WPP bosses rule out breakup but back sell-offs

WPP bosses have signalled a willingness to sell off underperforming parts of the global marketing empire but have ruled out a complete breakup following the departure of founder Sir Martin Sorrell, as shares surged almost 9% after a better-than-expected first quarter.

WPP is already running the rule over the future of market research arm Kantar, which continues to underperform, and has received an approach from the private capital group CVC. The market research division, which accounts for 15% of WPP’s profits and 18% of revenues, is valued at about £3.5bn.

“Having worked here 20 years or more and talking to clients and seeing what they want it doesn’t make sense to break it up,” said Mark Read, who is jointly running WPP while a successor to Sorrell is found. “That doesn’t mean we can’t look at specific asset sales.”

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Analysts believe that a sale of the parts of WPP could net investors at least £22bn. WPP’s market capitalisation is £14bn, and its share price has fallen by more than a quarter in the past year.

Read and Andrew Scott, promoted to joint chief operating officers following Sorrell’s resignation on 14 April, said they intended to “proactively address the underperforming parts of our business … and maximise shareholder value.”

“It is too early to speculate about specific asset sales,” said Read. “I don’t believe breaking up the group makes sense. I think you can rule it out quite straightforwardly.”

WPP reported a fall in revenue of just 0.1% to £2.94bn in the first quarter, beating analysts’ expectations of a fall of about 1% as clients pull back from committing marketing spend to be handled by global agency holding companies.

WPP, which is facing a global review of the creative ad business of its biggest client, Ford, has improved significantly from a poor start in which like-for-like revenues fell 1.2% in January. Nevertheless, it is its worst first-quarter performance in the best part of decade.

This followed the world’s largest ad group weathering its worst year for growth since the recession in 2009, with a 0.9% fall in 2017.

Read said WPP’s media buying, digital and PR businesses did well, and geographically the company performed well in faster-growing markets such as Asia Pacific and Latin America.

He said the company was underperforming in North America and the markets “most challenged by structural changes in advertising and parts of market research”.

The results mark the last with Sorrell as chief executive after he resigned in April from the company he founded 33 years ago amid an investigation into allegations of personal misconduct.

“Our people are getting on with business as usual, and our clients have expressed their continued support for and confidence in WPP,” said Read and Scott in a statement. “Our priority is to focus on growth. We will proactively address the underperforming parts of our business and we need to ensure that our capital is deployed to those areas that will grow fastest and maximise shareholder value.”