Wpp Plc · LSE:WPP
Wpp — FY2017 Earnings Presentation
129 slides from Wpp's earnings presentation, February 2018
Slide 1: Results for 2017
WPP Results for 2017 London sg OES yy < 6
Slide 2: Contents
Contents 1 Results for 2017 2 GroupM – This Year Next Year 3 Most Commonly Asked Questions 4 Our Structural Response 5 Outlook and Conclusions Hard Copy only 6 32 Year History 7 Other Financial Information 2
Slide 3: Results for 2017
1 Results for 2017 W PP
Slide 4: Results for 2017
Results for 2017 Reported billings up 0.6% at £55.563bn, -3.9% constant currency and -5.4% like-for-like. Reported revenue up 6.1% at £15.265bn, 1.6% constant currency and -0.3% like-for-like. Revenue less P-T¹ costs up 6.0% reportable, 1.4% constant currency and -0.9% like-for-like. Reporte
Slide 5: Results for 2017
Results for 2017 Average constant currency net debt up £584m to £5.143bn, reflecting significant net acquisition spend, share buy-backs and dividends. Average net debt to EBITDA ratio 2.0x, top-end of target range 1.5-2.0x. Share buy-backs £504m (2.5% of share capital) up from £427m (2.0%) last
Slide 6: Headline Performance versus Consensus
Results for 2017 Headline¹ Performance versus Consensus Actual Consensus £ million Results Median² £ Revenue less P-T³ costs 13,140 13,188 (48) EBITDA 2,534 2,556 (22) PBIT 2,267 2,290 (23) Net finance costs (174) (181) 7 PBT 2,093 2,109 (16) Diluted EPS 120.4p 119.8p 0.6p Revenue less P-T³ costs Ma
Slide 7: Summary Headline Results at a Glance
Results for 2017 Summary Headline¹ Results at a Glance % Change Year to 31 December 2017 2016 Reported Constant Currency Revenue £m 15,265 14,389 6.1 1.6 Revenue less P-T² costs £m 13,140 12,398 6.0 1.4 Revenue less P-T² costs Margin 17.3% 17.4% -0.1 +0.0 PBIT £m 2,267 2,160 4.9 1.5 EBITDA £m 2,534
Slide 8: Revenue Growth
Results for 2017 Revenue Growth +4.5% £15.3bn -0.3% +1.9% +6.1% £14.4bn 2016 Like-for-like Acquisitions FX 2017 8
Slide 9: Revenue Less P-T Costs Growth
Results for 2017 Revenue Less P-T¹ Costs Growth +4.6% +2.3% £13.1bn -0.9% £12.4bn +6.0% 2016 Like-for-like Acquisitions FX 2017 1 Revenue less pass-through costs, previously net sales 9
Slide 10: Impact of Foreign Exchange
Results for 2017 Impact of Foreign Exchange 2016 FY Act 2017 Q1 Act 2017 Q2 Act 2017 Q3 Act 2017 Q4 Act 2017 FY Act 16% Revenue Revenue less P-T¹ costs 14% 12% 10% Change versus Prior Year 8% 6% 4% 2% 0% -2% -4% -6% Q4 headwind -3.5% revenue and -3.4% revenue less P-T¹ costs. Full year tailwind
Slide 11: Unaudited IFRS Income Statement
Results for 2017 Unaudited IFRS Income Statement % Change Year to 31 December 2017 2016 Reported Constant £m £m Currency Revenue 15,265 14,389 6.1 1.6 Cost of services (12,090) (11,348) -6.5 -4.7 Gross profit 3,175 3,041 4.4 3.8 General and administrative costs (1,267) (978) -29.6 -27.0 Operating pr
Slide 12: Income Statement – Function vs Nature of Expense
Results for 2017 Unaudited IFRS Income Statement – Function vs Nature of Expense New Format Old Format Year to 31 December 2017 2016 Year to 31 December 2017 2016 £m £m £m £m Revenue 15,265 14,389 Revenue 15,265 14,389 Cost of services (12,090) (11,348) Direct costs (2,125) (1,991) Gross profit 3,17
Slide 13: Unaudited Headline IFRS Income Statement
Results for 2017 Unaudited Headline¹ IFRS Income Statement % Change Year to 31 December 2017 2016 Constant £m £m Reported Currency Revenue 15,265 14,389 6.1 1.6 Revenue less P-T² costs 13,140 12,398 6.0 1.4 Operating profit 2,154 2,095 2.8 -0.5 Income from associates 113 65 73.4 63.4 PBIT 2,267 2,16
Slide 14: Net Exceptional Loss of £24m
Results for 2017 Net Exceptional Loss¹ of £24m Year to 31 December 2017 £m Gain on disposals of investments and subsidiaries (Asatsu, Infoscout and others) 129 Investment write-downs (comScore and others) (96) Restructuring costs² (57) Net exceptional loss (24) ¹ Being net amount of gains/losses on
Slide 15: % Growth Versus Prior Year
Results for 2017 % Growth Versus Prior Year Revenue Revenue less Headline² Headline² P-T¹ costs PBIT EPS Like-for-like -0.3 -0.9 n/a n/a Acquisitions³ 1.9 2.3 n/a n/a Constant currency 1.6 1.4 1.5 2.7 Foreign exchange 4.5 4.6 3.4 3.7 Reportable sterling 6.1 6.0 4.9 6.4 Reportable US dollars4 1.7 1.6
Slide 16: Revenue and Revenue Less P-T Costs by Sector
Results for 2017 Revenue and Revenue Less P-T¹ Costs by Sector Revenue Revenue less P-T¹ costs % Change % Change 2017 Reported Constant Like-for- 2017 Reported Constant Like-for- £m Currency like² £m Currency like² Advertising, Media Investment 7,180 9.7 5.1 -0.1 5,852 8.1 3.6 -2.3 Management Data I
