Wpp Plc · LSE:WPP
Wpp — Q1 2016 Earnings Presentation
64 slides from Wpp's earnings presentation, April 2016
Slide 1: Trading Statement for First Quarter 2016
Trading Statement for First Quarter 2016 London
Slide 2: Contents
Contents 1 First Quarter 2016 Hard Copy only: 2 30 Year History 3 Other Information 2
Slide 3: First Quarter 2016
1 First Quarter 2016 W PP
Slide 4: Highlights
First Quarter 2016 Highlights Reported billings up 8.3% at £11.922bn and up 6.7% constant currency. Revenue growth of 10.5%, with like-for-like growth of 5.1%, 3.9% growth from acquisitions and 1.5% from currency. Net sales growth of 8.1%, with like-for-like growth of 3.2%, 3.5% growth from ac
Slide 5: Summary – Revenue and Net Sales Growth
First Quarter 2016 Summary – Revenue and Net Sales Growth % Growth Revenue Net Sales Like-for-like 5.1 3.2 Acquisitions 3.9 3.5 Constant currency 9.0 6.7 Foreign exchange 1.5 1.4 Reportable sterling 10.5 8.1 Reportable US dollars¹ 4.6 2.2 Reportable euros² 6.3 4.0 Reportable yen³ 0.9 -1.3 1 Translat
Slide 6: Revenue and Net Sales by Sector
First Quarter 2016 Revenue and Net Sales by Sector Revenue¹ Net Sales¹ % Change % Change 2016 Reported Constant Like-for- 2016 Reported Constant Like-for- £m Currency like² £m Currency like² Advertising, Media Investment 1,387 12.2 11.0 7.9 1,122 5.7 5.0 3.4 Management Data Investment Management 592
Slide 7: Advertising, Media Investment Management
First Quarter 2016 Advertising, Media Investment Management Strongest like-for-like revenue growth 7.9% with net sales growth 3.4%. Advertising grew in North America and Asia Pacific, but remained challenged in mature markets, particularly Western Continental Europe. J. Walter Thompson Company p
Slide 8: Data Investment Management
First Quarter 2016 Data Investment Management Data investment management constant currency net sales up 5.1%, like-for-like flat. Western Continental Europe, Latin America and Africa & Middle East like-for-like revenue and net sales up strongly, but North America, UK and Asia Pacific more diffic
Slide 9: Public Relations and Public Affairs
First Quarter 2016 Public Relations and Public Affairs Public relations and public affairs like-for-like revenue and net sales up 2.3%. All regions except North America up, with particularly strong growth in UK. Also strong performance from Cohn & Wolfe, Finsbury, Hering Schuppener in Germany, O
Slide 10: Branding and Identity, Healthcare and Specialist Communications
First Quarter 2016 Branding and Identity, Healthcare and Specialist Communications Constant currency revenue up 10.0% and like-for-like up 4.7%, strongest constant currency net sales growth up 10.9% and like-for-like up 5.2%. Growth in all Group’s businesses in this sector, except healthcare. Pa
Slide 11: Direct, Digital and Interactive
First Quarter 2016 Direct, Digital and Interactive At 31 March 2016, direct, digital and interactive revenues were $1.7bn or over 38% of total revenue (2015: $1.5bn and almost 37% respectively), up 13.6% in constant currency and up 8.3% like-for-like. The number of people working in the Group in
Slide 12: Revenue and Net Sales by Region
First Quarter 2016 Revenue and Net Sales by Region Revenue¹ Net Sales¹ % Change % Change 2016 Reported Constant Like-for- 2016 Reported Constant Like-for- £m Currency like £m Currency like North America 1,191 14.9 9.2 6.9 1,019 11.4 5.8 3.9 UK 451 8.2 8.2 4.7 375 7.1 7.1 3.2 Western Continental Euro
Slide 13: WPP Two Year Cumulative Like-for-Like Growth
