Wpp Plc · LSE:WPP
Wpp — FY2022 Earnings Presentation
53 slides from Wpp's earnings presentation, Feb 23, 2023
Slide 1: Preliminary Results
PRELIMINARY RESULTS 23 February 2023
Slide 2: Video
VIDEO
Slide 3: Preliminary Results
PRELIMINARY RESULTS 23 February 2023
Slide 4: Cautionary Statement Regarding Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This document contains statements that are, or may be deemed to be, “forward-looking statements”. Forward-looking statements give the Company’s current expectations or forecasts of future events. An investor can identify these statements by t
Slide 5: Agenda
• 2022 highlights • Financial performance • Strategic progress • Q&A
Slide 6: Highlights: Continued Strong and Broad-Based Performance
HIGHLIGHTS: CONTINUED STRONG AND BROAD-BASED PERFORMANCE • 2022 like-for-like revenue less pass-through costs growth +6.9% (Q4 +6.4%) • Broad-based performance: all major agencies grew in 2022 - GIA +6.9%, PR +8.2%, Specialist Agencies +5.6%, with good growth across most major markets • Winning perf
Slide 7: Financial Performance
FINANCIAL PERFORMANCE
Slide 8: Unaudited Headline IFRS Income Statement
UNAUDITED HEADLINE¹ IFRS INCOME STATEMENT YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ REPORTED Δ LFL2 – Strong LFL growth in revenue and revenue less pass-through costs Revenue 14,429 12,801 12.7% 6.7% – Foreign exchange tailwind of Revenue less pass-through costs 11,799 10,397 13.5% 6.9% 5.9pt on revenue
Slide 9: Reconciliation of Headline Operating Profit to Reported Operating Profit
RECONCILIATION OF HEADLINE OPERATING PROFIT TO REPORTED OPERATING PROFIT YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ Headline operating profit 1,742 1,494 248 – Goodwill impairment across six small CGU’s, reflecting slightly Goodwill impairment (38) (2) (36) lower growth assumptions – Restructuring costs
Slide 10: Global Integrated Agencies: Consistent Growth
GLOBAL INTEGRATED AGENCIES: CONSISTENT GROWTH £M 2022 2021 Δ REPORTED Δ LFL – GIA three-year LFL growth of 9.5% Revenue less pass-through costs1 9,742 8,683 12.2% 6.9% in 2022 Headline operating profit2 1,432 1,222 17.2% – LFL sales remain strong, +5.0% in GIA ex GroupM, with growth Headline operati
Slide 11: Global Integrated Agencies: 2022 and Three-Year Cumulative Growth
GLOBAL INTEGRATED AGENCIES: 2022 AND THREE-YEAR CUMULATIVE GROWTH CREATIVE AGENCIES (GIA EX GROUPM) GROUPM LFL REVENUE LESS PASS-THROUGH COSTS GROWTH (%) LFL REVENUE LESS PASS-THROUGH COSTS GROWTH (%) 3-year 1-year 45% 3-year 1-year 37% 8.2 of WPP of WPP in 2022 in 2022 20.0 17.2 6.0 5.6 15.7 15.9 4
Slide 12: Public Relations: Strong Demand for Strategic Communications
PUBLIC RELATIONS: STRONG DEMAND FOR STRATEGIC COMMUNICATIONS £M 2022 2021 Δ REPORTED Δ LFL – The increasing importance of Revenue less pass-through costs 1,157 910 27.1% 8.2% reputation, purpose-related and ESG assignments are key growth Headline operating profit 191 143 33.6% drivers Headline opera
Slide 13: Specialist Agencies: Good Growth Across All Businesses
