The owner of the Ogilvy, Grey and Hill+Knowlton agencies said it could flex costs against a range of scenarios to manage profit and cash flow
WPP posted a 3.3% dip in net sales in the first quarter of 2020 due to the globally spread COVID-19 pandemic as per the company’s earnings report. According to the earnings report, the impact of the virus will increase in the short term, but the company could not reveal by how much. The British owner of the Ogilvy, Grey and Hill+Knowlton agencies said net sales fell by 7.9% in March, reinforcing analyst expectations of a 25% drop in the second quarter. “We expect the impact of COVID-19 on our business to increase in the short term, but it is not possible to quantify the depth or duration of the impact,” the company said in a statement.
According to the advertising company, WPP has already set out steps to cut around 2 billion pounds in 2020 to see it through a downturn in client spending, including pulling the dividend and a share buyback. On Wednesday, the company stated that it had strong cash and liquidity and could flex costs against a range of scenarios to manage profit and cash flow. “We are nonetheless confident that, through our scenario planning, we are well positioned to take further action if the downturn is prolonged and to respond positively when the market picks up.”
Amongst additional cost saving measures, WPP has introduced a voluntary salary sacrifice from over 3,000 senior roles, part-time working and some permanent headcount reductions. Mark Read, chief executive officer, WPP, said a freeze on new hires would force the multiple agencies to move staff around within the holding company, while client demands for advertising to address the pandemic have forced them to work faster than ever before. “I think we’re working in faster, more agile ways,” he told Reuters. “Work that would have taken three months in the past is being done in a week,” he added.
Read took over the top job in 2018, vowing to simplify the company built by his predecessor Martin Sorrell after clients complained it was too slow and unwieldy, prompting them to take some ad work in house and others to go directly to tech giants, including Facebook and Google. Seeking to marry sectoral expertise with its technology know-how, he has merged agencies, such as the world’s oldest ad agency J Walter Thompson, with digital network Wunderman and merged its healthcare units with other agencies.
WPP is focusing on cutting more costs after it set out plans on March 31 to withdraw the dividend and share buyback to save around 2 billion pounds ($2.49 billion) in 2020. While the 107,000-employee group will be hit by the loss of work from clients in the travel, autos and luxury sectors, more than 50% of its work is for customers in consumer packaged goods, technology and pharmaceuticals that are still spending.
Leading rival Omnicom (OMC.N) announced job cuts on Tuesday while peers Publicis (PUBP.PA) and IPG (IPG.N) have taken other cost-saving measures to get through the downturn.