Wpp Plc · LSE:WPP

Wpp — Q3 2014 Earnings Presentation

56 slides from Wpp's earnings presentation, October 2014

  1. Slide 1: Trading Statement for the Third Quarter 2014

    Trading Statement for the Third Quarter 2014

  2. Slide 2: Contents

    Contents 1 Third Quarter 2014 Hard Copy only: 2 Other Financial Information 3 28 Year History 2

  3. Slide 3: Third Quarter 2014

    it, CANNES LIONS 2011 /12/13/14 HOLDING COMPANY OF THE YEAR EFFIE AWARDS 2012/13/14 MOST FFFECTIVE HOI DING COMPANY 1 Third Quarter 2014 W PP

  4. Slide 4: Highlights

    Third Quarter 2014 Highlights  Revenue growth of 3.1%, with like-for-like growth of 7.6%, 3.0% growth from acquisitions and -7.5% from currency.  Net sales growth of -1.2%, with like-for-like growth of 3.0%, 3.1% growth from acquisitions and -7.3% from currency.  Profits and net sales margin in t

  5. Slide 5: Summary – Revenue and Net Sales Growth

    Third Quarter 2014 Summary – Revenue and Net Sales Growth Revenue Net Sales % Growth Q3 YTD Q3 YTD Like-for-like 7.6 8.3 3.0 3.8 Acquisitions 3.0 2.7 3.1 2.5 Constant currency 10.6 11.0 6.1 6.3 Foreign exchange -7.5 -8.2 -7.3 -8.0 Reportable sterling 3.1 2.8 -1.2 -1.7 Reportable US dollars¹ 10.8 11.

  6. Slide 6: Revenue and Net Sales by Sector: Third Quarter

    Third Quarter 2014 Revenue and Net Sales by Sector: Third Quarter Revenue¹ Net Sales¹ % Change % Change 2014 Reported Constant Like-for- 2014 Reported Constant Like-for- £m Currency like £m Currency like Advertising, Media Investment 1,214 11.7 20.1 17.1 1,064 0.6 8.3 5.5 Management Data Investment

  7. Slide 7: Revenue and Net Sales by Sector: Year to Date

    Third Quarter 2014 Revenue and Net Sales by Sector: Year to Date Revenue¹ Net Sales¹ % Change % Change 2014 Reported Constant Like-for- 2014 Reported Constant Like-for- £m Currency like £m Currency like Advertising, Media Investment 3,604 9.9 19.3 16.7 3,182 -0.6 8.0 5.8 Management Data Investment M

  8. Slide 8: Advertising, Media Investment Management

    Third Quarter 2014 Advertising, Media Investment Management  Strongest performing sector with like-for-like revenue growth over 17% and net sales growth 5.5% in third quarter.  Strong growth in Ogilvy & Mather and Grey in the third quarter, and geographically especially in Asia Pacific, Latin Amer

  9. Slide 9: Data Investment Management

    Third Quarter 2014 Data Investment Management  Data Investment Management like-for-like revenue up 0.5% and net sales up 1.2%, in line with first half growth.  In the third quarter, revenue growth in all regions except North America, with particularly strong growth in Latin America and Africa & Mi

  10. Slide 10: Public Relations & Public Affairs

    Third Quarter 2014 Public Relations & Public Affairs  Public Relations and Public Affairs like-for-like revenue and net sales up 0.1%, which was lower than first half growth.  All regions, except Western Continental Europe, grew revenue and net sales in the third quarter, with Belgium, Finland, Ge

  11. Slide 11: Branding & Identity, Healthcare and Specialist Communications

    Third Quarter 2014 Branding & Identity, Healthcare and Specialist Communications  Constant currency revenue and net sales grew strongly at 6.8%, with like-for-like revenue growth 2.0% and net sales growth 1.4%.  In the third quarter, particularly strong growth in the Group’s Direct, Digital and In

  12. Slide 12: Direct, Digital and Interactive

    Third Quarter 2014 Direct, Digital and Interactive  For the first nine months of 2014, Direct, Digital and Interactive revenues were $4.9bn or almost 36% of total revenues (2013: $4.3bn and 35% respectively), up 14.3% in constant currency and up almost 11% like-for-like.  The number of people work

