(Alliance News) - WPP PLC on Thursday set out plans to return to 2019 levels of revenue growth by 2022, after stumbling in 2020, while also unveiling a new dividend policy.
The stock was up 3.9% in early dealings in London at 813.00 pence, making it one of the top performers in the FTSE 100 on Thursday.
The advertising agency said it intends to return the core Communications business to sustainable growth and is targeting annual cost savings of GBP600 million by 2025. Of these savings, WPP plans to invest two-thirds "in talent, incentives and technology" to drive growth.
"In partnership with our agency brands we are deepening and accelerating the change already happening within WPP. We aim to return our Communications business to sustainable growth and invest further in the high-growth areas of Commerce, Experience and Technology. We are converting our size into scale," said Chief Executive Mark Read.
The FTSE 100 constituent wants to supplement growth with "targeted, scalable" mergers and acquisitions of GBP200 million to GBP400 million annually.
WPP said like-for-like revenue less pass-through costs fell 6.7% in the two months to November, with the result for 2020 expected to be in line with the year-to-date performance of an 8.4% decline. WPP is aiming for a recovery to 2019 revenue less pass-through costs levels by 2022.
The company expects 3% to 4% annual growth in revenue less pass-through costs from 2023 - including an annual benefit from M&A of around 0.5% to 1.0% - and will implement a new dividend policy, intending to grow this annually with a payout ratio of around 40% of headline earnings per share. The 2020 dividend will be in line with this new policy.
"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," said WPP, adding that it anticipates recommencing the share buyback funded by the Kantar transaction proceeds in 2021.
Separately, WPP said a revised proposal of AUD0.70 per share to acquire the remaining shares in WPP AUNZ it does not already own has been accepted. The total aggregate consideration payable for WPP for the remaining shares will be around AUD230 million, equivalent to around GBP129.1 million.
The acquisition is in line with WPP's strategy of simplifying its structure and, if implemented, would move the company to full ownership and control of its Australian and New Zealand operations.
By Lucy Heming; lucyheming@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.