Biggest Ad Group WPP Adds Urgency to Digital Push After Slump
(Bloomberg) -- WPP Plc Chief Executive Officer Mark Read will put online ad technology and data intelligence at the heart of a turnaround plan for the world’s biggest advertising group on Tuesday in his most detailed strategy update since the departure of company founder Martin Sorrell.
Read will stress WPP’s capabilities in technology and data at an investor day in London, according to three people familiar with the plans. He is also expected to give an update on the sale of a majority stake in market research unit Kantar and may reveal a new company logo, said the people, who spoke on condition of anonymity as the details are not public.
Read is set to announce a restructuring charge of several hundred million pounds and is expected to lay out a timeline for when WPP will recoup the benefits from those savings, according to a separate person familiar with the matter.
WPP probably won’t give specific guidance on future revenue targets but could give more clarity on cost savings, Barclays analysts Julien Roch and Emily Johnson wrote in a note to clients Friday. A precise schedule of restructuring costs and their benefits over the next three to five years would be “extremely useful,” the analysts wrote.
A WPP spokesman declined to comment on the content of Tuesday’s strategy update.
Since taking over from Sorrell in April, Read has repeatedly said there are “no sacred cows” as he tries to restore stability to WPP’s myriad different agencies that create, deliver and measure the effectiveness of advertising campaigns. Sorrell abruptly left the company he founded following an investigation into misconduct, but has denied any wrongdoing. Read was made permanent CEO in September.
A slowdown in business and a spate of account losses have caused the London-based company’s worst share price slump since the financial crisis. The shares are down 39 percent this year. WPP cut its full-year revenue forecast in October, saying like-for-like sales will be down between 0.5 percent and 1 percent in 2018. The company is aiming to reduce debt with asset sales.
Read has vowed to make the group easier for clients to navigate and wants to invest more in digital services to better serve big advertisers as online marketing takes a growing chunk of their budgets. Facebook Inc. and Alphabet Inc.’s Google are moving to work directly with advertisers and cutting out agency middlemen, and WPP recently lost the creative account with automaker Ford Motor Co., one of its biggest and oldest clients.
He has announced a flurry of initiatives including merging some agencies and selling some of WPP’s positions in other companies. WPP is currently looking to sell its stake in The Farm Group, a TV post-production agency, a sale that could generate about 50 million pounds ($63 million), according to one of the people familiar with the company’s plans.
Investors are waiting to hear whether those moves will meaningfully reduce costs and whether Read has a compelling strategy to revive revenues, said Matthew Bloxham, an analyst at Bloomberg Intelligence.
Another key focus will probably be the company’s strategy in North America, WPP’s largest region for sales and where it’s seen a marked slowdown. WPP’s difficulties have come despite a strong year for competitors such as Interpublic Group of Cos. and Dentsu Inc., which have seen their shares rise 13 percent and 7.2 percent year-to-date, respectively.
“Read will want to give the impression of a turnaround story and forward momentum into 2019,” said Alex DeGroote, a media consultant at DeGroote Consulting. “It’s not going to happen overnight. Improving performance is probably not going to happen at best until the second half of next year.”
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