WPP PR & public affairs revenue dips in Q4 as firm calls 2017 'not a pretty year'

WPP has reported a 0.8 per cent fall in revenue (excluding currency fluctuations) in its PR and public affairs arm in the fourth quarter of 2017, but full-year revenue in the division rose 1.7 per cent.

CEO Sir Martin Sorrell says in the firm's preliminary results this morning that 2017 was "not a pretty year" for WPP, and suggested more integration could be on the way at the company.

Revenue in the PR and public affairs division, which includes Hill+Knowlton, Finsbury, Ogilvy PR and the newly merged Burson Cohn & Wolfe, was £1.17bn ($1.61bn) in 2017, up from £1.10bn ($1.51bn) in the previous year. Like-for-like growth was 0.7 per cent.

WPP cited "strong" growth in the UK and Middle East offset by "weaker" conditions in North America and Continental Europe.

The company said the division was weaker in the second half of the year, with revenue on a constant currency basis down 0.9 per cent in Q3 and down 0.8 per cent in Q4. Operating margins fell by 0.4 points, excluding currency fluctuations, to 16.1 per cent, with the firm citing a slowing in parts of its North American businesses in the second half.

However, WPP said Cohn & Wolfe, public affairs agency Glover Park, Ogilvy Government Relations and Buchanan "performed particularly well".

Donna Imperato, who was CEO of Cohn & Wolfe until this week's merger with Burson-Marsteller, when she became chief executive of the newly merged agency, said Cohn & Wolfe had its fourth consecutive year of double-digit growth in 2017. She said it was "largely attributed to the agency’s deep expertise in digitally-driven, creative content and integrated communications".

WPP follows rival marcoms giants Omnicom and Interpublic in finding growth in the PR businesses difficult in the final quarter of 2017.

Across WPP, revenue in 2017 was £15.27bn ($21bn), up 1.6 per cent on a constant currency basis. Like-for-like revenue fell 0.3 per cent.

Pre-tax profit rose 7.7 per cent, excluding currency fluctuations, to £2.11bn ($2.9bn).

'Not a pretty year'

Sorrell said: "2017 for us was not a pretty year, with flat like-for-like, top-line growth, and operating margins and operating profits also flat, or up marginally.

"The major factors influencing this performance were probably the long-term impact of technological disruption and more the short-term focus of zero-based budgeters, activist investors and private equity than, we believe, the suggested disintermediation of agencies by Google and Facebook or digital competition from consultants."

He added: "In this environment, the most successful agency groups will be those who offer simplicity and flexibility of structure to deliver efficient, effective solutions - and therefore growth - for their clients. With this in mind, we are now accelerating the implementation of our strategy for the group.

"For many years we have placed 'horizontality' at the heart of our strategy by presenting clients with tailor-made and seamlessly integrated offers to meet their specific requirements. Over the last year, we have begun to apply that philosophy to the structure of the group itself by simplifying a number of our operations.

"As our industry continues to undergo fundamental change, we are upping the pace of WPP's development from a group of individual companies to a cohesive global team dedicated to the core purpose of driving growth for clients.

Areas of focus

"As we build an increasingly unified WPP, we are focusing on a number of areas that will allow us to deploy our deep expertise with greater flexibility, efficiency and speed. These include:

  • further simplification of our structure; stronger client co-ordination across the whole of WPP, including greater responsibility and authority for global client teams and country managers;
  • the development of key cross-group capabilities in digital marketing, digital production, eCommerce and shopper marketing;
  • further sharing of functions, systems and platforms across the group;
  • the development and implementation of senior executive incentives to align them even more closely to group performance.

"We start this new phase of our journey from a position of market leadership, and with total confidence in the enduring value of what we offer our clients. We will report at every opportunity on our progress."

The analyst Numis said in a briefing note this morning that the results were in line with expectations, adding: "The group is accelerating the simplification of its structure and capabilities and retains its view that the pressures it is facing are due to short-term issues in its core CPG client base rather than due to digital disintermediation or the consultancies."

This article was updated on Friday morning with comment from Donna Imperato.

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