WPP has withdrawn its guidance for 2020 and implemented a number of new measures in order to cut costs, following a “weaker” March performance amid the ongoing Covid-19 crisis and “significant uncertainty” over the future outlook of the business.
Immediate action to reduce costs includes a freeze on new hires, stopping discretionary costs such as travel and awards entries, reviewing freelance expenditure and postponing planned salary increases for 2020.
The WPP board and members of the executive committee have also committed to taking a 20% reduction in their salaries or fees for at least three months.
These cuts are expected to save the business between £700-800 million in 2020, and the ad network said it would continue to consider further actions to reduce costs in the coming weeks and months.
In addition, the planned 2019 final dividend of 37.1 pence per share – which would have been proposed at the June annual general meeting – has been suspended, as well as the £950 million share buyback, funded by proceeds from the sale of Kantar to Bain Capital late last year. Since December 2019, £330 million of the programme had been completed.
Together, those two actions are expected to preserve approximately £1.1 billion of cash.
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Although performance in March looks to have been weak, WPP said media spend in the short term had largely remained committed or had been diverted to alternative channels. However, the group admitted to seeing an increasing volume of cancellations.
New business pitches are to continue where the process was already underway, although WPP admits to having “less certainty” over its future pipeline. The group added that while it expects the impact of the coronavirus on the business will increase, it cannot quantify the depth or duration of the impact at this stage.
Nevertheless, CEO Mark Read said he has “great confidence” in the long-term future of the company.
“The actions we have taken in the last 18 months to streamline and simplify WPP, together with raising £3.2 billion in asset disposals, have put WPP in a strong financial position,” Read said.
“Across WPP we now have close to 95% of our people working effectively and productively away from their offices. I am very proud of the response from our people, who are looking out for each other and going the extra mile for clients while demonstrating the creativity, collaboration and resilience that will be key to the enduring success of WPP.”
