What to watch: WPP revenue slump, Airbus €500m loss, Next coronavirus woes

Edmund Heaphy
Finance and news reporter
WPP, the world's largest advertising agency, saw revenue fall by almost 8% in March. (Richard Drew/AP Photo)

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

WPP revenue sinks as clients cut marketing spend

WPP (WPP.L), the world’s largest advertising agency, said on Wednesday that revenue fell by almost 8% in the month of March as the coronavirus pandemic pushed clients to cut their marketing budgets.

Like-for-like revenue fell by 3.3% in its first quarter compared to the same period in 2019, reflecting the spiralling economic impact of the virus, which has forced companies to slash costs and eliminate non-essential spending.

“After a good start to the year, with growth outside of China in January and February, our business started to be materially impacted by Covid-19 in March,” said chief executive Mark Read.

Revenue in the UK fell by almost 10% in March, while it cratered by almost 30% in China, where WPP has now reopened most of its offices.

Significant cuts to marketing budgets have been seen in the automotive, travel, and luxury sectors, WPP said, noting that these industries accounted for around a quarter of the spending of its top 200 clients.

But spending from consumer packaged goods, technology, and healthcare and pharmaceutical clients — which account for more than half of its top clients — is “holding up relatively well,” the company said.

The advertising giant said on Wednesday that close to 95% of its 107,000-strong workforce were now working from home.

Barclays' sets aside £2.1bn to cover coronavirus losses

Barclays (BARC.L) has set aside £2.1bn ($2.6bn) to cover an expected surge in bad debts due to the coronavirus pandemic.

The bank said on Wednesday it had taken a £2.1bn credit impairment charge in the first quarter of 2020, more than double what analysts had expected and almost five times what Barclays booked for credit losses in the same quarter a year earlier.

Finance director Tushar Morzaria said £400m of the credit charge was based on loans that had already turned bad during the first quarter.

Chief executive James ‘Jes’ Staley told journalists the bank was taking a “very conservative posture” on the pandemic based on a “very harsh economic scenario”. Barclays’ modelling assumes an approximate 50% slump in UK and US GDP during the second quarter of 2020 and a surge in unemployment.

Joseph Dickerson and Aqil Taiyeb, banking analysts at Jefferies, said the provisions were “very credible and more like what we have seen at US peers than European ones.”

Volkswagen eyes profit in 2020 despite coronavirus impact

Volkswagen (VOW3.DE) expects to make an operating profit in 2020, despite the global coronavirus pandemic devastating car sales.

The world’s largest carmaker by sales said on Wednesday that it expects sales revenue to be “significantly below” last year’s levels. VW said that while the group expects a “severe” year-on-year drop in operating profit, it will “still remain positive” thanks to its cost-cutting.

“The global COVID-19 pandemic substantially impacted our business in the first quarter,” said Volkswagen CFO Frank Witter in a statement. “We’ve taken numerous countermeasures to cut costs and ensure liquidity and we continue to be robustly positioned financially.”

The company said its net liquidity remains “robust” at €17.8bn (£15.5bn, $19.3bn).

Crisis pushes Airbus to nearly €500m loss in first quarter

European aircraft manufacturer Airbus (AIR.PA) made a loss of €481m (£420m, $522m) in the first quarter of this year as the coronavirus pandemic devastated the aviation industry.

“We are now in the midst of the gravest crisis the aerospace industry has ever known,” Airbus chief executive Guillaume Faury said on Wednesday. 

First-quarter adjusted earnings before interest and tax fell by nearly 50% in the quarter, to €281m. 

On Friday last week, Faury sent a memo to the company’s 135,000 employees warning that the plane-maker was “burning cash at an unprecedented speed, which may threaten the very existence of our company.”

In the memo, seen by a number of media outlets including Reuters and Bloomberg, Faury wrote “we must now act urgently to reduce our cash-out, restore our financial balance and, ultimately, to regain control of our destiny.”

Next warns pandemic could push full-year sales down 40%

Clothing retailer Next (NXT.L) warned on Wednesday that the coronavirus pandemic could see its full-year sales collapse by as much as 40%.

The company said that the impact of the UK-wide lockdown had been “faster and steeper” than it had anticipated, and that it now expected lower sales in both the first and second halves of the year.

Sales in the first quarter of its financial year, which ended on 25 April, fell by 41% overall, largely driven by a 52% fall-off in high street sales.

Some 84% of its staff are currently furloughed under the government’s wage-subsidy scheme, meaning that the retailer expects to save £135m ($168m) on wage costs this year.

Next said that, in its worst-case scenario, sales in it second quarter could plunge by as much as 62%, even after it reopened its online store on 14 April.

European stocks rise ahead of Federal Reserve meeting

European stocks rose slightly on Wednesday as investors awaited the latest monetary policy decision from the US Federal Reserve.

While the central bank is not expected to announce any major policy changes, analysts believe the bank could provide guidance on what it intends to do with its $6.6tn (£5.3tn) balance sheet, which has grown by over $2.3tn since the first week of March.

After some initial gains, the pan-European STOXX 600 index (^STOXX) rose by less than 0.2%. London’s FTSE 100 (^FTSE) rose by around 0.9%.

Germany’s DAX (^GDAXI) was up by around 0.3%, while France’s CAC 40 (^FCHI) was up marginally.

What to expect in the US

Futures were pointing to a higher open for US stocks on Wednesday.

S&P 500 futures (ES=F) rose by almost 1%, Dow Jones Industrial Average futures (YM=F) rose by more than 0.7%, while Nasdaq futures (NQ=F) were 1.1% in the green.