Wpp Plc · LSE:WPP
Wpp — H1 2009 Earnings Presentation
60 slides from Wpp's earnings presentation, August 2009
Slide 1: 2009 Interim Results
WPP 2009 Interim Results London August 2009 1
Slide 2: Agenda
WPP 1 2009 Interim Results 2 Key Priorities, Objectives and Strategy 3 Conclusions 2
Slide 3: 1 2009 Interim Results
WPP 1 2009 Interim Results 3
Slide 4: 2009 Interim Results
2009 Interim Results Billings up over 11% to £18.742 billion. Reported revenue up 28.4%. On a constant currency basis, revenue up 8.6%. Like-for-like revenue fell 8.3% and gross margin by less at 7.8%. Headline PBIT down 24.5% to £342.2m from £453.4m. Headline operating margins down 4.5 margin point
Slide 5: 2009 Interim Results
2009 Interim Results Headline PBT down 35.2% to £252.2m from £389.1m. Tax rate on headline profits improved 2.1 percentage points to 24.8% from 26.9%. Diluted headline EPS down 40.8% to 12.9p from 21.8p. Interim dividend maintained at 5.19p per share. Estimated net new business billings of £1.208 bi
Slide 6: Growth versus prior period
2009 Interim Results % growth vs prior period Revenue Headline² Headline² PBIT EPS Like-for-like -8.3 n/a n/a Acquisitions 16.9 n/a n/a Constant currency 8.6 -35.1 -51.0 Foreign exchange 19.8 10.6 10.2 Reportable sterling 28.4 -24.5 -40.8 Reportable US dollars¹ -2.9 -42.1 -54.0 ¹ Translated into US$
Slide 7: Unaudited Headline IFRS Income Statement
2009 Interim Results Unaudited Headline¹ IFRS Income Statement Six months to 30 June 2009 2008 Change Constant £m £m % Currency % Revenue 4,288.7 3,339.1 28.4 8.6 Headline operating profit 322.7 432.7 -25.4 -35.8 Income from associates 19.5 20.7 -5.8 -20.8 PBIT 342.2 453.4 -24.5 -35.1 Net finance co
Slide 8: Unaudited IFRS Income Statement
2009 Interim Results Unaudited IFRS Income Statement Six months to 30 June Constant 2009 2008 Change Currency £m £m % % Revenue 4,288.7 3,339.1 28.4 8.6 Operating Profit pre-goodwill/ intangibles 322.7 432.7 -25.4 -35.8 Goodwill/ intangibles charges, FA gains (124.0) (54.9) -125.9 -108.0 Operating P
Slide 9: Operating Expenses
2009 Interim Results Operating Expenses (like-for-like Sterling1 £’m) Six months to 30th June % B/(W) 2009 2008 Revenue 4,289 4,687 (8.3) Gross Margin 3,955 4,292 (7.8) Staff Cost 2,663 2,751 3.2 Establishment 350 318 (10.1) Other G&A 620 674 8.2 Total Operating Expenses 3,633 3,743 2.9 • Property i
Slide 10: Severance
2009 Interim Results Severance Charge of £66m ($100m) in H1 or ca 1.5% of revenue, or 1.0% margin points more than in H1 2008 Trends in Revenue and Staffing (%) Organic Avg Staff Revenue Staff v Dec 08 March 09 (5.8) (0.6) (3.1) June 09 (8.3) (2.8) (5.2) July 09 - (3.5) (6.3) Our average payment in
Slide 11: Revenue by Discipline
2009 Interim Results Revenue by Discipline 2009 2008 % Change £m £m Reported Constant Like-for- Currency like Advertising, Media Investment Management 1,644.4 1,521.3 8.1 -7.5 -7.8 Consumer Insight 1,123.8 486.5 131.0 97.4 -10.3¹ Public Relations & Public Affairs 403.4 356.1 13.3 -6.9 -8.2 Branding
Slide 12: Revenue by Region
2009 Interim Results Revenue by Region 2009 2008 % Change £m £m Reported Constant Like-for- Currency like North America 1,542.2 1,189.7 29.6 -1.2 -10.1 UK 509.3 450.2 13.1 13.1 -5.3 Western Continental Europe 1,131.3 832.4 35.9 19.7 -10.5 Asia Pacific, Latin America, Africa & Middle East, Central &
Slide 13: Headline PBIT and Margin by Discipline
