WPP reported Q1 earnings on Monday for the first time without its founder and long-tenured CEO Martin Sorrell.
Since Sorrell’s abrupt exit from the company earlier this month, former Wunderman CEO Mark Read and former European COO Andrew Scott have taken leadership of the company as co-COOs. Chairman Roberto Quarta has stepped in as CEO while the company looks for a replacement.
Despite the internal shakeup, WPP reported better-than-expected growth for the first quarter of the year, with like-for-like revenue up 0.8% to $4.9 billion. Analysts were predicting a 1% drop in revenue.
WPP’s stock was up almost 7% this morning.
“The types of services WPP offers our clients are in demand, and we think will be more in demand,” Read told investors on the earnings call. “But we need to get back to revenue growth.”
Despite WPP’s solid quarter, most of the call focused on strategy changes and succession planning in the wake of Sorrell’s exit.
Quarta reassured investors that the appointment of Read and Scott as co-COOs was part of a “longstanding contingency plan in the event that a sudden CEO departure would kick in.” He also said that both men are “fully empowered to run the business and develop and implement the strategy that’s approved by the board.”
“During this period, the company will not be standing still,” he said. “If anything, the pace of change will definitely increase.”
At the top of Quarta’s priority list is finding a replacement for Sorrell, for whom the company will look both internally and externally. Second is getting the company back to growth, which won’t necessarily lead to a breakup of the group, but it could lead to the divestiture of certain underperforming assets.
“Whilst we will keep an open mind and always go where there’s value for shareholders, the starting point is this is definitely not a break-up,” he said. “It’s far too early to speculate about specific asset sales.”
Industry press and insiders have speculated a possible sale of Kantar, the $4.8 billion market research company that, while an important source of first-party data to WPP, has been a drag on growth. WPP’s data investment management business was down -2.3% this quarter.
Management, however, didn’t give specific comment on the fate of Kantar under WPP’s new leadership.
“Kantar is an important source of data,” Read said. “It’s not the only source of data. We have a data business inside of Wunderman. We need to look more broadly at all sources of data.”
Despite uncertainties, management is squarely focused on getting the company back to growth in a period of structural change. That means offering services that clients need, in areas like customer experience and business transformation, to succeed in a market disrupted by platforms like Amazon and Alibaba. WPP will do that by providing more agile, integrated solutions that take into account the nuances and competitors in local markets.
“When pressure on clients relents, they're not going to go back to doing things in the old way,” Read said. “We need to shift our efforts and emphasis to the faster-growing parts. We haven’t done that fast enough.”
Unlike Sorrell, who brushed off the threat of consulting firms like Accenture and Deloitte in these areas, Read acknowledged them as competition.
“There are cases we win and cases they win, but they have strengths,” he said. “In talking to our clients, they’re very cognizant of creativity. I’m sure that there will be more management consultants at Cannes than there were before, and they’re very keen to win Lions. It’s not a technological shift but a battle for ideas.”
Despite what’s going on at a management level, it’s business as usual for WPP clients.
“Not one has said they’ll be moving or reviewing business as a result of events,” Read said. “People are very much getting on with their jobs, working on clients’ business and not being distracted.”