The company’s preferred metric of like-for-like revenue growth less pass through costs fell 1.9% in the final three months of 2019 once you strip out the divested Kantar market research business.
For the year as a whole pre-tax profit fell 22% to £982m and revenue was down 1.6% against consensus at -1%, although at least the dividend was unchanged at 60p. Guidance is for zero growth in revenue or margins in 2020 and the market doesn’t appear happy with the status quo.
While 2021 targets for growth in line with peers and an operating margin of 15% are maintained, some shareholders either don’t believe them or apparently weren’t prepared to stick around to find out if they can be achieved.
AJ Bell investment director Russ Mould says: ‘After a year of consolidation and modest progress, 2020 was supposed to be the year when CEO Mark Read really started to deliver, joined by newly appointed finance chief John Rogers.
‘He is off to a very ropey start after reporting that underlying revenue slumped rather alarmingly in the fourth quarter of last year. The best investors can hope for now is zero growth and maintained margins in 2020. The targets for 2021 have been maintained but the market’s patience appears to have snapped.’
Mould also points out that the current 2020 guidance doesn’t include any impact from the coronavirus which is likely to affect corporate growth and therefore ad spending.
Shore Capital is keeping the faith in Read’s ability to lead a recovery. Analyst Roddy Davidson comments: ‘We believe that this morning’s update supports our view that the growth and repositioning strategy formulated by Mark Reid and his senior team is gaining traction and enhancing many of WPP’s traditional strengths – although this remains work in progress.
‘We are particularly positive on the upside potential created by a proactive approach towards: simplifying operations and merging brands; fostering greater internal cooperation; driving competitive advantage through concerted investment in technology; pursuing efficiencies; reducing debt; realising value from non-core operations (most notably the sale of a 60% stake in Kantar for c. £2.4bn) and; generally pursuing a more disciplined capital allocation policy.’