WPP results: a wake-up call, not an alarm bell

Martin Sorrell has work to do as WPP disappoints, but it could be much worse.

by Stephen Jones
Last Updated: 01 Mar 2018

If there is one thing you could not accuse Martin Sorrell of it’s blind optimism.

While there was no sign of his famed ‘black swans’ (looming macroeconomic risks - perhaps they came home to roost), his supporting statement issued alongside the publication of WPP’s gloomy 2017 performance made for rather unhappy reading. 

Sorrell admits that ‘2017 for us was not a pretty year’ and highlights the flat like-for-likes, a downturn in net sales and slow top line growth that have culminated in WPP’s least impressive annual showing since 2009 and a share drop of 13%.

But is it really that bad? Below the surface not really.

Reasons to be cheerful

With all the pessimism surrounding the release, it is easy to forget that his was a slowdown in growth, but not a financial loss.

WPP’s profit after tax was up 27.4% (22.6% in constant currency), reported revenue was up 6.1% and while organic net sales were down in almost all regions, there was a 9.1% rise in the UK. Of course a major drop in share price is never good and casts doubts over the future, but the point here is that the situation is hardly terminal.

Let’s also not forget that this was not unexpected and is not unique to WPP.

It has been well documented that 2017 has been a rather ugly year for big ad firms as a whole: Publicis Groupe posted just 0.8% organic growth and Omnicom had a weak fourth quarter with like for like net income decreasing by 27%.

The problem has come on two fronts; a cut in advertising spend among traditional retail and consumer brand clients and a general shift towards digital advertising over traditional print and television ads.

At least Sorrell and the industry as a whole already know where it’s gone wrong and what they need to do to change it.

As he references in his statement, WPP has  implemented its strategy of ‘horizontality’ to the company’s rather unwieldy structure in attempts to better match the changing market. This largely involves a greater consolidation of the numerous internal agencies to simply operations. Of course restructuring of any type takes time to bear fruit so we'll have to wait and see what effect it has.

Sorrell’s certainly got work to do, but the collapse into administration or worse of Carillion, Toys "R"Us and Maplin already this year has  shown us that it could certainly be much worse.

Image Credit: World Economic Forum/Flickr

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