Wpp Plc · LSE:WPP
Wpp — Q3 2020 Earnings Presentation
29 slides from Wpp's earnings presentation, Oct 29, 2020
Slide 1: Q3 Trading Update
Q3 TRADING UPDATE 29 October 2020
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This presentation contains statements that are, or may be deemed to be, “forward-looking statements”. Forward-looking statements give the Group’s current expectations or forecasts of future events. An investor can identify these statements by
Slide 3: Agenda
AGENDA 1. Q3 HIGHLIGHTS 2. FINANCIAL PERFORMANCE 3. Q&A
Slide 4: Resilient Performance in a Challenging Environment
RESILIENT PERFORMANCE IN A CHALLENGING ENVIRONMENT • LFL1 revenue less pass-through costs -7.6% (Q2 -15.1%, Q1 -3.3%) - Recovery in integrated agencies, particularly at GroupM - Public Relations strongest performer - Specialist Agencies remain challenged • Continued new business momentum at $5.6 bil
Slide 5: Critical Partner to Our Clients
CRITICAL PARTNER TO OUR CLIENTS Top 200 clients +1.0% in Q1, -8.1% in Q2, -2.4% in Q3 SIGNIFICANTLY IMPACTED BALANCED RESPONSE RESILIENT 21% 22% 57% Automotive 13% Telco, Media, Ent 7% CPG 26% Luxury, Premium 6% Retail 6% Tech 18% Travel, Leisure 2% Other 5% Healthcare, Pharma 13% Financial services
Slide 6: Continued New Business Momentum
CONTINUED NEW BUSINESS MOMENTUM MAJOR WINS/RETENTIONS SINCE JULY MEDIA (M)/ ACCOUNT CREATIVE (C) REGION WPP AGENCY M/C Global M Global M/C Global M/C EMEA M APAC (China) M NA C EMEA (Germany)1 C (PR) Global C Global M EMEA (UK) C Global C APAC (Singapore) 6 1. Already responsible for 50% of the busi
Slide 7: Capital Markets Event 17 December
CAPITAL MARKETS EVENT 17 DECEMBER • Update on our strategic progress, and the next steps • Efficiency savings and reinvestment for growth • Capital allocation • Medium-term financial targets Q3 2020 TRADING UPDATE 7
Slide 8: Financial Performance
FINANCIAL PERFORMANCE
Slide 9: Revenue Less Pass-Through Costs by Quarter
REVENUE LESS PASS-THROUGH COSTS BY QUARTER CONTINUING OPERATIONS £M Δ REPORTED Δ LFL Q1 2,366 -4.3% -3.3% Q2 2,302 -15.6% -15.1% H1 4,668 -10.2% -9.5% Q3 2,401 -11.9% -7.6% YTD 7,069 -10.8% -8.9% Q3 2020 TRADING UPDATE 9
Slide 10: Global Integrated Agencies: Media Leading the Recovery
GLOBAL INTEGRATED AGENCIES: MEDIA LEADING THE RECOVERY LFL REVENUE LESS PASS-THROUGH COSTS GROWTH Q3 PERFORMANCE Q4 2019 Q1 2020 Q2 2020 Q3 2020 0.0% • All agencies showed sequential -0.8% improvement -5.0% -2.6% • VMLY&R continues to be strongest -6.7% performer, slightly down year-on-year -10.0% •
Slide 11: Public Relations: Best-Performing Segment
PUBLIC RELATIONS: BEST-PERFORMING SEGMENT LFL REVENUE LESS PASS-THROUGH COSTS GROWTH Q3 PERFORMANCE Q4 2019 Q1 2020 Q2 2020 Q3 2020 0.0% • Improving sequential trend, -0.1% -1.4% supported by ongoing demand for -2.9% strategic comms advice -5.0% • Specialist PR returned to growth -7.5% -10.0% • BCW
