WPP posted a $3.4B pretax loss in 2020 due to $3.7B in COVID-19 impairment charges compared to a $1.4B year-earlier profit.
The goodwill impairments relate to acquisitions whose carrying values have been reassessed in light of the pandemic, according to WPP. They were driven by a combination of higher discount rates used to value future cash flows, a lower profit base in 2020 and lower industry growth rates.
WPP CEO Mark Read called the financial performance “remarkably resilient” during a “tough year for everyone.”
He said the effort to slash debt, and transform and simplify WPP’s businesses following the exit of founder Martin Sorrell, paid dividends during 2020 with the dramatic shift to digital media and e-commerce as people’s lives went online.
“Having modernized 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,” said Read.
He said the demand for simple, integrated solutions that combine creativity with sophisticated data and technology capability is only set to grow.
Read expects 2021 to be a “year of solid recovery,” though uncertainties remain about the impact of vaccine roll-outs and economic growth.
WPP’s PR units chalked up $1B in 2020 revenues, down 4.0 percent on LFL and 4.9 percent on a reported basis.
Flagship shop BCW continued to improve during Q4, while Hill+Knowlton Strategies posted weaker results due to a tough year-ago comparison. Finsbury Glover Hering, a combo announced in July, “achieved strong traction, both with clients and in attracting new talent,” according to WPP.