WPP, the world’s biggest advertising company, has emerged from what it believes is the economic low point of the pandemic with a roadmap to prosperity.
The company surprised market analysts by announcing a dividend for shareholders when most of the industry is hoarding cash for uncertain days ahead.
First half like-for-like revenue fell 11.5% to GBP 5.58 billion. But net sales in July improved, down just 9.2%.
And WPP pulled in $US4 billion in new business in the first half, including wins from Intel, HSBC and Unilever.
CEO Mark Read says the pipeline is strong.
WPP declared an interim dividend of 10 pence a share, recognising the “importance of income to many investors”.
The decision to pay shareholders was made, says Read, with “confidence in our performance over the next six months”. He called it “eminently affordable”.
Still the first six months of the year were challenging. “But we haven’t stood still,” he says. “We’ve made significant progress against our strategic objectives, and I think demonstrated the resilience of our business model, the strength of our relationships with our clients.”
Read says COVID-19 is accelerating existing trends, with a decade’s innovation in a few months, matching the company’s strategic direction.
The key one is digital. At GroupM, 39% of billings are digital, 5.5 percentage points higher for the first half of last year.
In the first six months of this year, WPP spent about $US7.4 billion on digital media. “We are the single largest partner to Google, Facebook and Amazon on the media front,” says Read.
He says this is the first year that digital dominated media.
“Until today, you may logically start the media plan with the traditional media plan,” Read told analysts in a briefing,
“Today, you have to start a media plan with a digital approach. And we’re seeing continued shifts in consumption.”
Read doesn’t expect media consumption habits to return or revert to where they were pre-pandemic. Just like during the GFC in 2008, the impact on newspaper spend did not recover.
Another major trend is ecommerce. WPP is seeing ecommerce is about 30% of UK sales, up 54% year-on-year ,continuing into July.
“Despite the easing of the lockdown, patterns of behavior have shifted permanently,” he says.
“And I think that, that is what we’ll see for packaged goods companies, e-commerce can now represent 10% to 15% of sales, and they’re seeing 50%-plus growth in ecommerce. So ecommerce clearly is important to us.
The third big trend is for purpose, or ESG (environmental, social, and corporate governance) .
“Chief executives can no longer ignore the issues facing society,” says Read.
“They need to tackle them head on, whether that’s COVID-19, whether that’s racial justice or whether that’s the safety of social media platform.
“And it’s clear that consumers will judge companies by how they respond, not just what they say, but most importantly, what they do.”
For example, WPP has been working with pharmaceutical group Pfizerto lift its reputation as a patient-focused scientific leader. The campaign, Science Will Win, launched a couple of months ago.
The accelerating demand from clients:
“So all of these are topics where we’ve increasingly been advising our clients over the last six months,” says Read.
“We need to give our clients not just an understanding of technology and how the bits and bytes work, but also an understanding of human behaviour, of emotion, of how people think, why people do what they do and what they can do to communicate in a relevant way, their positions to their customers.”
The way we work
WPP, like the rest of the industry,has had most staff work remotely since March, with marred changes in productivity.
“We’ve seen a change in the way that we work, where we’ve embraced increased speed and agility in the way we work with clients,” says Read.
“We have more engagement with clients, less travel, much faster delivery.
“We’re making films for clients in 16 days that may perhaps previously taken 16 weeks or indeed, in many cases longer.”
But working from home will change.
“It’s increasingly clear that people’s well-being and effectiveness is being impacted,” says Read.
“And I think we are looking gradually over the next few months increasingly to get people back into our offices, but in new ways.
“We want to make sure that we incorporate the lessons and the new ways of working in a way that we come back to work.”
WPP will continue with faster, more agile ways of working, with less travel and making cost cuts permanent.
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