TIDMWPP
RNS Number : 5484D
WPP PLC
29 October 2020
WPP
Third Quarter Trading Update
Resilient performance in a challenging environment: improvement
on second quarter; strong new business momentum; tight cost
control
GBP million reported[1] LFL[2]
================================= ============ ============= ========
Third Quarter
================================= ============ ============= ========
Revenue 2,969 -9.8% -5.5%
================================= ============ ============= ========
Revenue less pass-through costs 2,401 -11.9% -7.6%
================================= ============ ============= ========
Year to date
--------------------------------- ------------ ------------- --------
Revenue 8,552 -11.5% -9.5%
================================= ============ ============= ========
Revenue less pass-through costs 7,069 -10.8% -8.9%
================================= ============ ============= ========
Note: all numbers relate to continuing operations unless
otherwise stated
n Q3 revenue -9.8%; LFL revenue -5.5%
n Q3 LFL revenue less pass-through costs -7.6%
n Top five markets Q3 LFL revenue less pass-through costs: US
-5.5%; UK -6.5%; Germany
-1.8%; Greater China -16.7%; India -16.3%
n Continued good momentum in new business: $1.6 billion won in
Q3, taking the year-to-date wins to $5.6 billion
n Strong liquidity and balance sheet, supported by tight working
capital management: year-to-date average net debt GBP2.5 billion,
down GBP2.0 billion year-on-year
n On track to be towards upper end of GBP700-800 million cost
reduction target
n Full year 2020 LFL revenue less pass-through costs growth and
headline operating margin expected to be within the range of latest
analysts' expectations[3]
Mark Read, Chief Executive Officer of WPP, said:
"WPP continues to demonstrate its resilience in a challenging
market. We have maintained our new business momentum as clients
seek out our creativity and our skills in media, technology, data
and ecommerce. This month, Uber joined a growing list of major
assignment wins that includes Alibaba, Dell, HSBC, Intel, Unilever
and Whirlpool, and we continue to lead the new business rankings.
We have also renewed and expanded our relationship with Walgreens
Boots Alliance to encompass its data- and technology-driven
marketing strategy.
"Given the tightening of COVID restrictions around the world and
uncertainty in the global economic outlook, we remain cautious
about the pace of recovery. It is important that we maintain our
strong financial position and we are on track to achieve cost
savings towards the upper end of our GBP700-800 million target.
"Our people have done a superb job in serving our clients,
largely working from home, but the events of 2020 have of course
created new pressures for everyone. We have increased our
investment in employee support services, with a particular focus on
mental health and wellbeing, and this will be an ongoing priority
for our leadership."
For further information:
Investors and analysts
Peregrine Riviere +44 7909 907193
Fran Butera (US) +1 914 484 1198
Media +44 20 7282 4600
Chris Wade
Richard Oldworth, +44 20 7466 5000
Buchanan Communications +44 7710 130634
wpp.com/investors
Revenue analysis
GBP million 2020 reported LFL
---------------- ------ ---------
First quarter 2,847 -4.9% -3.8%
---------------- ------ --------- -------
Second quarter 2,736 -19.0% -18.4%
---------------- ------ --------- -------
First half 5,583 -12.3% -11.5%
---------------- ------ --------- -------
Third quarter 2,969 -9.8% -5.5%
---------------- ------ --------- -------
First 9 months 8,552 -11.5% -9.5%
---------------- ------ --------- -------
Revenue less pass-through costs analysis
GBP million 2020 reported LFL
---------------- ------ ---------
First quarter 2,366 -4.3% -3.3%
---------------- ------ --------- -------
Second quarter 2,302 -15.6% -15.1%
---------------- ------ --------- -------
First half 4,668 -10.2% -9.5%
---------------- ------ --------- -------
Third quarter 2,401 -11.9% -7.6%
---------------- ------ --------- -------
First 9 months 7,069 -10.8% -8.9%
---------------- ------ --------- -------
Third Quarter Review
During the third quarter, our markets around the world saw an
increase in economic activity from the second quarter, and this in
turn led to an improving sequential trend in our business
performance. The vast majority of our people are still working
remotely, although many offices are now open, operating at reduced
capacity and observing strict hygiene and social distancing
protocols. Thanks to the continued efforts of our people, we have
continued to serve clients effectively, and our new business win
rate has maintained its momentum from the first half.
