Wpp Plc · LSE:WPP
Wpp — H1 2019 Earnings Presentation
53 slides from Wpp's earnings presentation, Aug 9, 2019
Slide 1: 2019 Interim Results
2019 INTERIM RESULTS London 9 AUGUST 2019 2019 INTERIM RESULTS 1
Slide 2: Safe Harbour Statement
SAFE HARBOUR STATEMENT In order to utilise the ‘safe harbour’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), WPP plc is providing the following cautionary statement. This presentation contains certain forward-looking statements – that is, statements r
Slide 3: 2019 Interim Results: Progress on Strategy, Conclusion and Q&A
2019 INTERIM RESULTS PROGRESS ON STRATEGY CONCLUSION AND Q&A 2019 INTERIM RESULTS 3
Slide 4: Six Months of Good Strategic Progress
SIX MONTHS OF GOOD STRATEGIC PROGRESS • H1 revenue less pass-through costs -2.0%; signs of progress in Q2 • Encouraging areas of growth: media businesses, tech clients and faster-growth economies • USA (Q1 -8.8%, Q2 -5.4%) remains a major area of focus • Improved client retention and key new busines
Slide 5: 2019 Interim Results
2019 INTERIM RESULTS 2019 INTERIM RESULTS 5
Slide 6: First Half and Q2 Highlights
FIRST HALF AND Q2 HIGHLIGHTS • H1 LFL revenue less pass-through costs -2.0% • Q2 LFL revenue less pass-through costs -1.4%, improved on Q1 -2.8% • Q2 LFL revenue less pass-through costs improved significantly for North America -5.3% (Q1 -8.5%) and UK 1.3% (Q1 -0.9%) • Western Continental Europe impr
Slide 7: Summary Unaudited IFRS Income Statement
SUMMARY UNAUDITED IFRS INCOME STATEMENT Δ CONSTANT HALF YEAR TO 30 JUNE 2019 £M 2018 £M Δ REPORTED¹ CURRENCY² Revenue 7,616 7,493 1.6% 0.0% Gross profit 1,226 1,274 -3.8% -5.1% Operating profit³ 673 842 -20.1% -21.0% PBIT⁴ 681 851 -20.0% -20.9% Profit before tax⁵ 478 846 -43.5% -44.1% Tax rate 26.9%
Slide 8: Summary Unaudited Headline Results
SUMMARY UNAUDITED HEADLINE¹ RESULTS Δ CONSTANT Δ LIKE-FOR- HALF YEAR TO 30 JUNE 2019 £M 2018 £M Δ REPORTED CURRENCY LIKE² Revenue 7,616 7,493 1.6% 0.0% -0.6% Revenue less pass-through costs 6,149 6,149 0.0% -1.6% -2.0% EBITDA³ 875 948 -7.7% -8.9% Operating profit 730 783 -6.8% -8.0% PBIT 751 821 -8.
Slide 9: Revenue Less Pass-Through Costs Growth vs Prior Year
REVENUE LESS PASS-THROUGH COSTS GROWTH VS PRIOR YEAR Q1 Q2 H1 1.1% Like-for-like -2.8% Like-for-like -1.4% Like-for-like -2.0% 1.1% 0.7 0.3 -3.9% % % -5.0% Acquisitions 0.5% Acquisitions 0.4% Acquisitions 0.4% FX 1.6% FX 1.7% FX 1.6% Reported -0.7% Reported 0.7% Reported 0.0% 2019 INTERIM RESULTS 9
Slide 10: Impact of FX on Revenue Less Pass-Through Costs
IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS 2018 FY ACT 2019 Q1 ACT 2019 Q2 ACT 2019 Q3 EST 2019 Q4 EST 2019 FY EST 5% 4% • 2019 H1 currency 3% tailwind 1.6% • 2019 currency tailwind 2% 3.9% 4.0% 2.8%¹ 2.8% 1% • 2018 full year 1.6% 1.7% headwind -2.8% 0% -1% -2.8% -2% -3% 1. Based on applying 31
Slide 11: Revenue Less Pass-Through Costs by Region
REVENUE LESS PASS-THROUGH COSTS BY REGION Δ CONSTANT Δ LIKE- HALF YEAR TO 30 JUNE % GROUP 2019 £M 2018 £M Δ REPORTED CURRENCY FOR-LIKE North America 35.1 2,157 2,155 0.1% -5.7% -6.9% UK 13.5 831 833 -0.2% -0.2% 0.2% Western Continental Europe 21.2 1,306 1,319 -1.0% 0.2% -0.1% Asia Pacific, Latin Ame
Slide 12: Revenue Less Pass-Through Costs Growth by Region
REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION LIKE-FOR-LIKE % C. & E. Europe % Q1 Q2 5.0 6.3 UK % Q1 Q2 -0.9 1.3 North America % Q1 Q2 W. Cont. Europe % -8.5 -5.3 Q1 Q2 -0.3 0.0 Asia Pacific % Q1 Q2 1.4 -1.6 Africa & M. East % Q1 Q2 -4.7 -0.5 Latin America % Q1 Q2 8.0 9.3 % Q1 Q2 H1 Mature Market
Slide 13: Top 5 Markets
TOP 5 MARKETS USA UK Germany Greater China² France Headcount 23,000 14,000 8,000 10,000² 4,000 REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2019 H1 -7.1% 0.2% -2.4% -2.9% -0.3% 2019 Q2 -5.4% 1.3% -5.0% -8.7% 0.9% 2019 Q1 -8.8% -0.9% 0.4% 4.5% -1.5% 2018 FY -4.2% -0.5% 0.0% 2.1% 0.1% 1. Like-for-like grow
Slide 14: BRIC Markets
BRIC MARKETS Mainland China Greater China² Brazil India Russia Headcount 8,000 10,000 7,000 11,000 2,000 REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2019 H1 -2.8% -2.9% 10.2% 12.6% 5.0% 2019 Q2 -10.1% -8.7% 11.6% 15.8% 11.1% 2019 Q1 6.6% 4.5% 8.6% 9.3% -1.1% 2018 FY 2.6% 2.1% 5.6% 5.5% 1.3% 1. Like-for-
Slide 15: Revenue Less Pass-Through Costs by Sector
REVENUE LESS PASS-THROUGH COSTS BY SECTOR¹ Δ CONSTANT Δ LIKE- HALF YEAR TO 30 JUNE % GROUP 2019 £M 2018£M Δ REPORTED CURRENCY FOR-LIKE Global Integrated Agencies 62.8 3,858 3,844 0.4% -1.4% -1.8% Data Investment Management 15.4 949 940 1.0% 0.6% 0.4% Public Relations 7.2 442 430 2.8% -0.1% -1.5% Spe
Slide 16: Headline Operating Profit and Margin by Region
HEADLINE¹ OPERATING PROFIT AND MARGIN BY REGION OPERATING PROFIT £M OPERATING MARGIN² HALF YEAR TO 30 JUNE 2019 2018 2019 2018 North America 301 342 14.0% 15.9% UK 107 107 12.8% 12.9% Western Continental Europe 119 122 9.1% 9.3% Asia Pacific, Latin America, Africa & Middle 203 212 11.0% 11.5% East a
Slide 17: Headline Operating Profit and Margin by Sector
HEADLINE¹ OPERATING PROFIT AND MARGIN BY SECTOR² OPERATING PROFIT £M OPERATING MARGIN³ HALF YEAR TO 30 JUNE 2019 2018 2019 2018 Global Integrated Agencies 471 485 12.2% 12.6% Data Investment Management 101 110 10.7% 11.7% Public Relations 70 69 15.7% 16.0% Specialist Agencies 88 119 9.7% 12.7% Total
Slide 18: Trade Estimates of Assignment Wins (1)
TRADE ESTIMATES OF ASSIGNMENT WINS (1) FIRST HALF MEDIA (M)/ WPP AGENCY CREATIVE (C) INCUMBENT ACCOUNT OFFICE BILLINGS $M MediaCom M OMC Signet N. America 360 Wavemaker M OMC Huawei China 350 Mindshare M DEN/PUB KangShiFu Drinks China 145 Essence M Wavemaker L’Oréal¹ UK/Ireland 130 Wunderman Thompso
Slide 19: Trade Estimates of Assignment Wins (2)
TRADE ESTIMATES OF ASSIGNMENT WINS (2) FIRST HALF MEDIA (M)/ WPP AGENCY CREATIVE (C) INCUMBENT ACCOUNT OFFICE BILLINGS $M Wavemaker M N/A Little Red Book China 66 Wavemaker M N/A Chimelong China 47 WPP C N/A Distell Global 45 MediaCom M DEN Adidas EMEA 42 MediaCom M PUB Coca-Cola Russia 40 Mindshare
Slide 20: Trade Estimates of Assignment Losses
TRADE ESTIMATES OF ASSIGNMENT LOSSES FIRST HALF MEDIA (M)/ WPP AGENCY CREATIVE (C) WINNING AGENCY ACCOUNT OFFICE BILLINGS $M Wavemaker M Essence L’Oréal¹ UK/Ireland 130 Essence M PUB NBC Entertainment USA 110 Shaded are Q2 wins 1. Transfer within WPP 2019 INTERIM RESULTS 20
Slide 21: Trade Estimates of Assignment Wins/Losses Since July
