WPP (mainly a consumer-facing business via its clients, really need a financial PR giant?

WPP in the post-Sorrell era has morphed into the proverbial giant tanker: difficult to turn around. CEO Read doesn’t seem to have done anything obviously wrong. One might argue with some of the internal mergers but the financial benefits of these (for the company) will necessarily be slow to realise, not least via job losses at some of the merged creative agencies. The former Wunderman Thompson agency in London (now merged into VML) seems to be shedding staff regularly.

So a testing and, maybe, game-changing few weeks for Read and WPP.

One Comment

  1. “…it won’t help CEO Mark Read’s cause.”

    Stephen, really mate, what cause? Seems to me self-destruction became self-evident years ago.

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