Wpp Plc · LSE:WPP
Wpp — H1 2016 Earnings Presentation
121 slides from Wpp's earnings presentation, August 2016
Slide 1: 2016 Interim Results
WPP 2016 Interim Results London
Slide 2: Contents
Contents 1 2016 Interim Results 2 GroupM - This Year Next Year 3 Four Core Strategic Priorities 4 Key Objectives 5 Outlook and Conclusions Hard Copy only 6 30 Year History 7 Other Financial Information 2
Slide 3: 2016 Interim Results
1 2016 Interim Results W PP
Slide 4: 2016 Interim Results
2016 Interim Results Billings of £25.3bn, up 9.3% reportable, 6.3% constant currency and 4.2% like-for-like. Revenue growth 11.9% reportable, 8.9% constant currency and 4.3% like-for-like. Net sales growth 11.0% reportable, 8.1% constant currency and 3.8% like-for-like. Headline PBIT of £769
Slide 5: Headline Performance versus Target
2016 Interim Results Headline¹ Performance versus Target Full Year Interim Actual Target Status Like-for-like revenue growth 4.3% Well over 3% a Like-for-like net sales growth 3.8% 3%+ a Constant currency net sales margin improvement +0.3² +0.3² a Reportable diluted EPS growth 16.7% 10-15% a Constan
Slide 6: Summary Headline Results at a Glance
2016 Interim Results Summary Headline¹ Results at a Glance % Change Half Year to 30 June 2016 2015 Reported Constant Currency Revenue £m 6,536 5,839 11.9 8.9 Net Sales £m 5,594 5,041 11.0 8.1 Net Sales Margin 13.7% 13.3% +0.4² +0.3² PBIT £m 769 669 14.9 10.3 EBITDA £m 889 782 13.7 9.5 Diluted EPS 39
Slide 7: Revenue Growth
2016 Interim Results Revenue Growth +3.0% +4.6% +4.3% £6.5bn +11.9% £5.8bn 2015 H1 Organic Acquisitions FX 2016 H1 7
Slide 8: Net Sales Growth
2016 Interim Results Net Sales Growth +2.9% +4.3% £5.6bn +3.8% +11.0% £5.0bn 2015 H1 Organic Acquisitions FX 2016 H1 8
Slide 9: Impact of Foreign Exchange
2016 Interim Results Impact of Foreign Exchange 2015 FY Act 2016 Q1 Act 2016 Q2 Act 2016 Q3 Est¹ 2016 Q4 Est¹ 2016 FY Est 16% 14% 12% Revenue Net Sales Change versus Prior Year 10% 8% 6% 4% 2% 0% -2% -4% Full year impact of 8% to 9% on revenue and net sales. ¹ July 2016 based on monthly average ra
Slide 10: Unaudited Headline IFRS Income Statement
2016 Interim Results Unaudited Headline¹ IFRS Income Statement % Change Half Year to 30 June 2016 2015 Constant £m £m Reported Currency Revenue 6,536 5,839 11.9 8.9 Net sales 5,594 5,041 11.0 8.1 Operating profit 745 645 15.5 10.7 Income from associates 24 24 -0.4 -1.5 PBIT 769 669 14.9 10.3 Net fin
Slide 11: Unaudited IFRS Income Statement
2016 Interim Results Unaudited IFRS Income Statement % Change Half Year to 30 June 2016 2015 Reported Constant £m £m Currency Revenue 6,536 5,839 11.9 8.9 Net sales 5,594 5,041 11.0 8.1 Operating profit pre-goodwill/intangibles 745 645 15.5 10.7 Net exceptional (loss)/gain¹ (114) 211 - - Goodwill/in
Slide 12: Growth Versus Prior Year
2016 Interim Results % Growth Versus Prior Year Revenue Net Sales Headline1 Headline1 PBIT EPS Like-for-like 4.3 3.8 n/a n/a Acquisitions2 4.6 4.3 n/a n/a Constant currency 8.9 8.1 10.3 11.5 Foreign exchange 3.0 2.9 4.6 5.2 Reportable sterling 11.9 11.0 14.9 16.7 Reportable US dollars3 5.2 4.3 7.7 9
Slide 13: Revenue and Net Sales by Sector
2016 Interim Results Revenue and Net Sales by Sector Revenue Net Sales % Change % Change 2016 Reported Constant Like-for- 2016 Reported Constant Like-for- £m Currency like¹ £m Currency like¹ Advertising, Media Investment 2,963 12.3 9.6 6.6 2,423 9.1 6.7 4.6 Management Data Investment Management 1,24
Slide 14: Revenue and Net Sales by Region
2016 Interim Results Revenue and Net Sales by Region Revenue Net Sales % Change % Change 2016 Reported Constant Like-for- 2016 Reported Constant Like-for- £m Currency like £m Currency like North America 2,440 12.7 6.4 4.4 2,103 12.0 5.8 4.0 UK 927 7.8 7.8 4.1 775 7.2 7.2 3.3 Western Continental Euro
Slide 15: Two Year Cumulative Like-for-Like Growth
2016 Interim Results WPP Two Year Cumulative Like-for-Like Growth1 - Consistent Performance % Revenue Net Sales 1 Year 2 Year 1 Year 2 Year H1 2014 8.7 11.1² 4.1 6.5² H2 2014 7.7 12.3² 2.5 6.8² H1 2015 4.9 13.6² 2.3 6.4² H2 2015 5.8 13.5² 4.1 6.6² H1 2016 4.3 9.2² 3.8 6.1² ¹Two year trend is total g
Slide 16: Two Year Cumulative Like-for-Like Revenue Growth vs Peers
2016 Interim Results Two Year Cumulative Like-for-Like Revenue Growth1 % WPP3 OMC2,4 Pub2,5 IPG2,6 HAV2,7 H1 2014 11.1 7.9 5.1 7.9 6.2 H2 2014 12.3 10.3 4.2 8.8 6.4 H1 2015 13.6 10.3 3.0 11.8 12.0 H2 2015 13.5 11.7 3.9 11.7 9.1 H1 2016 9.2 8.8 4.0 11.3 9.3 ¹ Two year trend is total growth for the na
