WPP pins growth to AI and tech strategy as it raises targets

wpp

WPP is set to announce the next phase of its strategy to capture the opportunities offered by AI, maximise the potential of creative transformation and deliver faster growth, higher margins and improved cash generation.

The company also upgraded its outlook for the year:

wpp-outlook-jan24
Source: WPP

At its annual Capital Markets Day today (30 January, 2024) for investors and market analysts, the media and advertising giant will pitch its four strategic pillars support achieving its goals:

Lead through AI, data and technology

The FTSE 100-listed company said it plans to lead through AI, data and technology, capitalising on its lead in artificial intelligence built on a number of elements including the acquisition of Satalia in 2021; organic investment in AI, client technology and data; and deep partnerships with Adobe, Google, IBM, Microsoft, Nvidia and OpenAI.

It will say it will drive improved returns to clients through a set of AI-enabled services and tools, delivered by WPP Open, its common technology platform, and powered by proprietary AI models.

WPP will fuel AI services with its proprietary data sets together with client, platform and market-level data to improve marketing performance for clients.

It will also ensure appropriate safeguards for client information, brand safety, copyright and ethics, and plans to expand the reach of its AI services through WPP Open, with more than 28,000 current users across WPP and adoption by key clients including L’Oréal and Nestlé.

Unlock the full potential of creative transformation to drive growth

Secondly, WPP hopes to expand its client relationships by further leveraging its global scale, integrated offer in creative, media, production and PR, and capabilities in growth areas such as commerce, influencer marketing and retail media to capture share in a growing market.

Build world-class, market-leading brands

It’s third pillar is built around leading the industry through six powerful agency networks – AKQA, Ogilvy, VML, Hogarth, GroupM and Burson – which now represent close to 90% of WPP’s revenue less pass-through costs.

It will realise the opportunities from VML as the world’s largest integrated creative agency and leverage GroupM’s simplified operating model and scale as the world’s largest media agency.

WPP also intends to establish Burson as a leading global strategic communications agency bringing together BCW and Hill & Knowlton

Execute efficiently to drive strong financial returns

The fourth and final pillar is to deliver growth and structural cost savings as a result of the creation of VML and Burson and simplification of GroupM, unlocking scale advantages and further efficiency savings.

It hopes that structural savings will deliver annualised net cost savings of  around £125m in 2025, with 40-50% of that saving expected to be achieved in 2024. Associated restructuring cost of around £125m in 2024.

It will also target £175m gross savings from efficiency opportunities across both back office and commercial delivery which will be used to invest in growth and support delivery of its medium-term margin target.

This strategy will be underpinned by a disciplined approach to capital allocation with continued organic investment, a progressive dividend policy and a disciplined approach to M&A supported by a strong balance sheet and an investment grade credit rating.

Mark Read, CEO of WPP, said: “The past three years have demonstrated the power of brands, creativity and investment in marketing to drive growth for clients and to build significant value. Research demonstrates that those companies with the strongest brands deliver the highest returns to shareholders.

“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.

“Our long-standing investments in AI, including our AI-powered platform, WPP Open, and our acquisition in 2021 of Satalia, a leading UK AI company, are at the heart of our competitive offer.

“An ongoing annual investment of £250m in data and technology to support our AI strategy is included in our 2024 financial plans.

“While we had to navigate a more challenging environment in 2023, we see strong future demand for our services and are confident we can accelerate our growth over the medium-term.

“Today, the team and I look forward to demonstrating our commitment to leadership through innovation and sharing our plans for improved and sustained returns for our people, our clients, our communities and our shareholders.”