WPP will invest to hire new creative staff and reduce costs by cutting offices and jobs under a plan by new boss Mark Read to steer the world's biggest advertising group back to growth.
A company veteran who replaced founder Martin Sorrell during a period of turmoil earlier this year, Read set out his vision after a loss of key clients lead to several profit warnings and a 40 per cent slump in its market value. Read said trading had improved slightly in the fourth quarter, clients remained supportive and the dividend would be maintained.
WPP will spend £300 million (€333 million) over three years to restructure and cut costs of £275 million a year by 2021. Up to 3,500 jobs will go, while it will hire around 1,000 more to improve its senior leadership in its New York agencies on Madison Avenue. The company, which employs 130,000 people, will also roll out its most successful technologies across the whole group to help clients.
“We need a simpler WPP, we need to invest in the future,” Read said.
“WPP has become too unwieldy, with too much duplication. It is not always as focused or as fleet of foot as it needs to be to satisfy the needs of all our clients around the globe.”
Analysts largely welcomed the plan but Ian Whittaker at Liberum questioned whether WPP could have gone further by cutting the dividend and slimming down more to protect margins. A target to return to the low single-digit revenue growth rates of peers Omnicom, Publicis and IPG by 2021 indicated it will not get to those levels before then.
WPP said full-year organic net sales were set to fall 0.5 per cent this year, compared with an October forecast of down 1 per cent, and it warned that recent account losses from the likes of Ford would provide “headwinds” in the first half of 2019.
Whittaker said he understood why WPP maintained the dividend, but added: “There was a case for being bold, reducing or scrapping the dividend and using the near £800 million of cash savings for greater reinvestment.” – Reuters
