Ad Giant WPP Posts Surprise Sales Rise

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(Bloomberg) -- WPP Plc made an unexpected return to organic sales growth in the third quarter as it won more business in the United Kingdom and Western Europe, giving Chief Executive Officer Mark Read more cushion to meet annual targets.

  • The London-based advertising group posted a 0.7% gain in like-for-like revenue less pass-through costs, including the Kantar unit in which it’s selling a majority stake. Analysts in a company-compiled survey had forecast a 0.6% decline. It was the first sales gain since the second quarter of 2018.

Key Insights

  • The surprise sales boost, even while small, and reiteration of WPP’s guidance comes as a relief to investors who watched French rival Publicis Groupe SA cut its 2019 revenue forecast for the second time in three months on Oct. 10, citing a squeeze on traditional advertising by U.S. consumer-goods companies.
  • In contrast, WPP said it’s seen a “significant improvement” in North America, even while business is still down there, as well as in China. It saw improvement in all markets in the third quarter, as it won new business from clients including Mondelez International Inc. and EBay Inc.
  • In an interview, Read said that while the third quarter was encouraging, the comparatives for the fourth quarter are tougher and he doesn’t want to “get in the business of micro-adjusting the guidance.” With the Kantar stake sale moving ahead and other internal mergers complete, much of his bigger changes to streamline WPP have been made, he said.
  • “We’ll continue to see some sort of tidying up of the way we operate and organize, but the bigger moves have been made,” Read said. Read took over from company founder Martin Sorrell over a year ago, and has been trying to simplify the company and pay down debt.

Market Reaction

  • WPP shares rose as much as 6.3% on Friday and were up 5% as of 8:30 a.m. in London, bringing the year-to-date gain to 14%.

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  • See the numbers here

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