WPP sales tumble -15% in Q2 as GroupM 'underperforms'
WPP suffered a -15.1% drop in net sales as the Covid-19 crisis took hold in the second quarter of this year - an "inevitable downturn" according to CEO Mark Read, but "better than our expectations".
Compared to the other major agency groups, WPP's performance over the quarter was middling. While Interpublic and Publicis recorded organic revenue declines of -9.9% and -13%, respectively, Havas dropped -18.3%, Dentsu Aegis Network fell -20%, and Omnicom was down -23%.
However, in the UK WPP saw its net sales (like-for-like revenue less pass-through costs) plummet -23.3% in the months between April and June. The US fared better, down -9.6%, while Greater China dropped by just -3.1% following the -21.3% decline it endured in Q1.
Net sales for the first half of the year were therefore down -9.5% overall.
However, while the market remains "volatile", WPP declared that figures would be in line with analyst expectations for the full year after seeing some improvement in July, during which net sales were down -9.2%.
Meanwhile, the ad network's 'global integrated agencies' - encompassing both its media and creative agencies - reported a Q2 decline of -15.7%.
While GroupM, WPP's media buying arm, "underperformed" because of "the closer correlation of its revenue to client media expenditure", the recently integrated agencies VMLY&R and Wunderman Thompson performed better than the segment as a whole.
Commenting on the results, Read said: “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."
Reiterating that the group's financial position "remains strong", in part due to the sale of Kantar and in part due to reaching its cost saving targets, Read added that WPP will be reinstating its dividend, with an interim dividend of 10p for 2020.
The network saved £450 million by cancelling its final 2019 dividend, and claims to have reduced operating costs by -6.5% year-on-year in H1. WPP said it is therefore on track to deliver cost savings of £700-£800 million this year, with 25% of savings to be permanent in nature.
Between January and June staff headcount fell by 5,000, “a combination of voluntary leavers whose roles were not replaced as part of the hiring freeze, and redundancies”.
WPP also reported a £2.6bn pre-tax half-year loss, although the group noted that much of that was a result of writing down the historic value of Y&R.