Financial summary
• Results impacted by weakness across key segments:
• Net sales of $405.6 million, down 2.6% (2018: $416.3 million)
• Headline EBIT of $43.6 million, down 12.6% (2018: $49.9 million)
• Operating margin 10.7% (2018: 12.0%)
• Advertising and Media segment impacted by global and local account losses and a weak media market, with earnings 16.6% behind the prior year.
Commenting on the results John Steedman, WPP executive director and interim chief executive officer said:
“We experienced a mixed performance across our portfolio of companies. Data Investment Management, Public Relations and Specialist Communications all achieved organic earnings growth in the first half, while the Advertising and Media segment faced headwinds due to global and local account losses, and a weak media spend market.
“In order to deliver integrated solutions to our clients, we are progressing our strategy to simplify the business. In the first half of the year and post the half-year end, we have entered into agreements to reduce the portfolio by 20 businesses through closure, merger of brands to enhance services to clients, or sale. This includes the recently announced proposed transaction to sell Kantar.
“Within the business, we continue to bring our agencies together as part of our ‘campus’ strategy; where our goal is to integrate operations, facilitate collaboration amongst our people and present the best of WPP to clients in one place. In the first half of the year, we piloted ‘One Kent Street’ which formalises a working relationship across 12 businesses and over 500 people working within a campus and is already delivering pleasing incremental annualised net sales growth. We also invested in a new Brisbane Campus, bringing together 4 agencies and 110 people. Further consolidation will take place in the Sydney market in 2019.
“As I’ve said before, attracting and retaining the best people in our industry is vital. To achieve this, we know our workplaces must be open, inclusive, respectful, collaborative and diverse in every sense. To this end, we have set a goal to have an equal gender representation in senior leadership roles by 2021. We have also established a Diversity and Inclusion Council comprising a cross section of representatives from around the company whose objective is to drive cultural change. I’m also very pleased that we committed to an industry leading parental leave policy as part of a revamped talent and retention plan.
“At the Annual General Meeting we had forecast a flat earnings per share growth for the year. Based on trading results in the subsequent quarter we are now forecasting a decline in earnings per share of 5%-10% for FY19. The earnings of the company are traditionally weighted towards the second half of the year so we still expect a strong result for the second half. Our forecast is based on an expected improvement in performance from the Large Format Production segment as operational efficiencies begin to deliver earnings upside; and incremental earnings from new business wins in the Advertising and Media segment achieved in the first half of the year. Our trading result for July was ahead of forecast and the prior year comparison. We are however, conservative in our outlook given the heavy weighting of earnings in the second half.”