Ad giant WPP sells stake in FGS for £610m as cost-cutting drive continues

WPP has agreed to sell its stake in FGS Global for around 775 million US dollars (£610 million), as the advertising giant continues its drive to cut costs and automate its work.

Its 50% stake in the communications agency will be sold to investment firm KKR.

The deal values FGS, which provides public affairs and media advice to large corporates, at about 1.7 billion US dollars (£1.3 billion).

WPP chief executive Mark Read said the sale is an “excellent outcome” for the firm and that it has “achieved an attractive price”.

The proceeds of the sale, which is expected to go through before the end of the year, will be used to reduce debts, invest in growth of the business, and return cash to shareholders.

WPP, which is the world’s largest advertising and marketing firm and counts the likes of Google and Coca-Cola among its clients, also gave investors an update on its financial performance this year.

The global group revealed a slight increase in revenues to £7.2 billion for the first six months of the year.

Its headline operating profit, which strips out the effect of one-off costs, dipped to £646 million from £666 million the prior year, partly due to cost inflation and investing in future growth.

But the firm said it has been cutting costs across the business, including trimming its workforce.

It had 111,000 staff at the end of June, 3,000 fewer than the 114,000 employed at the same time last year, it revealed.

Staff costs were 3.3% lower than the previous year, which it said reflected the lower headcount, offset by inflation driving higher staff wages.

Meanwhile, WPP said it has been increasing its use of artificial intelligence (AI), which it said will “fundamentally change” how it produces work and operates as a company.

It said it is continuing to invest in its AI-powered platform, WPP Open, as part of a £250 million yearly investment in the technology.

Major customers including Google, IBM , L’Oreal, LVMH, Nestle and Coca-Cola have been among those using the platform, it said.

Nevertheless, Mr Read said an “uncertain macro environment” has led the group to “moderate” its expectations for the full year, with it now predicting lower revenue growth.