Third Quarter Trading Update 2018
Mark Read, Chief Executive Officer, WPP:
“Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach.
“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.
“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.
“In April, we started immediately to develop the strategy for the new WPP that would simplify our organisation, better position our companies, invest more in creative talent, establish a common data and technology strategy and make it easier for our clients to access the many great strengths that reside within our company. At its heart is a new vision for WPP, supported by a strong culture that binds us together and makes us the most attractive destination for the best talent, allowing us to lead our industry in the future.
“We have already begun implementing this strategy, identifying the investments and restructuring actions that are needed to simplify the company and putting teams in place in the key areas of data and technology. We moved quickly to strengthen our 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.
“Since my appointment as CEO in September, we have put more of these plans into action with the creation of VMLY&R, a new brand experience agency formed by the merger of VML and Y&R; further simplification with the integration of our healthcare agencies with Ogilvy, VMLY&R and Wunderman; and key appointments in operations, clients and technology as we build an even stronger executive team at the centre of WPP.
“There is a significant opportunity to develop Kantar into the world’s leading data, insights and consulting company. We believe in the potential for Kantar but given our many priorities, we need to make tough choices and we believe that the best way to unlock this potential is with a strategic or financial partner. 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.
“This move, together with the actions that we will continue to take, should further improve our balance sheet. In future, we will pay greater attention to capital discipline and focus our acquisition spending only on the most strategic opportunities that we can tightly integrate into our organisation.
“In April, independent analysts identified WPP as having the most business at risk from publicly announced client reviews among our peer group. 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. 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.
“After 22 years as Group Finance Director, Paul Richardson has decided to retire from the company. He will leave during the course of 2019, and work with us to ensure a smooth transition as we appoint his successor. Paul has played a central role in building WPP, and on behalf of the Board and the company as a whole I would like to thank him for his contribution to our success over many years.
“WPP has grown into a large and complex organisation, with many strengths, but also challenges. 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.
“We will provide a strategy update in December. We look forward to updating our people, clients and share owners on the new vision for WPP, the substantial growth opportunities that exist for us, and how we will capture them through a simplified structure, investments in technology and talent, and a new culture that draws the best and brightest to WPP.”
- Third quarter reported revenue down 0.8% at £3.758 billion, impacted by currency headwinds of 2.0%. Constant currency revenue up 1.2%, like-for-like revenue up 0.2%
- Third quarter constant currency revenue less pass-through costs down 0.9%, like-for-like revenue less pass-through costs down 1.5%
- Nine months reported revenue down 1.6% at £11.251 billion
- Nine months constant currency revenue up 2.3%, like-for-like revenue up 1.1%
- Nine months constant currency revenue less pass-through costs up 0.7%, like-for-like revenue less pass-through costs down 0.3%
- Net debt at 30 September down £925 million compared with same period last year, following disposal of certain non-core assets and an improvement in net working capital
- Net new business of $4.0 billion in first nine months
Mark Read }
Andrew Scott }
Paul Richardson } +44 20 7408 2204
Lisa Hau }
Chris Wade }
Kevin McCormack }
Fran Butera } +1 212 632 2235
Juliana Yeh +852 2280 3790
Buchanan Communications +44 207 466 5000 +44 7710 130 634