Slide 17: Revenue and Revenue Less P-T Costs by Region
Results for 2017 Revenue and Revenue Less P-T¹ Costs by Region Revenue Revenue less P-T¹ costs % Change % Change 2017 Reported Constant Like-for- 2017 Reported Constant Like-for- £m Currency like £m Currency like North America 5,547 5.0 0.3 -2.3 4,799 4.2 -0.4 -3.2 UK 1,986 6.4 6.4 4.9 1,684 6.0 6.0
Slide 18: Two Year Cumulative Like-for-Like Revenue Growth
Results for 2017 Two Year Cumulative Like-for-Like Revenue Growth1 % WPP3 OMC2,4 Pub2,5 DEN2,6 IPG2,7 HAV2,8 H1 2016 9.2 8.8 4.0 13.6 11.3 9.3 H2 2016 7.6 8.9 0.4 10.6 11.1 7.4 H1 2017 4.0 7.5 2.6 6.8 6.6 2.6 H2 2017 1.5 5.7 0.4 3.6 7.0 2.0 ¹ Two year trend is total revenue (gross profit for DEN) gr
Slide 19: Headline PBIT and Margin by Sector
Results for 2017 Headline¹ PBIT and Revenue Less P-T² Costs Margin by Sector Headline PBIT Headline Margin 2017 2016 2017 2016 £m £m % % Advertising, Media Investment 1,109 1,027 19.0 19.0 Management Data Investment Management 350 351 17.1 17.6 Public Relations & Public Affairs 183 180 16.1 16.7 Bra
Slide 20: Headline PBIT and Margin by Region
Results for 2017 Headline¹ PBIT and Revenue Less P-T² Costs Margin by Region Headline PBIT Headline Margin 2017 2016 2017 2016 £m £m % % North America 937 895 19.5 19.4 UK 280 261 16.6 16.5 Western Continental Europe 376 352 14.4 14.5 Asia Pacific, Latin America, Africa & Middle 674 652 16.7 17.2 Ea
Slide 21: Revenue Growth by Region
Results for 2017 Revenue Growth¹ by Region -6.5% CENTRAL & EASTERN EUROPE -1.4% Q4 FY Q4 % 8.4% Mature Markets 1.8% -0.5% UNITED FY % KINGDOM “Fast Growth” Markets -0.1% 0.0% 4.9% 1.6% Total 1.2% -0.3% NORTH AMERICA -1.4% -2.3% WESTERN CONTINENTAL EUROPE -0.3% 0.3% ASIA PACIFIC -1.0% 2.3% -2.4% AFRI
Slide 22: Revenue Less P-T Costs Growth by Region
Results for 2017 Revenue Less P-T Costs Growth¹ by Region -13.5% CENTRAL & EASTERN EUROPE -3.9% Q4 FY Q4 % 9.1% Mature Markets -0.5% -0.9% UNITED FY % KINGDOM “Fast Growth” Markets -3.1% -0.8% 4.8% -3.4% Total -1.3% -0.9% NORTH AMERICA -0.8% -3.2% WESTERN CONTINENTAL EUROPE 0.0% -3.0% ASIA PACIFIC -
Slide 23: Top Markets
Results for 2017 Top 6 Markets – Almost 68%¹ of Revenue and Revenue Less P-T5 Costs Like-For-Like Revenue Down 1.0%¹ and Revenue Less P-T5 Costs Down 1.4%¹ Including associates: Revenue $7.0bn $2.9bn $1.4bn $1.3bn $0.8bn $0.7bn People ‘000² 25 17 13 8 4 5 USA UK Greater China3 Germany ANZ France Rev
Slide 24: BRICs Markets
Results for 2017 BRICs Markets – Over 12%¹ of Revenue and Revenue Less P-T6 costs Like-For-Like Revenue Up 0.8%¹ and Revenue Less P-T6 Costs Down 2.0%¹ Including associates: Revenue $1.4bn $0.6bn $0.5bn $0.2bn WPP Rank² #3 #7 #8 #26 People ‘000³ 13 19 7 2 Greater China4 India Brazil Russia Revenue l
Slide 25: Trade Estimates of Major New Business Wins (1)
Results for 2017 Trade Estimates of Major New Business Wins (1) WPP Agency Incumbent Account Office Billings($m) MediaCom HAV/OMC PSA Global 998 Sanofi Partnership/Mindshare PUB Sanofi Global 600 W Partnership OMC Walgreens Boots Alliance Global 600 Team L’Atelier PUB LVMH APAC 500 Grey/MediaCom PUB
Slide 26: Trade Estimates of Major New Business Wins (2)
Results for 2017 Trade Estimates of Major New Business Wins (2) WPP Agency Incumbent Account Office Billings($m) MediaCom OMC/DEN AkzoNobel Argentina,MENA,South Africa 80 MediaCom Wavemaker MetLife USA 75 Wavemaker IND ITC Industries India 75 MediaCom DEN/PUB Victorian Government Australia 70 Ogilvy
Slide 27: Trade Estimates of Major New Business Losses
Results for 2017 Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) MediaCom DEN/OMC AB InBev USA/Australia/India 525 Mindshare PUB Lionsgate USA 400 Grey IND/Other Coty Global 330 Wavemaker PUB KFC Global 230 Ogilvy DEN American Express Global 200 Min
Slide 28: Internal Estimates of Net New Business Wins
Results for 2017 Internal Estimates of Net New Business Wins ($m) Creative Media Total Advertising 1,364 3,444 4,808 Other Businesses 1,522 - 1,522 2017 2,886 3,444 6,330 28
Slide 29: Major New Business Wins/Losses Since January 2018
Results for 2017 Trade Estimates of Major New Business Wins/Losses Since 1 January 2018 WPP Agency Incumbent Account Office Billings($m) Team Amplify IPG Bose Global 80 WINS MediaCom/Y&R OMC Office Depot NAFTA 62 Wavemaker OMC Adobe Global 55 29
Slide 30: Cash Flow
Results for 2017 Cash Flow £m 2017 2016 Operating profit 1,908 2,063 Non-cash compensation 105 106 Depreciation & amortisation charges 489 455 Net interest paid & similar charges (170) (168) Tax paid (425) (414) Net cash generation 1,907 2,042 30
Slide 31: Uses of Cash Flow
