Measures include redundancies and voluntary pay cuts taken by more than 3,000 staff.
Good performance to February; March impact of COVID-19 as expected; strong liquidity position supported by substantial actions on cost and cash flow.
- Q1 revenue -4.9%; LFL revenue -3.8%
- Q1 LFL revenue less pass-through costs -3.3%, with the impact of COVID-19, felt more strongly in March, at -7.9%, as expected
- 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%)
- China: offices back to around 90% occupancy, rapid recovery in economic activity
- Encouraging net new business performance: $1 billion won in the first quarter
- Strong liquidity and balance sheet: average net debt £2.1 billion, down £2.1 billion year-on-year, with £4.4 billion of cash and undrawn facilities
- Substantial actions are already taken to manage cash flow and profitability include suspension of the 2019 final dividend and share buyback program, reductions in costs and capital expenditure, and tight controls on working capital
- Further measures on costs now being implemented: voluntary salary sacrifice from over 3,000 senior roles, part-time working, and some permanent headcount reductions
- 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 $1 billion of new business in the first quarter, including the global integrated Intel account, creative duties for Discover and the media accounts for Hasbro and Novo Nordisk.
“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.”
First Quarter Group performance
Revenue from continuing operations in the first quarter of 2020 was £2.8 billion, -4.9% compared with the same period last year on a reported basis and -4.6% on a constant currency basis. LFL revenue was -3.8% compared with last year.
Revenue fewer passthrough costs were £2.4 billion, -4.3% on a reported basis, -4.0% in constant currency, and -3.3% LFL.
In March, LFL revenue less pass-through costs were -7.9% as the impact of COVID-19 began to be felt more widely across our business.
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 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 were -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 the Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe LFL revenue less pass-through costs were -4.6%. The 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.