After 33 years at WPP PLC (LON:WPP) (WPP.L), Sir Martin Sorrell has today announced that he will step down as CEO. The company’s share price has fallen by over 3% at the time of writing.
The update released by the company notes that the previously announced investigation into an allegation of misconduct against Sir Martin has now been completed. It was found that the allegation did not involve amounts that are material.
Still, Sir Martin Sorrell has decided that it is in the best interests of the company if he steps down now. In my view, he has done a tremendous job in growing the business and developing it into one of the major PR/advertising companies in the world.
WPP appears to have a solid management team in place who appear to be very capable. I feel that they have the potential to deliver improved financial and share price performance for the business in future.
Sir Martin Sorrell will be missed in my opinion. I think he has been a key catalyst behind the company’s growth, although I still feel optimistic about the company’s future.
WPP has been able to move into new markets and regions over the years through an aggressive acquisition policy. With the stock appearing to have a relatively strong balance sheet and solid cash flow, this strategy could continue over the medium term. It may lead to improving growth rates – particularly since the prospects for the global economy remain generally bright to my mind.
With the stock trading on a prospective PE ratio of 11, the stock market seems to have factored in the forecast fall in EPS which is due to take place this year. Therefore, it seems to offer upside potential for the long run.
Although in the short term its share price could be volatile following today’s news, I’m optimistic about its investment prospects for the long term.