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WPP issues upbeat AGM statement as 27% of its investors fail to back pay report over Sorrell options

WPP said reported revenue for the first four months of 2018 were down 3.4% at £4.822bn, but with currency headwinds of 6.1%, constant currency revenue rose by 2.7% to US$6.633bn
Martin Sorrell
The ad giant said like-for-like revenue increased by 1.4% in the first four months of 2018

WPP Group PLC (LON:WPP) faced down shareholders at its annual general meeting on Thursday by issuing upbeat trading comments as over a quarter of its investors failed to back a key pay report because of a big options pay-off for departed boss Martin Sorrell.

With the proxy votes for AGM resolutions released as the midday meeting started, the Guardian business live website reported that 27% of shareholders opposed the pay report, while 15.5% voted against the re-election of the ad giant’s chairman, Roberto Quarta.

READ: WPP CEO Martin Sorrell retires after internal probe into alleged personal misconduct

Sorrell quit WPP in April after the board opened an investigation into an allegation of personal misconduct. The company has not given any details and Sorrell has denied any wrongdoing.

On Monday, the Financial Times reported the departure was triggered by staff claims that he had bullied junior employees, plus allegations the tycoon was spotted entering an address in a London red-light district.

Sorrell was allowed to leave the company with share awards worth millions of pounds intact and without a non-compete clause. At the end of last month, Sorrell unveiled a stock market comeback after cash shell company Derriston Capital (LON:DERR) said it has reached an agreement to acquire S4 Capital Limited, a new company formed by the ex-WPP boss.

In a published statement to be delivered at the meeting, WPP’s chairman made no mention of the furore over Sorrell’s departure and focused on the FTSE 100-listed firm’s current trading performance.

Like-for-like revenue positive

Quarta said that WPP’s reported revenue for the first four months of 2018 were down 3.4% at £4.822bn, but with currency headwinds of 6.1% on a constant currency basis, revenue rose by 2.7% to US$6.633bn and like-for-like revenue increased by 1.4%.

The chairman noted that, in constant currency, WPP’s net debt as at 30 April 2018 was up £66mln on the same date in 2017, but down significantly compared with the first quarter, with average net debt in the first four months of 2018 up by £360mln over the same period in 2017, similar to the first quarter.

He added: “As indicated in the first quarter trading update, our quarter one revised forecasts are in line with budget, with a slightly stronger second half, at the revenue less pass-through costs level and show flat like-for-like revenue less pass-through costs compared with last year, with the revenue less pass-through costs operating margin also flat.”

Quarta continued: “For the remainder of 2018, the focus remains on improving revenue less pass-through costs growth and concentrating on meeting our operating margin objective, by managing absolute levels of costs and increasing our cost flexibility, in order to adjust our cost structure to significant market changes.”

More confidence in guidance

In a swift initial reaction to the statement, analysts at Liberum Capital said the fact that the four months performance is now positive “will be seen as reassuring and give more confidence in WPP’s guidance of flat like for like revenues ex-pass through costs and flat margins.”

They added: “The statement should also reassure though in that Media Investment, the core of WPP’s profits (we estimate c. 45% of profits), is resilient as highlighted in WPP’s comment that North American Media Investment did well in the first four months. We think secular concerns in this area have been overdone and the evidence so far backs that case.”

Liberum repeated a ‘buy’ rating and 1,750p target price on WPP shares, which in early afternoon trading were changing hands at 1,255.5p each, up 0.7% on Tuesday’s close.

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