WPP CEO Mark Read is claiming a win in the third quarter of 2020 with “just” a 7.6% fall in the like for liker revenue compared to -15,1% in Q2.
Globally this metric amounted to (all minuses) 5.5% in the US, 6.5% in the UK, 1.8% in Germany 16.3% in India and a surprising 16.7% in China, where the ad market is proving sticky even as the rest of the economy recovers. For the year to date revenue less pass through costs (WPP’s definition of organic) is down 10.8% (8.9% like for like) at just over £7bn. Roughly on a par with biggest rival Omnicom.
Net debt is down to £2.5bn (£2bn down on a year ago – thank you Kantar) while Read says the company is on track to make cost savings of between £700-800m.
Read (above) says: “WPP continues to demonstrate its resilience in a challenging market. We have maintained our new business momentum as clients seek out our creativity and our skills in media, technology, data and ecommerce.
“This month, Uber joined a growing list of major assignment wins that includes Alibaba, Dell, HSBC, Intel, Unilever and Whirlpool, and we continue to lead the new business rankings. We have also renewed and expanded our relationship with Walgreens Boots Alliance to encompass its data and technology-driven marketing strategy.”
The big worry for Read and his ad holding company peers is the resurgent pandemic, already hitting big markets in Europe including the UK, Germany and France. The US may follow if Joe Biden is the next president and chooses to clamp down on the virus more enthusiastically than incumbent rival Donald Trump.
A short time ago Read said in an interview that WPP was moving into expansionary mode with acquisitions on the agenda. That option looks to be on the back burner for now in the second wave of the pandemic.
Read has done a pretty good job of battening down the hatches at WPP. The company is now performing more or less in line with its peer group which is what he promised when he took over from Sir Martin Sorrell a couple of years ago.
In a way the pandemic has worked to Read’s advantage because the market has come back to him, narrowing most differentials. And founder and former CEO Sorrell’s construct has proved more durable than some critics expected.
What Read and the others now need to do is find sustainable growth from somewhere. This year’s new business record is a start but no-one quite knows whether these gains and retains are on lower fees and margins.
WPP’s stock is down around 40 per cent in a year. Some shareholders will demand a break-up if real growth stays elusive. Read will be keeping a close eye on the share register for predators.