31st Mar 2020 10:54
(Alliance News) - WPP PLC on Tuesday joined the growing list of companies looking to preserve cash, as the ad agency pulled its dividend and suspended its share buyback due to Covid-19 uncertainty.
In light of the coronavirus outbreak, WPP said its GBP950 million buyback scheme and 2019 final dividend will be suspended given uncertainty it will have on the business. The move aims to save around GBP1.1 billion in total.
"Given the significant uncertainty over the coming months, we are taking prudent action now to maintain our liquidity and ensure that we emerge from this global crisis strong, secure, and ready to meet the continuing needs of our clients, shareholders and other stakeholders," the company said.
In terms of trading, WPP said 2020 has started well with strong business momentum, including key account wins and good customer retention.
WPP said overall new business performance was strong, with a number of key wins including Intel, Hasbro and Discover, and retentions including BBVA.
The marketing firm said, in the first two months, group like-for-like revenue less pass-through costs excluding Greater China was 0.4%.
However, in Greater China WPP said Covid-19 led to a 16.1% fall in like-for-like revenue less pass-through costs over the two-month period.
In terms of outlook, WPP expects its performance in March in markets experiencing significant Covid-19 outbreaks to be weaker than in January and February, hurt by government restrictions on movement and the reduction in economic activity from lockdowns.
"As we enter the second quarter, it is clear that 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. As a result, we have decided to withdraw our guidance for the 2020 financial year. We will provide an update when appropriate," the company said.
WPP stressed that it has a strong balance sheet and good liquidity. Over the past two years, the company noted that it raised GBP3.2 billion from disposals, selling 50 businesses and investments.
The FTSE 100 company will report first-quarter earnings on April 29.
Shares in the London-based firm were up 7.9% at 556.60 pence on Tuesday.
By Arvind Bhunjun; [email protected]
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