WPP Outlines Transformation Plans

WPP said today that it is evaluating numerous “expressions of interest” in its Kantar research division and that if a deal is struck — the holding company intends to keep a minority stake in the asset — it is expected to be announced in the second quarter of next year.

The Kantar divestiture is part of a broader restructuring that the company is briefing analysts and investors on today at its new London headquarters. The restructuring plan comes after a comprehensive seven-month strategic review.

The restructuring began as the plan was being devised and includes the mergers of VML and Young & Rubicam into VMLY&R (announced in September) and Wunderman and J. Walter Thompson into Wunderman Thompson (announced last month).

The company said today it would incur restructuring costs of £300 million over the next three years that would deliver estimated annual savings of £275 million by the end of 2021. About half of those annual savings will be reinvested in the business. 



The company’s simplified offer going forward will focus on four areas: communications, experience, commerce and technology. Those four areas already represent about 25% of the firm’s revenue.

Communications will focus on advertising, content, media, PR and healthcare. There will be a “renewed commitment to creativity,” according to the company, which will be expressed in part with the investment of an incremental £15 million a year for the next three years in creative leadership, “with a particular focus on the United States.”

The plan envisions job cuts of 3,500 worldwide, while 1,000 new jobs will be created to shore up agency leadership. 

The experience part of the new setup is keyed to burgeoning client needs to create brand, product and service experiences both internally and for clients.

The firm said it would expand its omnichannel commerce operations and related work with brands to help them succeed in marketplaces like Alibaba and Amazon.

On the tech front, WPP said it would expand efforts to work with CIOs and CMOs to build and operate marketing technology that supports consumer and customer-facing activities.

As part a new streamlined structure going forward the company said it will have fewer, more integrated companies equipped “to adapt to a changing market.” It has already sold 16 companies for £704 million with more to come. That said, the firm noted that it will “balance targeted M&A with divestments” while over the next three years prioritizing dividends over share buy-backs.

In addition to selling assets, some operations may be shuttered if the company  decides they are not sustainable and can’t be sold.

Further development of campus-type co-locations are also in the works for a number of markets.

The company said its medium-term financial targets are designed to allow for investments in talent and technology to improve its competitive position to achieve organic growth in line with peers by 2021. That would imply growth in the low- to mid-single-digit range if peer growth rates are maintained at current levels. That compares with an organic decline of 0.5% that WPP is now projecting for full-year 2018.

The company did not provide specific guidance for next year, but noted that it will face “headwinds” from recent account losses and that 2019 will be a “year of investment.” The company said that its recent victory in the Volkswagen review was directly attributable to the ongoing restructuring.

In addition to the Wunderman Thompson and VMLY&R mergers, WPP recently realigned its U.S. healthcare operations, eliminating a Health & Wellness sub-holding company in the process. The two merged agencies and the health and wellness operations combined account for 23% of WPP revenue.

“What we hear from clients is very consistent,” stated WPP CEO Mark Read. “They want our creativity, and they want us to help them transform their business in a world reshaped by technology…We are fundamentally positioning WPP as a creative transformation company with a simpler offer that allows us to meet the present and future needs of clients.”

Read has dubbed the new approach “radical evolution” because major changes are being implemented while “respecting the things that make WPP the great company it is today.”


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