WPP reported a 2020 net revenue decline of 10% to £9.762 billion (approximately $13.6 billion). The organic revenue decline (which excludes M&A and currency impact) was 8.2%. The shortfall was attributed largely to the COVID-19 pandemic.
Like the other major holding companies, WPP experienced improvement in the second half of the year and is expecting a return to organic growth in the mid-single-digit range for 2021.
The company is projecting that net revenues will return to 2019 levels by 2022, with growth of 3% to 4% starting in 2023.
“While uncertainties remain around the impact of the vaccine roll-out and economic growth, we continue to expect 2021 to be a year of solid recovery,” said CEO Mark Read.
Some agencies within the group have already turned the corner. VMLY&R was cited as a top performer with growth of nearly 3% in the fourth quarter, and was nearly a flat performer for the full year.
“WPP’s performance has been remarkably resilient,” said Read. “While revenue was significantly impacted as clients reduced spending, our performance exceeded our own expectations and those of the market throughout the year. There is no doubt that the actions we took during the previous two years to transform and simplify the business and reduce debt -- to a 16-year low at the end of 2020 -- played a crucial role in the strength of our response.”
The company reported that consumer packaged goods, technology and pharmaceuticals businesses (57% of WPP’s net revenue) from its top 200 clients held up “reasonably well." Organic growth in those categories was up nearly 1%.
On the flip side, automotive, luxury & premium, travel and leisure businesses (22% of the company’s business) were hardest hit, “and this in turn has been reflected in their marketing spend.” Combined, the organic decline in those areas of the company’s business was 9.8%. Retail, financial services, telecom and media & entertainment were off 4.7%.
Within media, the pivot to digital accelerated with GroupM’s billing mix increasing from 38% digital in 2019 to 41% in 2020. The firm said it saw “huge demand from clients for ecommerce services, across both media and our integrated creative agencies. We worked with 76 of our top 100 clients on ecommerce during 2020.”
The company took total impairment charges of £3.1 billion (about $4.3 billion), most of which relates to previous acquisitions whose values were reassessed downward due to the impact of COVID-19.
As part of a streamlining and simplification plan that began two years ago, the company sold 60 business (or stakes in companies) last year raising approximately $4.9 billion. It also merged 100 local offices worldwide and shuttered an additional 80 business units. That helped the company reduce its debt by over $5.5 billion.
Return to growth will be aided in part by a banner year in net new business wins in 2020, which totaled $4.4 billion including Intel (global creative), HSBC (global creative), Unilever (China media) and WW (global integrated creative and media).
In North America the organic decline was 5.7% in the fourth quarter and 5.8% for the full year. The U.S. was termed “resilient” with VMLY&R and BCW both growing in Q4. “This was offset by GroupM, which saw a slight deterioration compared to the third quarter.”
The United Kingdom was down 7.4% in the final quarter, and 10.5% for the full year. Western Continental Europe was down 3.9% in Q4 and 8.1% for the year.
Combined the Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe regions were down 8.8% in Q4 and 10.3% for 2020.
“We see many areas of attractive growth for WPP, from the permanent shift to ecommerce, the digitization of media and the need from our clients to convert brand purpose into action,” Read said. “The demand from clients for simple, integrated solutions that combine outstanding creativity with sophisticated data and technology capability is only set to grow.”