Results for 2017 Uses of Cash Flow £m 2017 2016 Net cash generation 1,907 2,042 Capital expenditure (326) (285) Acquisition payments (229) (697) - Net initial payments¹ (30) (605) - Earnout payments/loan note redemptions (199) (92) Other² (41) (172) Net cash inflow before distributions 1,311 888 Dis
Slide 32: Net Debt – December 2017
Results for 2017 Net Debt – 31 December 2017 £m 2017 2016 % Variance FY average net debt on constant currency basis (5,143) (4,559) -13% FY average net debt on reportable basis (5,143) (4,340) -19% Net debt at 31 December on constant currency basis (4,483) (4,092) -10% Net debt at 31 December on rep
Slide 33: Historic Average Net Debt/Headline EBITDA
Results for 2017 Historic Average Net Debt/Headline EBITDA £m Average net debt/headline EBITDA 5,500 PY average net debt at CY FX rates Average net debt 3.0 EBITDA 5,000 PY EBITDA at CY FX rates Average net debt/EBITDA 4,500 2.5 4,000 2.0 3,500 3,000 ) Target average net debt/headline EBITDA range 1
Slide 34: Debt Maturity Profile
Results for 2017 Debt Maturity Profile £m at 31 December 2017 700 £ Total £ Total Credit Drawn 650 £ bonds £400m (2.875% Sep ’46) 400 400 600 US bond $500m (5.625% Nov ’43) 370 370 550 US bond $300m (5.125% Sep ’42) 222 222 500 Eurobonds €600m (1.625% Mar ’30) 533 533 450 Eurobonds €750m (2.25% Sep
Slide 35: Uses of Free Cash Flow
Results for 2017 Uses of Free Cash Flow Category Target FY 2017 FY 2016 Acquisitions (excluding earnouts)¹: Gross £326m £686m Less proceeds £(296m) £(81m) Net acquisitions £300-£400m² £30m £605m Share buy-backs: n/a £504m £427m % of issued share capital 2%-3% 2.5% 2.0% Dividend increase n/a 6% 27% P
Slide 36: GroupM - This Year Next Year
2 GroupM - This Year Next Year 36
Slide 37: GroupM 2017 Forecast for Global AdSpend
Market Environment GroupM 2017 Forecast for Global AdSpend 3.1% …down from year-ago forecast 4.4% Source: GroupM This Year Next Year Worldwide, December 2017 37
Slide 38: GroupM 2018 Forecast for Global AdSpend
Market Environment GroupM 2018 Forecast for Global AdSpend 4.3% Source: GroupM This Year Next Year Worldwide, December 2017 38
Slide 39: GDP and Advertising Year-on-Year Nominal % Change
Market Environment GDP and Advertising Year-on-Year Nominal % Change 8.0 7.0 6.0 5.0 4.0 3.0 2.0 GDP Advertising 1.0 0.0 2010 2012 2014 2016 2018 2020 Source: IMF/GroupM 39
Slide 40: Real Ad Investment (2009 = 100)
Market Environment Real Ad Investment (2009 = 100) New 150 World Old 100 50 2009 2011 2013 2015 2017 2019 Source: GroupM This Year Next Year Worldwide, December 2017 40
Slide 41: Real Ad Investment (2009 = 100)
Market Environment Real Ad Investment (2009 = 100) New 150 World Japan 100 Old Eurozone 50 2009 2011 2013 2015 2017 2019 Source: GroupM This Year Next Year Worldwide, December 2017 41
Slide 42: Contributions to 2018
Market Environment Contributions to 2018 $ bn G2 World 7 +$6bn 6 5 +$4bn 4 3 2 1 0 UK India Eurozone Japan Argentina China USA Source: GroupM This Year Next Year Worldwide, December 2017 42
Slide 43: E-commerce and Digital Adex
Market Environment E-commerce and Digital Adex $bn 250 3000.0 2500.0 200 2000.0 150 Digital (left scale) E-commerce 1500.0 100 1000.0 50 500.0 0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: GroupM Interaction 2017 and This Year Next Year Worldwide, December 2017 43
Slide 44: Share of World Adex: Digital Intensity Quartiles 2018
Market Environment Share of world adex: digital intensity quartiles 2018 80 60 % share of 40 global adex 20 0 12% 21% 30% 48% Digital ad intensity Source: GroupM This Year Next Year Worldwide, December 2017 44
Slide 45: Ad Shares by Medium
Market Environment Ad Shares by Medium 80 2009 60 2018 40 20 0 TV Digital Print OOH Other Source: GroupM This Year Next Year Worldwide, December 2017 45
Slide 46: 2017/2018 Forecast Ad Spend Growth by Region
Market Environment 2017/2018 Forecast Ad Spend Growth by Region Growth % YoY 2017 2018 North America 2.2 3.4 Lat Am 5.4 6.6 W Europe 2.7 2.6 CEE 9.0 8.8 Asia-Pacific 4.0 5.4 WORLD 3.1 4.3 Source: GroupM This Year Next Year Worldwide, December 2017 46
Slide 47: Most Commonly Asked Questions
3 Most Commonly Asked Questions 47
Slide 48: Most Commonly Asked Questions
Most Commonly Asked Questions 1. Are Google, Facebook, Amazon, Alibaba and Tencent going direct? 2. Are consultancies eating our digital lunch? 3. Are ZBB models, activists and private equity driving down marketing costs? 4. Are clients increasingly in-housing marketing activities? 5. Are innovation
Slide 49: Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct?
