WPP to increase dividend and restart buybacks

WPP said it would increase its dividend each year and restart share buybacks as the world's biggest advertising company by sales set out plans for growth.

WPP scrapped its dividend and buybacks early in the Covid-19 crisis but surprised analysts by reinstating the dividend in August. On Thursday WPP said it would the payout would rise in 2020 and beyond, returning about 40% of headline earnings per share to investors.

The group also said it expected to restart buybacks in 2021 funded by the proceeds of its sale of a stake in Kantar in 2019. WPP shares rose 3.9% to 812.40p at 09:51 GMT and were the biggest gainers in the FTSE 100 index.

WPP said it would cut £600m of annual costs by 2025 and spend up to £400m a year on acquisitions to expand in ecommerce and other areas. WPP said it would reinvest about two-thirds of the cost savings in people and technology to support growth.

The company was already in a turbulent period before the Covid-19 crisis hit advertising spending and accelerated the shift to online business. After the acrimonious departure of founder Martin Sorrell in 2018 his replacement, Mark Read, is trying to simplify the sprawling business Sorrell created and catch up with trends in digital advertising.

Read said: "The events of 2020 have only accelerated the structural changes in our industry, from the expansion of digital channels to growing demand for ecommerce solutions. We are converting our size into scale, making us more effective and efficient as we share expertise across a simpler company of stronger agency brands."

WPP said trading in October and November was as expected with revenue excluding pass-through costs down 6.7%. Annual like-for-like revenue less pass-through costs will drop by about 8.4% - the rate for the first 11 months of the year, WPP said.

Russ Mould, investment director at AJ Bell, said: “The latest update from advertising agency WPP suggests it was more a case of growth disrupted and delayed than entirely deflated by coronavirus.

"In the context of a year of dividend disappointment the increase in the dividend announced today and a renewed share buyback programme, plus a commitment to increase capital returns to shareholders in the longer term, will be greeted like a glass of water in a desert.”

The headline operating profit margin for 2020 is expected to be 12.5-13%, reflecting "very strong" cost reduction activity, WPP said. Year-end net debt will be about £1.6bn.

WPP also said it had agreed to pay A$0.70 a share in cash to take full control of its business in Australia and New Zealand. The deal values the remaining shares at about A$230m.