First Quarter 2016 WPP Two Year Cumulative Like-for-Like Growth1 - Consistent Performance % Revenue Net Sales 1 Year 2 Year 1 Year 2 Year Q1 2014 7.0 9.1² 3.8 5.7² Q2 2014 10.2 12.9² 4.4 7.2² Q3 2014 7.6 12.6² 3.0 7.3² Q4 2014 7.8 12.0² 2.1 6.4² Q1 2015 5.2 12.2 2.5 6.3 Q2 2015 4.5 14.7 2.1 6.5 Q3 2
Slide 14: Two Year Cumulative Like-for-Like Revenue Growth
First Quarter 2016 Two Year Cumulative Like-for-Like Revenue Growth1 % WPP² OMC³ Pub4 IPG5 Havas6 Q1 2014 9.1 7.2 4.6 8.9 2.1 Q2 2014 12.9 8.6 5.5 6.9 9.6 Q3 2014 12.6 10.6 4.5 9.1 7.2 Q4 2014 12.0 10.1 3.9 8.5 5.5 Q1 2015 12.2 9.4 4.2 12.3 10.1 Q2 2015 14.7 11.1 1.9 11.4 13.4 Q3 2015 12.2 12.6 1.7
Slide 15: Revenue Growth by Region
First Quarter 2016 Revenue Growth¹ by Region CENTRAL & EASTERN EUROPE -2.2% Mature Markets 5.7% UNITED “Faster Growth” Markets 3.4% KINGDOM 4.7% Total 5.1% NORTH AMERICA WESTERN 6.9% CONTINENTAL EUROPE 4.4% ASIA PACIFIC Traditional 3.5% Media MIDDLE EAST 3.8% LATAM 4.3% AFRICA ANZ 6.9% 3.5% ¹ Like-f
Slide 16: Net Sales Growth by Region
First Quarter 2016 Net Sales Growth¹ by Region CENTRAL & EASTERN EUROPE 0.4% Mature Markets 3.3% UNITED “Faster Growth” Markets 3.0% KINGDOM 3.2% Total 3.2% NORTH AMERICA WESTERN 3.9% CONTINENTAL EUROPE 2.3% ASIA PACIFIC Traditional 3.0% Media MIDDLE EAST 1.8% LATAM 3.9% AFRICA ANZ 4.6% 3.1% ¹ Like-
Slide 17: Top Markets
First Quarter 2016 Top 6 Markets - Over 68%¹ of Revenue and Net Sales, Like-For-Like Revenue Growth of 5.2%¹ and Net Sales Growth of 3.0%¹ Including associates: Revenue $1.7bn $0.8bn $0.3bn $0.3bn $0.2bn $0.2bn People ‘000² 25 17 14 8 4 5 USA UK Greater China4,5 Germany ANZ France Revenue Net Sales
Slide 18: BRICs Markets
First Quarter 2016 BRICs Markets - Over 11% of Revenue and Net Sales, Like-For-Like Revenue Growth of -0.4%¹ and Net Sales Growth of -0.6%¹ Including associates: Revenue $0.3bn $0.1bn $0.1bn $0.05bn WPP Rank5 #3 #8 #12 #24 People ‘000² 14 14 7 2 Greater China4 India Brazil Russia Revenue Net Sales R
Slide 19: Growth by Region
First Quarter 2016 Growth by Region North America constant currency net sales growth 5.8%, region with strongest like-for- like growth 3.9%. Advertising and media investment management, direct, digital and interactive performed well. UK region with second strongest constant currency net sales gr
Slide 20: Revenue Growth by Country
First Quarter 2016 Revenue Growth by Country Revenue Growth1 Countries More than 20% Argentina, Indonesia, Turkey 10% to 20% Denmark, Mexico 5% to 10% South Africa, USA Australia, Belgium, Brazil, Canada, Greater China², Mainland China, Less than 5% France, Germany, India, Italy, Japan, Netherlands,
Slide 21: Revenue Growth by Category
First Quarter 2016 Revenue Growth by Category Revenue Growth¹ Categories More than 10% Media & Entertainment 5% to 10% Computers, Food, Retail Automotive, Drinks, Electronics, Financial Services, Government, Oil, Less than 5% Personal Care & Drugs, Telecommunications, Travel & Airline 1 Like-for-lik
Slide 22: Effects of Currency
First Quarter 2016 Effects of Currency Currency movements accounted for a 1.5% increase in reported revenue and 1.4% in net sales, reflecting the weakness of £ sterling against US$ and €, partially offset by strength against most faster growth market currencies. Sterling stronger or (weaker) as
Slide 23: Impact of Foreign Exchange
First Quarter 2016 Impact of Foreign Exchange 2015 FY Act 2016 Q1 Act 2016 Q2 Est 2016 Q3 Est 2016 Q4 Est 2016 FY Est 6% 5% 4% Change versus Prior Year 3% 2% 1% 0% -1% Revenue Net Sales -2% 2016 full year impact if rates remain at current levels projected to be 3-4% on both revenue and net sales.
