Wpp Plc · LSE:WPP
Wpp — Q1 2017 Earnings Presentation
65 slides from Wpp's earnings presentation, April 2017
Slide 1: Trading Statement for First Quarter 2017
Trading Statement for First Quarter 2017 London
Slide 2: Contents
Contents 1 First Quarter 2017 Hard Copy only: 2 31 Year History 3 Other Information 2
Slide 3: First Quarter 2017
1 First Quarter 2017 W PP
Slide 4: Highlights
First Quarter 2017 Highlights § Reported billings up 9.2% at £13.017bn. § Reported revenue up 16.9% at £3.597bn, 3.6% constant currency and 0.2% like-for-like. § Net sales growth 18.5% reportable, 4.8% constant currency and 0.8% like-for-like. § Constant currency revenue, net sales and operating pro
Slide 5: Summary – Revenue and Net Sales Growth
First Quarter 2017 Summary – Revenue and Net Sales Growth % Growth Revenue Net Sales Like-for-like 0.2 0.8 Acquisitions 3.4 4.0 Constant currency 3.6 4.8 Foreign exchange 13.3 13.7 Reportable sterling 16.9 18.5 Reportable US dollars¹ 1.2 2.6 Reportable euros² 4.9 6.3 Reportable yen³ -0.2 -1.1 1 Tran
Slide 6: Effects of Currency
First Quarter 2017 Effects of Currency Q1 2017 Q1 2016 Sterling Weaker US$ 1.24 1.43 -13% Currency movements accounted for € 1.16 1.30 -11% 13.3% increase reported revenue and ¥ 141 165 -15% 13.7% net sales, reflecting weakness Chinese Renminbi 8.5 9.4 -10% of £ sterling against most currencies. Bra
Slide 7: Impact of Foreign Exchange
First Quarter 2017 Impact of Foreign Exchange 2016 FY Act 2017 Q1 Act 2017 Q2 Est 2017 Q3 Est 2017 Q4 Est 2017 FY Est 16% 14% 12% Revenue Net Sales Change versus Prior Year 10% 8% 6% 4% 2% 0% -2% -4% § First half tailwind ca. 11% revenue and net sales. § Full year tailwind ca. 4%-5% revenue and net
Slide 8: WPP Two Year Cumulative Like-for-Like Growth
First Quarter 2017 WPP Two Year Cumulative Like-for-Like Growth1 – Consistent Overall Performance % Revenue Net Sales 1 Year 2 Year 1 Year 2 Year Q1 2015 5.2 12.2² 2.5 6.3² Q2 2015 4.5 14.7² 2.1 6.5² Q3 2015 4.6 12.2² 3.3 6.3² Q4 2015 6.7 14.5² 4.9 7.0² Q1 2016 5.1 10.3² 3.2 5.7² Q2 2016 3.5 8.0² 4.
Slide 9: Two Year Cumulative Like-for-Like Revenue Growth
First Quarter 2017 Two Year Cumulative Like-for-Like Revenue Growth1 % WPP² OMC³ Pub4 IPG5 HAV6 Q1 2015 12.2 9.4 4.2 12.3 10.1 Q2 2015 14.7 11.1 1.9 11.4 13.4 Q3 2015 12.2 12.6 1.7 13.4 11.5 Q4 2015 14.5 10.7 6.0 10.0 6.6 Q1 2016 10.3 8.9 3.8 12.4 10.5 Q2 2016 8.0 8.7 4.1 10.4 8.2 Q3 2016 7.8 9.3 0.
