4th Sep 2018 12:57
LONDON (Alliance News) - WPP PLC on Tuesday said its new chief executive officer intends to return the business to growth after seeing a decline in revenue in the first half of 2018.
On Monday, the advertising company announced it had promoted Mark Read, the head of its digital division, to CEO. The appointment was expected, as it had been reported by several media outlets.
Read - who has been with WPP for nearly 30 years - had been acting as joint chief operating officer alongside Andrew Scott since mid-April when former CEO and founder Martin Sorrell resigned. Scott will remain COO.
Sorrell left WPP following the conclusion of an investigation into what WPP called "an allegation of misconduct" which it said did not "involve amounts that are material" to the company.
"As chief executive, my focus will be on invigorating our company and returning the business to stronger, sustainable growth," Read said on Tuesday.
WPP posted pretax profit for the six months to the end of June that was 8.6% higher at GBP846.5 million, compared to GBP779.2 million reported a year earlier, despite revenue dropping 2.1% to GBP7.49 billion from GBP7.65 billion.
However, on a constant currency basis, revenue grew by 2.9%, reflecting the strengthening of the pound in the first half, primarily against the dollar.
On a like-for-like basis, which excludes the impact of acquisitions as well as currency, revenue was up 2.4% in the second-quarter, a significant improvement compared with first-quarter growth of 0.8%, giving 1.6% for the first-half.
On a divisional basis, revenue in the Advertising & Media Investment Management segment fell by 7.3% to GBP3.44 billion as advertising business in North America remains under pressure.
The Data Investment Management unit revenue declined 5.1% to GBP946 million, due to the challenges in the social research companies Kantar Insights, Kantar Public and Kantar Health.
Meanwhile, the Specialist Communications, Brand Consulting, Health & Wellness business was the strongest performer, with revenue up 2.5% to GBP2.01 billion, despite some US client losses towards the end of 2017.
Group billings were down 1.0% to GBP26.66 billion in the first-half compared to GBP26.92 billion a year before, although they were up 4.1% at constant currency. WPP said it returned to a strong performance after winning net new business billings of USD3.2 billion during the period.
Profit growth was helped by a reduction in general & administrative expenses, which fell by a third to GBP432.1 million from GBP643.7 million.
In addition to that, WPP generated one-off gains of GBP188.5 million, primarily relating to the gain on the sale of its investment in Globant SA.
However, these gains were partly offset by restructuring costs of GBP45.5 million and the company's share of associate company exceptional losses of GBP28.4 million.
That gave a net exceptional gain of GBP114.6 million in the first-half, compared to GBP300,000 net exceptional loss reported a year ago.
Headline pretax profit, meaning from normal business only, was down 7.4% to GBP735 million from GBP793 million the year prior and down 2.5% in constant currency.
WPP maintained its interim dividend at 22.7 pence per share. The company also noted that it repurchased 15.9 million shares during the period at an average price of 1,263 pence each, totalling GBP201 million.
The stock was trading 5.6% lower on Tuesday afternoon at 1,205.00 pence per share, making WPP the worst performer in the FTSE 100 index of London large-caps.
WPP said its average net debt increased during the period to GBP4.98 billion from GBP4.71 billion in the first half of 2017, reflecting the rise in capital expenditure and dividends, together with a worsening net working capital position towards the end of 2017.
As at June 30, net debt stood at GBP4.63 billion compared to GBP4.72 billion a year ago. The decrease reflects GBP469 million proceeds in relation to disposal of interest in certain associates and investments.
The company continues to sell its holdings to reduce the average net debt to earnings before interest, taxes, depreciation, and amortization ratio. WPP sold its stake in online advertising firm AppNexus for GBP169 million in August and more recently disposed of its interest in outdoor advertising company oOh!media for an undisclosed sum.
Looking forward, the company said like-for-like revenue in July grew by 2.1%, in line with the first-half growth rates.
WPP said it plans to update the shareholders on its new strategy before the year-end. The update will reveal the actions that will be taken to better position the business for growth and to address under-performing units, the company said, as well as detail any restructuring costs.
"The second quarter of 2018 was WPP's first quarter of like-for-like growth since the first quarter of 2017, and the company has performed strongly in terms of winning and retaining business over the period," said Read.
"Our review of strategy is underway, addressing our structure, our underperforming operations, particularly in the US, and how we position the company for the future," added Read.
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