TRADE ESTIMATES OF ASSIGNMENT WINS/LOSSES SINCE 1 JULY MEDIA (M)/ WPP AGENCY CREATIVE (C) INCUMBENT ACCOUNT OFFICE BILLINGS $M Mindshare M MediaCom Allergan¹ USA 378 WINS MediaCom M OMC/PUB/IPG eBay N. America/China 250 MEDIA (M)/ WINNING WPP AGENCY CREATIVE (C) AGENCY ACCOUNT OFFICE BILLINGS $M LOS
Slide 22: Free Cash Flow and Free Cash Flow Conversion
FREE CASH FLOW¹ AND FREE CASH FLOW CONVERSION HALF YEAR TO 30 JUNE 2019² £M 2018 £M Operating profit 673 842 Depreciation & amortisation charges 360 211 - Depreciation & amortisation ex IFRS 16 192 211 - Depreciation of right to use assets 168 - Lease payments (including interest) (156) - Non-cash c
Slide 23: Uses of Cash Flow
USES OF CASH FLOW¹ HALF YEAR TO 30 JUNE 2019 £M 2018 £M Free cash inflow pre working capital/provisions 266 347 Working capital and provisions (779) (556) - Trade working capital (297) (192) - Other receivables, payables & provisions (482) (364) Free cash outflow (513) (209) Net disposals/(acquisiti
Slide 24: Disposal Proceeds
DISPOSAL PROCEEDS¹ H1 2019 £M Property - 3 Columbus Circle, New York City 159 Chime 54 The Farm 27 Blue State Digital Tools 20 Other disposals 44 Total 304 1. Includes proceeds from disposals of property, plant & equipment (£167m), and investments and subsidiaries (£137m) 2019 INTERIM RESULTS 24
Slide 25: Restructuring: Disposals
RESTRUCTURING : DISPOSALS Investments Associates/JV’s Subsidiaries 2018 2018 2018 AppNexus Big Idea Group Grey Bulgaria CMC Content Bruin Sports Capital Grey Serbia Domo DASL IEG Fullscreen Globant JWT Mirum Miami Fullsix Imagina (Return of Capital) Maxx Marketing Imagine OptimizeRx OnCall Ooh!Media
Slide 26: Net Debt
NET DEBT HALF YEAR TO 30 JUNE: 2019 £M 2018 £M Δ £M Average net debt¹ on constant currency basis (4,384) (5,093) 709 Average net debt¹ on reportable basis (4,384) (4,979) 595 Net debt¹ at 30 June on constant currency basis (4,271) (4,742) 471 Net debt¹ at 30 June on reportable basis (4,271) (4,632)
Slide 27: Uses of Free Cash Flow
USES OF FREE CASH FLOW FY JUNE YTD JUNE YTD FY TARGET 2019 2018 2018 (Disposals)/acquisitions (excluding earnouts): Acquisitions¹ c. £200M £26M £136M £288M Less disposals² c. £(200M) £(304M) £(469M) £(849M) Net (disposals)/acquisitions NEUTRAL £(278M) £(333M) £(561M) Share buy-backs: - - £201M £207M
Slide 28: Debt Maturity Profile at 30 June 2019
DEBT MATURITY PROFILE £M AT 30 JUNE 2019 £ TOTAL £ TOTAL CREDIT DRAWN 700 ◼ £ bonds £400M (2.875% Sep ’46) 400 400 ◼ US bond $220M (5.625% Nov ’43) 173 173 600 ◼ US bond $93M (5.125% Sep ’42) 73 73 ◼ Eurobonds €600M (1.625% Mar ’30) 537 537 500 ◼ Eurobonds €750M (2.25% Sep '26) 671 671 ◼ Eurobond €5
Slide 29: IFRS 16: Overview
IFRS 16 : OVERVIEW IFRS 16 effective 1 January 2019: • All leases treated the same, no finance and operating designation • Primarily real estate (97%) • All leases on balance sheet except short-term and low value leases • Balance sheet gross up at 30 June 2019 includes £1.8B right-of-use asset and £
Slide 30: IFRS 16: Headline P&L Impact
IFRS 16: HEADLINE¹ P&L IMPACT BASED ON 1 JANUARY 2019 LEASES 2019 H1 2018 H1 P&L EX RIGHT- IMPACT OF-USE RIGHT-OF- AS AS P&L impact £M EX IFRS 16 IFRS 16 DEP’N USE DEP’N REPORTED REPORTED EBITDA 841 34 875 169 1,044 948 Operating profit 696 34 730 - 730 783 Operating margin² 11.4% 0.5% 11.9% - 11.9%
