Maja Pawinska Sims 11 Dec 2018 // 10:26AM GMT
LONDON — WPP chief executive Mark Read has outlined his three-year strategy for “radical evolution” to return the beleaguered holding group to growth.
WPP’s future offer will focus on four areas: communications, experience, commerce and technology. Communications, currently 75% of the business, covers advertising, content, media, public relations and public affairs, and healthcare.
WPP’s statement said: “Each of these areas is critical to success for modern clients, and by bringing them together the company will better serve clients’ needs as they react to the changing marketplace, and expand WPP’s own business in high-growth sectors.”
In a statement ahead of a presentation to investors and analysts today, and the announcement of a brand identity refresh for WPP, Read said: “What we hear from clients is very consistent: they want our creativity, and they want us to help them transform their business in a world reshaped by technology. This is at the heart of what we do. 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.”
That simpler offer will certainly include its public relations and public affairs agencies: sources close to the company said it should be seen as significant that they sit squarely within communications as the first, and largest, category in a new streamlined WPP.
It is not thought that any PR agency MBOs or sales are currently on the cards, however, the strategy makes it clear that further consolidation is likely as WPP has “become too unwieldy, with too much duplication.”
Read’s plan to tackle this is to become more client-centric, to have fewer, more integrated companies, and to integrate further at a country level, including more campus developments, which will affect around 100 offices. The strategy also includes “right-sizing and disposal of under-performing businesses,” and “closure of unsustainable operations,” with around 80 sites to be shut.
Read also told Reuters that the strategy is likely to lead to around 3,500 job losses from its 134,000 global workforce, although 1,000 creative jobs will be added, with the plan including a £15m annual investment in creativity over the next three years.
WPP has already merged its Burson-Marsteller and Cohn & Wolfe PR brands, and its VML and Y&R, and Wunderman and J. Walter Thompson advertising networks this year. Its other PR agencies include Hill + Knowlton, Ogilvy – whose London office recently went through its own voluntary redundancy exercise – and Finsbury.
The holding group has also announced that market research agency Kantar isn’t part of the core plan, and will be developed with a “strategic or financial partner, with WPP retaining a significant minority interest.”
Read said the restructuring would enable increased investment in creativity, technology and talent in the business areas with the greatest potential for future growth.
Shares in WPP have dropped by around 40% this year as it continued to struggle with the evolving marketing landscape, the loss of major clients including Ford, and to regain ground after the sudden departure of Sir Martin Sorrell in February. Sorrell is already building digital marketing capabilities at his new holding group, S4 Capital.
WPP expects the new strategy to deliver organic growth of at least 15% by the end of 2021. The cash costs of the restructuring are estimated to be £300m over the next three years, which will deliver annual savings of £275m.
The group has established its first executive committee to implement the new plan. The members of the committee are not yet public but a spokesperson told the Holmes Report that this would include “leadership from our largest global networks”.