SPECIALIST AGENCIES: GOOD GROWTH ACROSS ALL BUSINESSES £M 2022 2021 Δ REPORTED Δ LFL – Strong growth across all Revenue less pass-through costs1 900 804 11.9% 5.6% businesses Headline operating profit2 119 129 (7.8)% – CMI (Healthcare media) delivered double-digit PERFORMANCE REVIEWgrowth in 2022 He
Slide 14: Major Markets
MAJOR MARKETS LFL REVENUE LESS PASS-THROUGH COSTS GROWTH (%) 2022 2022 Q4 22.1 18.2 - USA and UK: strong growth in 12.0 GroupM and Hogarth in 2022 7.6 8.5 6.7 6.1 5.8 5.2 3.5 4.8 4.9 3.3 2.6 2.3 2.5 - Germany: strong growth in GroupM, Ogilvy and Landor & (4.0) (8.4) (5.2) Fitch (12.2) USA UK Germany
Slide 15: Transformation Programme: £375m Savings to Date, £600m by 2025
TRANSFORMATION PROGRAMME: £375M SAVINGS TO DATE, ON TRACK TO DELIVER £600M BY 2025 Functional/shared 700 services Updated, indicative savings • Workday and Maconomy ERP platform deployment 600 600 continues • Global IT hubs established in Bucharest, Chennai, Kuala Lumpur and Mexico, providing 24x7 s
Slide 16: Transformation Programme: Reinvestment and Impact on Margin
TRANSFORMATION PROGRAMME: REINVESTMENT AND IMPACT ON MARGIN Net reinvestment in new talent, incentives and IT, supporting top line growth and margin improvement Progress MARGIN HEADLINE OPERATING to date Key initiatives in H1 MOVEMENT 2019 TO 2022 On track Investments – Staff costs: increased headco
Slide 17: Change in Operating Margin Year-on-Year
CHANGE IN OPERATING MARGIN YEAR-ON-YEAR – Margin 14.8%, +40 basis points, in line with guidance, reflecting top line growth and transformation savings HEADLINE OPERATING MARGIN MOVEMENT 2022 – Staff costs ex incentives +17.5%, due to higher average headcount 1 (+9% to 114,000) and salary inflation –
Slide 18: Restructuring: Total Costs in Line with Guidance
RESTRUCTURING: TOTAL COSTS IN LINE WITH GUIDANCE YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ – Restructuring excluding ERP costs Restructuring and transformation costs in line with indication of £120m Severance 22 12 10 – ERP (Workday and Maconomy) in Establishment & other 47 40 7 line with indication of
Slide 19: Headline Income from Associates
HEADLINE INCOME FROM ASSOCIATES – Kantar: solid momentum over YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ REPORTED 2022 and continued gross margin growth Kantar 38 33 15.2% – Other associates: Haworth (loss Other Associates 36 53 (32.1)% of Walmart) and Imagina Total 74 86 (14.0)% – Headline income from a
Slide 20: Net Debt, Cashflow and Shareholder Returns
NET DEBT, CASHFLOW AND SHAREHOLDER RETURNS MOVEMENT IN NET DEBT1 – FY22 £M (901) DISCIPLINED CAPITAL (2,479) ALLOCATION £1.5 billion of share buybacks over past two years 1 Itemised movements in adjusted net debt represent management figures, which may vary from the presentation of the cash flow und
Slide 21: Trade Net Working Capital: Average Flat Year-on-Year
TRADE NET WORKING CAPITAL: AVERAGE FLAT YEAR-ON-YEAR £M 500 – Trade Net Working Capital at year end 2022 was £226m higher than 2021 including 0 the impact of FX Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec – Lower Trade NWC at year -500 end reflects WPP’s typical cash cycle – Average Trade NWC wa