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Top 10 Media Owners Ranked by WPP Actual Spend 2017 vs. 2012 2017 Top Media Owners Spend 2012 Top Media Owners 1 Google > $2bn 1 Comcast 2 Facebook² 2 NewsCorp¹, Sky, Foxtel 21st Century Fox 3 News
Slide 50: Google: We Don't Want to Disintermediate Agencies
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Google “We don’t want to disintermediate advertising agencies. We are actually working very, very closely with agencies all over the world. It’s important to understand that we see ourselves as a su
Slide 51: Google Partnerships: SWARM, GEODE, Starkiller
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Google SWARM: Creative Partnership - SWARM is the creative forum that brings WPP agencies exclusive access to Google product teams and new technologies, allowing us to be alpha partners on behalf of
Slide 52: Facebook and Amazon Partnerships
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Facebook Creative Ambassadors Program: a joint initiative developed specifically for WPP creative and digital agencies comprising of in-person training to optimise creative for mobile through Facebo
Slide 53: WPP Data + Partner Data = Unprecedented Insights
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? WPP Data + Partner Data = Unprecedented Insights Exclusive beta-test for Measure Facebook’s Access to Amazon’s access to aggregate ability to drive offline Retail Analytics Platform insights on audi
Slide 54: Further Progress With Mar-Tech Partners
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Further Progress With Mar-Tech Partners COMPANY Increase vs PY in FTEs WPP has many subject-matter experts trained in Creative, marketing and implementing solutions from the world’s leading Mar- doc
Slide 55: Data - [m]Platform Is A Single Source of Truth
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Data - [m]Platform Is A Single Source of Truth For Media Activity We have also invested in our own tech platforms REPORT & OPTIMISE INTERACTIVE CLIENT DASHBOARDS CUSTOMIZATION AUTOMATED REPORTS AGGR
Slide 56: Data – Zipline Is Our PII Data Product
Most Commonly Asked Questions First - Are Google, Facebook, Amazon, Alibaba and Tencent Going Direct? Data – Zipline Is Our PII Data Product We can build individual profiles Secure Ad ID connecting multiple Persistent Identity Global Persistent ID data points Management One way de-identification
Slide 57: Are Consultancies Eating Our Digital Lunch?
Most Commonly Asked Questions Second - Are Consultancies Eating Our Digital Lunch? Top Digital Agencies – Fake News? 2016 Revenue - Ad Age Estimates¹ Actual 2016 Digital Revenue Agency Rank $bn Agency Rank $bn Accenture Interactive 1 4.4 WPP² 1 7.5 Agency IBM iX 2 3.0 Publicis³ 2 5.8 Consultant Delo
Slide 58: Significant 2017 Wins/Losses vs. Consultants
Most Commonly Asked Questions Second - Are Consultancies Eating Our Digital Lunch? Estimate¹ of Significant 2017 Wins/Losses vs. Consultants WPP Agency Competitor Account Revenue ($m) Team WPP Accenture Automotive (confidential) 20 Wunderman² Accenture Telecoms (confidential) 8 Total Pitches Number
Slide 59: Examples of Digital Transformation Clients
Most Commonly Asked Questions Second - Are Consultancies Eating Our Digital Lunch? Some Examples of Digital Transformation Clients Automotive Financial Services FMCG Personal Care & Drugs Retail Travel & Airline Telecommunications 59
Slide 60: The Legacy Spectrum
Most Commonly Asked Questions Third - Are ZBB Driven Models, Activists and Private Equity Bringing Down Marketing Costs? The Legacy Spectrum Activist Zero Based Disrupters Investors Budgeters Carl Icahn Bill Ackman Dan Loeb¹ Nelson Peltz¹ Paul Singer Keith Meister ¹ Dan Loeb, Nelson Peltz strong pro
Slide 61: Leading CPG Clients vs. ZBB Results Trends
Most Commonly Asked Questions Third - Are ZBB Driven models, Activists And Private Equity Bringing Down Marketing Costs? Results Trends and Volume/Price Growth Trends Leading CPG clients vs. ZBB Leading CPG Clients ZBB Companies 3.0% Organic Growth Price Volume 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Q4/16 Q1
Slide 62: S&P 500 Revenue Growth by Sector
Most Commonly Asked Questions Third - Are ZBB Driven Models, Activists and Private Equity Bringing Down Marketing Costs? S&P 500 Revenue Growth by Sector Q4 2016 – Q4 2017 Market Cap Sector Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017¹ Average P/E 18/17² Energy 4.2% 33.2% 15.6% 17.9% 18.3% 17.8% 19.7 -3%
Slide 63: Weak Retail Channel Growth Compounds the Volume Issue
Most Commonly Asked Questions Third - Are ZBB Driven Models, Activists and Private Equity Bringing Down Marketing Costs? Weak Retail Channel Growth Compounds the Volume Issue GLOBAL Total Channel +1% 52.0 Share % +0.7% Growth % 26.1 +5.1% +26% +3.6% +3.2% 5.6 4.6 4.6 Hyper & Supermarkets Discounters
Slide 64: Are Clients Increasingly In-Housing Marketing Activities?
