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WPP Revenue Slumps in March With Advertising Budgets in Freefall

WPP Revenue Slumps in March With Advertising Budgets in Freefall

(Bloomberg) -- WPP Plc revealed the scale of devastation in the advertising industry as revenue fell as much as 30% in some regions and senior staff took pay cuts to protect its bottom line.

The world’s biggest ad group expects the impact on business from Covid-19 to increase in the short term, and said it’s not possible to assess the full consequences or how long they will last, WPP said in a statement Wednesday.

WPP CEO Sees Read-Across From China Sales Drop to Other Markets

Key Insights

  • WPP’s dozens of agencies, present in more than 100 countries, are a bellwether for the wider industry as the coronavirus pushes marketing budgets into freefall. Its like-for-like revenue less pass-through costs tumbled 7.9% in March, with Greater China down 30%, Germany down 15%, the U.K. 9.8% and the U.S. 3.7%.
  • WPP has already suspended shareholder payouts as industries from airlines to restaurant and cinema chains slash non-essential spending to stay afloat, and said Wednesday it cut jobs without specifying a number.
  • The advertising market faces a sharper downturn than in the 2008 financial crisis, and this time the global ad groups like WPP are starting in a weaker position due to a competitive assault from consulting firms and U.S. tech groups. This could make the recovery more prolonged and painful.
  • Measures being pushed through by Chief Executive Officer Mark Read to streamline the company and deepen its expertise in data-driven marketing may alleviate some of the pain. WPP said recent measures to protect profits, including voluntary salary sacrifice by senior staff, will save the company 700 million to 800 million pounds ($873 million - $997 million) this year.

Market Context

  • Shares in the owner of Ogilvy and Wunderman Thompson have tumbled 45% in the year to Tuesday, with U.S. rival Omnicom Group Inc. down 30% and Paris-based Publicis Groupe SA sliding 32%.

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  • WPP’s like-for-like revenue less pass-through costs fell 3.3% in the first quarter overall, the company said.
  • It said its commercial performance was encouraging before the full impact of the virus was felt, with $1 billion of new work secured in the quarter and no client losses registered to date.
  • The company was already under pressure heading into 2020

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