Maja Pawinska Sims 29 Apr 2020 // 12:17PM GMT
LONDON — WPP has reported a drop in revenue from its PR division for Q1, but its PR agencies are still outperforming the rest of the holding company’s businesses.
Revenue from WPP’s PR division – which includes Burson Cohn & Wolfe, Hill+Knowlton Strategies, Finsbury and Buchanan – was down by 1.4% on a like-for-like basis to £223 million, with a bigger decline of 4.4% in March as Covid-19 hit.
However, this was a better result for the quarter than WPP’s other divisions: global integrated agency revenue fell by 2.6% on a like-for-like basis, with a drop of 6.6% in March, while revenue from WPP’s specialist agencies fell by 7.4% during the quarter on a like-for-like basis, with a decline of 15.2% in March. Across WPP, Q1 revenue fell 3.3% to £2.4 billion, with a drop of 7.9% in March.
WPP said the decline in PR revenue was “mitigated by strong demand for some of our specialist PR services in the current environment,” and that “we are seeing continued and, in some cases, greater demand for our public relations, ecommerce, marketing technology and production capabilities.”
Chief executive Mark Read said: “After a good start to the year, with growth outside of China in January and February, our business started to be materially impacted by Covid-19 in March. Our response has focused on four areas: the health of our people, serving our clients, helping to mitigate the impact of the virus on our communities and ensuring WPP is financially strong.”
WPP last month announced a number of measures to mitigate the impact of Covid-19 on the business, including a hire freeze, reviewing freelance spend, postponing pay rises and stopping discretionary costs. It has now put additional measures in place, including voluntary salary sacrifice (more than 3,000 people on higher salaries have taken cuts of up to 20% for three months) and reduced hours.
The group said it had not avoided redundancies, however: “While we continue to protect our people as much as possible from redundancy, as well as ensure our ability to serve clients and grow when markets recover, we have had to reduce headcount in certain areas."
In its statement, WPP added: “We expect the impact of Covid-19 on our business to increase in the short term, but it is not possible to quantify the depth or duration of the impact. We are nonetheless confident that, through our scenario planning, we are well positioned to take further action if the downturn is prolonged and to respond positively when the market picks up.”
Across the group, client spend on digital media to drive sales was up, spend on earned and paid social media was level, but revenue from paid broadcast and print was down, as well as digital spend from companies in the hardest-hit sectors.
In terms of client resilience during the Covid-19 crisis, WPP said the most severely-impacted sectors were automotive, luxury/premium, and travel and leisure, which make up 24% of its client business and where spend was down 4%. Telco, media, retail and financial services, which represent 22% of its business, spent 4% more in Q1 compared with the same period last year. The most resilient sectors so far have been technology, healthcare/pharma and consumer packaged goods, which together make up 54% of WPP’s business and where spend across its agencies was up by 4.9% in Q1.
Among WPP’s biggest markets, the impact was unsurprisingly greatest in Greater China (including Hong Kong and Taiwan) – the first region to be affected by Covid-19, and where WPP has 9,000 employees – overall revenue was down 21.3% and 29.9% in March. In the UK, where WPP employs 11,000 people, the drop was 4.2% over the quarter and 9.8% in March. There has so far been less of a hit to revenues in the US, where the group has 20,000 employees: down 1.9% in Q1 and 3.7% in March.
Other markets have also been affected to different extents. In Germany, home to 7,000 WPP staff, Q1 revenues were down 4.3%, increasing to 14.9% for March. In Italy, one of the countries that has been hardest-hit by Covid-19 and where WPP employs 2,000 people, Q1 revenue was down 16.2% for Q1 and 23.7% in March.
In France and Spain, where the group has a similar number of employees, the impact has so far been less severe, with Q1 revenue down 4% and March down by 7.1%. Spain’s revenue was down 3.8% for Q1 but with no further drop for March. In India, where the group employs 8,000 people, Q1 revenue was actually up by 6.1%, with March revenue only dipping by 1.1%. In Brazil, where WPP has 5,000 employees, while Q1 revenue only dropped by 1,3%, in March it declined by 16.7%.
Read said: “Close to 95% of our 107,000 people are working from home, providing uninterrupted service to clients, helping them to communicate their own actions, sustain their brands and develop new ways to market their products. We have also won $1 billion of new business in the first quarter, including the global integrated Intel account, creative duties for Discover and the media accounts for Hasbro and Novo Nordisk.
“We have witnessed a decade’s innovation in a few short weeks, with the way people meet, shop, work and learn increasingly reliant on technology. We are seeing clients rapidly shift emphasis and budget into digital media and direct-to-consumer channels and continue marketing technology investments.
“And, while many clients are significantly impacted by a reduction in consumer demand, other sectors such as packaged goods, technology and food retail brands have been more resilient. As in previous downturns, those who are most prepared and most far-sighted will be at an advantage when we come through the current situation.”
WPP said it was working with clients, governments, national health organisations and NGOs to help limit the impact of Covid-19 on society. A team of its agencies, including Hill + Knowlton Strategies and Ogilvy, is supporting the World Health Organization pro bono, for example, by delivering global and regional public awareness campaigns to encourage people to stay at home and adopt safe behaviours.