WPP PR arm outperforms as Q2 like-for-like revenue dips 7.5 per cent

WPP's PR arm outperformed the company as a whole in the first half of 2020 amid the downturn triggered by COVID-19. PR like-for-like revenue fell 4.5 per cent to £426m ($561.9m) in H1, and by 7.5 per cent to £214m ($282.3m) in Q2.

WPP CEO Mark Read: 'The second quarter is expected to be the toughest period of the year'
WPP CEO Mark Read: 'The second quarter is expected to be the toughest period of the year'

By comparison, like-for-like revenue across WPP fell 9.5 per cent to £4.7bn ($6.2bn) in H1, and by 15.1 per cent to £2.3bn ($3bn) in Q2 (these figures exclude 'pass through' costs). WPP expects Q2 to be "the toughest period of the year".

The holding company said demand for PR services "held up well relative to other parts of the group, as clients sought advice on their communication with all stakeholders in light of the pandemic".

Headline operating profit in WPP's PR division – which includes Burson Cohn & Wolfe, Hill+Knowlton Strategies and the recently merged Finsbury Glover Hering – rose in H1, to £72m ($95m) from £68m ($89.7m)in the same period last year, as margins moved from 15.4 per cent to 16.9 per cent.

WPP said was Hill+Knowlton was "the best-performing of our major agencies" in its interim results announcement this morning.

Regarding its PR business, the company stated: "We expect future demand for our experience, commerce and technology services to be very strong, with clients looking to adapt rapidly to permanent changes in consumer behaviour. On the other hand, we have seen pressure on some project-based work in branding and identity as clients look to cut costs."

Impairment

WPP's overall 'headline' pre-tax profit figure fell 44.2 per cent to £276m ($364.1m) in H1. Its reported figure was a pre-tax loss of £2.58bn ($3.4bn), however, following a £2.7bn ($3.7bn) impairment charge related to acquisitions whose values have been reassessed, "triggered by the impact of COVID-19".

Headline operating margin in H1 was 8.2 per cent, down 3.7 points on the previous year as "cost savings offset the majority of revenue decline" – cost savings totalled £296m ($390.4m) in the first half of the year.

WPP said it had cancelled the 2019 final dividend to preserve about £450m ($593.2) of capital to offset the impact of lower underlying earnings and help it reach net debt-to-earnings targets. However, it declared an interim dividend of 10p per share for 2020 as it "continues to be profitable on a full-year headline basis".

The company expects full-year like-for-like revenue growth (excluding pass-through costs) will remain within the current range of analysts' expectations of -10 per cent to -11.5 per cent, and 10.4 per cent to 12.5 per cent in relation to headline operating margin. That assumes there are no further economic lockdowns in any of its major markets.

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 per cent, 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.

"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 per cent and more, and we are supporting eight of our top 10 clients on ecommerce strategies. Our new business record is industry-leading, at $4bn in the first half, including wins from Intel, HSBC and Unilever, and our pipeline remains strong.

"With £4.7bn ($6.1bn) 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.

"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."

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