REG - WPP PLC - Capital Markets Day 2024

WPPAnnouncement

30/01/2024 07:15

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RNS Number : 3480B  WPP PLC  30 January 2024

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  (#_ftn1)

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 22(nd). 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 (mailto: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 (mailto:press@wpp.com)

 

wpp.com/investors (http://www.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 or forecasts of future events. An investor can identify
these statements by the fact that they do not relate strictly to historical or
current facts.

These forward-looking statements may include, among other things, plans,
objectives, beliefs, intentions, strategies, projections and anticipated
future economic performance based on assumptions and the like that are subject
to risks and uncertainties. These statements can be identified by the fact
that they do not relate strictly to historical or current facts. They use
words such as 'aim', 'anticipate', 'believe', 'estimate', 'expect',
'forecast', 'guidance', 'intend', 'may', 'will', 'should', 'potential',
'possible', 'predict', 'project', 'plan', 'target', and other words and
similar references to future periods but are not the exclusive means of
identifying such statements. As such, all forward-looking statements involve
risk 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 statements.

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.

 1  (#_ftnref1) 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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