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(Alliance News) - Advertising agency WPP on Thursday said it intends to return its core Communications business to sustainable growth and is targeting annual cost savings of GBP600 million by 2025.
"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," Chief Executive Mark Read said in a strategy update.
The FTSE 100 constituent wants to supplement growth with mergers & acquisitions of GBP200 million to GBP400 million annually.
WPP said like-for-like revenue less pass-through costs fell 6.7% in the two months to November, with the result for 2020 expected to be in line with the year-to-date performance of an 8.4% decline. WPP is aiming for a recovery to 2019 revenue less pass-through costs levels by 2022.
The company expects 3% to 4% annual growth in revenue less pass-through costs from 2023, and will implement a new dividend policy, intending to grow this annually with a payout ratio of around 40% of headline earnings per share. The 2020 dividend will be in line with this new policy.
"Our goal is to pay a dividend that is growing and sustainable, reflecting the strong cash generation of the business while allowing for sufficient reinvestment for growth," said WPP, adding that it anticipates recommencing the share buyback funded by the Kantar transaction proceeds in 2021.
Separately, WPP said a revised proposal of AUD0.70 per share to acquire the remaining shares in WPP AUNZ it does not already own has been accepted. The total aggregate consideration payable for WPP for the remaining shares will be around AUD230 million.
WPP shares were up 3.5% early Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 6,588.90
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Hang Seng: up 0.7% at 26,637.06
Nikkei 225: closed up 0.2% at 26,806.67
DJIA: closed down 44.77 points, 0.2%, at 30,154.54
S&P 500: closed up 0.2% at 3,701.17
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GBP: up at USD1.3576 (USD1.3500)
EUR: up at USD1.2233 (USD1.2188)
Gold: up at USD1,874.85 per ounce (USD1,857.15)
Oil (Brent): up at USD51.80 a barrel (USD50.62)
(changes since previous London equities close)
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The price of Bitcoin has exceeded the threshold of USD21,000 for the first time. The cryptocurrency was worth just under USD21,340 on the Bitstamp trading platform as of Wednesday evening. It shot past the previous record of USD19,700 in November. Bitcoin, like other commodities has seen growth in value during the pandemic and has benefited as interest in digital currencies seems to have risen again in recent months after a prolonged lull. Other reasons for the increase in value are a relative scarcity and and Paypal's plan to allow customers to pay with cryptocurrencies
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1200 GMT UK Bank of England interest rate decision
1100 CET EU harmonised consumer price index
0830 EST US unemployment insurance weekly claims report
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Donald Trump's trade chief has said that the outgoing US administration is negotiating with the UK to secure a mini-deal reducing trade tariffs. Trade Representative Robert Lighthizer suggested tariffs on Scotch whisky could be reduced if a post-Brexit pact is successful. The UK government hopes to broker a full free trade agreement with Trump's successor as president, Joe Biden, but a mini-deal could ease trade before then. Talks on an interim deal emerged on Thursday after the UK dropped tariffs against the States over subsidies for aerospace firms. Lighthizer told the BBC: "I'm talking to [International Trade Secretary] Liz Truss, about trying to work out some kind of a deal…I'm hopeful we can get some kind of an agreement out you know, we don't have a lot of time left."
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No change in monetary policy is expected from the Bank of England on Thursday, as the year-end Brexit transition deadline looms with no resolution yet of the future trade relationship between the UK and EU. The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday. Bank Rate, the key UK interest rate, currently stands at a record low 0.1%, and this is not expected to change. Instead, analysts expect the UK central bank to signal willingness to act should the UK leave the EU without a deal in the new year. "Despite the positive vaccine news, tighter mobility restrictions over the winter months and Brexit-related disruptions continue to indicate downside risks to the outlook, at least in the near-term. Against this backdrop, we expect the MPC to reiterate its commitment to act, if warranted by the outlook," said UBS.
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US experts meet Thursday to decide whether to recommend approval of Moderna's Covid-19 vaccine, potentially paving the way for rollout early next week. The meeting comes after the Pfizer-BioNTech vaccine received an emergency use authorization and the first three million doses were distributed in the world's worst-hit country this week. Thursday's meeting will be live-streamed to the public, and will end with a vote by the two dozen independent scientists and industry representatives. Should the panelists vote in favor, as is widely expected, the Food & Drug Administration is expected to issue its green light soon after, which could make the US the first country to approve the Moderna vaccine.
