WPP said today it was imposing strict cost cutting measures in response to the pandemic, including a hiring freeze, reviewing freelance expenditures, stopping discretionary costs like travel and hotels and the costs of award shows and postponing planned salary increases for 2020.
Also members of the WPP executive committee, as well as its Board of Directors, are taking a 20% cut in salaries and fees for an initial period of three months.
The company said these steps are expected to generate 2020 savings of between £700 to £800 million ($870 to $995 million). Other cost cuts are being considered as well.
The firm also said it has identified another $125 million in capital expenditure savings largely from property and IT budgets.
In today’s update WPP stated, “We are continuing to work closely with our clients to ensure timely payment for the services we have provided in line with contractual commitments. On media, we are working with clients and vendors to maintain the settlement flow. Should we see any deterioration in payment from our media clients we will take appropriate action to manage our cash position.”
The firm is also suspending the £950 million share buyback, funded by proceeds from its sale of a 60% stake in Kantar to Bain. Since December 2019, about one-third of the planned buybacks under the program had been completed. It is also suspending a planned final dividend for 2019. Those two actions together will preserve approximately $1.4 billion in cash.
The firm, like other holding companies has withdrawn previous financial guidance given the unpredictable impact (other than quite damaging) that the health crisis will have this year on the economy.
For the first two months of 2020, excluding Greater China, WPP said organic growth was in line with expectations at 0.4%. In Greater China (approximately 7% of WPP’s business) the impact from COVID-19 led to a 16.1% organic decline for the first two months of the year.
March will be a weaker month as will the second quarter although visibility is too low to provide reliable guidance. WPP said its balance sheet remains strong with good liquidity and that steps being taken now are designed to maintain that position.
CEO Mark Read stated, “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. It is clear that the companies in the strongest financial position will be best placed to protect their people, serve their clients and benefit their shareholders during a period of great uncertainty, which is why we are taking the steps we are outlining today.”
Read noted that close to 95% of employees are working “effectively and productively away from their offices.” At the same time, he added, “we are supporting many governments and international health organizations on four communications programs to limit the impact of COVID-19 on our communities. The important role we are playing in helping our clients navigate a difficult time gives us great confidence in the long-term future of the company.”