WPP to ramp up consolidation as Sir Martin Sorrell says 2017 'not pretty' for agency giant
The boss of WPP has pledged to accelerate the "simplification" of its structure after the world’s largest marcomms group reported a 0.9% fall in 2017 net sales and a 0.3% drop in annual revenues.
Sir Martin Sorrell said 2017 “was not a pretty year” for the company and cited the impact of technological disruption and the emergence of zero-based budgeters among the factors for its sluggish performance.
WPP has forecast no growth for 2018 and will now "escalate" the programme of internal consolidation that has already seen several of its most prominent media and marketing agencies merge as it seeks to put a simpler proposition to clients.
WPP chief Sir Martin Sorrell
At the time of the publication, the company's share price had tumbled by 13% on the news.
“2017 for us was not a pretty year, with flat like-for-like, top-line growth, and operating margins and operating profits also flat, or up marginally,” said Sorrell.
“The major factors influencing this performance were probably the long-term impact of technological disruption and more the short-term focus of zero-based budgeters, activist investors and private equity than, we believe, the suggested disintermediation of agencies by Google and Facebook or digital competition from consultants.
"In this environment, the most successful agency groups will be those who offer simplicity and flexibility of structure to deliver efficient, effective solutions – and therefore growth – for their clients. With this in mind, we are now accelerating the implementation of our strategy for the group.”
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The reorganisation of WPP’s myriad brands began in earnest last year as the company combined its media agencies Maxus and MEC into Wavemaker, merged five of its design consultancies into Superunion and folded digital shop Possible into stablemate Wunderman.
This week WPP also revealed that it would be merging its PR firms Burson-Marsteller and Cohn & Wolfe to create Burson Cohn & Wolfe.
“These are all examples of simplifying our offer more effectively,” the company said in its preliminary results statement. “This escalation will continue as we continue to work with clients on developing the ‘agency of the future’ and who, at the same time, demand faster, better, cheaper.”
While consolidation was the dominant theme of 2017 for WPP, another headline-grabbing story from the year – the cyber attack on its agencies in June – also makes an appearance in the results.
WPP’s statement revealed that the company has invested significantly in infrastructure to prevent a repeat of such a costly incident.
It attributed £12.8m worth of its spending to “the project to transform and rationalise the group’s IT services and infrastructure including costs relating to the attack."