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LONDON (Alliance News) - WPP PLC will cut 2,500 jobs, simplify its business structure, invest in creative leadership, and sell under-performing businesses as part of a three-year business improvement strategy.
Shares in the company were up 6.8% at 860.10 pence each in morning trade on Tuesday, the best performing stock in the FTSE 100. However, WPP shares still remain 36% lower since 2018 began.
The advertising company, in a strategy update, said Tuesday it has become "too unwieldy, with too much duplication" and as a result, it is not always focused or "as fleet of foot as it needs" to satisfy clients. It also said that the industry was facing a structural shift towards digital advertising, and not structural decline.
"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," said recently-appointed Chief Executive Mark Read.
Read, formerly head of WPP's digital division, was appointed CEO in September after the company's founder and CEO Martin Sorrell resigned in mid-April due to "an allegation of misconduct".
"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," Read said.
The CEO told Reuters news agency that the company will cut around 3,500 jobs in areas of duplication, and hire a further 1,000 to boost its technology and creative divisions, particularly in New York.
Separately, the Financial Times newspaper, citing a company spokesman, reported that WPP plans to combine 100 of its offices and close 80 locations.
As part of a restructuring plan, the company intends to become a more client-centric organisation, have fewer but more integrated companies, and integrate further at a country level.
WPP, which owns the JWT and Ogilvy advertising agencies, also will invest GBP15 million a year over the next three years in creative leadership, with a particular focus on the US, and will accelerate investments in technology.
The FTSE 100-listed company, which has been facing stiff competition from the likes of online platforms Google and Facebook to win new business, has established an executive committee, drawn from both corporate and company leadership, to implement the new business plan. It also intends to review management incentive arrangements to align with the new business strategy.
Since April, the company has disposed of 16 non-core investments and associates, raising GBP704 million to reduce debt. It also has merged advertising agencies VML and Y&R and integrated healthcare agencies in a bid to streamline operations and return to growth.
In October, the company announced plans to sell a stake in its wholly-owned market research unit Kantar Group as part of a restructuring programme. WPP said Tuesday that it has received several expressions of interest for the Kantar stake and hopes to announce a deal in second quarter of 2019.
WPP, which is holding a strategy update for investors and analysts later on Tuesday, will record GBP300 million in restructuring costs over the next three years as it implements the new business plan. It predicts savings of GBP275 million by the end of 2021, around half of which will be reinvested in the business.
The London-headquartered company is targeting like-for-like revenue less pass-through costs growth in line with its peers and headline operating profit margin, excluding associates, of at least 15% by the end of 2021.
For 2018, WPP anticipates reporting results in line with consensus expectations, with full-year like-for-like revenue less pass-through costs growth now expected to fall by around 0.5%. Earlier, the company anticipated a 1% drop in organic sales growth.
The company expects 2019 to be a year of investment and predicts previously announced customer losses to create headwinds in the year, particularly in the first half of the year.
