08:00 Wed 29 Apr 2020
WPP PLC - First Quarter Trading Update 2020
FOR IMMEDIATE RELEASE
WPP
First Quarter Trading Update
Good performance to February; March impact of COVID-19 as expected; strong liquidity position supported by substantial actions on cost and cash flow
Note: all numbers relate to continuing operations unless otherwise stated
n Q1 revenue -4.9%; LFL[1] revenue -3.8%
n Q1 LFL revenue less pass-through costs -3.3%, with impact of COVID-19 felt more strongly in March, at -7.9%, as expected
n Top five markets Q1 LFL revenue less pass-through costs: US -1.9% (March -3.7%); UK -4.2% (March -9.8%); Germany -4.3% (March -14.9%); Greater China -21.3% (March -29.9%); India 6.1% (March -1.1%)
n China: offices back to around 90% occupancy, rapid recovery in economic activity
n Encouraging net new business performance:
n Strong liquidity and balance sheet: average net debt
n Substantial actions already taken to manage cash flow and profitability include suspension of the 2019 final dividend and share buyback programme, reductions in costs and capital expenditure, and tight controls on working capital
n Further measures on costs now being implemented: voluntary salary sacrifice from over 3,000 senior roles, part-time working and some permanent headcount reductions
n Plans in place to flex costs against a range of economic scenarios to ensure cash flow and profit are managed and the business can respond quickly when markets recover
Mark Read, Chief Executive Officer of WPP, said:
"After a good start to the year, with growth outside of China in January and February, our business started to be materially impacted by COVID-19 in March. Our response has focused on four areas: the health of our people, serving our clients, helping to mitigate the impact of the virus on our communities and ensuring WPP is financially strong.
"Close to 95% of our 107,000 people are working from home, providing uninterrupted service to clients, helping them to communicate their own actions, sustain their brands and develop new ways to market their products. We have also won
"We have witnessed a decade's innovation in a few short weeks, with the way people meet, shop, work and learn increasingly reliant on technology. We are seeing clients rapidly shift emphasis and budget into digital media and direct-to-consumer channels and continue marketing technology investments. And, while many clients are significantly impacted by a reduction in consumer demand, other sectors such as packaged goods, technology and food retail brands have been more resilient. As in previous downturns, those who are most prepared and most far-sighted will be at an advantage when we come through the current situation.
"At a time of great uncertainty, I am very proud of how our people and clients have responded. Despite the economic challenges that will, no doubt, be with us for some time, the way we have come together gives us real confidence in our future."
COVID-19 business update
People
The health of our people remains our first priority. In the middle of March we asked our people to work remotely and we now have almost 95% of our 107,000 employees working from home, with the exception of our teams in China who have largely returned to the office. Leadership across WPP and our agencies is communicating frequently with our teams, mainly by videoconference. We are supporting the physical and mental wellbeing of our people through regular sessions to help them manage the challenges of remote working.
Clients
Our clients have been able to depend on us for uninterrupted service from the outset. We believe that our broad geographic reach, our industry sector mix and the breadth of our offer provide defensive qualities in an economic downturn. While sectors such as Automotive, Travel & Leisure and Luxury & Premium, which together account for 24% of our top 200 clients' spend, have seen the most significant cuts, spend is holding up relatively well in sectors such as Consumer Packaged Goods, Technology and Healthcare & Pharma, which together represent 54%. We are seeing continued and, in some cases, greater demand for our public relations, ecommerce, marketing technology and production capabilities. Clients continue with new business reviews and we have registered a number of important wins including Discover, Hasbro, Intel, and Novo Nordisk, as well as retentions including BBVA. The pipeline remains encouraging and while we estimate some 20% of pitches have been put on hold, those that had started are continuing (though clients are understandably reluctant to begin new reviews). So far this year we have not lost a significant account from any client.
Communities
We are working with clients, governments, national health organisations and NGOs to help limit the impact of COVID-19 on society. A team of WPP agencies, for example, is supporting the
Financial resilience
On 31 March we outlined a number of measures designed to strengthen the Company's financial position, including steps to reduce costs and conserve cash, ensuring adequate liquidity and a significant cushion to our covenants, and we provide an update on page 4 of this release.