Slide 10: Revenue and Net Sales by Sector
First Quarter 2017 Revenue and Net Sales by Sector Revenue Net Sales % Change % Change 2017 Reported Constant Like-for- 2017 Reported Constant Like-for- £m Currency like¹ £m Currency like¹ Advertising, Media Investment 1,672 20.6 7.1 0.2 1,364 21.6 7.7 -0.3 Management Data Investment Management 639
Slide 11: Advertising, Media Investment Management
First Quarter 2017 Advertising, Media Investment Management § Strongest constant currency revenue growth 7.1% and net sales growth 7.7%, like-for- like revenue growth 0.2% and net sales -0.3%. § Advertising challenged in mature markets, particularly in recent years in Western Continental Europe. § M
Slide 12: Data Investment Management
First Quarter 2017 Data Investment Management § Data investment management constant currency net sales -1.3%, like-for-like -0.8%. § UK, Latin America and Africa like-for-like net sales up strongly, North America and Asia Pacific more difficult. § Kantar Worldpanel, Kantar Retail and Lightspeed perf
Slide 13: Public Relations and Public Affairs
First Quarter 2017 Public Relations and Public Affairs § Public relations and public affairs constant currency net sales growth 6.0% and strongest sector like-for-like 3.9%. § All regions and sub-regions up, particularly strong growth in USA, UK, Western Continental Europe and Middle East. § Cohn &
Slide 14: Branding and Identity, Healthcare and Specialist Communications
First Quarter 2017 Branding and Identity, Healthcare and Specialist Communications § Constant currency net sales growth 3.7%, like-for-like growth 2.2%, second strongest sector. § All businesses in this sector grew, except parts of Group’s specialist communications businesses, particularly strong gr
Slide 15: Digital across the Group
First Quarter 2017 Digital across the Group § Digital revenue $1.8bn or over 39% of total revenue (2016: $1.7bn, over 38%), up almost 6% constant currency and up over 4% like-for-like. Digital net sales over 40% for the first time. § The number of people working in the Group for digital almost 48,00
Slide 16: Revenue and Net Sales by Region
First Quarter 2017 Revenue and Net Sales by Region Revenue Net Sales % Change % Change 2017 Reported Constant Like-for- 2017 Reported Constant Like-for- £m Currency like £m Currency like North America 1,376 15.5 -0.2 -3.0 1,204 18.1 2.1 -1.1 UK 473 4.8 4.8 3.2 396 5.6 5.6 3.7 Western Continental Eur
Slide 17: Net Sales Growth by Region
First Quarter 2017 Net Sales Growth¹ by Region CENTRAL & EASTERN EUROPE 1.0% Mature Markets 1.1% UNITED “Faster Growing” Markets -0.1% KINGDOM 3.7% Total 0.8% NORTH AMERICA WESTERN -1.1% CONTINENTAL EUROPE 4.3% ASIA PACIFIC Traditional -0.7% Media AFRICA LATAM & MIDDLE EAST 3.6% -3.6% ANZ N/A² ¹ Lik
Slide 18: Top Markets
First Quarter 2017 Top 6 Markets¹ - Over 68%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth -1.2%¹ and Net Sales Growth 0.2%¹ Including associates: Revenue $1.7bn $0.7bn $0.3bn $0.3bn $0.2bn $0.2bn People ‘000² 26 17 8 13 4 5 USA UK Germany Greater China3 ANZ4 France Revenue Net Sales Reven
Slide 19: BRICs Markets
First Quarter 2017 BRICs Markets – Over 11%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth of -1.6%¹ and Net Sales Growth of -0.9%¹ Including associates: Revenue $0.3bn $0.1bn $0.1bn $0.05bn WPP Rank² #5 #8 #12 #20 People ‘000³ 13 15 7 2 Greater China4 India Brazil Russia Revenue Net Sales
