11th Dec 2018 07:52
LONDON (Alliance News) - WPP PLC said Tuesday it will simplify its business structure, invest in its creative leadership, and dispose of under-performing businesses as part of a three-year business improvement strategy.
The advertising company said 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.
"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.
"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, 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".
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 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 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.
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 for implementing 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%.
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