WPP’s new broom tears into Sorrell as shares plunge 20%

WPP shares crashed 20% on Thursday after new chief executive Mark Read revealed a weak third quarter and trashed the legacy of founder Sir Martin Sorrell.

Sorrell, the sage of Soho who bestrode the ad market for decades and revelled in his reputation as a business guru, was forced out in an unseemly row about misuse of corporate funds, which included the alleged use of prostitutes.

Sir Martin vehemently denied the claims and has set up a rival agency.

Today Read, in his second month in the job, moved quickly. The statement to the stock market was unusually brutal and did not shy from placing the blame.

Read said: “Turning around WPP requires decisive action and radical thinking, and our performance in the third quarter of 2018 reinforces our belief in that approach...

“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.

“There is much to do and we have taken a number of critical actions to address these legacy issues and improve our performance.”

Read told the Standard that WPP had suffered 18 months of underperformance and wasn’t moving quickly enough to cope with the shift to digital ads.

“We are not creative enough,” he said. Third-quarter revenues, hit by a poor performance in North America, were down 0.8% to £3.75 billion, worse than the City feared.

The shares tumbled 20% at first, and were later down 155p, 15%, at 900p. Read has seen Ford take some business away from WPP, though he insists the carmaker remains his biggest client. He admitted “we have not been winning enough business”.

Read plans to sell a majority stake in WPP’s £3.5 billion data arm Kantar.

One City analyst supportive of Sorrell said: “They’ve lost eight major pieces of business including Ford, Amex, GSK, Mercedes and Pepsi. Read is out of his depth.”

Read said the sale of Kantar was one of the “tough choices”. WPP’s North American arm was the biggest drag, with sales down 3.5% in the quarter.

WPP shares are now at a six-year low. Finance director Paul Richardson is stepping down after 22 years in the role. He is well regarded in the industry, though one critic dubbed him “the luckiest man in advertising”.