Slide 22: Leverage Metrics
LEVERAGE METRICS YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ £M Average net debt¹ on constant currency basis (2,928) (1,572) (1,356) Average net debt¹ on reportable basis (2,928) (1,565) (1,363) Net debt¹ at 31 December on constant currency basis (2,479) (1,074) (1,405) Net debt¹ at 31 December on reporta
Slide 23: Capital Allocation: Investment in Growth and Return of Excess Capital
CAPITAL ALLOCATION : INVESTMENT IN GROWTH & SIGNIFICANT RETURN OF EXCESS CAPITAL • Cash flow invested in growth, organically and through bolt-on acquisitions to expand in growth geographies and enhance our offer to clients £223m capex £365m returned • Bolt-ons included Village Marketing, Passport Br
Slide 24: 2023 and Medium-Term Guidance
2023 AND MEDIUM-TERM GUIDANCE 2023 Guidance Like-for-like revenue less pass-through costs growth of 3-5%; further margin improvement reflecting continued operating leverage to deliver a headline margin of around 15% (excluding the impact of FX) – M&A contribution will add 0.5-1.0% to revenue less pa
Slide 25: Strategic Progress
STRATEGIC \ PROGRESS
Slide 26: Increasing Complexity, New Opportunities
INCREASING COMPLEXITY, NEW OPPORTUNITIES
Slide 27: Companies Investing in Marketing
COMPANIES INVESTING IN MARKETING “ We believe that, in 2023, there is room for further marketing “ We're really pleased with the operating margin improvement, that we're seeing moving through the P&L and that will continue investments. And as a branded goods company, these are very important to us a
Slide 28: Today, a Broader, More Modern Offer
TODAY, A BROADER, MORE MODERN OFFER VERY GAY RAPTOR SEEING AI Communications Experience Commerce Technology ADOBE COMMERCE SHAH RUKH KHAN MY AD
Slide 29: Simpler Business, Stronger Brands
SIMPLER BUSINESS, STRONGER BRANDS GLOBAL INTEGRATED AGENCIES PUBLIC SPECIALIST RELATIONS AGENCIES Creative Media 45% 37% 10% 8% of WPP of WPP of WPP of WPP in 2022 in 2022 in 2022 in 2022
Slide 30: Delivering World-Class Work, Recognised by the Industry
DELIVERING WORLD-CLASS WORK, RECOGNISED BY THE INDUSTRY CREATIVE 2022 2022 2022 2022 2022 NETWORK LEADER IN WORLD CHANGING INAUGURAL GOLD LION OF THE YEAR MARKETING IDEAS AWARD CREATIVE B2B CREATIVE AND GRAND PRIX Cannes Cannes CONTENT SERVICES Fast Company Cannes Forrester MEDIA 2022 MOST CREATIVE
Slide 31: Diverse Client Mix and Geographic Footprint
DIVERSE CLIENT MIX AND GEOGRAPHIC FOOTPRINT1 GEOGRAPHY CLIENTS Travel Public & Leisure Sector +16.5% Other North -16.6%2 +6.2% Rest of America CPG World Financial 3% 3% +11.9% +6.6% +8.0% Services 6% 27% +7.5% 24% 6% Telecom & 40% Media +7.4% 7% Automotive 10% -6.0% Tech & 19% Digital Services Europ
Slide 32: Investing in Data & Technology
INVESTING IN DATA & TECHNOLOGY GROUPM NEXUS INVESTMENT BROAD CAPABILITIES LAUNCHED Partnerships 650 2,900 Microsoft Meta Blueprint certifications certifications 1,800 3,300 Salesforce Adobe certified Targeted M&A certifications professionals $2BN Billings in 2022 7,060 28 TikTok Senior executives Ac
