Wpp Plc · LSE:WPP
Wpp — FY2014 Earnings Presentation
134 slides from Wpp's earnings presentation, March 2015
Slide 1: Results for 2014
Results for 2014 London CANNES LIONS 2011/12/13/ 14 HOLDING COMPANY OF THE YEAR EFFIE AWARDS 2012/13/14 E MOST EFFECTIVE HOLDING COMPANY
Slide 2: Contents
Contents 1 Results for 2014 2 GroupM – This Year Next Year 3 Four Core Strategic Priorities 4 Key Objectives 5 Outlook and Conclusions Hard Copy only 6 29 Year History 7 Other Financial Information 8 Structure and Competitive Position 2
Slide 3: Results for 2014
1 Results for 2014 W PP
Slide 4: Another Record Year Despite Strong Currency Headwinds
Results for 2014 Another Record Year Despite Strong Currency Headwinds Billings £46.2bn, up 6.8% in constant currency. Revenue growth of 11.3% in constant currency, and 8.2% like-for-like, reduced to 4.6% reportable by currency -6.7%. Net sales growth of 6.3% in constant currency, and 3.3% lik
Slide 5: Headline Performance versus Consensus
Results for 2014 Headline¹ Performance versus Consensus +/- Actual Consensus £ million Results Median² £ % Net Sales 10,065 10,050 +15 +0.1 PBIT 1,681 1,673 +8 +0.5 Net finance costs (168) (189) +21 +11.1 PBT 1,513 1,484 +29 +2.0 Diluted EPS 84.9p 82.2p +2.7p +3.3 Net Sales PBIT Margin 16.7% 16.6% n
Slide 6: Headline Performance versus Target
Results for 2014 Headline¹ Performance versus Target Actual Target Achieved Like-for-like net sales growth 3.3% 3%+ a Constant currency net sales margin improvement +0.3² +0.3² a Reportable diluted EPS growth 5.1% 10-15% x Constant currency diluted EPS growth 12.6% 10-15% a Good performance versus
Slide 7: US Dollar Exchange Rate
Results for 2014 24 month US$ range 1.51 to 1.71 USD Monthly Average Quarterly % Variance vs PY 1.72 £ Strength 10% 1.70 1.68 8% 1.66 6% 1.64 8.7% 1.62 4% 7.1% 6.3% 1.60 2% 1.58 1.56 0% Q1 2014 Q2 Q3 Q4 -2.3% 1.54 -2% 2014 1.52 2013 -4% 1.50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec £ Weakness
Slide 8: Euro Exchange Rate
Results for 2014 24 month € range 1.16 to 1.27 EUR Monthly Average Quarterly % Variance vs PY 1.28 £ Strength 8% 1.27 1.26 1.25 6% 1.24 1.23 1.22 4% 1.21 7.1% 1.20 6.1% 1.19 2% 4.2% 1.18 2.8% 1.17 2014 1.16 2013 0% 1.15 Q1 2014 Q2 Q3 Q4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Slide 9: Summary Headline Results at a Glance
Results for 2014 Summary Headline¹ Results at a Glance % Change Year to 31 December 2014 2013 Reported Constant Currency Revenue £m 11,529 11,019 4.6 11.3 Net Sales £m 10,065 10,076 -0.1 6.3 Net Sales Margin 16.7% 16.5% +0.2² +0.3² PBIT £m 1,681 1,662 1.1 8.0 EBITDA £m 1,910 1,896 0.7 7.5 Diluted EP
Slide 10: Exceptional Gains and Restructuring Costs
Results for 2014 Exceptional Gains and Restructuring Costs Exceptional Gains¹ Restructuring Costs £m £m N. America Europe ROW Total AppNexus 83 Severance (6) (52) (9) (67) Rentrak 68 Property (16) oOh!Media 10 IT (39) Other 35 Other (6) Gains on disposals & remeasurement 196 Total restructuring cost
Slide 11: Revenue Growth
Results for 2014 Revenue Growth +3.1% -6.7% +8.2% £11.5bn £11.0bn +4.6% 2013 Organic Acquisitions FX 2014 11
Slide 12: Net Sales Growth
Results for 2014 Net Sales Growth +3.0% -6.4% +3.3% £10.1bn £10.1bn -0.1% 2013 Organic Acquisitions FX 2014 12
Slide 13: Unaudited Headline IFRS Income Statement
Results for 2014 Unaudited Headline¹ IFRS Income Statement % Change Year to 31 December 2014 2013 Constant £m £m Reported Currency Revenue 11,529 11,019 4.6 11.3 Net sales 10,065 10,076 -0.1 6.3 Operating profit 1,612 1,583 1.8 8.5 Income from associates 69 79 -11.9 -2.1 PBIT 1,681 1,662 1.1 8.0 Net
Slide 14: Unaudited IFRS Income Statement
Results for 2014 Unaudited IFRS Income Statement % Change Year to 31 December 2014 2013 Reported Constant £m £m Currency Revenue 11,529 11,019 4.6 11.3 Net sales 10,065 10,076 -0.1 6.3 Operating Profit pre-goodwill / intangibles 1,612 1,583 1.8 8.5 Net exceptional gain¹ 61 30 97.7 97.7 Goodwill / in
Slide 15: % Growth Versus Prior Year
Results for 2014 % Growth Versus Prior Year Revenue Net Sales Headline1 Headline1 PBIT EPS Like-for-like 8.2 3.3 n/a n/a Acquisitions2 3.1 3.0 n/a n/a Constant currency 11.3 6.3 8.0 12.6 Foreign exchange -6.7 -6.4 -6.9 -7.5 Reportable sterling 4.6 -0.1 1.1 5.1 Reportable US dollars3 9.9 4.9 4.6 8.4
Slide 16: Revenue and Net Sales by Sector
Results for 2014 Revenue and Net Sales by Sector Revenue¹ Net Sales¹ % Change % Change 2014 Reported Constant Like-for- 2014 Reported Constant Like-for- £m Currency like² £m Currency like² Advertising, Media Investment 5,134 12.1 19.8 16.1 4,502 0.9 7.8 5.0 Management Data Investment Management 2,42
Slide 17: Revenue and Net Sales by Region
Results for 2014 Revenue and Net Sales by Region Revenue¹ Net Sales¹ % Change % Change 2014 Reported Constant Like-for- 2014 Reported Constant Like-for- £m Currency like £m Currency like North America 3,900 4.1 10.0 9.5 3,472 -2.1 3.4 3.0 UK 1,640 16.0 16.0 12.9 1,396 7.1 7.1 4.8 Western Continental
Slide 18: Headline PBIT and Net Sales Margin by Sector
