WPP tumbles after CEO outlines painful turnaround effort

Bloomberg

WPP Plc Chief Executive Officer Mark Read is off to a disappointing start for investors with a cut to the ad giant’s outlook, triggering the company’s biggest share slump in almost two decades.
The owner of Ogilvy, Grey and J. Walter Thompson said it now expects sales to fall this year and its profit margin to decline as it revealed a third-quarter earnings miss, continuing a string of bad news that’s hammered its stock. The shares dropped as much as 23 percent to a six-year low on Thursday, wiping out 3 billion pounds ($3.9 billion) of market value.
The grim forecast means a turnaround pledged by Read will take longer to deliver and shows how tough it’s been for him to wrap his arms around challenges facing the world’s biggest ad group since taking over from founder Martin Sorrell in April.
Read, who stepped in when Sorrell abruptly resigned and took up the permanent CEO post in September, is contending with a weakening of the company’s business in North America and contract losses from key clients including Ford Motor Co. He’s trying to reorganise an unwieldy global network of hundreds of agencies built up by Sorrell over three decades, just as major clients cut spending and new digital rivals emerge.
WPP has been too slow to adapt to structural changes in the industry, has underinvested in key areas and has become too complicated, Read said in a sales update, pledging “decisive action and radical thinking.”
“Our industry is not in structural decline, it’s in structural change,” Read said in a phone interview.
“Perhaps we’ve been slow to react to those changes in the last two years. We need to accelerate the pace.”
While Read has been offloading small positions WPP has held in other businesses for months, his first big move as CEO came when he announced that WPP will sell a stake in Kantar, its data and market research unit, to reduce debt. The unit, which accounts for about 15 percent of the group’s sales, has been seen by analysts as underperforming and the most likely large sale candidate. Liberum has valued it at more than 3 billion pounds.
Investors will get a strategy update from WPP in December, including a “new vision” for WPP, Read said in the statement. He offered hints at his plan, pointing to a simplified structure, investments in technology and talent, and a new culture.