We remain cautious on the speed of recovery: Mark Read, CEO, WPP
Resilient performance in a challenging environment; market-leading new business performance; improved liquidity and on track to be towards the upper end of £700-800 million cost savings target – these are some of the highlights of WPP’s performance in the first half of the year 2020.
H1 and Q2 financial highlights
H1 reported revenue -12.3%, LFL revenue -11.5% (Q2 -18.4%)
H1 revenue less pass-through costs -10.2%, LFL revenue less pass-through costs -9.5%
Q2 LFL revenue less pass-through costs -15.1%: US -9.6%, UK -23.3%, Germany -11.6%, Greater China -3.1%, India -25.1%
H1 headline operating margin 8.2%, down 3.7pt on prior year as cost savings offset the majority of revenue decline
Cost savings of £296 million in H1, on track to deliver towards the upper end of the £700-800 million target. Around 25% of these savings expected to be permanent when returning to 2019 levels of revenue less pass-through costs
Reported loss before tax impacted by £2.7 billion of impairments (£2.5 billion goodwill, £0.2 billion investment and other write-downs); relating to acquisitions whose carrying values have been reassessed, triggered by the impact of COVID-19, and driven by a combination of higher discount rates, a lower profit base in 2020 and lower industry growth rates
Net debt at 30 June 2020 £2.7 billion, down £1.5 billion year-on-year reflecting Kantar transaction and strong working capital management
In a release issued, Mark Read, Chief Executive Officer, WPP, stated, “After two months, in which our strategic progress could be measured by growth outside Greater China, the second quarter saw an inevitable downturn, with like-for-like revenue less pass-through costs declining by 15%, albeit better than our expectations. Assuming there is no second wave nor major lockdowns, the second quarter is expected to be the toughest period of the year, although we remain cautious on the speed of recovery.”
He further said, “Our strategic transformation remains on track, but as COVID-19 accelerates the change in our sector, we are accelerating our plans. We continue to attract new talent, invest in technology and ecommerce, and train our people in the skills they need for the future, with more than 20,000 receiving accreditations from Adobe, Amazon, Facebook, Google and Salesforce this year.”
“We are working with our clients to help them get back to business, adapt their marketing strategies at speed and reshape their operations for a new world. Brands are seeing increases in online sales of 100% and more, and we are supporting eight of our top ten clients on ecommerce strategies. Our new business record is industry-leading, at $4 billion in the first half, including wins from Intel, HSBC and Unilever, and our pipeline remains strong,” Read added.
He further said, “With £4.7 billion of liquidity thanks to the Kantar transaction, and as we deliver against our cost savings targets, our financial position remains strong. As a result, we are able to return to paying our dividend, with an interim dividend of 10p for 2020.”