WPP took a $3.5 billion impairment write-down for the first half of the year mainly related to previous acquisitions whose values going forward have been reassessed in light of the pandemic.
The charge was reported in the firm’s first half results released today which disclosed a 15% organic net revenue decline for the second quarter and a 10.2% drop for the first half. The company said the second quarter results were better than expected and that barring a second COVID-19 wave Q2 should be the worst performing quarter of 2020 with slight improvements in the second half.
The company said its tentative outlook for the full year is in line with the current analyst consensus of an organic net revenue decline of between 10% and 11.5%.
Company shares were trading nearly 5% higher on the London Exchange Thursday.
By region, China and the U.S. held up best in Q2 with organic declines of 3.1% and 9.6% respectively. The UK was down 23%, Germany 11.6% and India 25.1%.
The company said it cancelled its final dividend of the year to support its relatively strong balance sheet (including $6.2 billion of liquidity) while a share buyback plan announced earlier remains under review.
WPP CEO Mark Read told analysts that the company’s new business wins totaled $4 billion (as measured by billings) in the first half with assignments from Intel, HSBC, Unilever and others. He also noted that the firm’s sector exposure helped the company perform above expectations with 56% of its business coming from categories less impacted by COVID-19 such as packaged goods, technology, pharmaceuticals and healthcare.
“Brands are seeing increases in online sales of 100% or more,” Read said, “and we are supporting eight of our top ten clients on ecommerce strategies."
Meanwhile, the company remains mostly in work-from-home mode in major markets, the exception being China where 77% of staff is now office-based. In the U.S. just 1% of workers have returned to the office while 3% of UK personnel have done so. In Germany 17% of workers are now back at the office. India remains a completely work-from-home region.