The current situation is unprecedented and the immediate future highly uncertain. There are some positive signs. In the past week, we have started to prepare for the reopening of our offices as and when governments begin to lift lockdowns - at substantially lower capacity and with enhanced safety measures in line with official guidance. Clients are also looking ahead. Visibility of a return to normal remains low, but a number of clients are seeking our advice and support on how they should market their brands in the recovery phase.
Revenue from continuing operations in the first quarter of 2020 was
In March, LFL revenue less pass-through costs was -7.9% as the impact of COVID-19 began to be felt more widely across our business.
Regional review
Revenue analysis - First Quarter
£ million |
2020 |
∆ reported |
∆ constant[2] |
∆ LFL[3] |
∆ LFL March |
2019 |
N. America |
1,102 |
-1.6% |
-3.5% |
-2.3% |
-9.9% |
1,120 |
United Kingdom |
411 |
-4.7% |
-4.7% |
-2.1% |
-4.6% |
431 |
W. Cont Europe |
561 |
-5.3% |
-4.2% |
-4.4% |
-10.6% |
593 |
AP, LA, AME, CEE[4] |
773 |
-9.0% |
-6.5% |
-6.2% |
-12.6% |
849 |
Continuing operations[5] |
2,847 |
-4.9% |
-4.6% |
-3.8% |
-10.1% |
2,993 |
Kantar |
77 |
-87.1% |
-87.1% |
2.9% |
|
595 |
|
2,924 |
-18.5% |
-18.3% |
-3.6% |
|
3,588 |
Revenue less pass-through costs analysis - First Quarter
£ million |
2020 |
∆ reported |
∆ constant |
∆ LFL |
∆ LFL March |
2019 |
N. America |
938 |
-0.8% |
-2.7% |
-1.9% |
-3.6% |
945 |
United Kingdom |
313 |
-5.5% |
-5.5% |
-4.2% |
-9.8% |
332 |
W. Cont Europe |
467 |
-4.7% |
-3.6% |
-3.7% |
-9.6% |
490 |
AP, LA, AME, CEE |
648 |
-8.0% |
-5.4% |
-4.6% |
-11.5% |
704 |
Continuing operations |
2,366 |
-4.3% |
-4.0% |
-3.3% |
-7.9% |
2,471 |
Kantar |
48 |
-89.4% |
-89.4% |
-3.9% |
|
455 |
|
2,414 |
-17.5% |
-17.2% |
-3.3% |
|
2,926 |
North America, with LFL revenue less pass-through costs -1.9%, was the best performing region in the first quarter, showing a further improvement in trend over the second half of 2019. This reflects the lapping of some significant assignment losses from 2018, and an improved new business performance in 2019. VMLY&R, Grey and GroupM all grew in the region during the period. March showed a slight deterioration in trend, as expected.
In the United Kingdom, LFL revenue less pass-through costs was -4.2%, with March -9.8% as the impact of the lockdown began to have an effect on client spend.
Western Continental Europe saw LFL revenue less pass-through costs of -3.7%. Performance varied significantly from market to market, with countries such as Spain and Denmark continuing to trade relatively well despite widespread lockdowns, and other markets such as Italy showing a marked deterioration in performance during March.
In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe LFL revenue less pass-through costs was -4.6%. Asia Pacific was the weakest sub-region, reflecting the COVID-19 impact on Greater China, but Africa & the Middle East grew strongly and Central & Eastern Europe was also up year-on-year.
