Wpp Plc · LSE:WPP
Wpp — H1 2010 Earnings Presentation
64 slides from Wpp's earnings presentation, August 2010
Slide 1: 2010 Interim Results
WPP 2010 Interim Results London August 2010 1
Slide 2: Agenda
WPP 1 2010 Interim Results 2 Key Priorities, Objectives and Strategy 3 Conclusions 2
Slide 3: 2010 Interim Results
WPP 1 2010 Interim Results 3
Slide 4: 2010 Interim Results Highlights
2010 Interim Results Billings up 8.5% at £20.333 billion. Reported revenue up 3.5%. On a constant currency basis, revenue up 2.7%. Like-for-like revenue up 2.5%. Headline PBIT up 33.1% to £455.3m from £342.2m. Headline operating margins up 2.3 margin points to 10.3% and up 3.7 margin points pre-ince
Slide 5: 2010 Interim Results Highlights (continued)
2010 Interim Results Headline PBT up 41.2% to £356.2m from £252.2m. Tax rate on headline profits improved 0.9 percentage points to 23.9% from 24.8%. Diluted headline EPS up 48.1% to 19.1p from 12.9p. First ordinary interim dividend up 15% at 5.97p per share. Estimated net new business billings of £2
Slide 6: Summary Headline Results at a Glance
2010 Interim Results Summary Headline Results at a Glance 2010 2009 Change £m £m % Revenue 4,441 4,289 3.5 Gross Margin 4,080 3,955 3.2 Staff Costs ex Severance & Bonus 2,514 2,537 1.0 Other Expenses 940 950 1.1 Operating Profit ex Severance & Bonus 626 468 33.7 Operating Profit ex Bonus 583 402 45.
Slide 7: Unaudited IFRS Income Statement
2010 Interim Results Unaudited IFRS Income Statement Six months to 30 June Constant 2010 2009 Change Currency £m £m % % Revenue 4,440.9 4,288.7 3.5 2.7 Operating Profit pre-goodwill/ intangibles 432.6 322.7 34.1 29.8 Goodwill/ intangibles charges, FA gains (92.4) (124.0) 25.5 25.1 Operating Profit 3
Slide 8: % growth vs prior period
2010 Interim Results % growth vs prior period Revenue Headline³ Headline³ PBIT EPS Like-for-like 2.5 n/a n/a Acquisitions 0.2 n/a n/a Constant currency 2.7 27.9 36.8 Foreign exchange 0.8 5.2 11.3 Reportable sterling 3.5 33.1 48.1 Reportable US dollars¹ 5.5 30.9 41.4 Reportable Euros² 6.5 37.2 53.1 ¹
Slide 9: Unaudited Headline IFRS Income Statement
2010 Interim Results Unaudited Headline¹ IFRS Income Statement Six months to 30 June 2010 2009 Change Constant £m £m % Currency % Revenue 4,440.9 4,288.7 3.5 2.7 Headline operating profit 432.6 322.7 34.1 29.8 Income from associates 22.7 19.5 16.4 -1.0 PBIT 455.3 342.2 33.1 27.9 Net finance costs (9
Slide 10: Operating Expenses Well Controlled
2010 Interim Results Operating Expenses Well Controlled (like-for-like Sterling1 £’m) 2010 2009 % B/(W) Revenue 4,441 4,333 +2.5 Gross Margin 4,080 3,988 +2.3 Staff Cost 2,684 2,689 +0.2 Establishment 331 349 +5.1 Other G&A 632 625 -1.1 Total Operating Expenses 3,647 3,663 +0.4 Average number of peo
Slide 11: Revenue by Discipline
2010 Interim Results Revenue by Discipline 2010 2009 % Change £m £m Reported Constant Like-for- Currency like Advertising, Media Investment Management 1,746.2 1,672.7¹ 4.4 3.0 3.0 Consumer Insight 1,162.5 1,123.8 3.4 2.7 2.4 Public Relations & Public Affairs 417.0 403.4 3.4 3.2 2.0 Branding & Identi
Slide 12: Organic Revenue Growth Trends by Discipline
2010 Interim Results Organic Revenue Growth Trends by Discipline 2008-2010 Q2 - Quarter by Quarter 12
Slide 13: Revenue by Region
2010 Interim Results Revenue by Region 2010 2009 % Change £m £m Reported Constant Like-for- Currency like North America 1,608.4 1,542.2 4.3 5.5 5.8 UK 523.1 509.3 2.7 2.7 2.8 Western Continental Europe 1,120.9 1,131.3 -0.9 0.8 -0.2 Asia Pacific, Latin America, Africa & Middle East, Central & Eastern
Slide 14: Organic Revenue Growth Trends by Region
2010 Interim Results Organic Revenue Growth Trends by Region 2008-2010 Q2 - Quarter by Quarter 14
Slide 15: Headline PBIT and Margin by Discipline
2010 Interim Results Headline PBIT¹ and Margin¹ by Discipline Headline PBIT Headline Margin 2010 2009 2010 2009 £m £m % % Advertising, Media Investment Management 205.6 167.2 11.8 10.0² Consumer Insight 83.7 68.6 7.23 6.13 Public Relations & Public Affairs 61.6 46.6 14.8 11.6 Branding & Identity, He
Slide 16: Headline PBIT and Margin by Region
2010 Interim Results Headline PBIT¹ and Margin¹ by Region Headline PBIT Headline Margin 2010 2009 2010 2009 £m £m % % North America 195.7 148.0 12.2 9.6 UK 57.7 50.1 11.0 9.8 Western Continental Europe 85.1 61.1 7.6 5.4 Asia Pacific, Latin America, Africa & Middle East, Central & Eastern Europe 116.