Most Commonly Asked Questions Fourth - Are Clients Increasingly In-Housing Marketing Activities? Hogarth production management platform growing significantly, revenues tripled over last 4 years. Programmatic and performance agencies continuing to grow. Xaxis gaining traction with over 4,000 clie
Slide 65: The New Normal
Most Commonly Asked Questions Fifth – Are Innovation and Branding Still Key? The New Normal Low GDP Low or No Growth Inflation Little Pricing High Focus Power on Costs 65
Slide 66: Short Executive Life Expectancy
Most Commonly Asked Questions Fifth – Are Innovation and Branding Still Key? 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 mo
Slide 67: S&P 500 Dividends & Buy-Backs as % of Operating Earnings
Most Commonly Asked Questions Fifth – Are Innovation and Branding Still Key? S&P 500 Dividends & Buy-Backs as % of Operating Earnings 140% 131% 122% 120% 114% 110% 104% 100% of operating earnings 99% 98% 98% 101% 95% 95% 95% 100% 94% 89% 88% 87% 87% 85% 83% 83% 81% 77% 78% 78% 80% 74% 74% 71% 71% 71
Slide 68: Investors and Cutters
Most Commonly Asked Questions Fifth – Are Innovation and Branding Still Key? Investors and Cutters Spending more on Advertising & Promotion correlates with faster organic sales growth. “Analysing A&P spend across 40 global FMCG companies shows those that have been consistently increasing brand inves
Slide 69: Strong Brands Generate Superior Shareholders' Return
Most Commonly Asked Questions Fifth – Are Innovation and Branding Still Key? Strong Brands Generate Superior Shareholders’ Return, Top 10 Global Brands Outperform S&P 500 by 60% and MSCI over 3x Over Last 11 Years 69
Slide 70: Our Structural Response
4 Our Structural Response W PP
Slide 71: Acceleration of Strategic Focus
Our Structural Response Acceleration of Strategic Focus Simplifying our verticals – Ogilvy with John Seifert’s Next Chapter; GroupM with Kelly Clark’s and Tim Castree’s Wavemaker; Kantar with Eric Salama’s Kantar First and Kantar Consulting; Donna Imperato’s leadership of Burson Cohn & Wolfe; Fins
Slide 72: Horizontalizing Functions, Systems, Platforms
Our Structural Response Acceleration of Strategic Focus “Horizontalizing” Functions, Systems, Platforms NEXT PHASE OF SIMPLIFICATION Select Client Team P&Ls Advertising Media Data Brand Public Health & Specialist Investment Investment Consulting Relations & Wellness Comms (incl. Management Managemen
Slide 73: Outlook and Conclusions
5 Outlook and Conclusions W PP
Slide 74: Conclusions 2017
Conclusions 2017 Not a Pretty Year With Flat Top-Line Growth and Margins Reported revenue and revenue less P-T¹ costs growth 6%, like-for-like revenue less P-T¹ costs -0.9%, reported margin down 0.1 margin points but flat constant currency and like-for-like. Reported headline diluted EPS of 120.4p
Slide 75: Outlook for 2018: Our Updated Financial Model
Outlook for 2018 Our Updated Financial Model Organic revenue and revenue less P-T¹ costs growth of 0-5% in line with market growth. Margin improvement of 0 to 0.3 margin points or more before currency movements, depending on revenue less P-T¹ costs growth and staff cost/revenue less PT¹ costs ra
Slide 76: Outlook for 2018
Outlook for 2018 Budgets, with operating companies encouraged to budget extremely conservatively, indicate − Flat like-for-like revenue and revenue less P-T¹ costs growth, with a stronger second half. − Flat constant currency operating margin to revenue less P-T¹ costs. − Acquisitions to add ca. 2
Slide 77: 32 Year History (Hard Copy Only)
6 32 Year History (Hard Copy Only) 77
Slide 78: WPP Reported Revenue
32 Year History WPP Reported Revenue £’m 17,000 16,000 15,265 15,000 14,389 14,000 13,000 12,235 12,000 11,529 11,019 11,000 32 Year CAGR 29% 10,373 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 1,5551,6911,7471,91
Slide 79: WPP Revenue Less P-T Costs
32 Year History WPP Revenue Less P-T¹ Costs £’m 14,000 13,140 13,000 12,398 12,000 11,000 10,524 10,065 10,000 10,076 9,515 9,239 9,000 32 Year CAGR 29% 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 1,328 1,437 1,469 1,633 1,076 1,0
Slide 80: WPP Organic Growth
32 Year History WPP Organic Growth % 20 18.6 Organic Revenue Growth Organic Revenue Less Pass-Through Costs Growth 15.0 15 13.9 14.1 11.8 10 32 Year average organic revenue growth : 5.3% 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 3.5 3.3 3.33.0 2.7 2.9 0.7 N/A 0 -0.3 -0.9