2009 Interim Results Headline PBIT¹ and Margin¹ by Discipline Headline PBIT Headline Margin 2009 2008 2009 2008 £m £m % % Advertising, Media Investment Management 167.2 242.6 10.2 15.9 Consumer Insight 68.6 49.3 6.1 10.1 Public Relations & Public Affairs 46.6 57.2 11.6 16.1 Branding & Identity, Heal
Slide 14: Headline PBIT and Margin by Region
2009 Interim Results Headline PBIT¹ and Margin¹ by Region Headline PBIT Headline Margin 2009 2008 2009 2008 £m £m % % North America 148.0 187.4 9.6 15.8 UK 50.1 58.2 9.8 12.9 Western Continental Europe 61.1 106.5 5.4 12.8 Asia Pacific, Latin America, Africa & Middle East, Central & Eastern Europe 83
Slide 15: Growth by Country
2009 Interim Results Growth by Country Revenue Growth¹ Countries Above 0% Argentina, Brazil, Poland, Russia, South Africa 0 to -5% Mainland China, France, India, Mexico > -5% Australia, Belgium, Canada, Denmark, Dubai, Germany, Hong Kong, Italy, Japan, Netherlands, Norway, Singapore, Spain, Sweden,
Slide 16: Growth by Category
2009 Interim Results Growth by Category Revenue Growth¹ Categories Above 0% Computers, Electronics, Entertainment 0 to -5% Drinks, Food, Government, Oil, Personal Care & Drugs > -5% Automotive, Financial Services, Retail, Telecommunications, Travel & Airline 1 Like-for-like 16
Slide 17: Effects of Sterling Weakness
2009 Interim Results Effects of Sterling Weakness Currency movements accounted for a 19.8% increase in revenue, reflecting the weakness of the £ sterling against the US dollar, the euro and the Japanese yen. Sterling was weaker on average in the first half of 2009 than in 2008 by 24.4% against the d
Slide 18: Trade Estimates of Major New Business Wins
2009 Interim Results Trade Estimates of Major New Business Wins Agency Account Office Billings ($m) mec Activision Blizzard mec 225 Wunderman Microsoft Worldwide 200 Grey NFL USA 160 Mindshare Zurich Worldwide 150 Wunderman Nokia Worldwide Not disclosed mec Sony Latam 150 JWT Microsoft Worldwide 100
Slide 19: Trade Estimates of Major New Business Wins
2009 Interim Results Trade Estimates of Major New Business Wins Agency Account Office Billings ($m) Mindshare Intercontinental Hotels Group USA 80 TNS European Commission Europe 80 WPP Vodafone Global Strategy Worldwide 50 MAXUS Yili Dairy China 50 MediaCom LVMH UK 47 Y&R Hotels.com USA 40 Grey TJ M
Slide 20: Trade Estimates of Major New Business Losses
2009 Interim Results Trade Estimates of Major New Business Losses Agency Account Office Billings ($m) Mindshare Bristol-Myers Squibb Worldwide 420 MediaCom Nokia Worldwide 260 Mindshare Wrigley USA 250 MediaCom LVMH USA 180 Ogilvy Kraft USA 80 mec Canon EMEA 75 Maxus Red Bull Asia 71 mec Long John S
Slide 21: Internal Estimates of Net New Business Wins
2009 Interim Results Internal Estimates of Net New Business Wins Billings ($m) Creative Media Total Advertising 540 908 1,448 Other Businesses 424 - 424 Total First Half 2009 964 908 1,872 21
Slide 22: New Business Wins & Losses Since 1 July
2009 Interim Results Trade Estimates of Major New Business Wins & Losses Since 1 July Agency Account Office Billings ($m) mec Mercedes Benz Germany 200 WINS JWT Microsoft Worldwide 100 JWT B&Q UK 60 LOSSES MediaCom China Unicom China 51 22
Slide 23: Cash Flow
2009 Interim Results Cash Flow 2009 2008 £m £m Operating profit 199 378 Non-cash compensation 31 30 Depreciation, amortisation & impairment 242 125 Net interest paid & similar charges (105) (67) Tax paid (95) (84) Net cash generation 272 382 23
