WPP AUNZ numbers beat (low) expectations in H1 as sweeping recast takes hold

Six months after WPP AUNZ announced it was making sweeping changes to its business and then announced wide-ranging cost cuts due to the effects of the COVID-19 pandemic, WPP AUNZ seems to have managed to finally find some stable ground. For the first half of its financial year, the network announced that it beat admittedly poor expectations, with its net sales hitting AU$296 milion (US$212 million) for the period, a decline of 14.3%. Its operating profit was down 61.5% to AU$8.5 million (US$6.1 million). Total advertising bookings fell 24%. 

Segment numbers reveal how much work is to be done. For example, the global integrated agencies business (previously called the advertising and media unit) saw its topline revenue fall by 12% to AU$202.1 million, even as the bottom line slid by over 61% to a loss of AU$14.1 million. Smaller businesses also faced challenges; public relations and public affairs saw revenue and profit decline by 20.8% and 38.1%, respectively, and the same metrics fell by 14.6% and 55.2% for specialist communications. Large-format production was the only business to sneak in a profit (of AU$1 million), up 21.7% even though its topline plummeted more than 49%. 

WPP AUNZ's relative financial stability has been aided by sweeping cost-cutting measures that have yielded better-than-expected results. According to a company statement, full-year cost controls are expected to yield savings of AU$80 to AU$100 million, versus initial estimates of AU$70 million.

Various targets set out in a February recast are on or ahead of target. For instance, the company has successfully restructured its New Zealand operations, which are now profitable. WPP AUNZ has also established a centralised tech hub which it calls a Centre of Excellence, with partnerships with Microsoft and Adobe, among others. Ten top client leaders have also been identified to drive relationships across WPP AUNZ brands and capabilities.   

"Our diversified regional footprint, quality client portfolio and our leading creative solutions have underpinned a better performance than the market," Jens Monsees, managing director and CEO, said. “I’m particularly pleased that our New Zealand operations, which have been restructured, are now profitable after reporting a loss in the prior year. The experience and success in New Zealand so far means we are constantly learning from our progress and improving our broader group strategy." 

As we had previously reported, the group has different priorities for its regions. In Southeast Asia, it wants to expand its offering and establish an "offshore hub". In Australia and New Zealand, the focus was driving collaboration through the establishment of one 'campus' offering per major city, in Perth, Brisbane, Adelaide, Auckland and Wellington. Each campus will have content and production capabilities. New Zealand looks set for the biggest change, with a restructure of the leadership team and reporting structure. This process is now complete in New Zealand, with one integrated campus and similar facilities across Australia. 

While the company has declined to provide a financial forecast for the year, it did disclose that its June and July operations for 2020 were more profitable than 12 months ago. It has nevertheless renewed and extended AU$420 million in banking facilities—AU$150 million in working capital expiring in August 2021 and a larger AU$270 million term facility to expire in August 2023—to support its ongoing restructuring.