WPP shows UK growth but US creative still hurting in Q2


WPP’s net sales sales fell 1.4% in the second quarter compared with a 2.8% drop in Q1, but the British advertising group warned it remained in the “early” stage of turning around the business.

Mark Read, the chief executive, said Q2 was “slightly ahead” of its internal expectations and WPP’s share price jumped 7% in early trading to about £9.80.

However, Read is sticking to his annual forecast of a 1.5% to 2% decline in 2019 – the third year in a row of falling net sales.

Agencies with the “greatest exposure to US creative continued to decline”, the company said.

Net sales, known as revenue less pass-through costs, fell 5.4% in North America, WPP’s biggest market, in Q2 compared with an 8.5% plunge in the first quarter.

The UK moved back into growth, reporting a 1.3% increase in Q2 to offset a 0.9% drop in Q1.

Western Continental Europe improved to flat. The rest of the world was up 1.2% but slowed from Q1.

Read said “an encouraging number of our businesses and markets are achieving good growth” and pointed to recent wins and “expanded assignments”, including from eBay, Instagram and L’Oréal.

“That said, we are still in the early stages of our three-year turnaround plan,” he said. 

WPP’s share price has halved from £19 at the start of 2017.

Analysts at Numis Securities described the Q2 result as “expected”, adding the “shares remain optically cheap, but we still see material challenges” as WPP must adapt to a “changed marketing services environment”.

Change to financial reporting 

WPP has reorganised its financial reporting. The largest business division is now called global integrated agencies, rather than advertising & media investment (AMIM), and represents almost two-thirds of turnover.

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The global integrated agencies are all of Ogilvy, VMLY&R, Wunderman Thompson, Grey, Group M and Hogarth to take into account a wave of internal agency mergers that WPP carried out to simplify the group.

Previously, AMIM included creative and media agencies but did not include Wunderman, VML, Ogilvy PR and OgilvyOne.

Net sales at global integrated agencies fell 0.3% in Q2 – an improvement on the 3.8% slump in Q1.

“All of the agencies within this segment improved over the first quarter, particularly at VMLY&R, Ogilvy, Grey and GroupM,” WPP said.

The company has three other business divisions in its new financial reporting structure.

Data investment management was up 0.5% in the quarter, public relations was down 2.6% and specialist agencies dived 7.1%.

The latter suffered from Ford agency Team GTB’s loss of US creative work.

Focus on largest clients

Ford remains a top client and Read is “increasing our commitment to bringing the best of WPP to our largest clients”.

The top 30 clients accounted for 27% of revenue less pass-through costs in the first half of 2019.

“We saw strong growth from clients in the technology sector, a varied performance in consumer packaged goods, with some improvements, and some weakness in healthcare,” WPP said.

Revenue less pass-through costs fell 2% to £6.1bn and headline profit before tax, excluding one-off items, dropped 18.4% to £605m in the first half.

The company has made 44 disposals in the past 15 months, including a planned sale of a majority stake of Kantar, to reduce debt.



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