Slide 17: Revenue growth by Country
2010 Interim Results Revenue growth by Country Revenue Growth¹ Countries >10% Argentina, India, Russia, Singapore 5% to 10% Greater China, USA <5% Belgium, Germany, Mexico, Sweden, UK, Australia, Brazil, Canada, Denmark, France, Italy, Japan, Netherlands, Spain 1 Like-for-like growth 17
Slide 18: Revenue Growth by Category
2010 Interim Results Revenue Growth by Category Revenue Growth¹ Categories >10% Computers, Financial Services, Government 5% to 10% Automotive <5% Entertainment, Personal Care & Drugs, Retail, Drinks, Food, Oil, Telecommunications, Travel & Airline 1 Like-for-like growth 18
Slide 19: Effects of Sterling Weakness
2010 Interim Results Effects of Sterling Weakness Currency movements accounted for a 0.8% increase in revenue, largely reflecting the weakness of the £ sterling against most currencies other than against the US$ and the euro. The average rates for the half versus sterling rates were as follows: H1 2
Slide 20: Trade Estimates of Major New Business Wins
2010 Interim Results Trade Estimates of Major New Business Wins WPP Agency Incumbent Account Office Billings ($m) GroupM IPG/OMC Bayer Worldwide 600 M4C AGS/PUB/Ind COI UK 375 WPP Ind Mazda Mexico 250 GroupM AGS Wind Telecom Italy 230 Grey IPG Direct TV USA 200 Team Bayer Various Bayer Worldwide 200
Slide 21: Trade Estimates of Major New Business Wins
2010 Interim Results Trade Estimates of Major New Business Wins WPP Agency Incumbent Account Office Billings ($m) Mindshare OMC 21st Century Insurance USA 100 MediaCom AGS Revlon USA 100 Ogilvy IPG Ikea USA 90 Brand Union PUB Bharti Airtel Africa 70 Ogilvy JWT Kimberley-Clark USA 70 Ogilvy PUB Tsing
Slide 22: Trade Estimates of Major New Business Losses
2010 Interim Results Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings ($m) RKCR/ Y&R OMC Virgin Media UK 105 MediaCom AGS Smuckers USA 95 MEC PUB Mars-Wrigley’s China 70 JWT Ogilvy Kimberley-Clark USA 70 JWT PUB Diageo Worldwide 59 MEC Ind Weight Watcher
Slide 23: Internal Estimates of Net New Business Wins
2010 Interim Results Internal Estimates of Net New Business Wins Billings ($m) Creative Media Total Advertising 923 1,956 2,879 Other Businesses 503 - 503 Total First Half 2010 1,426 1,956 3,382 23
Slide 24: Trade Estimates of Major New Business Wins Since July
2010 Interim Results Trade Estimates of Major New Business Wins Since 1 July WPP Agency Incumbent Account Office Billings ($m) MediaCom PUB AB Inbev China 190 Grey Ind Red Lobster USA 120 MediaCom PUB Travelers USA 100 Maxus AGS Alberto Culver USA 100 JWT Rediffusion Y&R¹ Bharti Airtel India 80 Grey
Slide 25: Trade Estimates of Major New Business Losses Since July
2010 Interim Results Trade Estimates of Major New Business Losses Since 1 July WPP Agency Winning Agency Account Office Billings ($m) MediaCom PUB GSK Europe 57 Mindshare PUB Telefonica/ O2 Europe 48 MediaCom Ind Lifetime Cable Network USA 25 25
Slide 26: Cash Flow
2010 Interim Results Cash Flow 2010 2009 £m £m Operating profit 340 199 Non-cash compensation 35 31 Depreciation & amortisation 106 114 Amortisation of acquired intangibles and impairment 97 128 Net interest paid & similar charges (107) (105) Tax paid (96) (95) Net cash generation 375 272 26
Slide 27: Uses of Cash Flow
2010 Interim Results Uses of Cash Flow 2010 2009 £m £m Net cash generation 375 272 Capital expenditure - IT (46) (37) - Property (44) (90) (92) (129) Acquisition payments: - Net initial payments¹ (15) (55) - Earnout payments/loan note redemptions (75) (38) (90) (93) Share repurchases (28) (9) Other
Slide 28: Net Finance Costs/ (Income)
