WPP AUNZ earnings for the half year to June will be better than expected.
The company told the ASX today it expects to report headline half year earnings before interest and tax (EBIT) above the guidance range provided at the AGM in May.
At that time the company was forecasting a significant negative impact on earnings in the second quarter.
However, based on an early assessment of the June results, headline EBIT for the six months is now expected to be within a range of $10 million to $14 million, above the previous guidance of between breakeven and a $10 million loss.
The stronger than anticipated performance reflects a better than expected trading performance in May and June and the benefit of an additional $4 million in JobKeeper payments from the federal government.
Detailed financial results will be announced August 20.
The company also expects to recognise a non-cash impairment charge of between $150 million and $190 million in the half year results.
The impairment charge follows a review of the value of the company’s assets based on the current trading results and the uncertainty surrounding COVID-19 and the flow-on economic impacts.
The impairment charge relates to acquired intangible assets including brand names, customer relationships and goodwill. It is non-cash in nature and has no impact on the company’s debt facilities and compliance with bank covenants.
WPP AUNZ had net debt of about $140 million at June 30. The company has total debt facilities of $420 million, including a three-year loan facility of $270 million and a revolving working capital facility of $150 million.
CEO Jens Monsees says the priorities in responding to the COVID-19 crisis have been to keep our people safe, ensure our clients continue to receive excellent service and the best creative ideas and to retain a strong balance sheet.
“We are accelerating the transformation of our business to respond to industry changes and to position us strongly for an economic recovery," he says.
"We look forward to providing an update on these initiatives at our upcoming results announcement.”
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