WPP PR, public affairs down 0.3% in Q1

The holding company's overall revenue dropped 8.5% in the quarter.

WPP PR, public affairs down 0.3% in Q1

LONDON: WPP’s PR and public affairs segment revenue was down 0.3% on a like-for-like basis in Q1 to $348.8 million.

There was particularly strong growth in western Continental Europe and the Middle East for those businesses, according to WPP’s earnings report.

WPP’s PR firms include BCW, Hill+Knowlton Strategies, and Finsbury. PR and public affairs make up 9.2% of the group.

Brand consulting, health and wellness and specialist communications, which makes up 32.7% of the group, was down 2.1% to $1.2 billion on a like-for-like basis in Q1. Health and wellness, in particular, was under considerable pressure in the U.S. following client losses in 2018, according to the earnings report.

For the holding company as a whole, WPP’s biggest market, North America, suffered a dramatic 8.5% plunge in quarterly net sales as the revenue decline at the world’s biggest advertising group worsened markedly in the first three months of 2019.

Net sales, which WPP describes as like-for-like revenue less pass-through costs, fell 2.8% globally in the worst quarterly performance since the group began to see sales decline two years ago.

Mark Read, chief executive since September 2018, said the decline was "anticipated." He had warned investors this year that 2019 would see revenues drop sharply as he embarks on a three-year turnaround.

He said "our expectations for the full year remain unchanged," with a likely fall of 1.5% to 2% in 2019, following the Q1 performance.

"Although we face a challenging year, especially in the first half, I am encouraged by how well our people, agencies and clients are responding to our new strategic direction," Read said.

Steve Liechti, an analyst at Numis Securities, an investment bank in London, said the results were "worse than we expected" and described the 8.5% slump in North America as "whopping."

"We still see material challenges and continuing forecast pressure as WPP adapts to the new/changed marketing services environment," he warned.

U.S. client losses take toll

WPP acknowledged that North America’s slump was "disappointing" and blamed it on "continued pressure and the impact of assignment losses among automotive, pharmaceutical and [CPG] clients in 2018," while insisting the decline "was in line with our budgets."

Ford, American Express and GlaxoSmithKline were major losses for WPP last year.

The company said "the actions we have taken since September with our creative and healthcare agencies," including the mergers to create Wunderman Thompson and VMLY&R to simplify the group, "are intended to address the group's performance" in the U.S.

The U.K. suffered a third consecutive quarter of decline, dropping 0.9%. Western Continental Europe fell 0.3% and the rest of the world, which includes Asia and Latin America, was up 2.3%.

WPP’s creative and media agencies, which are grouped together as advertising and investment management in the financial results, saw net sales slump 4.8%.

The group said that it is reconsidering how it presents financial results by division in the future because the "appropriateness of this sectoral breakdown" might be "less meaningful" following some of the internal agency mergers.

An earlier version of this story appeared on campaignlive.co.uk. Gideon Spanier contributed to this report. 

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