WPP AUNZ ‘significantly changes operating model’ as it posts full-year loss driven by market and account losses

WPP AUNZ will continue to strip back the number of brands in its portfolio, introduce a new leadership model, and establish ‘campuses’ in every major Australian city as part of an overhaul under new CEO Jens Monsees.

The unveiling of the new strategy coincides with the holding company’s full-year results, in which headline earnings before interest and tax (EBIT) were down 8.7% to $91.8m and net sales down 2.6% to $712.5m. Its statutory results show a net loss of $227.57m. Driven by challenging economic conditions, soft ad spend, and local account losses, the company said the results are in line with its previous market guidance.

Monsees presents to the WPP team

The ‘transformation strategy’ accompanying those results was presented to WPP’s leadership team last month and the wider company last week. It will be rolled out across three years and, according to Monsees – who began as chief executive in October – will simplify and scale the business, and return WPP to growth and market leadership.

“Over the last five months, I have been impressed by the capability and talent within our business. We must now power up our creative capability and traditional skill-set with technology to capture growing areas of e-commerce, technology and experience,” he said.

“As technology advances, the way consumers connect and communicate with brands is also evolving rapidly and that is why today we have announced a new strategy to simplify and scale our business and capture the new growth areas of the advertising, media and communications market.”

WPP’s 2019 results [Click to enlarge]

As part of WPP’s 2020 deliverables, it will establish campuses in Perth, Brisbane and Adelaide (in addition to Auckland and Wellington), roll out its new leadership model, establish individual KPIs, begin to centralise its services, start building an end-to-end tech stack, invest in tech platform partnerships, engage in mergers and acquisitions, restructure its New Zealand operations, and explore South East Asia growth options.

“It is a strategy that will significantly change our operating model,” Monsees said.

WPP AUNZ’s performance by segment [Click to enlarge]

“Our path to growth will be undertaken in three phases – transform, strengthen, and grow – over a three-year period to 2022.

“This year is the transformation phase of our strategy. Now two months into 2020, I can say we have already made meaningful progress in this phase by announcing a new leadership structure, a restructuring of our New Zealand business, added capabilities in technology through the acquisition of Dominion in New Zealand and announcing the establishment of our Centre of Excellence to consolidate the technology consulting operations of the Group.”

The holding company’s deliverables for this year. [Click to enlarge]

Team members will now work towards individual KPIs, under a performance-based remuneration model that includes options and shares. Monsees explained that a renewed focus on talent acquisition and retention is a key part of the plan.

“Our team is intent on being a true partner of choice for our clients, creating a shared services platform, and attracting and retaining the best talent in the market,” he said.

“Key to our success will be relentless execution and creating avenues for growth. We have new solutions technology and data capabilities, and campuses to drive better client service and a strengthened geographic footprint into South-East Asia.

“We are confident in our ability to change gear and create a future of opportunity and success. No-one in our market is yet leading the future of consumer communication and that is where we want to be. We believe we are strongly placed with our creativity and technology capabilities to become the leading creative transformation business in Australia, New Zealand and South-East Asia.”

A ‘shared service delivery platform’ will see functions like IT, legal and admin simplified, the introduction of a central IT system and CRM and a communications and marketing hub, and a content and production studio set up at each campus. This, WPP said, will improve employee engagement.

The new strategy encompasses everything from geography and platform to operating model and talent. [Click to enlarge]

In a presentation deck, the company said that, until now, the approach has focused on individual brands and campaigns, with an inconsistent delivery platform and limited opportunities for growth.

The financial results for the year ending 31 December 2019 also showed leverage reduced from 1.9x to 1.1x thanks to post-Kantar debt levels. WPP sold the data, insights and consulting company last year for $158.7m, and will pay approximately $5m tax on that transaction.

The proceeds of that sale will be used to reduce gearing, invest in a new growth strategy, and pay out special dividends of $50m, with 1.5c per share to be paid for the next four dividends, every six months, from April.

WPP AUNZ’s 2019 results [Click to enlarge]

“Taking into consideration the considerable transformation that will be undertaken in the 2020 financial year, we expect to provide guidance on the 2020 outlook at the AGM in May 2020,” Monsees said.

“It is too early to predict our full year result given the uncertain economic backdrop for our clients and the significance of our transformation strategy.”


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