Advertising giant WPP has starting dishing out dividend payouts to shareholders again after coming to the conclusion it has already ridden out the ‘toughest period’ of the year.
The group, which often acts as a bellwether for the health of the advertising and marketing sector, suffered a £2.5billion loss for the first half of its financial year, with revenue sinking by 9.5 per cent.
After scrapping its dividend for last year, WPP today revealed that it will pay shareholders a dividend of 10p a share for the first half of this year, with the company claiming it is in a ‘strong financial position.’
Dwindling profits and lower growth rates across the industry prompted the group to recognise a £2.7billion impairment charge in the first half of the year, principally from its acquisition of Y & R agencies two decades ago.
WPP now hopes that the worst is behind it, and that the second quarter will be the most painful period.
But this is reliant on there not being a second wave of Covid-19, and more mass lockdowns, it 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,’, WPP boss Mark Read said.
He added: ‘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.’
Read said that the Covid-19 pandemic has accelerated changes that were already happening in the sector, and therefore WPP needed to speed up its own plans.
The company is investing in technology and e-commerce, and training staff with new skills, including accreditations from Adobe, Amazon, Facebook, Google and Salesforce.
Read said: ‘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 10 clients on e-commerce strategies.’
WPP said it had cut its operating costs by 6.5 per cent year-on-year in the first half and confirmed it was ‘on track’ to meet its target of saving up to £800million by the end of the year.
On the subject of Government support received during the pandemic, WPP said: ‘We have generally not applied for government support in response to Covid-19, although in some markets funding has been applied automatically.
‘We did not use the UK Government funded Job Retention Scheme. In total we have received £29 million of funding, none of which related to the UK or US, and have also benefited from the deferral of certain taxes under local initiatives available to all companies in the countries concerned.’
FTSE 100-listed WPP’s share price is performing strongly today and is currently up 4.65 per cent or 29p to 653p, while a year ago it stood closer to 947p.
Chris Daly, chief executive at the Chartered Institute of Marketing said: ‘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.
‘Brands need marketing, even more so post-crisis if we are to unlock a V-shaped recovery. Our own research shows that brand reputation has been prioritised at the expense of short-term promotional strategies.
‘As the recovery gathers pace, the opportunity for marketers to generate value is immense.
‘Something that WPP has worked hard to improve by strengthening its technology offering. As digital channels continue to dominate, and sectors such as consumer goods, technology and healthcare prove their resilience, WPP’s digital strategy will prove instrumental in achieving a return to growth by 2021.’
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