Can new CEO Mark Read help steer WPP from its current lows with Thursday’s Q3 trading update?
It’s been a tough, internally seismic year for the advertising agency, with the departure of founder Martin Sorrell and a difficult economic landscape causing problems. Starting at £13.43, the stock had actually spiked to £14.76 in mid-February; yet that peak is a distant memory at this point, with WPP PLC slipping to a current trading price of £10.39, a level not seen since the first half of 2013.
The impetus for the firm’s most recent slide was September’s half year results. Reported revenue fell 2.1% to £7.493 billion, in large part due to currency headwinds; on a constant currency basis revenue was up 2.9%, with like-for-like rising 1.6% (accelerating to 2.4% in Q2). Perhaps more of an issue was the 7% decline in headline profit before tax and interest to £821 million, which was still down 2.3% in constant currency. The final kicker? News that its full year PBIT margin would be ‘similar to the first half decline of 0.4 margin points on a like-for-like basis’.
In that interim statement, Read also promised that the ‘review of strategy’ was underway, addressing the company’s structure, underperforming operations (particularly in the US) and how the firm is positioned in the future. And though the full report won’t be available until the end of the year, investors will be on the lookout for any hints as to what path the new CEO will be taking in Thursday’s Q3 update.
Beyond that, investors will want the maintenance of, or ideally improvement on, the 2.1% and 0.4% increases in like-for-like revenue and revenue less pass-through costs posted in July (mentioned in the current trading section of September’s statement). Oh, and any word on the US investigation into media-buying practices in the ad sector could also be key.
WPP PLC(LON:WPP) (LON:WPP) has a consensus rating of ‘Hold’ alongside an average target price of £14.53.
Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved."