Staff Reporters
Mar 31, 2020

WPP AUNZ announces sweeping cost controls to manage COVID-19 blowback

Senior management salary cuts, shortened work week, consolidation of real estate among measures to control costs.

WPP AUNZ announces sweeping cost controls to manage COVID-19 blowback

WPP AUNZ has taken a series of measures overnight to try to manage the searing blowback to its business from COVID-19.

The agency network has rolled out measures including: 

  • A voluntary reduction in base salaries for its board directors, the CEO and senior leadership team
  • A voluntary program of nine-day fortnights and four-day weeks
  • Utilisation of employee leave
  • Slashing the use of freelancers
  • Limiting new hires
  • Salary-increase reductions
  • A push for greater intra-group resource sharing.

In addition, the unit will also stop all international and domestic business travel, cut capex and consolidate its property leases to save costs. Further, WPP AUNZ will advance its strategic transformation plan announced on 24 February this year as it seeks to control costs in a fraught environment.

"It is too early to have a conclusive view as to the consequences of the COVID-19 pandemic on our 2020 financial year earnings, including the impact of progressive enforced “shutdowns” in large sectors of the economy and changing state and federal legislation," the group announced in a note to its investors. 

On Tuesday last week, WPP AUNZ decided to to cancel the 2019 final and special dividend, as it sought to cap costs. The note to investors pointed out that the challenges its clients faced and the group's plans were reflective of these broad cuts. The unit plans to resume its dividend plans once there is more business certainty. 

"Many of our clients have already reduced their marketing and communications expenditure and more may continue to do so throughout this period as part of their own remedial actions," the note stated. "The extent of their reduced expenditure is still unfolding but we draw some confidence from the increased communications work we are undertaking ... for ... clients across sectors such as government, financial services, insurance, and FMCG, in response to the immediate demands of consumers and change in consumer behaviours."

For the moment, WPP AUNZ has enough cash in the bank to keep business going, As of 31 December 2019, the group had over $300 million of liquidity and a term debt facility of $270 million does not mature until June 2021. In addition, the group has a rolling $150 million 364-day working capital facility which was only drawn to $10 million as of 31 December. 

"Whilst we do not at this stage have clarity on the company’s earnings outlook for FY2020, it is our view that our 2019 year-end conservative leverage position, the pre-emptive and prudent decision to cancel the dividend on 24 March 2020, and the cost control actions outlined...put the company in a sound position to weather the current, known impacts of the COVID-19 crisis," WPP AUNZ's note stated. 

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