Slide 81: WPP PBIT and Margins
32 Year History WPP PBIT and Margins PBIT PBIT margin 2004 onwards £’m % PBIT reported 17.4%17.3% 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
Slide 82: WPP Headline Diluted EPS
32 Year History WPP Headline Diluted EPS Post 1992 Rights Issue pence 140 120.4 120 113.2 100 93.6 24 Year CAGR: 14% 84.9 80.8 80 73.4 67.7 60 55.5 56.7 45.8 44.4 42.0 40 36.0 30.3 30.9 32.3 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 i
Slide 83: Other Information (Hard Copy only)
7 Other Information (Hard Copy only) 7.1 Further Revenue Analysis 7.2 Financial Information Relating to Income Statement 7.3 Acquisitions 7.4 Share Owner Returns Information 7.5 Competitor Information 83
Slide 84: 7.1 Further Revenue Analysis
7.1 Further Revenue Analysis (Hard Copy only) 84
Slide 85: Our Billion $ Revenue Brands
Results for 2017 Our Billion $ Revenue Brands 85
Slide 86: Improving the Creative Reputation of all our Businesses
Results for 2017 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
Slide 87: Revenue by Industry
Results for 2017 Revenue by Industry Other Auto 10% 12% T&E 6% Consumer Products 6% Telcom 5% Personal Care Technology 11% 6% Retail 6% Government Healthcare 2% Oil 12% 2% Financial Services 8% Food & Drink 14% Chart represents the amount of revenue attributed to each industry expressed as a percent
Slide 88: Revenue Less P-T Costs Growth by Category
Results for 2017 Revenue Less P-T Costs Growth¹ by Category Revenue less P-T costs Growth¹ Categories More than 5% Electronics 0% to 5% Computers, Media & Entertainment, Financial Services, Oil, Retail Automotive, Drinks, Food, Government, Personal Care & Drugs, Less than 0% Telecommunications, Trav
Slide 89: Revenue Share Continues to Increase
Results for 2017 Revenue Share Continues to Increase WPP Share of Digital Revenue 42% 40-45% 39% 37%+ 35% 36% 33%¹ 30% 21% 12% 2000 2006 2011 2012 2013 2014 2015 2016 2017 Target in 5 Years 1 Including AKQA Pro-Forma 89
Slide 90: WPP Position in Direct, Digital and Interactive
Results for 2017 WPP Position in Direct, Digital and Interactive Full Year 2017 Revenue $’m Direct, Digital and Interactive Networks 3,556 (Ogilvy, Wunderman, Geometry, VML, WPP Digital, Mirum & AKQA) % of Group revenue 18% Specialist Direct, Digital and Interactive resources: - Data Investment Mana
Slide 91: Our Billion $ Revenue Markets
Results for 2017 Our Billion $ Revenue Markets 91
Slide 92: Revenue Less P-T Costs Growth by Country
Results for 2017 Revenue less P-T Costs Growth¹ by Country Revenue less P-T Costs Growth Top Countries More than 10% Argentina 5% to 10% Indonesia 0% to 5% Belgium, Brazil, Denmark, Philippines, South Africa, Thailand, UK Australia, Canada, Greater China², Mainland China, Dubai, France, Less than 0%
Slide 93: WPP's Performance Remains Strong in BRICs Markets
Results for 2017 WPP’s Performance Remains Strong in BRICs Markets Revenue $'m 1,600 17 year CAGR 13% 1,400 1,200 1,000 800 17 year CAGR 16% 600 17 year CAGR 11% 400 17 year CAGR 40% 200 0 2000 2016 2017 2000 2016 2017 2000 2016 2017 2000 2016 2017 Greater China¹ Brazil India Russia 1 Includes Hong
Slide 94: WPP in Faster Growing Markets
Results for 2017 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 0.7 19 Thailand 0.9 35% 1 0.2 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 0.6 8
Slide 95: Account Teams – One-Third of Revenue
Results for 2017 51 Account Teams – one-third of revenue with over 38,000 WPP employees working on these clients 95
Slide 96: 7.2 Financial Information Relating to Income Statement
7.2 Financial Information Relating to Income Statement (Hard Copy only) 97
Slide 97: Improving Operating Margins
Results for 2017 Improving Operating Margins PBIT1 PBIT1 margin £’m % 2,400 20% 2,267 Long-term PBIT margin targets include 1.0% 2,200 2,160 margin improvement from 19% operational efficiency programmes 2,000 18% 1,774 1,800 1,662 1,681 17.4% 17% 1,600 1,531 17.3% 1,429 16.9% 16.7% 16.5% 16% 1,400 1
Slide 98: Maintaining Flexibility in The Cost Base
Results for 2017 Maintaining Flexibility in The Cost Base - Change in Variable Costs1 8.2 8.3 8.0 8.0 7.6 7.3 2012 2013 2014 2015 2016 2017 Variable Staff Costs as % of Revenue Less Pass-Through Costs ¹ Freelance, consultants and incentive costs 99
Slide 99: Net Finance Costs
