WPP bets on new strategy to return business to growth
WPP has announced the results of its strategic review, setting out a new plan to return the business to growth.
The strategy reflects a new vision for WPP as a leader in creativity and technology. It incorporates a simpler, improved offer designed to capture the opportunities of a changing marketplace, and a streamlined structure built around the needs of clients.
It also includes additional investments in creativity, technology and talent to enhance WPP’s proposition to clients and drive top-line growth.
WPP expects to deliver organic growth, defined as like-for-like revenue less pass-through costs growth, in line with its peers at a headline operating profit margin, excluding associates, of at least 15% by the end of 2021 as a result of the strategy.
The company will incur cash costs for restructuring of £300m over the next three years to deliver estimated annual savings of £275m by the end of 2021, approximately half of which will be reinvested in the business.
Mark Read, Chief Executive Officer of WPP, said: “What we hear from clients is very consistent: they want our creativity, and they want us to help them transform their business in a world reshaped by technology. This is at the heart of what we do. “We are fundamentally repositioning WPP as a creative transformation company with a simpler offer that allows us to meet the present and future needs of clients. This more contemporary proposition has already helped us to win new business, including Volkswagen’s creative account in North America.
“The restructuring of our business will enable increased investment in creativity, technology and talent, enhancing our capabilities in the categories with the greatest potential for future growth. As well as improving our offer and creating opportunities for clients, this investment will drive sustainable, profitable growth for our shareholders. “We describe our approach as ‘radical evolution’: radical because we are taking decisive action and implementing major change; evolution because we will achieve this while respecting the things that make WPP the great company it is today.”
The Board of WPP has decided to develop Kantar with a potential strategic or financial partner, with WPP retaining a significant minority interest and strategic links with Kantar. Proposals will be evaluated on their financial and strategic benefits and if a transaction is agreed it is likely to be announced in the second quarter of 2019.
WPP has also established an Executive Committee drawn from both corporate and company leadership.
This Executive Committee will work together to implement the new plan, and the company will review the company’s incentive arrangements to align with the strategy.
To make WPP the natural home for the best and brightest, and to attract the next generation of talent, it says it will champion a culture across WPP culture across WPP characterized by the values of openness,optimism and a commitment to extraordinary work.