Goldman Sachs – one of the planet’s most formidable investment advisers – has delivered some badly needed good news to WPP.
In its latest assessment of the world’s biggest media company, the US bank’s analyst said WPP should benefit from some relief in the short-term as some large advertisers step up their marketing efforts.
In doing so, Goldman Sachs upgraded its recommendation for WPP shares from “neutral” to “buy” due to “improving organic growth momentum and cost cutting upside”. Which, if anything, is a vote in confidence for the direction WPP’s newly minted CEO, Mark Read (main photo), is taking the business.
For its European media, analysts predicted that WPP’s organic growth will improve to -0.7 per cent in the second half of 2019 from -2.8 per cent in the first half. This was due to recent new business wins, phasing out of account losses and easier comparatives from last year.
Goldman Sachs also predicted that WPP’s north American operations would enjoy a stronger than predicted second half to 2019.
The analysts noted that WPP was not “at risk” from major media reviews such as Kantar and LG , while a partial sale of WPP’s data arm Kantar should have a positive impact on WPP’s overall share price.
Goldman Sachs’ report noted: “In our view recent new business performance is particularly encouraging given the departure of long-standing CEO Sir Martin Sorrell in April 2018 and the company’s ongoing reorganisation – which we previously highlighted as a risk.”
However, Goldman Sachs’ appraisal appears to differ greatly from Sorrell’s recent assessment of the business and Read, his successor’s, performance.
Last week, Sorrell used an interview in the UK’s Financial News to criticise the direction Read was taking the business, he criticised its largesse and called out alleged sycophancy when it came to promoting WPP staff.
“As a shareholder, it’s worrying. I don’t think there is a strong direction [for the company],” said Sorrell in the interview. “The people running WPP see their jobs as a burden now. When they get up in the morning, they feel burdened. I know that to be the case.”
Sorrell was particularly scathing of Read’s cost-cutting decision to merge J Walter Thompson with Wunderman in November.
“People are saying, ‘Now we know what the W is in WPP – it’s Wunderman’. That’s because a lot of Wunderman people seem to have been promoted. There is a feeling of sycophancy and that friends are being elevated rather than the more talented people,” Sorrell moaned.
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