Slide 20: Growth by Region
First Quarter 2017 Growth by Region § North America constant currency net sales growth 2.1%, like-for-like -1.1%, weakest performing region. Both advertising and media investment management and data investment management weaker, partly offset by strong growth in public relations and public affairs,
Slide 21: Net Sales Growth by Country
First Quarter 2017 Net Sales Growth by Country Net Sales Growth1 Countries More than 20% Argentina 10% to 20% Germany, Indonesia, Philippines 5% to 10% Belgium, India, Italy, South Korea, Russia, Sweden Brazil, Canada, Denmark, France, New Zealand, South Africa, 0.8%² to 5% Switzerland, Thailand, UK
Slide 22: Net Sales Growth by Category
First Quarter 2017 Net Sales Growth by Category Net Sales Growth¹ Categories More than 5% Computers, Electronics, Government 0.8%² to 5% Financial Services, Food, Oil, Personal Care & Drugs Automotive, Drinks, Media & Entertainment, Retail, Telecommunications, Less than 0.8%² Travel & Airline ¹ Like
Slide 23: Trade Estimates of Major New Business Wins
First Quarter 2017 Trade Estimates of Major New Business Wins WPP Agency Incumbent Account Office Billings($m) Team WBA OMC Walgreens Boots Alliance Global 600 Wunderman OgilvyOne¹ BT UK 190 Mindshare IPG Tyson Foods USA 135 MediaCom OMC Volkswagen Audi China 120 MEC PUB Mercedes-Benz China 105 Ogil
Slide 24: Trade Estimates of Major New Business Losses
First Quarter 2017 Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) Grey IND/Other Coty Global 330 JWT PUB Kellogg’s USA 100 Grey Ogilvy/OgilvyOne Vodafone UK 70 Losses in red are transfers of business 24
Slide 25: Internal Estimates of Net New Business Wins
First Quarter 2017 Internal Estimates of Net New Business Wins ($m) Creative Media Total Advertising 519 1,259 1,778 Other Businesses 325 - 325 First Quarter 2017 844 1,259 2,103 First Quarter 2016 925 854 1,779 25
Slide 26: Major New Business Wins/Losses Since April
First Quarter 2017 Trade Estimates of Major New Business Wins/Losses Since 1 April WPP Agency Incumbent Account Office Billings($m) Mindshare IPG T.J. Maxx Global 215 Grey IND Applebee’s USA 150 WINS MediaCom OMC Whole Foods Market USA 60 Maxus/MEC/Mindshare N/A Kingfisher Global 60 Team Campari N/A
Slide 27: Cash Flow and Net Debt
First Quarter 2017 Cash Flow and Net Debt § March YTD average net debt up £453m to £4.544bn, compared to £4.091bn in 2016, at 2017 exchange rates. § Net acquisitions (including earnouts) £129m (2016 - £144m) and share buy-backs £180m (2016 - £62m). § 31 March net debt up £474m to £5.008bn, compared
Slide 28: Acquisitions and Investments
First Quarter 2017 Acquisitions and Investments Faster Growing Quantitative & Markets Digital Deeplocal (USA) Bruketa&Žinić (Croatia) 3Ti (China) Eightytwenty (Ireland) Mediacom India¹ CMC (China)¹,² Fullscreen (USA)¹,² Shanghai Ogilvy & Mather¹ IDG (China)¹,² Newsaccess (Ireland) Raine (China)¹,² P
Slide 29: Uses of Free Cash Flow
First Quarter 2017 Uses of Free Cash Flow March YTD March YTD Full Year Category Target 2017 2016 2016 Acquisitions (excluding earnouts)¹ £300-£400m² £129m £144m £605m Share buy-backs n/a £180m³ £62m £427m % of issued share capital 2%-3% 0.8% 0.3% 2.0% Dividend increase n/a n/a n/a 27% Pay-out ratio
Slide 30: Debt Maturity Profile
