Wpp Plc · LSE:WPP
Wpp — H1 2007 Earnings Presentation
53 slides from Wpp's earnings presentation, August 2007
Slide 1: WPP 2007 Interim Results
WPP 2007 Interim Results London August 2007 1
Slide 2: Agenda
WPP 1 2007 Interim Results 2 Key Priorities, Objectives and Strategy 3 Conclusions 2
Slide 3: 2007 Interim Results
WPP 1 2007 Interim Results 3
Slide 4: 2007 Interim Results
2007 Interim Results Billings up almost 5% to £15.085 billion. Reported revenue up 2%. On a constant currency basis, revenue up 7.7%. Like-for-like revenue up 5.3%. Headline PBIT up 6.1% to £383.1m from £361.0m, up 12.1% in constant currency. Operating margin up 0.5 margin points to 13.1% from 12.6%
Slide 5: 2007 Interim Results
2007 Interim Results Headline PBT up 6.9% to £338.0m from £316.1m, up 13.7% in constant currency. Tax rate on headline profits was down 2.1 percentage points to 26.9% from 29.0% Diluted headline EPS up 9.6% to 18.2p from 16.6p, up 18.8% in constant currency. Interim dividend up 20% to 4.32p per shar
Slide 6: Results if reporting as a US company
2007 Interim Results If reporting as a US company¹: – Reportable revenue up 12.3% to $5.764 billion. – Headline operating profit up 16.5% to $757.6 million. – Headline profit before tax up 17.2% to $668.6 million. – EBITDA up 15.9% to $894.4 million. – Diluted headline earnings per share up 20.4% to
Slide 7: Growth vs Prior Period
2007 Interim Results Growth vs Prior Period Revenue Headline² Headline² % PBIT % EPS % Like-for-like 5.3 n/a n/a Acquisitions 2.4 n/a n/a Constant currency 7.7 12.1 18.8 Foreign exchange (5.7) (6.0) (9.2) Reportable sterling 2.0 6.1 9.6 Reportable US dollars¹ 12.3 16.5 20.4 ¹ Translated into US$, us
Slide 8: Unaudited IFRS Income Statement
2007 Interim Results Unaudited IFRS Income Statement Six months to 30 June Constant 2007 2006 Change Currency £m £m % % Revenue 2,921.0 2,864.4 2.0 7.7 Operating Profit pre-goodwill/ intangibles 363.6 339.7 7.0 12.9 Goodwill/ intangibles charges, FA gains (44.1) (31.8) (38.7) (47.0) Operating Profit
Slide 9: Unaudited Headline IFRS Income Statement
2007 Interim Results Unaudited Headline¹ IFRS Income Statement Six months to 30 June 2007 2006 Change Constant £m £m % Currency % Revenue 2,921.0 2,864.4 2.0 7.7 Headline operating profit 363.6 339.7 7.0 12.9 Income from associates 19.5 21.3 (8.5) (1.0) Headline PBIT 383.1 361.0 6.1 12.1 Net finance
Slide 10: Revenue by Discipline
2007 Interim Results Revenue by Discipline 2007 2006 % Change £m £m Reported Constant Like-for- Currency like Advertising, Media Investment Management 1,364.4 1,354.4 0.7% 6.0% 5.2% Information, Insight & Consultancy 431.8 438.9 -1.6% 3.3%¹ 1.3%² Public Relations & Public Affairs 313.0 290.3 7.8% 14
Slide 11: Revenue by Region
2007 Interim Results Revenue by Region 2007 2006 % Change £m £m Reported Constant Like-for- Currency like North America 1,111.6 1,135.5 -2.1% 8.3% 5.1% UK 430.4 415.1 3.7% 3.7%¹ 2.3%² Continental Europe 771.6 741.4 4.1% 6.0% 3.1% Asia Pacific, Latin America, Africa & Middle East 607.4 572.4 6.1% 11.