  13. Slide 13: Revenue and Net Sales by Region: Third Quarter

    Third Quarter 2014 Revenue and Net Sales by Region: Third Quarter Revenue¹ Net Sales¹ % Change % Change 2014 Reported Constant Like-for- 2014 Reported Constant Like-for- £m Currency like £m Currency like North America 945 -0.3 7.5 7.8 848 -5.2 2.2 2.3 UK 404 14.9 14.9 10.2 345 7.3 7.3 3.7 Western Co

  14. Slide 14: Revenue and Net Sales by Region: Year to Date

    Third Quarter 2014 Revenue and Net Sales by Region: Year to Date Revenue¹ Net Sales¹ % Change % Change 2014 Reported Constant Like-for- 2014 Reported Constant Like-for- £m Currency like £m Currency like North America 2,823 1.3 9.8 9.5 2,525 -4.2 3.9 3.6 UK 1,188 16.4 16.4 13.4 1,011 8.0 8.0 5.8 West

  15. Slide 15: Revenue Growth by Region

    Third Quarter 2014 Revenue Growth¹ by Region 5.3% Q3 % CENTRAL & EASTERN EUROPE REGION 7.0% YTD % Q3 YTD 10.2% Mature Markets 7.2% 8.2% UNITED KINGDOM Faster Growing 8.5% 8.7% 13.4% Markets 7.8% NORTH Total 7.6% 8.3% AMERICA 4.3% 9.5% WESTERN CONTINENTAL EUROPE 13.5% 3.2% ASIA PACIFIC Traditional 12

  16. Slide 16: Net Sales Growth by Region

    Third Quarter 2014 Net Sales Growth¹ by Region 5.0% Q3 % CENTRAL & EASTERN EUROPE REGION 7.1% YTD % Q3 YTD 3.7% Mature Markets 2.4% 3.2% UNITED KINGDOM Faster Growing 4.4% 5.1% 5.8% Markets 2.3% NORTH Total 3.0% 3.8% AMERICA 1.5% 3.6% WESTERN CONTINENTAL EUROPE 5.7% 0.9% ASIA PACIFIC Traditional 6.0

  17. Slide 17: Top Markets

    Third Quarter 2014 Top 5 Markets – YTD 63%¹ of Revenue and Net Sales, YTD Like-For-Like Revenue Growth of 9.3%¹ and Net Sales Growth of 3.9%¹ YTD Including associates: Revenue $4.6bn $2.3bn $1.0bn $1.0bn $0.6bn People ‘000² 24 16 15 7 5 USA UK Greater China4 Germany France Revenue Net Sales Revenue

  18. Slide 18: BRICs Markets

    Third Quarter 2014 BRICs Markets – YTD Over 12%¹ of Revenue and Net Sales, YTD Like-For-Like Revenue Growth of 8.9%¹ and Net Sales Growth of 5.1%¹ YTD Including associates: Revenue $1.0bn $0.5bn $0.3bn $0.2bn WPP Rank5 #3 #8 #11 #17 People ‘000² 15 6 13 2 Greater China4 Brazil India Russia Revenue N

  19. Slide 19: Growth by Region

    Third Quarter 2014 Growth by Region  Asia Pacific, Latin America, Africa & the Middle East and Central and Eastern Europe was the region with second strongest revenue growth and strongest net sales growth in the third quarter, with like-for-like revenue growth 8.5% and net sales growth 4.4%.  Fast

  20. Slide 20: Revenue Growth by Country

    Third Quarter 2014 Revenue Growth by Country Revenue Growth1 Countries >20% Argentina, India, South Korea 10% to 20% Mainland China, Thailand, UK Average³ to 10% Greater China², Mexico, USA 5% to Average³ Denmark, South Africa, Spain, Sweden, Turkey Australia, Belgium, Brazil, Canada, France, German

  21. Slide 21: Net Sales Growth by Country

    Third Quarter 2014 Net Sales Growth by Country Net Sales Growth1 Countries >20% Argentina 10% to 20% India, Poland, Thailand 5% to 10% Mainland China, Turkey Average³ to 5% Germany, Italy, Mexico, Singapore, South Africa, UK Australia, Belgium, Brazil, Canada, Greater China², Denmark, Below Average³

  22. Slide 22: Revenue Growth by Category

    Third Quarter 2014 Revenue Growth by Category Revenue Growth¹ Categories More than 10% Entertainment, Travel & Airline Average² to 10% Drinks 5% to Average² Automotive, Financial Services Computers, Electronics, Food, Government, Oil, Personal Care Less than 5% & Drugs, Retail, Telecommunications 1