Results for 2014 Headline¹ PBIT and Net Sales Margin by Sector Headline PBIT Headline Margin 2014 2013 2014 2013 £m £m % % Advertising, Media Investment 836 824 18.6 18.5 Management Data Investment Management 273 264 15.6 14.3 Public Relations & Public Affairs 139 134 15.8 14.7 Branding & Identity,
Slide 19: Headline PBIT and Net Sales Margin by Region
Results for 2014 Headline¹ PBIT and Net Sales Margin by Region Headline PBIT Headline Margin 2014 2013 2014 2013 £m £m % % North America 622 617 17.9 17.4 UK 221 205 15.8 15.7 Western Continental Europe 277 272 12.9 12.3 Asia Pacific, Latin America, Africa & Middle 561 568 18.3 18.9 East and Central
Slide 20: Revenue Growth by Region
Results for 2014 Revenue Growth¹ by Region 4.8% CENTRAL & EASTERN EUROPE 6.3% Q4 % Q4 FY REGION 11.5% Mature Markets 8.3% 8.2% UNITED FY % KINGDOM Faster Growing 6.5% 8.0% 12.9% Markets 9.4% NORTH Total 7.8% 8.2% AMERICA 5.3% 9.5% WESTERN CONTINENTAL EUROPE 9.0% 3.8% ASIA PACIFIC Traditional 11.5% 5
Slide 21: Net Sales Growth by Region
Results for 2014 Net Sales Growth¹ by Region 0.8% CENTRAL & EASTERN EUROPE 5.1% Q4 % Q4 FY REGION 2.2% Mature Markets 1.6% 2.7% UNITED FY % KINGDOM Faster Growing 3.3% 4.6% 4.8% Markets 1.3% NORTH Total 2.1% 3.3% AMERICA 1.6% 3.0% WESTERN CONTINENTAL EUROPE 3.5% 1.1% ASIA PACIFIC Traditional 5.2% 5.
Slide 22: Top Markets
Results for 2014 Top 5 Markets - Over 62%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth of 9.1%¹ and Net Sales Growth of 3.4%¹ Including associates: Revenue $6.2bn $3.2bn $1.5bn $1.4bn $0.8bn People ‘000² 24 16 15 7 5 USA UK Greater China4 Germany France Revenue Net Sales Revenue Net Sales
Slide 23: BRICs Markets
Results for 2014 BRICs Markets - Over 12% of Revenue and Net Sales, Like-For-Like Revenue Growth of 8.2%¹ and Net Sales Growth of 4.6%¹ Including associates: Revenue $1.5bn $0.6bn $0.5bn $0.3bn WPP Rank5 #3 #8 #11 #17 People ‘000² 15 6 14 2 Greater China4 Brazil India Russia Revenue Net Sales Revenu
Slide 24: Revenue Growth by Country
Results for 2014 Revenue Growth by Country Revenue Growth1 Countries >20% Argentina, India, South Korea 10% to 20% Turkey, UK Average³ to 10% Mainland China, Mexico, Netherlands, Thailand, USA Greater China², Denmark, Germany, Poland, Russia, Spain, 5% to Average³ Sweden Australia, Belgium, Brazil,
Slide 25: Revenue Growth by Category
Results for 2014 Revenue Growth by Category Revenue Growth¹ Categories More than 10% Travel & Airline Average² to 10% Entertainment 5% to Average² Automotive, Drinks, Financial Services Computers, Electronics, Food, Government, Oil, Personal Care Less than 5% & Drugs, Retail, Telecommunications 1 Li
Slide 26: Major New Business Wins Over $100m Billings
Results for 2014 Trade Estimates of Major New Business Wins Over $100m Billings WPP Agency Incumbent Account Office Billings($m) MEC OMC Vodafone Global 1,008 MediaCom PUB Mars Global 747 MediaCom PUB AB InBev N. America 575 Mindshare MEC Blackrock Global 400 David IND Burger King Global 325 Mindsha
Slide 27: Major New Business Wins $30m-$100m Billings
Results for 2014 Trade Estimates of Major New Business Wins $30m-$100m Billings WPP Agency Incumbent Account Office Billings($m) Ogilvy Grey Allianz Global 90 Johannes Leonardo IND TTI Floor Care Global 80 Mindshare HAV Volvo Global 80 MediaCom PUB Procter & Gamble Latin America 75 Maxus/MediaCom DE
Slide 28: Major New Business Losses
Results for 2014 Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) MEC Mindshare Blackrock Global 400 Wunderman IPG/DEN Microsoft Global 320 M4C DEN UK Government UK 235 MediaCom PUB ConAgra USA 135 Mindshare PUB Nestlé UK 96 Grey Ogilvy Allianz Globa
Slide 29: Totals of Major New Business Wins & Losses
Results for 2014 Totals of Major New Business Wins & Losses Over $30m Billings WPP From OMC From PUB From DEN From IPG From HAV Other Total Wins Above 6,481 1,573 2,272 525 150 80 1,881 $30m % Of Total 24% 35% 8% 2% 1% 30% Total Losses Above 1,566 60 381 395 160 - 570 $30m % Of Total 4% 24% 25% 10%
Slide 30: Internal Estimates of Net New Business Wins
Results for 2014 Internal Estimates of Net New Business Wins ($m) Creative Media Total Advertising 1,436 7,002 8,438 Other Businesses 892 - 892 2014 2,328 7,002 9,330 30
Slide 31: Business Wins/Losses Since January 2015
Results for 2014 Trade Estimates of Major New Business Wins/Losses Since 1 January 2015 WPP Agency Incumbent Account Office Billings($m) Grey RKCR/Y&R Vodafone UK 80 JWT Various Treasury Wine Estates Global 70 WINS GroupM IND Airtel India 64 JWT N/A Askme-.com India 56 Team WPP None Pandora Jewelery
Slide 32: Cash Flow
Results for 2014 Cash Flow £m 2014 2013 Operating Profit 1,507 1,410 Non-cash compensation 102 105 Depreciation & amortisation charges 393 438 Net interest paid & similar charges (179) (203) Tax paid (290) (273) Net cash generation 1,533 1,477 32
Slide 33: Uses of Cash Flow
