North America hit hard as WPP’s 2018 revenue slips

The holding co. expects more challenges for the first half of 2019, but remains committed to its turnaround plan.
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Holding company WPP’s results saw a downturn in 2018 as a result of major client losses and significant revenue dips in North America, but the company’s CEO says its turnaround plan is proceeding as planned.

According to the 2018 full-year results issued today, WPP’s net revenue – which it refers to as “like-for-like revenue less pass-through costs” – was down 0.4% for the year. North America’s performance was particularly weak, with revenue slipping by 4.2%. U.K. revenue was flat with a 0.5% decline and revenue from Africa and Middle East dropped 3.1%, though the company saw gains in Western Europe (2%), Latin America (7.9%), Central and Eastern Europe (6.9%) and Asia Pacific (1.2%).

The fourth quarter was the most difficult for WPP in North America last year, posting a 5.7% loss in Q4.

The company’s results remained at the upper end of its forecasts, and Mark Read, WPP’s CEO, said the first half of 2019 will continue to be challenging as it continues to feel the effects of major client losses from the year prior. The company estimates the resulting net revenue decrease to be between 1.5% and 2%.

The major client losses on the creative side include portions of the Ford account, Grey’s global Revlon account, VMLY&R’s portion of PepsiCo work and JWT’s Edgewell Brands. In media, major losses included the global media accounts for GlaxoSmithKline, American Express and HSBC, as well as the Canadian Yum! Brands account. Those losses were partially offset by winning the global media accounts for Mars and Adidas, as well as the North American creative account for Volkswagen.

Despite anticipating some struggles, Read also expressed optimism about WPP’s three-year turnaround plan that includes cutting staff and offices, as well as merging agency networks, to streamline the advertising giant. He attributed £849 million (roughly CAD $1.5 million) in savings through 36 disposals since April, and pointed out that VMLY&R picked up USD $25 million in new billings in the three months following its creation.

According to an investor presentation, WPP has completed or is in the progress of completing the mergers of 70 individual offices out of a planned 100 by the end of 2019, and closed 57 business units of a planned 80. It has also reduced its headcount by 2,650 with plans to reach 3,500 by the end of the year.

Advertising and media (1.2% decline) and data investment management (1.8% decline) were the sectors hit hardest in 2018, though it saw a 2.6% increase in the PR sector and a 0.6% increase in the healthcare, consulting and specialist sector.

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