Slide 24: Trade Estimates of Major New Business Wins
First Quarter 2016 Trade Estimates of Major New Business Wins WPP Agency Incumbent Account Office Billings($m) MediaCom DEN/OMC Sony Playstation Global 500 Y&R VML PUB Wendy’s USA 140 Maxus IND Jet.com USA 100 Ogilvy IND Nationwide UK 80 MEC N/A SABMiller Europe 69 GroupM MediaCom Westpac Australia
Slide 25: Trade Estimates of Major New Business Losses
First Quarter 2016 Trade Estimates of Major New Business Losses WPP Agency Winning Agency Account Office Billings($m) Grey PUB Procter & Gamble Global 55 MediaCom GroupM Westpac Australia 45 Ogilvy OMC Time Warner USA 34 MediaCom IND Everest UK 30 Mindshare OMC Nissan MENA 30 25
Slide 26: Internal Estimates of Net New Business Wins
First Quarter 2016 Internal Estimates of Net New Business Wins ($m) Creative Media Total Advertising 548 854 1,402 Other Businesses 377 - 377 2016 925 854 1,779 Continuing to lead net new business league tables 26
Slide 27: Major New Business Wins/Losses Since April
First Quarter 2016 Trade Estimates of Major New Business Wins/Losses Since 1 April WPP Agency Incumbent Account Office Billings($m) GroupM Haworth¹ Target USA 686 WINS MEC PUB Mitsubishi Australia 45 WPP Agency Winning Agency Account Office Billings($m) LOSS Haworth¹ GroupM Target USA 686 ¹ Associat
Slide 28: WPP Now First In 2015 Media Reviews Based on RECMA
First Quarter 2016 WPP Now First In 2015 Media Reviews Based on RECMA1,2 On New Client Wins and Retentions 8,000 6,000 4,000 Billings in $m 2,000 0 WPP PUB OMC IPG DAN Havas -2,000 New Client Incl Retained -4,000 ¹ RECMA 2016 “ Major Wins 2015 – 44 largest pitches & moves” ² Adjusted for Publicis lo
Slide 29: Cash Flow and Net Debt
First Quarter 2016 Cash Flow and Net Debt Average net debt in first three months up £767m to £3.689bn, compared to £2.922bn in 2015, at 2016 exchange rates. Net acquisitions (including earnouts) £152m (2015 - £22m) and share buy-backs £62m (2015 - £156m) in first quarter 2016. Net debt at 31 M
Slide 30: Acquisitions and Investments – Year to Date
First Quarter 2016 Acquisitions and Investments – Year to Date Faster Growth Quantitative & Markets Digital ArcTouch (USA) comScore (USA)¹,² 3yz (Brazil) Conrad Caine (Germany) Analytics Quotient (India) Essence (UK)¹ CBC I,II III (China)¹,² Imagine Entertainment (USA)² EFFECT PR (TURKEY) Comwerks (
Slide 31: Uses of Free Cash Flow
First Quarter 2016 Uses of Free Cash Flow March YTD March YTD Category Target FY 2015 2016 2015 Acquisitions¹ £300-£400m² £144m £14m £649m³ Share buy-backs: n/a £62m4 £156m £588m % of issued share capital 2%-3% 0.3% 0.8% 3.0% Dividend increase n/a n/a n/a 17% Pay-out ratio 50% n/a n/a 47.7% Headroom
Slide 32: Using Free Cash Flow to Enhance Share Owner Value
First Quarter 2016 Using Free Cash Flow to Enhance Share Owner Value £’m Distributions to Share Owners Since 2004 Over the ten years Cumulative from 1 January 2004: to 2015 we 9,081 Buy-backs returned £5.2bn to Dividends paid share owners 7,852 Headline Earnings % of Headline Earnings 6,716 5,628 62
Slide 33: Market Environment
First Quarter 2016 Market Environment Macro Micro Global GDP growth projections for 2016 have been Low growth, low inflation, no pricing power, gives focus on costs. trending down, but still higher than 2015 (maxi- Disrupters, zero based budgeters and activists increase short- quadrennial). te