First Quarter 2017 700 Debt Maturity Profile £m at 31 March 2017 650 Total Total 600 Credit Drawn 550 £ bonds £400m (2.875% Sep ’46) 400 400 500 US bond $500m (5.625% Nov ’43) 398 398 450 US bond $300m (5.125% Sep ’42) 239 239 Total Drawn (£m) 400 Eurobonds €600m (1.625% Mar ’30) 512 512 Eurobonds €
Slide 31: Macro and Micro Trends
First Quarter 2017 Macro and Micro Trends Macro Micro GDP New normal r Trumponomics USA a Disrupters (including consultants) r IMF UK a Capital return r Elections r eCommerce a Interest rates r Fragmentation a Geo-political r Efficiency & effectiveness Traditional media r Fake news, brand safety, vi
Slide 32: Like-for-Like Growth and GDP
First Quarter 2017 Like-for-Like Growth and GDP 11.0 WPP Like-for-Like Revenue Growth 10.0 WPP Like-for-Like Net Sales Growth 9.0 GDP Nominal / WPP 8.0 GDP Nominal / Goldman Sachs GDP growth % 7.0 2017 Forecast Nominal/WPP Growth (%) Nominal/ 6.0 Goldman Sachs Real IMF¹ 5.0 4.0 3.0 2.0 1.0 0.0 Q1/12
Slide 33: The New Normal
First Quarter 2017 The New Normal Low GDP Low or No Growth Inflation Little Pricing High Focus Power on Costs 33
Slide 34: The Legacy Spectrum
First Quarter 2017 The Legacy Spectrum Active Zero Based Disrupters Investors Budgeters Bill Ackman Daniel Loeb Nelson Peltz 34
Slide 35: Short Executive Life Expectancy
First Quarter 2017 Short Executive “Life Expectancy” § CEO tenure 6 to 7 years (FTSE 100 5.9 years, S&P 500 7.1 years) § CFO tenure 4 to 5 years (FTSE 100 4.1 years, S&P 500 4.8 with 50% less than 3 years) § CMO tenure 2 to 3 years (S&P 45 months) 35
Slide 36: S&P Dividends & Buy-Backs as % of Operating Earnings
First Quarter 2017 S&P 500 Dividends & Buy-Backs as % of Operating Earnings 140% 131% 122% 114% 120% 110% 104% 100% of operating earnings 99% 98% 95% 95% 100% 89% 87% 87% 85% 83% 83% 81% 77% 78% 78% 74% 74% 80% 71% 71% 71% 68% 67% 68% 63% 59% 59% 60% 60% 40% 20% 0% Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'1
Slide 37: Highest FTSE EPS in Three Years, Falling Pay-Out Ratio
First Quarter 2017 Highest FTSE 100 EPS in Three Years, Falling Pay-Out Ratio in Q1 2017 110% 75% FTSE 100 EPS FTSE 100 pay-out ratio WPP pay-out ratio 70% 100% 65% 90% 60% 80% 55% EPS Pay-out ratio Q3/11 =100% 50% 70% 45% 60% 40% 50% 35% 40% 30% Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13
Slide 38: US Total Investment as % of GDP
First Quarter 2017 US Total Investment as % of GDP 38
Slide 39: Strong Brands Generate Superior Shareholders' Return
First Quarter 2017 Strong Brands Generate Superior Shareholders’ Return Top 10 Global Brands Outperform S&P 500 by over 50% and MSCI 3.5x Over Last 10 Years Download the reports at www.brandz.com 39
Slide 40: Leading Clients Published Results Trends
First Quarter 2017 Leading Clients Published Results Trends § Like-for-like revenue growth ca. 1.0%. § Pricing led as volumes remain weak. § US growth behind International. § Slow start to the year and deceleration from Q4 2016. 40
Slide 41: Horizontality, New Markets, New Media and Data Investment Management
First Quarter 2017 Horizontality, New Markets, New Media and Data Investment Management § Horizontality – ensuring our people work together through client teams and country and sub-regional managers for benefit of clients. § Faster growing markets to be 40-45% of total Group revenue over next three
Slide 42: Horizontality
id, ‘CANNES IONS 2011-2016 HOLDING COWPANY OFTHEVERR Horizontality »y EFFIE AWARDS 2012-2016 MOST EFECIVE HOLDING COMPANY Our 4f strategic priorities Advance horizontality by ensuring our people work together for the benefit of clients Cross-Group client teams W PP 42
