LONDON (ShareCast) - (Sharecast News) - WPP shares tumbled on Thursday as it posted a drop in third-quarter revenues, cut its revenue guidance for the year and announced plans to sell a stake in its data division.
Third-quarter revenue fell 0.8% to £3.76bn, dented by currency headwinds of 2%. At constant currency, revenue was up 1.2%, while like-for-like revenue excluding the impact of acquisitions and currency fluctuations increased 0.2%, compared with 1.6% in the first half.

Net revenues were down 1.5% compared to a 0.7% rise in the second quarter and a 0.3% increase in the first half.

WPP said LFL revenue growth was stronger in Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, with all other regions, particularly North America and the UK, slipping back as clients cut their spending. South East Asia and Latin America were particularly strong with Africa & the Middle East more difficult.

The company said it now expects like-for-like revenue less pass-through costs to be down 0.5% to 1% in 2018, down from previous guidance of growth of about 0.3%. It also downgraded its margin guidance from flat at constant currency to down 100 basis points to 150 basis points.

WPP also announced that it has decided to sell a stake in its data division Kantar.

Chief executive officer Mark Read said: "There is a significant opportunity to develop Kantar into the world's leading data, insights and consulting company. We believe in the potential for Kantar but given our many priorities, we need to make tough choices and we believe that the best way to unlock this potential is with a strategic or financial partner."

The company also said that finance director Paul Richardson will leave the group at some point next year after 22 years in the role.

Read said the slowdown in the third quarter primarily reflects a further weakening of the performance of its businesses in North America and in its creative agencies, both of which were highlighted in the interim results.

"As previously stated, our industry is facing structural change, not structural decline, but in the past we have been too slow to adapt, become too complicated and have under-invested in core parts of our business. There is much to do and we have taken a number of critical actions to address these legacy issues and improve our performance," Read said.

At 0835 BST, the shares were down 15% to 897.60p.

Liberum said WPP's cut to revenue guidance, along with the fact that other agency groups have posted generally well-received third-quarter results, will raise questions over its specific issues.

Russ Mould, investment director at AJ Bell, expressed a similar sentiment.

"What's concerning about the firm's poor performance and downbeat guidance is how out of step it is with the wider peer group. The likes of Omnicom and Publicis have already delivered well-received third quarter trading statements.

"This suggests WPP is tangling with company-specific issues. Mr Read is at least not sitting on his hands, with the planned sale of the Kantar market research firm something several observers had previously suggested would be a logical move.

"He will need to come up with more action at a promised strategy update in December to convince the market he can turn the fortunes of the business around."

Meanwhile, George Salmon, equity analyst at Hargreaves Lansdown, said: "While the group may be PR masters by trade, with net revenue trends falling pretty much across the board, major contracts slipping away and margins coming under pressure, there's not many positive news stories to spin out of these results. Very much not the start new CEO Mark Read would have wanted.

"We're yet to get the full details, but it looks like the over-riding theme of his restructure will be a simplification of the business. It's easy to see why. Taking over at a group where success depends so much on having an in-depth knowledge of all the various agencies and divisions was always going to be a serious challenge."

Salmon said he can see the rationale for the Kantar stake sale, "but one can't help but notice the division was the only one not to see like-for-like net revenue trends weaken this quarter".

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