Slide 34: WPP Like-for-Like Growth and World GDP Growth
First Quarter 2016 WPP Like-for-Like Growth and World GDP Growth 11.0 10.0 WPP Like-for-Like Net Sales Growth WPP Like-for-Like Revenue Growth 9.0 GDP Nominal / Goldman Sachs GDP Nominal / WPP 8.0 GDP Real / IMF¹ (FY 2016 Only) 7.0 6.0 Growth (%) 5.0 4.0 3.0 2.0 1.0 0.0 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12
Slide 35: S&P Dividends & Buy-Backs as % of Operating Earnings
First Quarter 2016 S&P 500 Dividends & Buy-Backs as % of Operating Earnings 140% 122% 120% 110% 104% 100% of operating earnings 99% 98% 100% 95% 89% 87% 87% 85% 83% 81% 77% 78% 78% 80% 74% 74% 71% 71% 71% 68% 67% 68% 63% 59% 59% 60% 60% 40% 20% 0% Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'1
Slide 36: Strong Brands Generate Superior Shareholders' Return
First Quarter 2016 Strong Brands Generate Superior Shareholders’ Return 36
Slide 37: The Bolloré Model
First Quarter 2016 The Bolloré Model • Telecommunications • Media Ownership • Content • Agency Services 37
Slide 38: Horizontality, New Markets, New Media and Data Investment Management
First Quarter 2016 Horizontality, New Markets, New Media and Data Investment Management Horizontality – ensuring our people work together through client teams and country and sub-regional managers for benefit of clients. Faster growth markets to be 40-45% of total Group revenue over next five ye
Slide 39: Our 4 strategic priorities: Horizontality
First Quarter 2016 Our 4f strategic priorities HORIZONTALITY Advance horizontality by ensuring our people work together for the benefit of clients Cross-Group client teams W PP 39
Slide 40: Horizontality Matrix
First Quarter 2016 Horizontality Matrix Specialist Communications J. Walter Ogilvy Y&R Grey GroupM Kantar H+K BtoD GroupH WPP WPP Thompson Group Strategies Group Digital Spec Comms Client Leaders Country / Regional Managers 40
Slide 41: Our strategic priorities: New Markets
First Quarter 2016 Our 4 strategic priorities NEW MARKETS Increase share of t revenues from a faster-developing : markets to 40-45% Are we on target? 7 28% 29% 2010 2015 2020 W PP 41
Slide 42: Our strategic priorities: New Media
First Quarter 2016 Our 4f strategic priorities NEW MEDIA Increase share of revenues from new media to 40-45% Are we on target? 20% 37.5% 42.5% 2010 2015 2020 W PP 42
Slide 43: Our strategic priorities: Technology, Data & Content
First Quarter 2016 Our | strategic priorities TECHNOLOGY, DATA & CONTENT* Maintain share of more measurable marketing services at 50% of revenues Are we on target? 49% 52% 2010 2015 * Also known as Data Investment Management & Application of Technology W PP
Slide 44: WPP Investments in Technology, Data and Content
First Quarter 2016 WPP Investments in Technology, Data and Content New areas key to supporting clients and managing measurement, viewability, verification, value and performance. Technology Data Content AppNexus comScore ($322m¹ vs $358m²) Vice ($329m¹ v $35m²) Globant ($232m¹ vs $80m²) Invidi Ima
Slide 45: Conclusions
First Quarter 2016 Conclusions Sector leading reported revenue growth of 10.5% with like-for-like revenue growth of 5.1%. Net sales growth of 6.7% in constant currency with like-for-like growth of 3.2% and 3.5% contribution from acquisitions. Completion of over 20 acquisitions and investments.
