WPP withdraws guidance, suspends share buyback and dividend on Coronavirus uncertainty

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.