An already bad 2018 turned worse in October, a third quarter update-prompted plunge leaving the advertising agency on course to close out December at £8.50, nearly 37% lower than where it started the year.
After moving laterally throughout January, the stock then dove towards a 6-year-plus low of £7.93 in early February as rival Publicis revealed an unwelcome set of fourth quarter results. WPP PLC now sits at a current trading price of £8.50.
Going back to that Q3 statement in October, it is never good when your CEO says he isn’t going to ‘sugarcoat the reality’ of the firm’s performance. With the industry facing ‘structural change’, and a ‘further weakening’ in its North American division, where comparable sales dropped by 5.3%, like-for-like revenue less pass-through costs were far worse than forecast, falling 1.5%.
During that update, chief exec Mark Read said it would take ‘decisive action and radical thinking’ to turn the company around, including finding a buyer for its research group Kantar, valued at around £3 billion. WPP expanded on this in December, announcing it would cut 3500 jobs worldwide and shut or merge 200 offices, though it would also be hiring 1000 creative staff as it shifts its focus back to its advertising roots. This restructuring would cost a not insignificant £300 million over 3 years, in theory leading to savings of £275 million a year by the end of 2021.
As per December’s revised guidance, WPP is expecting full year like-for-like revenue less pass-through costs to fall around 0.5% – better than October’s estimates, but way off the previously suggested 0.3% rise. Any word on offloading Kantar, meanwhile, could end up being the headline story on Friday.
WPP PLC (LON:WPP) has a consensus rating of ‘Hold’ alongside an average target price of £12.07.
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