LONDON: WPP is warning on profit after a downturn at its flagship media buying agency, sent its shares to a 27-year low and laying bare the task facing new boss Cindy Rose to turn around the advertising group.
Last Thursday, its stock fell as much as 18% to levels last seen in the late 1990s when Martin Sorrell was building WPP into the world’s biggest ad group after buying agencies like Ogilvy.
Rose, a former Microsoft executive who took over from Sorrell’s successor Mark Read last month, said the numbers were “unacceptable” and she would “dramatically” simplify the group.
WPP reported a worst-than-expected 5.9% drop in like-for-like net revenue for its third quarter and said the full-year decline could be as much as 6%.
A company-compiled consensus had predicted a 4.5% drop for the year.
The slump in its shares gave the group a market cap of £3.18bil or about US$4.27bil. It was worth £24bil as recently as 2017.
WPP, which has suffered a string of big client losses and lost its crown as the world’s biggest ad group to France’s Publicis last year, said it had been hit by a deterioration in its ad planning and buying agency WPP Media.
WPP said it expected net revenue to fall by between 5.5% and 6% this year, compared to its previous 3% to 5% forecast, while its operating profit margin would be around 13%, below the bottom of its previous range.
Customer losses earlier in the year had started to impact in the quarter, it said, compounded by volatility in client spending.
Turning around WPP Media, previously branded GroupM, was “absolutely critical”, Rose said, but she was confident its stronger focus on data and AI would deliver.
“We are starting to see early signs of success with important client retentions and wins,” she told reporters, such as M&S, Maersk and Mastercard.
Rose’s predecessor Read streamlined WPP by merging its agencies into six main groups, including Ogilvy and VML.
But she said he had not gone far enough or fast enough to adapt to the changing needs of clients, who wanted more simplicity and use of data and AI.
Publicis’ data capabilities have been central to its success in luring clients from WPP. It raised its growth forecast for a second time earlier this month.
WPP has been working to build out its own data and artificial-intelligence (AI) capabilities, which Rose described as future proof and competitive.
WPP said last week it would also allow brands to access its AI-powered marketing platform to plan, create and publish their own campaigns.
“We are committed to doing the hard work that it will take to turn this business around,” she said, adding that she would deliver a full strategic plan in the new year.
One change would be a harder push into enterprise and technology solutions, she said. — Reuters
