Wpp Plc · LSE:WPP
Wpp — H1 2017 Earnings Presentation
128 slides from Wpp's earnings presentation, August 2017
Slide 1: 2017 Interim Results
WPP 2017 Interim Results London
Slide 2: Contents
Contents 1 2017 Interim Results 2 GroupM - This Year Next Year 3 Four Core Strategic Priorities 4 Key Objectives 5 Outlook and Conclusions Hard Copy only 6 31 Year History 7 Other Financial Information 2
Slide 3: 2017 Interim Results
1 2017 Interim Results W PP
Slide 4: 2017 Interim Results
2017 Interim Results Reported billings up 6.3% at £26.906bn, -4.7% constant currency and -5.9% like-for-like. Reported revenue up 13.3% at £7.404bn, 1.9% constant currency and -0.3% like-for-like. Net sales growth 13.7% reportable, 2.2% constant currency and -0.5% like-for-like. Reported hea
Slide 5: 2017 Interim Results
2017 Interim Results Average constant currency net debt up £421m to £4.811bn, reflecting significant net acquisition spend, share buy-backs and dividends. Average net debt to EBITDA ratio for year to 30 June 2017 under 1.9x towards top end of target range 1.5-2.0x. Share buy-backs £290m (1.3% of
Slide 6: Headline Performance versus Consensus
2017 Interim Results Headline¹ Performance versus Consensus Actual Consensus £ million Results Median² £ Net Sales 6,362 6,422 (60) EBITDA 1,016 1,031 (15) PBIT 882 895 (13) Net finance costs (89) (91) 2 PBT 793 804 (11) Diluted EPS 45.4p 45.8p (0.4p) Net Sales PBIT Margin 13.9% 13.9% - ¹ Figures be
Slide 7: Headline Performance versus Target
2017 Interim Results Headline¹ Performance versus Target Full Year Target Actual Target Performance Like-for-like revenue growth -0.3% 2% Like-for-like net sales growth -0.5% 2% Constant currency/like-for-like net sales margin improvement² +0.0/+0.1 +0.3 Reportable diluted EPS growth 16.1% 10-
Slide 8: Summary Headline Results at a Glance
2017 Interim Results Summary Headline¹ Results at a Glance % Change Half Year to 30 June 2017 2016 Reported Constant Currency Revenue £m 7,404 6,536 13.3 1.9 Net Sales £m 6,362 5,594 13.7 2.2 Net Sales Margin 13.9% 13.7% +0.2 +0.0² PBIT £m 882 769 14.7 1.9 EBITDA £m 1,016 889 14.2 1.7 Tax Rate 22.0%
Slide 9: Revenue Growth
2017 Interim Results Revenue Growth +11.4% £7.4bn -0.3% +2.2% +13.3% £6.5bn 2016 H1 Like-for-like Acquisitions FX 2017 H1 9
Slide 10: Net Sales Growth
2017 Interim Results Net Sales Growth +11.5% +2.7% £6.4bn -0.5% +13.7% £5.6bn 2016 H1 Like-for-like Acquisitions FX 2017 H1 10
Slide 11: Impact of Foreign Exchange
2017 Interim Results Impact of Foreign Exchange 2016 FY Act 2017 Q1 Act 2017 Q2 Act 2017 Q3 Est 2017 Q4 Est 2017 FY Est 16% 14% 12% Revenue Net Sales Change versus Prior Year 10% 8% 6% 4% 2% 0% -2% -4% First half tailwind 11.4% revenue and 11.5% net sales. Full year tailwind ca. 4-5% revenue and
Slide 12: Unaudited Headline IFRS Income Statement
2017 Interim Results Unaudited Headline¹ IFRS Income Statement % Change Half Year to 30 June 2017 2016 Constant £m £m Reported Currency Revenue 7,404 6,536 13.3 1.9 Net sales 6,362 5,594 13.7 2.2 Operating profit 836 745 12.3 -0.1 Income from associates 46 24 90.5 61.8 PBIT 882 769 14.7 1.9 Net fina
Slide 13: Unaudited IFRS Income Statement
2017 Interim Results Unaudited IFRS Income Statement % Change Half Year to 30 June 2017 2016 Reported Constant £m £m Currency Revenue 7,404 6,536 13.3 1.9 Net sales 6,362 5,594 13.7 2.2 Operating profit pre exceptional & goodwill/intangibles 836 744 12.3 -0.1 Net exceptional loss¹ (14) (114) - - Goo
Slide 14: % Growth Versus Prior Year
2017 Interim Results % Growth Versus Prior Year Revenue Net Sales Headline1 Headline1 PBIT EPS Like-for-like -0.3 -0.5 n/a n/a Acquisitions2 2.2 2.7 n/a n/a Constant currency 1.9 2.2 1.9 2.4 Foreign exchange 11.4 11.5 12.8 13.7 Reportable sterling 13.3 13.7 14.7 16.1 Reportable US dollars3 -0.4 0.0
Slide 15: Revenue and Net Sales by Sector
2017 Interim Results Revenue and Net Sales by Sector Revenue Net Sales % Change % Change 2017 Reported Constant Like-for- 2017 Reported Constant Like-for- £m Currency like¹ £m Currency like¹ Advertising, Media Investment 3,489 17.7 6.1 0.0 2,830 16.8 5.1 -1.7 Management Data Investment Management 1,
Slide 16: Revenue and Net Sales by Region
