WPP results see green shoots but new CEO Mark Read says underperforming US operations will be scrutinised

WPP outlines 2018 interim results / WPP

WPP has made its first half year financial announcement since Sir Martin Sorrell left the business earlier this year, just one day after appointing former Wunderman leader Mark Read as his permanent replacement.

Overall, the outlook is still tough for the advertising giant as reported revenue was down 2.1% at £7.493bn but, as Read points to in his first financial commentary as CEO, it’s is the first quarter to see like-for-like revenue to grow since 2017, with Q2 2018 up 2.4%.

As part of the announcement, he briefly outlined his intentions but admitted that the strategy was still being worked on. “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.”

Commenting on the results, he said new business and client retention had factored into early signs of recovery.

“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. At our first quarter trading update we said there was no standing still, and in the last few months we have made progress in a number of important areas.

“We have focused our efforts on providing more effectively integrated solutions to clients and, in competitive pitches, we have won or grown business with clients including Adidas, Hilton, Mars, Mondelez, Shell and T-Mobile,” he added.

He attributed client retention to initiatives around simplifying its business, including the creation of co-locations in New York, Kuala Lumpur, Prague and Toronto.

Another positive factor for the company was in balancing its cash, after it sold off 15 divestments, including Globant and Appnexus, generating £676m this year.

Despite this, he warned that margins were slimmed by investment into growing areas and a mix of geography performance. “The mix of performance by geography and function and a decision to invest in the growing areas of our business resulted in a slightly lower headline PBIT margin.”

The tone overall was lighter than Sorrell’s last few comments on financial results, which were regularly blunt about the outlook, calling 2017 ‘not pretty’.

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