26th Feb 2024 17:24
(Alliance News) - Shore Capital Markets hailed WPP PLC's "positive new business momentum" and believes the advertising company's prospects are not fairly priced into the stock.
Shore reiterated its 'buy' recommendation on WPP shares.
WPP closed 0.5% lower at 726.60 pence each in London on Monday. It has a market capitalisation of GBP7.81 billion.
WPP on Thursday said pretax profit slumped by 70% to GBP346 million in 2023 from GBP1.16 billion the year prior. Headline operating profit was little changed at GBP1.75 billion compared to GBP1.74 billion before, in line with a Vuma-cited consensus.
Diluted earnings per share totalled 10.1 pence, down 84% from 61.2p before.
Revenue was more resilient, rising 3.2% on a comparable basis to GBP14.85 billion from GBP14.43 billion.
Revenue less pass-through costs edged up by 0.9% to GBP11.86 billion from GBP11.80 billion.
Looking ahead to 2024, WPP forecast comparable revenue less pass-through costs growth of 0% to 1%.
Shore analysts commented: "We have updated our financial forecasts to reflect the performance and forward guidance detailed in WPP's full year results and anticipate solid medium-term EPS, [dividend per share] and cash flow delivery as the company leverages its underlying strengths and implements its tech and data centric growth strategy.
"We do not believe this potential is reflected in a modest valuation both in absolute terms and relative to its peers and reiterate our medium-term buy recommendation."
Last month, WPP said it aims to "maximise the potential of creative transformation and deliver faster growth, higher margins and improved cash generation".
Chief Executive Officer Read said at the time: "AI is transforming our industry and we see it as an opportunity not a threat. We firmly believe that AI will enhance, not replace, human creativity.
"We are already empowering our people with AI-based tools to augment their skills, produce work more efficiently and improve media performance, all of which will increase the effectiveness of our work. We also see opportunities to sell new AI-driven products and services to our clients and to capture more growth in areas like production."
The company also announced cost cuts. WPP said it expects annualised net cost savings of around GBP125 million in 2025, with 40% to 50% of that saving anticipated to be achieved in 2024.
Further, it targets GBP175 million in gross savings from efficiency opportunities across back office and commercial delivery.
WPP added: "Our plans include annual cash investment of around GBP250 million in proprietary technology to support our AI and data strategy."
Shore labelled "AI and data commitment a key driver" for WPP.
"We like the fact that the company has set out a proactive and aspirational approach to embracing change by adding new skills and services to its already impressive holistic client offering and enhancing its growth potential and financial characteristics," Shore added.
By Eric Cunha, Alliance News news editor
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