Slide 17: Headline PBIT and Net Sales Margin by Sector
2016 Interim Results Headline¹ PBIT and Net Sales Margin by Sector Headline PBIT Headline Margin 2016 2015 2016 2015 £m £m % % Advertising, Media Investment 369 330 15.2 14.9 Management Data Investment Management 125 101 13.5 11.7 Public Relations & Public Affairs 71 66 14.4 14.7 Branding & Identity
Slide 18: Headline PBIT and Net Sales Margin by Region
2016 Interim Results Headline¹ PBIT and Net Sales Margin by Region Headline PBIT Headline Margin 2016 2015 2016 2015 £m £m % % North America 349 307 16.6 16.4 UK 98 92 12.6 12.7 Western Continental Europe 138 103 12.4 10.7 Asia Pacific, Latin America, Africa & Middle 184 167 11.5 11.3 East and Centr
Slide 19: Revenue Growth by Region
2016 Interim Results Revenue Growth¹ by Region 10.8% CENTRAL & EASTERN EUROPE 4.6% Q2 H1 Q2 % 3.5% Mature Markets 3.6% 4.6% UNITED H1 % KINGDOM “Faster Growing” Markets 3.4% 3.4% 4.1% 2.2% Total 3.5% 4.3% NORTH AMERICA 6.2% WESTERN 4.4% CONTINENTAL EUROPE 0.8% 5.4% ASIA PACIFIC 2.1% -0.5% MIDDLE EAS
Slide 20: Net Sales Growth by Region
2016 Interim Results Net Sales Growth¹ by Region 10.2% CENTRAL & EASTERN EUROPE 5.6% Q2 H1 Q2 % 3.4% Mature Markets 4.5% 3.9% UNITED H1 % KINGDOM “Faster Growing” Markets 3.8% 3.5% 3.3% 4.0% Total 4.3% 3.8% NORTH AMERICA 6.2% WESTERN 4.0% CONTINENTAL EUROPE 1.7% 4.3% ASIA PACIFIC Traditional 2.3% 1.
Slide 21: Top Markets
2016 Interim Results Top 6 Markets - Over 65%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth of 3.5%¹ and Net Sales Growth of 3.3%¹ Including associates: Revenue $3.4bn $1.7bn $0.7bn $0.6bn $0.4bn $0.3bn People ‘000² 27 17 14 8 5 5 USA UK Greater China4 Germany ANZ5 France Revenue Net Sales
Slide 22: BRICs Markets
2016 Interim Results BRICs Markets - Over 11%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth of -0.6%¹ and Net Sales Growth of 0.3%¹ Including associates: Revenue $0.7bn $0.3bn $0.2bn $0.1bn WPP Rank5 #3 #8 #12 #24 People ‘000² 14 15 7 2 Greater China4 India Brazil Russia Revenue Net Sales
Slide 23: Revenue Growth by Country
2016 Interim Results Revenue Growth by Country Revenue Growth1 Countries More than 20% Argentina, Turkey 10% to 20% Denmark, Indonesia, Mexico 5% to 10% Belgium, India, Italy, Sweden Australia, Brazil, Canada, Greater China², Mainland China, France, Less than 5% Germany, Japan, Netherlands, Poland,
Slide 24: Revenue Growth by Category
2016 Interim Results Revenue Growth by Category Revenue Growth¹ Categories More than 10% Food, Media & Entertainment 5% to 10% Automotive, Computers Drinks, Electronics, Financial Services, Government, Oil, Personal Less than 5% Care & Drugs, Retail, Telecommunications, Travel & Airline 1 Like-for-l
Slide 25: Trade Estimates of Major New Business Wins
2016 Interim Results Trade Estimates of Major New Business Wins WPP Agency Incumbent Account Office Billings($m) GroupM Haworth¹ Target USA 686 MediaCom DEN/OMC Sony Playstation Global 421 Cohn & Wolfe IND Applebee’s Global 150 J. Walter Thompson PUB Newell Brands Global 120 Maxus IND Jet.com USA 10
Slide 26: Trade Estimates of Major New Business Wins
2016 Interim Results Trade Estimates of Major New Business Wins WPP Agency Incumbent Account Office Billings($m) MediaCom Geometry BRP Global 45 MEC PUB Mitsubishi Australia 45 GroupM MediaCom Westpac Australia 45 AKQA N/A Caterpillar Global 44 MediaCom IPG Tempur Sealy Europe, Asia Pacific 41 Team
Slide 27: Trade Estimates of Major New Business Losses
2016 Interim Results Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) MediaCom OMC Volkswagen Global 2,179 Haworth¹ GroupM Target USA 686 Mindshare IND LG Electronics USA 297 Grey PUB Procter & Gamble Global 55 GroupM IND VF Corporation Asia 45 Geome
Slide 28: Internal Estimates of Net New Business Wins
2016 Interim Results Internal Estimates of Net New Business Wins ($m) Creative Media Total Advertising 987 1,485 2,472 Other Businesses 520 - 520 2016 1,507 1,485 2,992 28
Slide 29: Major New Business Wins/Losses Since July
2016 Interim Results Trade Estimates of Major New Business Wins/Losses Since 1 July WPP Agency Incumbent Account Office Billings($m) MediaCom PUB Procter & Gamble China 266 Team Connect Maxus/MEC BT/EE UK 248 Grey Y&R Marks & Spencer UK 100 WINS Grey/Wunderman/Geometry OMC/PUB GSK Global 73 MediaCom
Slide 30: Cash Flow
