WPP sets out plan for return to growth

wpp office

Global media and marketing behemoth WPP, is hosting a virtual presentation for investors and analysts which will provide an update on its strategy for growth.

It will also set out opportunities for efficiency and reinvestment, outline its plans for capital allocation and provide new medium-term financial targets.

WPP strategic goals

Among the key strategic goals will be returning the core Communications business to sustainable growth; expanding further into high-growth areas of commerce, experience and technology – from 25% of its business today to 40% by 2025; and funding growth and improving profitability through gross annual cost savings of £600 million by 2025, with approximately two-thirds reinvested in talent, incentives and technology to drive growth.

Will there be job losses?

The cost savings will almost certainly involve some job losses, given the people-intensive nature of WPP’s businesses. Investors seemed to approve of the measures, as the firm’s shares were up more than 5% in London today, ahead the meeting.

WPP said it will also plan to supplement growth through targeted, scalable M&A of £200-400 million annually; and invest capital expenditure of £450-500 million per annum in 2021 and 2022 and £300-350 million per annum thereafter, in its campus programme, ERP systems and shared services to deliver gross cost savings and improved business insight and talent management

Ahead of the presentation, Mark Read, CEO of WPP, said: “It has been two years since we set out our strategy to return WPP to growth.

“Since then, we have made significant progress, with stronger agency brands, new leadership, a simpler structure and a strong balance sheet.

“We can see the results in our industry-leading new business performance, with $5.6 billion won in the first nine months including Alibaba, HSBC, Intel, Uber and Unilever.

COVID19 impact on structural change

He added: “The events of 2020 have only accelerated the structural changes in our industry, from the expansion of digital channels to growing demand for ecommerce solutions.

“The actions that we have taken have positioned us well, and we are already working with 76 of our top 100 clients on ecommerce.

“There are significant new growth opportunities for WPP as clients demand simple, integrated solutions that combine creativity with technology and data expertise.

“Clients need trusted partners more than ever to help them transform and succeed.

“In partnership with our agency brands we are deepening and accelerating the change already happening within WPP.

“We aim to return our Communications business to sustainable growth and invest further in the high-growth areas of Commerce, Experience and Technology.

“We are converting our size into scale, making us more effective and efficient as we share expertise across a simpler company of stronger agency brands.

“£400 million of the targeted £600 million savings will be used to fund investment in the capabilities and technology that will drive future growth for our people, our clients, our business and our shareholders.”

Let’s just hope that Read manages to steer clear of any ageist comments at today’s meeting. Earlier this year Read was widely criticised for appearing to boast at the low average age of staff at the company and another investor presentation.

This despite the fact he is 53-years old himself and many of the firm’s clients are either older or serve the older generation of consumers, who also happen to have the deepest pockets.