Advertising giant WPP has written down the value of some of the businesses it has bought – pushing it into a major loss for the first six months of the financial year.
The marketing business saw the first half of last year’s £409 million pre-tax profit totally annihilated during the Covid-19 months as it lost nearly £2.6 billion.
WPP said it had taken £2.7 billion of impairments, which helped flip it deep into the red, around the acquisition of some of its subsidiaries.
The write-downs were triggered by the Covid-19 pandemic as companies had to give higher discounts and made less profit in an industry where growth slowed down.
WPP also reported a 12.3% drop in revenue to just under £5.6 billion in the first half of the financial year.
The business now hopes that the worst is behind it, and that the second quarter will be the most painful period.
But this is reliant on there not being a second wave of Covid-19, and no major lockdowns, it said.
“After two months in which our strategic progress could be measured by growth outside Greater China, the second quarter saw an inevitable downturn, with like-for-like revenue less pass-through costs declining by 15%, albeit better than our expectations,” said chief executive Mark Read.
“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.”
Mr Read said that the Covid-19 pandemic has accelerated changes that were already happening in the sector, and therefore WPP needed to speed up its own plans.
It is investing in technology and ecommerce, and training staff with new skills, including accreditations from Adobe, Amazon, Facebook, Google and Salesforce.
“We are working with our clients to help them get back to business, adapt their marketing strategies at speed and reshape their operations for a new world.
“Brands are seeing increases in online sales of 100% and more, and we are supporting eight of our top 10 clients on ecommerce strategies.”