2016 Interim Results Cash Flow £m 2016 2015 Operating Profit 554 789 Losses/(gains) on disposal & remeasurement¹ 103 (232) Non-cash compensation 52 48 Depreciation & amortisation charges 121 113 Amortisation of acquired intangibles and impairment 78 67 Net interest paid & similar charges (81) (81) T
Slide 31: Uses of Cash Flow
2016 Interim Results Uses of Cash Flow £m 2016 2015 Net cash generation 577 539 Capital expenditure (143) (90) Acquisition payments (226) (467) - Net initial payments¹ (205) (456) - Earnout payments/loan note redemptions (21) (11) Share buy-backs (197) (405) Other 25 43 Net cash inflow/(outflow) bef
Slide 32: Net Debt – June 2016
2016 Interim Results Net Debt – 30 June 2016 £m 2016 2015 % Variance YTD average net debt on constant currency basis (3,986) (3,374) -18% YTD average net debt on reportable basis (3,986) (3,131) -27% Net debt at 30 June on constant currency basis (4,249) (3,904) -9% Net debt at 30 June on reportable
Slide 33: Net Debt – Year on Year Movement
2016 Interim Results Net Debt – Year on Year Movement +£157m +£144m +£565m £4,249m +£866m £3,383m 30-Jun-15 FX STW Debt Acquired Cash & Other Operating Items 30-Jun-16 33
Slide 34: Historic Average Net Debt/Headline EBITDA
2016 Interim Results Historic Average Net Debt/Headline EBITDA £m Average net debt/headline EBITDA 4,500 3.0 Average net debt EBITDA 4,000 Average net debt/EBITDA 2.5 3,500 3,000 2.0 2,500 ) 1.5 Target average net debt/headline EBITDA range 2,000 1,500 1.0 1,000 0.5 500 0 0.0 2009 2010 2011 2012 201
Slide 35: Uses of Free Cash Flow
2016 Interim Results Uses of Free Cash Flow H1 H1 Category Target FY 2015 2016 2015 Acquisitions¹ £300-£400m² £205m £456m £649m Share buy-backs: n/a £197m £405m £588m % of issued share capital 2%-3% 1.0% 2.0% 3.0% Dividend increase n/a 23% 37% 17% Pay-out ratio 50% 50% 47% 48% Headroom: Undrawn faci
Slide 36: Debt Maturity Profile
2016 Interim Results 600 Debt Maturity Profile £m at 30 June 2016 550 £ Total £ Total 500 Credit Drawn US bond $500m (5.625% Nov ’43) 377 377 450 US bond $300m (5.125% Sep ’42) 226 226 400 Eurobonds €600m (1.625% Mar ’30) 501 501 Total Drawn (£m) 350 Eurobonds €750m (2.25% Sep '26) 626 626 300 US bo
Slide 37: Earnings and EPS
2016 Interim Results Earnings and EPS¹ Pence/ £m share 1,400 100p Earnings EPS 93.6p 84.9p 90p 1,200 80.8p 80p 73.4p 1,000 67.7p 70p 56.7p 60p 800 50p 44.4p 600 39.1p 40p 33.5p 400 30p 20p 200 10p 0 0p 2009 2010 2011 2012 2013 2014 2015 2015 H1 2016 H1 1 Diluted Headline Earnings and Diluted Headlin
Slide 38: GroupM - This Year Next Year
2 GroupM - This Year Next Year 38
Slide 39: GroupM 2016 Forecast for Global AdSpend
Market Environment GroupM 2016 Forecast for Global AdSpend 4.0% …down from December 2015 forecast 4.5% Source: GroupM This Year Next Year Worldwide Report, July 2016 39
Slide 40: GroupM 2017 Forecast for Global AdSpend
Market Environment GroupM 2017 Forecast for Global AdSpend 4.3% Source: GroupM This Year Next Year Worldwide Report, July 2016 40
Slide 41: GDP and Advertising Year-on-Year Nominal % Change
Market Environment GDP and Advertising Year-on-Year Nominal % Change 10.0 8.0 6.0 4.0 2.0 0.0 2007 2009 2011 2013 2015 2017 2019 2021 -2.0 GDP Advertising -4.0 -6.0 -8.0 Source: IMF/GroupM 41
Slide 42: Advertising Peak Recovered
Market Environment Advertising Peak Recovered Real ad investment (2007 = 100) 200 New 150 World 100 Old 50 2007 2009 2011 2013 2015 2017 Source: GroupM This Year Next Year Worldwide Report, July 2016 42
Slide 43: UK the European Outlier
Market Environment UK the European Outlier Real ad investment (2007 = 100) 120 UK Pre Referendum, Remain 100 UK Hard Brexit 80 EU ex UK 60 2007 2009 2011 2013 2015 2017 Source: GroupM This Year Next Year Worldwide Report, July 2016 43
Slide 44: Contributions to 2016
Market Environment Contributions to 2016 $ bn 6 G2 World +$5.4bn +$5.0bn 5 4 3 2 +$1.3bn +$1.5bn 1 0 Russia Philippines Argentina India Japan UK China USA -1 Source: GroupM This Year Next Year Worldwide Report, July 2016 44
Slide 45: Less Dependent on “New World”
Market Environment Less Dependent on “New World” % contribution 80 Old 60 New 40 20 0 2011-2015 2016-2017 Source: GroupM This Year Next Year Worldwide Report, July 2016 45
Slide 46: More Dependent on Digital
Market Environment More Dependent on Digital $ bn 12 10 Digital Traditional 8 6 4 2 0 Old world Growth world Source: GroupM This Year Next Year Worldwide Report, July 2016 46
Slide 47: 2016/2017 Forecast Ad Spend Growth by Region