2017 Interim Results Revenue and Net Sales by Region Revenue Net Sales % Change % Change 2017 Reported Constant Like-for- 2017 Reported Constant Like-for- £m Currency like £m Currency like North America 2,767 13.4 -0.4 -3.0 2,410 14.6 0.7 -2.2 UK 979 5.6 5.6 4.5 813 5.0 5.0 3.8 Western Continental E
Slide 17: Two Year Cumulative Like-for-Like Revenue Growth
2017 Interim Results Two Year Cumulative Like-for-Like Revenue Growth1 % WPP3 OMC2,4 Pub2,5 DEN2,6 IPG2,7 HAV2,8 H1 2014 11.1 7.9 5.1 n/a 7.9 6.2 H2 2014 12.3 10.3 4.2 n/a 8.8 6.4 H1 2015 13.6 10.3 3.0 n/a 11.8 12.0 H2 2015 13.5 11.7 3.9 n/a 11.7 9.1 H1 2016 9.2 8.8 4.0 13.6 11.3 9.3 H2 2016 7.6 8.9
Slide 18: Headline PBIT and Net Sales Margin by Sector
2017 Interim Results Headline¹ PBIT and Net Sales Margin by Sector Headline PBIT Headline Margin 2017 2016 2017 2016 £m £m % % Advertising, Media Investment 432 370 15.3 15.3 Management² Data Investment Management 129 125 13.0 13.5 Public Relations & Public Affairs² 80 69 14.0 14.1 Branding & Identi
Slide 19: Headline PBIT and Net Sales Margin by Region
2017 Interim Results Headline¹ PBIT and Net Sales Margin by Region Headline PBIT Headline Margin 2017 2016 2017 2016 £m £m % % North America 401 349 16.6 16.6 UK 112 98 13.8 12.6 Western Continental Europe 153 138 12.4 12.4 Asia Pacific, Latin America, Africa & Middle 216 184 11.3 11.5 East and Cent
Slide 20: Revenue Growth by Region
2017 Interim Results Revenue Growth¹ by Region -7.2% CENTRAL & EASTERN EUROPE -2.7% Q2 H1 Q2 % 5.8% Mature Markets -1.5% -0.6% UNITED H1 % KINGDOM “Faster Growing” Markets 0.8% 0.3% 4.5% -3.0% Total -0.8% -0.3% NORTH AMERICA -3.2% WESTERN -3.0% CONTINENTAL EUROPE 1.9% 0.7% ASIA PACIFIC 0.5% 5.9% -5.
Slide 21: Net Sales Growth by Region
2017 Interim Results Net Sales Growth¹ by Region -3.7% CENTRAL & EASTERN EUROPE -1.6% Q2 H1 Q2 % 4.0% Mature Markets -2.3% -0.7% UNITED H1 % KINGDOM “Faster Growing” Markets -0.4% -0.3% 3.8% -3.3% Total -1.7% -0.5% NORTH AMERICA -4.2% WESTERN -2.2% CONTINENTAL EUROPE -0.4% -0.3% ASIA PACIFIC -0.5% 3
Slide 22: Top Markets
2017 Interim Results Top 6 Markets - Around 68%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth of -1.4%¹ and Net Sales Growth of -1.1%¹ Including associates: Revenue $3.4bn $1.4bn $0.6bn $0.6bn $0.4bn $0.3bn People ‘000² 26 17 8 13 4 5 USA UK Germany Greater China3 ANZ4 France Revenue Net S
Slide 23: BRICs Markets
2017 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 -1.1%¹ Including associates: Revenue $0.6bn $0.3bn $0.2bn $0.1bn WPP Rank² #4 #9 #12 #21 People ‘000³ 13 17 7 2 Greater China4 India Brazil Russia Revenue Net Sales
Slide 24: Net Sales Growth by Country
2017 Interim Results Net Sales Growth by Country Net Sales Growth1 Top Countries² More than 10% Argentina 5% to 10% India, Indonesia, Philippines 0% to 5% Belgium, Brazil, Canada, Mexico, Sweden, UK Denmark, Dubai, France, Germany, Greater China³, Italy, Mainland Less than 0% China, Japan, Netherlan
Slide 25: Net Sales Growth by Category
2017 Interim Results Net Sales Growth by Category Net Sales Growth¹ Categories More than 5% Computers, Electronics, Government 0% to 5% Financial Services, Oil, Retail Automotive, Drinks, Food, Media & Entertainment, Personal Care & Drugs, Less than 0% Telecommunications, Travel & Airline ¹ Like-for
Slide 26: Trade Estimates of Major New Business Wins (1)
2017 Interim Results Trade Estimates of Major New Business Wins (1) WPP Agency Incumbent Account Office Billings($m) MediaCom HAV/OMC PSA Global 998 W Partnership OMC Walgreens Boots Alliance Global 600 Team L’Atelier PUB LVMH APAC 500 Mindshare IPG T.J. Maxx Global 215 Team Horizon PUB/DEN British
Slide 27: Trade Estimates of Major New Business Wins (2)
2017 Interim Results Trade Estimates of Major New Business Wins (2) WPP Agency Incumbent Account Office Billings($m) Maxus IND ITC Industries India 75 Ogilvy/OgilvyOne Grey Vodafone UK 70 Wunderman IND Samsung EMEA 70 Geometry/Wunderman PUB/OMC/IND Telkom South Africa South Africa 64 MediaCom OMC Wh
Slide 28: Trade Estimates of Major New Business Losses
2017 Interim Results Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) Grey IND/Other Coty Global 330 MEC PUB KFC Global 230 Ogilvy DEN American Express Global 200 Mindshare PUB Mattel USA 150 JWT PUB Kellogg’s USA 100 Grey Ogilvy/OgilvyOne Vodafone U
Slide 29: Internal Estimates of Net New Business Wins
