WPP has implemented a number of cost-cutting measures in light of the spread of COVID-19.
The holding company said it is freezing new hires, reviewing freelance spend and stopping “discretionary” costs, which include travel, hotels and awards show payments. WPP is also postponing planned salary increases for 2020.
Members of WPP’s executive committee, as well as its board, have committed to taking a 20% reduction in their salaries or fees for an initial period of three months.
According to WPP, it predicts these changes will generate savings to the tune of 700-800 million pounds sterling ($869-$993 million) this year.
Additionally, the company has chosen to immediately suspend its 950 million pounds ($1.2 billion) share buyback program, which is being funded by its recent sale of Kantar. WPP said it has completed 330 million pounds ($411 million) of the program since December of last year. The company is also suspending its 2019 final dividend, which was due to be proposed at its annual general meeting in June. Taken together, WPP said these two actions will save the company 1.1 billion pounds ($1.4 million).
The company also said it has identified savings in excess of 100 million pounds ($124 million) in “property and IT capital expenditure” against an initial 2020 budget of around 400 million pounds ($498 million).
“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,” WPP CEO Mark Read said in a statement. “I am very proud of the response from our people, who are looking out for each other and going the extra mile for clients while demonstrating the creativity, collaboration and resilience that will be key to the enduring success of WPP.”
WPP has also withdrawn its guidance for 2020 due to the impact of the coronavirus and will provide an update “when appropriate.” In its fourth quarter and full-year earnings call last month, the holding company predicted flat growth for 2020. In 2019, WPP’s organic revenue declined 1.6% year-over-year.
The company said it has seen a “range of different responses from clients globally” this month. While media spend spend has “largely remained committed, or diverted to alternative channels,” WPP said it has seen an increasing volume of cancellations. Project and retained work has “continued in most sectors,” but activity has begun to decline.
“New business pitches continue where the process was already underway, albeit we have less certainty over our future pipeline,” the company said in a statement. “In some markets, we are seeing additional demand in our PR and specialist communications businesses.”
For the first two months of 2020, WPP said its organic revenue was down 0.6% compared to the same period the year prior. In the U.S., organic revenue declined 0.9%.