WPP results to meet expectations as it sets medium-term targets

(Sharecast News) - Advertising giant WPP said in an update on Tuesday that it expected its 2023 results to align with earlier guidance.

The FTSE 100 company anticipated that like-for-like revenue less pass-through costs would approximate 0.9%, with a projected 2023 headline operating profit margin of 14.8%, equivalent to 15.0% on a constant currency basis, falling within the upper end of the guidance range.

Looking to 2024, WPP envisioned like-for-like revenue less pass-through costs growing between 0% and 1%.

The firm said it aimed to achieve an improvement in the headline operating profit margin of 20 to 40 basis points, excluding the impact of foreign exchange.

To support its AI and data strategy, WPP said it was planning to invest around £250m annually in proprietary technology.

On its medium-term targets, WPP said it was now aiming for a minimum of 3% year-over-year growth in revenue, excluding pass-through costs.

The company was also seeking to achieve a headline operating profit margin within the range of 16% to 17% in the medium term, complemented by an adjusted operating cash flow conversion rate of 85% or higher.

"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," said chief executive officer Mark Read.

"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."

Read said WPP was empowering its people with AI-based tools to augment their skills, produce work more efficiently and improve media performance, all of which he said would increase the effectiveness of the firm's 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."

Mark Read added that, while the company navigated a more challenging environment in 2023, it saw strong future demand for its services and was confident it could accelerate its growth over the medium-term.

At 0834 GMT, shares in WPP were up 4.84% at 818.4p.

Reporting by Josh White for Sharecast.com.