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WPP reassures with 'strategy for growth'

Shares in the advertising group were marked up on the publication of its medium-term growth plan
December 12, 2018

WPP’s (WPP) shares rose by as much as a tenth on the release of its ‘strategy for growth’, which newly appointed chief executive Mark Read expects to boost organic revenue growth in line with peers, and result in a headline operating margin of at least 15 per cent – excluding associates – by the end of 2021. However, management guided towards a 0.5 per cent dip in organic revenues this year, admittedly in line with market expectations. The group will also incur £300m in restructuring costs over the next three years, to deliver approximately £275m in annual savings – around half of which will be reinvested into the business. 

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Signalling progress already made, WPP has integrated agencies VML, Y&R, Wunderman and J Walter Thompson and disposed of 16 non-core investments and associates to raise £704m, reducing its debt. It’s also working towards selling a stake in data business Kantar, with a view to retaining a "significant minority interest”.

The year 2019 will be one “of investment”, during which account losses will constitute an “anticipated headwind”, particularly in the first half. In October, Mr Read cut the marketing giant's full-year guidance – triggering a considerable sell-off in the shares.

Analysts at Numis said this update was “pretty much as we expected” with the good news being that “management is trying to address the key issues WPP faces”. But the broker notes the outcome “is not particularly revolutionary in our view at this stage”.