WPP AUNZ reports profit slump following sales decline
Local holding group WPP AUNZ has continued its run of bad news, reporting a 12.8% fall in earnings before interest and tax on the back of a 4% sales decline.
The group’s previous report to the ASX last October saw the business’ share price collapse 28% and the abrupt departure of then-CEO Mike Connaghan.
WPP AUNZ reported net sales of $857.3m over the six months to the end of 2018, down 1.4% from the same period the previous year.
Earnings before interest and tax were $121.0m, a fall of 12.8% from 2017’s $138.7m, while the group’s operating margin slid from 15.9% to 14.1%.
Adding in depreciation, the group’s EBITDA fell 11.9% to $133.3m, with the group reporting a $9.5m loss after tax, down from the $80.7m profit in the previous period.
John Steedman, executive director of WPP AUNZ, said in a statement: “We are disappointed that the strong performance across many of our businesses has not translated into positive group financial results.”
The group’s core business of advertising and media investment accounted for the company’s slide into loss, recording a 2.9% slide in income to $481.1m while the division’s EBIT fell 12.7% to $68.6m and margins eased from 15.9% to 14.3%.
WPP AUNZ’s troubled large format production group, represented the biggest percentage fall of the company’s divisions with sales dropping 31.5% to $20.0m. In March last year, the group announced its agencies would take production responsibilities in-house with its Hogarth business.
Other divisions including data investment and specialist communications saw improvements in sales but declining margins also hurt profits with only the public relations and public affairs businesses improving their bottom lines.
Steedman added in his statement: “We have taken quick action to remedy these underperforming segments in our business.
“We have accelerated the pace in which we make changes to right-size the business and to allocate our capital to the areas of our business with the greatest opportunity to generate profitable growth.
“These initiatives will enable the company to simplify our operating structure (thus reducing costs over time), concentrate on our core businesses, invest in our people, and focus on growth.”
WPP AUNZ has followed its majority stakeholder WPP Plc in restructuring some of its iconic agencies, having merged Y&R and VML to create VMLY&R last September and JWT and Wunderman to form Wunderman Thompson in November.
The Australian group also ditched the Ogilivy name for its public relations operations last June, rebranding the business as Opr.
As a result of its restructures, the group booked $80.7m in impairments and amortisation of intangibles.
In its announcement, the company also said it was in discussions with majority shareholder WPP Plc about the options for the Kantar research business, which late last year the UK group flagged it would divest.
WPP AUNZ executive director, John Steedman: ‘We are disappointed’
Steedman continued: “In the 2018 year, we made significant investments for the future as we combined the strengths of traditional and digital creative agencies of VMLY&R and Wunderman Thompson, created a new Melbourne campus housing 15 agencies, and reshaped the portfolio of companies under the WPP AUNZ Group.
“During the year, we acquired additional WPP related entities and increased shareholdings in existing businesses where we had a minority stake, allowing us to execute on strategic initiatives with greater speed and control.
“Like almost every industry, we too, are facing structural change. We have seen rapid digital transformation, economic headwinds, market changes and we know that chief marketing officers, and the C-Suite in general, are seeking agility and responsiveness when it comes to their marketing needs. Our clients look to us to help them navigate this new world and to remove any complexity that might be an impediment to growth.
“As a business, our vision is to offer a far simpler structure and to utilise technology and data wherever we can to help our clients talk to, and transact with, their customers and other key stakeholders as effectively and easily as possible.”
who’d have thought that some bean counters in London making decisions to merge agencies with no consideration at all for people, clients or cultures in this part of the world would somehow damage the brands and business down under
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Call me crazy, but, If you stop duplicating roles, having joint ceos and joint managing partners in your creative agencies like VMLY&R, you might be able to reduce cost, reward and perhaps even retain talent. Not to mention make a decision…
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Wow, so Active Display is so bad it has become its own line item in the report and is responsible for -$62m impairment on the bottom line???
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Anyone with the ability to think deeper than a birdbath; which makes me wonder whether it was as easy as that. Was it perhaps part of a darker plan?
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Poor financial results? Let’s merge more agencies. Been doing it for the last decade, maybe something different will happen!
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Wonderfully put!
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And that is what you call the STW effect…such a great opportunity absolutely obliterated.
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My prediction: The large advertising networks are in decline, but WPP is in the worst shape by far. It’s leadership style is enormously disliked both externally and internally and there exists no vision to turn the business into a nimble, contemporary and above all sustainable business that people wish to work in. Clients just can’t afford to be associated with company that doesn’t care for its staff and whose staff just don’t want to work there, it’s a model that simply works for a bunch of out of date acountants at the very top and for no one else including its shareholders. If you own shares isn’t his company you’ve obviously never worked in it. It’s a house of cards.
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“bunch of out of date acountants at the very top”, absolutely, who have instituted such a degree of mind-numbing, creativity-killing red tape and admin for even the simplest task that productivity is being suffocated across the group.
But the accountants are happy.
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When ad agencies focus on doing good work and getting results for clients over profit, they become profitable.
When ad agencies focus on profit over doing good work and getting results for clients, they become broke.
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