WPP to Invest £250 Million in AI This Year

Dan Meier 30 January, 2024 

WPP plans to invest £250 million in AI this year, the holding group announced ahead of its Capital Markets Day due to take place later today.  The company also expects its 2023 earnings to come in at the top end of its previously issued guidance.

The London-based firm laid out plans to drive growth by leveraging AI, tech and data. WPP has already made a number of investments in the field, having acquired AI specialist Satalia in 2021, and formed partnerships with Adobe, Google, IBM, Microsoft, Nvidia and OpenAI.

It also looks to expand the reach of AI tools through WPP Open, a business platform used to share data across the company. WPP said the platform is currently used by over 28,000 employees, as well as clients including L’Oréal and Nestlé.

“AI is transforming our industry and we see it as an opportunity not a threat,” said WPP CEO Mark Read. “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 investment echoes last week’s announcement by French holding group Publicis, which aims to invest €300 million in AI this year.

Future demand

In addition to the AI investment, WPP pre-released its 2023 earnings, with full results due on 22nd February. The company expects to report 2023 revenue growth (less pass-through costs) of 0.9 percent, in line with the 0.5-1.0 percent guidance issued in Q3 2023.

Operating profit margin is also on track for 14.8 percent growth in 2023 (15.0 percent on a constant currency basis), also in line with guidance of 14.8-15.0 percent.

For 2024, the company has forecast revenue growth (less pass-through costs) of 0-1 percent, and operating profit margin improvement of 0.2-0.4 percent. WPP noted that the projection accounts for the AI investment.

And in the medium-term, WPP has forecast 3 percent revenue growth, 16-17 percent operating profit margin, and adjusted operating cash flow conversion of 85 percent.

“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,” said Mark Read.

Consolidate to innovate

The firm is also targeting cost savings of £125 million by 2025 via its consolidation measures, with 40-50 percent of those savings to be realised in 2024. In October, the company merged Wunderman Thompson and VMLY&R to form VML. And last week, WPP merged two of its agencies, Hill & Knowlton and BCW, to form Burson.

The company noted it will incur associated restructuring costs of £125 million this year, but is additionally seeking £175 million gross savings in back office and business cost reductions.

The business said its six agency networks, AKQA, Ogilvy, VML, Hogarth, GroupM and Burson, represent almost 90 percent of WPP’s revenues. It also plans to expand its capabilities in “growth areas such as commerce, influencer marketing and retail media” to capture a greater share of these growing markets.

“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,” said Read.

WPP shares jumped 5.97 percent on Tuesday morning to lead the FTSE 100.

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