WPP is implementing a series of cost-cutting measures, including reducing executive salaries by 20% for the next three months and a hiring freeze, as it grapples with the impact of the COVID crisis.
The global holding company says the cost-cutting measures will result in savings of £700-800 million this year. The company said it is also making a “detailed assessment” of further actions to reduce costs over the coming weeks and months.
The company has also identified savings of more than £100 million in property and IT capital expenditure against an initial 2020 budget of about £400 million, and stressed that it is working with clients to ensure timely payment for services it has provided, in line with contractual commitments.
“On media, we are working with clients and vendors to maintain the settlement flow,” it said in a statement. “Should we see any deterioration in payment from our media clients we will take appropriate action to manage our cash position.”
WPP’s global revenues were up 0.1% in January and February, although they plummeted by 23.2% in China, where the COVID crisis first hit. Its March performance was weaker, reflecting the spread of the virus and subsequent government containment efforts.
U.S. revenues fell by a moderate amount, 0.9%, in the first two months of the year, a number that will almost certainly drop as the country bears the full brunt of the COVID crisis. “Significant uncertainty” over the immediate outlook has led the holding company to withdraw its guidance for 2020.
CEO Mark Read said that the actions taken by the company in the months prior to the global health crisis have left 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,” he said.
Working from home has also become the new reality during the crisis, with WPP noting that almost 95% of its nearly 107,000 worldwide employees are now working from home.
Last week, both Interpublic and Publicis Groupe said the uncertainty caused by the COVID pandemic meant they would not provide further guidance for 2020.
“Our company’s balance sheet and liquidity are strong, and consistent with past practices we will look for opportunities to further enhance our financial condition,” said Michael Roth, chairman and CEO of IPG. “We have multiple cost levers to align expenses with changes in revenue and our operators are executing as appropriate on both the revenue and expense sides.”
Working from home has become standard for most office workplaces around the world. And successfully creating separation between work and home life is also becoming a paramount concern for companies as employees’ personal and professional lives intersect.
In an internal memo obained by the U.K. trade publication Campaign, Omnicom Group CEO John Wren urged employees to ensure they are taking breaks and stopping work for the day at an appropriate time.
“In these uncertain times, compassion for one another is critical and I urge everyone to remain conscious of their work/life balance,” said Wren in the memo. “When your office becomes your home, it can be harder to step away from your computer and have an official end to the workday.”
Omnicom said last week that it is currently unable to predict the impact of COVID on its business operations and liquidity, but said it could be “material” depending on the magnitude and duration of the pandemic.