Slide 46: Our Long-Term Financial Model
First Quarter 2016 Our Long-Term Financial Model Organic revenue and net sales growth of 0-5% in line with market growth. Margin improvement of 0.3 margin points or more before currency movements, with long-term net sales margin target of 19.7%. Use of our substantial cash flow to enhance EPS
Slide 47: Long Term Impact of Financial Model
First Quarter 2016 Long Term Impact of Financial Model WPP Headline Diluted EPS Post 1992 Rights Issue pence 100 93.6 90 84.9 80.8 80 22 Year CAGR: 14% 73.4 70 67.7 60 55.5 56.7 50 45.8 44.4 42.0 40 36.0 30.9 32.3 30.3 29.0 30 27.9 22.7 23.8 18.8 20 15.7 13.5 9.4 10 6.5 5.0 0 UK GAAP IFRS Note: 1993
Slide 48: Outlook
First Quarter 2016 Outlook Preliminary first quarter revised forecast in line with budget. Like-for-like revenue of well over 3% and net sales growth target of over 3% maintained. Like-for-like headcount flat in quarter with hires in balance of year to support growth in revenue carefully contr
Slide 49: 30 Year History (Hard Copy Only)
2 30 Year History (Hard Copy Only) 49
Slide 50: 30 Year History: WPP Reported Revenue
30 Year History WPP Reported Revenue £’m 13,000 12,235 12,000 11,529 11,019 11,000 10,373 10,022 10,000 9,331 9,000 8,684 30 year CAGR 31% 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 1,7471,918 2,000 1,5551,691 1,2641,2041,2731,4311,427 1,005 1,000 5
Slide 51: 30 Year History: WPP Net Sales
30 Year History WPP Net Sales £’m 12,000 11,000 10,524 10,065 10,000 10,076 9,515 9,239 9,000 8,561 7,981 8,000 30 year CAGR 30% 7,009 7,000 5,850 6,000 5,611 5,133 5,000 4,074 4,000 3,7903,6903,869 3,000 2,736 1,855 2,000 1,4371,469 1,633 1,328 1,0761,0161,0701,2091,204 843 1,000 442 219 4 24 0 51
Slide 52: 30 Year History: WPP Organic Growth
30 Year History WPP Organic Growth % 20 18.6 Organic Revenue Growth Organic Net Sales Growth 15.0 15 13.9 14.1 11.8 10 8.0 8.3 8.4 8.0 8.0 30 year average organic revenue growth : 5.6% 8.2 6.3 5.7 5.5 5.4 5.3 5.3 5.3 5.2 5.0 5 4.0 4.0 3.5 3.3 3.3 2.7 2.9 0.7 N/A 0 -3.0 -5 -4.7 -5.9 -8.1 -10 Note: Es
Slide 53: 30 Year History: WPP PBIT and Margins
30 Year History WPP PBIT and Margins PBIT 2004 onwards PBIT margin £’m PBIT reported % 16.9% 1,600 under IFRS 16.5%16.7% 15.9%16.0% 16.1% 15.7%15.8% 15.5% 15.3% 16% 15.0% 14.8% 14.9%14.7% 15.3% 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
Slide 54: Other Information (Hard Copy only)
3 Other Information (Hard Copy only) 54
Slide 55: WPP Today: Many of the Best Known Brands
WPP Today WPP Has Many of the Best Known Brands in the Industry Ranked 1 or 2 in all sectors in which it competes Hill+Knowlton Strategies J. Walter Thompson Company Ogilvy Public Relations (O) Public Relations Ogilvy & Mather (O) Burson-Marsteller (Y) & Public Affairs Advertising Cohn & Wolfe (Y) Y