Results for 2014 Uses of Cash Flow £m 2014 2013 Net cash generation 1,533 1,477 Capital expenditure (214) (285) Acquisition payments (495) (221) - Net initial payments¹ (461) (193) - Earnout payments/loan note redemptions (34) (28) Share buy-backs (511) (197) Other (151) 27 Net cash inflow before di
Slide 34: Net Debt – December 2014
Results for 2014 Net Debt – 31 December 2014 % £m 2014 2013 Variance YTD average net debt on constant currency basis (3,001) (3,001) - YTD average net debt on reportable basis (3,001) (2,989) - Net debt at 31 December on constant currency basis (2,275) (2,296) +1% Net debt at 31 December on reportab
Slide 35: Historic Average Net Debt/Headline EBITDA
Results for 2014 Historic Average Net Debt/Headline EBITDA £m Average net debt/headline EBITDA 4,000 3.0 Average net debt EBITDA 3,500 Average net debt/EBITDA 2.5 3,000 2.0 2,500 2,000 )1.5 Target average net debt/headline EBITDA range 1,500 1.0 1,000 0.5 500 0 0.0 2008 2009 2010 2011 2012 2013 2014
Slide 36: Uses of Free Cash Flow
Results for 2014 Uses of Free Cash Flow Category Target FY 2014 FY 2013 Acquisitions¹ £300m-£400m² £461m £193m Share purchases: n/a £511m £197m % of issued share capital 2-3% 3.0% 1.4% Dividend increase n/a 12% 20% Pay-out ratio 45%³ 45% 42% Headroom: Undrawn facilities & n/a £3.9bn £3.1bn surplus c
Slide 37: Earnings and EPS
Results for 2014 Earnings and EPS¹ Pence/ £m share 1,200 90p 84.9p 80.8p Earnings 80p EPS 73.4p 1,000 67.7p 70p 800 56.7p 60p 55.5p 45.8p 50p 44.4p 600 40p 400 30p 20p 200 10p 0 0p 2007 2008 2009 2010 2011 2012 2013 2014 1 Headline Diluted Earnings and Headline Diluted EPS 37
Slide 38: Taxation
Results for 2014 Taxation Headline tax rate of 20.0%, compared to 20.2% for 2013. Reported tax rate of 20.7% in 2014 (2013 – 21.9%). Cash tax paid of £290m compares to £273m paid in 2013. Estimated employer and employee social taxes paid during 2014 almost $1.5bn for the Group. 38
Slide 39: GroupM - This Year Next Year
2 GroupM - This Year Next Year 39
Slide 40: Market Environment: 2014 Global AdSpend Forecast
Market Environment GroupM 2014 Forecast for Global AdSpend 3.9% Source: GroupM This Year Next Year Worldwide Report, December 2014 40
Slide 41: Market Environment: 2015 Global AdSpend Forecast
Market Environment GroupM 2015 Forecast for Global AdSpend 4.9% Source: GroupM This Year Next Year Worldwide Report, December 2014 41
Slide 42: GDP and Advertising Year-on-Year Change
Market Environment GDP and Advertising Year-on-Year Nominal % Change 10.0 8.0 6.0 4.0 2.0 0.0 2005 2007 2009 2011 2013 2015 2017 2019 -2.0 -4.0 GDP -6.0 Advertising -8.0 Source: IMF/GroupM 42
Slide 43: Real Ad Investment
Market Environment Advertising Peak Recovered Real ad investment (2005 = 100) 200 New 150 World 100 Old 50 2005 2007 2009 2011 2013 2015 Source: GroupM This Year Next Year Worldwide Report, December 2014 43
Slide 44: Contributions to 2014 and 2015
Market Environment Contributions to 2014 and 2015 $ bn 8 G2 World 7 2014 2015 6 5 4 3 2 1 0 Argentina Hong Kong Colombia Australia India Japan UK Brazil USA China Source: GroupM This Year Next Year Worldwide Report, December 2014 44
Slide 45: Digital vs Traditional Contributions to 2015 Growth
Market Environment Digi vs Trad Contributions to 2015 YoY Growth $ bn 14 12 10 8 6 Digi 4 Trad 2 0 Old world Growth world -2 -4 Source: GroupM This Year Next Year Worldwide Report, December 2014 45
Slide 46: 2014/2015 Forecast Adspend Growth by Region
Market Environment 2014/2015 Forecast Adspend Growth by Region Growth % YoY 2015 2014 North America 3.8 3.1 Lat Am 9.7 8.9 W Europe 2.4 1.8 CEE 0.1 1.5 Asia-Pacific 6.8 6.0 World 4.9 3.9 Source: GroupM This Year Next Year Worldwide Report, December 2014 46
Slide 47: Four Core Strategic Priorities
3 Four Core Strategic Priorities 47
Slide 48: Ten Key Global Trends
Market Environment Ten Key Global Trends Shift to East, South and South-East. Overcapacity and shortage of human capital. Rise and rise of the web. Growth of retail power. Importance of internal communications. Global and local structures. Relative power of finance and procurement. G
Slide 49: Like-for-Like Growth and GDP
Market Environment Like-for-Like Growth and GDP 11 WPP Like-for-Like Net Sales Growth WPP Like-for-Like Revenue Growth 10 GDP Nominal / Goldman Sachs GDP Nominal / WPP GDP Nominal / Business Council (2015 Only) 9 8 7 6 Growth (%) 5 4 +? 3 2 1 0 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q
Slide 50: Macro and Micro Trends
Market Environment Macro and Micro Trends Macro Micro Uniformly slightly higher nominal and real Clients focused on opportunities in faster growing GDP projections for 2015 than for 2014. markets and on following consumers in new media. Continued recovery in US and UK and Client investment i
Slide 51: Competitor Review
Market Environment Competitor Review1 35 14 30 12 25 10 Market Cap/EBITDA 20 8 Market Capitalisation $bn 15 6 10 4 5 2 0 - WPP OMC PUB Nielsen Dentsu IPG Havas GfK Ipsos Market Cap 2014 Revenue 2014 EBITDA Market Cap/ EBITDA EV/EBITDA 1 Market Capitalisation/ Enterprise Value as of 6 March 2015 51
Slide 52: Four Strategic Priorities