Slide 33: Delivering on the Potential of Data and Technology for Our Clients
DELIVERING ON THE POTENTIAL OF DATA AND TECHNOLOGY FOR OUR CLIENTS
Slide 34: Investing in Our Purpose
INVESTING IN OUR PURPOSE PEOPLE PLANET COMMUNITIES • Invested in Future Readiness • Industry-leading net zero • Ukraine: raised $1.4m for UN Academies commitment Refugee Agency • Media decarbonisation initiative: • Similar campaigns for Pakistan, • Extended Mental Health Allies client coalition of l
Slide 35: In Conclusion: WPP Positioned to Deliver Sustainable Long-Term Growth
IN CONCLUSION: WPP POSITIONED TO DELIVER SUSTAINABLE LONG-TERM GROWTH • Positive outlook for the industry driven by complexity, new opportunities and client demand • Our client offer has delivered a three-year CAGR of 3.2% since 2019 o North America 3.3% o Media 5.4% o Creative 1.2% o PR 5.0% • Sign
Slide 36: Q&A
Q&A
Slide 37: Contacts and Further Resources
CONTACTS AND FURTHER RESOURCES TOM WALDRON INVESTOR WEBSITE Group Investor Relations Director www.wpp.com/investors tom.waldron@wpp.com Tel: +44 (0) 7788 695 864 WPP IQ ANTHONY HAMILTON WPP’s industry intelligence platform Investor Relations Director www.wpp.com/wpp-iq anthony.hamilton@wpp.com Tel:
Slide 38: Appendix
APPENDIX
Slide 39: Examples of Our Offer
EXAMPLES OF OUR OFFER VMLY&R provoked a much needed, global conversation about the pickup truck category’s COMMUNICATIONS homophobia problem: Very Gay Raptor Ogilvy Honduras launched a multinational campaign on behalf of Grupo Estratégico PAE, EXPERIENCE supporting women’s rights to use emergency co
Slide 40: Revenue Less Pass-Through Costs by Sector
REVENUE LESS PASS-THROUGH COSTS BY SECTOR1 YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ REPORTED Δ LFL Global Integrated Agencies 9,742 8,683 12.2% 6.9% Public Relations 1,157 910 27.1% 8.2% Specialist Agencies 900 804 11.9% 5.6% Total Continuing Operations 11,799 10,397 13.5% 6.9% 1. Prior year figures ha
Slide 41: Revenue Less Pass-Through Costs by Region
REVENUE LESS PASS-THROUGH COSTS BY REGION YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ REPORTED Δ LFL North America 4,688 3,849 21.8% 6.6% UK 1,537 1,414 8.7% 7.6% Western Continental Europe 2,319 2,226 4.2% 5.5% Asia Pacific, Latin America, Africa & Middle 3,255 2,908 11.9% 8.0% East and Central & Eastern
Slide 42: Revenue Less Pass-Through Costs Growth by Region
REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION Central & Eastern Europe % Q1 Q2 Q3 Q4 FY 4.9 0.9 8.9 17.3 8.0 UK % Q1 Q2 Q3 Q4 FY 8.1 6.2 4.2 12.0 7.6 North America % Q1 Q2 Q3 Q4 FY 8.7 10.2 4.7 3.4 6.6 Western Continental Europe % Q1 Q2 Q3 Q4 FY 8.9 6.6 (2.1) 8.7 5.5 Asia Pacific % Q1 Q2 Q3 Q4 FY
Slide 43: Top Markets Like-for-Like Revenue Less Pass-Through Costs Growth
TOP MARKETS LIKE-FOR-LIKE REVENUE LESS PASS-THROUGH COSTS GROWTH USA UK GERMANY Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 50.0% 50.0% 50.0% 45.0% 45.0% 40.0% 40.0% 40.0% 35.0% 35.0% 30.0% 30.0% 30.0% 20.0% 16.1% 25.0% 25.0
