- £250 million investment into data and technology
- Targeting a further £175 million gross savings
- Shares up 5% year-to-date
Shares in WPP (WPP) were up nearly 3% to 802p in morning trading as the advertising giant upgraded its medium-term targets due to cost cutting and structural savings.
The structural savings - announced at a capital markets day in London - will deliver annualised net cost savings of £125 million in 2025, with 40%-to-50% of that saving expected to be achieved in 2024.
The company is targeting a further £175 million in gross savings from cost cutting in its back office and commercial delivery areas. However, it will incur an associated restructuring cost of circa £125 million in 2024.
Year-to-date WPP shares have experienced modest gains up 5%.
Russ Mould, investment director at AJ Bell said: ‘Advertising agency WPP’s move to upgrade medium-term financial targets is encouraging but is based on achieving cost cutting not on improved momentum in the business.
‘Built on acquisitions under its founder Sir Martin Sorrell, before his acrimonious split from the company in 2018, it would not be surprising if there remained some inefficiencies which could be ironed out.
‘The other immediate question is whether the company might take more drastic action to slimline the business – with the sale of its 40% stake in market research outfit Kantar still being mulled.’
ARTIFICIAL INTELLIGENCE (AI) CATCH UP
The advertising giant also gave a strategy update saying it was keen ‘to capture the opportunities offered by AI.’
This includes ‘driving improved returns to clients through a set of AI-enabled services and tools, fuelling AI services with WPP’s proprietary data sets, capitalising on WPP’s lead in AI after the acquisition of UK AI company Satalia in 2021 and expand the reach of our AI services through WPP Open.
Is this enhanced AI strategy too little too late?
Russ Mould investment director at AJ Bell thinks so, adding: ‘The company, which has been playing catch-up on digital advertising over the last decade or so is looking to get ahead of the AI trend by investing in its capabilities. AI is seen as a threat to some of the functions around the creation, planning and purchase of advertisements.
‘WPP’s CEO Mark Read seems confident machines will be more sorcerer’s apprentice than capable of producing the marketing magic themselves.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
