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WPP to double down on AI – organic growth still lagging Publicis

It’s WPP’s eagerly-awaited Capital Markets day for investors and analysts today and, if first gleranings are to be believed, it doesn’t look as though there’ll be any fireworks.

FILE PHOTO: The corporate logo of WPP is seen in this picture from 2018, obtained July 12, 2019. WPP/Handout via REUTERS

CEO Mark Read is expected to say that the company plans to spend £250m on AI this year and save around £60m with cost reductions, another £60 next year. However this will lead to £125m of restructuring costs, which presumably means redundancies. There have already been a number of exits from Wunderman, now part of VML.

Read told the FT: “Its much easier to see all the jobs that AI will disrupt than all the jobs it will create. But it’s going to make creative people even more important, because it can level the functional playing field and make the idea itself even more critical.”

WPP says it now has a medium-term target of more than 3 per cent growth in revenue less pass-through costs, from a previous goal of 3-4 per cent — a figure boosted by M&A. Headline operating profit margin would be 16-17 per cent, it said, from 15.5-16 per cent. 

Like-for-like 2023 revenue less pass-through costs was expected to be 0.9 per cent, at the upper end of guidance of 0.5-1 per cent, with an operating profit margin of 14.8 per cent, again at the top end of guidance. In other words really, much as expected and way behind rival Publicis’ 6.3% growth on higher margins. Investors may lose patience.

WPP’s share price rose slightly in early trading this morning.

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