2017 Interim Results Internal Estimates of Net New Business Wins ($m) Creative Media Total Advertising 1,001 2,101 3,102 Other Businesses 1,144 - 1,144 First Half 2017 2,145 2,101 4,246 First Half 2016 1,507 1,485 2,992 29
Slide 30: Major New Business Wins/Losses Since July
2017 Interim Results Trade Estimates of Major New Business Wins/Losses Since 1 July WPP Agency Incumbent Account Office Billings($m) Sanofi Partnership/Mindshare PUB Sanofi Global 600 WINS Grey/MediaCom PUB Revlon Global 420 MediaCom PUB Richemont Global 400 WPP Agency Winning Agency Account Office
Slide 31: Cash Flow
2017 Interim Results Cash Flow £m 2017 2016 Operating Profit 724 554 (Gains)/losses on disposal & remeasurement¹ (6) 103 Non-cash compensation 51 52 Depreciation & amortisation charges 134 121 Amortisation of acquired intangibles and impairment 98 78 Net interest paid & similar charges (61) (81) Tax
Slide 32: Uses of Cash Flow
2017 Interim Results Uses of Cash Flow £m 2017 2016 Net cash generation 686 577 Capital expenditure (120) (143) Acquisition payments (241) (226) - Net initial payments¹ (179) (205) - Earnout payments/loan note redemptions (62) (21) Other² (15) 25 Net cash inflow before distributions and NWC changes
Slide 33: Net Debt – June 2017
2017 Interim Results Net Debt – 30 June 2017 £m 2017 2016 % Variance YTD average net debt on constant currency basis (4,811) (4,390) -10% YTD average net debt on reportable basis (4,811) (3,986) -21% Net debt at 30 June on constant currency basis (4,670) (4,459) -5% Net debt at 30 June on reportable
Slide 34: Net Debt – Year on Year Movement
2017 Interim Results Net Debt – Year on Year Movement 30 June 2016 FX Net Cash Outflow Net Trade Working Capital Other¹ 30 June 2017 -£4,249m -£421m -£67m -£4,670m -£172m +£12m -£194m 1 Other receivables, payables and provisions 34
Slide 35: Historic Average Net Debt/Headline EBITDA
2017 Interim Results Historic Average Net Debt/Headline EBITDA £m Average net debt/headline EBITDA 5,000 2015 Average net debt at 2016 FX rates Average net debt 3.0 EBITDA 4,500 2015 EBITDA at 2016 FX rates Average net debt/EBITDA 2.5 4,000 3,500 2.0 3,000 2,500 ) 1.5 Target average net debt/headlin
Slide 36: Uses of Free Cash Flow
2017 Interim Results Uses of Free Cash Flow H1 H1 Category Target FY 2016 2017 2016 Acquisitions¹ £300-£400m² £179m £205m £605m Share buy-backs: n/a £290m £197m £427m % of issued share capital 2-3% 1.3% 1.0% 2.0% Dividend increase n/a 16% 23% 17% Pay-out ratio 50% 50% 50% 48% Headroom: Undrawn facil
Slide 37: Debt Maturity Profile
2017 Interim Results Debt Maturity Profile £m at 30 June 2017 700 £ Total £ Total 650 Credit Drawn £ bonds £400m (2.875% Sep ’46) 400 400 600 US bond $500m (5.625% Nov ’43) 384 384 550 US bond $300m (5.125% Sep ’42) 231 231 500 Eurobonds €600m (1.625% Mar ’30) 527 527 450 Total Drawn (£m) Eurobonds
Slide 38: Earnings and EPS
2017 Interim Results Earnings and EPS¹ Pence/ £m share 1,600 120p Earnings EPS 113.2p 21% 1,400 6 Year CAGR: 12% 93.6p 100p 10% 1,200 5% 84.9p 80.8p 10% 80p 73.4p 1,000 8% 67.7p 19% 800 56.7p 60p 16% 45.4p 600 39.1p 40p 400 20p 200 0 0p 2010 2011 2012 2013 2014 2015 2016 2016 H1 2017 H1 1 Diluted He
Slide 39: GroupM - This Year Next Year
2 GroupM - This Year Next Year 39
Slide 40: Market Environment: 2016 Global AdSpend
Market Environment 2016 Actual Global AdSpend 3.7% …down from December 2016 forecast 4.3% Source: GroupM This Year Next Year Worldwide Report, August 2017 40
Slide 41: Market Environment: 2016 Categories
Market Environment 2016 - First Cut of Categories CPG -1% Retail -3% Source: GroupM This Year Next Year Worldwide Report, August 2017 41
Slide 42: Market Environment: 2017 Forecast
Market Environment GroupM 2017 Forecast for Global AdSpend 3.0% …down from December 2016 forecast 4.4% Source: GroupM This Year Next Year Worldwide Report, August 2017 42
Slide 43: Market Environment: 2018 Forecast
Market Environment GroupM 2018 Forecast for Global AdSpend 4.3% Source: GroupM This Year Next Year Worldwide Report, August 2017 43
Slide 44: GDP and Advertising Nominal Change
Market Environment GDP and Advertising Year-on-Year Nominal % Change 10.0 8.0 6.0 4.0 2.0 0.0 2008 2010 2012 2014 2016 2018 2020 2022 -2.0 GDP Advertising -4.0 -6.0 -8.0 Source: IMF/GroupM. The value for 2019 is an average of the 2018 and 2020 values to smooth the transition from our manual forecast
