WPP PLC (LON:WPP) has confirmed the appointment of joint chief operating officer Mark Read as its chief executive officer with immediate effect filling the void left by the advertising giant’s founder Martin Sorrell’s departure earlier this year.
Read had been seen as the leading internal candidate to become CEO, having stepped up to become WPP’s joint chief operating officer – together with Andrew Scott - in April after Sorrell quit after 33 years in charge following a complaint of personal misconduct against him, which he denied.
READ: WPP expected to name current joint chief operating officer Mark Read as CEO
In a statement today, the FTSE 100-listed group said Scott will continue in his role as chief operating officer, while Roberto Quarta has resumed his role as non-executive chairman having stepped up to an executive role following Sorrel’s departure.
The group – which regularly faced criticism over Sorrel’s pay package as CEO - said Read will be paid an annual salary of £975,000 and an annual bonus of up to 250% of salary with mandatory deferral of at least 40% of the bonus into shares deferred for a two-year period.
It added that the new CEO will also have a LTIP (long-term incentive plan) award of 350% of salary, with performance measured over a five-year period.
The firm stressed that Read “will be paid in accordance with the Compensation Policy approved by shareowners on 7 June 2017, as set out in the 2016 Annual Report.”
Restrictive covenants
WPP also pointed out that Read’s contract of employment contains restrictive covenants, including an industry non-compete, a non-deal with clients and a non-poach and non-employ of key individuals at the group – again something that the firm had failed to put in place for Martin Sorrell.
WPP’s chairman, Quarta said: "The Board carried out a rigorous selection process, assessing internal and external candidates.
“That process, alongside Mark's wise and effective stewardship of the business in the last few months, left us with no doubt that he is the right leader for this company, and we are delighted to announce the Board's unanimous decision to appoint him as Chief Executive Officer of WPP.”
Mark Read commented: "Our industry is going through a period of structural change, not structural decline, and if we embrace that change we can look ahead to an exciting and successful future.”
Results due Tuesday
WPP is due to publish second-quarter results on Tuesday, In a preview, analysts at Deutsche Bank said: “Coming at the end of a quarter where the ad agency sector has delivered volatile organic growth, we think WPP will report a solid, unspectacular set of results, with broadly flat organic growth. If anything, the risk is to the upside with comps easing 250 bps vs. 1Q.”
They added: “With the shares down c.20% over the past 12 months and 2018E PE multiple of 11x/ FCF yield 10%, an in-line set of results should be enough to provide some modest upside for the shares.”
Liberum positive
In a note to clients, commenting on Read’s appointment, analysts at Liberum Capital said: “We would see that as a positive. He comes with the advantages of having run one of the major units (Wunderman) and of knowing WPP extensively as well as being known to the markets in his previous role as Deputy CEO.
“Moreover, in the past several months during his tenure as joint COO, the group has won a number of major contracts, including two major recent wins at Mars and Mondelez and taken steps to reduce the net debt level by selling off minority stakes in several businesses.”
Liberum repeated its ‘buy’ rating and 1,750p price target on WPP shares.
In mid-morning trading, the ad giant’s stock was trading at 1,284.5p, up 0.5% on Friday’s close.
-- Adds analyst comment, share price --