WPP, the insignificant engineering company which rose to become one of the global advertising giants is running into rough weather. Slowdown in business growth has led to a fall in its share value up to 22% with the third quarter results not presenting an encouraging picture.
With a new boss in the form of Mark Read at the helm, the firm is all set for a drastic restructuring program to improve performance. Divesting some of the assets is on top of the agenda and keeping in line, the company will sell off its stake in Kantar, the data analytics group with a previous year’s revenue figure of 2.7bn pounds. This will make funds available for investing in its important North American business which has witnessed reduced sales, a fall of about 5.8% in the current year.
The company whose businesses range from public relations, creative agencies to data analytics and consultancies is facing stiff competition from online tech giants like Facebook and Google due to the increased popularity of online advertising.
With key client, Unilever slashing its advertising budget and traditional players like Deloitte making an entry, WPP’s sales are expected to drop by 1% in current year as against a 0.3% growth target fixed prior to three months.
The restructuring program would focus mainly on business simplification and rightly so, according to George Salmon, equity analyst at Hargreaves Lansdown. Understanding the varied constituents of the group in depth is going to be a big challenge for Mark Read. However, the process has begun and offloading stake in Kantar is the first action step.
Sir Martin Sorrell, the former WPP head stepped down this year amidst a personal misconduct scandal which he had vehemently denied and created a competing firm named S4 Capital. His new firm acquired MediaMonks, the Dutch digital production company outbidding his earlier firm in the month of July.