WPP’s reported revenue for 2018 was down 1.3 per cent at £15.602 billion. Reported revenue less pass-through costs was down 2.6 per cent, up 0.2 per cent in constant currency and down 0.4 per cent like-for-like. In the fourth quarter, like-for-like revenue was down 0.1 per cent, a slight deterioration from the third quarter of +0.2 per cent, with all regions, except North America, showing an improvement. On the same basis, revenue less pass-through costs in the fourth quarter was down 0.7 per cent, an improvement over the third quarter of -1.5 per cent, with North America and the United Kingdom slightly weaker, more than offset by stronger growth in Western Continental Europe and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe.
Headline profit before tax was down 11.0 per cent to £1.863 billion from £2.093 billion, and down 8.5 per cent in constant currencies. Reported profit before tax fell by 30.6 per cent to £1.463 billion from £2.109 billion, the difference between the headline and reported figures reflecting principally the £302 million of restructuring and transformation costs and £184 million of goodwill impairment charges. In constant currencies, reported profit before tax fell by 28.1 per cent.
Reported profit after tax fell by 40.4 per cent to £1.139 billion from £1.912 billion. In constant currencies, profits after tax fell 38.5 per cent. Profits attributable to share owners fell 41.5 per cent to £1.063 billion from £1.817 billion, again reflecting principally the £302 million of restructuring and transformation costs and £184 million of goodwill impairment. In constant currencies, profits attributable to share owners fell by 39.6 per cent.
Profit before tax reflects impact of restructuring and transformation costs and goodwill impairment.
As outlined in the Investor Day on December 11, 2018, WPP undertook a strategic review of it operations. As part of that review, restructuring actions have been taken to right-size underperforming businesses, address high cost severance markets and simplify operational structures. This has included a number of WPP’s operating companies having been merged, closed or sold. It also includes transformation costs with respect to strategic initiatives like co-locations in major cities, IT transformation and shared services.
£234 million of restructuring and transformation costs were recorded in the fourth quarter in relation to this plan. This included £63 million of non-cash write-offs and £171 million of actions that have a cash impact in 2018 and beyond. In 2018 the cash outflow was £50 million. The £171 million forms part of the anticipated £300 million total cash cost of the restructuring plan that we announced – with the balance to be incurred in 2019, 2020 and 2021.
The total of restructuring and transformation costs in 2018 was £302 million. The remaining £68 million relates to severance restructuring costs recorded in the first half, together with costs in relation to the continuing global IT transformation program.
These exceptional costs of £302 million and £41 million of associate company exceptional losses have been partly offset by exceptional gains of £235 million, primarily relating to the gain on the sale of the Group’s investment in Globant S.A.
This gives a net exceptional loss of £108 million and compares with a net exceptional loss in 2017 of £24 million.
Reported billings at £55.798 billion were up 0.4 per cent, up 3.3 per cent in constant currency and up 3.2 per cent like-for-like.
Mark Read, Chief Executive Officer, WPP , remarked, “As we have said previously, 2019 will be challenging – particularly in the first half – due to headwinds from client losses in 2018. However, we start the year with fewer clients under review than we did in 2018, and investments in creativity and technology will further improve the competitiveness of our offer.”
He further said, “We are at the beginning of a three-year turnaround plan, but WPP’s new positioning as a creative transformation company with stronger, more integrated, more tech-enabled agencies is already proving effective, having driven several of our recent new business successes. As we implement our strategy in 2019 we will continue to put creativity, technology and great work for clients at the heart of our own transformation.”