“What you saw in the first quarter [of 2019] is in line with our expectations,” said WPP CEO Mark Read when opening this morning’s East Coast earnings call.
Those expectations, however, were not particularly positive.
The world’s largest advertising company continued to face significant challenges this quarter, embodied by an 8.5% year-over-year decline in revenues for its largest market, North America.
“As anticipated, our first quarter trading update reflects the impact of certain significant client losses in 2018, in particular in the United States,” said Read in his statement, noting Ford’s decision to move its global creative duties from GTB to Wieden + Kennedy and BBDO. WPP began 2018 with $3 billion in billings in the balance, he added—and while the holding group ultimately succeeded in retaining clients like Shell and won new business from Mars and Adidas, it also lost significant revenue from Ford and others including Amex, GSK and United Airlines.
The delayed effects of those losses were the main reason for the negative numbers, Read said.
At the same time, WPP’s stock price had risen by more than 5% at the time this story went live. This was primarily because, as observers told Adweek, leadership had conditioned investors to brace for the revenue decline.
Other significant statistics included a 2.8% decline in global like-for-like revenue after subtracting pass-through or utility costs, a decrease in average net debt from $6.3 billion to $5.38 billion from Q1 2018 to Q1 2019, and an organic growth rate that is “in line with peers.”
Read also said that his three-year turnaround strategy is proceeding as planned, despite these somewhat less-than-encouraging results.
“The structural changes are having a positive impact on pitches and new business,” he said in reference to the mergers of Y&R and VML and Wunderman and JWT. “But we have not seen positive growth for WPP North America since 2016.”
Read implied that any account losses will not be as dramatic this year, noting that the $800 million in billings currently up for grabs only represents a fraction of those from 2018. He cited a “steady series of wins” which “can give us a headwind coming into this year.”
The CEO, who made less in total compensation than predecessor and top shareholder Martin Sorrell last year, also reminded investors and analysts that change does not happen overnight.
“As we have said before, it will take time to address the company’s legacy issues, but we are committed to taking all the actions necessary to position WPP for future success,” Read said.