Slide 12: Headline PBIT and Margin by Discipline
2007 Interim Results Headline PBIT¹ and Margin¹ by Discipline Headline PBIT Headline Margin 2007 2006 2007 2006 £m £m % % Advertising, Media Investment 201.1 190.3 14.7 14.1 Management Information, Insight & Consultancy 42.0 41.5 9.7 9.5 Public Relations & Public Affairs 46.0 40.3 14.7 13.9 Branding
Slide 13: Headline PBIT and Margin by Region
2007 Interim Results Headline PBIT¹ and Margin¹ by Region Headline PBIT Headline Margin 2007 2006 2007 2006 £m £m % % North America 175.8 176.1 15.8 15.5 UK 47.5 36.7 11.0 8.8 Continental Europe 90.2 85.8 11.7 11.6 Asia Pacific, Latin America, 69.6 62.4 11.5 10.9 Africa & Middle East Total 383.1 361
Slide 14: Revenue Growth by Country
2007 Interim Results Revenue Growth by Country Revenue Growth¹ Countries 20%+ Greater China, India 15-20% Singapore, Thailand 10-15% Brazil, Spain 5-10% Canada, Germany, Italy, Mexico, Poland, USA <5% Australia, Belgium, Denmark, France, Japan, Netherlands, Sweden, UK 1 Constant currency 14
Slide 15: Revenue Growth by Category
2007 Interim Results Revenue Growth by Category Revenue Growth1 Categories 20%+ Entertainment, Retail 15-20% n/a 10-15% Drinks, Food 5-10% Automotive, Financial Services, Telecommunications, Personal Care & Drugs <5% Computer, Oil 15 1 Constant currency
Slide 16: Effects of Strength of Sterling
2007 Interim Results Effects of Strength of Sterling Sterling was stronger on average in the first half of 2007 than in 2006 by 10.0% against the dollar, by 1.8% against the euro, and by 14.3% against the Japanese yen. Impact of currency reduced constant currency revenue growth of 7.7% by 5.7% to 2.
Slide 17: Trade Estimates of Major New Business Wins
2007 Interim Results Trade Estimates of Major New Business Wins Agency Account Office Billings ($m) mec Paramount Worldwide 250 mec Macy’s USA 200 mec Energizer USA 130 United IOC USA & Europe 120 Berlin Cameron Heineken USA 80 Grey Toshiba EMEA 50 MediaCom Staples Canada/ UK 37 HTW Wunderman Orange
Slide 18: Trade Estimates of Major New Business Losses
2007 Interim Results Trade Estimates of Major New Business Losses Agency Account Office Billings ($m) MindShare Sears USA 740¹ MindShare Twentieth Century Fox USA 500¹ mec United Airlines USA 100 Y&R Toys R Us USA 90 Ogilvy Quiznos USA 80 MediaCom DWP UK 75 Y&R Weight Watchers USA 70 JWT Kraft – Rit
Slide 19: Internal Estimates of Net New Business Wins
2007 Interim Results Internal Estimates of Net New Business Wins Billings ($m) Creative Media Total Advertising 456 2,033 2,489 Other Businesses 562 - 562 Total 2007 1,018 2,033 3,051 19
Slide 20: Trade Estimates of Major New Business Wins & Losses Since 1 July
2007 Interim Results Trade Estimates of Major New Business Wins & Losses Since 1 July Agency Account Office Billings ($m) MediaCom GSK Europe 100 MediaCom Michelin USA 100 mec BT UK 100 WINS mec SABMiller Worldwide 100 JWT Johnson & Johnson N America 83 Ogilvy Kraft – Oscar Mayer¹ USA 60 MindShare A
Slide 21: Cash Flow
2007 Interim Results Cash Flow 2007 2006 £m £m Operating profit 320 308 Non-cash compensation 33 38 Depreciation 70 67 Goodwill amortisation and impairment 47 36 Net interest paid & similar charges¹ (67) (37) Tax paid (76) (69) Net cash generation 327 343 ¹ Includes £22m of 1% rolled-up coupon on ma
Slide 22: Uses of Cash Flow
2007 Interim Results Uses of Cash Flow 2007 2006 £m £m Net cash generation 327 343 Capital expenditure (72) (74) Acquisition payments: − Net initial payments¹ (141) (32) − Earnout payments (65) (81) − Loan note redemptions (2) (12) (208) (125) Share repurchases (209) (162) Other 24 50 Net cash (outf
Slide 23: Net Finance Costs/ (Income)
