WPP shares crash on Q4 'deterioration' in North America, UK

WPP’s net sales fell 1.9% in the final three months of 2019 – the worst quarterly performance since the first quarter – as the agency group suffered slowdowns in a number of key markets.

The decline was "a deterioration from the improvement seen in the third quarter of +0.5%," the company said.

North America, a weak spot for three years, suffered in the last three months of 2019, sliding 4.5% compared with a 3.5% fall in the third quarter.

The UK was also surprisingly weak with net sales, known as like-for-like revenue less pass-through costs, slumping 3.7% in the fourth quarter compared with 3.1% growth in the third quarter.

WPP’s global integrated agencies – its flagship creative and media shops – performed "less well" in the UK, "particularly Group M", the media buying arm.

There was no mention of any impact from Brexit uncertainty in the final three months of the year, but Group M faced some tough comparisons after losing global media accounts including HSBC and American Express at the end of 2018.

Asia-Pacific, Latin America and central and eastern Europe also performed less well, with Africa and the Middle East improving. Lumped together, net sales in these regions slipped 1.7% in Q4.

Shares fall to lowest in eight years

Investors did not like the underlying picture, sending shares down more than 16% in early trading to around 770p – the lowest level since 2012. Dentsu and Publicis are currently also trading around 7-year lows.

Chief executive Mark Read, who launched a three-year turnaround plan in December 2018, had previously warned recovery would take time.

"2019 was the foundational year for the new WPP strategy," he said, unveiling the annual results.

Overall, net sales fell 1.6% to £13.2bn in 2019, making it one of the poorer performers among the big six groups.

Annual pre-tax profits from continuing operations, following the sale of a majority stake in Kantar, fell 30% to £707m.

Four of the big six groups – WPP, Publicis Groupe, Dentsu Aegis Network and Havas – reported declines in organic revenue last year. Only Interpublic and Omnicom increased revenue in 2019.

WPP is forecasting flat net sales in 2020 – a prediction made before the coronavirus broke out and the company said it was too soon to gauge any impact.

Read said: "I am optimistic about the future of our industry and WPP's position within it, although there is still much more work to do.

"The marketing landscape has never been more dynamic and complex; clients need our help and expertise more than ever.

"With our market-leading scale and global footprint, allied to the creativity of our agencies and our technology leadership, we are confident of further progress against our 2021 targets."

WPP has reported three years of consecutive falling revenue.

Read took over from Sir Martin Sorrell in 2018 and has sought to simplify WPP.

Steve Liechti, analyst at Numis Securities, said the results were "disappointing" in terms of both revenue and declining profit margin.

"We see on-going industry challenges and mid-term forecast pressure as WPP adapts to the new/changed marketing services environment," he said.