Slide 12: Specialist Agencies: Slower Recovery
SPECIALIST AGENCIES: SLOWER RECOVERY LFL REVENUE LESS PASS-THROUGH COSTS GROWTH Q3 PERFORMANCE Q4 2019 Q1 2020 Q2 2020 Q3 2020 0.0% • GTB improved for the second consecutive quarter as impact of the loss of a major assignment ended -5.0% • Brand Consulting and other niche -7.4% -7.4% agencies remain
Slide 13: Top Markets
TOP 5 MARKETS¹ USA UK Germany Greater China³ India Headcount 19,000 10,000 7,000 8,000 8,000 REVENUE LESS PASS-THROUGH COSTS GROWTH² 2020 YTD -5.7% -11.7% -6.0% -13.5% -12.5% 2020 Q3 -5.5% -6.5% -1.8% -16.7% -16.3% 2020 Q2 -9.6% -23.3% -11.6% -3.1% -25.1% 2020 Q1 -1.9% -4.2% -4.3% -21.3% 6.1% 2019 F
Slide 14: Other Major Markets
OTHER MAJOR MARKETS France Italy Spain Brazil Headcount 2,000 2,000 2,000 4,000 REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2020 YTD -15.6% -17.5% -9.2% -11.8% 2020 Q3 -13.1% -5.3% -11.9% -14.1% 2020 Q2 -27.9% -29.9% -17.2% -18.7% 2020 Q1 -4.0% -16.2% 3.8% -1.3% 2019 FY -1.3% -2.1% 1.0% 9.3% 1. Like-for
Slide 15: Significant Improvement in Net Debt Year-on-Year
SIGNIFICANT IMPROVEMENT IN NET DEBT YEAR-ON-YEAR (£M) -1.2% -2,318 -4,469 Notes: - Itemised movements in net debt represent management figures, which may vary from the presentation of the cash flow under IFRS Q3 2020 TRADING UPDATE 15 - Acquisitions/disposals include earn-out payments
Slide 16: 2020 Guidance
2020 GUIDANCE • 2020 financial performance expected to be within the range of current market expectations (assuming no widespread lockdowns in any of our major markets): - LFL revenue less pass-through costs -8.5% to -10.7% - Headline operating margin 11.4% to 12.5% • Small working capital outflow f
Slide 17: Q&A
Q&A
Slide 18: Other Financial Information
OTHER FINANCIAL INFORMATION
Slide 19: Revenue Less Pass-Through Costs Growth vs Prior Year
REVENUE LESS PASS-THROUGH COSTS GROWTH VS PRIOR YEAR Q1 Q2 Q3 YTD Continuing Operations: Reported -4.3% Reported -15.6% Reported -11.9% Reported -10.8% FX -0.3% FX 0.4% FX -3.9% FX -1.3% Acquisitions/ -0.7% Acquisitions/ -0.9% Acquisitions/ -0.4% Acquisitions/ -0.6% disposals disposals disposals dis
Slide 20: Revenue Less Pass-Through Costs by Sector: Q3
REVENUE LESS PASS-THROUGH COSTS BY SECTOR THIRD QUARTER 2020 £M 2019 £M Δ REPORTED Δ LFL Global Integrated Agencies 1,805 2,036 -11.3% -6.7% Public Relations 210 225 -6.9% -2.9% Specialist Agencies 386 464 -16.7% -13.9% Total Continuing Operations 2,401 2,725 -11.9% -7.6% Q3 2020 TRADING UPDATE 20
Slide 21: Revenue Less Pass-Through Costs by Region: Q3
REVENUE LESS PASS-THROUGH COSTS BY REGION THIRD QUARTER 2020 £M 2019 £M Δ REPORTED Δ LFL North America 922 1,034 -10.8% -5.1% UK 311 334 -6.7% -6.5% Western Continental Europe 493 518 -4.8% -5.5% Asia Pacific, Latin America, Africa & Middle 675 839 -19.6% -12.5% East and Central & Eastern Europe Tot