Market Environment 2016/2017 Forecast Ad Spend Growth by Region Growth % YoY 2016 2016 2017 prev North America 2.6 3.0 2.9 Lat Am 5.9 4.6 7.1 W Europe 3.4 3.4 2.8 CEE 3.1 6.9 7.5 Asia-Pacific 7.1 5.3 5.9 WORLD 4.5 4.0 4.3 Source: GroupM This Year Next Year Worldwide Report, July 2016 47
Slide 48: Four Core Strategic Priorities
3 Four Core Strategic Priorities 48
Slide 49: Macro and Micro Trends
Market Environment Macro and Micro Trends Macro Micro Global GDP growth projections for 2016 trending down, but Low growth, low inflation, no pricing power, gives focus on costs. 2017 still projected higher than 2016. Disrupters, zero based budgeters and activist investors increase Brexit im
Slide 50: Like-for-Like Growth and GDP
Market Environment Like-for-Like Growth and GDP 11.0 10.0 WPP Like-for-Like Revenue Growth 9.0 WPP Like-for-Like Net Sales Growth 8.0 GDP Real / IMF¹ (FY 2016, 2017 Only) GDP Nominal / Goldman Sachs 7.0 GDP Nominal / WPP 6.0 Growth (%) 5.0 4.0 3.0 2.0 1.0 0.0 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/1
Slide 51: S&P Dividends & Buy-Backs as % of Operating Earnings
Market Environment S&P 500 Dividends & Buy-Backs as % of Operating Earnings 100% of operating earnings Source: S&P Capital IQ 51
Slide 52: Rising FTSE Dividend Pay-Out Ratios
Market Environment Rising FTSE Dividend Pay-Out Ratios 130% 75% FTSE 100 EPS FTSE 250 EPS FTSE 100 pay-out ratio FTSE 250 pay-out ratio WPP pay-out ratio 120% 70% 110% 65% 100% 60% 90% 55% EPS Pay-out ratio Q3/11 =100% 80% 50% 70% 45% 60% 40% 50% 35% 40% 30% Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13
Slide 53: Strong Brands Generate Superior Shareholders’ Return
Market Environment Strong Brands Generate Superior Shareholders’ Return 53
Slide 54: Four Strategic Priorities
Four Strategic Priorities 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
Slide 55: Horizontality
Horizontality 45 48 10 2010 2015 2016 H1 55
Slide 56: Horizontality
Horizontality Over 200,000 people1 in over 3,000 offices in 113 countries with access to over $28bn1 of annual revenue 1 Including associates and investments 56
Slide 57: Horizontality Matrix
2016 Interim Results Horizontality Matrix Specialist Communications J. Walter Ogilvy Y&R Grey GroupM Kantar H+K BtoD GroupH WPP WPP Thompson Group Strategies Group Digital Spec Comms Client Leaders Country/Regional Managers 57
Slide 58: Horizontality Account Teams
Horizontality 48 Account Teams – over one third of revenue with over 38,000 WPP employees working on these clients 58
Slide 59: Horizontality
Horizontality People, clients, acquisitions. Ensure our people work across our businesses and geographies to deliver best resources to clients. Deliver specialist skills (e.g. digital, shopper, analytics, sustainability, retailing, internal communications and media and entertainment) to client
Slide 60: New Markets
New Markets 42.5% 28% 29% 29% 2010 2015 2016 H1 2020 61
Slide 61: Revenue in Faster Growing Markets 2004-2015
New Markets Revenue¹ in Faster Growing³ Markets 2004-2015 6.0 5.5 5.0 4.5 4.0 3.5 Revenue ($'bn) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 4 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 WPP OMC² PUB² IPG² HAV² ¹ WPP reportable US$ revenue per WPP results and peer $ revenue as shown in annual result
Slide 62: WPP’s Performance Remains Strong in BRIC Markets
New Markets WPP’s Performance Remains Strong in BRIC Markets¹ Over Long-Term Revenue $'m 1,600 15 year CAGR 15% 1,400 1,200 First half 2015 1,000 800 600 15 year CAGR 15% 15 year CAGR 11% 400 200 15 year CAGR 41% 0 2000 2015 2016 H1 2000 2015 2016 H1 2000 2015 2016 H1 2000 2015 2016 H1 Greater China
Slide 63: New Media
New Media 38.2% 42.5% 29% 37.5% 2010 2015 2016 H1 2020 64
Slide 64: USA Cable and Broadcast Audience Delivery
New Media USA Cable and Broadcast Audience¹ Delivery YoY growth Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Cable -10% -8% -8% -5% -4% 0% -7% Broadcast -15% -7% -4% -8% -11% -13% -7% ¹ Source: Moffett Nathanson Research monthly C3 Ratings July 2016 65
Slide 65: Media Time Spent vs. Ad Spend Not Aligned
New Media Media Time Spent vs. Ad Spend Not Aligned % of Time Spent in Media vs. % of Advertising Spending, USA, 2015 45% Time Spent 2015 % of Total Media Consumption Time of Ad Spend 2015 40% 42% Ad Spend 2011 39% Total Of Which Internet Ad Mobile Ad 35% 36% = $60B = $21B 30% Advertising Spending 2
Slide 66: More Time Spent Does Not Mean Greater Engagement