  23. Slide 23: Effects of Currency

    Third Quarter 2014 Effects of Currency  Currency movements accounted for a 7.5% decrease in reported revenue and 7.3% in net sales, reflecting the overall strength of the £ sterling against many currencies, particularly in the faster growth markets. This has been so in every quarter since the final

  24. Slide 24: Projected impact of Foreign Exchange

    Third Quarter 2014 Projected impact of Foreign Exchange¹ Q1 Act Q2 Act Q3 Act Q4 Est 0.0% ‐1.0% ‐2.0% Change versus Prior Year ‐3.0% ‐4.0% ‐5.0% ‐6.0% ‐7.0% ‐8.0% Revenue ‐9.0% Net Sales ‐10.0%  Full year impact if rates remain at current levels projected to be <-7% on both revenue and net sales. 1

  25. Slide 25: Major New Business Wins Over $100m Billings

    Third Quarter 2014 Trade Estimates of Major New Business Wins Over $100m Billings WPP Agency Incumbent Account Office Billings($m) MEC OMC Vodafone Global 1,008 David IND Burger King Global 325 Mindshare OMC Pepsi China 250 Maxus DEN/IND NBC Universal USA 200 MEC PUB BGL Group Global 185 MediaCom DE

  26. Slide 26: Major New Business Wins $30m-$100m Billings

    Third Quarter 2014 Trade Estimates of Major New Business Wins $30m-$100m Billings WPP Agency Incumbent Account Office Billings($m) Ogilvy Grey Allianz Global 90 Johannes Leonardo IND TTI Floor Care Global 80 Mindshare HAV Volvo Global 80 Maxus/MediaCom DEN RWE/nPower EMEA 73 Wunderman Various GSK Gl

  27. Slide 27: Major New Business Losses

    Third Quarter 2014 Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) Wunderman/POSSIBLE IPG/DEN Microsoft Global 320 MediaCom PUB ConAgra USA 135 Grey Ogilvy Allianz Global 90 OgilvyOne PUB British Airways Global 90 Grey PUB Red Lobster USA 60 Ogilvy

  28. Slide 28: Internal Estimates of Net New Business Wins

    Third Quarter 2014 Internal Estimates of Net New Business Wins – Third Quarter YTD ($m) Creative Media Total Advertising 991 3,885 4,876 Other Businesses 871 - 871 Third Quarter YTD 1,862 3,885 5,747 28

  29. Slide 29: New Business Wins/Losses Since October

    Third Quarter 2014 Trade Estimates of Major New Business Wins/Losses Since 1 October WPP Agency Incumbent Account Office Billings($m) MediaCom PUB AB InBev USA 575 MediaCom IPG Bayer/Merck USA 150 MEC Various Tiffany & Co. Global 100 WINS MediaCom PUB Procter & Gamble Latin America 75 MEC PUB Nestlé

  30. Slide 30: Cash Flow and Net Debt

    Third Quarter 2014 Cash Flow and Net Debt  Average net debt for September YTD down £126m to £2.935bn, compared to £3.061bn in 2013, at 2014 exchange rates.  Acquisitions (including earnouts) for September YTD of £341m (2013 - £186m) and share buy-backs of £499m (2013 - £134m).  Net debt at 30 Sep

  31. Slide 31: Acquisitions and Investments – Year to Date

    Third Quarter 2014 Acquisitions and Investments – Year to Date Faster Growing Quantitative & Markets Digital APPNEXUS (USA)² Bannerconnect (Netherlands) CMC Capital Partners (USA)² EXP (AFRICA) AMVG (Turkey) Lemon Sky (Poland) Cognifide (UK) NEOWORKS (UK) Circus (Peru) APPLOGIX (SOUTH AFRICA) Market

  32. Slide 32: Acquisitions and Investments – Since October

    Third Quarter 2014 Acquisitions and Investments – Since 1 October Faster Growing Quantitative & Markets Digital Civolution (France) Planorama (France) Rentrak (USA)¹ Healthcare Element (USA) 1 Investment 32

  33. Slide 33: Uses of Free Cash Flow

    Third Quarter 2014 Uses of Free Cash Flow Sept YTD Sept YTD Category Target FY 2013 2014 2013 Acquisitions¹ £300-£400m £341m² £186m² £221m² Share buy-backs: n/a £499m³ £134m £197m % of issued share capital 2%-3% 3.0% 1.0% 1.4% Dividend increase n/a 10% 20% 20% Dividend pay-out ratio 45%4 n/a n/a 42%

