WPP plc (WPP) - Get Report shares fell to a six-year low Thursday after it slashed its full-year profit outlook following a dismal third quarter as the world's biggest advertising group attempts to regroup following the ouster of its founder and former CEO Sir Martin Sorrell.
WPP said full year operating margins would slide 100 basis points to 1.5% as net sales decline by 1% from 2017 following the loss of big-brand clients such as Ford Motor Co. F earlier this year. The outlook followed a third quarter update that showed net sales fell 0.8% to £3.758 billion ($4.85 billion). WPP also said long-serving finance direction Paul Richardson would step down and that the group would look to the sale of a stake in data analytics group Kantar while retrenching its merger ambitions in order to focus on organic growth.
"This move, together with the actions that we will continue to take, should further improve our balance sheet," said new CEO Mark Read. "In future, we will pay greater attention to capital discipline and focus our acquisition spending only on the most strategic opportunities that we can tightly integrate into our organisation."
WPP shares plunged more than 18.6% in the opening minute of trading in London to change hands at £8.58 each, the lowest since 2012 and a move that extends its year-to-date decline past 36%.
Read, who took over as CEO last month following the April following the April departure of Sorrell amid accusations of mis-using company funds and inappropriate behavior, has vowed to deepen the group's restructuring plans after reporting multiple disappointing quarters.
Earlier this spring, Sorrell has said he would focus on restructuring its sprawling global business of digital and traditional agencies into a more comprehensive unit.
"Our industry is facing structural change, not structural decline, but in the past we have been too slow to adapt, become too complicated and have under-invested in core parts of our business," Read said Thursday. "There is much to do and we have taken a number of critical actions to address these legacy issues and improve our performance."
WPP chairman Roberto Quarta has also suggested the group could look to major changes in the near terms is seeks to redefine the group following Sorrell's departure, telling the Wall Street Journal there will be "no sacred cows" in its portfolio.
Sorrell revealed his intention to quit the group in an April statement that referenced only the ad industry's "current disruption" that is "simply putting too much unnecessary pressure on the business, our over 200,000 people and their 500,000 or so dependents, and the clients we serve in 112 countries."
However, his resignation came amid a company investigation tin allegations of misconduct against Sorrell, including those linked to company funds, charges which the 74-year-old rejected "unreservedly".
Sorrell, who founded WPP in 1971 and turned the then two-man operation into the world's biggest advertizing firm through a seemingly endless series of leveraged mergers and acquisitions, was not only one of Europe's most visible CEOs, but also its highest paid, having earned more than £48.1 million in 2016 - more than double the final pay package of the FTSE 100's second-highest paid CEO, Carnival plc.'s Arnold Donald.