WPP pulls dividend, outlook and share buyback as coronavirus hits ad sales
WPP has cancelled its dividend and share buyback and suspended its guidance for 2020, as the coronavirus pandemic forces a growing number of the advertising giant’s clients to cancel work.
The world’s biggest advertising company has launched a cost-cutting drive in response to the outbreak, identifying £800m of savings that can be made for 2020, including cutting executive pay and reducing capital expenditure.
WPP said it was producing health campaigns for governments and clients around the world, including a Whatsapp information service in the UK.
However other clients are pulling campaigns as the outbreak dents advertising demand and with no certainty about how long the downturn will last, WPP said there was “significant uncertainty” over its immediate outlook.
The advertising giant has already cut debt and raised cash as part of a three-year turnaround plan, and said it has frozen new hires, reviewed freelance expenditure, stopped discretionary costs such travel and postponed salary increases in response to the outbreak.
“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,” said WPP chief executive Mark Read.
The group’s executive committee and board have taken a 20 per cent salary cut for an initial period of three months, and WPP said it was drawing up plans for further cost saving measures that could be made to mitigate the impact of Covid-19.
WPP said that 2020 had started well with “strong business momentum” including “key account wins and good retention”, but that its performance in March had been weaker as the virus spread and government containment measures began to bite.
Roddy Davidson, a Shore Capital analyst, said WPP’s announcement “ should not come as a surprise given that many other companies have already gone down the same route, but it does highlight how difficult it is to accurately assess the impact of Covid-19 on the scale and deployment of corporate marketing budgets over the coming months”.
“In the short term, media spend is reported to have “largely remained committed, or diverted to alternative channels” although an increasing volume of cancellations has been experienced,” he added.
Shares in the company rose as much as 7.48 per cent in morning trading.