Slide 24: Uses of Cash Flow
2009 Interim Results Uses of Cash Flow 2009 2008 £m £m Net cash generation 272 382 Capital expenditure (129) (74) Acquisition payments: − Net initial payments¹ (55) (143) − Earnout payments (38) (30) − Loan note redemptions - (3) (93) (176) Share repurchases (9) (112) Other (11) 11 Net cash inflow b
Slide 25: Net Finance Costs/(Income)
2009 Interim Results Net Finance Costs/ (Income) £m 2009 2008 B/(W) Net debt interest 84.0 64.7 (19.3) Investment income (5.0) (5.0) - IAS 19 (Pensions) 8.6 4.3 (4.3) Earnout interest 1.3 0.4 (0.9) IAS 32 (Convertibles) 1.1 (0.1) (1.2) 6.0 (0.4) (6.4) Headline finance costs 90.0 64.3 (25.7) IAS 39 (
Slide 26: Net Debt - June 2009
2009 Interim Results Net Debt - 30 June 2009 2009 2008 % £m £m Net debt at 30 June (3,447) (1,857) (86) YTD average net debt on constant (3,507) (2,256) (55) currency basis YTD average net debt on (3,507) (1,873) (87) reportable currency basis Headline finance costs (90) (64) (41) Interest cover on
Slide 27: Impact of FX on debt year to June 2009
2009 Interim Results Impact of FX on debt year to June 2009 £ millions 4,000 3,752 3,500 3,447 Base FX TNS 3,068 1,333 3,000 1,333 2,500 2,221 2,172 1,333 2,000 364 1,500 2,419 2,172 2,114 1,000 1,857 1,735 500 0 'Jun 08 Sep-08 Dec-08 Mar-09 Jun-09 27
Slide 28: Debt Maturity Profile
2009 Interim Results Debt Maturity Profile £m As at 30 June 2009 Maturity Total Total 2009 2010 2011 2012 2013 2014 2015 2016 2017 . 2020 Credit Drawn £ bonds £200m (6.375% ’20) 200 200 200 £ bonds £400m (6% ’17) 400 400 400 Eurobonds €750m (6.625% ’16) 640 640 640 Eurobonds €500m (5.25% ’15) 427 42
Slide 29: Banking Covenants
2009 Interim Results Banking Covenants • No covenants or ratings triggers on public bonds other than the US$600m 2014¹ bond • Bank Revolver and new TNS facility subject to the following covenants: - Net Debt/EBITDA ≤ 3.5 measured half yearly - EBITDA/Net Interest ≥ 5.0 measured half yearly - The cov
Slide 30: Credit Rating Agencies
2009 Interim Results Credit Rating Agencies Standard & Poor’s Moodys BBB negative outlook Baa2 negative outlook Adjusted Average Debt to EBITDA: Adjusted Average Debt to EBITDAR: 12 months to December 08: x 3.2 12 months to 31.12.08: x 3.2 12 months to June 09: x 3.7 12 months to 30.6.09: x 3.8 Rati
Slide 31: Use of Free Cash Flow
2009 Interim Results Use of Free Cash Flow Category Target H1 New acquisitions Up to £100m £55m Share buy back Up to 1% 0.2% or £10m Dividends Growth up to 15% Flat Net cash generated of £272m despite downturn 31
Slide 32: Ordinary Shares - Basic
2008 Interim Results Ordinary Shares - Basic June June 2009 2008 No. of Shares (million) Actual Actual 1 January 1,255 1,192 Share buy-back - (19)1 Option exercise - 1 30 June 1,255 1,174 -6.9% Weighted Average 1,255 1,179 ESOP/Treasury shares (34) (35) Average Basic 1,221 1,144 -6.7% 32 ¹ Buy-back
Slide 33: Ordinary Shares - Diluted
2008 Interim Results Ordinary Shares – Diluted June June 2009 2008 No. of Shares (millions) Actual Actual Average Basic 1,221 1,144 -6.7% Share Option Dilution 2 7 Other Potentially Issuable Shares 13 14 Sub-Total 1,236 1,165 Convertibles: Grey $150m ¹ n/a 9 £450m a/d2 n/a Fully Diluted Shares 1,236
Slide 34: TNS Integration: Consumer insight revenue growth
