WPP is aiming to save £125m in costs through consolidation of its network and has earmarked £250m a year to invest in technology and AI.
The group, which employs about 115,000 people, is taking a restructuring hit of £125m this year that is likely to include some job losses, although it offered no comment or guidance on numbers. This, it said, would enable it to achieve cost savings of £125m in 2025, about half of which would be made this year.
The group is targeting a further £175m in gross savings from ‘efficiency opportunities across both back office and commercial delivery’.
Announced ahead of its Capital Markets Day, most of its savings will come from efficiencies realised from the merger of VMLY&R and Wunderman Thompson into VML and the simplification of Group M.
It said its 2023 revenues (less pass-through costs) are expected to be up 0.9 per cent and it forecasts growth of 0-1 per cent in 2024.
WPP’s announcement has been cautiously welcomed by investors and analysts, with WPP’s share price rising by around 5.5 per cent this morning before falling back. Analysts at Numis described the news as “sensible overall, if not groundbreaking”.
It also announced that it will consolidate its advertising, marketing and PR agencies under six networks – AKQA, Ogilvy, VML, Hogarth, Group M and Burson – that collectively represent around 90 per cent of WPP’s revenue.
The holding company has updated medium-term targets, aiming for 3 per cent-plus like-for-like growth, less pass-through costs, and a 16-17 per cent profit margin. Its previous targets, outlined at WPP’s Capital Markets Day in December 2020, were 3-4 per cent and 15.5-16 per cent respectively.
The group said it will achieve faster growth across four “strategic pillars”.
The first is leading through AI, data and technology. This builds on its acquisition of AI Satalia in 2021; investment in tech and data and partnerships with the likes of Adobe, Google IBM and OpenAI; generating improved returns using AI-enabled tools and services across WPP Open; and using proprietary data sets.
The other pillars are to “unlock the full potential of creative transformation to drive growth”; focusing on agency brands AKQA, Ogilvy, VML, Hogarth, Group M and Burson; and, finally, the aforementioned cost savings
Mark Read, chief executive of WPP, said: “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.
“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.”
Last week, Publicis Groupe announced a €300m investment in AI over the next three years. The group also pre-empted its financial results, revealing revenues up 6.3 per cent.
This article first appeared in Campaign UK.
