WPP looks to £700m+ savings

In a trading statement, WPP said the first two months of 2020 had been in line with expectations with strong business momentum and key account wins. Since the Covid-19 pandemic, it said it was operating well under remote working conditions but its March performance was weaker as the virus has spread and government containment actions take hold.

But with significant uncertainty for the immediate outlook it has reviewed costs to protect profits where possible from the decline in revenue.

Its immediate actions include: freezing new hires; reviewing freelance expenditure; stopping discretionary costs, including travel and hotels and the costs of award shows; and postponing planned salary increases for 2020.

In addition, members of the WPP executive committee, as well as the board, have committed to a 20% reduction in their salaries or fees for an initial period of three months.

"We anticipate these measures will generate total in-year savings for 2020 of £700 – 800 million. In addition, we are making a detailed assessment of further actions to reduce cost subject to the impact of the virus on our business over the coming weeks and months," it said in a statement.

WPP said its balance sheet was strong with good liquidity having raised approximately £3.2bn from its disposals programme which saw it sell 50 businesses and investments. At 31 December 2019 it had £3.0bn cash and total liquidity, including undrawn credit facilities of £4.8bn. Net debt was £1.5bn, down from £4.0bn a year earlier.

Its board has suspended the £950m share buyback, funded by the sale of Kantar, with immediate effect.

Mark Read (pictured), chief executive officer, WPP said: “The actions we have taken in the past 18 months to streamline WPP, together with raising £3.2bn in asset disposals, have put WPP in a strong financial position. 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.

“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. At the same time, we are supporting many governments and international health organisations on communications programmes 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.”