  34. Slide 34: Using Free Cash Flow to Enhance Share Owner Value

    Third Quarter 2014 Using Free Cash Flow to Enhance Share Owner Value Distributions to Share Owners Over the Last 10 Years £’m 7,000 Cumulative from 1 January 2004: 6,716 Buy-backs Dividends declared 6,000 5,628 Dividends paid Headline Earnings 5,000 % of Headline Earnings 4,662 4,000 3,779 53% 3,049

  35. Slide 35: Market Environment

    Third Quarter 2014 Market Environment Macro Micro Uniformly slightly higher nominal and real GDP Geo-political issues source of increased client caution. projections for 2015 than for 2014. Clients still focussed on following consumers in new Strong recovery in US and UK, but signs of media and oppo

  36. Slide 36: Summary

    Third Quarter 2014 Summary  Performance in the first nine months strong, with like-for-like revenues up 8.3% and net sales up 3.8% and with a 2.7% contribution from acquisitions to revenues and 2.5% to net sales.  Strong foreign exchange headwinds of 8.2% reduced constant currency revenue growth t

  37. Slide 37: Like-for-Like Growth and GDP

    Third Quarter 2014 Like-for-Like Growth and GDP 11 WPP Like-for-Like Net Sales Growth WPP Like-for-Like Revenue Growth 10 GDP Nominal / Goldman Sachs GDP Nominal / WPP GDP Nominal / Business Council (2014 Only) 9 8 7 6 Growth (%) 5 4 3 2 1 0 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/1

  38. Slide 38: Asia Pacific FMCG Sales

    Third Quarter 2014 Asia Pacific FMCG Sales¹ Moving Average Trend vs Year Ago Value movement Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 China (Urban) 16% 13% 14% 11% 9% 9% 7% 6% 6% Indonesia N/A N/A 15% 17% 19% 16% 14% 15% 15% Philippines 5% 5% 5% 5% 7% 6% 2% 0% -2% Thailand 8% 9% 11% 10%

  39. Slide 39: Latin America FMCG Sales

    Third Quarter 2014 Latin America FMCG Sales¹ Moving Average Trend vs Year Ago Value movement Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Argentina 14% 28% 30% 30% 48% 33% Bolivia 11% 13% 5% 4% 12% 9% Brazil 7% 8% 10% 13% 14% 15% Central America 5% 3% 3% 1% 1% 1% Chile 3% 3% 3% 2% 2% 3% Colombia 1% -1% -2% -

  40. Slide 40: Our Strategic Priorities

    Third Quarter 2014 Summary - Our Strategic Priorities  Faster growing markets to be 40-45% of total Group revenues over the next five years.  New media to be 40-45% of total Group revenues over the next five years.  Data Investment Management and quantitative disciplines to be one half (achieved)

  41. Slide 41: The Application of Technology, Big Data and Digital

    Third Quarter 2014 The Application of Technology, Big Data and Digital  Two important technology partnerships completed in the last 6 weeks underline the progress and importance of applying technology to enhance clients’ marketing effectiveness. Both involved trading existing assets of the Group: 1

  42. Slide 42: Outlook

    Third Quarter 2014 Outlook  Preliminary quarter 3 revised forecast shows some softening in revenues and net sales on the quarter 2 revised forecast.  Our target remains like-for-like net sales growth of over 3% and a margin improvement of 0.3 margin points before the impact of currency.  Headcoun

  43. Slide 43: Other Financial Information (Hard Copy only)

    2 Other Financial Information (Hard Copy only) 43

  44. Slide 44: Debt Maturity Profile

    Debt Maturity Profile £m 30th September 2014 Total Total Credit Drawn 700 US bond $500m (5.625% ’43) 309 309 US bond $300m (5.125% ’42) 185 185 600 Eurobonds €750m (2.25% '26) 586 586 500 US bond $750m (3.75% '24) 463 463 400 Total Drawn (£m) Eurobonds €750m (3.0% ’23) 586 586 US bond $500m (3.625%

  45. Slide 45: Acquisitions

    Third Quarter 2014 Acquisitions Applogix – South Africa (Wunderman) Applogix is a marketing and ecommerce technology company in South Africa. Founded in 2005 and employing around 20 people in Johannesburg, the agency’s services include web and mobile application build, front end development, ecommer

