By Paul Sandle
LONDON (Reuters) -Advertising group WPP is to invest in AI to drive its top line and improve margins in the medium term but 2024 will be another tough year, as it forecast that like-for-like growth would be flat to up by 1%.
The British group set a medium-term target of growing its top line by more than 3%, driven by investment in AI, data and technology.
It also said it could improve its headline operating profit margin to 16-17%, up from an expected 14.8% in 2023.
It sees a 20-40 basis points step towards that goal this year.
Chief Executive Mark Read said he would invest 250 million pounds ($317 million) every year in data and technology to support WPP’s AI strategy.
“AI is transforming our industry and we see it as an opportunity not a threat,” he said.
“We firmly believe that AI will enhance, not replace, human creativity,” he said on Tuesday.
WPP said like-for-like organic revenue grew 0.9% last year, in line with a forecast it cut in October after tech clients pulled back on marketing and there was a sharp slowdown at media buying agency GroupM.
Earlier in 2023 it had expected growth of up to 5%.
Analysts at Citi said 0.9% full-year growth indicated a better-than-expected fourth quarter, with a broadly flat performance against market expectations of -0.3% to -0.5%.
WPP’s shares, which have this fallen 17% in the last 12 months, rose more than 6% in early deals to a six-month high.
Read has simplified WPP to focus on six networks – AKQA, Ogilvy, VML, Hogarth, GroupM and Burson – with an aim to deliver net cost savings of 125 million pounds a year from 2025.
Earlier this month, the company said it would merge communications agencies Hill & Knowlton and BCW to create Burson.
WPP will report full-year earnings on Feb. 22
($1 = 0.7880 pounds)
(Reporting by Paul Sandle; editing by Sarah Young and Jane Merriman)