Slide 45: Real ad investment
Market Environment Real ad investment (2009 = 100) 150 New World Old 100 2009 2011 2013 2015 2017 Source: GroupM This Year Next Year Worldwide Report, August 2017 45
Slide 46: Contributions to 2017
Market Environment Contributions to 2017 $ bn 5 G2 World +$4.0bn 4 +$3.0bn 3 2 +$1.2bn +$0.9bn 1 0 Brazil Russia Philippines India UK Japan China USA Source: GroupM This Year Next Year Worldwide Report, August 2017 46
Slide 47: Returning to Parity
Market Environment Returning to Parity % contribution 80 Old 60 New 40 20 0 2011-2016 2017-2018 Source: GroupM This Year Next Year Worldwide Report, August 2017 47
Slide 48: Even More Dependent on Digital
Market Environment ..But Even More Dependent on Digital % contribution 100 90 80 Traditional 70 Digital 60 50 40 30 20 10 0 2011-2016 2017-2018 Source: GroupM This Year Next Year Worldwide Report, August 2017 48
Slide 49: Share Trajectories
Market Environment Share Trajectories 50 TV 40 30 Digital 20 Print 10 0 2009 2011 2013 2015 2017 Source: GroupM This Year Next Year Worldwide Report, August 2017 49
Slide 50: 2017/2018 Forecast Ad Spend Growth by Region
Market Environment 2017/2018 Forecast Ad Spend Growth by Region Growth % YoY 2017 2017 2018 prev North America 2.6 2.2 3.4 Lat Am 6.5 4.3 6.6 W Europe 3.0 2.6 2.6 CEE 7.9 8.2 8.3 Asia-Pacific 6.3 4.1 5.3 WORLD 4.4 3.0 4.3 Source: GroupM This Year Next Year Worldwide Report, August 2017 50
Slide 51: Four Core Strategic Priorities
3 Four Core Strategic Priorities 51
Slide 52: Macro and Micro Trends
Market Environment Macro and Micro Trends Macro Micro (continued) Worldwide GDP slowed in late 2016 and H1 2017. IMF growth projections slightly worse Uncertainty and short-termism reducing investment in favour of buy- than before with Eurozone and China up, but UK and USA down. backs/dividends,
Slide 53: Like-for-Like Growth and GDP
Market Environment Like-for-Like Growth and GDP 11.0 10.0 WPP Like-for-Like Revenue Growth WPP Like-for-Like Net Sales Growth 9.0 GDP Nominal / WPP GDP growth % 8.0 2018 Forecast WPP Weighted GDP Nominal / Goldman Sachs Goldman Sachs 7.0 Real IMF¹ Growth (%) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Q1/12 Q2/12 Q
Slide 54: The New Normal
Market Environment The New Normal Low GDP Low or No Growth Inflation Little Pricing High Focus Power on Costs 54
Slide 55: The Legacy Spectrum
Market Environment The Legacy Spectrum Activist Zero Based Disrupters Investors Budgeters Carl Icahn Bill Ackman Daniel Loeb Nelson Peltz Paul Singer Keith Meister 55
Slide 56: Short Executive Life Expectancy
Market Environment Short Executive “Life Expectancy” CEO tenure 6 to 7 years (FTSE 100 5.9 years, S&P 500 7.1 years) CFO tenure 4 to 5 years (FTSE 100 4.1 years, S&P 500 4.8 with 50% less than 3 years) CMO tenure 2 to 3 years (S&P 45 months) 56
Slide 57: S&P Dividends & Buy-Backs as % of Operating Earnings
Market Environment S&P 500 Dividends & Buy-Backs as % of Operating Earnings 140% 131% 122% 120% 114% 110% 104% 100% of operating earnings 99% 98% 98% 95% 95% 100% 94% 89% 88% 87% 87% 85% 83% 83% 81% 77% 78% 78% 80% 74% 74% 71% 71% 71% 68% 67% 68% 63% 59% 59% 60% 60% 40% 20% 0% Q1'09 Q2'09 Q3'09 Q4'0
Slide 58: Highest FTSE EPS in Three Years
Market Environment Highest FTSE 100 EPS in Three Years, Stable Pay-Out Ratio in Q2 2017 110% 75% FTSE 100 EPS FTSE 100 pay-out ratio WPP pay-out ratio 70% 100% 65% 90% 60% 80% 55% EPS Pay-out Ratio Q3/11 = 100% 50% 70% 45% 60% 40% 50% 35% 40% 30% Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13
Slide 59: US Total Investment as % of GDP
Market Environment US Total Investment as % of GDP 59
Slide 60: Leading Consumer Packaged Goods Clients Published Results
Market Environment Leading Consumer Packaged Goods Clients Published Results Trends Like-for-like revenue growth 1-2%. Pricing leads as volumes are flat: Q4/16 Q1/17 Q2/17 Organic growth 2.5% 0.9% 1.4% Price 2.1% 1.5% 1.3% Volume 0.4% -0.6% 0.1% US growth remains behind International. Sluggi
Slide 61: S&P Revenue Growth by Sector
Market Environment S&P 500 Revenue Growth by Sector Q4 2016 – Q2 2017 Sector Q4 2016 Q1 2017 Q2 2017 Average P/E Energy 4.2% 34.3% 15.8% 18.1% 50.9 Information Technology 7.2% 8.2% 8.7% 8.0% 22.2 Utilities 8.1% 7.2% 6.4% 7.2% 19.6 Materials 4.0% 9.1% 7.2% 6.8% 20.6 Financials 5.5% 9.8% 4.5% 6.6% 15.
