WPP’s biggest market, North America, has suffered a dramatic 8.5% plunge in quarterly net sales as the revenue decline at the world’s biggest advertising group worsened markedly in the first three months of 2019.
Net sales, which WPP describes as like-for-like revenue less pass-through costs, fell 2.8% globally in the worst quarterly performance since the group began to see sales decline two years ago.
WPP’s brand consulting, health and wellness and specialist communications business, which accounts for 32.7% of the holding company’s overall billings, posted a 2.1% revenue decline on a like-for-like basis to $1.2 billion.
Mark Read, chief executive since September 2018, said the overall decline was “anticipated.” He warned investors this year that 2019 would see revenues drop sharply as he embarks on a three-year turnaround.
He said, “Our expectations for the full year remain unchanged,” with a likely fall of 1.5% to 2% for 2019, following the Q1 performance.
“Although we face a challenging year, especially in the first half, I am encouraged by how well our people, agencies and clients are responding to our new strategic direction,” Read said.
Steve Liechti, analyst at London investment bank Numis Securities, said the results were “worse than we expected” and described the 8.5% slump in North America as “whopping.”
“We still see material challenges and continuing forecast pressure as WPP adapts to the new/changed marketing services environment,” he warned.
U.S. client losses take toll
WPP said that North America’s slump was “disappointing” and blamed it on “continued pressure and the impact of assignment losses among automotive, pharmaceutical and [CPG] clients in 2018,” while insisting the decline “was in line with our budgets.”
Ford, American Express and GlaxoSmithKline were major losses for WPP last year.
The company said “the actions we have taken since September with our creative and healthcare agencies,” including the mergers to create Wunderman Thompson and VMLY&R to simplify the group, “are intended to address the group’s performance” in the U.S.
WPP is combining its health agencies Sudler & Hennessey, Ogilvy CommonHeath, and ghg with three respective full-service marketing agencies as it retires the WPP Health & Wellness brand. Sudley is being combined with the newly formed VMLY&R, creating the VMLY&R health practice; Ogilvy CommonHealth is set to join Ogilvy; and ghg will be merged into Wunderman, becoming part of Wunderman Health. The holding company is planning to finish integrating the firms in the first half of this year.
The WPP Health & Wellness group transitioned into a specialty health practice within WPP without its former branding. Global CEO Mike Hudnall is leading the unit, while Claire Gillis, former CEO of WPP Health & Wellness International, took on leadership of the international health business.
WPP’s health-focused agencies also include CMI/Compas; GCI Health and Kantar Health.
The U.K. suffered a third consecutive quarter of decline, dropping 0.9%. Western Continental Europe fell 0.3% and the rest of the world, which includes Asia and Latin America, was up 2.3%.
WPP’s creative and media agencies, which are grouped together as advertising and investment management in the financial results, saw net sales slump 4.8%.
The group said that it is reconsidering how it presents financial results by division in the future because the “appropriateness of this sectoral breakdown” might be “less meaningful” following some of the internal agency mergers.
This story first appeared on campaignlive.co.uk.