Marcoms giant WPP has launched plans to make around £2bn in savings, as the impact of the Covid-19 shutdown hits its business.
In a trading statement, WPP said that for the first two months of the year, total global revenues rose 0.1%, but since March, clients had started to pull back on advertising as the virus spread globally. The group has put in place its cost-saving plans after revenues in China, the world's second largest ad market after the US, fell 23% in January/February. Just over half of WPP's 5,000 staff in China are now back at work, as health restrictions there are now being lifted, but overall, 95% of the group's more than 107,000 global workforce are currently working remotely.
So far, in its bid to make savings, the company has frozen its £950m share buyback scheme, funded by the sale of Kantar, of which £330m has been completed; and it has ditched its final dividend, in a move to save £1.1bn in total. WPP has also imposed a 20% pay cut on its executive committee and Board for an initial period of three months, postponed staff salary increases, frozen hiring, and halted spending on travel, hotels and award shows - all of which it says will bring up to £800m in savings this year. It is also planning to save £100m by cutting back on investment in property and IT. CEO Mark Reid (pictured) said the plans will put the group in the best position to protect its people, serve its clients, and benefit its shareholders, during this 'period of great uncertainty'.
According to Reid, WPP has a strong balance sheet and good liquidity. Over the last two years, the group has raised approximately £3.2bn from its disposals programme, selling 50 businesses and investments. As at 31st December 2019, it had cash of £3.0bn and total liquidity, including undrawn credit facilities, of £4.8bn. Net debt was £1.5bn, down from £4.0bn a year earlier. 'Given the significant uncertainty over the coming months, we are taking prudent action now to maintain our liquidity and ensure that we emerge from this global crisis strong, secure, and ready to meet the continuing needs of our clients, shareholders and other stakeholders', Reid added.
In a statement, WPP said that while it is clear that the impact of Covid-19 on the business will increase, it is not possible at this stage to quantify the depth or duration of the impact, and as a result, the group has withdrawn its guidance for the 2020 financial year.
Web site: www.wpp.com .
All articles 2006-20 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.