Mark Read has said he is confident about WPP’s outlook for 2022, despite soaring inflation and the war in Ukraine, and expects to hire about 4,000 staff if the agency group hits its forecast of 5% growth.
Read, the WPP chief executive, admitted he was concerned about the “terrible news” from Ukraine, where 200 people work for WPP agencies, and the parent company is providing financial assistance and other support to them.
He was speaking to Campaign after WPP reported annual results that beat expectations, with 12.1% organic growth in revenue less pass-through costs in 2021 – near the top of the global agency peer group – after an 8.4% decline in 2020.
In another sign of recovery, WPP added 9,500 jobs as global headcount increased to 109,400, more than making up for the loss of 6,500 jobs a year earlier, and will pay £592m in staff bonuses – double pre-pandemic levels.
However, WPP’s share price fell sharply, despite a broadly positive response from analysts, as the results were published on the same morning that Russian forces entered Ukraine.
You have called 2021 a “marquee year” and an “outstanding year”. Did you underestimate the recovery because you have blown past some of your targets – for example, hitting the 2023 revenue target two years early?
There’s no doubt that the economic recovery has been stronger than people expected and WPP has benefitted from that – like other companies. But, more importantly, the results reflect the strength of our business in areas like digital marketing, media, ecommerce, data and technology where clients are spending more money.
They obviously reflect our new-business wins in 2020 and 2021, when we had a strong performance, as well as levels of confidence by clients in investing in marketing as economies reopened and they seek to transform their business. We have upgraded [forecasts] three times during the year and I think it is a very strong performance.
WPP’s results have come out on the same day as Russian forces went into Ukraine. What’s the impact on the company and any of your staff in the region?
We all woke up to the terrible news and we are watching it unfold in front of us. Clearly, it’s too early to tell the economic impact of what’s happening in Ukraine – terrible though it is.
We have about 200 people in Ukraine – Wunderman Thompson, Ogilvy, VMLY&R, Group M and Hill & Knowlton all have people there. We have about 1,200 people in Russia as well.
We have been making contingency plans and helping people with financial support and the ability to relocate if they want, and other forms of assistance, including advancing them additional financial resources. It’s safe to say people there are shocked by what has happened.
To what extent as the biggest agency group, are you gravitating more towards bigger clients such as Coca-Cola? Is that the way that WPP can turn the dial on growth by building bigger relationships with mega-clients? I am thinking of your top 10 clients who were worth an average of $170m each in annual revenue before the pandemic.
We have to be able to work with the biggest global companies as well as smaller and more innovative businesses – companies that want to build brands and reach consumers no matter what their size. Part of the strategy has to be to grow our business with small, innovative digital companies that will be big companies of the future. At the same time, there’s no doubt that major global marketers are looking to simplify how they work with their partners and to build bigger and stronger strategic partnerships. And we’ve been a beneficiary of that.
If I look back on our new-business record and I take three wins – Coca-Cola, Google and Unilever – we should be proud of the fact that WPP is working with three of the world’s largest marketers on critical issues to their growth and future success.
In your annual results presentation to investors (see image above), you talk about the importance of becoming Coca-Cola’s main integrated marketing partner across all of its creative, media, data and more. How transformational is the Coca-Cola expansion? And what impact might it have on WPP – as an example to other clients and to your staff?
It is a very transformational move by them to seek to find a partner who can help them change how they market. If you think about The Coca-Cola Company, it is a company based on strategic partnerships – look at their relationships with bottlers. And, to some extent, they’re seeking the same relationship with a single partner who can help them transform their marketing but they also realise they need to have the very best creative ideas.
We went through a very rigorous process where they tested us in every respect – how we would do creatively, the strength of our data offer, our ability to build and help them reinforce big strategic partnerships with the major technology companies on a global basis –as they operate in 200 countries around the world.
What we’re building for them is, in many respects, a model for the future of client-agency partnership and it gives our people the ability to work with fantastic brands and come up with big ideas that resonate around the world. The Lunar New Year work [produced by Ogilvy Shanghai and featuring a mobile game, a limited-edition line of collectible cans, animated 3D billboards and non-fungible tokens (NFTs)] is a good example of the work that has come out of the partnership and how it’s working.
You added 9,500 jobs in 2021, which is a sign of strength. But was it an error to cut more than 6,000 roles in 2020? And how challenging is it to recruit so many people?
If you look back at our response to the pandemic in its early stages [in 2020], we took a lot of steps to limit the number of people that we did cut and our revenues were down 8.4% versus the headcount decline [of about 6%]. We were consciously trying to mitigate the number of job reductions that we made, like shorter working weeks, the voluntary salary sacrifices that we then repaid [subsequently].
