* Shares down 15% after fourth-quarter sales drop 1.9%
* World's biggest ad agency sees no improvement in 2020
* WPP in middle of three-year turnaround under new CEO
(Adds reaction, background)
By Kate Holton
LONDON, Feb 27 (Reuters) - WPP 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.
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 and
American Express.
"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, Amazon and Alphabet Inc's
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 also being buffeted by industry
shifts and American groups Omnicom and IPG
performing more strongly.
Read has responded by merging agencies, changing incentive
schemes and hiring new talent in the United States.
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)
WPP (WPP)