Slide 62: Strong Brands Generate Superior Shareholders' Return
Market Environment Strong Brands Generate Superior Shareholders’ Return Top 10 Global Brands Outperform S&P 500 by over 50% and MSCI over 3x Over Last 11 Years 62
Slide 63: Four Strategic Priorities
Four Strategic Priorities Horizontality, New Markets, New Media and Data Investment Management Horizontality – first critical priority - ensuring our people work seamlessly together through client teams and country and sub-regional managers to provide integrated benefit for clients. Faster growi
Slide 64: Horizontality – Critical Priority
Four Strategic Priorities Horizontality – Critical Priority 50 2017 H1 64
Slide 65: Horizontality Matrix
Horizontality Horizontality Matrix Specialist Communications Digital, eCommerce, Shopper Marketing Media Data Public Relations Branding Health & Specialist Advertising Investment Investment & Public Affairs & Identity & Wellness Communications Management Management Global Client Teams Country & Regi
Slide 66: Horizontality Account Teams
Horizontality 50 Account Teams – over one third of revenue with over 38,000 WPP employees working on these clients 66
Slide 67: Horizontality Critical Priority
Horizontality Critical Priority 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 & entertai
Slide 68: New Markets
Four Strategic Priorities New Markets 28% 29% · · 2016 H1 2017 H1 69
Slide 69: Revenue in Faster Growing Markets 2007-2016
New Markets Revenue¹ in Faster Growing³ Markets 2007-2016 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 4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 WPP OMC³ PUB³ IPG³ HAV³ ¹ WPP reportable US$ revenue per WPP results and peer $ revenue as shown in annual results presen
Slide 70: WPP's Performance in BRIC Markets
New Markets WPP’s Performance Remains Strong in BRIC Markets¹ Over Long-Term Revenue $'m 1,600 16 year CAGR 13% 1,400 1,200 First half 2016 1,000 800 16 year CAGR 15% 600 16 year CAGR 11% 400 200 16 year CAGR 38% 0 2000 2016 2017 H1 2000 2016 2017 H1 2000 2016 2017 H1 2000 2016 2017 H1 Greater China
Slide 71: Media Billings by Geography
New Markets Media Billings by Geography Worldwide Ranking by Group as % of the Six Groups % WPP Omnicom Publicis Dentsu IPG Havas 40 35 30 25 20 15 10 5 0 Worldwide Americas Europe Asia Pacific Source: RECMA July 2017 billings report, based on 2016 data 72
Slide 72: New Media
Four Strategic Priorities New Media 38% 41% · · 2016 H1 2017 H1 73
Slide 73: Advertising Spend Increasingly Moving to Digital
New Media Advertising Spend is Increasingly Moving to Digital Digital as a % of Total Ad Spend 69% 67% Proliferation of consumer 56% 58% media channels and devices Mobile as the primary screen 42% 40% 39% 39% for content consumption 34% 31% 30% 28% 29% Digitalisation of the traditional linear
Slide 74: Remain Optimistic About Mobile Ad Spend Growth
New Media Remain Optimistic About Mobile Ad Spend Growth… Print remains way over-indexed relative to time spent % of Time Spent in Media vs. % of Advertising Spending, USA, 2016 Source: (KPCB 2017) Internet and Mobile advertising spend based on IAB and PwC data for full year 2016. Print, Radio, and
Slide 75: Digital in All Our Businesses
New Media Digital in All Our Businesses Digital Revenue ($billion – 2016 Full Year) 7.5 5.8 4.7 4.4 3.0 2.7 2.7 2.6 2.1 0.7 WPP Publicis Omnicom¹ Accenture² IBM² Dentsu IPG¹ Deloitte² PwC² Havas¹ 1Omnicom, IPG and Havas digital revenue based on Exane BNP Paribas estimates. ² Accenture, IBM, Deloitte
Slide 76: Revenue Share Continues to Increase
New Media Revenue Share Continues to Increase WPP Share of Digital Revenue 41% 40-45% 39% 37%+ 36% 35% 33%¹ 30% 21% 12% 2000 2006 2011 2012 2013 2014 2015 2016 2017 H1 Target in 3-4 Years 1 Including AKQA Pro-Forma 77
Slide 77: [m]PLATFORM: Audience Intelligence and Activation Solution
New Media [m]PLATFORM: GroupM’s Audience Intelligence and Activation Solution [m]PLATFORM builds personalised consumer relationships at scale. At the core of [m]PLATFORM is the uniquely powerful consumer identifier, [mp]ID. [m]PLATFORM teams are present in 50 markets globally, with over 5,000 employ
Slide 78: Xaxis: The Outcome Media Company
New Media Xaxis: The Outcome Media Company GLOBAL SCALE ANNUAL SALES CLIENTS GROWTH 2,000+ EMPLOYEES $1.1 BILLION 3,300+ ACCOUNTS ca. +10% YOY SERVING 61 MARKETS ASSUMING RISKS FOR CLIENTS FOCUSED ON MACHINE LEARNING LATAM REGION IN AN OVERLY COMPLEX TO DELIVER MEASURABLE GROWTH AT 200% PROGRAMMATIC
Slide 79: Data Investment Management and Quantitative Disciplines
Four Strategic Priorities Data Investment Management and Quantitative Disciplines 80
Slide 80: 2016 Revenue by Sector
Data Investment Management and Quantitative Disciplines 2016 Revenue by Sector $19.4bn Data Investment Management 3.6 Marketing Services Advertising $15.4bn Media 7.0 7.34 $10.8bn 5.6 $7.8bn $7.2bn 3.4 0.4 3.3 6.0 2.5 6.8 5.4 2.9 $2.5bn 0.8 2.1 2.7 0.8 1.6 0.9 WPP Omnicom Publicis IPG Dentsu Havas S
Slide 81: WPP Investments in Technology, Data and Content
Data Investment Management and Quantitative Disciplines WPP Investments in Technology, Data and Content New areas key to supporting clients and managing measurement, viewability, verification, value and performance. Technology Data Content ActionX comScore ($326m¹ vs $393m²) 88rising AppNexus Info
