Interactive Investor

ii view: WPP restarts dividend after surviving toughest quarter

1st September 2020 16:05

Keith Bowman from interactive investor

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Its shares have fallen by over 40% in 2020, but the online offering remains management's key focus.

First-half results to 30 June 2020

  • Revenues down 12.3% to £5.58 billion
  • Loss of £2.6 billion, down from a profit of £409 million
  • Interim dividend down 56% to 10p per share
  • Net debt down 36% to £2.7 billion

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.

"Our strategic transformation remains on track but as Covid-19 accelerates the change in our sector, we are accelerating our plans.”

ii round-up:

Advertising, marketing and communications specialist WPP (LSE:WPP) employs more than 105,000 people in over 100 countries. 

Its clients include 348 of the Fortune Global 500, all 30 of the Dow Jones 30, 70 of the Nasdaq 100 and 69 of the FTSE 100.

Group agency brands include Ogilvy, groupm, Finsbury and Landor.  

For a round-up of its latest first-half results, please click here

ii view:

Following the earlier loss of its founder and chief executive, the media giant outlined a new strategy in late 2018. Initiatives included offering customers a simpler and improved offer, a renewed commitment to creativity and an acceleration of its technology and data capabilities.

Its latest results also saw a further reassessment of the business being made, given the ongoing pandemic. Write-downs in the value of businesses to the tune of £2.7 billion pushed the company to a significant loss. But the part sale of its Kantar market data business helped reduce debt, opening the way for a restarting of the dividend payment. 

For investors, customer moves to increasingly advertise online, leaving it battling the likes of Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) need to be remembered. Pre-tax profit has also declined since 2017. But management action to transform the company remains ongoing, with a return to dividend payments, albeit a reduced one, a clear positive for investors. For now, while a turnaround in profits is yet to be made, the push to online activity driven by Covid-19 does at least mirror WPP’s own strategy.   

Positives: 

  • A three-year strategy to return it to growth
  • A restarting of dividend payments

Negatives:

  • Alphabet Google and Facebook have built significant advertising businesses
  • Operating profit fell by 38% to £382 million

The average rating of stock market analysts:

Strong hold

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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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