On today’s earnings call, WPP CEO Mark Read acknowledged the company had a difficult quarter thanks to a string of major media account losses and underperformance on the creative side of the business, especially in North America.
WPP stock dropped more than 15 percent in London today and more than 17 percent in early trading in New York upon news of the results. The company has lost nearly a third of its value so far in 2018.
“It was a tough Q3 for us; we saw the top line slip more, obviously, than we had expected,” Read told investors and others on the call. “This performance does reinforce our need to take decisive action and [adopt] more radical thinking to address issues we face in the business.”
Total reported revenue for the third quarter was down 0.8 percent to 3.76 billion pounds ($4.83 billion) while like-for-like revenue less pass-through costs was down 1.5 percent when compared to the previous year.
Reported revenue for the previous nine months was down 1.6 percent to 11.25 billion pounds ($14.45 billion) despite net new business wins amounting to $4 billion.
At the same time, the newly installed CEO tried to place the disappointing results in context, adding that he and other WPP leaders were working to turn the company around after an “extended period of underperformance.”
He also confirmed widespread speculation that WPP would seek to sell a majority of data company Kantar, which was founded in 1993 and became one of the world’s largest information and consultancy groups but has grown more slowly than other WPP businesses in recent years.
“Emotionally, we may prefer to keep Kantar as part of WPP,” Read said, “but rationally, given our other priorities,” it would make more sense to turn the company into the world’s leading strategy and data firm “with a financial partner,” where it would operate “at arm’s length” from WPP.
He went on to add that WPP has received a number of “unsolicited expressions of interest” since rumors of a sale began circulating months ago but does not expect a deal to close until 2019.
In another significant move, Read stated that Paul Richardson, a 26-year company veteran who became group finance director in 1996, decided to retire “over the course of 2019.”
On the call, Read returned to the theme that clients should have greater access to WPP’s teams and assets around the world. Speaking of recent reviews, like those involving Mars and Mondelez, that saw WPP retain or increase its share of a given company’s business, Read said, “We made it easier for clients to get best talent seamlessly from across WPP, and we need to learn our lessons from that.”
Read also acknowledged the relative weakness of the network’s North American creative offering, stating that two of its agencies have gone through “well-publicized departures” in an apparent reference to Ogilvy and JWT and noting that most of this summer’s Cannes wins came from offices in Latin America and the Asia Pacific region (with the exception of VML).
“We need to make sure we are sourcing and building creative networks across the whole of North America, not just in Manhattan,” he said.
Richardson also noted, however, that the company’s performance in the third quarter was “weaker than forecasted” in both western continental Europe and APAC, adding, “This has given us cause for concern.”
On a more positive note, Read spoke of a meeting involving 150 top WPP executives that took place in Brooklyn, N.Y., earlier this month at which he laid out his future vision for the company. As reported in Adweek’s AgencySpy, the CEO used that opportunity to introduce a new visual identity and positioning documents on the “radical evolution” theme that were “well received” by the leaders of his various agencies.
He also noted the speed at which WPP established VMLY&R and integrated its healthcare offerings under creative agency umbrellas in the U.S. When asked about future mergers on the media side, Richardson highlighted the complexity of the challenges ahead, saying, “As we are doing more of these mergers, the distinction between various disciplines is going to get … even less meaningful in some sense.”
In the company’s official earnings statement, Read told investors to expect a strategic update in December.
“WPP is a great company with many strengths, many great people and many great client relationships,” he said before the question-and-answer portion of the call. “When I talk to clients, they want WPP to be successful. But we have lots of work left to do to get us to sustainable growth.”
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