2010 Interim Results Net Finance Costs/ (Income) £m 2010 2009 B/(W) Net debt interest 91.6 84.0 (7.6) Investment income (5.7) (5.0) 0.7 IAS 19 (Pensions) 8.2 8.6 0.4 Earnout interest 0.5 1.3 0.8 IAS 32 (Convertibles) 4.5 1.1 (3.4) 7.5 6.0 (1.5) Headline finance costs 99.1 90.0 (9.1) IAS 39 (Financia
Slide 29: Net Debt - June 2010
2010 Interim Results Net Debt - 30 June 2010 2010 2009 % £m £m Net debt at 30 June (3,029) (3,447) 12 YTD average net debt on constant (3,168) (3,422) 7 currency basis YTD average net debt on (3,168) (3,507) 10 reportable currency basis 29
Slide 30: Debt Maturity Profile
2010 Interim Results Debt Maturity Profile £m As at 30 June 2010 Total Total 2010 2011 2012 2013 2014 2015 2016 2017 . 2020 Credit Drawn £ bonds £200m (6.375% ’20) 200 200 200 £ bonds £400m (6% ’17) 400 400 400 Eurobonds €750m (6.625% ’16) 614 614 614 Eurobonds €500m (5.25% ’15) 410 410 410 £ conver
Slide 31: Uses of Cash Flow
2010 Interim Results Uses of Cash Flow Average net debt in the first half down £254 million to £3.168 billion, compared to £3.422 billion in 2009, at 2010 exchange rates. Net debt at 30 June down £418 million to £3.029 billion, compared to £3.447 billion last year. Free cash flow in the last 12 mont
Slide 32: Use of Free Cash Flow
2010 Interim Results Use of Free Cash Flow Category Target H1 2010 H1 2009 FY 2009 New acquisitions¹ Up to £100m £15m² £55m² £63m² Share purchases Up to 1% 0.4% 0.2% 0.2% Dividends Growth up to 15% 15% Flat Flat Headroom: Undrawn - £1.9bn £1.5bn £2.2bn facilities & surplus cash 1 Includes investment
Slide 33: Average debt/EBITDA
2010 Interim Results Average debt/EBITDA £M’s Average debt/EBITDA 3,500 3.0 average debt 3,000 2.5 EBITDA 2,500 average debt\EBITDA 2.0 2,000 1.5 1,500 1.0 1,000 500 0.5 0 0.0 2003 2004 2005 2006 2007 2008 2009 Jun-10* 33 *Rolling annual average debt
Slide 34: Ordinary Shares - Basic
2010 Interim Results Ordinary Shares - Basic June June 2010 2009 No. of Shares (million) Actual Actual 1 January 1,256 1,255 Option exercise 2 - 30 June 1,258 1,255 -0.2% Weighted Average 1,257 1,255 ESOP/Treasury shares (34) (34) Average Basic 1,223 1,221 -0.2% 34
Slide 35: Ordinary Shares – Diluted
2010 Interim Results Ordinary Shares – Diluted June June 2010 2009 No. of Shares (millions) Actual Actual Average Basic 1,223 1,221 -0.2% Share Option Dilution 7 2 Other Potentially Issuable Shares 24 13 Sub-Total 1,254 1,236 Convertibles: £450m a/d¹ a/d¹ Fully Diluted Shares 1,254 1,236 -1.5% Fully
Slide 36: Key Priorities, Objectives and Strategy
WPP 2 Key Priorities, Objectives and Strategy 36
Slide 37: State of the market
2010 Interim Results State of the market Macro Micro Fear of fiscal contagion in Europe Cost cuts, where now? Uncertainty in USA for 2011 Efficiency, effectiveness and Conservatism: Toyota, Goldman liquidity Sachs, Prudential, BP and HP New markets Different speeds geographically and New media funct
Slide 38: New markets, new media and consumer insight
Key Priorities, Objectives and Strategy New markets, new media and consumer insight Faster growing markets to be one third of total Group, within three to four years. Marketing services including new media to be two thirds of total Group, within three to four years. Quantitative disciplines includin
Slide 39: Faster Growing Markets to be One Third of Total Group
Key Priorities, Objectives and Strategy Faster Growing Markets to be One Third of Total Group Today Today Including Associates Tomorrow North America UK & Western Continental Europe Asia Pacific, Latin America, Africa & Middle East, Central & Eastern Europe 39
Slide 40: Revenues in Faster Growing Markets 2003-2009