Slide 43: New Markets
New Markets Our 4 strategic priorities Increase share of revenues from faster-developing markets to 40-45% Are we on target? 28% 29% 30% 42.5% 2010 2017 12016 2020 id, ‘CANNES IONS 2011-2016 HOLDING COWPANY OFTHEVERR sereawanosann-core Ep Enea Rb Conn W PP
Slide 44: New Media
New Media Our | strategic priorities Increase share of revenues from new media to 40-45% Are we on target? 20% 38.9% 39.6% 42.5% 2010 2016 20171 2020 iW, ‘CANNES LIONS 2011-2016 HOLDING COWPANY OFTHEVEAR MOST EFECIVE HOLDING COMPANY W PP
Slide 45: Data Investment Management and Quantitative Disciplines
Data Investment Management and Quantitative Disciplines 45
Slide 46: Summary
First Quarter 2017 Summary § Strong reported revenue growth almost 17% and net sales over 18%, like-for-like net sales growth 0.8%. § On a constant currency basis revenue, net sales and operating profit well ahead of budget and last year. Severance costs very similar with increased incentives compar
Slide 47: Our Long-Term Financial Model
First Quarter 2017 Our Long-Term Financial Model § Organic revenue and net sales growth of 0%-5% in line with market growth. § Margin improvement of 0.3 margin points or more before currency movements, with long-term net sales margin target of 19.7%. § Use of our substantial cash flow to enhance EPS
Slide 48: Outlook
First Quarter 2017 Outlook § Our forecasts indicate − Like-for-like revenue and net sales growth around 2% in line with budget, stronger second half reflecting comparatively weaker second half of 2016. − Margin improvement in line with target 0.3 margin points excluding currency, off a constant curr
Slide 49: 31 Year History (Hard Copy Only)
2 31 Year History (Hard Copy Only) 49
Slide 50: WPP Reported Revenue
31 Year History WPP Reported Revenue £’m 16,000 15,000 14,389 14,000 13,000 12,235 12,000 11,529 11,019 11,000 10,373 10,022 31 year CAGR 30% 10,000 9,331 8,684 9,000 8,000 7,477 7,000 6,185 5,908 6,000 5,374 5,000 4,300 4,0223,9084,106 4,000 2,981 3,000 2,173 1,918 2,000 1,5551,6911,747 1,2641,2041
Slide 51: WPP Net Sales
31 Year History WPP Net Sales £’m 14,000 13,000 12,398 12,000 11,000 10,524 10,065 10,076 10,000 9,515 9,239 9,000 31 year CAGR 30% 8,561 7,981 8,000 7,009 7,000 5,850 6,000 5,611 5,133 5,000 4,074 3,790 3,690 3,869 4,000 2,736 3,000 1,855 2,000 1,328 1,437 1,469 1,633 1,076 1,016 1,070 1,209 1,204
Slide 52: WPP Organic Growth
31 Year History WPP Organic Growth % 20 18.6 Organic Revenue Growth 15.0 Organic Net Sales Growth 15 13.9 14.1 11.8 10 31 year average organic revenue growth : 5.5% 8.0 8.3 8.4 8.0 8.0 8.2 6.3 5.7 5.5 5.4 5.0 5.3 5.3 5.3 5.2 5 4.0 4.0 3.1 3.5 3.3 3.33.0 2.7 2.9 0.7 N/A 0 -3.0 -5 -4.7 -5.9 -8.1 -10 N
Slide 53: WPP PBIT and Margins
31 Year History WPP PBIT and Margins PBIT PBIT margin 2004 onwards £’m % PBIT reported 17.4% 18% under IFRS 16.7%16.9% 16.5% 15.9%16.0% 16.1% 2,000 15.7%15.8% 15.5% 15.3% 16% 15.0% 14.8% 14.9%14.7% 15.3% 14.4% 14.0% 13.8%13.7% 15.0% 15.0% 15.1% 14.8% 14% 14.5% 13.0% 14.5% 14.3% 14.3% 12.7% 14.1%14.0
Slide 54: WPP Headline Diluted EPS
31 Year History WPP Headline Diluted EPS Post 1992 Rights Issue pence 120 113.2 100 93.6 84.9 80.8 80 23 Year CAGR: 15% 73.4 67.7 60 55.5 56.7 45.8 44.4 42.0 40 36.0 30.9 32.3 30.3 29.0 27.9 22.7 23.8 18.8 20 15.7 13.5 9.4 5.0 6.5 0 UK GAAP IFRS Note: 1993 adjusted to reflect 1992 rights issue. Head
