WPP returns to paying dividends but losses hit £2.5 billion after it slashes the value of its businesses

Advertising and marketing giant WPP today announced it was returning to paying its dividend but reported massive losses for the first half of the year.

The company struggling to restructure its sprawling business to cope with an increasingly digital marketing world said it would be paying a 10p interim dividend even as it plunged into a £2.45 billion loss after massively cutting the valuations of its businesses.

While the dividend was lower than the 22.7p it paid this time last year, in March, it had warned the outlook was too uncertain to pay anything at all. Its 2019 dividend was cancelled, saving £450 million. Shares rose 5% to 655p.

The move will be cheered by investors who have seen major companies hold back on paying hundreds of millions of pounds in dividends used by pension funds and others to fund their savers' incomes.

The dividend comes despite taking the option for a £600 million loan under the Covid Corporate Financing Facility and £29 million of state support overseas. Chief executive Mark Read told the Standard the loan hadn’t been drawn down and making the payout despite the support was “not an issue”.

WPP today said it was on track to make savings at the upper end of its targeted £700 million to £800 million.

It raised about £2.4 billion from the sale last year of a major stake in its Kantar analytics business to private equity group Bain Capital and was today able to say it had cut its towering debts by £1.5 billion in the first half of the year to £2.7 billion.

However, operating profits fell sharply, from £617 million to £382 million and the group made a headline loss of £2.45 billion after writing down the value of its assets.

WPP slashed £2.7 billion off the value of previous deals after revaluing its assets in light of Covid. Its $4.7 billion acquisition of Wunderman owner Y&R at the height of the dotcom boom in 2000 accounted for around 75% of the charge. It also forecast lower growth rates for the ad and marketing industries.

Read said the company's performance had been inevitably hit in the second quarter of the year by Covid but said: "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 about the speed of the recovery."