Key Priorities, Objectives and Strategy Revenues in Faster Growing Markets 2003-2009 1. WPP reportable US $’s per WPP results and peer $ revenues as shown in annual results presentations 2. Peer data sourced from annual results translated at average exchange rate for the year (IPG, Publicis and Omni
Slide 41: 2009 Revenue by Geography
Key Priorities, Objective and Strategy 2009 Revenue by Geography $13.6bn $11.7bn $6.0bn $6.3bn $2.0bn $2.1 bn 1.5 ¹ 1 Source: WPP – reportable US $’s per WPP preliminary results. Omnicom, IPG, Publicis and Havas - company presentations for 2009 with CEE estimated at 3%. 2 FX. Havas and Publicis assu
Slide 42: Media Billings by Geography
Key Priorities, Objectives and Strategy Media Billings by Geography Worldwide ranking by Group as % of the Six Groups 42 Source: RECMA July 2010 billings report, based on 2009 data.
Slide 43: WPP in Faster Growing Markets
Key Priorities, Objectives and Strategy WPP in Faster Growing Markets Region Market Billings1 % Share1 Rank1 12 month2 People2 $bn Revenue $bn ‘000 Asia Greater China3 4.2 37% 1 0.8 10.9 India 1.3 39% 1 0.3 8.2 Thailand 0.4 37% 1 0.1 1.3 LatAm Brazil4 1.8 26% 1 0.6 3.9 Mexico 0.3 21% 2 0.1 2.4 Argen
Slide 44: Marketing Services to be Two Thirds of Total Group
Key Priorities, Objectives and Strategy Marketing Services to be Two Thirds of Total Group Today Today including associates Tomorrow Marketing Services Advertising & Media Investment Management 44
Slide 45: 2009 Revenue by Discipline
Key Priorities, Objective and Strategy 2009 Revenue by Discipline $13.6bn $11.7bn $6.0bn $6.3bn $2.5bn $2.0bn ¹ Source: 1 WPP reportable US $’s per WPP preliminary results. 2 2009 company disclosures except: Aegis ’09 consensus estimate revenue at ’08 splits, Havas, and IPG media splits analyst esti
Slide 46: Quantitative Disciplines to be One Half of Total Group
Key Priorities, Objectives and Strategy Quantitative Disciplines to be One Half of Total Group Today Today including associates Tomorrow Consumer Insight and Direct, Digital & Interactive Advertising, Media Investment Management & Other Marketing Services 46
Slide 47: WPP Position in Direct, Digital and Interactive
Key Priorities, Objectives and Strategy WPP Position in Direct, Digital and Interactive First Half 2010 $’m Direct, Digital and Interactive Networks 1,099 (OgilvyOne, Wunderman, G2 and WPP Digital) % of Group revenues 16% Specialist Direct, Digital and Interactive resources: - Consumer Insight (Mill
Slide 48: WPP Position in Direct, Digital and Interactive
Key Priorities, Objectives and Strategy WPP Position in Direct, Digital and Interactive WPP with three “digital leaders” (Leading Independent Research Firm interactive ranking) Key criteria for inclusion: – mentioned as a “top three competitor” by peers – covering at least 7 of 9 key service areas (
Slide 49: Digital in all our businesses
Digital in all our businesses Global scale and quality Revenues $’billion • Most significant resource in peer group (geographic spread, strength of brands and size) • Only Group with more than one “Leader” in Leading Independent Research Firm Interactive Agency Report – and we had three (OgilvyInter
Slide 50: Digital Strategy
Key Priorities, Objectives and Strategy Digital Strategy 2010 run rate $4bn of digitally driven revenues – strongest position in interactive agency space. Proprietary technology combined with industry partnerships improves client campaign effectiveness: – $700m in digital spend on WPP platforms – Ab
Slide 51: We continue to focus on our key objectives
