Unlock Editor’s Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
London-listed advertising group WPP has announced plans to spend £250m on technology with a focus on artificial intelligence this year, raising its medium-term financial targets on the back of cost-cutting measures.
At Capital Markets Day in London on Tuesday, WPP completed a wide-ranging restructuring that saw its marketing, advertising and PR agencies fall under six networks: AKQA, Ogilvy, VML, Hogarth, Group M and Burson. is scheduled to be announced.
WPP forecasts that the merger process will deliver annual net cost savings of around £125m in 2025, with nearly half of this expected to be achieved in 2024.
We are targeting a further £175m in total savings through cost reductions in the back office and other parts of the business. However, WPP warns it will face related restructuring costs of around £125m in 2024.
WPP plans to invest £250m a year in the kind of AI technology that many analysts believe poses a threat to the sector, with advertising agencies planning to create, plan and buy marketing for big brands. May replace much of the functionality. AI also has the potential to enable more companies to perform their own marketing functions.
WPP chief executive Mark Read said “AI will have a significant impact on our business” and sees the opportunity for AI-enabled services and tools to help clients create marketing campaigns at scale. pointed out.
“AI is transforming our industry, and we see this as an opportunity, not a threat. We believe that AI will enhance, not replace, human creativity. I strongly believe that.”
The company’s AI technology platform, WPP Open, is used by more than 28,000 people across the group and has been adopted by clients such as L’Oréal and Nestlé.
Mr Reid said it was “too early” to tell whether the move would lead to an increase or decrease in employment in the sector. He told the Financial Times that the strategy reflects “how we think companies need to be organized to succeed in the age of AI.”
He added: “It’s much easier to see all the jobs AI will destroy than all the jobs it will create.” But creative talent will become even more important because they can level the functional playing field and make ideas themselves even more important. ”
WPP will announce at Capital Markets Day that it plans to focus on a progressive dividend policy and a disciplined approach to mergers and acquisitions. Analysts and bankers are speculating about opportunities for private equity to break up or sell the business.
WPP is considering whether to sell its 40% stake in market research company Kantar.
WPP said it has a medium-term goal of increasing its revenue growth rate after deducting pass-through costs from the previous 3% to 4% to more than 3%. This number was boosted by M&A. Overall operating margin will be 16-17%, up from 15.5-16%, the company said.
According to the report, real revenue in 2023 after deducting pass-through costs is expected to be 0.9%, reaching the upper limit of guidance of 0.5% to 1%, and operating margin is expected to be 14.8%, also the highest. Stated. Instruction finished.
And for 2024, like-for-like revenue before pass-through costs was expected to be between 0 and 1%, with operating margins improving by 20 to 40 basis points.
Read pointed to the impact of losing some customers last year and warned that the business would continue to face challenges in 2024, before predicting a return to strong growth.
