Wpp Plc · LSE:WPP
Wpp — FY2023 Earnings Presentation
42 slides from Wpp's earnings presentation, Feb 22, 2024
Slide 1: Preliminary Results
PRELIMINARY RESULTS 22 February 2024
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This document contains statements that are, or may be limited to: the impact of epidemics or pandemics including depending on, among other things, regional, national and deemed to be, “forward-looking statements”. Forward- restrictions on bus
Slide 3: Agenda
• 2023 highlights • Financial performance • Strategic progress • Q&A
Slide 4: Highlights
HIGHLIGHTS .
Slide 5: Highlights
HIGHLIGHTS • Resilient performance in 2023 with LFL growth +0.9% (Q4 +0.3%) and a headline operating margin of 14.8%, +0.2 pts on a constant currency basis showing disciplined cost control • Ex-US markets grew 3.3% on strong growth in the UK and India, partially offset by declines in China. A challe
Slide 6: Financial Performance
FINANCIAL PERFORMANCE
Slide 7: Revenue Less Pass-Through Costs Growth
REVENUE LESS PASS-THROUGH COSTS GROWTH 2023 +0.5% -1.3pt +0.9pt +0.9% Reported growth FX contribution to M&A contribution to Like-for-like growth (-2.8% in Q4 ‘23) reported growth reported growth (+0.3% in Q4 ‘23) 7
Slide 8: Unaudited Headline IFRS Income Statement
UNAUDITED HEADLINE¹ IFRS INCOME STATEMENT YEAR TO 31 DECEMBER 2023 £M 2022 £M Δ REPORTED Δ LFL 2 • Continued LFL growth in revenue and revenue less pass-through costs Revenue 14,845 14,429 2.9% 3.2% • Foreign exchange headwind of 1.3pt Revenue less pass-through costs 11,860 11,799 0.5% 0.9% on reven
Slide 9: Reconciliation of Headline Operating Profit to Reported Operating Profit
RECONCILIATION OF HEADLINE OPERATING PROFIT TO REPORTED OPERATING PROFIT 2023 2022 Δ YEAR TO 31 DECEMBER £M £M £M • Restructuring and transformation costs: include £16m in relation to the Headline operating profit 1,750 1,742 8 creation of VML and simplification of GroupM; £52m for the ERP Goodwill
Slide 10: Global Integrated Agencies
GLOBAL INTEGRATED AGENCIES £M 2023 Δ REPORTED Δ VS 22 LFL • Continued growth at Ogilvy, reflecting client wins including H&R Block, Revenue less pass-through costs 9,808 0.7% 1.3% Mondelēz, SC Johnson and Verizon • AKQA, VMLY&R, Wunderman Thompson, Headline operating profit 1,474 2.9% lower spend fr
Slide 11: Public Relations
PUBLIC RELATIONS £M 2023 Δ REPORTED Δ VS 22 LFL • FGS Global: strong performance with high- single digit growth. KKR acquired a 29% Revenue less pass-through costs 1,180 1.6% 1.4% stake. Ranked #1 in PR by Chambers and PERFORMANCE Partners1 REVIEW Headline operating profit 191 (0.5)% • H+K: continue
Slide 12: Specialist Agencies
SPECIALIST AGENCIES £M 2023 Δ REPORTED Δ VS 22 LFL • CMI Media Group, specialist healthcare Revenue less pass-through costs 872 (2.6)% (3.4)% unit, maintained double-digit growth PERFORMANCE • REVIEW Landor and Design Bridge and Partners Headline operating profit 85 (27.4)% continued weakness with d
Slide 13: Performance by Region
PERFORMANCE BY REGION LFL REVENUE LESS PASS-THROUGH COSTS GROWTH (%) 2023 Q4 2023 5.6 5.1 5.3 3.7 1.8 (0.8) (2.7) (4.1) N. N. America America UK UK W. W.Continental ContinentalEurope Europe RoW RoW . 38% OF WPP 14% OF WPP 20% OF WPP 28% OF WPP • USA: -2.8% (Q4: -4.5%) • Continued growth in CPG and •
Slide 14: Diverse Client Sector Mix
