WPP CEO Mark Read will meet shareholders later today but he’s prepared the ground with a statement promising “radical evolution,” a (slightly) trimmed down WPP that will cost £300m over the next three years but aim to deliver annual savings of £275m by the end of 2021.
Around five per cent of WPP’s 134,000 workforce are expected to go but Read hasn’t named a number so far.
There’ll be a new corporate identity produced in-house by Superunion and Landor and a new Executive Committee, although we don’t know who’ll be on it yet. WPP also plans to bolster its creative offer, especially in the US, by investing an extra £15m annually (which doesn’t sound that much.) More disposals are on the cards (the company has raised over £700m from these already) and it plans to sell a majority holding in research operation Kantar by the second half of 2019.
Read (below) has revised up this year’s growth forecast from minus one per cent to -0.5 and says he aims for a 15 per cent profit margin after exceptional costs. This, he says, is in line with its peers.
In future WPP will concentrate on what it calls four “high growth sectors:”
• Communications focusing on advertising, content, media, public relations and public affairs, and healthcare.
• Experience reflecting the growing need of clients to create new brand, product and service experiences.
• Commerce allowing WPP to expand its growing omni-channel commerce business and its work with brands to help them succeed in marketplaces such as Alibaba and Amazon.
• Technology underpinning WPP’s work with both CMOs and CIOs to build and operate marketing technology that supports their consumer- and customer-facing activities.
WPP says experience, commerce and technology already account for about a quarter of WPP’s revenue and this, presumably, shows why VML and Wunderman have emerged on top in their mergers with Y&R and JWT respectively.
Reed says: “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.”
Which all sounds fine and dandy; Read’s job now is to persuade more clients to buy into the new WPP (and persuade others not to leave) and convince shareholders that, finally, there’ll be some movement upwards. He plans to keep the dividend (which will please them) but reduce share buy-backs, a prominent feature of Sir Martin Sorrell’s regime. Share buy-backs artificially bolster the share price so without them WPP really does need to deliver meaningful growth.
Holy fucking shit. As I say on AdScam… How the mighty have fallen. Pretty soon my five WPP shares will only be good for hanging on a nail in the shithouse. If you still don’t believe my thesis that the ad biz as we knew and loved it, is totally fucked, this might help convince you.