WPP profit slumps 40% on lower sales, writedowns | 1 March 2019

Read said “The newly formed VMLY&R for example has enjoyed a strong start with client wins totalling $25 million in its first 90 days”

Read said “The newly formed VMLY&R for example has enjoyed a strong start with client wins totalling $25 million in its first 90 days”

Rival Publicis alarmed investors with a weak showing last month and WPP said its underlying net sales would fall by as much as 2% in 2019 after dropping 0.4% in 2018.

WPP, which was rocked by the sudden departure a year ago of founder and chief executive Sir Martin Sorrell, plans to shed under-performing parts of the business and make itself leaner. Under his plan he hopes to bring WPP back in line with peers by the end of 2021.

"Through 36 disposals since April 2018, we have strengthened our balance sheet and streamlined our business, raising £849mln of cash proceeds in 2018".

For 2019, the company expects like-for-like revenue less pass-through costs to fall by 1.5% to 2%.

But, as he said at the strategic update in December, the client losses will make 2019 challenging, particularly in the first half.

WPP faced a tumultuous year in 2018, losing its founder Sir Martin Sorrell, 40% of its market value and several big clients as the advertising industry struggled with competition from Facebook and Google. Analysts had on average expected a decline of 0.6% for the year and 1.5% for the fourth quarter.

"We are at the beginning of a three-year turnaround plan, but WPP's new positioning. with stronger, more integrated, more tech-enabled agencies is already proving effective", chief executive Mark Read said in the statement.

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FTSE 100 advertising firm WPP (WPP) tops the FTSE 100 leaderboard, up 7.8% to 889.8p, as both its 2018 numbers and 2019 guidance are a little bit better than feared.

He said the business is performing strongly in Western Europe, Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and "we are addressing our performance in the United States", where there ha been "important wins" such as Volkswagen and "significant investments" were being made in talent in what is the group's largest market. "With the shares at 9x adjusted PE, we see considerable scope for a re-rating".

George Salmon, equity analyst at Hargreaves Lansdown, said: "Stronger momentum in Europe and emerging markets provide some welcome relief after a torrid 2018".

The group's total dividend to investors for the year is 60p a share, which is the same as a year earlier.

"The light at the end of the tunnel is getting nearer, but with 2019 set to be impacted by continued weakness in the key USA market, revenue and margin trends could well get worse before they get better", he added.

In late morning trading, shares gained 7.9% to 891p.

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