Slide 82: WPP Global Data Partnerships
Data Investment Management and Quantitative Disciplines WPP Global Data Partnerships Exclusive data partnerships with the world’s largest digital media owners and specialist datasets, providing greater insight, targeting and measurement services for clients. Digital Media Owners Specialist Dataset
Slide 83: Digital and Faster Growing Markets
Digital and Faster Growing Markets Two Key Long-Term Growth Drivers Overall 60% of 2017 H1 Actual Revenue Faster growing markets Digital 29% 41% of revenue of revenue Digital in faster growing markets 10% of revenue 84
Slide 84: Key Objectives
4 Key Objectives W PP
Slide 85: 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 86: Improving Operating Margins
Key Objectives Improving Operating Margins PBIT1 PBIT1 margin £’m % 2,500 20% Long term target 19.7% Long-term PBIT margin targets include 1.0% 2,160 margin improvement from 19% operational efficiency programmes 2,000 1,774 18% 1,662 1,681 PBIT 1,531 17.4% 17% 1,500 1,429 Net Sales Margin 16.9% 16.7
Slide 87: Using Free Cash Flow to Enhance Dividend Pay-Out Ratio
Key Objectives Using Free Cash Flow to Enhance Dividend Pay-Out Ratio 120p 50% Target pay-out ratio 45% 100p 40% 35% 80p 30% 60p 25% 20% 40p 15% 10% 20p 5% 0p 0% 2012 2013 2014 2015 2016 2016 H1 2017 H1 Headline Diluted EPS 73.4p 80.8p 84.9p 93.6p 113.2p 39.1p 45.4p Dividend Declared/ Share 28.5p 34
Slide 88: 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: 11,129 Buy-backs 10,548 Dividends paid 9,081 Headline Earnings Over the ten years to % of Headline Earnings 7,852 2016 we returned £5.9bn to share 6,716 63% ow
Slide 89: 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 digital, eCommerce & shopper marketing and data investment manageme
Slide 90: Acquisitions and Investments – Year to Date
Key Objectives Acquisitions and Investments – Year to Date Faster Growing Quantitative & Markets 88rising (USA)² Digital The Cocktail (Spain) Deeplocal (USA) Eightytwenty (Ireland) 3Ti (China) Fullscreen (USA)¹,² CBC (CHINA)¹,² Game Pass (USA)² Bruketa&Žinić (Croatia) CMC (China)¹,² Keltra (USA)² Me
Slide 91: Majority Stakes Acquired Post-Lehman
Key Objectives Using Free Cash Flow for Acquisitions Majority stake acquired in 242 companies1 post-Lehman, 2009 - 2016 Faster Growing Quantitative & Markets Digital Client/Creative 38 94 84 26 Total revenue in 2017F: $2,621m2 Total consideration paid: $3,061m3 1 Includes majority acquisitions and s
Slide 92: Acquisitions: 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% 25% 15% 8% 20% 10% 6% 15% WACC 4% 10% 6.3% 5% 2% 5% 0% 0% 0% Faster Direct & Both Creative Total Faster Direct & Both Creative To
Slide 93: Improving the Creative Reputation of all our Businesses
Key Objectives Improving the Creative Reputation of all our Businesses Network¹ 1 BBDO Ogilvy & Mather 2 Ogilvy & Mather Cannes Network of the Year 2012-2016 3 McCann 3 out of the top 6 Cannes 4 Y&R networks of the year 5 DDB 2 out of the top 4 Cannes agencies of the year 6 Grey Ogilvy & Mather 7 TB
Slide 94: Outlook and Conclusions
cannes uons 2011-207 WY HOLDING COMPANY OF THE YEAR on 9 MOSTEFFECIVE HOLDING COMPANY 5 Outlook and Conclusions W PP
Slide 95: Conclusions: 2017 H1 Summary
Conclusions 2017 H1 Summary First half reported net sales growth 13.7%, constant currency 2.2% but like-for-like -0.5%. Reported margin improvement of 0.2 margin points and 0.1 margin points like-for-like. Headcount controlled, down 1.0% since 1 January 2017 compared to like-for-like net sales
Slide 96: Long-Term Financial Model
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 through acquisitions, s
Slide 97: Outlook for Full Year
Outlook for Full Year Weak start to second half with July like-for-like net sales down 2.6% and YTD down 0.8%. Our forecasts indicate − Like-for-like revenue and net sales growth revised downwards to between zero and 1%, with stronger second half partly reflecting easier comparatives. − Margin i
Slide 98: 31 Year History (Hard Copy Only)
6 31 Year History (Hard Copy Only) 99
Slide 99: WPP Reported Revenue
31 Year History WPP Reported Revenue £’m 16,000 15,000 14,389 14,000 13,000 12,235 12,000 11,529 11,019 11,000 10,373 31 year CAGR 30% 10,022 10,000 9,331 9,000 8,684 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 2,000 1,555 1,6911,7471,918 1,2641,2041
Slide 100: WPP Net Sales
31 Year History WPP Net Sales £’m 14,000 13,000 12,398 12,000 11,000 10,524 10,065 10,000 10,076 9,515 9,239 9,000 31 year CAGR 30% 8,561 7,981 8,000 7,009 7,000 5,850 6,000 5,611 5,133 5,000 4,074 3,790 3,690 3,869 4,000 3,000 2,736 1,855 2,000 1,437 1,469 1,633 1,328 1,076 1,016 1,070 1,209 1,204
Slide 101: WPP Organic Growth
31 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 31 year average organic revenue growth : 5.5% 8.0 8.3 8.4 8.0 8.0 8.2 6.3 5.7 5.5 5.4 5.0 5.3 5.3 5.3 5.2 5 4.0 4.0 3.1 3.5 3.3 3.33.0 2.7 2.9 0.7 N/A 0 -3.0 -5 -4.7 -5.9 -8.1 -10 N
Slide 102: WPP PBIT and Margins
31 Year History WPP PBIT and Margins PBIT PBIT margin 2004 onwards £’m % PBIT reported 17.4% 18% under IFRS 16.9% 16.5%16.7% 15.9%16.0% 16.1% 2,000 15.7%15.8% 15.5% 15.3% 16% 15.0% 14.8% 14.9%14.7% 15.3% 14.4% 14.0% 13.8%13.7% 15.0% 15.0% 15.1% 14.8% 14% 14.5% 13.0% 14.5% 14.3% 14.3% 12.7% 14.0% 14.
