Rudderless WPP sails into a storm without Martin Sorrell at the helm

The departure of Martin Sorrell, the face of WPP for three decades, raises questions about the firm's future. (AFP)
Updated 18 April 2018
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Rudderless WPP sails into a storm without Martin Sorrell at the helm

  • The sudden departure of Sorrell has sparked questions as to whether the holding group can remain in its current form of employing 200,000 people in more than 400 agencies across 112 countries.
  • WPP said that chairman Roberto Quarta will step up to be executive chairman while its digital boss Mark Read and Andrew Scott, the chief operating officer of WPP Europe, become joint chief operating officers.

WPP, the world’s biggest advertising company, entered uncharted territory on Monday without its founder Martin Sorrell whose departure has left it rudderless at a time of swirling industry change.
Shares in the group fell 4 percent after Sorrell, the driving force behind 33 years of dealmaking and relentless expansion, stepped down on Saturday after the board investigated an allegation of misconduct.
The sudden departure of Sorrell, the face of the company since he founded it in 1985, has sparked questions as to whether the holding group can remain in its current form of employing 200,000 people in more than 400 agencies across 112 countries. It has also prompted fears that without Sorrell’s contacts it could lose clients and talent while it seeks out a new CEO.
“Sorrell’s departure is negative considering ... how instrumental he has been in assembling the assets WPP has today,” said Pivotal Research analyst Brian Wieser.
WPP said that chairman Roberto Quarta will step up to be executive chairman while its digital boss Mark Read and Andrew Scott, the chief operating officer of WPP Europe who oversaw acquisitions, become joint chief operating officers.
They inherit a difficult task, with WPP in March publishing its weakest results since the financial crisis as consumer goods groups such as Unilever and P&G cut spending and other customers jumped ship.
The industry is also battling the might of Google and Facebook, which dominate the online advertising market, and watching nervously as consultants such as Accenture move more aggressively into the sector. The changing dynamics have meant the previous idea of building marketing groups up to offer advertising, branding, planning and research on a global scale — championed by Sorrell and followed by others — is now under threat as clients want more nimble relationships in a digital age.
Many are starting to ask if they can do things differently — creating their own content to place directly on online platforms or working with smaller ad groups. Analysts are already saying that WPP’s market research arm Kantar could be sold off for around
£3.5 billion ($5 billion), compared with the group’s overall market value of £14.5 billion, and question whether there are synergies from holding PR assets like Finsbury.
“We think the lack of operational direction for the group and potential for client losses are clear downside risks over the short to medium term,” Deutsche Bank said.
“The potential for asset sales or even a break-up may provide some support, but these are highly uncertain and unlikely to take place in the near-term.”
Sorrell, 73, did not have a non-compete clause and could set up a new advertising business. He owns 1.4 percent of WPP, according to Thomson Reuters data.
With so much change in the industry, some analysts have questioned whether the group should seek a new CEO from outside who could look at it dispassionately.

 

Names already in the frame include Jerry Buhlmann, who runs the Dentsu Aegis network, and Adam Crozier who previously ran broadcaster ITV and Royal Mail. Jeremy Darroch, the well regarded CEO of bid target Sky, and Andrew Robertson, boss of rival ad agency BBDO, have also been linked with the job. From inside WPP Read, 51, is seen as the lead candidate. While a common refrain heard about WPP is that no one knows the company like Sorrell, Read is the one man who comes close after he wrote to the WPP boss asking for a job in 1989. From the company’s office in Farm Street, Mayfair, he watched as Sorrell pulled off a string of takeovers before building his own profile by growing its digital operations. He spent nearly 10 years on the WPP board, introducing him to investors, and is regarded by peers as a strategic thinker who can win corporate pitches to bring in work.
Scott, 49, is better known in the corporate world than the advertising community, having worked on the company’s acquisition strategy.
“Mark will be responsible for clients, operating companies and people,” a spokesman said. “Andrew will focus on financial and operational performance and implementing on-going reorganization of the group’s portfolio.” They will “report to and be supported” by Chairman Quarta. Read has already contacted senior executives within WPP to offer to speak to clients and reassure them that work will continue as normal.
Whoever replaces Sorrell however will face longer-term questions as to whether a group that was built in his mold should remain intact after his departure. Already executives are predicting that bits will be sold off in a move that could once again become a model for the wider industry.
David Jones, the former CEO of WPP peer Havas and the founder of tech marketing group You and Mr.Jones, predicted WPP would eventually end up missing Sorrell more than he would WPP. “No one else can keep that company together the way he has been able to because he built it,” he told Reuters. “It’s the fall of an emperor and one that I think will not only take the empire down with him but will also have massive ramifications for that entire industry.”

FASTFACTS

Martin Sorrell, WPP’s founder and CEO, quit on Saturday after a board investigation into alleged misconduct. Two executives appointed joint COO as CEO hunt begins. Departure comes at time of huge industry change. WPP shares down 4 percent.


World oil demand, refining growth to peak in 2035 — Unipec

Updated 7 min 7 sec ago
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World oil demand, refining growth to peak in 2035 — Unipec

  • Improved energy efficiency and technological changes, including the rise of renewables, meant global oil demand growth would slow in coming years before peaking in 2035
  • The switch to cleaner fuels will boost global demand for liquefied natural gas
SINGAPORE: World oil demand will peak at 104.4 million barrels per day (bpd) in the mid-2030s, up from just below 100 million bpd currently, as new technologies gradually eat into oil use, China’s Unipec said on Monday.
Improved energy efficiency and technological changes, including the rise of renewables, meant global oil demand growth would slow in coming years before peaking in 2035, Unipec President Chen Bo told the annual Asia Pacific Petroleum Conference (APPEC).
This in turn will slow growth in global oil refining capacity, which is set to hit 5.6 billion tons per year in 2035, he said.
“We believe 2018-2035 will be the last cycle of global refining capacity expansion. After 2035, it is difficult to see large-scale refining projects in construction, except for some small upgrade projects and petrochemical projects,” said Chen.
Unipec is the trading arm of Asia’s largest refiner Sinopec.
The switch to cleaner fuels will also boost global demand for liquefied natural gas (LNG), particularly in the Asia Pacific, after 2025, he added.
An escalating trade war between China, the largest energy importer, and the United States has dampened the Asian nation’s demand for US crude oil and LNG.
The United States exported 300,000 barrels per day (bpd) of crude oil to China in the first half of 2018, and 56 cargoes of LNG through July, or roughly 10 percent of its total LNG exports, according to official data.
Despite the trade dispute, Chen said US crude supply was an important new source for Chinese refiners as it allowed diversification from Middle East and African crudes.
Trade war tensions between the two countries would last “for the time being, and in the future we’ll be active in this area,” he added.
Beijing has excluded US crude imports from its tariffs list so far, but most Chinese buyers are staying away from US oil as the trade war shows no signs of cooling.
Unipec resumed loading US crude in September after a two-month hiatus.
China is also under pressure from the US to reduce its Iranian oil imports as Washington aims to cut exports from OPEC’s third-largest exporter to zero to force Tehran to negotiate a nuclear treaty.
Buyers in Europe, Japan, South Korea and India have either stopped or are reducing Iranian oil imports sharply ahead of the introduction of sanctions in November.
“I expect we’ll cut a little but the volume has not been finalized,” Chen said, without giving a timeframe for the cuts.
He added that Unipec has resumed normal loadings of Saudi oil after it cut imports in May-July.
Given the current supply and demand dynamic in global markets, Chen said, crude oil prices between at $60 and $80 per barrel were normal.