31st Jan 2024 15:57
(Alliance News) - WPP PLC this week set out plans to invest GBP250 million this year as part of an artificial intelligence drive, a technology it sees as an "opportunity not a threat".
The company also announced a series of 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 said for 2023, it expects 3% like-for-like growth in revenue minus pass-through costs, and a headline operating profit margin between 16% to 17%.
This is an upgrade from its October guidance for 2023. Back then, it had expected growth of 0.5% to 1.0% in like-for-like revenue minus pass-through costs, and a headline operating margin of 14.8% to 15.0%.
For 2024, it expects like-for-like revenue less pass-through costs growth between 0% and 1%, and a headline operating profit margin improvement of 20 to 40 basis points, excluding foreign exchange impacts.
WPP added: "Our plans include annual cash investment of around GBP250 million in proprietary technology to support our AI and data strategy."
Chief Executive Mark Read said: "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."
Analysts at Shore Capital Markets noted it was a busy capital markets day for WPP on Tuesday. However, there was no mention of any plans to sell a stake in Kantar.
Reuters earlier in January reported WPP was mulling the sale of its 40% stake in the market research firm.
Shore believes the event of a Kantar stake sale would be balance sheet positive.
Despite the little nod to a Kantar stake disposal, Shore was still impressed.
"We are encouraged by this proactive and aspirational approach, regard the group's stock as modestly valued and reiterate our long-term 'buy' recommendation," Shore added.
Shares in WPP were down 2.8% to 773.20 pence each in London on Wednesday afternoon.
By Eric Cunha, Alliance News news editor
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