Four Strategic Priorities New Markets, New Media, Data Investment Management and Horizontality Faster growing markets to be 40-45% of total Group revenue over the next five years. New media to be 40-45% of total Group revenue over the next five years. Data Investment Management and quantitativ
Slide 53: The Application of Technology, Big Data and Digital
The Application of Technology, Big Data and Digital Trifecta Technology/Data Trifecta – injecting assets and cash: 1. Partnership with AppNexus, the leading independent provider of programmatic advertising technology. 2. Partnership with Rentrak delivering census level data on TV usage from set-to
Slide 54: New Markets, New Media and Data Investment Management: Today
New Markets, New Media and Data Investment Management Today 1: New Markets 2: New Media 3: Quantitative Today 30%¹ Today 36%¹ Today 52%¹ UK & Western Continental Europe Traditional Media North America Traditional Media Qualitative UK & Western Continental Europe Asia Pacific, Latin America, Africa &
Slide 55: New Markets, New Media and Data Investment Management: Tomorrow
New Markets, New Media and Data Investment Management Tomorrow 1: New Markets 2: New Media 3: Quantitative Target 40-45% Target 40-45% Target 50% UK & Western Continental Europe Traditional Media North America Traditional Media Qualitative UK & Western Continental Europe Asia Pacific, Latin America,
Slide 56: Revenue in Faster Growing Markets 2004-2014
New Markets Revenue in Faster Growing Markets 2004-2014 6.0 5.5 5.0 4.5 4.0 3.5 Revenue ($'bn) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 WPP OMC PUB IPG HAV ¹ WPP reportable US$’s per WPP results and peer $ revenue as shown in annual results presentations ² P
Slide 57: WPP's Performance Remains Strong in BRICs Markets
New Markets WPP’s Performance Remains Strong in BRICs Markets Revenue $'m 1,600 14 year CAGR 11% 1,400 Associates @ 100% 1,200 1,000 800 14 year CAGR 8% 600 14 year CAGR 11% 400 14 year CAGR 40% 200 0 2000 2013 2014 2000 2013 2014 2000 2013 2014 2000 2013 2014 Greater China (including Brazil India R
Slide 58: WPP in Faster Growing Markets
New Markets WPP in Faster Growing Markets Region Market Billings1 % Share1 Rank1 12 month2 People2 $bn Revenue $bn ‘000 Asia Pacific: Greater China3 12.1 37% 1 1.5 15 India 2.8 49% 1 0.5 14 Thailand 1.0 39% 1 0.1 2 4 LatAm: Brazil n/a n/a 1 0.6 6 Mexico 0.9 25% 2 0.2 2 Argentina 0.8 30% 1 0.4 5 Othe
Slide 59: Media Billings by Geography
New Markets Media Billings by Geography Worldwide Ranking by Group as % of the Six Groups % WPP Omnicom Publicis Dentsu IPG Havas 40 35 30 25 20 15 10 5 0 Worldwide Americas Europe Asia Pacific Source: RECMA July 2014 billings report, based on 2013 data 59
Slide 60: Media time spent vs. ad spend not aligned
New Media Media time spent vs. ad spend not aligned Internet/Mobile (upside…) vs. Print (downside...) % of Time Spent in Media vs. % of Advertising Spending, USA 2013 50% Time Spent Ad Spend 45% 45% 40% 38% 35% ~$30bn+ Opportunity 30% in USA 25% 25% 20% 22% 20% 19% 15% 10% 12% 10% 5% 5% 4% 0% Print
Slide 61: WPP's Digital Strategy
New Media WPP’s Digital Strategy 1. Digital • Invest in digital in all of our businesses through training, Everywhere recruitment, acquisitions, etc. 2. Specialist • Develop new services beyond traditional advertising, e.g, Digital programmatic platform, web development, DSPs, mobile, Expertise soci
Slide 62: Xaxis - World's Largest Programmatic Media and Technology Platform
New Media Xaxis - World’s Largest Programmatic Media and Technology Platform GLOBAL ANNUAL CLIENTS GROWTH SALES YoY 800+ employees $775MM 2,750+ 30%+ in 40 markets (2014) North America EMEA Latin America • 28% net sales growth • 25% net sales growth • 420% net sales growth APAC • 77% net sales growt
Slide 63: Xaxis Markets February 2015 Update
New Media Xaxis Markets February 2015 Update Group 1: Mature markets Group 4: USA New markets 2015 Canada Finland Austria Greece Germany Hungary Denmark Slovakia Italy South Africa Netherlands Group 2: Growth markets Poland Group 3: Belgium Spain New markets 2014 Norway Turkey Czech Republic Portuga
Slide 64: Data Investment Management and Quantitative Disciplines
Data Investment Management and Quantitative Disciplines WPP Advantage Marketing becoming more data driven. Clients need simplified better utilisation of existing data and help in managing explosion of new data. Digital campaigns driven by data analytics and feedback to shape new activity. Ab
Slide 65: Horizontality
Horizontality Over 188,000 people1 in over 3,000 offices in 111 countries with access to almost $27bn1 of annual revenue 1 Including associates and investments 65
Slide 66: Horizontality: Account Teams
Horizontality 46 Account Teams – Over 38,000 WPP employees work on these clients 66
Slide 67: Horizontality: Country and Regional Managers
Horizontality 16 Current Country and Regional Managers – People, Clients, Acquisitions Europe Covering 50 out Eastern of 111 countries Europe Portugal Turkey South Korea Greater China Italy Israel Mexico ME & N Africa India Vietnam Indonesia Andina Australia New Zealand 67