DIVERSE CLIENT SECTOR MIX1 LFL REVENUE LESS PASS-THROUGH COSTS 2023 (Q4) 4% 3% 5% Telecom, media & 27% 6% CPG +14.2% (+12.5%) entertainment +2.9% (+6.2%) Financial services +4.3% (-4.4%) 6% Tech & digital services -6.9% (-4.9%) Other -3.4% (-11.2%) Healthcare & pharma +0.6% (-6.8%) Travel & leisure
Slide 15: Change in Operating Margin Year-on-Year
CHANGE IN OPERATING MARGIN YEAR-ON-YEAR • Margin: reported basis 14.8%, flat YoY; up 0.2 pts on a constant FX basis 15.0% • Staff costs: proactive cost 14.8% 14.8% management • Personal expenses: some inflationary pressure on travel costs • Establishment costs and other G&A: benefiting from savings
Slide 16: More Profitable Growth
MORE PROFITABLE GROWTH BALANCING MARGIN PROGRESSION AND INVESTMENT INVESTMENT IN CLIENT- SIDE INVESTMENT TECHNOLOGY IN TALENT OPERATING LEVERAGE EFFICIENCY SAVINGS GUIDANCE STRUCTURAL +20-40bps SAVINGS 16% to 15.0% 17% 1 to 15.2%1 14.8% FY23 FY24 Medium term 1. At constant FX 16
Slide 17: Net Debt Since December 2022
NET DEBT SINCE DECEMBER 2022 Operating cash flow £1,280m £M Free cash flow £637m 2,479 2,504 1.74x 2022 Headline Non-cash Rent1 Non-headline Capex Working Dividends to Net interest Tax Net M&A and Dividends3 Buybacks/FX/ 2023 Net Debt EBITDA compensation cost (including Capital minorities/from dispo
Slide 18: Restructuring Costs
RESTRUCTURING COSTS YEAR TO 31 DECEMBER 2023 £M 2022 £M Δ IT transformation 113 135 (22) o/w ERP 52 97 (45) Other transformation 67 84 (17) Structural restructuring costs (VML, GroupM) 16 - 16 Restructuring and transformation costs 196 219 (23) Property (including 2023 NYC/Global review) 232 18 214
Slide 19: 2024 Guidance
2024 GUIDANCE LFL revenue less pass-through costs growth of 0-1% Headline operating margin improvement of 20-40bps at constant currency Other FY 2024 financial indications: • Mergers and acquisitions will add 0.5-1.0% to revenue less pass-through costs growth • FX impact: current rates (at 15 Februa
Slide 20: Strategic Progress
STRATEGIC > PROGRESS
Slide 21: Innovating to Lead, Today and Tomorrow
INNOVATING TO LEAD, TODAY AND TOMORROW 1 LEAD THROUGH AI, DATA & TECHNOLOGY 2 ACCELERATE GROWTH THROUGH THE POWER OF CREATIVE TRANSFORMATION 3 BUILD WORLD-CLASS, MARKET-LEADING BRANDS 4 EXECUTE EFFICIENTLY TO DRIVE FINANCIAL RETURNS THROUGH MARGIN AND CASH 21
Slide 22: Lead Through AI, Data & Technology
1 LEAD THROUGH AI, DATA & TECHNOLOGY AI-powered technology • New opportunities for technology licence fees, particularly in commerce, solutions through WPP Open production, media • Consulting projects to enable clients to use AI AI services and consulting • Technology projects with AI embedded solut
Slide 23: Creative Transformation: WPP at Super Bowl LVIII
2 CREATIVE TRANSFORMATION: WPP AT SUPER BOWL LVIII Ogilvy VML and Verizon Mindshare “Can’t B Broken” Hellmann’s “Mayo Cat” 12 CREATIVE TV SPOTS 19 VML Progressive Insurance WPPOnefluence, North America CeraVe MEDIA SPOTS “Watch Party” “Michael CeraVe” 4 out of top 5 ADs1 1. Ranked by Forbes in an as
Slide 24: Video
VIDEO
Slide 25: World Class Brands, Approaching 90% Net Sales
3 WORLD CLASS BRANDS, APPROACHING 90% NET SALES GLOBAL INTEGRATED AGENCIES PR CREATIVE MEDIA #1 Leading Leading #1 #1 Top 2 creative agency, global production spanning brand, CX global creative ideas and innovation agency global media global PR firm agency company agency and commerce 30k 15k 5.5k 7.
