Thursday 11 March 2021 9:21 am

WPP resumes £620m share buyback as it eyes return to growth

WPP today said it would resume its £620m share buyback programme and restore its dividend as the advertising giant eyes a return to growth this year.

The London-listed ad group halted the buyback, funded by its $4bn sale of Kantar in 2019, and the payout due to the pandemic.

Read more: WPP buys Brazilian software engineering firm DTI Digital

But it today said up to £300m will be raised over the next three months and proposed a final dividend of 14p per share.

It came as WPP, which owns agencies such as Ogilvy, Grey and Group M, reported full-year results marginally ahead of expectations.

The firm said like-for-like revenue less pass-through costs — the metric closely followed by analysts — dropped 8.2 per cent to £9.8bn.

The ad giant has taken a battering amid a wider economic slump caused by the pandemic, though fourth-quarter revenue proved more resilient than expected.

WPP posted a pre-tax loss of £2.8bn for the year, compared to a profit of £1.2bn in 2019. This was impacted by previously-announced impairments of £3.1bn related to previous acquisitions.

But the company reiterated its forecasts for 2021, forecasting a mid-single-digit rise in revenue with a return to growth in the second quarter.

“We see many areas of attractive growth for WPP, from the permanent shift to ecommerce, the digitisation of media and the need from our clients to convert brand purpose into action,” said chief executive Mark Read.

“The past 12 months have demonstrated the importance and impact of communications. The demand from clients for simple, integrated solutions that combine outstanding creativity with sophisticated data and technology capability is only set to grow and, while uncertainties remain around the impact of the vaccine roll-out and economic growth, we continue to expect 2021 to be a year of solid recovery.”

Shares in WPP ticked up 0.4 per cent as investors welcomed the full-year figures.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said the company was “marching through the mud churned up by coronavirus”.

“It isn’t all bad though. In a lot of ways, the pandemic gave this sprawling giant the workout it needed. Streamlining and digitisation efforts are moving quickly and that’s something we’ve been wanting to see for a while.”

Read more: Ads giant WPP turns to tech to restore growth after accounting error

Ramping up growth

Under chief executive Mark Read WPP has looked to overhaul its business over the last two years since the acrimonious departure of founder Sir Martin Sorrell.

Read, who described the sprawling holding group as “unwieldy”, has set about simplifying the firm through a string of mergers and disposals.

In December the company outlined plans to accelerate its growth, setting a target of annual growth of between three and four per cent from 2023.

It will also look to double down on tech and tap into high-growth markets such as e-commerce, aiming to increase its business in this area from 25 per cent to 40 per cent by 2025.

Read more: WPP signs early access advertising deal with Tiktok

The London-based company also plans to ramp up investment in high-growth markets such as China, India and South America.

WPP said it has secured $4.4bn of net new business from companies including Alibaba, HSBC, Intel, Uber and Unilever.

It also saved roughly £800m last year thanks to a reduction in headcount, cutting down its use of freelancers and a huge cut to its travel budget.

WPP said it plans to achieve annual savings of £600m by 2025 by slimming down its operating model and cutting down its real estate portfolio.