2009 Interim Results TNS Integration Consumer insight revenue growth hit by recession as elsewhere Revenue performance in line with peers Kantar GFK IPSOS Synovate Q1 (6.9) (4.6) (5.1) (9.0) Q2 (13.5) (12.0) n/a n/a H1 (10.4) (8.5) n/a n/a GM decline is lower than revenue decline at 7.8% July showed
Slide 35: TNS Integration: Business reorganised into new divisions
2009 Interim Results TNS Integration Business reorganised into new divisions TNS/RI, Kantar Health, Kantar Media, Kantar Retail and Kantar Worldpanel Some delay on severance actions due to European regulations Synergy programme on track with workstreams indicating synergy benefits in excess of £60m
Slide 36: Key Priorities, Objectives and Strategy
WPP 2 Key Priorities, Objectives and Strategy 36
Slide 37: Key Priorities, Objectives and Strategy
Key Priorities, Objectives and Strategy Faster growing markets to be one third of total group. Marketing services including new media to be two thirds of total group. Quantitative disciplines including consumer insight to be one half of total group. 37
Slide 38: Faster Growing Markets to be One Third of Total Group
Key Priorities, Objectives and Strategy Faster Growing Markets to be One Third of Total Group Today¹ Today Including Associates¹ Tomorrow Faster growing markets including Central & 33% 24% Eastern Europe 27% 28% 34% 29% 33% 3% 3% 40% 33% 40% N. America UK & Western Asia Pacific, Latin America, Afric
Slide 39: WPP's Performance Strong in BRIC Markets
Key Priorities, Objectives and Strategy WPP’s Performance Strong in BRIC Markets Revenue $’m 700 600 500 Associates @ 100% 400 300 200 100 0 09 09 09 09 00 08 00 08 00 08 00 08 20 20 20 20 20 20 20 20 20 20 20 20 1 1 1 1 H H H H China (including Hong Brazil India Russia 39 Kong and Taiwan)
Slide 40: WPP's Performance in Other Faster Growing Markets
Key Priorities, Objectives and Strategy WPP’s Performance in Other Faster Growing Markets Revenue $’m 450 400 350 Associates @ 100% 300 250 200 150 100 50 0 09 09 09 09 08 00 08 08 00 08 00 00 20 20 20 20 20 20 20 20 20 20 20 20 1 1 1 1 H H H H Middle East Central & Eastern Indonesia Vietnam 40 Euro
Slide 41: WPP in Faster Growing Markets
Key Priorities, Objectives and Strategy WPP in Faster Growing Markets Region Market Billings1 % Share¹ Rank¹ 12 month2 People² $bn Revenue $bn ‘000 Asia Greater China3 4.1 38% 1 0.7 11.1 India 1.2 40% 1 0.3 8.5 Thailand 0.3 36% 1 0.1 1.3 LatAm Brazil5 1.1 25% 1 0.5 9.2 Mexico 0.9 25% 2 0.1 1.7 Argen
Slide 42: Revenue by Geography
Key Priorities, Objective and Strategy Revenue by Geography $15.4bn $13.4bn 3.6 Asia Pacific, LatAm, Africa & Middle East 1.5 Europe N America 4.8 6.8 $7.0bn $6.9bn 1.3 1.3 1.8 2.6 7.1 $2.3bn $2.3 bn 5.1 3.9 0.2 2.9 1.7 1.3 0.7 0.6 WPP¹ Omnicom IPG Publicis Havas Aegis 1 Source: WPP - sterling reven
Slide 43: Slowdown in Advertising Growth 2008-2009
Key Priorities, Objectives and Strategy Slowdown in Advertising Growth 2008-2009 15% 10% 5% 0% 2006 2007 2008 2009 2010 -5% -10% -15% North America Western Europe Latin America Asia Pacific Worldwide 1. Source: Summer 2009 GroupM media forecast growth projections; 2006, 2007 and 2008 are actual grow
Slide 44: Media Billings by Geography
Key Priorities, Objectives and Strategy Media Billings by Geography Worldwide ranking by Group as % of the Six Groups 40 35 WPP 30 Publicis Omnicom 25 IPG 20 Aegis Havas 15 10 5 0 Americas Europe Asia Pacific Worldwide 44 Source: RECMA July2009 billings report, based on 2008 data.
