Global advertising giant WPP on Friday said net profit slumped more than 41 percent in 2018 as the British company began restructuring after the controversial exit of ex-boss Martin Sorrell.
Profit after tax reached £1.06 billion ($1.41 billion, 1.24 billion euros) last year, down from £1.82 billion in 2017, WPP said in a statement.
“We are at the beginning of a three-year turnaround plan, but WPP’s new positioning… with stronger, more integrated, more tech-enabled agencies is already proving effective,” chief executive Mark Read said in the statement. Following the update and a better-than-expected outlook, shares in WPP surged 7.5 percent to 887.60 pence in early deals on London’s FTSE 100 index, which was 0.7-percent higher overall.
— John McCarthy (@JohnGeeMcCarthy) March 1, 2019
WPP in December announced plans to axe a net 2,500 jobs in a bid to return to growth. The company is struggling to compete with US technology titans Google and Facebook who have captured advertising spend by multinationals looking to cut costs. “WPP is undergoing a transformation that’ll hopefully see it shed significant levels of debt, and dispose of several non-core divisions, meaning it emerges as a simpler business with a stronger balance sheet,” noted George Salmon, equity analyst at stockbroker Hargreaves Lansdown.
“The light at the end of the tunnel is getting nearer, but with 2019 set to be impacted by continued weakness in the key US market, revenue and margin trends could well get worse before they get better,” he added. WPP in September promoted Read to the post of chief executive, replacing group-founder Sorrell who sensationally quit last year amid allegations of personal misconduct at the company.
Read had been CEO of WPP’s digital unit, developing the company’s technological offering. “2019 will be challenging — particularly in the first half — due to headwinds from client losses in 2018,” Read said in Friday’s earnings statement. “However, we start the year with fewer clients under review than we did in 2018, and investments in creativity and technology will further improve the competitiveness of our offer,” he added.
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