Fitch Ratings revised its outlook on WPP PLC to negative from stable, saying the U.K. advertising giant faces a period of uncertainty following the departure of longtime chief executive Martin Sorrell.
The rating agency said Sorrell's exit "comes at an important time" for WPP as it deals with pressures building both across the industry and at the company, which is expected to continue running high financial leverage for an extended period.
The pressures weighing on WPP, which also drove the outlook revision, include the rise of direct online advertising platforms, increasing competition from large business consultancies, and pressures on companies' advertising budgets.
"Specific to WPP is the degree to which leverage is now expected to remain outside the company's target leverage, that growth is under-performing the wider sector and strategic questions following the departure of its longtime CEO and uncertainties surrounding his succession," Fitch said.
WPP's leverage is likely to remain elevated through 2019, and its revised leverage target would take time to achieve, according to the rating agency.
"The Negative Outlook is therefore likely to remain in place for the next 12 to 18 months," said Fitch, which affirmed WPP's long-term issuer default rating and unsecured rating at BBB+.
Fitch said WPP's key strategy goals remained mostly unchanged after Sorrell's exit, and that the company was not expected to make a wide-ranging portfolio shakeup.
"Market speculation over a breakup of the business is, in Fitch's view, unwarranted and not our central case for the business," it said.
Sorrell resigned in April after the WPP board investigated him over alleged misuse of company assets and personal misconduct.