Results for 2017 Net Finance Costs £m 2017 2016 B/(W) Net debt interest 180 177 (3) Investment Income (16) (12) 4 IAS 19 (Pensions) 10 9 (1) Sub-total (6) (3) 3 Headline finance costs 174 174 - IAS 39 (Financial Instruments) (261) 48 309 Net finance costs (87) 222 309 100
Slide 100: Pensions Deficit
Results for 2017 Pensions Deficit £m 2017 2016 Deficit B/F (277) (229) Service cost (13) (22) Plan liabilities interest charge (33) (37) Funding 68 44 Investment returns 40 97 Change in valuation assumptions¹ 4 (85) Other movements (3) 1 Movements in the year excluding FX 63 (2) Foreign exchange imp
Slide 101: Earnout Accrual
Results for 2017 Earnout Accrual 2017 Rollforward £m Expected Payments £m 31 December 2016 977 2018 181 Earnouts paid (199) 2019 128 New acquisitions 164 2020 144 Revised estimates taken to goodwill (61) 2021 58 Revaluations of payments (209) 2022 103 Excluding FX 672 2023+ 17 Foreign exchange impac
Slide 102: Ordinary Shares – Diluted
Results for 2017 Ordinary Shares – Diluted December December 2017 2016 No. of Shares (million) Actual Actual Average Basic 1,261 1,278 Share Option Dilution 2 2 Other Potentially Issuable Shares 13 16 Diluted Shares 1,276 1,296 1.5% 103
Slide 103: Ordinary Shares - Basic
Results for 2017 Ordinary Shares - Basic December December 2017 2016 No. of Shares (million) Actual Actual 1 January 1,332 1,329 Option exercise 1 3 31 December 1,333 1,332 -0.1% Weighted Average 1,332 1,330 ESOP, Treasury & Other (71) (52) Average Basic 1,261 1,278 1.3% 104
Slide 104: Effects of Currency
Results for 2017 Effects of Currency 2017 2016 Sterling Weaker US$ 1.29 1.35 -4% € 1.14 1.22 -7% ¥ 145 147 -1% Revenue less pass-through costs Chinese Renminbi 8.7 9.0 -3% were increased by £638m and Brazilian Real 4.11 4.74 -13% headline PBIT¹ by £67m as a Australian $ 1.68 1.82 -8% result of weakn
Slide 105: USD Monthly Average
Results for 2017 24 month US$ range 1.23 to 1.45 USD Monthly Average Quarterly % Variance vs PY 1.50 £ Strength 10% 2018 1.45 2017 5% 2016 6.9% 1.40 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -0.3% 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 Jun Jul A
Slide 106: EUR Monthly Average
Results for 2017 24 month € range 1.10 to 1.33 EUR Monthly Average Quarterly % Variance vs PY 1.35 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -2.2% -2% -3.5% 1.30 -5.3% -4% -8.3% -8.4% 2018 1.25 -10.4% 2017 -6% 2016 -8% -15.6% 1.20 -16.9% -10% 1.15 -12% -14% 1.10 -16% 1.05 -18% Jan Feb Mar Apr May Jun Jul
Slide 107: Fast Growth Regions - Quarterly % Variance vs PY
Results for 2017 Fast Growth Regions - Quarterly % Variance vs PY 5% Asia Pacific Latin America 30% 4.1% 0% 20% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -0.1% -1.0% -3.2% 21.9% -5% -11.0% 10% 13.6% -15.4% 9.0% 1.3% -18.5% -10% -20.5% 0% Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 -3.0% -4.5% -13.6% -15% -10% -24.9%
Slide 108: 7.3 Acquisitions (Hard Copy only)
7.3 Acquisitions (Hard Copy only) 109
Slide 109: Using Free Cash Flow for Acquisitions
Results for 2017 Using Free Cash Flow for Acquisitions Significant pipeline of reasonably priced small and medium-sized potential acquisitions. Continue to focus on new media, data investment management, including application of new technology, big data and content. Acceleration to reach 40-45
Slide 110: Acquisitions and Investments
Results for 2017 Acquisitions and Investments Fast Growth Quantitative & Markets Digital 88rising (USA)² The Cocktail (Spain) ARBA (Hong Kong) Deeplocal (USA) Mic (USA)² CBC (China)¹,² DIS/PLAY (Denmark) Newsaccess (Ireland) Bruketa&Žinić (Croatia) CMC (China)¹,² Eightytwenty (Ireland) Pierry (USA)
Slide 111: Acquisitions Since October
Results for 2017 Acquisitions Since 1 October ARBA – Hong Kong (Ogilvy) ARBA is a digital consultancy, and was founded in Hong Kong in 2012, ARBA offers bespoke digital design and software engineering services with a focus on sales acceleration and customer experience. It specializes in digital stra
Slide 112: Acquisitions Since October
Results for 2017 Acquisitions Since 1 October Fatherly¹ – USA (WPP Ventures) Fatherly is a digital media company producing content for millennial parents in the US. advertising and branded-content clients include Johnson & Johnson, Mattel, Inc. and the New York Life Insurance Company. Fatherly has w
Slide 113: Acquisitions Since October
Results for 2017 Acquisitions Since 1 October Mash Strategy¹ – UK (Kantar Consulting) Mash is a London-based brand strategy and growth consultancy. Mash provides integrated consulting services covering growth strategy, insight, innovation and brand transformation. Clients include Johnson & Johnson,