Slide 103: WPP Headline Diluted EPS
31 Year History WPP Headline Diluted EPS Post 1992 Rights Issue pence 120 113.2 100 93.6 84.9 80.8 80 23 Year CAGR: 15% 73.4 67.7 60 55.5 56.7 45.8 44.4 42.0 40 36.0 30.9 32.3 30.3 29.0 27.9 22.7 23.8 18.8 20 15.7 13.5 9.4 5.0 6.5 0 UK GAAP IFRS Note: 1993 adjusted to reflect 1992 rights issue. Head
Slide 104: Other Financial Information (Hard Copy only)
7 Other Financial Information (Hard Copy only) 105
Slide 105: Competitor Review
2017 Interim Results Competitor Review1 30 14 Market Cap 2016 Revenue 2016 EBITDA Market Cap/ EBITDA EV/EBITDA 12 25 10 20 EBITDA Valuation Ratios Market Capitalisation $bn 8 15 6 10 4 5 2 0 - WPP OMC PUB Nielsen Dentsu IPG Havas GfK Ipsos 1 Market Capitalisation/Enterprise Value as of 18 August 201
Slide 106: Net Finance Costs
2017 Interim Results Net Finance Costs £m 2017 2016 B/(W) Net debt interest 89 84 (5) Investment Income (5) (10) (5) IAS 19 (Pensions) 5 5 - Sub-total - (5) (5) Headline finance costs 89 79 (10) IAS 39 (Financial Instruments) (84) 66 150 Net finance costs 5 145 140 107
Slide 107: Ordinary Shares - Basic
2017 Interim Results Ordinary Shares - Basic June June 2017 2016 No. of Shares (million) Actual Actual 1 January 1,332 1,329 Option exercise - 1 30 June 1,332 1,330 -0.2% Weighted Average 1,332 1,330 ESOP, Treasury & Other (66) (46) Average Basic 1,266 1,284 1.4% 108
Slide 108: Ordinary Shares – Diluted
2017 Interim Results Ordinary Shares – Diluted June June 2017 2016 No. of Shares (million) Actual Actual Average Basic 1,266 1,284 Share Option Dilution 2 2 Other Potentially Issuable Shares 12 14 Diluted Shares 1,280 1,300 1.5% Fully Diluted Shares: Full Year 1,284 1,296 Estimate/Actual 109
Slide 109: Our Billion $ Revenue Markets
2017 Interim Results Our Billion $ Revenue Markets 110
Slide 110: Our Billion $ Revenue Brands
2017 Interim Results Our Billion $ Revenue Brands 111
Slide 111: Over 200,000 people in over 3,000 offices
2017 Interim Results Over 200,000 people1 in over 3,000 offices in 113 countries with access to over $26bn1 of annual revenue 1 Including associates and investments 112
Slide 112: 2016 Revenue by Geography
2017 Interim Results 2016 Revenue by Geography $19.4bn 5.8 Asia Pacific, Latin America, Africa & Middle East, CEE $15.4bn Western Europe 2.8 N America $10.8bn 3.4 6.5 2.3 $7.8bn $7.2bn 2.7 1.7 1.4 9.2 4.8 7.1 5.8 $2.5bn 4.7 0.4 1.2 1.2 1.2 0.9 Source: WPP Omnicom Publicis IPG Dentsu Havas 1 WPP – re
Slide 113: WPP in Faster Growing Markets
2017 Interim Results WPP in Faster Growing Markets Region Market Billings1 % Share1 Rank1 12 month2 People2 $bn Revenue $bn ‘000 Asia Pacific: Greater China3 11.6 36% 1 1.4 13 India 4.8 50% 1 0.6 17 Thailand 0.9 35% 1 0.1 2 4 LatAm: Brazil n/a n/a 1 0.5 7 Mexico 1.1 28% 1 0.2 2 Argentina 0.6 24% 3 0
Slide 114: WPP Clear No. 1 in Brazil
2017 Interim Results WPP Clear No. 1 in Brazil¹ RECMA does not cover Brazil, IBOPE measures media spend with “IBOPE Rate Card Monitor”. Agency R$’bn Rank Group R$’bn Rank Y&R 6.0 1 WPP 11.6 1 W/McCann 3.7 2 OMC 9.1 2 Almap/BBDO 3.7 3 PUB 8.4 3 Ogilvy 3.4 4 IPG 3.7 4 Publicis 3.2 5 HAV 2.7 5 Africa
Slide 115: WPP Position in Digital, eCommerce & Shopper Marketing
2017 Interim Results WPP Position in Digital, eCommerce & Shopper Marketing First Half 2017 Revenue $’m Digital, eCommerce & Shopper Marketing Networks 1,706 (OgilvyOne, Wunderman, Geometry, VML, WPP Digital, Mirum & AKQA) % of Group revenue 18% Specialist Direct, Digital and Interactive resources:
Slide 116: Maintaining Flexibility in The Cost Base
2017 Interim Results Maintaining Flexibility in The Cost Base Change in Variable Costs1 % 8 7.5 7.4 7.3 7.2 7.1 7 6 5 4 3 2 1 0 2013 H1 2014 H1 2015 H1 2016 H1 2017 H1 Variable Staff Costs as % of Net Sales ¹ Freelance, consultants and incentive costs 117
Slide 117: Distributions to Share Owners