Slide 31: Kantar Transaction
KANTAR TRANSACTION¹ STRENGTHENS BALANCE SHEET, LIMITS DILUTION • Successfully executed: simplification and de-leverage • Net proceeds c. $3.1B • “First Completion” (≥86% of Kantar and associated proceeds) expected early 2020 • Subsequent completion(s) and remainder of proceeds within 12 months of an
Slide 32: Outlook
OUTLOOK Our 2019 financial targets remain as: • Like-for-like revenue less pass-through costs -1.5% to -2.0% • Headline operating margin¹ down around 1.0 margin point on constant currency basis (excluding impact of IFRS 16) 1. Margin as % of revenue less pass-through costs 2019 INTERIM RESULTS 32
Slide 33: Progress on Strategy
PROGRESS ON STRATEGY 2019 INTERIM RESULTS 33
Slide 34: Radical Evolution: A Strategy for Growth
RADICAL EVOLUTION: A STRATEGY FOR GROWTH VISION AND DATA AND CREATIVITY OFFER TECHNOLOGY SIMPLER STRUCTURE CULTURE 2019 INTERIM RESULTS 34
Slide 35: Clients' Needs Significantly Growing Our Addressable Market
CLIENTS’ NEEDS SIGNIFICANTLY GROWING OUR ADDRESSABLE MARKET COMMUNICATIONS EXPERIENCE COMMERCE TECHNOLOGY $1 trillion market: >$100 billion market: Platform spend $300 billion market: +/- 3% growth1 5-10% growth2 $9.5bn: 15% growth3 5-10% growth2 1. GroupM forecast 2. Exane BNP Paribas 3. Forrester
Slide 36: Encouraging Growth Areas in H1
ENCOURAGING GROWTH AREAS IN H1 India “Big Tech” clients1 Xaxis +13% +16% +16% Luxury Goods Brazil clients +10% +7% 2019 INTERIM RESULTS 36 1. “Big Tech” represents 13 technology companies in our top 100 clients
Slide 37: Recent Campaigns Integrate Tech, Purpose and Creativity
RECENT CAMPAIGNS INTEGRATE TECH, PURPOSE AND CREATIVITY 2019 INTERIM RESULTS 37
Slide 38: Improved Offer Reflected in New and Expanded/Retained Business
IMPROVED OFFER REFLECTED IN NEW AND EXPANDED/ RETAINED BUSINESS NEW CLIENTS EXPANDED REMIT/RETENTION 2019 INTERIM RESULTS 38 Highlights 2019 YTD
Slide 39: New Business Case Study: L'Oréal Beauty Tech Lab
NEW BUSINESS CASE STUDY: L’ORÉAL BEAUTY TECH LAB SCOPE AND VALUE • UK&I media planning/buying. Total media billings £106m. Top 5 UK&I advertiser • Transformative approach to reaching customers based on a clear data strategy. WHY WE WON Advanced use of tech, Essence tools and deep knowledge of Google
Slide 40: New Business Case Study: Vodafone Ziggo/GO One
NEW BUSINESS CASE STUDY: VODAFONE ZIGGO/GO ONE • Multi-disciplinary strategic marketing and communications partnership model SCOPE AND VALUE • 2018 media billings €140m; top 5 NL advertiser • WPP’s ability to deliver a unique integrated client model WHY WE WON • access to best in class talent across
Slide 41: Campuses Driving Engagement for Clients and Our People
CAMPUSES DRIVING ENGAGEMENT FOR CLIENTS AND OUR PEOPLE NEW YORK MADRID AMSTERDAM MILAN MUMBAI BUENOS AIRES 2019 INTERIM RESULTS 41
Slide 42: Simpler Structure: Increased Efficiency
SIMPLER STRUCTURE: INCREASED EFFICIENCY Investor Day Target Current Status On Plan? 100 planned mergers Business Unit 102 completed or in (at local office level) Rationalisation progress by end of 2019 80 planned closures Business Unit Closures 68 closed or in progress by end of 2019 Gross Headcount
Slide 43: Summary