Slide 114: 7.4 Share Owner Returns Information
7.4 Share Owner Returns Information (Hard Copy only) 115
Slide 115: Return on Equity and WACC
Results for 2017 Return on Equity and WACC¹ % 18 16.9 16.3 16.2 16 15.0 14.4 14 13.6 12.9 12 11.1 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 Return on Equity WACC ¹ Return on equity is headline diluted EPS divided by equity shareowners funds per share; WACC Is weighted average cost of capi
Slide 116: Using Free Cash Flow to Enhance Dividend Pay-Out Ratio
Results for 2017 Using Free Cash Flow to Enhance Dividend Pay-Out Ratio 140p 50% Target pay-out ratio 50% 45% 120p 40% 100p 35% 30% 80p 25% 60p 20% 40p 15% 10% 20p 5% 0p 0% 2010 2011 2012 2013 2014 2015 2016 2017 Headline Diluted EPS 56.7p 67.7p 73.4p 80.8p 84.9p 93.6p 113.2p 120.4p Dividend Declare
Slide 117: Distributions to Share Owners
Results for 2017 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 60%² 5% 800 48%² 47%² 59%² 4% 600 3% 400 67%² 2% 55%² 70%² 200 1% 81%² 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 Dividends paid 201 218 307
Slide 118: Dividends and Share Buy-Backs
Results for 2017 Using Free Cash Flow to Enhance Share Owner Value Dividends and Share Buy-Backs 2017 final dividend increased by 0.7% to 37.30p per share (2016 – 37.05p) to give full year dividend of 60.0p per share (2015 – 56.6p), up 6.0%. Distributions to share owners: Share Buy-Backs Dividen
Slide 119: Distributions to Share Owners Since 2004
Results for 2017 Using Free Cash Flow to Enhance Share Owner Value £’m Distributions to Share Owners Since 2004 14,000 Cumulative from 1 January 2004: Over the last ten Buy-backs years we have 12,084 returned £6.6bn to 12,000 Dividends paid share owners 10,548 Headline Earnings 10,000 % of Headline
Slide 120: 7.5 Competitor Information (Hard Copy only)
7.5 Competitor Information (Hard Copy only) 121
Slide 121: Two Year Cumulative Like-for-Like Revenue Growth
Results for 2017 Two Year Cumulative Like-for-Like Revenue Growth1 % WPP² OMC³ PUB4 DEN5 IPG6 HAV7 Q1 2016 10.3 8.9 3.8 11.3 12.4 10.5 Q2 2016 8.0 8.7 4.1 16.0 10.4 8.2 Q3 2016 7.8 9.3 0.9 6.9 11.4 7.5 Q4 2016 7.2 8.4 0.3 14.5 10.5 7.3 Q1 2017 5.3 8.2 1.7 9.0 9.4 3.5 Q2 2017 2.7 6.9 3.5 4.7 4.1 1.8
Slide 122: Competitor Review
Results for 2017 Competitor Review1 30 10 Market Cap 2017 Revenue 2017 EBITDA Market Cap/ EBITDA EV/EBITDA 9 25 8 7 20 EBITDA Valuation Ratios 6 Market Capitalisation $bn 15 5 4 10 3 2 5 1 0 - WPP OMC PUB Dentsu Nielsen IPG Ipsos 1 Market Capitalisation/Enterprise Value as of 23 February 2018 123
Slide 123: 2017 Revenue by Geography
Results for 2017 2017 Revenue by Geography $19.7bn 5.9 Asia Pacific, Latin America, Africa & Middle East, CEE $15.3bn Western Europe 2.9 N America $10.9bn 6.6 3.7 2.3 $7.9bn $7.9bn 2.7 1.7 1.4 4.9 8.7 7.2 5.9 4.8 1.4 1.6 Source: WPP Omnicom Publicis IPG Dentsu 1 WPP – reportable US $’s per WPP preli
Slide 124: Revenue in Faster Growing Markets 2004-2017
Results for 2017 Revenue¹ in Faster Growing³ Markets 2004-2017 6.0 5.5 5.0 4.5 4.0 3.5 Revenue ($'bn) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 4 5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 WPP OMC² PUB² IPG² HAV² ¹ WPP reportable US$ revenue per WPP results and peer $ revenue as shown
Slide 125: Media Billings by Geography
Results for 2017 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 126
Slide 126: Media Rankings in Brazil
Results for 2017 Media Rankings 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 4.0 1 PUB 13.4 1 My Agencia 3.7 2 WPP 11.3 2 Ogilvy 3.7 3 OMC 9.7 3 Publicis 3.5 4 IPG 5.4 4 Africa 3.0 5 HAV 4.2 5 Talent 2.9 6
Slide 127: 2017 Revenue by Sector
Results for 2017 2017 Revenue by Sector $19.7bn Data Investment Management 3.5 Marketing Services Advertising $15.3bn Media 6.9 7.3 4 $10.9bn $7.9bn $7.9bn 5.7 3.3 0.4 3.4 5.9 2.5 7.5 6.0 2.9 2.1 2.7 1.6 WPP Omnicom Publicis IPG Dentsu Source: 1 WPP reportable US $’s per WPP preliminary results 2 20
Slide 128: Digital in All Our Businesses
Results for 2017 Digital in All Our Businesses Digital Revenue ($billion – 2017 Full Year) 8.2 5.8 4.7 2.7 2.7 0.7 WPP Publicis Omnicom¹ Dentsu IPG¹ Havas¹ 1 Omnicom, IPG and Havas digital revenue based on Exane BNP Paribas estimates. 129
Slide 129: WPP London
WPP Results for 2017 London sg OES yy < 6