Advertising, marketing and media giant WPP has suffered a slowdown in the third quarter of 2018, with its CEO admitting that “decisive action and radical thinking” is needed to turn the company around.
Third-quarter revenue for the group was down 0.8 per cent to £3.758 billion, compared to the same period last year, while reported revenue was down 1.6 per cent to £11.251 billion.
In a trading update to shareholders, WPP chief executive Mark Read said the slowdown primarily reflects a further weakening of the performance of our businesses in North America and in our creative agencies, issues that we highlighted in our interim results.
“Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach,” he said.
“As previously stated, our industry is facing structural change, not structural decline, but in the past, we have been too slow to adapt, become too complicated and have under-invested in core parts of our business.
“There is much to do, and we have taken a number of critical actions to address these legacy issues and improve our performance.”
Read said those actioned included strengthening WPP’s balance sheet, making 16 disposals to date – primarily of non-core investments – raising £704 million.
“As a result of this, and a renewed focus on working capital, our net debt is down £925 million compared to the same period last year,” he said.
The creation of VMLY&R; further simplification with the integration of WPP healthcare agencies with Ogilvy, VMLY&R and Wunderman; and key appointments in operations, clients and technology were among the other actions Read noted.
WPP’s boss said that while it believes in the potential for Kantar to become the world’s leading data, insights and consulting company, the group needs to make tough choices given its priorities.
“We believe that the best way to unlock this potential is with a strategic or financial partner,” Read said.
“The board has approved a formal process to review the strategic options that will maximise share owner value. It is envisaged that WPP will remain a share owner with strategic links to ensure that the benefits to clients are realised.
“Preparations are underway, involving Kantar management, and unsolicited expressions of interest have been received.”
Read used the trading update to reflect on WPP’s pitch performance so far in 2018.
“The Ford review, which began nearly a year ago, resulted in the loss of the creative business, but the retention of global activation and the majority of our work around the world,” he said.
“While we have lost pitches (primarily media) in relation to American Express, GSK, HSBC, Opel and United Airlines, we have retained significant business with these clients.
“We have also won and successfully defended business with Adidas, BP, Hilton, Mars, Mondelez, Shell, T-Mobile and GSK’s Panadol.
“Our successes highlight our strengths, but we need to make it simpler for clients to get the best talent and expertise seamlessly from across WPP.”
The company’s CEO also revealed that after 22 years as group finance director, Paul Richardson has decided to retire from the company, and will leave during the course of 2019.
“WPP has grown into a large and complex organisation, with many strengths, but also challenges,” Read said.
“It will take time to improve our performance and we are realistic about the short-term issues that we face.
“Our top 150 leaders met in Brooklyn two weeks ago to discuss our plans and came away excited by the future, united by a new sense of common purpose, and committed to work together to build a new WPP.”