Slide 55: Other Financial Information (Hard Copy only)
3 Other Financial Information (Hard Copy only) 55
Slide 56: US Dollar Exchange Rate
First Quarter 2017 24 month US$ range 1.56 to 1.23 USD Monthly Average Quarterly % Variance vs PY 1.60 £ Strength 5% 1.55 4.6% 1.50 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -5.5% -1.0% 1.45 -6.4% -5% -9.4% 1.40 -13.4% -15.3% 2017 -18.1% 1.35 2016 -10% 2015 1.30 -15% 1.25 1.20 -20% Jan Feb Mar Apr May Ju
Slide 57: Euro Exchange Rate
First Quarter 2017 24 month € range 1.41 to 1.12 EUR Monthly Average Quarterly % Variance vs PY 1.45 £ Strength 5% 1.40 4.1% 2.0% 0% 1.35 Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -3.5% -5.5% 2017 -8.3% 1.30 -5% -10.4% 2016 2015 -15.6% 1.25 -16.9% -10% 1.20 -15% 1.15 1.10 -20% Jan Feb Mar Apr May Jun Jul Au
Slide 58: Faster Growing Regions - Quarterly % Variance vs PY
First Quarter 2017 Faster Growing Regions - Quarterly % Variance vs PY Asia Pacific Latin America £ Strength £ Strength 5% 30% 2.2% 0% 20% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -0.1% -3.2% -1.1% 21.9% -5% -10.9% 10% 13.6% -15.4% 0.3% -18.5% -10% -20.5% 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -3.0% -4.5% -1
Slide 59: WPP Has Many of the Best Known Brands in the Industry
WPP Today WPP Has Many of the Best Known Brands in the Industry Ranked 1 or 2 in all sectors in which it competes J. Walter Thompson Worldwide Kantar Millward Brown Ogilvy CommonHealth (O) Data Ogilvy & Mather (O) Investment Kantar TNS Sudler & Hennessey (Y) Advertising Management BrandAsset Valuato
Slide 60: Seven Reporting Relationships Cover 86% of Revenue
WPP Today Seven Reporting Relationships Cover 86% of Revenue J. Walter Thompson Company GroupM Chairman: Irwin Gotlieb CEO: Tamara Ingram CEO: Kelly Clark Mirum Mindshare MEC Ogilvy & Mather MediaCom Chairman & CEO: John Seifert Ogilvy Public Relations Maxus OgilvyOne [m]Platform Essence CEO: Peter
Slide 61: Eight Further Reporting Relationships
WPP Today Eight Further Reporting Relationships Cover Most of Remaining 14% of Revenue CEO: Frank-Michael Schmidt Commarco Specialist Communications Joint COOs: MaryEllen Howe, Specialist Public Relations Laurence Mellman CEO: Jack Martin Hill+Knowlton Strategies WPP Digital CEO: Mark Read COO: Mark
Slide 62: Acquisitions
First Quarter 2017 Acquisitions 3Ti – China (JWT Mirum) Founded in 2005, the 3Ti’s services span digital business strategy consulting, product design and development, software and mobile app development. 3Ti provides Internet+ and IoT solutions, and has designed and developed smart wearables, smart
Slide 63: Acquisitions
First Quarter 2017 Acquisitions MediaCom India¹ – India (GroupM) MediaCom India was founded in 2007. It employs around 170 people in India, with offices in Gurgaon, Bangalore and Mumbai as well as a representative office in Chennai. As a Content + Connection agency, MediaCom India specialises in med
Slide 64: Acquisitions
First Quarter 2017 Acquisitions SubVRsive¹ – USA (WPP Digital) SubVRsive is a technology company that works with advertisers that want to engage consumers in the emerging virtual reality and augmented reality sector. Clients include the American Heart Association, Lionsgate Entertainment, Procter &
Slide 65: Trading Statement for First Quarter 2017
Trading Statement for First Quarter 2017 London