Revenue in the third quarter was down 9.8% at GBP3.0 billion. On
a constant currency basis, revenue was down 5.9% year-on-year. Net
changes from acquisitions and disposals had a negative impact of
0.4% on growth, leading to a like-for-like performance, excluding
the impact of currency and acquisitions, of -5.5%.
Revenue less pass-through costs in the third quarter was down
11.9% year-on-year to GBP2.4 billion, and down 8.0% on a constant
currency basis. Excluding the impact of acquisitions and disposals,
like-for-like growth was -7.6%. All regions and business segments
witnessed an improving trend over the second quarter.
We have continued to exercise tight cost control, despite the
recovery in activity compared to the second quarter, with all of
the decline in revenue less pass-through costs mitigated through
cost savings during the third quarter.
Regional review
Revenue analysis
GBP million Q3 2020 reported LFL
================ ======== ========= ======
N. America 1,087 -12.5% -6.8%
================ ======== ========= ======
United Kingdom 426 0.0% -1.4%
================ ======== ========= ======
W. Cont Europe 587 -4.2% -3.3%
================ ======== ========= ======
AP, LA, AME,
CEE [4] 869 -13.9% -7.1%
================ ======== ========= ======
Total Group 2,969 -9.8% -5.5%
---------------- -------- ---------
Revenue less pass-through costs analysis
GBP million Q3 2020 reported LFL
================ ======== ========= =======
N. America 922 -10.8% -5.1%
================ ======== ========= =======
United Kingdom 311 -6.7% -6.5%
================ ======== ========= =======
W. Cont Europe 493 -4.8% -5.5%
================ ======== ========= =======
AP, LA, AME,
CEE 675 -19.6% -12.5%
================ ======== ========= =======
Total Group 2,401 -11.9% -7.6%
---------------- -------- ---------
North America like-for-like revenue less pass-through costs was
down 5.1% in the third quarter, compared to a decline of 10.2% in
the second quarter, with a steady improvement in the US and a very
strong recovery in Canada driven by new business. In the US,
VMLY&R continued to grow year-on-year, and GroupM recovered
quickly, in line with client media spend.
United Kingdom like-for-like revenue less pass-through costs was
down 6.5% in the third quarter, a significant improvement on the
second quarter (-23.3%), which was affected by an extensive
economic lockdown. GroupM returned to growth, but our integrated
creative agencies have been slower to recover so far.
Western Continental Europe like-for-like revenue less
pass-through costs was down 5.5%, compared to a decline of 18.8% in
the second quarter. Germany recovered to be nearly flat
year-on-year, and France, Italy and Spain all significantly
improved on the second quarter. Growth in Denmark accelerated.
Asia Pacific, Latin America, Africa & the Middle East and
Central & Eastern Europe like-for-like revenue less
pass-through costs was down 12.5%, a steady recovery from the
second quarter (-14.8%). All regions improved their performance,
with Central & Eastern Europe relatively better than the other
regions.
