WPP, the London based advertising company with the biggest revenues will be shifting its focus to acquiring high growth businesses in the e-commerce and marketing technology space.
The company said on Thursday that it expected to spend £200 million to £400 million a year on acquisitions in these high-growth areas. WPP aims to expand its presence in these businesses from 25 percent to 40 percent of revenues by 2025. It aims to increase its annual dividend to approximately 40 percent of its headline earnings per share.
WPP is hosting a virtual presentation for investors and analysts to update on its strategy for growth, reinvestments, and outline its plans for capital allocation and provide new medium-term financial targets.
It wants to fund growth and improve profitability through gross annual cost savings of £600 million by 2025, with approximately two-thirds reinvested in talent, incentives and technology to drive growth.
The group also plans to resume share buybacks relating to the disposal of Kantar, the market data business, from next year. Mark Read, chief executive, said, “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.”
In a bid to improve its business strategies and talent management, it plans a capital expenditure of £450-500 million per annum in 2021 and 2022 and £300-350 million per annum thereafter, in campus programs, ERP systems and shared services. In the long run it will help cut costs for the company. They even plan to add an extra 10,000 staff.
WPP too was hit hard by the pandemic. It expects to return to growth in “mid-single digits” next year.
Read 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.”
He further said that the pandemic has hastened the structural changes that were long overdue in the industry. The move towards e-commerce and digital space has forced the industry to look for channel partners here.
Clients are demanding a similar transition where there is an integration of technology with changing consumer needs that are majorly moving online. He said, “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.
“£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,” he added.
John Rogers, the chief financial officer of WPP said that their plan was very ambitious and something that will help them beat the market through cost efficiencies and take those savings and reinvest them back into growth.