Business sector review
Revenue analysis - First Quarter
£ million |
2020 |
∆ reported |
∆ constant |
∆ LFL |
∆ LFL March |
2019 |
Global Integrated Agencies |
2,154 |
-4.1% |
-3.8% |
-2.5% |
-9.3% |
2,246 |
Public Relations |
223 |
-2.2% |
-2.5% |
-2.9% |
-7.0% |
228 |
Specialist Agencies |
470 |
-9.5% |
-9.0% |
-9.4% |
-14.9% |
519 |
Continuing operations |
2,847 |
-4.9% |
-4.6% |
-3.8% |
-10.1% |
2,993 |
Kantar |
77 |
-87.1% |
-87.1% |
2.9% |
|
595 |
|
2,924 |
-18.5% |
-18.3% |
-3.6% |
|
3,588 |
Revenue less pass-through costs analysis - First Quarter
£ million |
2020 |
∆ reported |
∆ constant |
∆ LFL |
∆ LFL March |
2019 |
Global Integrated Agencies |
1,745 |
-3.5% |
-3.2% |
-2.6% |
-6.6% |
1,807 |
Public Relations |
212 |
-1.0% |
-1.3% |
-1.4% |
-4.4% |
214 |
Specialist Agencies |
409 |
-9.0% |
-8.6% |
-7.4% |
-15.2% |
450 |
Continuing operations |
2,366 |
-4.3% |
-4.0% |
-3.3% |
-7.9% |
2,471 |
Kantar |
48 |
-89.4% |
-89.4% |
-3.9% |
|
455 |
|
2,414 |
-17.5% |
-17.2% |
-3.3% |
|
2,926 |
In Global Integrated Agencies, LFL revenue less pass-through costs was -2.6%. VMLY&R performed strongly, achieving good growth in the first quarter. All of the other agencies recorded declines, although Wunderman Thompson and Grey had been showing encouraging sequential improvement until March.
Public Relations LFL revenue less pass-through costs was -1.4%, with the decline mitigated by strong demand for some of our Specialist PR services in the current environment.
Specialist Agencies LFL revenue less pass-through costs was -7.4%, with the overall performance continuing to be impacted by a significant client assignment loss in late 2018. Geometry and our
The business sector mix of our client base has defensive qualities. Within our top 200 clients, 54% of revenue less pass-through costs came from the Consumer Packaged Goods, Technology and Healthcare & Pharma sectors, which are yet to see a significant impact and were up 4.9% LFL in the first quarter. 22% of revenue less pass-through costs came from sectors including Telecoms,
Update on cost reduction measures
As announced on
More recently, we have implemented a range of additional measures, including voluntary salary sacrifice and part-time working. Over 3,000 people with salaries above certain levels have already committed to give up 10-20% of their salary for an initial three-month period. While we continue to protect our people as much as possible from redundancy, as well as ensure our ability to serve clients and grow when markets recover, we have had to reduce headcount in certain areas.
Given the significant uncertainty over the immediate outlook, we have modelled a number of economic scenarios and developed detailed cost actions against each of these, using a combination of the cost savings outlined above. Owing to the flexibility of the cost base, we are able to respond quickly and will reduce cost further if the depth and length of the downturn requires it, as well as ensure the business is ready to take advantage of any market recovery.
Balance sheet and liquidity
WPP has a strong balance sheet and good liquidity. Over the last two years, we have raised approximately
As at
Our covenants, which relate to our
During the period we received a further
As previously communicated, to preserve liquidity the Board has decided to suspend the share buyback programme and the 2019 final dividend. These two actions together will preserve approximately
We have identified capital expenditure savings in excess of
Financial guidance
As announced in our update of
For further information:
Investors and analysts
Peregrine Riviere } +44 7909 907193
Fran Butera (US) } +1 914 484 1198
Media
Chris Wade } +44 20 7282 4600
Kevin McCormack (US) } +1 212 632 2239
Juliana Yeh (APAC) } +852 2280 3790
Richard Oldworth, +44 20 7466 5000
Buchanan Communications +44 7710 130 634
This announcement is being distributed to all owners of Ordinary shares. Copies are available to the public at the Company's registered office.
The following cautionary statement is included for safe harbour purposes in connection with the Private Securities Litigation Reform Act of 1995 introduced in the United States of America. This announcement may contain forward-looking statements, including statements relating to the potential impact of the COVID-19 outbreak, within the meaning of the US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially including adjustments arising from the annual audit by management and the Company's independent auditors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings by the Company with the
[1] Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals
[2] Percentage change at constant currency exchange rates
[3] Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals
[4] Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
[5] Continuing operations excludes certain Kantar assets which remain wholly owned by WPP pending completion
This information is provided by RNS, the news service of the
The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of...
FOR OUR FULL DISCLAIMER CLICK HERE