In the circumstances today’s first quarter update from advertising giant WPP (WPP) looked pretty good.
The shares were 3.7% higher to 612.4p as the company signalled it is still seeing strong demand in some areas and revealed the positive impact on its balance sheet of the sale of 60% of its Kantar market research business. Net debt has halved to £2.1bn.
This now looks very well-timed given it has put the business in a much better position to weather the current period of economic stasis. The company joins the long list of firms which are suspending their dividend and also calls off its buyback programme.
The company is aiming for flexibility on costs as it aims to sustain profit and cash flow through the crisis while positioning itself for a recovery. It notes offices in China are now back to 90% occupancy amid a rapid recovery in economic activity. Some sectors such as packaged goods, technology and food retail are namechecked as being resilient.
On a like-for-like basis, revenue in the three months through March fell 3.8%, with the impact of the coronavirus felt more strongly in March when like-for-like revenue was down 7.9%.
NEW BUSINESS WINS
Chief executive Mark Read Read is now more than 18 months into his tenure after stepping up to revitalise the business following the acrimonious departure of founder Martin Sorrell.
Encouragingly Read said the company had won $1bn of new business in the first quarter, including a global integrated Intel account, creative duties for Discover and media accounts for Hasbro and Novo Nordisk.
Shore Capital analyst Roddy Davidson said: ‘We continue to view WPP as a quality business and like the way in which it has been repositioned under its current management team.
‘Specifically, we are positive on the long-term upside potential created by a proactive approach towards: simplifying operations and merging brands; fostering greater internal cooperation; driving competitive advantage through concerted investment in technology; pursuing efficiencies; reducing debt; realising value from non-core operations and; generally pursuing a more disciplined capital allocation policy.’
