Shares in advertising behemoth WPP (WPP) traded 8% higher to 557p after it reported solid trading in the first two months of 2020 with ex-Greater China like-for-like sales up 0.4% and cancelled its final dividend and planned buyback to preserve cash.


In China, during the peak lock down, like-for-like revenues dropped 16.1% excluding pass-through costs, perhaps giving a steer for what may happen in other territories.

During that time almost all employees were working remotely, but with restrictions now being lifted around 55% of people have returned to the office.

For the company as a whole, like-for-like revenues fell 0.6%, in line with the announcement on 27 February.

New business performance was very strong, with a number of key wins including Intel, Hasbro and Discover, and retentions including BBVA.


The company has successfully moved 95% of its 107,000 workforce to homeworking and they remain actively engaged in helping clients, including assisting governments to manage and adjust their communications through these difficult times.

For example, the firm’s global media network Wavemaker worked with the Cabinet Office to launch its coronavirus service on WhatsApp to reduce pressure on the NHS.

From March the early indications are that media spending has remained committed or diverted to other channels, but the company has also seen an increasing number of cancellations and activity has slowed down.

Media spending is essentially discretionary, but equally, WPP has a variable cost base and has decided to freeze new hires, suspend salary increases and stop spending on travel and hotels.

Setting an example, the WPP executive committee and the board has taken a 20% reduction in remuneration and fees for a period of three months.

In total these actions will save between £700m and £800m of expenses for 2020.

The company is also looking to reduce capital expenditures and working capital and has identified around £100m of savings across the property and technology areas.

Further actions will be taken if the firm sees evidence of any deterioration in client payments in order to protect cash flows.


Chief executive Mark Read commented, ‘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.’

At 31 December the firm had £3bn of cash and total liquidity of £4.8bn, while net debt (gross cash minus debt) was £1.5bn, which represents 0.8 times earnings before, interest, tax, depreciation and amortisation (EBITDA), below the 3.5 times limit set by the banks.

The board is cancelling the final dividend of 37.3p per share and suspending the £950m buyback, preserving £1.1bn of liquidity in total.


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Issue Date: 31 Mar 2020