Slide 22: Revenue Less Pass-Through Costs by Sector: Nine Months
REVENUE LESS PASS-THROUGH COSTS BY SECTOR NINE MONTHS YEAR-TO-DATE 2020 £M 2019 £M Δ REPORTED Δ LFL Global Integrated Agencies 5,267 5,894 -10.6% -8.6% Public Relations 636 667 -4.7% -4.0% Specialist Agencies 1,166 1,363 -14.4% -12.5% Total Continuing Operations 7,069 7,924 -10.8% -8.9% Q3 2020 TRAD
Slide 23: Revenue Less Pass-Through Costs by Region: Nine Months
REVENUE LESS PASS-THROUGH COSTS BY REGION NINE MONTHS YEAR-TO-DATE 2020 £M 2019 £M Δ REPORTED Δ LFL North America 2,779 2,985 -6.9% -5.8% UK 897 1,026 -12.6% -11.7% Western Continental Europe 1,412 1,560 -9.4% -9.7% Asia Pacific, Latin America, Africa & Middle 1,981 2,353 -15.8% -10.9% East and Cent
Slide 24: Revenue Less Pass-Through Costs Growth by Region Like-for-Like
REVENUE LESS PASS-THROUGH COSTS GROWTH¹ BY REGION LIKE-FOR-LIKE % C. & E. Europe % Q1 Q2 Q3 YTD 4.7 -7.0 -2.7 -2.0 UK % Q1 Q2 Q3 YTD -4.2 -23.3 -6.5 -11.7 North America % Q1 Q2 Q3 YTD -1.9 -10.2 -5.1 -5.8 W. Cont. Europe % Q1 Q2 Q3 YTD -3.7 -18.8 -5.5 -9.7 Asia Pacific % Q1 Q2 Q3 YTD -8.6 -14.0 -13.
Slide 25: BRIC Markets
BRIC MARKETS Mainland China Greater China² Brazil India Russia Headcount 6,000 8,000 4,000 8,000 1,000 REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2020 YTD -11.8% -13.5% -11.8% -12.5% 1.0% 2020 Q3 -16.1% -16.7% -14.1% -16.3% -6.2% 2020 Q2 3.5% -3.1% -18.7% -25.1% -0.1% 2020 Q1 -23.4% -21.3 % -1.3% 6.1%
Slide 26: Client Sector Mix
CLIENT SECTOR MIX Travel & leisure Luxury & premium 2% 6% Financial services 4% CPG Other 26% 5% Retail 6% Telecom, media & entertainment 7% Automotive 13% Healthcare & pharma 13% Tech 18% % of total top 200 designated clients attributable to each industry for continuing operations in the first nine
Slide 27: Debt Maturity Profile at September 2020
DEBT MATURITY PROFILE £M AT SEPTEMBER 2020 £ TOTAL £ TOTAL CREDIT DRAWN 700 ◼ £ bonds £400m (2.875% Sep ’46) 400 400 ◼ US bond $220m (5.625% Nov ’43) 170 170 600 ◼ US bond $93m (5.125% Sep ’42) 72 72 500 ◼ £ bonds £250m (3.75% May ’32) 250 250 ◼ Eurobonds €600m (1.625% Mar ’30) £M drawn 545 545 400
Slide 28: Effects of Currency
EFFECTS OF CURRENCY STERLING THIRD QUARTER 2020 2019 STRONGER US$ 1.29 1.23 5% € 1.11 1.11 - • Currency movements accounted for 3.9% Chinese Renminbi 8.9 8.7 3% decrease¹ in revenue Brazilian Real 6.95 4.90 42% less pass-through costs Australian $ 1.81 1.80 1% • £ sterling strengthens against most c
Slide 29: Impact of FX on Revenue Less Pass-Through Costs
IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS¹ 19/FY Act 20/Q1 Act 20/Q2 Act 20/Q3 Act 20/Q4 Est 20/FY Est 2% • YTD currency headwind -1.3% 1.2% • 2020 full year 0% 0.4% -0.2% headwind -1.0% at -0.3% -1.0% latest exchange rates² • 2019 full year currency tailwind 1.2% -2% -3.9% -4% 1. Continuing o