Business sector review
Revenue analysis
GBP million Q3 2020 reported LFL
===================== ======== ========= =======
Global Integrated
Agencies 2,316 -8.9% -3.8%
===================== ======== ========= =======
Public Relations 219 -9.1% -4.8%
===================== ======== ========= =======
Specialist Agencies 434 -14.6% -14.1%
===================== ======== ========= =======
Total Group 2,969 -9.8% -5.5%
--------------------- -------- ---------
Revenue less pass-through costs analysis
GBP million Q3 2020 reported LFL
===================== ======== ========= =======
Global Integrated
Agencies 1,805 -11.3% -6.7%
===================== ======== ========= =======
Public Relations 210 -6.9% -2.9%
===================== ======== ========= =======
Specialist Agencies 386 -16.7% -13.9%
===================== ======== ========= =======
Total Group 2,401 -11.9% -7.6%
--------------------- -------- ---------
Global Integrated Agencies like-for-like revenue less
pass-through costs was -6.7% year-on-year, compared to -15.7% in
the second quarter. VMLY&R continued to be the best performing
global agency, and was down only slightly year-on-year, while
GroupM recovered strongly as client media expenditure picked up.
The other integrated agencies recovered steadily.
Public Relations like-for-like revenue less pass-through costs
was down 2.9%, an improvement over the second quarter (-7.5%) as it
continued to be the best-performing segment in WPP. Client demand
for strategic communications advice in light of the pandemic
remained robust, with BCW recovering well.
Specialist Agencies like-for-like revenue less pass-through
costs was down 13.9%, showing a small recovery from the second
quarter (-16.3%). GTB showed an improved performance over the
second quarter, but this was offset by ongoing pressures in Brand
Consulting, which is more project-based than much of our other work
and continued to suffer from client budget cuts. In addition, our
specialist airline and events production agencies remained under
pressure.
Balance sheet highlights
Average net debt in the first nine months of 2020 was GBP2.5
billion, compared to GBP4.5 billion in 2019, at 2020 exchange
rates, a decrease of GBP2.0 billion. The year-on-year improvement
largely relates to the proceeds from the Kantar transaction. Net
debt at 30 September 2020 was GBP2.3 billion, compared to GBP4.6
billion on 30 September 2019, at 2020 exchange rates, a decrease of
GBP2.3 billion.
Outlook and capital markets event
Progress in the third quarter on both the recovery in activity
and cost management has been ahead of our expectations. We do,
however, remain cautious on the speed of recovery as we track
further waves of the pandemic and government responses. Assuming no
widespread lockdowns in any of our major markets for the rest of
the year, we expect full-year like-for-like revenue less
pass-through costs to be within the current range of analysts'
forecasts of -8.5% to -10.7%, and headline operating margin to be
within the current range of analysts' forecasts of 11.4% to
12.5%.The previous ranges, given at the time of our first half
results on 27 August 2020, were -10.0% to -11.5% and 10.4% to 12.5%
respectively.
We are hosting a virtual capital markets event for investors and
analysts on 17 December 2020. The event will cover: strategic
progress against the December 2018 plan and the next steps in our
strategy; efficiency savings and our plans for reinvestment in
growth areas; capital allocation; and medium-term targets for
growth and margin.