Slide 68: Horizontality
Horizontality People, clients, acquisitions. Ensure our people work across our businesses and geographies to deliver best resources to clients. Deliver specialist skills (e.g. digital, shopper, analytics, sustainability, retailing, internal communications and media and entertainment) to client
Slide 69: Our Billion $ Revenue Brands
Our Billion $ Revenue Brands 69
Slide 70: Digital and Faster Growing Markets
Digital and Faster Growing Markets Two Key Long-Term Growth Drivers Overall 57% of 2014 Actual Revenue Faster growing markets Digital 30% 36% of revenue of revenue Digital in faster growing markets 9% of revenue 70
Slide 71: Key Objectives
4 Key Objectives W PP
Slide 72: We Continue to Focus on Our Key Objectives
Key Objectives We Continue to Focus on Our Key Objectives Improving operating margins. Increasing flexibility in the cost base. Using free cash flow to enhance share owner value and improve return on capital employed. Developing the role of the parent company. Emphasising net sales growth
Slide 73: Improving Operating Margins
Key Objectives Improving Operating Margins PBIT1 PBIT1 margin £’m % Long term target 19.7% 1,800 20% Long-term PBIT margin 1,662 1,681 targets include 1.0% margin improvement from 1,600 19% operational efficiency 1,531 programmes 1,429 18% 1,400 1,229 16.7% 17% 16.5% 1,200 16.1% 1,017 15.5% 16% 1,00
Slide 74: Operational Effectiveness Programmes
Key Objectives Improving Operating Margins Operational Effectiveness Programmes Shared Service Centres to generate scale and improve process efficiency. Off-shoring of certain tasks from high cost markets with outsourcing where appropriate to take advantage of scale and skills of major providers
Slide 75: Increasing Flexibility in The Cost Base
Key Objectives Increasing Flexibility in The Cost Base Change in Variable Costs 8.5 8.2 8.0 7.8 7.3 2010 2011 2012 2013 2014 Variable Staff Costs as % of Net Sales 75
Slide 76: Dividend Pay-Out Ratio
Key Objectives Using Free Cash Flow to Enhance Dividend Pay-Out Ratio 90p 50% Target pay-out ratio¹ 80p 45% Headline Diluted EPS Dividend Declared/ Share 40% 70p Dividend Pay-Out Ratio 35% 60p 30% 50p 25% 40p 20% 30p 15% 20p 10% 10p 5% 0p 0% 2008 2009 2010 2011 2012 2013 2014 Headline Diluted EPS 55
Slide 77: Distributions to Share Owners
Key Objectives Using Free Cash Flow to Enhance Share Owner Value Distributions to Share Owners¹ £’m 1,000 5.9% 900 Buy-backs 800 Dividends paid 700 511 3.8% 600 500 197 4.3% 4.5% 47%² 400 134 67%² 300 4.7% 182 3.0% 70%² 3.4% 46 460 200 112 9 55%² 397 95%² 81%² 59%² 307 100 190 201 218 162 0 2008 200
Slide 78: Distributions to Share Owners Since 2004
Key Objectives Using Free Cash Flow to Enhance Share Owner Value Distributions to Share Owners Since 2004 £’m 7,852 8,000 Cumulative from 1 January 2004: Buy-backs 7,000 6,716 Over the last ten Dividends paid years we have Headline Earnings returned £4.3bn to 6,000 5,628 % of Headline Earnings share
Slide 79: Using Free Cash Flow for Acquisitions
Key Objectives Using Free Cash Flow for Acquisitions Significant pipeline of reasonably priced small- and medium-sized potential acquisitions. Continue to focus on the faster growing geographical and functional services, particularly direct, digital & interactive and data investment management.
Slide 80: Acquisitions and Investments
Key Objectives Acquisitions and Investments Faster Growing Quantitative & Markets Appnexus (USA)² Digital Bannerconnect (Netherlands) CMC Capital Partners (USA)² AMVG (Turkey) HEYDAY (NEW ZEALAND) Cognifide (UK) CB’A (TURKEY)³ Applogix (South Africa) IBOPE (LATIN AMERICA)¹ Data Republic (Spain) Circ
Slide 81: Acquisitions and Investments – Since January 2015
Key Objectives Acquisitions and Investments – Since 1 January 2015 Faster Growing Quantitative & Markets Digital Bruin Sports Capital (USA)² OPR Healthcare (Australia)¹ Phantasia (Peru) comScore (USA)² ¹ Step-ups in investments, associates and subsidiaries’ equity ² Investment 81
Slide 82: Return on Equity and WACC
Key Objectives Return on Equity and WACC¹ % 16 15.0 14.4 14 13.6 12.9 12 11.1 10 9.5 8 6 4 2 0 2009 2010 2011 2012 2013 2014 Return on Equity WACC ¹ Return on equity is headline diluted EPS divided by equity shareowners funds per share; WACC Is weighted average cost of capital 82
Slide 83: Improving the Creative Capabilities and Reputation
Key Objectives Improving the Creative Capabilities and Reputation of all Our Businesses By placing greater emphasis on recruitment. By recognising creative success tangibly and intangibly. By acquiring highly regarded creative businesses. By placing greater emphasis on awards. 1st as a Gro
Slide 84: Improving the Creative Reputation of all our Businesses
Key Objectives Improving the Creative Reputation of all our Businesses Network Points1 1 Ogilvy & Mather 663 2 DDB 608 Ogilvy & Mather Cannes Network of the Year 3 BBDO 552 2012, 2013 and 2014 4 Y&R 423 5 Leo Burnett 336 6 TBWA 294 Grey Global Agency of the Year 2013 7 FCB 253 8 Publicis 247 9 McCan
