44 2GM Friday August 28 2020 | the times
Business
WPP has reinstated its dividend after
predicting that the advertising industry
will maintain its gradual recovery from
the depths of the pandemic.
In comments that boosted the
advertising group’s share price by more
than 6 per cent, Mark Read, its chief
executive, said that the “worst is behind
us”, with clients slowly increasing mar-
keting spending after cutting budgets
during the lockdown.
Mr Read, 53, said that the second
quarter was likely to be the “toughest
period of the year” and that WPP had
proved “more resilient than we feared”.
Its revenues fell by 15 per cent between
April and June, compared with fore-
casts for a 20 per cent drop.
“The worst is behind us, but people
are still cautious about the second half
of the year,” said. “We’re not through
this yet. The recovery will be gradual
and will require a mix of a return of
consumer confidence and increased
business investment.”
WPP is the world’s largest advertis-
ing and marketing services group,
employing more than 100,000 people.
Sir Martin Sorrell built the former
maker of wire baskets into an inter-
Strong demand from parents looking
to entertain their house-bound child-
ren during lockdown could not prevent
The Works from sliding to a heavy pre-
tax loss.
The discount stationery, arts and
crafts retailer announced an £18 mil-
lion loss for the year to April 26, com-
Worst is behind us,
says WPP chief as
dividend restarted
Simon Duke national powerhouse during a three-
decade reign, buying up hundreds of
independent agencies.
Since replacing Sir Martin two years
ago, Mr Read has sold £3.2 billion-
worth of businesses and other invest-
ments and in the past year has reduced
the group’s net debt by £1.5 billion to
£2.7 billion. He is more than halfway
through a three-year programme to
help WPP to compete more effectively
in an industry dominated by Google
and Facebook.
However, the FTSE 100 group
announced a record first-half loss after
writing down the value of some of its
largest agencies by £2.7 billion. The
bulk of the impairment came from the
subsidiary that grew from Y&R Group,
a New York-based rival that WPP
bought for $4.7 billion two decades ago
in one of Sir Martin’s landmark deals.
Writedowns pushed WPP into a pre-
tax loss of £2.6 billion in the first half,
compared with profit of £409 million in
the same period last year. Revenues fell
by 9.5 per cent to £4.7 billion, with head-
line operating profits down 38 per cent
at £382 million.
WPP will resume paying dividends,
having axed the final payout for last
year. It has handed investors 10p a share
for the first half, down 55 per cent from
last year. Mr Read said that he would
unveil a revised dividend policy at an
investor day later in the year.
WPP preserved £1.1 billion of cash by
cancelling payments and suspending a
share buyback scheme. Mr Read said
that the group would “hold its fire” on
repurchasing its stock until “we have
greater visibility over the long term”.
The business is exposed to some of
the sectors that have been most
affected by Covid-19, with about a fifth
of revenues tied to travel, leisure and
automotive companies. The car indus-
try was enjoying a healthy recovery, but
it would take several years for airlines to
bounce back to previous heights, Mr
Read said.
Unlike some of its rivals, WPP pro-
vided financial guidance. It expects
turnover to fall by between 10 per cent
and 11.5 per cent this year and headline
operating profit margins to be between
10.4 per cent and 12.5 per cent.
It said that 77 per cent of its workers
in China were back at the office, com-
pared with 17 per cent in Germany, 3 per
cent in Britain and 1 per cent in the
United States.
Shares in WPP rose by 41¼p, or
6.6 per cent, to 665¼p.Jigsaws cannot solve puzzle for The Works
Ashley Armstrong pared with a £2.3 million profit last year,
after a writedown on the value of its
stores during the pandemic. Annual
sales still grew by 3.5 per cent to
£225 million, while like-for-like sales
were 0.7 per cent higher.
All of The Works’ 534 shops were
closed throughout lockdown. Since
stores have reopened, total like-for-like
sales are up 0.7 per cent, boosted by a
doubling in online revenue, while store
like-for-like sales are still down by a
“high-single-digit” figure.
Gavin Peck, 38, the company’s chief
executive, said that there had been a
boost in sales of “boredom busters”,
including jigsaws, art materials and
adult colouring books.
The shares closed down 1p, or 4.2 per
cent, at 22¾p last night.D
emand for
loungewear
during the
lockdown
has helped
Abercrombie & Fitch
to a surprise profit
(Louisa Clarence-
Smith writes).
Shares in the preppyAmerican fashion
retailer rose 8.1 per
cent, or 90 cents, to
$12.03 on Wall Street
last night after it
reported a 56 per cent
jump in digital sales in
the second quarter to
$386 million.
Net sales fell by17 per cent to
$698.2 million in the
three months to the
end of August, but that
was still ahead of
estimates of
$658.44 million.
Abercrombie was
founded in 1892 as a
retailer specialising in
high-quality camping,
fishing and hunting
clothing. The brand
has been worn by the
US presidents
Theodore Roosevelt
and John F Kennedy.Abercrombie takes
comfort in casuals