New Media More Time Spent Does Not Mean Greater Engagement Billboard Internet Magazine Radio Online News TV Newspaper 0 50 100 150 200 250 (Average) Source: Newspapers Canada November 2013 67
Slide 67: The Application of Technology, Data and Content
New Media The Application of Technology, Data and Content Technology, Data and Content - injecting assets and cash: 1. Partnership with AppNexus, the leading independent provider of programmatic advertising technology. 2. Partnership with Rentrak, now merged with comScore, delivering census level
Slide 68: Data Investment Management and Quantitative Disciplines
Data Investment Management and Quantitative Disciplines 49% 52% 52% 50% 2010 2015 2016 H1 2020 69
Slide 69: Digital and Faster Growing Markets
Digital and Faster Growing Markets Two Key Long-Term Growth Drivers Overall 57% of 2016 H1 Actual Revenue Faster growing markets Digital 28% 38% of revenue of revenue Digital in faster growing markets 9% of revenue 70
Slide 70: Key Objectives
4 Key Objectives W PP
Slide 71: 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 parent company. Emphasising revenue and net sales
Slide 72: Improving Operating Margins
Key Objectives Improving Operating Margins PBIT1 PBIT1 margin £’m % 2,000 20% Long term target 19.7% Long-term PBIT margin 1,774 targets include 1.0% 1,800 19% margin improvement from 1,662 1,681 operational efficiency programmes 1,600 1,531 18% 1,429 16.9% 1,400 16.7% 17% 16.5% PBIT 1,229 16.1% 1,2
Slide 73: 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 74: Maintaining Flexibility in The Cost Base
Key Objectives Maintaining Flexibility in The Cost Base Change in Variable Costs1 % 8 7.5 7.4 7.3 7.2 7.0 7 6 5 4 3 2 1 0 2012 H1 2013 H1 2014 H1 2015 H1 2016 H1 Variable Staff Costs as % of Net Sales ¹ Freelance, consultants and incentive costs 75
Slide 75: Using Free Cash Flow to Enhance Dividend Pay-Out Ratio
Key Objectives Using Free Cash Flow to Enhance Dividend Pay-Out Ratio 100p 50% Target pay-out ratio 90p 45% 80p 40% 70p 35% 60p 30% 50p 25% 40p 20% 30p 15% 20p 10% 10p 5% 0p 0% 2011 2012 2013 2014 2015 2015 H1 2016 H1 Headline Diluted EPS 67.7p 73.4p 80.8p 84.9p 93.6p 33.5p 39.1p Dividend Declared/
Slide 76: Distributions to Share Owners Since 2004
Key Objectives Using Free Cash Flow to Enhance Share Owner Value Distributions to Share Owners Since 2004 Cumulative £m from 1 January 2004: Buy-backs Dividends paid 9,590 9,081 Headline Earnings Over the ten years to % of Headline Earnings 7,852 2015 we returned £5.2bn to share 6,716 owners. 5,628
Slide 77: 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 faster growing geographical and functional services, particularly direct, digital & interactive and data investment management. Acc
Slide 78: Acquisitions and Investments – First Half
Key Objectives Acquisitions and Investments – First Half Faster Growing Quantitative & Markets Digital All Def Digital (USA)² ArcTouch (USA) 3yz (Brazil) comScore (USA)¹,² Analytics Quotient (India) Conrad Caine (Germany) Bienalto (Australia)¹ Essence (UK)¹ Effect PR (Turkey) CBC I,II III (China)¹,²
Slide 79: Acquisitions and Investments – Since July
Key Objectives Acquisitions and Investments – Since 1 July Faster Growing Quantitative & Markets Digital Famous (Turkey) Easycom Group (China) Conexance (France) Maruri (Ecuador) WANDA Digital (Turkey)¹ iStrategyLabs (USA) 1 Step-ups in investments, associates and subsidiaries’ equity 80
Slide 80: Majority stake acquired in 209 companies post-Lehman
Key Objectives Using Free Cash Flow for Acquisitions Majority stake acquired in 209 companies1 post-Lehman, 2009 - 2015 Faster Growing Quantitative & Markets Digital Client/Creative 33 86 72 18 Total revenue in 2016F: $2,235m2 Total consideration paid: $2,393m3 1 Includes majority acquisitions and s
Slide 81: Strong Financial Performance and Return
Key Objectives Using Free Cash Flow for Acquisitions Strong Financial Performance and Return1 Organic Revenue Growth2 Operating Margin Contribution2 Return on Capital 10% 20% 15% 8% 15% 10% 6% 10% 4% WACC 5% 5.5% 5% 2% 0% 0% 0% Faster Direct & Both Creative Total Faster Direct & Both Creative Total
Slide 82: Improving the Creative Reputation of all our Businesses
Key Objectives Improving the Creative Reputation of all our Businesses Network 1 Ogilvy & Mather Ogilvy & Mather 2 BBDO Cannes Network of the Year 2012-2016 3 Y&R 4 out of the top 7 Cannes 4 McCann networks of the year 5 DDB 2 out of the top 3 Cannes agencies of the year 6 Grey Ogilvy & Mather 7 J.