Slide 44: Top Markets Performance Like-for-Like Revenue Less Pass-Through Costs Growth
TOP MARKETS PERFORMANCE LIKE-FOR-LIKE REVENUE LESS PASS-THROUGH COSTS GROWTH AUSTRALIA CANADA FRANCE Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 50.0% 50.0% 50.0% 40.0% 40.0% 40.0% 30.0% 30.0% 30.0% 20.0% 20.0% 10.0% 6.1% 20
Slide 45: Sterling Weakness: Tailwind to Revenue Less Pass-Through Costs
STERLING WEAKNESS: TAILWIND TO REVENUE LESS PASS-THROUGH COSTS STERLING FULL YEAR 2022 2021 (WEAKER)/STRONGER 2021 Act Q1 22 Act Q2 22 Act Q3 22 Act Q4 22 Act 2022 Act 9.1% US $ 1.24 1.38 (10%) 7.5% € 1.17 1.16 1% 5.9% 5.9% Chinese Renminbi 8.31 8.87 (6%) Indian Rupee 97 102 (5%) 0.3% Brazilian Real
Slide 46: Unaudited IFRS Income Statement
UNAUDITED IFRS INCOME STATEMENT Δ CONSTANT YEAR TO 31 DECEMBER 2022 £M 2021 £M Δ REPORTED CURRENCY Revenue 14,429 12,801 12.7% 7.0% Gross profit 2,539 2,204 15.2% 6.5% – Share of associate Operating profit pre exceptional & goodwill/intangibles1 1,742 1,494 16.6% 10.6% exceptional loss Net exception
Slide 47: Headline Operating Profit and Margin by Sector
HEADLINE¹ OPERATING PROFIT AND MARGIN BY SECTOR²,³ OPERATING PROFIT £M OPERATING MARGIN⁴ YEAR TO 31 DECEMBER 2022 2021 2022 2021 Global Integrated Agencies 1,432 1,222 14.7% 14.1% Public Relations 191 143 16.5% 15.7% Specialist Agencies 119 129 13.2% 16.0% Total 1,742 1,494 14.8% 14.4% 1 Continuing
Slide 48: Headline Operating Profit and Margin by Region
HEADLINE¹ OPERATING PROFIT AND MARGIN BY REGION² OPERATING PROFIT £M OPERATING MARGIN³ YEAR TO 31 DECEMBER 2022 2021 2022 2021 North America 770 656 16.4% 17.0% UK 188 181 12.2% 12.8% Western Continental Europe 301 289 13.0% 13.0% Asia Pacific, Latin America, Africa & Middle 483 368 14.8% 12.7% East
Slide 49: Change in Headline Operating Margin
CHANGE IN HEADLINE¹ OPERATING MARGIN 2022 2021 Δ YEAR TO 31 DECEMBER £M £M £M % Revenue less pass-through costs 11,799 10,397 1,402 13.5% Staff costs pre incentives (7,743) (6,574) (1,168) (17.8)% Establishment (536) (529) (7) (1.3)% IT (620) (578) (42) (7.3)% Personal (204) (132) (72) (54.6)% Other
Slide 50: Free Cash Flow
FREE CASH FLOW YEAR TO 31 DECEMBER 2022 £M 2021 £M Operating profit 1,358 1,229 Depreciation & amortisation charges 513 542 - Depreciation & amortisation ex IFRS 16 251 269 - Depreciation of right-of-use assets 262 273 Investment and other impairment charges/(reversals) 158 (1) Lease payments (inclu
Slide 51: Uses of Cash Flow
USES OF CASH FLOW YEAR TO 31 DECEMBER 2022 £M 2021 £M Adjusted free cash flow 53 1,265 Net (acquisitions)/disposals ex earnout payments (223) (387) - Disposal proceeds 51 77 - Net initial payments1 (274) (464) Net cash flow before distributions (170) 878 Distributions to shareholders (1,228) (1,134)
Slide 52: Debt Maturity Profile
DEBT MATURITY PROFILE £M AT DECEMBER 31, 2022 £ TOTAL £ TOTAL CREDIT DRAWN 800 ◼ £ bonds £400m (2.875% Sep ’46) 400 400 700 ◼ US bond $220m (5.625% Nov ’43) 182 182 ◼ US bond $93m (5.125% Sep ’42) 77 77 600 ◼ £ bonds £250m (3.75% May ’32) 250 250 500 ◼ Eurobonds €600m (1.625% Mar ’30) 531 531 400 ◼
Slide 53: Thank You
THANK YOU