* Shares up 5% on improving net sales
* Reiterates full-year outlook
* Wins new work from eBay and Mondelez
(Adds reaction, background, shares)
By Kate Holton
LONDON, Oct 25 (Reuters) - WPP reported a return to
quarterly organic sales growth for the first time in over a year
on Friday, with a new strategy from boss Mark Read helping the
world's biggest advertising company to attract talent and win
more work.
The British company, which has been hit in recent years by
major client losses in North America, said despite the improving
trajectory it maintained its cautious 2019 outlook because there
would be twists and turns ahead.
The upbeat statement shows WPP has avoided the problems
ensnaring French rival Publicis, which spooked markets
earlier this month when it cut its sales outlook, and was moving
more in the direction of the solidly performing American groups
Omnicom and IPG.
"The improvement over the quarter has come from across the
board which is encouraging," Read told Reuters. Its shares rose
4% in early trading.
Read, a company veteran who took over from founder Martin
Sorrell last year, has merged agencies and changed incentive
schemes to provide a more streamlined service after clients
complained that the owner of Ogilvy, Grey and Finsbury had
become too unwieldy.
Results released on Friday showed organic growth less
pass-through costs, its key sales measurement, rose 0.7% in the
third quarter, an improvement on the first half when it dropped
2% and against a consensus of down 0.6%.
That rise included a contribution from Kantar, its market
research arm which it is selling. Excluding Kantar net sales
rose 0.5%.
For the year it reiterated its expectation of a drop of
between 1.5% and 2% and a 1.0 point drop in headline operating
margin.
WPP's performance has steadily improved through the year as
it recovered from the loss of work from clients such as Ford and
American Express. It is hiring new staff in the United States to
rebuild its creative agencies and says it is merging some
operations to provide a more joined up service for customers.
Net sales in North America dropped by 3.2%, an improvement
on the 5.9% drop in the second quarter and 8.8% in the third.
Data from Refinitiv shows sentiment around the group started
to improve around this time last year, with analysts lifting
their recommendations. Currently of 24 recommendations, 3 are a
strong buy, 8 are a buy, 10 are at hold and 3 are a sell.
The group showed improvement across all its regions, helped
by contract wins in the quarter including Mondelez and eBay.
Analysts at Citi said WPP still traded at more than a 20%
discount to U.S. peers and the stock had room to recover.
"Although the company has sensibly not decided to move up
guidance at this stage (even if there is some scope for
optimism), the challenge will be keeping a lid on expectations
for 2020," they said. It rates WPP a buy.
(Reporting by Kate Holton; editing by Paul Sandle and David
Evans)
WPP (WPP)
