New WPP CEO aims to 'invigorate' and 'simplify' company as revenue sees slight dip

Hot on the heels of the appointment of a new CEO Mark Read, WPP has released its financial results where Read described the second quarter of 2018 as WPP’s first quarter of like-for-like growth since Q1 2017.

“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 […] the company has performed strongly in terms of winning and retaining business over the period,” Read said.

Read added that the company, which saw reported revenue down 2.1% at £7.493 billion, and like-for-like revenue up 1.6% in the first half of 2018 (Q2 up 2.4%), focused its efforts on providing more effectively integrated solutions to clients and, in competitive pitches. This led to the network winning pitches such as adidas, Hilton, Mondelez and T-Mobile, as well as expanding relationships with Danone, Mars and Shell.

He added that WPP is now looking to “simplify” its organisation “making it easier to manage clients with access”. For example, co-locations have been opened or announced to open in markets such as New York, Kuala Lumpur, Prague and Toronto. Read said the mix of performance by geography and function and a decision to invest in the growing areas of the 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 underperforming operations, particularly in the United States, and how we position the company for the future. We will provide an update by the year end,” he said.

The company is also focusing on its portfolio through 15 disposals and divestments, including Globant and AppNexus, generating cash proceeds of £676 million so far this year. This is with the aim to strengthen WPP’s balance sheet and improve average net debt to EBITDA ratio. Currently, its profit before interest and tax stood at £821 million down 7.0%, down 2.3% in constant currency. Meanwhile headline PBIT margin 13.3% down 0.5 margin points.

Meanwhile, WPP's revenue for Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe witnessed a 2.9% increase in like-for-like revenue less pass-through in Q2 2018 to £980 million compared to the same period last year. Despite this, WPP's financial statement said that mainland China showed "significant improvement" in Q2 2018, with like-for-like less pass-through costs up 9.0%. This was driven by "strong performance" in the group's media investment management, data investment management and brand consulting businesses.

Malaysia, the Philippines, South Korea, Japan and Pakistan also saw improved revenue, while India and Thailand were "slower", the financial statement said. North America, the UK and Western Continental Europe reported a revenue of £1.34 billion, £560 million and £850 million respectively.

WPP's brand consulting, health and wellness and specialist communications segment witnessed a 2.2% increase to £1.04 billion compared to the same period last year. Its PR and public affairs segment also saw a 5.8% increase in Q2 2018 to £288 million. On the other hand, WPP's data investment management and advertising and media investment management both dipped 1.3% and 0.7% respectively to £491 million and £1.4 billion.

The financial statement noted that WPP's advertising businesses remains difficult with all regions, except Western Continental Europe. It is "slower" particularly in North America, where its major networks remain under pressure.

During his appointment, Read had said that currently the industry is going through a period of structural change, not structural decline. "If we embrace that change we can look ahead to an exciting and successful future. Our mission now is to release the full potential that exists within the company for the benefit of our clients, to accelerate our transformation and simplify our offering, and to position WPP for stronger growth."

“To achieve that we need to foster a culture that attracts the best and brightest: inclusive, respectful, collaborative, diverse. What makes our company special is its people, and I am very proud to have been given the chance to build a new WPP with them.”