WPP is implementing further measures to control costs during the Covid-19 crisis, as the group’s latest financial update revealed a -3.3% drop in net sales during the first quarter of 2020.
Confirming expectations, March saw net sales (like-for-like revenue less pass-through costs) take the most significant hit as a result of the pandemic, down -7.9% over the month.
As such, the ad network has implemented further actions to manage cash flow and profitability, on top of the “substantial actions” announced last month – which included the suspension of the 2019 final dividend and share buyback programme, and cuts to executive salaries.
Since then, over 3,000 senior employees have agreed to a voluntary salary sacrifice of 10-20% for an initial three-month period. The group has also introduced more part-time working and has made permanent headcount reductions in some areas.
Unusually, North America was WPP’s best performing region in Q1 in terms of net sales – the market was down only -1.9%.
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However, the UK’s sales fell -4.2%, with the lockdown’s impact on client spend resulting in a -9.8% drop in March alone.
Western Continental Europe, meanwhile, was down -3.7%, while the Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe region saw net sales drop -4.6%.
Reflecting the impact of Covid-19 on the country, Greater China plummeted -21.3%.
Overall revenue less pass-through costs was £2.4 billion in the first quarter of the year.
However, WPP noted that it has seen an “encouraging” performance in net new business, with $1 billion won in Q1.
Meanwhile, although significant cuts have been made in the automotive, travel & leisure and luxury & premium sectors, which account for 24% of WPP’s top 200 clients’ spend, the group claims that spend in sectors such as consumer packaged goods, technology, and healthcare & pharma are holding up “relatively well”, representing 54% of spend.
“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 Mark Read, CEO at WPP.
“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 business had seen “a decade’s innovation in a few short weeks”, and that clients are “rapidly” shifting emphasis and budget into digital media and direct-to-consumer channels, while continuing marketing technology investments.
“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,” he said.
WPP’s guidance for the 2020 financial year was withdrawn last month as a response to the coronavirus pandemic. The business said it expected the impact of the crisis to increase in the short term, but that it is unable to quantify the depth or duration of the impact.
