WPP’s AI ambitions to take centre stage in full-year results

Media and advertising giant WPP is set to release its preliminary full-year results on 22 February, which are likely to include commentary on its plans to expand into artificial intelligence.

The group said it expected to post full year net-revenue growth of 0.9 per cent, with operating margins in the region of 15 per cent.

“That’s at the top end of guidance, and given how recently the update landed, there is optimism that the group will come good on these plans,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

The firm’s stock price is down 23.4 per cent over the last year, but have slowly risen since hitting a three-year low in October.

Lund-Yates argued that rather than revenues, market moves are “more likely to be governed by WPP’s commentary on AI”, which has continued to drive stock performance across the entire market.

At a capital markets day last month, WPP’s chief exec Mark Read said the group would be investing £250m on AI development this year.

“Investors would like a bit more detail on exactly how that will be spent,” added Lund-Yates, explaining that the tech presented both “huge opportunity” and also risk to the group.

Russ Mould, investment director at AJ Bell, added that the group’s CEO Mark Read “seems confident machines will be more sorcerer’s apprentice than capable of producing the marketing magic themselves”.

In addition, the capital markets day saw the firm upgrading its medium-term financial targets, but Mould explained that this was “based on achieving cost cutting, not on improved momentum in the business”.

“Built on acquisitions under its founder 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,” he added.

In a blow to the firm, The Mail on Sunday reported over the weekend that the board of WPP had been accused of ‘neo-colonialist practices’ by a Kenyan entrepreneur.

Bharat Thakrar, founder of one of Africa’s largest marketing agencies, accused the group of discriminating against him and his firm’s finance chief for their Indian heritage.

Other questions for the group include whether it will take more drastic action to slimline the business, with Mould noting that the sale of its 40 per cent stake in market research outfit Kantar was “still being mulled”.

Additionally, Lund-Yates noted that investors were looking to see how “creaking economic activity in China” was affecting its marketing spending, with “further steer” needed on how the global advertising landscape is shaping up this year.