WPP AUNZ delivers $71m in cost savings post transformation plan
WPP AUNZ has delivered $71 million in cost savings for 2020, including $13.6 million in government subsidies received to support jobs, following the implementation of CEO Jens Monsees’ transformation plan for the business and undertaking cost cutting measures in response to the COVID-19 pandemic.
The installation of the campus model in Brisbane, Adelaide and Perth, which was announced during last year’s report and consolidates WPP’s offices in each market, saved the business $2.7 million. Meanwhile employee costs were adjusted by 11%, following a mix of both temporary and permanent cost actions, such as its voluntary pay cut program introduced in April and the board committing to a 20% reduction in salaries and fees for an initial period of three months.
Savings of $13 million in general and administrative costs were also made through the reduction in travel, entertainment, and refraining from entering awards.
Source: WPP AUNZ (click to enlarge)
Monsees said he was proud of the group’s efforts in a “volatile operating environment”, and reported revenues of $612.3 million in 2020.
“We are working in new ways, both as a result of the pandemic environment, but also because of the transformational initiatives we have rolled out to bring together our businesses more closely and collaboratively to better service our clients,” Monsees said.
“Our transformation strategy means WPP AUNZ taps further into growing areas of the market like e-commerce, personalised advertising and digital consumer experience. Clients are looking to us to provide them with the skills, creativity and ideas they need to match the changing needs of their consumers.”
Monsees speaking on the investor call this morning
Chief financial officer, Chris Rollinson, said WPP is now positioned to move into 2021 with a “leaner and more adgile cost base”.
The sustainable cost measures are expected to provide a benefit of approximately $65 million in FY21.
WPP AUNZ’s net debt has also been significantly reduced from $121.4 million in 2019 to $17.2 million in 2020, driven by cash collections and capital management. Banking facilities of $420 million were renewed and extended in August 2020.
Earnings before interest and tax (EBIT) was $61.9 million in its full year results, down 32.6% from the previous year. Net sales also slid by 14.1%, landing on $612.3 million. However the holding company was encouraged by its results being in line with its market guidance, with EBIT in the upper end of its guidance between $59 million and $62 million predicted in December, and considering the Standard Media Index reported ad spend being down 15% for 2020.
Source: WPP AUNZ
Global integrated agencies, which includes media and creative services, were down 10.4% in net sales for 2020, attributed to the COVID related slowdown at the start of the pandemic.
Public relations agencies were back 21% owing client losses, deferrals and cancellations of projects. Specialist communications agencies, comprised of digitally focused businesses and agencies delivering brand and experience services were described as “well positioned for further growth, both locally and in South East Asia”.
The results provided an update on the status of WPP AUNZ’s transformation under Monsees’ leadership. Deliverables achieved in 2020 included the launch of the centralised tech hub, the Centre of Excellence, the acquisition of Perth agency Meerkats and New Zealand agency Dominion, introduction of KPI and renumeration schemes for all leaders, the consolidation of HR, IT and financial services, and the mergers of AKQA and WhiteGrey in to AKQA group, and Geometry and VMLY&R to form VMLY&R Commerce.
The results revealed that the business assets of Meerkats were acquired for an upfront payment of $400,000, with a contingent consideration of $3.4 million for hitting targets.
Monsees added: “The feedback from our clients on the new ways we are serving them has been fantastic and makes us proud and confident in our growth agenda in the region.
“We now move into the ‘strengthen’ phase of our transformation strategy. This is about embedding a strong foundation in our business to support growth. Our focus is on clients, talent, tech solutions and operational excellence.
“With our creativity and technology capabilities we are well-placed to drive growth as the leading creative transformation company in Australia and New Zealand.”
The reduced debt and cost base will support the next phase of the transformation plan, which will look to scale the growth of client relationships across WPP AUNZ’s agencies, leveraging the Centre of Excellence, while also meeting the goal of driving top line growth.
Continuing to grow the digital skills of its talent was also laid out as an objective for 2021, as was exploring the use of offshore capabilities.
The campus model is also set to roll out in Sydney and Melbourne.
Source: WPP AUNZ (click to enlarge)
Referencing a comparison made between WPP AUNZ and consultancies Accenture and McKinsey, Monsees said: “We are the only player that can support clients along this complete customer journey.”
The full year results also mark a return to paying dividends to share holders, announcing a total dividend of 4.4 cents per share, fully franked, comprised of an ordinary dividend of 2.9 cents per share and the reinstatement of a special dividend payment of 1.5 cents per share, in recognition of the proceeds of the sale of Kantar in 2019.
Monsees was paid $2.4 million in 2020, including $1.4 million of his $1.5 million fixed annual remuneration, $400,000 in other benefits and $640,000 in vested LTI value.
Steedman, who retired from his post as chief operating officer in October, was paid just over $900,000, with a fixed remuneration value of $739,000, taking in to account his 20% pay reduction for the months April to July in line with the rest of the board.
