WPP CEO Mark Read has downgraded the company’s prospects, triggering its biggest share slump in almost two decades.
WPP now expects sales to fall this year and its profit margin to decline as it revealed a third-quarter earnings miss.
The shares dropped as much as 23% today, wiping out $5.4 billion in market value.
Read, who took over from Sorrell earlier this year, called out APAC and Europe specifically for being “weaker than forecasted”, adding “this has given us cause for concern”.
Sources close to WPP said the poor performance of the APAC region were one of the reasons behind the resignation of AUNZ CEO Mike Connaghan this week.
Read acknowledged the company’s difficult quarter, losing United Airlines, Ford, Mercedes and American Express, and underperformance on the creative side of the business.
At the same time, Read reflected on how the business has defended Adidas, BP, Hilton, Mars, Mondelez, Shell, T-Mobile and GSK’s Panadol.
He also confirmed the speculation that WPP would sell a majority stake in Kantar, adding that the group has received a lot of interest in the market research business.
The new forecast means a turnaround pledged by Read will take longer to deliver, but the former Wunderman CEO said he and other WPP leaders are working hard to turn the company around after an “extended period of underperformance”.
He said “decisive action and radical thinking” is needed moving forward, adding the company needs to "accelerate at pace" in response to the changing advertising landscape.
Total reported revenue for the third quarter was down 0.8% to 3.76 billion pounds ($6.8 billion) while like-for-like revenue less pass-through costs was down 1.5% when compared to the previous year.
The company also cut its guidance for full-year net sales, saying they could fall as much as 1%. It had told investors three months ago that sales would grow by 0.3% this year.
Read said execs responded well to his vision for the company which he outlined recently in New York.
He also noted recent changes in the portfolio, such as the VML and Y&R merger and the integrated health offerings, as a positive for the company.
WPP's rivals have all reported strong third-quarter revenue growth with Omnicom’s rising 2.9%, Publicis Groupe up 1.3% and Interpublic Group up 5.4%.
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