The world’s largest advertising agency WPP (WPP.L) has pulled its 2020 outlook, dividend, and share buyback amid the escalation of cancellations from clients due to the coronavirus pandemic.
The group said in a statement on Tuesday 31 March that while 2020 “started well with strong business momentum: key account wins and good retention, the impact of COVID-19 on the business will increase but “it is not possible at this stage to quantify the depth or duration of the impact.”
It said that clients around the world have been responding differently to the pandemic — but overall there has been a large volume of media spend cancellations. It added that while project and retained work has continued in most sectors — that “activity has begun to decline.”
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WPP says that it expects March performance likely to be weaker than January and February, so it will cancel its 2020 guidance and is looking at ways to buffer the impact.
Launching a review of its costs to protect profitability from a fall in revenue.
Pulling its dividend — the return it gives to shareholders out of profits.
Pulling its share buyback — this is when a company usually thinks its stock is undervalued and will buy its own shares back from the marketplace.
Over the last 18 months the group has sought to simplify the business and sold off multiple assets. It said, due to this strategy, it has £3bn ($3.7bn) in cash and total liquidity, including undrawn credit facilities, of £4.8bn.
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“The actions we have taken in the last 18 months to streamline and simplify WPP, together with raising £3.2bn in asset disposals, have put WPP in a strong financial position,” CEO Mark Read said in a statement.
“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.”
WPP will issue a trading update for the first quarter of 2020 on 29 April.