WPP Q3 revenues dip 0.8% to £3.758 bn, impacted by currency headwinds of 2.0%

WPP has reported a dip of 0.8 per cent in its revenues in the third quarter of 2018 at £3.758 billion. Revenue in constant currency was up 1.2 per cent compared with last year, the difference to the reported number reflecting the strengthening of the pound sterling in the first half, primarily against the US dollar, and other currencies in the third quarter. On a like-for-like basis, excluding the impact of acquisitions and currency fluctuations, revenue was up 0.2 per cent, compared with 1.6 per cent in the first half. 

Geographically, like-for-like revenue growth in the third quarter was stronger in the Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, with all other regions, particularly North America and the United Kingdom, slipping back. South East Asia and Latin America were particularly strong with Africa & the Middle East more difficult. Functionally, all sectors, except data investment management, performed less well compared with the first half. 

In the third quarter, there was a slowdown in revenue less pass-through costs, with -0.9 per cent constant currency growth and -1.5 per cent like-for-like. All regions, except Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe showed a deteriorating trend in the third quarter, with all sectors, except data investment management, slipping back. 

Nine months reported revenue was down 1.6 per cent at £11.251 billion, while nine months constant currency revenue was up 2.3 per cent, and like-for-like revenue was up 1.1 per cent. 

Net debt as of September 30, 2018 was down £925 million, compared with same period last year, following disposal of certain non-core assets and an improvement in net working capital. 

WPP reported net new business of $4.0 billion in the first nine months. 

In the Asia Pacific, India showed particularly strong growth, with China and Singapore continuing to perform well. Australia and New Zealand were down over 5 per cent in the third quarter, driven largely by the creative agencies and production businesses. 

The United Kingdom, with like-for-like revenue less pass-through costs down 2.0 per cent in the third quarter, compared with +1.4 per cent in the second quarter and +1.5 per cent for the first half, as most sectors were impacted by the spending cuts and the impact of net client losses in the quarter, particularly media investment management, data investment management and direct, digital and interactive. The Group’s advertising businesses showed a small relative improvement compared with the first half. 

North America showed further continued pressure in the third quarter, with like-for-like revenue less pass-through costs down 5.3 per cent, compared with -3.3 per cent in the second quarter and -2.9 per cent in the first half, as parts of the Group’s media investment management, data investment management, health & wellness, direct, digital & interactive and specialist communications businesses slipped back, driven partly by client losses, but largely by spending reductions among the Group’s larger clients. These reductions were partly offset by improving performance in the Group’s public relations and public affairs businesses. 

In the third quarter of 2018, like-for-like revenue less pass-through costs in the Group’s advertising and media investment management businesses showed a significant deterioration compared with the first half, particularly in North America, the United Kingdom and Continental Europe, partly offset by double digit-growth in Asia Pacific and Latin America. The Group’s advertising businesses remain difficult, particularly in Continental Europe and Asia Pacific, with all regions, except the United Kingdom and Latin America, slower. 

Data investment management showed a slight improvement in the third quarter, with like-for-like revenue less pass-through costs down 1.2 per cent, compared with -1.3 per cent in the second quarter and -1.5 per cent for the first half. There was significant improvement in Asia Pacific, up over 7 per cent, with Western Continental Europe also showing improvement. North America remains difficult and the United Kingdom, following an improvement in the second quarter, slipped back, as Kantar Insights and Kantar Media came under pressure. Kantar Public and Kantar Health remain challenged, but both showed an improvement in the third quarter compared with the first half. 

Public relations and public affairs was the strongest performing sector in the third quarter as it was in the second quarter, with like-for-like revenue less pass-through costs up 2.5 per cent. This was driven by strong growth in both the United Kingdom and Germany through the Group’s financial public relations businesses and continued strong growth in Asia Pacific and the Middle East. 

In the Group’s specialist communications businesses, direct, digital & interactive together with health & wellness were up strongly, but brand consulting remains challenging, particularly in the United States following some client losses towards the end of 2017. 

Commenting on the group’s performance, Mark Read, Chief Executive Officer, WPP, said, “Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach. The slowdown primarily reflects a further weakening of the performance of our businesses in North America and in our creative agencies, issues that we highlighted in our interim results.” 

He further said, “As previously stated, our industry is facing structural change, not structural decline, but in the past we have been too slow to adapt, become too complicated and have under-invested in core parts of our business. There is much to do and we have taken a number of critical actions to address these legacy issues and improve our performance.” 

“In April, we started immediately to develop the strategy for the new WPP that would simplify our organisation, better position our companies, invest more in creative talent, establish a common data and technology strategy and make it easier for our clients to access the many great strengths that reside within our company.  We moved quickly to strengthen our balance sheet, making 16 disposals to date, primarily of non-core investments, raising £704 million. As a result of this, and a renewed focus on working capital, our net debt is down £925 million compared to the same period last year,” Read added. 

“Since my appointment as CEO in September, we have put more of these plans into action with the creation of VMLY&R, a new brand experience agency formed by the merger of VML and Y&R; further simplification with the integration of our healthcare agencies with Ogilvy, VMLY&R and Wunderman; and key appointments in operations, clients and technology as we build an even stronger executive team at the centre of WPP,” he said.