Slide 85: Outlook and Conclusions
5 Outlook and Conclusions W PP
Slide 86: Conclusions 2014
Conclusions 2014 Another Record Year Despite Strong Currency Headwinds Strong year with market leading like-for-like revenue and net sales growth enhanced by 3% of revenue from acquisitions. Strong currency headwind ravages reported revenue and net sales. Margin improvement of 0.3 margin point
Slide 87: Our Long-Term Financial Model
Outlook for 2015 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 th
Slide 88: Outlook for 2015
Outlook for 2015 Our budgets indicate − Like-for-like revenue and net sales growth of over 3%. − Margin improvement in line with our target of 0.3 margin points pre-currency. − Acquisitions to add over 2% to revenue. At current exchange rates full year currency impact is balanced and will likely
Slide 89: 29 Year History
6 29 Year History (Hard Copy Only) 89
Slide 90: WPP Reported Revenue
29 Year History WPP Reported Revenue £’m 13,000 12,000 11,529 11,019 11,000 10,373 10,022 10,000 9,331 9,000 8,684 29 year CAGR 32% 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 1,7471,918 2,000 1,5551,691 1,2641,2041,2731,4311,427 1,005 1,000 547 284
Slide 91: WPP Net Sales
29 Year History WPP Net Sales £’m 11,000 10,065 10,076 10,000 9,515 9,239 9,000 8,561 7,981 8,000 7,009 29 year CAGR 31% 7,000 5,850 6,000 5,611 5,133 5,000 4,074 4,000 3,7903,6903,869 3,000 2,736 1,855 2,000 1,633 1,3281,4371,469 1,0761,0161,0701,2091,204 843 1,000 442 219 4 24 0 91
Slide 92: WPP Organic Growth
29 Year History WPP Organic Growth % 20 18.6 Organic Revenue Growth Organic Net Sales Growth 15.0 15 13.9 14.1 11.8 10 8.0 8.3 8.4 8.0 8.0 29 year average organic revenue growth : 5.6% 8.2 6.3 5.7 5.5 5.4 5.3 5.3 5.2 5.0 5 4.0 4.0 3.5 3.3 2.7 2.9 0.7 N/A 0 -3.0 -5 -4.7 -5.9 -8.1 -10 Note: Estimates
Slide 93: WPP PBIT and Margins
29 Year History WPP PBIT and Margins PBIT PBIT margin £’m 2004 onwards PBIT reported % 16.7% 1,600 16.5% under IFRS 15.9%16.0% 16.1% 15.7%15.8% 15.5% 15.3% 16% 15.0% 14.8% 14.9%14.7% 15.3% 1,400 14.4% 14.0% 15.0% 15.1% 13.8%13.7% 15.0% 14.8% 14.5% 14.5% 14.3% 14% 14.3% 1,200 12.7% 14.0%13.0% 14.1%14
Slide 94: WPP Headline Diluted EPS
History WPP Headline Diluted EPS Post 1992 Rights Issue pence 90 84.9 80.8 80 73.4 70 67.7 21 Year CAGR: 14% 60 55.5 56.7 50 45.8 44.4 42.0 40 36.0 32.3 30.3 30.9 29.0 27.9 30 22.7 23.8 18.8 20 15.7 13.5 9.4 10 6.5 5.0 0 UK GAAP IFRS Note: 1993 adjusted to reflect 1992 rights issue. Headline Diluted
Slide 95: Other Financial Information
7 Other Financial Information (Hard Copy only) 95
Slide 96: Impact of Foreign Exchange
Results for 2014 Impact of Foreign Exchange Q1 Act Q2 Act Q3 Act Q4 Act 0.0% -1.0% -2.0% Change versus Prior Year -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% -9.0% Revenue Net Sales -10.0% Full year impact of -6.7% on revenue and -6.4% on net sales. 96
Slide 97: Effects of Currency
Results for 2014 Effects of Currency 2014 2013 Sterling Stronger US$ 1.65 1.56 5% Net sales were reduced by € 1.24 1.18 5% £656m and headline PBIT¹ by ¥ 174 153 14% £112m as a result of the strength of £ sterling versus prior year. Chinese Renminbi 10.2 9.6 6% Brazilian Real 3.87 3.38 14% Australian
Slide 98: Exchange Rate Analysis (USD)
Exchange Rate Analysis Range since 1st January 2013 $1.51 - $1.71 USD Monthly Average Quarterly % Variance vs PY 1.75 £ Strength 10% 2015 Est 8% 1.70 2014 6% 2013 4% 8.7% 6.3% 7.1% 1.65 2% 0% Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 1.60 -2.3% -2.5% -2% -4% -8.2% -8.1% -9.0% 1.55 -6% -8% 1.50 -10% Jan Feb
Slide 99: Exchange Rate Analysis (EUR)
Exchange Rate Analysis Range since 1st January 2013 €1.16 - €1.38 EUR Monthly Average Quarterly % Variance vs PY 1.40 £ Strength 12% 1.35 10% 2015 Est 2014 8% 1.30 2013 6% 11.0% 1.25 10.2% 8.7% 4% 8.1% 7.1% 6.1% 1.20 2% 4.2% 2.8% 1.15 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Q1 2014 Q2 Q3
Slide 100: Net Finance Costs
Results for 2014 Net Finance Costs £m 2014 2013 B/(W) Interest on net debt 184 197 13 Investment income (26) (10) 16 IAS 19 (Pensions) 10 13 3 IAS 32 (Convertibles) - 4 4 Sub-total (16) 7 23 Headline finance costs 168 204 36 IAS 39 (Financial Instruments) (51) (21) 30 Net finance costs 117 183 66 10
Slide 101: Pensions Deficit
Results for 2014 Pensions Deficit £m 2014 2013 Deficit B/F (247) (336) Service cost (17) (25) Plan liabilities interest charge (41) (40) Funding 68 48 Investment returns 102 32 Change in valuation assumptions¹ (155) 73 Other movements (4) - Movements in the year excluding FX (47) 88 Foreign exchange
Slide 102: Earnout Accrual
Results for 2014 Earnout Accrual 2014 Rollforward £m Expected Payments £m 31 December 2013 193 2015 67 Earnouts paid (34) 2016 67 New acquisitions 136 2017 65 Revised estimates taken to goodwill 26 2018 35 Revaluations of payments (13) 2019 52 Increase excluding FX 308 2020+ 25 Foreign exchange impa