SUMMARY • Good operational execution of our strategic plan to date • H1 financial performance in line, and Q2 sequentially better • Kantar transaction successfully executed: simplification and de-leverage • Fewer, stronger businesses to drive better retention and new business • Further progress in H
Slide 44: Other Financial Information
OTHER FINANCIAL INFORMATION 2019 INTERIM RESULTS 44
Slide 45: Unaudited IFRS Income Statement
UNAUDITED IFRS INCOME STATEMENT Δ CONSTANT HALF YEAR TO 30 JUNE 2019 £M 2018 £M Δ REPORTED CURRENCY Revenue 7,616 7,493 1.6% 0.0% Gross profit 1,226 1,274 -3.8% -5.1% Operating profit pre exceptional & goodwill/intangibles¹ 730 783 -6.8% -8.0% Net exceptional gain 10 143 - - Goodwill/intangible char
Slide 46: Impact of Non Headline Items on PBT
IMPACT OF NON HEADLINE ITEMS ON PBT Δ CONSTANT 2019 2018 Δ REPORTED CURRENCY HALF YEAR TO 30 JUNE £M £M £M % % Exceptional (loss)/gain (3) 114 (117) Goodwill/intangible charges (67) (84) 17 Revaluation of financial instruments¹ (57) 81 (138) Non headline items (127) 111 (238) Reported PBT 478 846 (3
Slide 47: Net Exceptional Gain/(Loss)
NET EXCEPTIONAL GAIN/(LOSS) HALF YEAR TO 30 JUNE 2019 £M Gain on disposals of investments and subsidiaries 40 Litigation settlement 17 Gain on sale of New York freehold property 8 Restructuring and transformation costs (55) Net exceptional gain 10 Share of associate exceptionals (13) Net exceptional
Slide 48: Unaudited Headline IFRS Income Statement
UNAUDITED HEADLINE¹ IFRS INCOME STATEMENT Δ CONSTANT Δ LIKE-FOR- HALF YEAR TO 30 JUNE 2019 £M 2018 £M Δ REPORTED CURRENCY LIKE Revenue 7,616 7,493 1.6% 0.0% -0.6% Revenue less pass-through costs 6,149 6,149 0.0% -1.6% -2.0% Operating profit 730 783 -6.8% -8.0% Income from associates 21 38 -43.4% -43
Slide 49: Revenue Less Pass-Through Costs Growth by Country
REVENUE LESS PASS-THROUGH COSTS GROWTH BY COUNTRY REVENUE LESS PASS-THROUGH COSTS GROWTH¹ TOP COUNTRIES² More than 10% Argentina, Belgium, Brazil, India, Turkey 5% to 10% Denmark, Mexico, Poland, Russia Colombia, Indonesia, Italy, Netherlands, Singapore, 0% to 5% Sweden, Switzerland, UK Canada, Main
Slide 50: Revenue Less Pass-Through Costs Growth by Category
REVENUE LESS PASS-THROUGH COSTS GROWTH BY CATEGORY REVENUE LESS PASS-THROUGH COSTS GROWTH¹ CATEGORIES More than 10% Government 0% to 10% Tech, Food, Retail, Telecommunications Automotive, Drinks, Electronics, Financial Less than 0% Services, Media & Entertainment, Oil, Personal Care & Drugs, Travel
Slide 51: Revenue Less Pass-Through Costs by Industry
REVENUE LESS PASS-THROUGH COSTS BY INDUSTRY Other Auto 11% 12% Travel & Entertainment Consumer Products 7% 6% Telecommunications 5% Personal Care 10% Technology 6% Retail 7% Healthcare 11% Government 2% Oil 2% Financial Services Food & Drink 7% 14% Chart represents the amount of revenue less pass-th
Slide 52: Effects of Currency
EFFECTS OF CURRENCY STERLING 2019 2018 (WEAKER)/STRONGER US$ 1.29 1.38 -7% € 1.15 1.14 1% • Currency movements accounted for 1.6% ¥ 142 150 -5% increase in revenue less Chinese Renminbi 8.8 8.8 - pass-through costs Brazilian Real 4.97 4.71 6% • Reflects overall weakness of £ sterling, Australian $ 1
Slide 53: 2019 Interim Results
2019 INTERIM RESULTS London 9 AUGUST 2019 2019 INTERIM RESULTS 53