Slide 83: Outlook and Conclusions
5 Outlook and Conclusions W PP
Slide 84: Conclusions: 2016 H1 Summary
Conclusions 2016 H1 Summary Strong H1 with leading like-for-like revenue and net sales growth enhanced by over 4% of revenue and net sales from acquisitions. Increasing tailwind from FX with 1.4% in Q1, 4.4% in Q2 and 2.9% for H1. Margin improvement of 0.4 margin points on a reported basis and
Slide 85: Our Long-Term Financial Model
Outlook for 2016 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 86: Long Term Impact of Financial Model
Long Term Impact of Financial Model WPP Headline Diluted EPS Post 1992 Rights Issue pence 100 93.6 90 84.9 80.8 80 73.4 22 Year CAGR: 14% 70 67.7 60 56.7 55.5 50 45.8 44.4 42.0 40 36.0 30.9 32.3 30.3 29.0 30 27.9 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 reflec
Slide 87: Outlook for 2016
Outlook for 2016 Our forecasts indicate − Like-for-like revenue growth well over 3% and net sales growth of over 3% − Margin improvement in line with our target of 0.3 margin points pre-currency − Acquisitions to add ca. 4% to revenue and net sales At current exchange rates the full year currenc
Slide 88: 30 Year History (Hard Copy Only)
6 30 Year History (Hard Copy Only) 89
Slide 89: WPP Reported Revenue
30 Year History WPP Reported Revenue £’m 13,000 12,235 12,000 11,529 11,019 11,000 10,373 10,022 10,000 9,331 9,000 8,684 30 year CAGR 31% 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 5
Slide 90: WPP Net Sales
30 Year History WPP Net Sales £’m 12,000 11,000 10,524 10,065 10,000 10,076 9,515 9,239 9,000 8,561 7,981 8,000 30 year CAGR 30% 7,009 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 1,4371,469 1,633 1,328 1,0761,0161,0701,2091,204 843 1,000 442 219 4 24 0 91
Slide 91: WPP Organic Growth
30 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 30 year average organic revenue growth : 5.6% 8.2 6.3 5.7 5.2 5.5 5.4 5.3 5.3 5.3 5.0 5 4.0 4.0 3.5 3.3 3.3 2.7 2.9 0.7 N/A 0 -3.0 -5 -4.7 -5.9 -8.1 -10 Note: Es
Slide 92: WPP PBIT and Margins
30 Year History WPP PBIT and Margins PBIT PBIT margin 2004 onwards £’m % 16.9% PBIT reported 1,600 16.5%16.7% under IFRS 16.1% 15.7%15.8% 15.9%16.0% 15.3% 15.5% 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
Slide 93: Other Financial Information (Hard Copy only)
7 Other Financial Information (Hard Copy only) 94
Slide 94: Competitor Review
2016 Interim Results Competitor Review1 35 16 14 30 12 25 Market Cap/EBITDA 10 20 Market Capitalisation $bn 8 15 6 10 4 5 2 0 - WPP OMC Nielsen PUB Dentsu IPG Havas Ipsos GfK Market Cap 2015 Revenue 2015 EBITDA Market Cap/ EBITDA EV/EBITDA 1 Market Capitalisation/Enterprise Value as of 19 August 201
Slide 95: WPP Two Year Cumulative Like-for-Like Growth
2016 Interim Results WPP Two Year Cumulative Like-for-Like Growth1 - Consistent Performance % Revenue Net Sales 1 Year 2 Year 1 Year 2 Year Q1 2014 7.0 9.1² 3.8 5.7² Q2 2014 10.2 12.9² 4.4 7.2² Q3 2014 7.6 12.6² 3.0 7.3² Q4 2014 7.8 12.0² 2.1 6.4² Q1 2015 5.2 12.2² 2.5 6.3² Q2 2015 4.5 14.7² 2.1 6.5
Slide 96: Two Year Cumulative Like-for-Like Revenue Growth
2016 Interim Results Two Year Cumulative Like-for-Like Revenue Growth1 % WPP² OMC³ Pub4 IPG5 HAV6 Q1 2014 9.1 7.2 4.6 8.9 2.1 Q2 2014 12.9 8.6 5.5 6.9 9.6 Q3 2014 12.6 10.6 4.5 9.1 7.2 Q4 2014 12.0 10.1 3.9 8.5 5.5 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
Slide 97: Our Billion $ Revenue Brands
2016 Interim Results Our Billion $ Revenue Brands 98
Slide 98: 2015 Revenue by Geography
2016 Interim Results 2015 Revenue by Geography $18.7bn 5.4 $15.1bn Asia Pacific, Latin America, Africa & Middle East, CEE 2.6 Western Europe N America 3.5 $10.6bn 6.4 2.4 $7.6bn 2.5 $6.7bn 1.7 1.4 9.0 4.5 6.9 5.7 $2.4bn 4.5 0.4 1.2 1.2 1.0 0.8 WPP Omnicom Publicis IPG Dentsu Havas Source: 1 WPP – re
