hargreaves lansdown

16 Apr 2018

WPP shares fall following Sir Martin Sorrell’s exit

Late Saturday night, WPP announced that their chief executive, Sir Martin Sorrell, the man who had led the company for 33 years, would be stepping down.

This news was followed by a 5.5% fall in the shares of the advertising giant, WPP, on Monday morning when London Stock Exchange opened. However, the share price did recover to trade at 2.9% lower at £12.05.

Sorrell’s decision to leave comes after WPP launched an investigation into allegations of his misconduct.

Over the weekend however, WPP declared the investigation had concluded and the company had no intention on publishing a report detailing the findings. They added:

“The allegation did not involve amounts that are material.”

WPP consist of about 400 businesses, including many globally recognised brands such as Ogilvy & Mather, Kantar Group and Young & Rubicam. Analysts believe this news could be followed by the company being broken up into amongst its smaller businesses and possibly sold.

“It is inevitable that this company is going to be broken up,” said Alex DeGroote, an analyst at Cenkos Securities. “We think the market research assets such as Kantar could be sold fairly quickly, which would generate £3bn-£3.5bn. This would raise other questions about the balance of the group.”

Shareholders of the company have been enduring a miserable 18 months as the company lost a third of its market value after struggling with spending cuts from some of its major consumer brands. Procter & Gamble, one of the world’s biggest advertisers, being one of those companies, trimming their budget by $750 million since 2015 and proposing to cut a further $400 million by 2021.

Brian Wieser, a senior analyst at Pivotal, said:

“WPP’s been hit harder than most – they had some unusually large account losses. AT&T was one, Volkswagen was another. But there is nothing that far away from the overall industry average that was affecting WPP at the time.”

By Lyba Nasir