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Strategy review underway, says Mark Read after WPP's soft margin in H1'18

Excluding certain impacts from acquisitions and currency, WPP’s total revenue climbed 2.4 % and 1.6 % in the second quarter and first half of 2018, respectively

Mark Read

Shares of WPP slipped nearly 8 % in London yesterday morning after advertising’s largest holding company reported slowing sales in the critical North American market during the first half of this year.

In the second quarter, like-for-like sales in North America fell 0.3 %. They slipped 0.7 % in the first half of 2018.

Excluding certain impacts from acquisitions and currency, total revenue climbed 2.4 % and 1.6 % in the second quarter and first half of 2018, respectively.

Like-for-like sales in the U.K. were up 1 % in the second quarter and 3.1 % in the first half of the year; in Western continental Europe, like-for-like sales rose 4.6 % in the quarter and 1.7 % in the first half; and in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe region, sales spiked 4.5 % in the second quarter and 3.7 % in the first half of 2018.

Presenting the group’s first-half results after being confirmed on Monday as CEO, Mark Read said WPP had returned to top line growth for the first time in more than a year and nudged the 2018 net sales target higher, but margin concerns set the tone.

Read vowed to invest in creative talent in the United States to strengthen its position on Madison Avenue, as he seeks to rebuild the ad group by prioritizing sustainable growth over short-term profits.

“We took a view to get the investments in now to deliver sustained growth rather than hold back on everything to make the number,” Read said of the group margin of 13.3 %, down 0.4 points.

“The mix of performance by geography and function and a decision to invest in the growing areas of our business resulted in a slightly lower headline PBIT margin,” Read noted.

Read added that WPP is committed to “providing more effectively integrated solutions to clients” and highlighted recent account wins such as Adidas, Hilton, Mars, Mondelez, Shell and T-Mobile.

Read has promised to update the market on his broader strategy for the group by the end of the year, after he started selling some joint venture holdings to pay down debt.

“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,” he said.

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