Slide 45: Marketing Services to be Two Thirds of Total Group
Key Priorities, Objectives and Strategy Marketing Services to be Two Thirds of Total Group Today¹ Today including associates¹ Tomorrow 39% 33% 40% 60% 67% 61% Marketing Services Advertising & Media Investment Management ¹ Based on full year 2008 reported revenue adjusted to include a full year of TN
Slide 46: Revenue by Discipline
Key Priorities, Objective and Strategy Revenue by Discipline $15.4bn $13.4bn Marketing Services Advertising Media 9.5 7.6 $7.0bn $6.9bn 2.9 2.5 3.6 4.7 2.6 2.6 $2.3bn $2.3bn 0.8 0.9 2.3 1.8 1.0 1.1 1.4 1.4 0.5 WPP ¹ Omnicom IPG Publicis Havas Aegis Source: 1 WPP sterling revenue converted at $1.85=£
Slide 47: Quantitative Disciplines to be One Half of Total Group
Key Priorities, Objectives and Strategy Quantitative Disciplines to be One Half of Total Group Today ¹ Today including associates ¹ Tomorrow 50% 47% 47% 53% 53% 50% Consumer Insight and Direct, Internet & Interactive Advertising, Media Investment Management & Other Marketing Services ¹ Based on full
Slide 48: WPP Position in Direct, Internet and Interactive
Key Priorities, Objectives and Strategy WPP Position in Direct, Internet and Interactive First Half 2009 $ millions Wide¹ Definition Digital, Internet and Interactive Networks 1,012 (OgilvyOne, Wunderman, rmg:connect, G2 and WPP Digital) % of Group revenues 15% Specialist Digital, Internet and Inter
Slide 49: We continue to focus on our key objectives
Key Priorities, Objectives and Strategy 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 r
Slide 50: Historic headline PBIT and margins
Key Priorities, Objectives and Strategy Historic headline PBIT¹ and margins PBIT1£’m PBIT1 margin % 1200 Long-term IFRS target 19% 20% 2008 including full year of TNS 1000 14.3% 1,118 16% 14.1% 15.0% 15.0% 13.0% 14.5% 800 14.0% 928 13.0% 859 12% 755 600 13.6% 8% 560 534 400 8.0% 453 342 4% 200 0 0%
Slide 51: Flexibility in the cost base
Key Priorities, Objectives and Strategy Flexibility in the cost base Change in variable costs % 12.0 2002 H1 10.6 2008 H1 10.0 2009 H1 7.6 7.8 8.0 6.3 6.0 4.9 4.3 4.0 2.0 0.0 Variable Staff costs as a % of Staff costs Variable Staff costs as a % of Revenue 51
Slide 52: Using Free Cash Flow to Enhance Share Owner Value
Key Priorities, Objectives and Strategy Using Free Cash Flow to Enhance Share Owner Value Dividends and Share Repurchases 2009 first interim dividend maintained at 5.19p per share. Distributions to share owners: Share Repurchases Dividends Paid Amount % of Share Base 2000 £25.6m £94.1m 1.3% 2001 £44
Slide 53: Distributions to Share owners
Key Priorities, Objectives and Strategy Using Free Cashflow to Enhance Share Owner Value Distributions to Share owners¹ £ millions 600 6.6% Buy-Backs 500 Dividends Declared Dividends paid 400 4.8% 415 300 4.7% 3.6% 258 3.2% 2.7% 112 200 1.6% 152 112 2.7% 89 10 100 23 139 162 100 119 104 124 67 82 0
Slide 54: Using Free Cashflow: Acquisitions
Key Priorities, Objectives and Strategy Using Free Cashflow to Enhance Share Owner Value Acquisitions Continue to focus on the faster growing geographical areas and marketing services, particularly direct, internet & interactive and consumer insight. During 2009, 10 small and mid size acquisitions w
Slide 55: Acquisitions and Investments
2009 Interim Results Acquisitions¹ and Investments Faster Growing Quantitative and Markets Digital H&K Feedback (Poland) CBC² (China) Danone CRM (France) Jupiter Drawing Room (S. Africa) Saffron Hill³ (China) H-art (Italy) MDS (China) ZAO GALLUP² (Russia) INDEX VENTURES² (UK) Smart Media (Vietnam) O
Slide 56: Improving the Creative Capabilities and Reputation
Key Priorities, Objectives and Strategy 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 award
Slide 57: Conclusions
WPP 3 Conclusions 57
Slide 58: Conclusion: Outlook
Conclusion Outlook The financial crisis and credit tightening has triggered recession across the globe. The sharp deceleration in Q1 revenue and an even greater decline in Q2 and consequent severance has depressed H1 margin. Number of people in the business and revenue more aligned at end of first h
Slide 59: Conclusions
Conclusions New markets new media and consumer insights, the group’s three areas of strategic focus, will become even more important as the recession abates. The Group continues to be well placed to benefit from these key industry trends. The TNS acquisition represents a major competitive advantage
Slide 60: WPP London August 2009
WPP 2009 Interim Results London August 2009 60