- WPP expects to save £2 billion in 2020 by suspending share buyback and dividends.
- The advertising company says sales in mainland China dropped 16% in January and February.
- WPP's board members & executive committee agree on 20% salary cut for the next 3 months.
The world’s largest advertising company, WPP (LON:WPP), withdrew its financial guidance for 2020 on Tuesday ascribed to the sharply rising uncertainty due to the Coronavirus. The company also suspended its share buyback and dividend for 2020.
WPP also said in its statement that it plans on launching a cost-cutting drive that along with these moves will save roughly £2 billion this year and support the company in surviving through the ongoing health emergency that has broadly disrupted operations.
Economic Impact Of COVID-19 Is Stronger Than 2008’s Financial Crisis
WPP’s CEO Mark Read commented on Tuesday and reiterated that the economic impact of the Coronavirus on global businesses has been stronger than the one seen in the financial crisis of 2008. The pandemic has quickly ran multiple companies out of cash with many of them seeing no reason in sustaining their expenditure on marketing.
According to the advertising company, sales in mainland China have seen a sharp 16% decline in January and February attributed to the ongoing health crisis. While businesses are gradually resuming operations in China now, WPP added, consumer spending is still on the lower side.
WPP’s rivals including Publicis and IPG also withdrew their earnings outlook for 2020 last week.
Other strategies that the company plans on employing to conserve cash include freezing hiring, minimizing discretionary costs, reviewing freelance related expenditure, and delaying the scheduled salary increases. Via cutting the IT and property-related costs, WPP also expects to save an additional £100 million.
WPP’s members of the board of directors and its executive committee have also agreed on a 20% reduction in salaries for the next 3 months.
WPP Had £3 Billion In Cash & Additional Liquidity At The End Of 2019
The multinational communications and public relations company had recorded £13 billion in revenue in 2019. At the end of last year, the company had £3 billion in cash and additional liquidity.
WPP is currently working with governments across the globe including in the UK to launch health campaigns aimed at providing accurate information regarding the prevention and control of COVID-19 to the public via platforms like WhatsApp.
Following the announcement, WPP posted an 8% increase in the stock market on Tuesday. Currently trading at 544 pence per share, the company still suggests an around 50% decline in 2020 so far. Its performance in 2019, on the other contrary, was reported fairly upbeat with an annual gain of roughly 25%. WPP is currently valued at £6.66 billion.