WPP had a pretty gruesome April, May and June with Q2 like-for-like sales (its version of organic growth) falling 23% in the UK, 25% in India, 3.1% in China (now seemingly slowly recovering from coronavirus) and 9.6% in its key US market.
For the half year to June however the number is 11.5%, better than all its peers in Q2 with the exception of Interpublic (down 9.9%.)
WPP reported a pre-tax loss for the half year of £2.45bn as CEO WPP Read essayed a kitchen sink cleaning operation, booking £2.7bn of impairments, £2.5bn in writing down the value of acquisitions made pre-Covid (some, no doubt, in the Sir Martin Sorrell era*.) WPP reduced its net debt from £4.2bn to £2.7bn, chiefly through its sale of 60% of research operation Kantar to Bain. It says it’s on track for £800m of cost savings in 2020.
After scrapping its 2019 dividend to save £400m it says it will pay an interim divided this year of 10p, which should please shareholders, a surprise but a confident sign.
CEO Read (above) says: “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.
“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.
“I would like to thank our people around the world, the vast majority of whom have been working from home and have shown great creativity, agility and collective spirit to support our clients in challenging times.”
The troops do, indeed, seem to have responded to Read’s (relatively) light touch. He says merged agencies Wunderman Thompson and VML/Y&R were the company’s “best performing integrated agencies” (some might say they’re the only two) which may indicate that further mergers can be expected.
After the big write-downs this is a new-style WPP and one in Read’s image. Less spectacular than WPP in the Sorrell era no doubt, but seemingly a more solid entity with at least the prospect of steady growth (albeit from a much lower base.)
All that could unravel of course and there are, no doubt, further upheavals to come. The once trailblazing media business GroupM is trying to find a new role in a world dominated by Facebook, Google and Amazon.
Regionally the US seems to be recovering a bit (although the comparables may be kind as WPP in the US has been struggling for two years now), the UK looks like a car crash and further surgery is inevitable. Grey, for example, is struggling in the UK after a few years in the sun.
Read, with his experience of running Wunderman on its own successfully, knows as much about the digital landscape as anyone. But WPP seems to be in no worse a position than its peers and better than some – ahead of one of Read’s targets when he took the job.
The reminder of 2020 and 2021 will show if his marriage of tech and creative really is a viable model for ad holding companies as they try to navigate an uncertain future.
*Reported to be Y&R (now merged into VML/Y&R.) Deemed to be worth a now mind-boggling $4bn back in 2000.
This is an updated version of an earlier story.