WPP plunges to loss but reinstates dividend

WPP plunged to a £2.6bn first-half loss as it wrote down £2.7bn for the reduced value of its assets but the advertising company reinstated its dividend after business started to improve.

The FTSE 100 company swung to a pretax loss of £2.58bn in the six months to the end of June from a £409m profit a year earlier as revenue dropped 12.3% to £5.58bn.

WPP wrote down £2.5bn of goodwill for acquired businesses whose values have declined because of the impact of Covid-19. It also wrote down £0.2bn of investments.

The company reinstated its dividend, which was 56% lower than a year earlier at 10p a share. The decision to pay a dividend surprised some analysts.

WPP said business improved in July when revenue excluding pass-through costs fell 9.2% compared with 15.1% in the second quarter though it said performance across markets was volatile. Companies have cut traditional advertising spending during the Covid-19 crisis, hitting broadcasters such as ITV.

WPP gained $4bn (£3bn) of new business in the first half and that it was helping eight out of its top 10 clients on ecommerce to respond to changing consumer behaviour. The company's shares rose 3.8% to 647.4p at 08:34 BST and were the biggest gainers in the FTSE 100.

Chief Executive Mark Read said: "Assuming there is no second wave nor major lockdowns, the second quarter is expected to be the toughest period of the year, although we remain cautious on the speed of recovery."

WPP said if there are no more economic lockdowns in big markets results for the year should meet analyst expectations for a decline in like-for-like revenue less pass-through costs of between 10% and 11.5%.

The on-going impact of the Covid-19 pandemic on WPP’s trading environment remains uncertain and difficult to call and we remain cautious on the outlook for advertising spend through the remainder of this year," Shore Capital analyst Roddy Davidson said. "That said we are encouraged by the signs of improvement, strong new business performance and financial strength flagged in today’s results."

Davidson said WPP's decision to pay an interim dividend was a surprise and that he had assumed the payout would be waived.

The company suspended its final dividend for 2019 in March and has now scrapped that payout permanently. It said the decision to pay an interim dividend was backed by a strong financial position and cost cuts.