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
Please shut it all down and spare anyone else any more pain. This is a disgraceful performance. There will be those who will be paid bonuses on costs savings through even more restructuring. When they have squeezed every last dollar they can make they’l quietly disappear.
Hmmm. Tough market out there.
it’s a great headline but in truth the ‘loss’ is all asset writedowns to get the balance sheet look nicer for when the new CEO starts
earnings down 4%
profit down from $42m to $35m doesn’t have quite the same ring to it!
Absolutely – take the opportunity to get the slate as clear as possible before the new CEO lands so the “turnaround” story is as compelling as possible.
Your last paragraph is still a very ordinary result and that on top of mass departures and law suits even more so.
definitely true and to be fair, the group is mainly a huge mess outside of Ogilvy and a few other brands. and I’m not sure the new CEO is going to help much – no agency, no PLC and no Aus experience…steep learning curve
Is Ogilvy in great shape? Aside from the high profile hires, where are the account wins and work that demonstrate it’s any better than a strong independent? They’ve traded well off a storied name but added very little locally.
the financial loss was expected given the impairment requirement.
the real issue was the lack of strategy or direction around reversing the issues, and no insight into how they’d invest the Kantar sale proceeds.
Kantar sales will be mostly to de-leverage one would think, moreso now with the asset writedown.
Was this moving the rebate money around? Be curious to know what those impairments actually was.
Hi ‘ACCC bites’,
If you want more info WPP said:
During the half year, the company has recorded an impairment charge relating to intangible assets of $294.7 million (before tax). This impairment charge relates to acquired intangible assets including brand names, customer relationships and goodwill. The impairment charge predominantly relates to the segments of Advertising and Media Investment Management ($246.8 million) and Data Investment Management ($44.3m), as recently announced in the proposed Kantar transaction.
The impairment charge follows a review of the carrying value of the group’s assets based on varied trading results. This has been driven primarily by the Advertising and Media Investment Management segment as a result of weak media spend and softening of the future outlook. Due to the ongoing repositioning of global brands including the potential sale of the Data Investment Management segment, customer attrition in some segments, and the slowdown of the overall Australian economy, management has reassessed its estimate of forecasted cashflows and growth rates to reflect the factors outlined above.
If you want any more info, you can go to Note 9 in WPP AUNZ’s Half-Year Financial Report (which you can find here). It’s on page 27 of the report, which is actually page 29 of what has been posted to the ASX.
Thanks,
Vivienne – Mumbrella
“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,” Steedman.
Hmmm – might be part of the issue. Fat cats, heads in sand.
… ‘you don’t know what you are doing’
Hey WPP, Big Red it’s ours not yours!
Hi there,
Just to clarify, this should have read Team Red, the bespoke Vodafone agency named in the lawsuit. It was a typo on my part and is now correct.
Thanks,
Vivienne – Mumbrella
It’s a tough market, feel for everyone involved. However you attribute the losses though, they reflect overall business performance given the revenue was recognised at some point.
So balance sheet or not, it’s a tough result.
To everyone involved, hope you’re taking some time to relax, breathe and not drown in stress.
I think you’ve mixed up Big Red with Team Red for Vodafone
Hi WA,
You are most correct. It should say Team Red, the bespoke Vodafone agency within WPP.
Thank you for flagging, and apologies to Big Red, which is not involved at all here, for the typo.
Thanks,
Vivienne – Mumbrella
Great news for small or independent agencies. The writedowns demonstrate how little value the market puts on the WPP model.
This is actually a very sage comment. Wonder when the other groups report, if they are also writing down the value of their global brands, or is it just WPPAUNZ?
Yes!
“however the group did manage to get operating expenses down from $360.1m to $351.9m”
The holding companies got into the business when the margins were healthy. They are no longer that way (an haven’t been for some time). So as the holding companies try to make cuts to preserve margins, they actually eat into the very reason their clients are coming to them – i.e. in most cases, they are not cutting fat; they are cutting muscle. If I were a client, I would be asking where my money is going when I choose a holding company agency rather than an independent.
Yeah this is a fair diagnosis. “The ship is slowing down – let’s remove the sails”
Though not technically part of WPP Efficient Media had a pretty good year thanks to WPP (or more specifically, thanks to one WPP agency).
Are you talking about Mediacom’s dealings again ?
Iceberg, dead ahead!
Let’s screw the staff (not offer them a bonus or cost of living increase) and screw the shareholders (share price tanking) just so we can make sure the new German CEO gets his bonus
What is it with this industry and the associated trade publishers?
Firstly, the misleading (click bait) headline which clearly isn’t representative of the actual results presented today (assuming whoever wrote it has any financial acumen that is). The results were down – but the loss purely a result of sensible balance sheet corrections.
And then all of the usual negative trade commentary having a crack at Australia’s most successful marketing communications company. Yes the group appears to be experiencing challenges…but as is most of the industry…and as the largest player in the market…they are understandably the most impacted by market headwinds and most likely to find it the most challenging to adapt and change.
They are clearly making change (globally and locally) and as a large employer of talent (last count around 5,000 across AUNZ) don’t we want this company to ultimately succeed.
No.
This mess is WPP’s own making. The board and execs are out of touch with the market and the write downs reflect this. When independent agencies like The Monkeys, The Works and many others are being picked up by other groups, you can’t blame the economy. WPPAUNZ is paying the price for the slow pace in change – starting from the top.
When you have WPP media agencies (thinking one with a pink logo) getting major business on 1.9% media spend commission, but requiring 30-40 staff to run it…. how can that ever be profitable? Especially when they then have to have other agencies on the books to do the work (efficient media), why are the senior management surprised at these kinds of results? A bunch of Ostrich’s with their heads in the sand.
What are all these comments with reference to Efficient Media , and Mediacom ? What’s the deal ??
This comment wreaks of cynicism and is uninformed.
All groups have their own internal Search agencies, OMG have resolution, DAN have Ipro, IPG have Reprise and there’s many more.
I’d say those in glass houses shouldn’t throw stones, but from some of the comments here, I’d say the pigs in the pig pen shouldn’t sling mud.
To be fair Steady looks pretty happy with the results. Jens the German smiling too because with this kind of kitchen sinking as Yazz said “ze only way is up!”. He will walk in with millions in sign on bonus, salary, allowances etc whilst everyone else is screwed! Steady will retire on a nice pension to Golf in Thailand. Great result for management. Let the rest eat cake.
Mark Read, Roberto Cunta are you even paying attention? Why did you listen to Chairman Rob? U think he knew more than Mike? All he knows is he raked in the fees as an advisor to the merger (not a conflict at all right cos it’s an old boys network)
Hope Geoff Wilde retires soon and retains something of his dignity.
What a mess.
@Really??? i think the title ‘Australia’s most successful marketing communications company’ doesn’t fit any more. Share price in 2017 was over $1.20, now 60c – pretty much as low as it’s ever been. You seem defensive. Time to sell yours … or move agencies?
I wish no ill on the world and it’s people, but this story (irrespective of the financial balance sheet machinations) gave me joy on a Friday. Seeing Goliath and the ego of him and his self preservation mates frailing. May this build the confidence of David and his many female equivalents to rise and conquer. Here’s cheers to the strong growth of more smaller dynamic challenger agencies and all the joy they bring. 😀
What a mess. Huh
Click bait.
Gee the STW shareholders must be wondering about the lemon they were sold? Market cap of the combined group back to where STW was pre-merger.
My guess is additional head count across the group and in head office to scramble to be compliant with London’s demands on reporting probably dwarfed any “synergies”.