WPP AUNZ shares slammed following earnings downgrade and CEO departure

The share price of WPP AUNZ has collapsed 28% this morning following news of an earnings downgrade and the departure of the company’s CEO, Mike Connaghan.

Shortly after Connaghan’s departure was announced to the ASX, the company revealed it expected earnings per share for the financial year to be down between 12% and 15%, while net sales would fall between 1% and 2%.

CEO Mike Connaghan’s departure was announced a few minutes before the earnings downground.

The company had previously told shareholders it expected 3% growth for this financial year following 2017 sales of $869.9m resulting in 9.8c earnings per share.

In its half year results released in August, the company reported a 3.8% half year profit increase from $41.9m to $43.4m – a result Connaghan described as being “a tad disappointed” with.

Management attributed the earnings downgrade to “the underperformance of certain production businesses and creative agencies with some 60 percent of the reported decline against 2017 attributed to just two business.”

The statement went on to say some of its agencies had been affected by clients’ reduced marketing spend while investment costs for its Hogarth production arm had also dragged down profits.

Earlier this year, WPP AUNZ told shareholders Hogarth would assume all of the group’s production responsibilities, cutting other agencies and providers from production work.

A previously announced restructure of the group’s point-of-sale business, Active Display Group, was flagged as one of the divisions where management was looking to restore profits.

In August, Active Display dumped its CEO as part of its bid to ‘transform’ the struggling business following major retail clients including Myer and Revlon cutting back on in-store marketing spend.

The company also stated it intends to merge brands to consolidate its sprawling business portfolio, citing the merger of Y&R and VML last month. Currently the merged Australian operation has two CEOs, Pete Bosilkovski, who only only joined Y&R three months prior, and Aden Hepburn.

The VMLY&R merger was part of a global rationalisation by WPP Plc, which owns 61.5% of WPP AUNZ. In April, the global group announced it would rationalise underperforming divisions after revealing a 4% fall in revenue.

In its ASX announcement, WPP AUNZ also warned the revised guidance did not include any restructure costs or writing down of goodwill from the restructures.


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