WPP posts sharp drop in third quarter trading, cuts guidance as new boss unveils more disposal plans

The FTSE 100-listed firm saw its underlying net sales less pass-through costs fall by 1.5% in the third quarter, compared with a 0.7% rise in the previous three months

New WPP boss Mark Read
WPP said like-for-like underlying revenue is now likely to be down 0.5%-1.0%

WPP PLC (LON:WPP) saw its shares drop on Thursday as the advertising giant reported a sharp fall in third-quarter trading and cut its full-year guidance, while its new boss unveiled plans for further sell-offs and said the group will hold off from making more acquisitions.

The FTSE 100-listed firm, which saw founder and CEO Martin Sorrell leave under a cloud in April, posted underlying net sales less pass-through costs fall by 1.5% in the third quarter, compared with a 0.7% rise in the previous three months.

READ: WPP appoints Mark Read as CEO with immediate effect

It said third-quarter reported revenue was down 0.8% to £3.758bn, impacted by currency headwinds of 2.0%.

The group also reduced its full-year 2018 guidance to reflect the slowdown in the third quarter and a more cautious outlook for the rest of the year, with like-for-like revenue less pass-through costs now likely to be down 0.5%-1.0%.

The group, which is being rebuilt by new chief executive Mark Read who took over the reins fully in September, said it had decided to sell a stake in its data division Kantar because, given its many priorities, it thinks it could run the unit better alongside a financial or strategic partner.

Decisive action needed

Read commented: "Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach."

He added:  "The slowdown primarily reflects a further weakening of the performance of our businesses in North America and in our creative agencies, issues that we highlighted in our interim results.”

WPP also revealed that its finance director Paul Richardson is to step down after 22 years in the role and will leave during the course of 2019.

The group said it will issue an update on its strategy in December which will “address the actions that have already been taken and those we will be taking to better position the business for growth”.

In early trading, WPP shares topped the FTSE 100 fallers board, dropping 15.6% to 891.20p.

Not many positives to spin

George Salmon, equity analyst at Hargreaves Lansdown commented: “While the group may be PR masters by trade, with net revenue trends falling pretty much across the board, major contracts slipping away and margins coming under pressure, there’s not many positive news stories to spin out of these results.”

He added: “Taking over at a group where success depends so much on having an in-depth knowledge of all the various agencies and divisions was always going to be a serious challenge.

“16 non-core disposals mean this journey has already started, and the decision to sell a stake in Kantar is the next step. We can see the rationale here, but one can’t help but notice the division was the only one not to see like-for-like net revenue trends weaken this quarter.”

He concluded: “With businesses the world over focusing on ways to reduce advertising costs, the worry is others will follow suit.”

 -- Adds share price, analyst comment --

Quick facts: WPP PLC

Price: 593 GBX

Market: LSE
Market Cap: £7.27 billion

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