WPP to pay dividend even as ad revenues slump due to coronavirus
Advertising giant WPP has said it will pay an interim dividend of 10 pence a share even as advertising revenues plunged due to coronavirus.
The group said trading had improved in July, winning more business than rivals, suggesting the worst was over for the ad group.
The figures
WPP reported a 12.3 per cent drop in revenue in the first half of the year, down from £6.4bn in the first half of 2019 to £5.6bn.
Revenue less pass-through costs was £4.7bn, down from £5.2bn in the first half of 2019.
Revenues in the UK plunged 23.3 per cent in the second quarter as the impact of lockdown hit, while China, recovering from the impact of the pandemic, fell 3.1 per cent.
Profit before tax plunged 44.2 per cent from £494m to £276m in the comparable period.
The advertising giant took a £2.7bn impairment charge which it said was due to the reassessment of acquisitions in light of the pandemic and driven by discount rates.
WPP declared an interim dividend of 10p.
Why it’s interesting
While WPP has recommended an interm dividend of 10p, it has suspended its 2019 final dividend “to protect liquidity in light of the threat to liquidity and cash flow” from the pandemic.
The firm said its share buyback was under review but intended to restart once the environment had stabilised.
WPP said its results reflected an uptick in its new business, having won almost £4bn of new business. In July, the advertising group recorded like-for-like revenue less pass-through costs of minus 9.2 per cent, a slight improvement over the second quarter even as markets remain volatile.
The ad firm said that while the economic outlook remains certain, and assuming no further lockdowns occur in its major markets, it expects an outcome for the full year to be within the current range of analysts’ expectations of minus 10.0 per cent to minus 11.5 per cent for like-for-like growth in revenue less pass-through costs.
The world’s biggest advertising company said its performance had moved away from client media expenditure, reflecting “the broader spread of marketing services” it now provides. It also said it reflected a broader shift away from commission on media investment.
“Today’s WPP results will relieve the 400,000 currently employed in the UK’s marketing profession, indicating that business may be returning to normal”, said Chris Daly, chief executive of the Chartered Institute of Marketing. Shares in the advertising firm surged 4.94 per cent.
What WPP said
Chief executive Mark Read said:
“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.
“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.