Key Priorities, Objectives and Strategy We continue to focus on our key objectives Improving operating margins. Increasing flexibility in the cost base. Using free cash flow to enhance share owner value, and improve return on capital employed. Developing the role of the parent company. Emphasising r
Slide 52: Historic headline PBIT and margins
Key Priorities, Objectives and Strategy Historic headline PBIT¹ and margins PBIT1£’m PBIT1 margin % Long-term IFRS target 19% 10.3% 8.0% ¹Headline PBIT/ margin: profit before finance income/ costs, taxation, goodwill and intangibles charges, investment gains and 52 write-downs, and share of exceptio
Slide 53: Earnings and EPS
Key Priorities, Objectives and Strategy Earnings and EPS¹ Earnings (£m) EPS pence/share 21% -20% 9% 17% 29% 19.1p 12.9p ¹ Diluted Headline Earnings and Diluted Headline EPS
Slide 54: Flexibility in the cost base
Key Priorities, Objectives and Strategy Flexibility in the cost base Change in variable costs % 54
Slide 55: Using Free Cashflow to Enhance Share Owner Value
Key Priorities, Objectives and Strategy Using Free Cashflow to Enhance Share Owner Value Distributions to Share owners¹ £ millions 6.6% 4.8% 4.7% 3.6% 3.4% 2.7% 2.0% 2.7% 55 ¹ Sum of share buy-backs and dividends paid divided by average shares in issue for the relevant period, as a % of the average
Slide 56: Using Free Cashflow: Acquisitions
Key Priorities, Objectives and Strategy Using Free Cashflow to Enhance Share Owner Value Acquisitions Continue to focus on the faster growing geographical areas and marketing services, particularly direct, internet & interactive and consumer insight. During 2010, a few small and mid size acquisition
Slide 57: Acquisitions and Investments – Year to Date
2010 Interim Results Acquisitions and Investments – Year to Date Faster Growing Quantitative and Markets Digital ACE METRIX (USA)² EXPERT MONITOR (Poland)¹ E-COMMERA (UK)² Grey Brazil¹ ID Consultores (Argentina)¹ ICONMOBILE (GERMANY)¹ Grey Poland¹ MIDIA DIGITAL (BRAZIL) INVIDI (USA)¹,² Solski (Polan
Slide 58: Other Acquisitions – Year to Date
2010 Interim Results Other Acquisitions – Year to Date Healthcare Geoff Howe² (UK/ USA/ Czech Republic) Public Relations & Public Affairs Hering Schuppener¹ (Germany) 58 ¹ Step-ups in investments, associates and subsidiaries’ equity ² August 2010 acquisition
Slide 59: Improving the Creative Capabilities and Reputation
Key Priorities, Objectives and Strategy Improving the Creative Capabilities and Reputation of all our Businesses By placing greater emphasis on recruitment. By recognising creative success tangibly and intangibly. By acquiring highly regarded creative businesses. By placing greater emphasis on award
Slide 60: Conclusions
WPP 3 Conclusions 60
Slide 61: Summary
2010 Interim Results Summary Industry has moved from “less worse” in Q4 2009 through stabilisation in Q1 2010 to growth in Q2 2010 albeit against weak comparatives. The Group showed strong growth with revenue up nearly 5% in Q2 2010, driven by US up over 8% and Advertising up 4% having been down 4%
Slide 62: Outlook
2010 Interim Results Outlook The US has shown the sharpest turnaround confirming it will probably be the biggest source of growth in 2010. Faster growing markets were later into the recession but show a similar trend and will be the major source of growth in 2011 and beyond – India and Mainland Chin
Slide 63: Conclusions
2010 Interim Results Conclusions The Group is well placed by region and discipline to benefit from industry trends. The investment in digital tools and infrastructure will enable the Group to optimise client campaigns and build unique advantage for clients. In Wunderman and OgilvyOne, WPP has the tw
Slide 64: WPP
WPP 2010 Interim Results London August 2010 64