WPP PLC’s (LON:WPP) new boss, Mark Read – who only started in his new job yesterday – has said he will lay out his new strategy for the advertising giant by the end of the year as the firm reported a modest rise in underlying first-half revenue and edged up its full-year sales forecast, but its shares still dropped amid margin worries.
The FTSE 100 group reported 0.3% growth in like-for-like revenue, less pass-through costs in the first-half, with second-quarter growth stronger, up 0.7%.
READ: WPP appoints Mark Read as CEO with immediate effect, filling void left by Martin Sorrell’s departure
However, the firm’s headline pre-tax profit was down 7.4% in the first-half to £735mln, with the constant currency decline 2.5%.
WPP’s operating margin fell by 0.4 points in the period, and the group said it is likely to stay at a similar level for the full year as it restructures.
But the group said it now expected growth in full-year net sales to come in at a similar level to the first half, ahead of its previous prediction of no growth at all.
New CEO Read commented: “The second quarter of 2018 was WPP's first quarter of like-for-like growth since Q1 2017, and the company has performed strongly in terms of winning and retaining business over the period."
Read, formerly WPP’s digital boss, became the group’s joint chief operating officer – together with Andrew Scott - in April after founder Martin Sorrell quit after 33 years in charge following a complaint of personal misconduct against him, which he denied.
Read continued: "As Chief Executive, my focus will be on invigorating our company and returning the business to stronger, sustainable growth.
“Our review of strategy is underway, addressing our structure, our underperforming operations, particularly in the United States, and how we position the company for the future. We will provide an update by the year-end.”
WPP left its interim dividend unchanged from a year earlier at 22.7p.
Shares decline
In early morning trading, having gained on Monday following confirmation of Read's appointment, WPP shares topped the FTSE 100 faller's list, down 7.4% at 1,18150p.
Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “New CEO Mark Read will be glad the slide in revenues seems to have abated, but with margins under pressure instead, profits are still sinking.”
He added: “We won’t get a full update on plans to get WPP back on track until later this year, but there are several areas that need attention. Net debt is expected to shrink, which is likely to mean further asset sales, and with dividends already above the target payout ratio, that might come at the expense of growth in the payment to shareholders.”
The analysts concluded: “Longer term, margins are expected to stabilise and earnings per share targets are ambitious. But the big question is whether Mr Read feels WPP’s conglomerate structure remains the way forward, if not, then WPP as we know it might not long survive the departure of its founder.”
-- Adds share price, analyst comment --