30 January
2024
CAPITAL MARKETS DAY 2024
Innovating to Lead
WPP is today announcing 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.
Four strategic pillars support these
goals:
1.
Lead through AI, data and technology
· Capitalise on WPP's lead in artificial intelligence built on:
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
· Drive improved returns to clients through a set of AI-enabled
services and tools, delivered by WPP Open, our common technology
platform, and powered by proprietary AI models
·
Fuel AI services with WPP's proprietary data sets
together with client, platform and market-level data to improve
marketing performance for clients
·
Ensure appropriate safeguards for client
information, brand safety, copyright and ethics
· Expand the reach of our AI services through WPP Open, with
more than 28,000 current users across WPP and adoption by key
clients including L'Oréal and Nestlé
2.
Unlock the full potential of creative transformation to drive
growth
· Expand our client relationships by further leveraging WPP's
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
3.
Build world-class, market-leading brands
·
Lead 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
· 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
·
Establish Burson as a leading global strategic
communications agency bringing together BCW and Hill &
Knowlton
4.
Execute efficiently to drive strong financial
returns
· 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. Structural
savings to deliver annualised net cost savings of c.£125m in 2025,
with 40-50% of that saving expected to be achieved in 2024.
Associated restructuring cost of c.£125m in 2024
· Target c.£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 our 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.
Updated medium-term targets
·
3%+ LFL growth in revenue less pass-through
costs
·
16-17% headline operating profit margin
·
Adjusted operating cash flow conversion of
85%+[1]
Previous medium-term targets,
outlined at WPP's Capital Markets Day in December 2020, were for
3-4% growth in revenue less pass-through costs including an M&A
benefit of 0.5-1.0% annually; with a headline operating profit
margin of 15.5-16.0%.
2023 expected out-turn and 2024 outlook
WPP will report 2023 results on
February 22nd. We expect to report results in line with
our guidance ranges with:
·
2023 LFL revenue less pass-through costs expected
to be 0.9% consistent with guidance given at Q3 2023 of
0.5-1.0%
·
2023 headline operating profit margin expected to
be 14.8%, equivalent to 15.0% on a constant currency basis, which
is at the top end of guidance of 14.8-15.0% (excluding the impact
of FX)
Looking ahead,
·
2024 LFL revenue less pass-through costs growth of
0-1%
·
2024 headline operating profit margin improvement
of 20-40bps (excluding the impact of FX)
·
Our plans include annual cash investment of around
£250m in proprietary technology to support our AI and data
strategy
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."
The Capital Markets Day for analysts
and investors will take place at our offices at Sea Containers
House in London with presentations beginning from 1pm (UK time)
today. Investors and analysts who wish to attend in person are
required to pre-register by emailing irteam@wpp.com.
The event will feature demonstrations of our AI capabilities along
with presentations from creative, production and media agencies,
and contributions from key clients and partners. A live stream of
the event will be available from 1pm (UK time) today at
www.wpp.com/investors and will subsequently be made available for
replay.
For further information:
Investors and analysts
Tom Waldron
+44 7788 695864
Anthony
Hamilton
+44 7464 532903
Caitlin
Holt
+44 7392 280178
irteam@wpp.com
Media
Chris
Wade
+44 20 7282 4600
Richard
Oldworth,
+44 7710 130 634
Buchanan Communications
+44 20 7466 5000
press@wpp.com
wpp.com/investors
Cautionary statement regarding forward-looking
statements
This document contains statements
that are, or may be deemed to be, "forward-looking statements".
Forward-looking statements give the Company's current expectations
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and uncertainty because they relate to future events and
circumstances that are beyond the control of the Company. Actual
results or outcomes may differ materially from those discussed or
implied in the forward-looking statements. Therefore, you should
not rely on such forward-looking statements, which speak only as of
the date they are made, as a prediction of actual results or
otherwise. Important factors which may cause actual results to
differ include but are not limited to: the impact of, epidemics or
pandemics including restrictions on businesses, social activities
and travel; the unanticipated loss of a material client or key
personnel; delays or reductions in client advertising budgets;
shifts in industry rates of compensation; regulatory compliance
costs or litigation; changes in competitive factors in the
industries in which we operate and demand for our products and
services; changes in client advertising, marketing and corporate
communications requirements; our inability to realise the future
anticipated benefits of acquisitions; failure to realise our
assumptions regarding goodwill and indefinite lived intangible
assets; natural disasters or acts of terrorism; the Company's
ability to attract new clients; the economic and geopolitical
impact of the Russian invasion of Ukraine; the risk of global
economic downturn, slower growth, increasing interest rates and
high and sustained inflation; supply chain issues affecting the
distribution of our clients' products; technological changes and
risks to the security of IT and operational infrastructure,
systems, data and information resulting from increased threat of
cyber and other attacks; the Company's exposure to changes in the
values of other major currencies (because a substantial portion of
its revenues are derived and costs incurred outside of the UK); and
the overall level of economic activity in the Company's major
markets (which varies depending on, among other things, regional,
national and international political and economic conditions and
government regulations in the world's advertising markets). In
addition, you should consider the risks described in Item 3D,
captioned "Risk Factors" in the Group's Annual Report on Form-20F
for 2022, which could also cause actual results to differ from
forward-looking information.
Neither the Company, nor any of its
directors, officers or employees, provides any representation,
assurance or guarantee that the occurrence of any events
anticipated, expressed or implied in any forward-looking statements
will actually occur. Accordingly, no assurance can be given that
any particular expectation will be met and investors are cautioned
not to place undue reliance on the forward-looking
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Other than in accordance with its
legal or regulatory obligations (including under the Market Abuse
Regulation, the UK Listing Rules and the Disclosure and
Transparency Rules of the Financial Conduct Authority), The Company
undertakes no obligation to update or revise any such
forward-looking statements, whether as a result of new information,
future events or otherwise.
Any forward-looking statements made
by or on behalf of the Group speak only as of the date they are
made and are based upon the knowledge and information available to
the Directors at the time.