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Massive cost-cutting at WPP as Covid-19 crisis impacts revenues

Measures 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

Amid the ongoing and intensifying Covid-19 crisis, WPP assured that it has a strong balance sheet and good liquidity. However, the world’s largest advertising company announced massive cost cutting measures to maintain the profitability.

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The holding company said it is taking prudent action now to maintain its liquidity and ensure that the company emerges from this global crisis strong, secure, and ready to meet the continuing needs of its clients, shareholders and other stakeholders.

WPP Board has decided to suspend the ÂŁ950 million share buyback, funded by proceeds from the Kantar transaction, with immediate effect. Since December 2019, the company has completed ÂŁ330 million of the programme.

In addition, the Board is suspending the 2019 final dividend of 37.3 pence per share, which was due to be proposed at the AGM in June 2020.

“These two actions together will preserve approximately £1.1 billion of cash. The Board will continue to review the status of the 2019 dividend,” WPP said.

Among the cost cutting measures to maintain the cash flows, the company will be 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 taking 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,” the company said.

Mark Read, Chief Executive Officer, WPP, said, “The actions we have taken in the last 18 months to streamline and simplify WPP, together with raising £3.2 billion in asset disposals, have put WPP in a strong financial position. 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.

“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, 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. 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.”

The holding company will issue its trading update for the first quarter of 2020 on 29 April 2020.

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