Slide 103: Ordinary Shares - Basic
Results for 2014 Ordinary Shares - Basic December December 2014 2013 No. of Shares (million) Actual Actual 1 January 1,349 1,265 Bond conversion - 77 Treasury share cancellations (27) - Option exercise 4 7 31 December 1,326 1,349 1.7% Weighted Average 1,339 1,316 ESOP, Treasury & Other (32) (22) Ave
Slide 104: Ordinary Shares – Diluted
Results for 2014 Ordinary Shares – Diluted December December 2014 2013 No. of Shares (million) Actual Actual Average Basic 1,307 1,294 Share Option Dilution 5 7 Other Potentially Issuable Shares 25 31 Sub-Total 1,337 1,332 -0.4% Convertibles: £450m 5.75% bond - 28 Diluted Shares 1,337 1,360 1.7% 104
Slide 105: Dividends and Share Buy-Backs
Key Priorities, Objectives and Strategy Using Free Cash Flow to Enhance Share Owner Value Dividends and Share Buy-Backs 2014 final dividend increased by 12.4% to 26.58p per share (2013 – 23.65p) to give a full year dividend of 38.2p per share (2013 – 34.21p), up 11.7%. Distributions to share own
Slide 106: Revenue by Industry
Results for 2014 Revenue by Industry Other 8% Auto 13% T&E 6% Telcom Consumer Products 6% 6% Technology 6% Personal Care Retail 15% 4% Healthcare 9% Government 2% Oil Food & Drink 2% 14% Financial Services 9% Chart represents the amount of revenue attributed to each industry expressed as a percentag
Slide 107: 2014 Revenue by Geography
Key Priorities, Objectives and Strategy 2014 Revenue by Geography $19.0bn 5.6 $15.3bn Asia Pacific, Latin America, Africa & Middle East, CEE 2.4 Western Europe N America 4.2 6.9 $9.6bn 2.4 $7.5bn 1.8 $6.3bn 2.6 1.5 8.7 4.5 6.4 $2.5bn 4.6 4.2 0.5 1.1 1.2 0.7 0.8 WPP Omnicom Publicis IPG Dentsu Havas
Slide 108: WPP Clear No. 1 in Brazil
New Markets WPP Clear No. 1 in Brazil¹ RECMA does not cover Brazil, IBOPE measures media spend with the “IBOPE Rate Card Monitor”. Agency R$’bn Rank R$’bn Rank Y&R 7.6 1 WPP 15.1 1 Ogilvy/Grey141 4.8 2 IPG 7.4 2 W/McCann 3.9 3 PUB 4.8 3 Borghi/Lowe 3.5 4 OMC 3.4 4 Almap/BBDO 3.4 5 HAV 2.9 5 Havas
Slide 109: 2014 Revenue by Sector
Key Priorities, Objectives and Strategy 2014 Revenue by Sector $19.0bn 4.0 Data Investment Management $15.3bn Marketing Services Advertising Media 6.5 8.1 4 $9.6bn $7.5bn 3.8 5.5 $6.3bn 3.3 0.3 5.5 2.7 2.8 6.0 $2.5bn 4.7 0.9 1.7 0.9 1.4 1.4 0.7 WPP Omnicom Publicis IPG Dentsu Havas Source: 1 WPP rep
Slide 110: Digital In All Our Businesses
Digital In All Our Businesses Global Scale and Quality Digital Revenue ($billion – 2014 Full Year) 6.9 4.0 2.7 1.8 1.1 0.6 WPP Publicis Omnicom Dentsu IPG Havas 1 Peer digital revenue according to Sanford Bernstein %’s applied to FY 2014 US$ revenue. 110
Slide 111: Revenue Share Continues to Increase
New Media Revenue Share Continues to Increase 40- WPP Share of Digital Revenue 45% 36% 35% 33%¹ 30% 21% 12% 2000 2006 2011 2012 2013 2014 Target in 5 years 1 Including AKQA Pro-Forma 111
Slide 112: WPP Position in Direct, Digital and Interactive
Key Priorities, Objectives & Strategy WPP Position in Direct, Digital and Interactive Revenue $’m Direct, Digital and Interactive Networks 3,255 (OgilvyOne, Wunderman, Geometry, VML, WPP Digital & AKQA) % of Group revenue 17% Specialist Direct, Digital and Interactive resources: - Data Investment Ma
Slide 113: Impact of Xaxis on our Revenue
Impact of Xaxis on our Revenue Underlying principles and worked example Accounting Principles driving New Model Traditional new model Model Billings 150 150 Billings to be reported as revenue if Company is responsible for Cost of Media - 120 fulfilment. Company acts as principal in Revenue 150 3
Slide 114: Debt Maturity Profile
Debt Maturity Profile £m 31st Dec 2014 Bonds Maturity Total Total Credit Drawn 700 US bond $500m (5.625% ’43) 321 321 US bond $300m (5.125% ’42) 192 192 600 Eurobonds €750m (2.25% ’26) 583 583 US bond $750m (3.75% ’24) 481 481 500 Eurobonds $750m (3.00% ’23) 583 583 Total drawn (₤) 400 US bond $500m
Slide 115: Fourth Quarter Acquisitions
Results for 2014 Fourth Quarter Acquisitions CB’a – Turkey (Ogilvy)¹ CB'a Turkey is a branding and design agency in Turkey. Founded in 2006 and employing 15 people in Istanbul, CB'a Turkey's clients include Ulker, Coca-Cola and Nestlé. Clarus – Mexico (J. Walter Thompson Worldwide) Clarus is a leadi
Slide 116: Fourth Quarter Acquisitions
Results for 2014 Fourth Quarter Acquisitions Habitus – Ecuador (Kantar) Habitus is the leading market research company in Ecuador. Clients include the Interamerican Development Bank, Coca-Cola, SAB Miller and Nestlé. Habitus employs 80 people and is based in Quito with an office in Guayaquil. It was
Slide 117: Fourth Quarter Acquisitions
Results for 2014 Fourth Quarter Acquisitions NexTracker/SyncNow – France (Kantar) NexTracker is an audience measurement business and SyncNow is a second screen audio watermarking business. They are based in Rennes, France and SyncNow is recognised as a world leader in audio watermarking technology,
Slide 118: Fourth Quarter Acquisitions