  46. Slide 46: Acquisitions

    Third Quarter 2014 Acquisitions Double Encore – USA (POSSIBLE) Clients include Major League Soccer, JetBlue, PGA TOUR, Kingston Technology Company and Meredith Corporation. Based in Denver, Double Encore employs 55 people. The company develops mobile apps for brands for iOS and Android operating sys

  47. Slide 47: Acquisitions

    Third Quarter 2014 Acquisitions Guardian Digital Agency – UK (Kantar) Guardian Digital Agency is a specialist data visualisation, site design and interactive development agency, previously part of Guardian News and Media Group. The company, which employs 13 people, will be rebranded under the new na

  48. Slide 48: Acquisitions

    Third Quarter 2014 Acquisitions Indigenous Media¹ – USA (WPP Digital) Indigenous Media is a new digital studio that produces high-quality scripted content and develops channel brands for content distribution, founded by award-winning film makers Jon Avnet, Rodrigo Garcia and Jake Avnet. Indigenous M

  49. Slide 49: Acquisitions

    Third Quarter 2014 Acquisitions Neoworks – UK (WPP Digital/Salmon) Neoworks is based in London and specialises in the implementation of e-commerce sites using SAP's hybris technology. Neoworks employs 35 people and services clients including Ted Baker, ASICS, and T-Mobile. Teein – China (Y&R/VML) Te

  50. Slide 50: 28 Year History (Hard Copy Only)

    3 28 Year History (Hard Copy Only) 50

  51. Slide 51: 28 Year History: WPP Reported Revenue

    28 Year History £’m WPP Reported Revenue 12,000 11,019 11,000 10,373 10,022 10,000 9,331 9,000 8,684 8,000 7,477 28 year CAGR 33% 7,000 6,185 5,908 6,000 5,374 5,000 4,300 4,022 3,908 4,106 4,000 2,981 3,000 2,173 1,918 2,000 1,691 1,747 1,264 1,204 1,273 1,431 1,427 1,555 1,005 1,000 547 284 4 24 0

  52. Slide 52: 28 Year History: WPP Net Sales

    28 Year History £’m WPP Net Sales 11,000 10,076 10,000 9,515 9,239 9,000 8,561 7,981 8,000 7,009 7,000 28 year CAGR 32% 5,850 6,000 5,611 5,133 5,000 4,074 4,000 3,790 3,690 3,869 3,000 2,736 1,855 2,000 1,633 1,437 1,469 1,076 1,016 1,070 1,209 1,204 1,328 843 1,000 442 219 4 24 0 52

  53. Slide 53: 28 Year History: Like-for-Like Revenue Growth

    28 Year History % WPP Like-for-Like Revenue Growth 20 18.6 15.0 15 13.9 14.1 11.8 Average: 5.5% 10 8.3 8.4 8.0 8.0 8.0 6.3 5.7 5.5 5.4 5.3 5.3 5.2 5.0 5 4.0 4.0 3.5 2.7 2.9 N/A 0.7 0 -3.0 -5 -4.7 -5.9 -8.1 -10 Note: Estimates for 1985-1990 53

  54. Slide 54: 28 Year History: PBIT and Margins

    28 Year History WPP PBIT and Margins PBIT 2004 onwards PBIT margin £’m PBIT reported % 1,600 under IFRS 16.5% 15.9% 16.0% 16.1% 15.7% 15.8% 15.5% 16% 15.3% 15.0% 14.8% 14.9% 15.3% 14.7% 1,400 14.4% 14.0% 15.0% 15.1% 13.8% 13.7% 15.0% 14.8% 14.5% 14.5% 14.3% 14% 14.3% 1,200 12.7% 14.0% 13.0% 14.1% 14

  55. Slide 55: History: Headline Diluted EPS

    History pence WPP Headline Diluted EPS Post 1992 Rights Issue 90 80.8 80 73.4 70 67.7 20 Year CAGR: 15% 60 55.5 56.7 50 45.8 44.4 42.0 40 36.0 32.3 30.3 30.9 29.0 27.9 30 22.7 23.8 18.8 20 15.7 13.5 9.4 10 6.5 5.0 0 UK GAAP IFRS Note: 1993 adjusted to reflect 1992 rights issue. Headline Diluted EPS

  56. Slide 56: Trading Statement for the Third Quarter 2014

    Trading Statement for the Third Quarter 2014

WPP — Q3 2014 Earnings Presentation on 6ix