* Shares rise as group cuts costs
* WPP to cut 2 bln stg of spending
* Organic growth fell 16% in China
(Adds reaction, context)
By Kate Holton
LONDON, March 31 (Reuters) - The world's biggest advertising
company WPP has pulled its dividend and share buyback
and withdrawn its 2020 guidance after the coronavirus pandemic
sparked the most uncertain time in its 35-year history.
The owner of the Ogilvy, Grey and Hill+Knowlton agencies
said its actions, along with a cost cutting drive, would save
around 2 billion pounds in 2020 to see it through a downturn in
client spending.
Chief Executive Mark Read said fallout from the coronavirus
outbreak had been much more rapid than from the 2008 economic
crash, hitting different sectors more quickly and leaving many
companies with zero revenue and no reason to spend on marketing.
"This is the period with the greatest uncertainty," Read
told Reuters. "We don't know yet whether it will be the worst."
The pandemic, which has shut down the global economy with
shopping districts deserted, sports fixtures cancelled and
millions of people left idle, has come at a difficult time for
the company that was founded by Martin Sorrell.
In the middle of a three-year turnaround plan designed to
simplify the sprawling company, trading outside of China had
improved in the first two months of the year but that came to an
end in March.
In a sign of what could be ahead, the British company said
organic sales had fallen by 16% in Greater China in January and
February and while life was slowly returning to normal there,
consumer spending remained depressed.
Rivals IPG and Publicis have already
pulled their earnings guidance for the year.
CONSERVING CASH
To conserve cash WPP has frozen new hires, reviewed
freelance expenditure, stopped discretionary costs such as
travel and postponed salary increases. It will also save more
than 100 million pounds assigned for property and IT costs.
Members of the executive committee and board have also taken
a 20% salary cut for an initial period of three months.
The group, with 2019 revenue of 13 billion pounds, also had
3 billion pounds of cash at the end of 2019, and additional
liquidity.
"The companies that go into this in the strongest position
financially will come out of it in the strongest position," Read
said.
WPP said it was producing health campaigns for governments
and clients around the world including in Britain where it
launched an information service on WhatsApp. Public relations
and public affairs advice was in strong demand.
Some clients, particularly in Asia, are working on
rebranding while others are shifting media spend from cinemas
and outdoor to digital and TV, and pushing it back to later in
the year.
Analysts at Citi said the measures were prudent and the 16%
drop in China not quite as bad as feared. Shares in the group
were up 8%. "The good news is we will come out the other side
and at the end of the day we'll be alright," Read said.
($1 = 0.8093 pounds)
(Reporting by Kate Holton; Editing by Kirsten Donovan)
WPP (WPP)
