Analysts are expecting disappointing figures for WPP later in the week and predict more troubled times for the firm’s new boss Mark Read.
Analysts expect an annual drop in revenues of 4 per cent for the advertising giant and predict that the firm is in need for some radical changes and alterations for returning on the path of growth.
The last year has not been a favourable one for the advertising firm after the untimely exit of founder and chief executive Sir Martin Sorrell, 73 midst high controversy. Analysts say that if there is an annual drop in sales in the company, it would mark the first such yearly drop for the firm in revenues since 2002.
Read, 51, earlier headed the digital agency Wunderman of WPP and was appointed to head the group early last month.
There had been a board investigation about mysterious allegations that were pitted against Sorrell, following which the founder left the company that he had founded in 1985. There were reports in the media later on which revealed that the allegations against Sorrell was of paying off prostituted from company funds. The allegations have been vehemently rebuffed by Sorrell.
There have been some high profile account losses for the company during the early weeks of Read’s leadership which included the loss of the contract with US car maker Ford earlier in the current month. However, it has been reported that the company would feel the impact of these losses only next year.
But in the last one year, there has been a fall of about a quarter in the shares of WPP and closed at £10.34 last week. Under the leadership of Sorrell, the company had acquired a large number of smaller advertisement firms. This year however, WPP has made only 11 acquisitions this year compared to 25 that were made a year earlier, according to data from Refinitiv.
The company was second in the bidding for Dutch agency Media in July and the company was taken over by S4 Capital which is a new investment vehicle headed by Sorrell. According to analysts, the lower value of sterling would be partly responsible for a more or less flat turnover figures for the third-quarter compared to the same period last year. The company is expecting like-for-like growth to be near-flat at 0.3 per cent for the year as a whole.
According to reports quoting experts, the Brexit driven fall in the value of the sterling would have a significant impact on WPP because the company has operations throughout the world and most of its payments are made in the local currencies which are then exchanged into pounds.
Last year, there was a 0.3 per cent drop in like-for-like revenues which was the worst revenues for the company since 2009 – during the height of the financial crisis. Despite that, the company has been able to maintain its total revenue figure for the last 16 years and includes the effect of currency exchanges.
“We fear WPP might need more radical surgery than currently communicated,” said Steve Liechti, an analyst at City broker Numis.
His team at Numis are ‘worried over the scale of US problems’ that is plaguing the business of the company, Liechti told investors in a note. The note cited the loss of the Ford account this month where the car maker decided to replace WPP with rival Omnicom as the company’s lead creative agency.
(Adapted form ThisIsMoney.co.uk)