Appendix
Regional Review
Revenue analysis - Nine Months Year-to-Date
GBP million 9M 2020 reported LFL
================ ======== ========= =======
N. America 3,264 -8.8% -7.4%
================ ======== ========= =======
United Kingdom 1,184 -11.3% -9.9%
================ ======== ========= =======
W. Cont Europe 1,680 -10.5% -10.3%
================ ======== ========= =======
AP, LA, AME,
CEE 2,424 -15.6% -11.5%
================ ======== ========= =======
Total Group 8,552 -11.5% -9.5%
---------------- -------- ---------
Revenue less pass-through costs analysis - Nine Months
Year-to-Date
GBP million 9M 2020 reported LFL
================ ======== ========= =======
N. America 2,779 -6.9% -5.8%
================ ======== ========= =======
United Kingdom 897 -12.6% -11.7%
================ ======== ========= =======
W. Cont Europe 1,412 -9.4% -9.7%
================ ======== ========= =======
AP, LA, AME,
CEE 1,981 -15.8% -10.9%
================ ======== ========= =======
Total Group 7,069 -10.8% -8.9%
---------------- -------- ---------
Business Sector Review
Revenue analysis - Nine Months Year-to-Date
GBP million 9M 2020 reported LFL
===================== ======== ========= =======
Global Integrated
Agencies 6,565 -11.5% -8.8%
===================== ======== ========= =======
Public Relations 666 -6.6% -5.9%
===================== ======== ========= =======
Specialist Agencies 1,321 -13.8% -14.3%
===================== ======== ========= =======
Total Group 8,552 -11.5% -9.5%
--------------------- -------- ---------
Revenue less pass-through costs analysis - Nine Months
Year-to-Date
GBP million 9M 2020 reported LFL
===================== ======== ========= =======
Global Integrated
Agencies 5,267 -10.6% -8.6%
===================== ======== ========= =======
Public Relations 636 -4.7% -4.0%
===================== ======== ========= =======
Specialist Agencies 1,166 -14.4% -12.5%
===================== ======== ========= =======
Total Group 7,069 -10.8% -8.9%
--------------------- -------- ---------
Cautionary statement regarding forward-looking statements
This document contains statements that are, or may be deemed to
be, "forward-looking statements". Forward-looking statements give
the Group's current expectations or forecasts of future events. An
investor can identify these statements by the fact that they do not
relate strictly to historical or current facts. They use words such
as 'anticipate', 'estimate', 'expect', 'intend', 'will', 'project',
'plan', 'believe', 'target' and other words and terms of similar
meaning in connection with any discussion of future operating or
financial performance.
These forward-looking statements may include, among other
things, plans, objectives, projections and anticipated future
economic performance based on assumptions and the like that are
subject to risks and uncertainties. As such, actual results or
outcomes may differ materially from those discussed in the
forward-looking statements. Important factors which may cause
actual results to differ include but are not limited to: the
unanticipated loss of a material client or key personnel, delays or
reductions in client advertising budgets, shifts in industry rates
of compensation, regulatory compliance costs or litigation, natural
disasters or acts of terrorism, the Company's exposure to changes
in the values of other major currencies (because a substantial
portion of its revenues are derived and costs incurred outside of
the UK) and the overall level of economic activity in the Company's
major markets (which varies depending on, among other things,
regional, national and international political and economic
conditions and government regulations in the world's advertising
markets). In addition, you should consider the risks described
under Item 3D 'Risk Factors' in the Group's Annual Report on Form
20-F for 2019 and any impacts of the COVID-19 pandemic which could
also cause actual results to differ from forward-looking
information. In light of these and other uncertainties, the
forward-looking statements included in this document should not be
regarded as a representation by the Company that the Company's
plans and objectives will be achieved. Other than in accordance
with its legal or regulatory obligations (including under the
Market Abuse Regulation, the UK Listing Rules and the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority), the Group undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise. The reader should, however, consult any
additional disclosures that the Group may make in any documents
which it publishes and/or files with the SEC. All readers, wherever
located, should take note of these disclosures. Accordingly, no
assurance can be given that any particular expectation will be met
and investors are cautioned not to place undue reliance on the
forward-looking statements.
Any forward looking statements made by or on behalf of the Group
speak only as of the date they are made and are based upon the
knowledge and information available to the Directors on the date of
this document.
[1] Percentage change in reported sterling.
[2] Like-for-like. LFL comparisons are calculated as follows:
current year, constant currency actual results (which include
acquisitions from the relevant date of completion) are compared
with prior year, constant currency actual results, adjusted to
reflect the results of acquisitions and disposals for the
commensurate period in the prior year.
[3] Like-for-like growth in revenue less pass-through costs of
-8.5% to -10.7% and headline operating margin of 11.4% to 12.5%.
Equivalent ranges on 27 August 2020 were -10.0% to -11.5% and 10.4%
to 12.5% respectively.
[4] Asia Pacific, Latin America, Africa & Middle East and
Central & Eastern Europe.
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