WPP AUNZ reports earnings of $24.6m for Q3 2020, predicts weak outcomes in Q4
WPP AUNZ has reported earnings before interest and tax (EBIT) of $24.6m for the three months that make up the September quarter – an increase on the previous year of 15.4%, largely due to operation efficiencies, government subsidies and a better performance than what was forecasted.
But the holding group has warned of a subdued fourth quarter, saying it expects Christmas will be significantly down on previous years and ‘weak trading conditions’.
WPP AUNZ won’t be providing guidance for 2020, but does hope for green shoots in Q4
The agency group reported net sales of $153.6m – an improvement on Q2 but 14.3% down on 2019’s Q3 sales of $179.3m. WPP reports it is still ahead of the market in this area though, with market bookings down 27.1% for the period.
Earlier this year, WPP AUNZ flagged it was eying $70m in cost savings for 2020, which was reflected in $29m worth of savings in Q3, including $5.9m in government subsidies.
The group also worked to reduce its debt in Q3, dropping it from $138.7m as of June to $128m. Earnings guidance will not be provided for 2020, with WPP AUNZ pointing to ongoing uncertainty as the reason.
In August, WPP ended its voluntary pay cut program, returning all staff to full pay. In September the business appointed its first head of comms and marketing in Toby Hemming and in October, longtime leader John Steedman announced his retirement.
Managing director and CEO, Jens Monsees, who just marked one year in the top job, said the group’s diverse offering is what has allowed it to weather the storm brought about by COVID-19.
“WPP AUNZ is a business of strong and diverse brands, providing end-to-end media and marketing services. Whether it be creating a tv ad, building a new website or direct-to consumer platforms, data strategies, martech and adtech implementation, creating a social media campaign or crisis communications advice, we are working hand in hand with our partners and clients to support them through these uncertain times. Our diverse offerings, and excellent client relationships have seen us perform better than the overall market, as measured by agency bookings,” said Monsees.
“The exceptional performance in a difficult year is a credit to our people across our brands, who continue to support the many clients we have, as we together, and in close partnership, sail these unchartered waters.
“The recent recognition of Ogilvy as 2020 Agency of the Year in the Effie Awards, and AKQA as a marketing technologist leader by Gartner, demonstrate the quality of our brands and the strong position we have in the market.”
WPP AUNZ Q3 trading performance [click to enlarge]
For the year to date, WPP AUNZ is currently 32.2% down on the same period last year in EBIT, reporting $37.9m compared to $55.9m. In net sales, the group has improved on a poor Q2, which saw a 21.5% variance between 2019 and 2020.
Unsurprisingly, large format production was the hardest hit across the year, with net sales dropping 43.6% in Q3 and 47.2% across the year to date. The group reported possible green shoots in large format production closer to Christmas as more brands prepare to spend. Specialist communications is still feeling the pinch however, due to deferred spend by clients.
WPP AUNZ Q3 segment performance [click to enlarge]
Looking forward, Monsees said the company is moving in the right direction, but things aren’t likely to improve in the short term.
“We expect the Christmas period to be more subdued than previous years and this will impact what is usually a strong fourth quarter for our business. The market continues to be volatile in response to the pandemic, making it a challenge to predict client spend in certain areas. For this reason, we are not providing specific earnings guidance for the full year,” said Monsees.
“We are confident that our long-term strategy is taking us in the right direction to capture more client spend in digital marketing and infrastructure, which we have already seen grow substantially over the last year.
“We continue to drive our transformation initiatives, partner with our clients to bring fresh insights and new digital and creative solutions and adapt our cost base as market conditions change.”
