By Alexandra Bruell
WPP PLC shares jumped Thursday after the ad holding company reinstated its dividend and said the impact of the coronavirus crisis in the second quarter wasn’t as bad as it had feared.
WPP, which owns GroupM and VMLY&R, reported global revenue of GBP2.3 billion ($3 billion) in the second quarter. Like-for-like revenue, which strips out the effects of acquisitions and disposals, fell 15% in the quarter. Like-for-like revenue was down just under 10% in the U.S., compared with declines of over 23% in the U.K. and India.
“We had a resilient performance in a challenging environment,” WPP Chief Executive Officer Mark Read said on an earnings call. “The second quarter was slightly better than we had expected, and significantly better than some of the worst-case scenarios we had looked at back in March.”
WPP restarted its dividend program with an interim payment of 10 pence a share. The company had suspended dividend payments and withdrew its financial guidance for the year in March, citing the uncertainty caused by the pandemic.
WPP said it is cautiously optimistic that the worst of the crisis is over.
“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,” Mr. Read said in a statement.
Shares in WPP were up 6% at $43.75 in morning U.S. trade.
For the entire first half, profit before tax was down 44% at GBP276 million. Diluted earnings per share were down 45% at 15.4 pence. Goodwill impairments and other write-downs for the first half totaled GBP2.74 billion, driven by impairments at agencies Wunderman Thompson and VMLY&R, as Covid-19 led to higher discount rates used to value future cash flows, a lower profit base in 2020 and a lower industry growth rate, the company said.
WPP won a significant amount of business in the first half, including work from Intel Corp., HSBC Holdings PLC and Unilever in China, Mr. Read said.
GroupM underperformed other parts of WPP’s business as many large advertisers reduced their media spending in the quarter. Compared with public-relations firms, for example, the ad-buying group’s revenue is highly dependent on how much clients spend on media.
Before the pandemic, WPP had embarked on a three-year turnaround plan after taking large account losses and concluding that the business had become unwieldy. The company merged a number of agencies and completed the sale of 60% of data unit Kantar last year.
Write to Alexandra Bruell at email@example.com
(END) Dow Jones Newswires
August 27, 2020 12:07 ET (16:07 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.