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BROKER RATING CHANGES
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CREDIT SUISSE RAISES SCHRODERS TO 'NEUTRAL' (UNDERPERFORM) - TARGET 3,100 (2,690) PENCE
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CREDIT SUISSE RAISES MAN GROUP TO 'OUTPERFORM' (NEUTRAL) - TARGET 150 (130) PENCE
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JEFFERIES RAISES SCAPA GROUP PRICE TARGET TO 210 (150) PENCE - 'BUY'
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COMPANIES - FTSE 100
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Miner Rio Tinto has promoted Jakob Stausholm to be its next chief executive, effective from the start of 2021. Stausholm joined the Anglo-Australian miner in 2018 as an executive director and chief financial officer, having previously been CFO and strategy & transformation officer of Danish shipping company AP Moeller - Maersk. Controller Peter Cunningham will be appointed interim chief financial officer of Rio Tinto. Back in September, Rio Tinto said that, by mutual agreement, CEO Jean-Sebastian Jacques would resign from his role with effect on March 31, or earlier should a successor be appointed before then. He will step down from his role as an executive director on January 1, the company said on Thursday, and leave the group at the end of March. In May, Rio Tinto had blasted rock shelters in the Juukan Gorge in Western Australia's remote Pilbara region, destroying one of the earliest known sites occupied by Australia's indigenous people in order to expand its iron ore mine. Following a board review in August, the group said it had engaged extensively with shareholders, some of which had expressed concerns about executive accountability for the failings identified.
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COMPANIES - FTSE 250
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TalkTalk Telecom has agreed to be taken over by Tosca IOM in a deal valuing the London-listed telecommunication firm at GBP1.11 billion. Shareholders will receive 97 pence in cash per TalkTalk share under the deal, a 16% premium to the stock's closing price on October 7, being the last business day before the offer period started. TalkTalk shares closed at 96.25 pence in London on Wednesday. Tosca IOM newly-incorporated company, formed at the direction of London-based alternative asset manager Toscafund and private equity investor Penta. "Having considered in detail the best interests of all shareholders and TalkTalk as a whole, the independent TalkTalk directors believe that the cash offer from Toscafund provides an opportunity for shareholders to recognise immediate value for their shares at a premium of approximately 26% to volume-weighted average price for the three month period ended 7 October 2020," said TalkTalk Senior Non-Executive Director Ian West. The deal is expected to close in the first quarter of 2021.
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Separately on Thursday, TalkTalk reported interim results. Revenue fell to GBP740 million for the six months to September from GBP792 million a year prior, with the company swinging to a pretax loss of GBP3 million from a GBP1 million profit. In light of the recommended acquisition, there will be no interim dividend, the firm said.
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SSP Group, an operator of food and beverage outlets in travel locations, reported a sharp swing to loss in its recently ended financial year as the pandemic hit the travel market. Revenue for the year slumped to GBP1.43 billion from GBP2.79 billion the year before, sending SSP to a pretax loss of GBP425.8 million, turning from a profit of GBP197.2 million the year prior. Like-for-like sales were down 51%, with the company noting these were hit by Covid-19 and the closure of most global travel markets since March. From very low sales in the third quarter - 93% lower year-on-year - passenger numbers increased gradually over the final quarter and by the end of September were 76% lower year-on-year. However, the re-emergence of the virus and further lockdowns since the end of the financial year has resulted in further volatility in passenger numbers. "As a result we expect sales during the first quarter of the 2021 financial year to remain broadly in line with the final quarter of the year, approximately 80% lower year-on-year. This volatility is expected to continue through the second quarter of the new financial year," said SSP. The company will pay no dividend for the year.
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COMPANIES - MAIN MARKET AND AIM
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Shares in Summerway Capital jumped on Wednesday after it set out amendments to its investment policy on Tuesday, while announcing a raft of changes to its board as well as a share placing. Shares in Summerway closed 42% higher at 165.00p each on Wednesday in London. They were up another 0.2% early Thursday. Summerway listed on the London Stock Exchange in October 2018, with the goal of acquiring businesses in the household and consumer goods sector with enterprise valuations of between GBP20 million and GBP100 million. On Tuesday, the company said its revised investment policy will focus on investment and acquisition opportunities across the software, software-as-a-service, digital technologies and services sectors. Summerway Capital also announced the resignations of Chair Alexander Anton and Director Mark Farmiloe, both of whom were members of the board upon the company's listing. Anton will be replaced by Vinodka Murria, who is currently a non-executive director of IT infrastructure technology and services provider Softcat, distribution firm Bunzl and law firm DWF Group. Concurrently with Murria's hire, she has agreed to buy 500,000 shares at 85 pence each from a selling shareholder and subscribe for 1.9 million new shares at 88p each by way of a direct subscription. Following completion of the transactions, worth GBP2.1 million in total, Murria will have a 30% stake.
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Thursday's Shareholder Meetings
Countryside Properties PLC - AGM
Kier Group PLC - AGM
JD Wetherspoon PLC - AGM
Amiad Water Systems Ltd - AGM
SolGold PLC - AGM
Frontier IP Group PLC - AGM
Netcall PLC - AGM
Falanx Group Ltd - AGM
BATM Advanced Communications Ltd - AGM
Bluefield Solar Income Fund Ltd - AGM
Transense Technologies PLC - AGM
Ryanair Holdings PLC - EGM re replacement of CREST
Ovoca Bio PLC - AGM
European Metals Holdings Ltd - AGM
Pressure Technologies PLC - GM re equity raise
Griffin Mining Ltd - AGM
Petra Diamonds PLC - AGM
Focusrite PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