Slide 56: WPP Today: Six Reporting Relationships Cover Nearly 90% of Revenue
WPP Today Six Reporting Relationships Cover Nearly 90% of Revenue Revenue by Brand J. Walter Thompson Company Grey Chairman & CEO: Jim Heekin CEO: Tamara Ingram Mirum President: Michael Houston Geometry Global (shared ownership) GroupM Chairman: Irwin Gotlieb Ogilvy & Mather Mindshare President: Dom
Slide 57: WPP Today: Six Further Reporting Relationships
WPP Today Six Further Reporting Relationships Cover Most of the Remaining 10% of Revenue Revenue by Brand CEO: Jack Martin Hill+Knowlton Strategies WPP Digital BtoD Group POSSIBLE Hogarth CEO: Lois Jacobs Landor Associates Rockfish CEO: Simon Bolton Group XP Blue State Digital CEO: Mark Read CEO: Ji
Slide 58: Debt Maturity Profile
Debt Maturity Profile £m 31st Mar 2016 600 £ Total £ Total 550 Credit Drawn US bond $500m (5.625% Nov ’43) 348 348 500 US bond $300m (5.125% Sep ’42) 209 209 450 Eurobonds €600m (1.625% Mar ’30) 475 475 400 Eurobonds €750m (2.25% Sep '26) 593 593 Total Drawn (£m) US bond $750m (3.75% Sep '24) 521 52
Slide 59: Acquisitions
First Quarter 2016 Acquisitions 3yz - Brazil (Ogilvy) 3yz is a leading online social and content marketing agency in Brazil. Clients include Grendene, RBS, Reebok, Ri Happy, Shoppings Iguatemi and Tramontina. The company employs 53 people and is based in Porto Alegre with an office in São Paulo. It
Slide 60: Acquisitions
First Quarter 2016 Acquisitions Cacto - Mexico (Geometry) Cacto is a digital customer relationship management company based in Mexico. Cacto specialises in creating CRM programs for international companies in the automotive and pharmaceutical categories. Founded in 2007, Cacto is based in Mexico Cit
Slide 61: Acquisitions
First Quarter 2016 Acquisitions dBOD¹ – Netherlands (VBAT, The Partnership) dBOD is a leading design agency in the Netherlands. Founded in 1980, dBOD is a full-service agency specialising in packaging design, corporate design, digital media and retail design. dBOD employs 38 people at its headquarte
Slide 62: Acquisitions
First Quarter 2016 Acquisitions Millward Brown Denmark ApS – Denmark, Sweden (Millward Brown) Kantar has acquired a majority stake in its partner in Denmark and Sweden, Millward Brown Denmark ApS. Since joining the Millward Brown network as a licensee in 1997, the company, with offices in Copenhagen
Slide 63: Acquisitions
First Quarter 2016 Acquisitions TSE Consulting – Switzerland (Burson-Marsteller) TSE Consulting SA is an international sports consultancy headquartered in Lausanne, Switzerland and with regional partners in Europe, North and South America, Africa and the Middle East, TSE Consulting provides strategi
Slide 64: Trading Statement for First Quarter 2016
Trading Statement for First Quarter 2016 London