February 27, 2020 / 7:31 AM / in 3 months

WPP shares slump to lowest since 2012 as sales slide

LONDON (Reuters) - WPP (WPP.L) shares plunged to their lowest level in nearly eight years on Thursday after a sharp slowdown in fourth-quarter trading derailed the latest recovery attempt at the world’s biggest advertising company.

FILE PHOTO: Mark Read, CEO of WPP Group, the largest global advertising and public relations agency, poses for a portrait at their offices in London, Britain, July 17, 2019. REUTERS/Toby Melville/File Photo

WPP, which is in the middle of a three-year turnaround plan to counter the loss of major clients and the threat from big tech giants, also said it did not expect any improvement this year but aims to grow in line with rivals in 2021.

While the results and outlook were broadly in line with WPP’s previous comments, a 1.9% fall in fourth-quarter organic sales after 0.5% growth the previous quarter spooked investors.

Its shares fell 15% in early trading to 773 pence, more than 60% below their record high set in 2017 before the company lost major clients in the United States such as Ford (F.N) and American Express (AXP.N).

“It’s the first year of a three-year plan,” Chief Executive Officer Mark Read told Reuters. “We expected Q4 to be a little bit tougher and it came in in line with our expectations.”

He said while the company had a string of contract reviews in 2018 and 2019 it had less work under review in 2020.

“I’m confident that I’ll be able to talk to you about something very soon that is interesting,” he said, referring to a potential new global contract.

“There is good momentum inside the company and we have been investing in people and talent to turn the company around.”

Read, a WPP veteran who took over from founder Martin Sorrell in 2018, has been tasked with rebuilding the owner of the Ogilvy, Grey and Finsbury agencies after clients complained the company had become too unwieldy and slow in a digital age.

It has also faced fluctuating spending from some of its biggest consumer goods clients and competition from tech firms such as Facebook (FB.O), Amazon (AMZN.O) and Alphabet Inc’s (GOOGL.O) Google, which use their own data to target adverts.

INDUSTRY CHANGE

Analysts at Citi, which rate WPP shares as a “Buy”, said they had expected a weak fourth quarter but the scale of the disappointment was more pronounced than anticipated.

“The impact here, to be clear, is not so much on the forecasts, where this makes limited difference, but rather on sentiment. The question now is whether the group can regain a sense of momentum as 2020 unfolds,” they said.

WPP’s traditional rivals have faced fluctuating fortunes, with France’s Publicis (PUBP.PA) also being buffeted by industry shifts and American groups Omnicom (OMC.N) and IPG (IPG.N) performing more strongly.

Read has responded by merging agencies, changing incentive schemes and hiring new talent in the United States.

FILE PHOTO: Branding signage is seen for WPP Group, the largest global advertising and public relations agency at their offices in London, Britain, July 17, 2019. REUTERS/Toby Melville

WPP said there was a slowdown in the fourth quarter across nearly all its regions and particularly at specialist agencies, where organic sales fell 7.4%. They include brand consulting and advertising, and incorporate the loss of the Ford contracts.

For 2019 overall, WPP reported a 1.6% drop in organic sales, which excluded Kantar following the sale of a 60% stake in the data business to U.S. private equity firm Bain Capital for $3.1 billion. The sale helped the company cut its debt significantly.

For 2020, WPP said it was aiming to match its performance last year for both organic revenue and its headline operating profit margin, which came in at 14.4%. The company’s outlook did not include any possible impact from coronavirus.

Reporting by Kate Holton; Editing by Paul Sandle and David Clarke

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