Slide 26: World Class Brands, New Business Wins 2023
3 WORLD CLASS BRANDS, NEW BUSINESS WINS 2023 $4.5bn Net new billings in 2023 GLOBAL INTEGRATED AGENCIES PR CREATIVE MEDIA 1 2 Global Global N. America Global Global Switzerland Europe Global Global UK N. America Global UK N. America Americas Global Global Denmark Global Europe India N. America EMEA
Slide 27: Medium-Term Financial Framework
4 MEDIUM-TERM FINANCIAL FRAMEWORK 3%+ 16%-17% 85%+ 1.5-1.75x Organic growth Headline Adjusted Operating Cash Average Net Debt / Revenue less pass- Operating Margin Flow Conversion Headline EBITDA1 through costs DISCIPLINED CAPITAL ALLOCATION Potential for M&A to accelerate growth by up to 1% p.a. 1.
Slide 28: WPP | The Investment Case
WPP | THE INVESTMENT CASE • Unrivalled global reach and scale • Attractive and growing addressable markets Accelerated • Deep client relationships with leading growth, margin businesses expansion and improved cash • Leading through AI, data and technology generation to drive • Financial strength wit
Slide 29: Q&A
Q&A
Slide 30: Contacts and Further Resources
CONTACTS AND FURTHER RESOURCES TOM WALDRON INVESTOR WEBSITE Group Investor Relations Director wpp.com/investors tom.waldron@wpp.com Tel: +44 (0) 7788 695 864 CAPITAL MARKETS DAY 2024 Materials linked here ANTHONY HAMILTON Investor Relations Director INVESTOR WEBINARS anthony.hamilton@wpp.com A serie
Slide 31: Appendix
APPENDIX
Slide 32: Revenue Less Pass-Through Costs by Sector
REVENUE LESS PASS-THROUGH COSTS BY SECTOR YEAR TO 31 DECEMBER 2023 £M 2022 £M Δ REPORTED Δ LFL Global Integrated Agencies 9,808 9,743 0.7% 1.3% Public Relations 1,180 1,161 1.6% 1.4% Specialist Agencies 872 895 (2.6)% (3.4)% Total 11,860 11,799 0.5% 0.9% Prior year figures have been re-presented to
Slide 33: Revenue Less Pass-Through Costs by Region
REVENUE LESS PASS-THROUGH COSTS BY REGION YEAR TO 31 DECEMBER 2023 £M 2022 £M Δ REPORTED Δ LFL North America 4,556 4,688 (2.8)% (2.7)% UK 1,626 1,537 5.8% 5.6% Western Continental Europe 2,411 2,319 4.0% 1.8% Asia Pacific, Latin America, Africa & Middle 3,267 3,255 0.3% 3.7% East and Central & Easte
Slide 34: Revenue Less Pass-Through Costs Growth by Region Like-for-Like
REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION LIKE-FOR-LIKE % Central & Eastern Europe % Q1 Q2 Q3 Q4 FY 11.0 10.3 3.3 4.1 6.9 UK % Q1 Q2 Q3 Q4 FY 7.4 9.0 1.1 5.1 5.6 North America % Q1 Q2 Q3 Q4 FY 1.9 (4.1) (4.1) (4.1) (2.7) Western Continental Europe % Q1 Q2 Q3 Q4 FY 3.4 3.9 1.1 (0.8) 1.8 Asia P
Slide 35: Like-for-Like Growth Top Markets