2017 Interim Results Using Free Cash Flow to Enhance Share Owner Value £’m Distributions to Share Owners¹ Distributions as % of shares issued¹ 1,200 7% 6% 1,000 5% 800 4% 600 3% 59%² 400 2% 48%² 67%² 47%² 200 70%² 62%² 61%² 1% 81%² 55%² 0 0% 2010 2011 2012 2013 2014 2015 2016 2016 H1 2017 H1 Buy-bac
Slide 118: Effects of Currency
2017 Interim Results Effects of Currency H1 2017 H1 2016 Sterling Weaker US$ 1.26 1.43 -12% € 1.16 1.28 -9% ¥ 141 160 -12% Net sales were increased by Chinese Renminbi 8.7 9.4 -7% £644m and headline PBIT¹ by Brazilian Real 4.00 5.31 -25% £89m as a result of weakness of Australian $ 1.67 1.95 -14% £
Slide 119: USD Monthly Average and Quarterly Variance
2017 Interim Results 18 month US$ range 1.23 to 1.45 USD Monthly Average Quarterly % Variance vs PY 1.50 £ (Weakness)/Strength 10% 1.45 5% 6.3% 1.40 0.0% 2017 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 2016 1.35 -5.5% -6.4% -5% -10.8% -13.4% -15.3% 1.30 -18.1% -10% 1.25 -15% 1.20 -20% Jan Feb Mar Apr May
Slide 120: EUR Monthly Average and Quarterly Variance
2017 Interim Results 18 month € range 1.12 to 1.33 EUR Monthly Average Quarterly % Variance vs PY 1.35 £ Weakness 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -2% -2.8% -3.5% -4.6% 1.30 -4% -8.3% -8.4% -10.4% -6% 1.25 2017 -8% -15.6% -16.9% 2016 1.20 -10% -12% 1.15 -14% -16% 1.10 -18% Jan Feb Mar Apr May Ju
Slide 121: Faster Growing Regions Quarterly Variance
2017 Interim Results Faster Growing Regions - Quarterly % Variance vs PY 5% Asia Pacific Latin America 30% 0.3% 2.8% 0% 20% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -0.1% -3.2% 21.9% -5% -11.0% 10% 13.6% -15.4% 2.5% 5.9% -18.5% -10% -20.5% 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -3.0% -4.5% -13.6% -15% -10% -
Slide 122: Two Year Cumulative Like-for-Like Revenue Growth
2017 Interim Results Two Year Cumulative Like-for-Like Revenue Growth1 % WPP² OMC³ Pub4 DEN5 IPG6 HAV7 Q1 2015 12.2 9.4 4.2 n/a 12.3 10.1 Q2 2015 14.7 11.1 1.9 n/a 11.4 13.4 Q3 2015 12.2 12.6 1.7 n/a 13.4 11.5 Q4 2015 14.5 10.7 6.0 n/a 10.0 6.6 Q1 2016 10.3 8.9 3.8 11.3 12.4 10.5 Q2 2016 8.0 8.7 4.1
Slide 123: Acquisitions Since April
2017 Interim Results Acquisitions Since 1 April 88rising¹ – USA (WPP Ventures) 88rising is a US based producer of digital content catering to the Asian millennial market. 88rising has branded and sponsored content deals with companies such as adidas, Maybelline and Revolve, an online fashion and cos
Slide 124: Acquisitions Since April
2017 Interim Results Acquisitions Since 1 April The Cocktail – Spain (Wunderman) The Cocktail is a digital transformation consultancy based in Spain. It is a recognised leader in providing sophisticated digital transformation services through an integrated approach to strategy development, design, t
Slide 125: Acquisitions Since April
2017 Interim Results Acquisitions Since 1 April hug digital¹ – Dubai (Grey) hug is a leading Middle East based digital agency that provides services including campaigns, social media, research, content marketing and influencer marketing. Clients include international, regional and local brands such
Slide 126: Acquisitions Since April
2017 Interim Results Acquisitions Since 1 April Marketplace Ignition – USA (WPP Digital/POSSIBLE) Marketplace Ignition is an eCommerce agency focused on advising clients on how to grow their business on Amazon and other online marketplaces. Marketplace Ignition works with more than 400 brands, repre
Slide 127: Acquisitions Since April
2017 Interim Results Acquisitions Since 1 April Sensio¹,² – France (Grey) Sensio is a full service digital agency that offers services including consulting, design, technology and customer acquisition. Founded in 1998, the agency has around 75 people and is headquartered in Paris. Clients include Gr
Slide 128: WPP London
WPP 2017 Interim Results London