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Capital Markets Day 2024


WEBWIRE

Innovating to Lead

WPP is 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 WPPs 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 WPPs 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 LOral and Nestl


2. Unlock the full potential of creative transformation to drive growth

  • Expand our client relationships by further leveraging WPPs 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 WPPs revenue less pass-through costs
  • Realise the opportunities from VML as the worlds largest integrated creative agency and leverage GroupMs simplified operating model and scale as the worlds 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 WPPs 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.

WPP Capital Markets Day 2024

  1. Adjusted operating cash flow conversion is calculated as headline EBITDA plus non-cash compensation, less repayment of lease liabilities and related interest, cash restructuring costs, capex and working capital.



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