Slide 99: WPP in Faster Growing Markets
2016 Interim Results WPP in Faster Growing Markets Region Market Billings1 % Share1 Rank1 12 month2 People2 $bn Revenue $bn ‘000 Asia Pacific: Greater China3 11.3 35% 1 1.5 14 India 4.6 51% 1 0.5 15 Thailand 0.9 34% 1 0.1 2 4 LatAm: Brazil n/a n/a 1 0.4 7 Mexico 1.1 28% 2 0.2 2 Argentina 0.8 25% 2 0
Slide 100: Media Billings by Geography
2016 Interim Results Media Billings by Geography Worldwide Ranking by Group as % of the Six Groups % WPP Omnicom Publicis Dentsu IPG Havas 40 35 30 25 20 15 10 5 0 Worldwide Americas Europe Asia Pacific Source: RECMA July 2016 billings report, based on 2015 data 101
Slide 101: WPP Clear No. in Brazil
2016 Interim Results WPP Clear No. 1 in Brazil¹ RECMA does not cover Brazil, IBOPE measures media spend with “IBOPE Rate Card Monitor”. Agency R$’bn Rank Y&R 7.0 1 R$’bn Rank Ogilvy 3.8 2 WPP 13.2 1 Africa² 3.5 3 PUB 8.1 2 W/McCann 3.5 4 IPG 6.2 3 Almap/BBDO 3.4 5 OMC 5.9 4 Leo Burnett 3.2 6 Havas
Slide 102: 2015 Revenue by Sector
2016 Interim Results 2015 Revenue by Sector $18.7bn 3.7 Data Investment Management Marketing Services $15.1bn Advertising Media 6.5 7.5 4 $10.6bn 5.5 $7.6bn $6.7bn 3.5 0.3 3.3 5.7 2.4 2.8 6.4 5.0 $2.4bn 0.7 2.7 0.8 1.9 1.5 0.9 WPP Omnicom Publicis IPG Dentsu Havas Source: 1 WPP reportable US $’s per
Slide 103: Xaxis – The World’s Largest Programmatic Audience Company
2016 Interim Results Xaxis – The World’s Largest Programmatic Audience Company GLOBAL ANNUAL SALES CLIENTS GROWTH 1,500+ EMPLOYEES $1.1 BILLION 3,000+ ACCOUNTS 25% YOY IN 46 MARKETS (PROJECTED 2016) UNRESTRICTED ACCESS TO LAUNCH OF LIGHT REACTION, PLISTA PROPRIETARY TECHNOLOGY EXCLUSIVE AND PREMIUM
Slide 104: Xaxis – Markets as of August 2016
2016 Interim Results Xaxis – 46 Markets as of August 2016 EMEA AMERICAS UNITED KINGDOM FRANCE GERMANY PORTUGAL NETHERLANDS TURKEY CANADA BELGIUM UNITED ARAB EMIRATES UNITED STATES AUSTRIA SAUDI ARABIA ARGENTINA SWITZERLAND POLAND BRAZIL FINLAND RUSSIA COLOMBIA NORWAY CZECH REPUBLIC MEXICO SWEDEN ROM
Slide 105: WPP Investments in Technology, Data and Content
2016 Interim Results WPP Investments in Technology, Data and Content New areas key to supporting clients and managing measurement, viewability, verification, value and performance. Technology Data Content AppNexus comScore³ ($274m¹ vs $371m²) Vice ($329m¹ v $35m²) Globant ($263m¹ vs $80m²) Invidi
Slide 106: Digital in All Our Businesses
2016 Interim Results Digital in All Our Businesses Digital Revenue ($billion – 2015 Full Year) 7.3 5.5 4.7 2.3 2.3 0.7 WPP Publicis Omnicom¹ Dentsu IPG¹ Havas¹ 1Omnicom, IPG and Havas digital revenue based on Exane BNP Paribas estimates. 107
Slide 107: Revenue Share Continues to Increase
2016 Interim Results Revenue Share Continues to Increase WPP Share of Digital Revenue 40-45% 37%+ 35% 36% 33%¹ 30% 21% 12% 2000 2006 2011 2012 2013 2014 2015 Target in 5 years 1 Including AKQA Pro-Forma 108
Slide 108: WPP Position in Direct, Digital and Interactive
2016 Interim Results WPP Position in Direct, Digital and Interactive First Half 2016 Revenue $’m Direct, Digital and Interactive Networks 1,694 (OgilvyOne, Wunderman, Geometry, VML, WPP Digital, Mirum & AKQA) % of Group revenue 18% Specialist Direct, Digital and Interactive resources: - Data Investm
Slide 109: Using Free Cash Flow to Enhance Share Owner Value
2016 Interim Results Using Free Cash Flow to Enhance Share Owner Value Distributions to Share Owners¹ £’m 1,200 6.0% Buy-backs 1,000 5.9% Dividends Proposed Dividends paid 588 800 3.8% 511 3.8% 600 405 2.8% 197 48%² 4.3% 4.5% 47%² 197 400 134 67%² 65%² 182 46%² 3.0% 70%² 546 46 460 200 55%² 397 369
Slide 110: Effects of Currency
