WPP’s revenue less pass-through costs slid 3.3% in the first quarter of 2020, as the impact of Covid-19 weighed down its March performance.
The holding group generated £2.8bn in revenue from continuing operations in the three months to 31 March, down by 4.9% compared with the same period last year. Revenue less pass-through costs was £2.4bn, marking a 3.3% decrease like for like.
Chief executive Mark Read said the network had a “good start to the year” with growth in January and February outside China, but revenue in March tumbled 7.9% as the virus spread across the world.
Unsurprisingly, WPP experienced the most marked revenue drop in Greater China, where the virus originated, with first-quarter revenue down 21.3%, including a significant 29.9% fall in March. Yet the network noted that its offices in China are back to “around 90% occupancy”, while economic activity is recovering. Of the group’s other top markets, Germany’s like-for-like revenue was down 4.3%, the UK down 4.2% and the US down 1.9%.
North America, with like-for-like revenue less pass-through costs down 1.9%, was the best-performing region in the first quarter.
While the holding company announced a number of cost-cutting actions on 31 March, including a hiring freeze and a 20% pay cut for executive and board members, it has now revealed additional measures to protect its financial stability.
This includes voluntary pay cuts that have so far been taken up by more than 3,000 staff above certain salary bands, ranging from 10% to 20% of their salaries for an initial three-month period. It has also reduced headcount in certain areas, but has not revealed which departments have been affected.
WPP said it will reduce costs further “if the depth and length of the downturn requires it”.
The group noted that it has “strong liquidity and balance sheet” to see it through the crisis, with average net debt of £2.1bn in the first quarter (down £2.1bn year on year) and £4.4bn of cash and undrawn facilities as of 31 March.
Elsewhere, WPP won $1bn in net new business in the quarter, including Discover, Hasbro, Intel and Novo Nordisk, and claims it has not lost a significant account so far this year. However, it estimates that one-fifth of pitches have been put on hold due to Covid-19 and this may weigh down on its 2020 performance going forward.
Read said: “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.”