Results for 2014 Fourth Quarter Acquisitions Rentrak – USA (GroupM and Kantar)¹ GroupM and Kantar Media have entered into agreements with Rentrak, the US-based film and television measurement company. The partnerships are designed to deliver new services in television measurement and consumer insigh
Slide 119: Structure and Competitive Position
8 Structure and Competitive Position (Hard Copy Only) 119
Slide 120: WPP Today
WPP Today WPP is the world’s largest communication services group with almost 179,000 people (including associates) in over 3,000 offices in 111 countries worldwide. 355 of the Fortune Global 500, all 30 of the Dow Jones 30 and 71 of the NASDAQ 100. 534 clients in all four disciplines and 426 cl
Slide 121: WPP Today: Brands
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 Millward Brown Ogilvy & Mather TNS Y&R Advertising BrandAsset Valuator and BRANDZ Grey OgilvyOne Mindshare Wunderman MEC Geometry Global MediaCom POSSIBLE Ma
Slide 122: WPP Today: Revenue and PBIT
WPP Today Revenue £11.5bn WPP PBIT £1.681bn Branding & Identity, Media Data Public Relations Healthcare and Advertising Investment Investment & WPP Digital Management Specialist Management Public Affairs Communications Revenue £5.1bn Revenue £2.4bn Revenue £0.9bn Revenue £3.1bn Revenue Broader £4.1b
Slide 123: WPP Today: Advertising
WPP Today Advertising J. Walter Thompson Ogilvy & Y&R Grey Worldwide Mather Advertising (Global) (Global) (Global) (Global) Non-Exec Chairman: Chairman and CEO: CEO: Chairman & CEO: Bob Jeffrey Miles Young David Sable Jim Heekin Chairman & CEO: Gustavo Martinez DY&R Asatsu - DK Chime Joint Venture (
Slide 124: WPP Today: Media Investment Management
WPP Today Media Investment Chairman: Irwin Gotlieb Management: President: Dominic Proctor GroupM Mindshare MEC MediaCom Maxus KR Media Xaxis tenthavenue CEO: CEO: CEO: CEO: CEO: Chairman: CEO: Rupert Day Nick Emery Charles Courtier Stephen Allan Lindsay Pattison Jean-Philippe Bertaux David Moore CEO
Slide 125: Media Investment Management - Competitive Worldwide Ranking
WPP Today Media Investment Management - Competitive Worldwide Ranking Americas EMEA Asia Pacific Worldwide Mindshare 4 6 1 4 MEC 7 5 7 7 MediaCom 8 2 3 6 Maxus 12 12 9 12 GroupM 2 1 1 1 Source: RECMA July 2014 Billings Rankings report, based on 2013 data. 125
Slide 126: WPP Today: Data Investment Management
WPP Today Data Investment Chairman & CEO: Management: Eric Salama Kantar Kantar Media Millward Brown Kantar Japan Added Value Kantar Retail IMRB International Kantar Health The Futures Company Kantar TNS Worldpanel Graphical Digital Agency Lightspeed GMI Benenson Strategy 126
Slide 127: Data Investment Management – Worldwide Competitive Ranking
WPP Today Data Investment Management – Worldwide Competitive Ranking 1. The Nielsen Company 2. Kantar 3. IMS Health 4. Ipsos 5. Gfk 6. IRI 7. Westat Inc. 8. Dunnhumby 9. Intage Inc. 10. NPD Group Source: ESOMAR 2014 report. Top 25 Global research organizations ranking based on 2013 consolidated reve
Slide 128: WPP Today: Public Relations & Public Affairs
WPP Today Public Relations & Public Affairs Hill+Knowlton Ogilvy Public Burson- Specialist Cohn & Strategies Relations Marsteller Public Relations Wolfe Chairman & CEO: Chairman:Chris Graves Founding Chairman: CEO: Donna Imperato Jack Martin Harold Burson CEO: Stuart Smith Chairman & CEO: Don Baer C
Slide 129: WPP Today: Branding & Identity
WPP Today Branding & Identity: BtoD Group The Partners Landor Brand Union FITCH Addison Lambie-Nairn CEO: Lois Jacobs VBAT CEO: Simon Bolton Chairman: Tim Greenhalgh Peclers CEO: Simon Bolton 129
Slide 130: WPP Today: Healthcare
WPP Today Healthcare Chairman: John Zweig Ogilvy CommonHealth Grey Healthcare Group Sudler & Hennessey CEO: CEO: Chairman & CEO: Matt Geigerich Lynn O’Connor Vos Jed Beitler 130
Slide 131: WPP Today: Direct, Digital and Interactive Networks
WPP Today Direct, Digital and Interactive - Networks Mirum Geometry Wunderman WPP Digital AKQA OgilvyOne¹ VML JWT Digital Global Chairman: Chairman Emeritus: Chairman: CEO: Chairman: Chairman & CEO: President & CEO: Stefano Zunino Lester Wunderman Toby Hoare Mark Read Tom Bedecarre Brian Jon Cook CE
Slide 132: WPP Today: WPP Digital
WPP Today WPP Digital CEO: Mark Read COO: Mark Povey Blue State POSSIBLE Hogarth Rockfish F.biz Acceleration Cognifide Salmon Digital CEO: CEO: CEO: CEO: Co CEOs: CEO: CEO: CEO: Shane Atchison Barry Jones Kenny Tomlin Joe Rospars Pedro Reiss Jacques Miro Walker Neil Stewart Roberto Grosman van Nieke
Slide 133: WPP Today: Specialist Communications
WPP Today Specialist Communications Chairman: John Zweig COO N. America: MaryEllen Howe COO International: Laurence Mellman Relationship Media, Technology Sports Demographic Industry Sector Field Marketing and & Production Marketing Marketing Marketing Marketing Promotion Services Imagina² Barrows¹
Slide 134: Results for 2014
Results for 2014 London CANNES LIONS 2011/12/13/ 14 HOLDING COMPANY OF THE YEAR EFFIE AWARDS 2012/13/14 E MOST EFFECTIVE HOLDING COMPANY