- Return core Communications business to sustainable growth
- Expand further into high-growth areas of Commerce, Experience and Technology - from 25% of our business today to 40% by 2025
- Fund growth and improve profitability through gross annual cost savings of £600 million by 2025, with approximately two-thirds reinvested in talent, incentives and technology to drive growth
- Supplement growth through targeted, scalable M&A of £200-400 million annually
- Invest capital expenditure of £450-500 million per annum in 2021 and 2022 and £300-350 million per annum thereafter, in our campus programme, ERP systems and shared services to deliver gross cost savings and improved business insight and talent management
- Recovery to 2019 revenue less pass-through costs levels by 2022
- 3-4% annual growth in revenue less pass-through costs from 2023, including M&A benefit of 0.5-1.0% annually
- 15.5-16.0% headline operating margin in 2023
- Double-digit headline EPS growth over next three years
- New dividend policy: intention to grow annually with a pay-out ratio around 40% of headline EPS
- Average net debt/EBITDA maintained in the range 1.5-1.75x
2020 and 2021 guidance
- LFL revenue less pass-through costs growth of -6.7% in the two months to November
- 2020 LFL revenue less pass-through costs growth expected to be in line with year to date performance of -8.4%
- 2020 headline operating margin expected to be 12.5-13.0%
- 2020 year-end net debt expected to be around £1.6 billion
- 2020 dividend in line with new policy
- 2021 LFL revenue less pass-through costs growth of mid-single-digits %, with headline operating margin of 13.5-14.0%
Kantarshare buyback programme to resume in 2021
“It has been two years since we set out our strategy to return
“The events of 2020 have only accelerated the structural changes in our industry, from the expansion of digital channels to growing demand for ecommerce solutions. The actions that we have taken have positioned us well, and we are already working with 76 of our top 100 clients on ecommerce. There are significant new growth opportunities for
“In partnership with our agency brands we are deepening and accelerating the change already happening within
We are building a strong culture and attracting new talent. Many of our major agencies have new leadership, from internal promotions and external hires, who are working together as part of a
We have significantly simplified
This strategic progress is becoming evident in our results. Our relative performance has consistently improved over recent quarters, and both globally and in the US we have outperformed the average of our global marketing services peers for the last two quarters; we are leading in new business in 2020; and our client satisfaction scores continue to improve, with a clear acceleration during the pandemic as clients placed additional value on the work that we do for them. Despite the challenges of the pandemic, we grew our relationships with 15 of our top 30 clients in the third quarter of the year.
Addressable market and WPP’s growth agenda
The profound changes to consumer behaviour brought about by COVID-19 have only accelerated the need for companies to invest in digital technologies, ecommerce and new customer experiences. We are strongly positioned to benefit from this acceleration.
WPP’s business mix in 2019 was approximately 75% in Communications and 25% in Experience, Commerce and Technology. Our goal is to deliver sustainable growth in Communications through a focus on digital communications, and to expand further into high-growth areas of Commerce, Experience and Technology, growing our mix from 25% to 40% by 2025, so that we increase our share of the higher-growth areas of client spend. Furthermore, leveraging WPP’s existing global strength we will accelerate our investment in high growth potential markets, such as
In our four integrated creative agencies, we will increase investment in creative talent, our global client teams and our content and technology platforms, as well as attractive industry sectors such as consumer packaged goods, technology and healthcare. We will supplement organic growth with targeted acquisitions, scalable across
In our media business, we will drive growth through investment in our innovative digital platforms, such as Xaxis, our programmatic business, and Finecast, our market-leading addressable TV platform.
In PR and other specialist communications, we are well-positioned to meet demand for advice around purpose, reputation management and sustainability, which will be the growth drivers of the next few years.
Purpose and sustainability progress and priorities
Our purpose is to use the power of creativity to build better futures for our people, planet, clients and communities. We have the ability to use the power of marketing to communicate the actions that our clients are taking to build a sustainable future and a more inclusive society.
Our goal is for
We have made significant progress in driving gender equality, with women now representing 50% of our senior managers. At the most senior executive level, this figure is 37%, and our aim is to achieve parity. From 2021, we will be integrating inclusion and diversity metrics into executive remuneration to hold our leaders accountable for progress.
We have made major steps in reducing our environmental impact, cutting our
Efficiency and reinvestment
Of the total cost savings target, we expect to reinvest around two-thirds into talent, technology and incentives to drive growth. These cost savings will be phased over the next five years.
The four elements of our capital allocation strategy are as follows:
Capital expenditure: we will continue to invest in our technology infrastructure and campuses, building platforms for our people and our clients, and supporting reduced property costs and standardised systems. Capex will rise to £450-500 million in 2021 and 2022, reflecting the peak of campus and IT investments but also in part reflecting the postponement of some 2020 spend. After 2022, we expect capex to return to a more normalised range of £300-350 million per annum.
Dividend: 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. Starting from the current year, we intend to grow the dividend annually and to pay out approximately 40% of headline earnings per share.
M&A: acquisitions have always been an important engine for growth for
Excess capital and leverage target: we anticipate recommencing the share buyback funded by the
Current trading and 2020 full year outlook
Trends in October and November have been as expected, with LFL revenue less pass-through costs growth of -6.7% across the two months, taking the year-to-date performance to -8.4%.
We expect full-year 2020 LFL revenue less pass-through costs to be in line with the 11-month figure. Headline operating profit margin is expected to be 12.5-13.0%, reflecting a very strong performance on cost reduction. We expect year-end net debt to be around £1.6 billion, supported by strong working capital management.
2021 guidance and medium-term targets
For 2021, we expect mid-single-digits % LFL growth in revenue less pass-through costs, and a headline operating margin of 13.5-14.0%.
We expect to return to 2019 levels of revenue less pass-through costs by 2022. From 2023, we are targeting annual revenue less pass-through costs growth of 3-4%, including an annual benefit from M&A of around 0.5-1.0%. Based on the expected phasing of our five-year efficiency plan and reinvestment, we anticipate a headline operating margin of 15.5-16.0% in 2023, and double-digit headline EPS growth over the next three years.
Cautionary statement regarding forward-looking statements
This document contains statements that are, or may be deemed to be, “forward-looking statements”. Forward-looking statements give the Group’s current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as ‘anticipate’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’, ‘believe’, ‘target’ and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.
These forward-looking statements may include, among other things, plans, objectives, projections and anticipated future economic performance based on assumptions and the like that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the forward-looking statements. Important factors which may cause actual results to differ include but are not limited to: the unanticipated loss of a material client or key personnel, delays or reductions in client advertising budgets, shifts in industry rates of compensation, regulatory compliance costs or litigation, natural disasters or acts of terrorism, the Company’s exposure to changes in the values of other major currencies (because a substantial portion of its revenues are derived and costs incurred outside of the
Any forward looking statements made by or on behalf of the Group speak only as of the date they are made and are based upon the knowledge and information available to the Directors on the date of this document.
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