LONDON (Reuters) – Mark Read, tasked with running WPP (WPP.L) after the sudden exit of founder Martin Sorrell, said he would look at restructuring the world’s biggest advertising group but ruled out a break up.
Digital boss Read, appointed joint chief operating officer alongside acquisitions specialist Andrew Scott, said on Monday the company had the tools to respond in an industry facing lower customer spending and technological upheaval.
Quarterly sales were not as bad as feared, boosting WPP shares as much as 9 percent and easing some of the investor pressure on the owner of ad agencies JWT and Ogilvy & Mather.
Analysts have speculated that WPP could sell its underperforming market research arm Kantar as an initial step to start to unwind the empire built up by Sorrell over more than three decades.
Scott said the group would definitely look at disposing some minority assets it holds.
WPP’s Read says no timetable on reviewing the group
Read, who was previously on the board for nine years, was speaking as the group reported first-quarter trading figures. Organic net sales slipped only 0.1 percent — compared with a 1 percent drop that analysts had forecast.
The share jump meant the WPP stock was on course for its best single gain ever and has now regained the losses it incurred when it announced Sorrell’s departure on April 14.
“We are not complacent about what we need to do and we recognize that we need to get the top-line growing more quickly,” Read told Reuters in an interview.
“There are structural shifts in the industry and we need to have more of a structural response, (but) we are an industry in structural change, not structural decline.”
WPP, which provides advertising, data and market research to the likes of Ford, Unilever and Vodafone through its 200,000 staff in 112 countries, has been rocked this month by the departure of its founder who launched the company 33 years ago.
HARD ACT TO FOLLOW
Sorrell, who built the company from a two-man outfit in 1985 to dominate the industry, will be a hard act to follow after he never missed a quarterly results session and used them as a platform to discuss everything from advertising trends to geopolitical events.
Sorrell, 73, quit after an allegation of personal misconduct. WPP did not give any details of the allegation and Sorrell denied the charges.
Investors, and the board, are likely to assess how Read and Scott deal with the presentation to financial analysts on Monday, compared with the smooth Sorrell.
WPP has trailed its peers Omnicom (OMC.N), Publicis (PUBP.PA) and IPG (IPG.N) in terms of growth rates in the last year as it was particularly hit by the lower spending from consumer goods groups such as Unilever and P&G.
It has said it does not expect to grow in 2018, a position it reiterated on Monday.
The weak performance, combined with the upheaval sparked by the growth of Google and Facebook, has prompted some analysts to question whether WPP should be broken up or at least sell some underperforming divisions such as its market research arm Kantar.
Read declined to comment on a report in the Financial Times that said private equity group CVC had approached WPP about a potential sale of Kantar Media but he said that division needed to do better.
He added however: “Even within Kantar it’s mainly the custom parts of the business (that is struggling), other parts of the business are doing well.” The custom parts refer to projects carried out for individual clients.
His comments could point towards a more nuanced approach to the restructuring, selling off bits of assets but not dumping whole divisions within the group.
NO TIMETABLE
Read, who is seen as a front runner for the CEO job, said it did not make sense to break up WPP but that he and Scott were reviewing all options and will present them to Executive Chairman Roberto Quarta.
He said there was no timetable for the process.
“Roberto has asked Andrew and I to look at the strategy and come back as quickly as we can to the board with recommendations,” he said.
The trading update is likely to ease some of the pressure on the group.
The results were boosted by an improved performance in Britain and Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
“Mark Read and Andrew Scott are providing the stability and leadership WPP requires, but there is no standing still,” Quarta said.
“They have my and the board’s full backing to review the strategy, to come back to us with recommendations, and to move forward decisively to implement our vision for the group.”
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