WPP to reveal cost-cutting progress as pandemic hits turnaround plan

WPP is set to tell investors whether the company has met cost-cutting targets or if the coronavirus pandemic has blown its turnaround plans off course.

Investors will be hoping that the reopening of major economies has driven a jump in business spending since the peak of Covid-19.

However, shareholders will remain cautious ahead of the advertising giant’s half-year results announcement on Thursday August 27.

In February, WPP had already been downbeat in its projections for 2020, predicting that revenue would be flat after a tough final quarter in 2019.

The company is still in the middle of its turnaround plans following the exit of Sir Martin Sorrell.

In April, it said it had made progress in simplifying its business and pushing down debt, but it is expected to face a challenge in reaching its aim of returning to growth by the end of 2021.

WPP said like-for-like revenues slumped by 3.3% in the third quarter as it was hammered by a 7.9% decline in March when the pandemic started to affect spending by clients.

A consensus of analysts predicted organic revenue decline of 20% in the second quarter.

Analysts at JP Morgan said they expect WPP to report an 18% fall for the quarter, improving its latest full-year projection to a 10% drop.

WPP said it would cut jobs as part of its plans to slash costs in order to save around £800 million this year.

It saw notable spending cuts in the automotive, travel and leisure, and luxury sectors, which significantly scaled back marketing costs in the face of the virus.

Advertising budgets are often significantly affected when economic conditions sour, but investors will be hoping for continued resilience in the important consumer goods, technology and healthcare sectors.

Will Ryder, equity analyst at Hargreaves Lansdown, said: “WPP has responded to the pandemic by focusing on controlling costs.

“The current range of measures includes hiring freezes, stopping discretionary spending and salary reductions for senior management.

“The plan was to save £700 million to £800 million in this way, and we look forward to finding out how successful it’s been.”