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WPP recovered from pandemic but macro uncertainty lies ahead

The huge impairment it took out in 2020 shows how vulnerable advertising agencies are to marco economic volatility.
WPP recovered from pandemic but macro uncertainty lies ahead
  • Organic revenue ahead of pre-pandemic levels
  • Management has promised to hand out 40 per cent of earnings as dividend

In 2020, WPP (WPP) took a £2.82bn impairment charge to reflect adverse impacts of COVID-19 on the business. Historically, marketing spend has been one of the first costs to be cut by businesses when economic instability arises. This huge impairment therefore reflected WPP’s fear that clients will hand over less money during a period of global uncertainty.

As it turned out, Covid-19 was not the disaster for advertising businesses that many expected. With everyone forced online, companies increased digital marketing spend to capture new customers online. Global advertising spend increased 22.5 per cent in 2021, driven by a 30.5 per cent increase in digital spend, according to GroupM estimates. At WPP, digital billings have now grown to 43 per cent of  total from 41 per cent last year.

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