Rapid digital switch puts WPP on path to recovery

LONDON (Reuters) - The world’s biggest advertising company WPP expects its net sales to bounce back to pre-pandemic levels earlier than previously forecast thanks to the rapid global corporate switch to e-commerce and digital services.

FILE PHOTO: Branding signage for WPP, the largest global advertising and public relations agency at their offices in London, Britain, July 17, 2019. REUTERS/Toby Melville/File Photo

The owner of the Ogilvy, Grey and GroupM agencies was hit hard this year when firms slashed spending to conserve cash but WPP said it had now achieved an industry-leading new business performance by helping clients build e-commerce operations.

WPP said on Thursday it expected its key measurement of underlying net sales to drop 8.4% in 2020 before rising by a mid single digit percentage next year and reaching pre-pandemic levels in 2022. It then expects annual growth of 3% to 4%.

Chief Executive Mark Read said the business had proved more resilient than many had expected and a strategy set out two years ago to offer clients a combination of digital expertise with data and creativity had proved invaluable during 2020.

“COVID has accelerated many of the trends,” he told Reuters. “The shift to digital media, the explosion of e-commerce, the importance of purpose and reputation: the fundamentals of our strategy haven’t changed but COVID forced us to accelerate it.”

Analysts welcomed the statement as proof that WPP could navigate the recovery, noting that many of the financial forecasts were ahead of expectations, though they said the group now had to execute its plan properly.

By mid March, WPP shares had slumped almost 60% from the end of 2019 but they have recovered steadily and were 3.6% higher on Thursday, trimming losses for the year so far to 24%.

WPP’s agencies worked with brands such as L’Oreal, Ford and British retailer The Works to switch their marketing and sales platforms online rapidly as the virus forced the closure of shops.

It now plans to expand its presence in the faster-growing digital and e-commerce sector by investing more, hiring new staff and making targeted acquisitions, funded by gross annual cost savings of 600 million pounds ($815 million) by 2025.

The company built by Martin Sorrell also vowed to reinstate its share buyback programme in 2021 and pay a progressive dividend.

CEO Read said sectors that had been floored by the pandemic, such as airlines and cruise liners, were starting to prepare for a recovery next year though momentum could change day to day.

Hopes in recent weeks of a return to some normality have been driven by the launch of a vaccine but surging COVID-19 cases across Europe in the last week alone have since cast a shadow over the short-term outlook.

($1 = 0.7365 pounds)

Reporting by Kate Holton; Editing by Guy Faulconbridge, Paul Sandle and David Clarke