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Digital shift and vaccines help WPP plot path to recovery

Mar 11, 2021

By Kate Holton

LONDON (Reuters) – The world’s biggest advertising company WPP said it would relaunch its buyback scheme immediately after its work to promote vaccines and help clients shift online helped get it through the worst of the pandemic.

Hit in early 2020 by the sudden collapse in spending as clients hoarded cash, WPP has steadily improved by helping businesses build e-commerce and digital offerings to reach consumers when shopping districts remained shut.

It forecast a return to growth in the second quarter of 2021 after a reduction in headcount, the use of fewer freelancers and a massive cut to the travel budget helped the British company save around 800 million pounds ($1.1 billion).

The owner of the Ogilvy, Grey and GroupM agencies reported a fourth-quarter drop in underlying net sales of 6.5%, slightly better than an analyst consensus of -6.7%, taking the full-year drop to 8.2% compared with a forecast of -8.4%.

“We’re pretty pleased with the performance given all of the uncertainties over the last 12 months and what we’ve been navigating economically,” Chief Executive Mark Read told Reuters.

WPP won new work by helping clients develop their e-commerce and digital capabilities, such as helping Ford launch a new car via online platforms when they couldn’t open showrooms and working with others to build commercial online marketplaces.

It said it had secured a “market-leading” $4.4 billion of net new business from companies including Alibaba, HSBC, Intel, Uber and Unilever. WPP shares hit a year-high, and were last up 1.3%, giving it a market valuation of 11.3 billion pounds.

Read said the recent purchase of many failing retail brands by online-only groups such as Boohoo and ASOS in Britain suggested the rapid shift online and away from physical stores would last to some extent beyond the pandemic.

He launched a new strategy more than two years ago to better combine the group’s digital and data capabilities with its creative agencies, a new approach that had been demanded by clients who accused the 100,000-strong group of being unwieldy.

The share price has recovered from the depths of March 2020, but it has halved from a peak four years ago.

Shore Capital analyst Roddy Davidson said the group’s move to simplify operations, improve internal cooperation, invest in technology and cut debt had strengthened its position.

French rival Publicis has also forecast a return to growth in the second quarter.

($1 = 0.7168 pounds)

(Reporting by Kate Holton; Editing by Guy Faulconbridge, Paul Sandle and Emelia Sithole-Matarise)

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