LIKE-FOR-LIKE REVENUE LESS PASS-THROUGH COSTS GROWTH TOP MARKETS USA UK GERMANY Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 30% 30% 30% 20% 20% 20% 10% 12.0% 3.5% 10% 9.0% 10% 2.3% 7.4% 6.6% 5.1% 4.9% - 4.0% 1.1% (4.5%) (4.2
Slide 36: Like-for-Like Growth Top Markets
LIKE-FOR-LIKE REVENUE LESS PASS-THROUGH COSTS GROWTH TOP MARKETS AUSTRALIA CANADA FRANCE Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 20% 20% 20% 10% 10% 10% 4.5% 2.6% 2.5% 2.3% 0.5% 0.9% 1.4% - - - (0.8%) (2.2%) (3.6%) (2.7%
Slide 37: Exchange Rate Analysis
EXCHANGE RATE ANALYSIS STERLING YEAR TO 31 DECEMBER 2023 2022 (WEAKER)/STRONGER 2022 Act Q1 23 Act Q2 23 Act Q3 23 Act Q4 23 Act 2023 FY Act US $ 1.24 1.24 - 6.3% € 1.15 1.17 (1.7)% 5.9% Chinese Renminbi 8.81 8.31 6.0% Indian Rupee 102.71 97.06 5.8% Brazilian Real 6.21 6.39 (2.8)% (0.6%) (1.3%) Aust
Slide 38: Headline Operating Profit and Margin by Sector
HEADLINE OPERATING PROFIT AND MARGIN BY SECTOR 1,2 OPERATING PROFIT £M OPERATING MARGIN3 YEAR TO 31 DECEMBER 2023 2022 2023 2022 Global Integrated Agencies 1,474 1,433 15.0% 14.7% Public Relations 191 192 16.2% 16.5% Specialist Agencies 85 117 9.7% 13.0% Total 1,750 1,742 14.8% 14.8% 1 Figures befor
Slide 39: Headline Operating Profit and Margin by Region
HEADLINE OPERATING PROFIT AND MARGIN BY REGION 1 OPERATING PROFIT £M OPERATING MARGIN2 YEAR TO 31 DECEMBER 2023 2022 2023 2022 North America 834 771 18.3% 16.4% UK 215 187 13.2% 12.2% Western Continental Europe 258 301 10.7% 13.0% Asia Pacific, Latin America, Africa & Middle 443 483 13.6% 14.8% East
Slide 40: Change in Headline Operating Margin
CHANGE IN HEADLINE OPERATING MARGIN¹ 2023 2022 Δ YEAR TO 31 DECEMBER £M £M £M % Revenue less pass-through costs 11,860 11,799 61 0.5 Staff costs pre incentives (7,751) (7,743) (8) (0.1) Establishment (516) (536) 20 3.8 IT (698) (620) (78) (12.6) Personal (223) (204) (19) (9.3) Other operating expens
Slide 41: Debt Maturity Profile at December 31, 2023
DEBT MATURITY PROFILE AT DECEMBER 31, 2023 (£M) EUR GBP USD 700 £ TOTAL £ TOTAL Bonds (currency of issuance) 600 CREDIT DRAWN ◼ £ bonds £400m (2.875% Sep ’46) 400 400 500 ◼ US bond $220m (5.625% Nov ’43) 173 173 ◼ US bond $93m (5.125% Sep ’42) 73 73 400 ◼ £ bonds £250m (3.75% May ’32) 250 250 ◼ Euro
Slide 42: Leverage Metrics
LEVERAGE METRICS YEAR TO 31 DECEMBER 2023 £M 2022 £M Δ £M Average adjusted net debt1,2, on constant currency basis (3,620) (2,875) (745) Average adjusted net debt1,2 on reportable basis (3,620) (2,852) (768) Adjusted net debt1 at 31 December on constant currency (2,504) (2,444) (60) basis Adjusted n