WPP cautious despite revenues falling less than expected

WPP struck a cautious note on Thursday as the spectre of further lockdowns overshadowed improving business trends at the world’s biggest advertising agency group by sales.

Mark Read, chief executive, said that while the second quarter would remain “the toughest of the year”, he is still guarded about the remainder of 2020, noting fresh curbs on social contact imposed in France, Germany and other European countries.

“My observation would be that government is trying to strike the right balance between stopping the spread of the virus and protecting the economy, but we do remain cautious about the fourth quarter and the impact on spending,” he said. But he added that WPP “hasn’t yet seen clients pull spend in a major way”.

WPP shares, which are down almost 45 per cent since the start of a woeful year for the advertising industry, fell a further 3.5 per cent in morning trading.

The London-based group beat market expectations with a 7.6 per cent decline in like-for-like revenues to £2.4bn in the three months to September, with business in all regions experiencing a pick-up.

The third-quarter performance puts WPP behind its rivals Publicis and Interpublic Group, which reported like-for-like declines of 5.6 and 3.7 per cent respectively, but ahead of Omnicom, which suffered an 11.7 per cent fall.

On the assumption that there are “no widespread lockdowns in any of our major markets”, WPP said it expected full-year revenues to decrease within a range of 8.5 per cent to 10.7 per cent.

Asked whether measures taken by France and Germany on Wednesday affected that view, Mr Read said: “We are comfortable with the guidance given where we are.”

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WPP surprised markets in August by resuming dividend payments that had been suspended at the start of the pandemic.

Mr Read’s guidance indicates that the latest Covid restrictions are not likely to scupper a planned return to regular payouts and, once the recovery is in full swing, to share buybacks. The company will outline its detailed capital plans and acquisitions strategy to shareholders in December.

“We will see WPP return to growth in the second quarter of next year and [take] two years to get back to the numbers of 2019,” Mr Read told the Financial Times.

WPP’s public relations businesses reported some of the best performance within the group, with sales falling just 2.9 per cent on a like-for-like basis, while its integrated advertising agencies, such as VMLY&R, declined by 6.7 per cent.

Worst hit were specialist agencies in areas such as brand consultancy, with like-for-like sales dropping 13.9 per cent during the quarter. WPP said it at least matched all the decline in revenue through cost savings.



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