WPP shares dive 14pc as new boss turns on Sorrell
A WAR of words has broken out between the former WPP boss Sir Martin Sorrell and the man who succeeded him over the advertising giant’s ‘ car crash’ performance.
Mark Read, who took over as chief executive last month, said the group was paying the price for being ‘slow to adapt’ after it lost business from major clients.
He claimed the group’s problems began while Sorrell was in charge and could not be fixed overnight, sending shares plummeting nearly 14pc.
Although he did not mention Sorrell by name, the comments were a thinly disguised rebuke. Just a day earlier, the 72-year-old had referred to WPP as ‘a car crash in slow motion’.
But Read ( pictured above right) responded: ‘The slowdown you’ve seen really started at the beginning of last year. And if I look at what we need to do and what we’ve done, we have been too slow to adapt to some of the changes that are going on in our industry. We have become too complex, and we have under-invested in some core parts of our business, primarily in our creative agencies.
‘So we’ve got a lot of work to do, and we decided to get on with it.’
A spokesman for Sorrell ( inset) declined to comment yesterday.
The tycoon, who built WPP into the world’s biggest ad agency over 30 years, left the group in April amid allegations he had spent company money on a prostitute, which he denies. He has since started a new company, S4 Capital.
His departure left WPP in a crisis at a time when it was also struggling to adjust to competition from consultancies and technology giants such as Google and Facebook, which have allowed advertisers to cut out agencies from ad purchasing.
In recent months it has also lost business from key clients including HSBC, Ford, Pepsi, Glaxosmithkline and United Airlines.
Sorrell, who is still WPP’s seventhbiggest shareholder with 1.4pc, described the losses as ‘not insignificant’ on Wednesday. Speaking at a conference in Washington DC, he added: ‘Sadly, what seems to be happening at WPP is it seems to be a car crash in slow motion.’ WPP unveiled a grim set of quarterly results. Like- for- like sales fell 1.5pc in the three months to September 30, worse than City analysts predicted.
Overall sales fell 0.8pc to £3.8bn and the group downgraded fullyear forecasts, saying they could now fall by up to 1pc.
The slump spooked investors and triggered a sell-off that saw more than £2bn wiped off its value. Read said the firm needed a radical overhaul to survive. This meant simplifying the complex structure built up under Sorrell and selling stakes in various businesses, which had raised more than £700m so far. He confirmed that would also see one of Sorrell’s favourite divisions, digital analytics firm Kantar, put up for sale. Analysts say it could fetch around £3.5bn. Read added: ‘We need to make tough choices and we believe that the best way to unlock this potential is with a strategic or financial partner.’ George Salmon, an analyst at Hargreaves Lansdown, said: ‘This is very much not the start Mark Read would have wanted.
‘While WPP prefers to focus on the retention of part of the Ford contract, the fact is the majority of that package hasn’t been renewed. With businesses the world over focusing on ways to reduce advertising costs, the worry is others will follow suit.’
And Russ Mould, investment director at AJ Bell, added: ‘This miserable update from WPP reveals the scale of the task facing Mark Read.
‘He is at least not sitting on his hands, with the planned sale of Kantar something observers had previously suggested would be a logical move.
‘But he will need to come up with more action to convince the market he can turn the fortunes of the business around.’
WPP shares yesterday fell 13.8pc, or 145.2p, to 910.8p.
SORRELL’S son has been brought in to help WPP find a buyer for Kantar.
Mark Sorrell, whose father ran WPP for more than 30 years, is head of mergers and acquisitions for Europe, the Middle East and Africa at Goldman Sachs, which is advising on the sale process.
Yesterday reports claimed his father Sir Martin could emerge as a possible buyer.
WPP has already had expressions of interest from potential suitors. Accenture and other consultancies are thought to be among them.