WPP reveals £3.1bn of impairments as it dives into the red

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WPP PLC (LON:WPP) reported an eye-watering £3.1bn of impairments in its 2020 results as it reassessed the value of acquisitions made in the pre-coronavirus era.

The write-downs led to the acquisitive marketing and advertising conglomerate posting a loss before tax of £2.79bn for 2020 versus a profit in 2019 of £1.21bn.

What WPP refers to as “headline profit before tax”, which essentially omits exceptional items, fell 23.6% to £1.04bn from £1.36bn the year before.

The operating profit tumbled 19.2% to £1.26bn from £1.56bn while the operating profit margin fell by 1.5 percentage points, or 1.4 points on a like-for-like basis, to 12.9%.

Full-year revenue fell by 9.3%, or 7.3% on a like-for-like basis, to £12.00bn from £13.23bn the previous year.

Net debt at the end of 2020 stood at a 16-year low of £695.6mln, compared to net debt a year earlier of £1.54bn.

The FTSE 100 firm reiterated the 2021 guidance issued in December.

Mark Read, WPP’s chief executive, acknowledged it had been a “tough year for everyone” but said the group’s performance had been “remarkably resilient”.

“At the height of the pandemic we saw five years’ worth of innovation in five weeks, with a dramatic shift to digital media and e-commerce as people’s lives went online – trends on which we based our vision for WPP. Having modernised our client offer, refined our structure and strengthened our agency brands, we were well prepared for this shift and saw the benefits of this acceleration in parts of our business. Our strategic progress was also evident in our very strong new business performance, with key wins including Alibaba, HSBC, Intel, Uber and Unilever,” he said.

“The demand from clients for simple, integrated solutions that combine outstanding creativity with sophisticated data and technology capability is only set to grow and, while uncertainties remain around the impact of the vaccine roll-out and economic growth, we continue to expect 2021 to be a year of solid recovery,” Read said.

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