Coming to 2021, our net sales were up 12% and our headcount is up 9% and we’re seeing growth in new areas [some of which are different from the areas where there were redundancies]. I feel we did what we could to protect the business and mitigate that impact.
The talent market is very competitive and people have options. It’s why making WPP an attractive place to work, the focus we’re placing on employee wellness, on more flexible ways of working, on our campuses, on training and development, on career opportunities across the group, are so important.
How is the campus strategy working? If we take London as an example, you’ve just moved Grey, Mindshare and other agencies into a second campus building, Rose Court. You’ve got some very big buildings – many of which you committed to pre pandemic. Frankly, do you really need all the space you have committed to?
We have reduced our space significantly. We’re moving from 38 buildings in London to three, over a five-year period, and as part of that we will be consolidating our space. I think our campuses are exactly what we need for the future. They are buildings that are very flexible in terms of how we accommodate people. They have much more co-working space, they are dynamic, lively environments, we have activities going on that provide people with a reason to come into the office.
When I walked around Sea Containers [WPP’s London headquarters] yesterday, we had 1,100 people – it felt like a buzzy, energetic place to work and somewhere where people look forward to coming in. There are savings that we can make in our property portfolio [by reducing more space in future] but absolutely this [shared space for multiple agencies] is the right thing to do – to provide the type of workplace where people want to come into work.
We will probably create more co-working space and less dedicated space [allocated to specific people]. We need to have space for people to have meetings and Zooms. We’re rapidly reconfiguring our space for the future ways of working. I don’t think we’re going to go to the future where everyone works from the office all of the time or indeed everyone works from home all of the time. It’s going to be a balance.
What proportion of people are coming in?
Probably 50% [in Sea Containers] – we were never at 100% even before the pandemic, because people go to client meetings and we have a lot of visitors. The picture varies very much around the world. In Taiwan, we’re at 95% occupancy, in China we’re 70%, at the US we’re at a lot less than in the UK.
With WPP forecasting revenue growth of 5% in 2022, are you hiring maybe at 3% or 4%? You are now 109,000 people, so are we talking about hiring 4,000 this year?
Probably somewhere in that range. It’s what our budgets would indicate now.
In terms of salary inflation, WPP’s pay rises were quite low globally before the pandemic – average base salary increases were less than 2% a year. What are you going to do about salary inflation in 2022 in a market where consumer inflation is running at more like 5%?
2020 was a tough year in terms of increases. We paid more than average in 2021. And I think we are going to likely pay more on average in 2022 – the average across the board might be 4% but it’s going to vary from position to position and role to role.
You talk at considerable length about the importance of ESG and sustainability in the annual results. And you obviously think it matters – despite some investors saying your clients have “lost the plot” on sustainability messaging? And, linked to that, how sustainable is it for WPP to send lots of people to Cannes Lions?
We did an excellent commercial in the Super Bowl for [Unilever’s] Hellmann’s, highlighting its role in reducing waste. Consumers do want purpose at the heart of their brands – the Hellmann’s work was, I think, voted the number two ad of the Super Bowl. I think we can build purpose into our work in a way that resonates with consumers.
So far as Cannes is concerned, we would like it to be a hybrid event – to take fewer people there but to enable more of our people to experience it digitally at the same time. There are many ways in which we should be able to connect people with the event digitally, and we would encourage the organisers to find more and more ways to allow people who can’t be there to experience it virtually.
We will take fewer people from WPP in 2022 than we did in 2019. It’s still an important event and it’s important to recognise creativity but we can do that both in-person and virtually.
Looking ahead, you say you are confident despite the squeeze on the cost of living because of inflation and now Ukraine?
Clearly events in Ukraine are concerning. I don’t think today’s a day to think through what the medium- and longer-term impact is going to be on the global economy. From a direct perspective, it’s a really small part of WPP’s business. Notwithstanding that, the [global] economy is recovering from the pandemic.
The inflationary pressures in the economy are a result of very strong consumer demand and clients are looking to invest in their brand to mitigate that. Clients are cautious but they are also keen to maintain their marketing investment to the greatest degree possible and that gives us confidence going into the year.
Take a step back and think about WPP and our journey over the last few years and we do think the company is in a much better competitive position. If you go back three years ago to this set of results [the first that Read presented after taking over as CEO], the company hadn’t grown in more than two years, our biggest client [Ford] had been up for review and our debt was approaching £5bn.
We come into 2022 with a company that is growing above the peer group average, where we’ve just won the largest review of 2021, and our balance sheet and financial health is extremely strong, which gives us opportunity to invest in the business both organically and through acquisition and return cash to shareholders. We feel we’re in a strong position for the year overall.