WPP AUNZ posted a $253.55 million loss for the half year to June, as the local arm of the world's biggest advertising company reported restructuring costs and almost $300 million in impairment charges against intangibles such as brand names and customer relationships.
The statutory result was a fall of 2,039.8% compared to the same six months the year before when profit was $13.1 million.
Excluding significant items, the company had headline profit of $22.6 million, down 15.3%.
"We are progressing our strategy to simplify the business," says John Steedman, Executive Director and Interim Chief Executive Officer.
"In the first half of the year and post the half year end, we have entered into agreements to reduce the portfolio by 20 businesses through closure, merger of brands to enhance services to clients, or sale."
“We experienced a mixed performance across our portfolio of companies. Data Investment Management, Public Relations and Specialist Communications all achieved organic earnings growth in the first half, while the Advertising and Media segment faced headwinds due to global and local account losses, and a weak media spend market.”
Shares in WPP AUNZ fell on the ASX. At lunch, they were down 9% to $0.60.
The impairment charges of $294.7 million represent a write down of 25% of the company's intangible asset value.
Earnings per share came in at a negative 29.8 cents compared to a positive 1.5 cents last year.
And there's more pain to come. The company expects earnings per share to fall 5% to 10% for the full year, a significant downgarded on earlier forecasts of flat earnings.
"Our trading result for July was ahead of forecast and the prior year comparison," says Steadman. "We are however, conservative in our outlook given the heavy weighting of earnings in the second half."
Net sales were down 2.6% to $405.6 million. Total revenue was down 0.4% to $509.22 million.
The company declared a fully franked interim dividend of 2.3 cents a share.
The portfolio of businesses:
- Encouraging performance from the Data Investment Management, Public Relations and Specialist Communications segments, delivering organic earnings growth.
- Advertising and Media segment impacted by global and local account losses and a weak media market, with earnings 16.6% behind the prior year.
- Large Format Production segment continues to undergo transformation, with cost and operational efficiencies on track to be realised in the second half of the year.
The result by division:
Steadman says the company has been bringing agencies together as part of a campus strategy.
"Our goal is to integrate operations, facilitate collaboration amongst our people and present the best of WPP to clients in one place," he says.
"In the first half of the year, we piloted ‘One Kent Street’ which formalises a working relationship across 12 businesses and over 500 people working within a campus and is already delivering pleasing incremental annualised net sales growth.
"We also invested in a new Brisbane Campus, bringing together 4 agencies and 110 people."
And there more consolidation ahead for the Sydney market in 2019.
The half year numbers:
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