Maja Pawinska Sims 04 Sep 2018 // 9:07PM GMT
LONDON — WPP’s quarterly results, announced one day after Mark Read was confirmed as the holding group’s new CEO, showed a downturn in revenue, leading to shares dropping by more than 8%.
But the news was not all bad for the PR and public affairs division, which includes Burson Cohn & Wolfe, Hill+Knowlton, Finsbury and Buchanan, where like-for-like revenue rose 6% in Q2, compared to only 1.1% in Q1.
The holding company said the performance of its PR and public affairs agencies was driven by strong growth in the UK and Germany and double-digit growth in Latin America and the Middle East.
Burson Cohn & Wolfe global CEO Donna Imperato said: “The constant demand from clients for integrated communications solutions helped Cohn & Wolfe end the first half of 2018 up 10.6% and set the stage for a fifth-consecutive year of double-digit growth. Burson-Marsteller’s revenue was flat but both agencies delivered double-digit increases in profit through the first six months of the year.”
Overall WPP revenue was down by 0.2% in the second quarter of 2018 compared to the same period last year, to £3.94bn, not helped by a rise in the UK pound. Sales showed like for like growth of 2.4%, up from 0.8 per cent in Q1. In North America, which represents a third of WPP’s revenue, like for like sales slipped by 0.3%.
Like for like sales were stronger outside the US, increasing by 1% in the UK, 4.6% in Western Continental Europe and 4.5% in Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
Mark Read, who becomes CEO after Sir Martin Sorrell’s sudden resignation in April, said: “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.”
Read said the second quarter of 2018 was WPP’s first quarter of like-for-like growth since Q1 2017, and the company had performed strongly in terms of winning and retaining business: “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.”
Industry analyst Ian Whittaker at Liberum issued a “buy” recommendation on the back of the results announcement, saying: “Our view continues to be that the agency model is, longer-term, still solid and that, while changes are required, this is not a broken industry.”
And he said it was likely that WPP would seek to sell some of its market research businesses to help drive growth: “We would not expect a revolution in its approach nor a break-up but we would expect a significant evolution.
"WPP’s comment that it will ‘address under-performing units’ raises, to us, the possibility that WPP may look to dispose of at least significant parts of its Market Research (what it calls Data Investment) assets, which would have the dual benefit of both improving the stated performance of the group and essentially resolving any balance sheet concerns, thus allowing WPP greater flexibility to drive growth.”