2016 Interim Results Effects of Currency Currency movements accounted for 4.6% increase in reported revenue and 4.3% in net sales, reflecting overall weakness of £ sterling, particularly against US$, € and ¥. Sterling (weaker) or stronger as follows: H1 2016 H1 2015 Sterling (Weaker)/Stronger US
Slide 111: USD Monthly Average and Quarterly Variance
2016 Interim Results 18 month US$ range 1.56 to 1.32 USD Monthly Average Quarterly % Variance vs PY 1.60 £ Strength 0% Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4 1.55 -2% -4.1% -5.5% -6.4% -7.2% -4% -8.5% -8.9% 1.50 -6% -13.0% 1.45 -14.9% 2016 -8% 2015 1.40 -10% -12% 1.35 -14% 1.30 -16% Jan Feb Mar Apr May J
Slide 112: EUR Monthly Average and Quarterly Variance
2016 Interim Results 18 month € range 1.42 to 1.19 EUR Monthly Average Quarterly % Variance vs PY 1.45 £ Strength 14% 12% 1.40 10% 8% 6% 12.9% 1.35 11.4% 10.6% 9.4% 4% 2% 1.30 0% 2016 Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4 -2% -3.5% 2015 -4% -8.3% 1.25 -6% -14.2% -13.5% -8% 1.20 -10% -12% -14% 1.15 -16%
Slide 113: Faster Growing Regions Quarterly Variance vs PY
2016 Interim Results Faster Growing Regions - Quarterly % Variance vs PY Asia Pacific Latin America £ Strength £ Strength 5% 25% 2.9% 20% 1.7% 0% Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4 15% -4.4% -3.7% -0.1% -3.2% -5% 21.9% 10% 19.3% 18.1% -16.1% 13.6% -18.0% 5% 10.7% -10% 5.3% 0% Q1 2015 Q2 Q3 Q4 Q1 2016
Slide 114: Net Finance Costs
2016 Interim Results Net Finance Costs £m 2016 2015 B/(W) Net debt interest 84 78 (6) Investment Income (10) (10) - IAS 19 (Pensions) 5 5 - Sub-total (5) (5) - Headline finance costs 79 73 (6) IAS 39 (Financial Instruments) 66 22 (44) Net finance costs 145 95 (50) 115
Slide 115: Ordinary Shares - Basic
2016 Interim Results Ordinary Shares - Basic June June 2016 2015 No. of Shares (million) Actual Actual 1 January 1,329 1,326 Option exercise 1 1 30 June 1,330 1,327 -0.2% Weighted Average 1,330 1,326 ESOP, Treasury & Other (46) (31) Average Basic 1,284 1,295 0.8% 116
Slide 116: Ordinary Shares – Diluted
2016 Interim Results Ordinary Shares – Diluted June June 2016 2015 No. of Shares (million) Actual Actual Average Basic 1,284 1,295 Share Option Dilution 2 3 Other Potentially Issuable Shares 14 19 Diluted Shares 1,300 1,317 1.3% Fully Diluted Shares: Full Year 1,293 1,307 Estimate/Actual 117
Slide 117: Acquisitions
2016 Interim Results Acquisitions All Def Digital (ADD)¹ – USA (WPP Ventures) ADD is a digital media company founded by hip-hop impresario Russell Simmons in the USA. ADD’s clients include NBC Universal and Samsung. The company was founded by Simmons in 2013. It employs approximately 35 people and i
Slide 118: Acquisitions
2016 Interim Results Acquisitions dBOD – Netherlands (VBAT, The Partnership) dBOD is a leading design agency in Netherlands. Founded in 1980, dBOD is a full-service agency specialising in packaging design, corporate design, digital media and retail design. dBOD employs 38 people at its headquarters
Slide 119: Acquisitions
2016 Interim Results Acquisitions Famous¹ – Belgium (Grey) Famous is a leading creative agency in Belgium. Founded in 1998 and based in Brussels, it is a multi-award winning and full-service agency with creativity at its core. Famous creates in three languages: French, Flemish and English. Its main
Slide 120: Acquisitions
2016 Interim Results Acquisitions WANDA Digital¹,² – Turkey (J. Walter Thompson Company) WANDA Digital is a leading independent digital agency in Turkey. Founded in 2006 and employing around 80 people in Istanbul, its clients include Media Markt, Nestle, Turkcell, Ülker and Unilever. WANDA Digital o
Slide 121: WPP London
WPP 2016 Interim Results London