Writtle half year report and dividend announcement
I am pleased to report a resilient group performance in a first half overshadowed by the impact of the Covid-19 pandemic.
Once we had ensured our staff were safe and government Covid-19 guidelines followed, we acted quickly to address the decline in global demand caused by lockdowns in most of our markets. Costs and overheads were re-aligned to lower turnover levels, investment and expenditure were curtailed but at the same time we were determined to offer our clients an uninterrupted and high-quality service throughout the period.
The half year results are testament to the success of these actions.
RESULTS AND DIVIDENDS
Turnover was £33.30m (2019: £34.36m) and headline profit before tax was £2.00m (2019: £2.37m). With fewer exceptional items than in the prior period, profit before tax was £1.57m (2019: £1.41m).
Net cash balances at 30 June 2020 were £12.96m (2019: £4.72m) as cash management was prioritised.
Since the period end the final dividend for 2019 of 12p per share has been paid and an interim dividend of 6.25p (2019: 6.25p) will be paid on 30 October 2020 to shareholders on the register on 19 August 2020.
REVIEW OF TRADING
The performance of our three business groups is shown on page 8 of this report.
Our Innovation businesses saw an overall decline in revenues against prior year of 9% yet increased profits, but this masks widely differing performances between agencies. Our larger agencies like Epoch and Seymourpowell, performed strongly while smaller agencies in branding and design saw discretionary client spend fall sharply. Unsurprisingly, agencies with clients in hospitality, travel and high street retail fared worst, and we have embarked on a programme to merge some smaller agencies to create fewer, larger businesses going forward.
Our Implementation businesses, trading as Branded, saw the inclusion of Showcard’s results for the full period for the first time which gave an increase in overall turnover against the prior period. However, excluding Showcard, the like for like decline in revenues and profits were 7% and 22% respectively. Branded has a strong presence with food retailer clients and this offset declines in hospitality and travel-related clients. Showcard itself was the hardest hit of Writtle’s businesses with client spend 42% behind budgeted levels in the second quarter which necessitated significant cost reductions through furlough and redundancy, and we exited one expensive property lease at the end of June. Showcard is now back to monthly breakeven and is in a position to benefit from the usual seasonal uplift in September, October and November to recover its first half losses.
Our Instore business, Arken, performed extremely well in very difficult circumstances. New orders for Arken all but stopped at the end of March when most non-food retailers closed, but Arken was able to spread its long term order book over the remainder of the quarter and operate with minimal staff to maintain client service levels and take new briefs for the future. As a result, Arken was able to withstand a 26% decline in turnover and maintain profits at prior year levels.
All our business groups benefitted from the government’s Coronavirus Job Retention Scheme (CJRS) and I am pleased to report that many furloughed employees are now returning to work as demand begins to pick up. These employees would have been lost to our business without the CJRS and although our staff numbers are unlikely to recover to pre Covid-19 levels in the short term, it is good to see the CJRS delivering the outcome that was intended.
Trading has remained sound rather than spectacular in July and August. With the onset of a global recession, we do not anticipate our usual trading uplift in the second half, but we do intend to stay in profit and build for the future. At the beginning of the pandemic our aim was simply to survive but given our first half results we have raised our expectations and I hope to report a satisfactory full year performance next April.
19 August 2020