WPP AUNZ announces $253.5m loss, a decline of over 2000%

The Australian and New Zealand arm of the world’s largest agency holding group, WPP, has announced a loss of $253.5m for the first half of the calendar year.

In the financials posted to the ASX today, WPP AUNZ revealed this is a 2,039.8% decline on its net profit of $13.1m for the same period last year.

On a call to investors this morning, interim CEO John Steedman said the results were disappointing.

Steedman: Tough conditions will continue

Net sales for the group were down slightly from $416.3m for the six months to 30 June 2018, to $405.6m this year, a 2.6% decline, however the group did manage to get operating expenses down from $360.1m to $351.9m.

Earnings before interest, tax, depreciation and amortisation was $56.3m, down from $58.9m.

WPP’s results as released to the ASX (Click to enlarge)

It was the ‘depreciation, amortisation and impairment’ line of the balance sheet, however, which really hit the group. In the first half of the calendar year for 2018, it hit the group with $19.1m. This year, it soared to $325.6m.

A lot of this loss was attributed to the impairment of goodwill, with the group noting weak media spend in Australia as well as both global and local account losses. Customer attrition, plus further hits from the expected slowdown of the Australian economy were also cited.

The impairment charges represent a write down of 25% of the intangible asset value contained in the balance sheet from 31 December, 2018.

WPP’s financial results for the six months to 30 June, 2019 (Click to enlarge)

“In summary, while the group’s financial performance is disappointing, we are doing all we can to right shape the group so that we are fit for the future, to capture growth in the markets we operate and to entrench our position as a leader in creative transformation across Australia and New Zealand,” Steedman told investors.

The group is also expecting further costs as it attempts to simplify its structure.

“In order to deliver integrated solutions for our clients, we are progressing our strategy to simplify the business,” Steedman said in a statement. “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.”

WPP has merged a number of its agencies in recent months, including creative agencies J Walter Thompson and Wunderman, to create Wunderman Thompson, and VML and Y&R to create VMLY&R.

With the significant items removed, the group said it delivered a headline profit for the half year of $22.6m, down 15.3% on the year prior’s result of $26.8m.

WPP AUNZ’s headline results by segment (Click to enlarge)

Its net debt position increased to $326m, up from $270.3m at the conclusion of 2018.

Steedman also told investors he expected the tough conditions to continue for the remainder of the calendar year.

The group has also faced some challenges from former high-level staff, with both Rob Moore (former general manager of WPP’s media agency Mediacom in Melbourne), and Carmel Wilson (former managing director of bespoke Vodafone agency Team Red) launching court action this year.

Moore alleges he was made redundant due to the disclosure of his mental health struggles, and has claimed the agency management did not do enough to reduce his workload and stress.

Wilson alleges that harassment and a “boys club” culture ultimately led to her being dismissed after just six months in the role and in need of psychological treatment.

Steedman’s statement accompanying the financial results said workplaces must be open, respectful, collaborative and diverse.

WPP needs to be diverse, says Steedman

“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,” he said.

“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.”

In October, WPP AUNZ’s new permanent CEO Jens Monsees will join the company from Germany.

Monsees has a big job in front of him

He will be charged with turning the group’s fortunes around.

“Jens has a strong international reputation for building brands and leading change,” Steedman said. “Together with the leadership team, he will be charged with developing a strategic plan to accelerate our positioning for future growth and to capitalise further on the many opportunities available though our scale.”

WPP’s media agencies include Group M’s Wavemaker (the result of a merger between Maxus and MEC), Midshare and Mediacom. Its creative agencies include White Grey (the result of a merger between The White Agency and Grey Group) and Ogilvy. It also has public relations businesses including Opr and PPR.


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