WPP revenue slumps as clients slash marketing budgets during Covid-19 crisis
WPP today posted a sharp drop in revenue in March as clients across the globe slashed marketing budgets due to the coronavirus crisis.
The advertising giant reported a 7.9 per cent fall in like-for-like revenue last month, while revenue slipped 3.3 per cent in the first quarter as a whole.
The Covid-19 crisis has taken its toll across WPP’s main markets, dropping almost 10 per cent in the UK last month. March revenue plunged just shy of 30 per cent in China, though the company said most of its offices in the country had now reopened.
The figures highlight the devastating impact of the pandemic on the advertising industry as marketing budgets have suffered their sharpest fall since the 2009 financial crisis.
WPP has already pulled its dividend, suspended a £950m share buyback and scrapped its guidance for the full year amid uncertainty caused by the lockdown.
Executives have also taken a 20 per cent pay cut for at least three months as part of a plan to save £800m before the end of the year.
WPP today said it had taken further cost-cutting measures, including voluntary, salary cuts for over 3,000 workers and some job cuts.
Shares in WPP were up almost four per cent in early trading.
The holding group, which has more than 100,000 employees around the world, has an average net debt of £2.1bn.
This is halved from last year, thanks largely to its $4bn (£2.2bn) sale of a majority stake in market research firm Kantar. The company has £4.4bn in cash and undrawn facilities.
“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,” said chief executive Mark Read.
“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.”
Read added that the company had witnessed “a decade’s innovation in a few short weeks” due to the sharp rise in home-working and use of technology.
Despite the challenges, WPP said it had won $1bn of new business in the first quarter, including Intel’s global creative account, which is thought to be one of the largest in recent years.
WPP said that while roughly a fifth of pitches had been put on hold, the group had not lost a significant account from any client.
“Mark Read’s decisive action to implement early cost-saving measures is yet to stem the wounds from marketing budgets being delayed or cancelled as brands seek to minimise their exposure,” said Chris Daly, chief executive of the Chartered Institute of Marketing.
“However, the opportunity for WPP is significant — it has been strengthening its technology offering over the past two years and this is likely to prove instrumental as digital channels are increasingly the key connector between us, our families, communities and the brands we love.”