2007 Interim Results Net Finance Costs/ (Income) £’m 2007 2006 B/(W) Net debt interest 40.9 34.3 (6.6) Investment income (4.0) (0.5) 3.5 IAS 19 (Pensions) 3.1 3.5 0.4 Earnout interest 0.5 1.2 0.7 IAS 32 (Convertibles) 4.6 6.4 1.8 4.2 10.6 6.4 Headline finance costs 45.1 44.9 (0.2) IAS 39 (Financial
Slide 24: Net Debt - June 2007
2007 Interim Results Net Debt - 30 June 2007 2007 2006 % £m £m Variance Net debt at 30 June (1,264) (1,219) (4%) YTD average net debt on constant (1,196) (1,111) (8%) currency basis YTD average net debt on (1,196) (1,170) (2%) reportable currency basis Headline finance costs (45) (45) - Interest cov
Slide 25: Debt Maturity Profile
2007 Interim Results Debt Maturity Profile $m Total 2008 2009 2012 2013 2014 2017 2033 Grey 5% convertible 150 150 £ bonds £400m (6% 2017) 780 780 US bond $650m (5.875% 2014) 650 650 Eurobonds €600m (4.375% 2013) 780 780 Yankee bonds $100m (6.875% 2008) 100 100 Eurobonds €650m (6% 2008) 845 845 Term
Slide 26: Net Debt
Net Debt Half Yearly Position £m 0 (100) Dec-05 Jun-06 Dec-06 Jun-07 (200) (300) (400) (804) (814) (500) (600) (1,219) (1,264) (700) (800) (900) Inflow 405 (1,000) Outflow (415) (1,100) (1,200) Outflow (450) (1,300) 26
Slide 27: Ordinary Shares - Basic
2007 Interim Results Ordinary Shares - Basic June June 2007 2006 No. of Shares (million) Actual Actual 1 January 1,241 1,252 Share buy-back (28)¹ (18)² Option exercise 5 15 30 June 1,218 1,249 -2.5% Weighted Average 1,231 1,252 ESOP (42) (47) Average Basic 1,189 1,205 -1.3% ¹ Buy-back for cancellati
Slide 28: Ordinary Shares – Diluted
2007 Interim Results Ordinary Shares – Diluted June June 2007 2006 No. of Shares (millions) Actual Actual Average Basic 1,189 1,205 -1.3% Share Option Dilution 21 18 Other Potentially Issuable Shares 24 11 Sub-Total 1,234 1,234 Convertibles: WPP £450m n/a anti-dilutive Grey $150m ¹ 9 9 Fully Diluted
Slide 29: Key Priorities, Objectives and Strategy
WPP 2 Key Priorities, Objectives and Strategy 29
Slide 30: Objective and Strategy: Long-term factors
Key Priorities, Objective and Strategy Long-term factors Globalisation /Americanisation /BRICs Overcapacity, shortage of human capital The Web (internet penetration, e-commerce, mobile) Internal communications Retail concentration Corporate Social Responsibility and the environment 30
Slide 31: Objectives and Strategy
Key Priorities, Objectives and Strategy Faster growing markets to be one third of total group Marketing services to be two thirds of total group Quantitative disciplines to be one half of total group 31
Slide 32: 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 Today¹ Today Including Associates¹ Tomorrow Faster growing markets including Eastern Europe 23% 20% 26% 39% 34% 34% 33% 3% 3% 38% 37% 33% N. America Europe Asia Pacific, Latin America, Central & Africa & Mi
Slide 33: WPP's Performance Strong in BRIC Markets
Key Priorities, Objectives and Strategy WPP’s Performance Strong in BRIC Markets Revenue $’m 500 450 400 350 Associates @ 100% 300 250 200 150 100 50 0 H1 6 00 H1 6 00 H1 6 00 00 H1 6 07 07 07 07 0 0 0 0 20 20 20 20 20 20 20 20 20 20 20 20 China (including Brazil India Russia Hong Kong and 33 Taiwan
Slide 34: WPP's Performance in Other Faster Growing Markets
Key Priorities, Objectives and Strategy WPP’s Performance in Other Faster Growing Markets Revenue $’m 350 300 250 Associates @ 100% 200 150 100 50 0 H1 6 00 H1 6 00 H1 6 00 00 H1 6 07 07 07 07 0 0 0 0 20 20 20 20 20 20 20 20 20 20 20 20 Middle East Central & Indonesia Vietnam 34 Eastern Europe
Slide 35: 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 2.5 36% 1 0.5 7.8 India 1.0 56% 1 0.2 5.8 Thailand 0.3 39% 1 0.1 1.2 LatAm Brazil5 1.1 25% 1 0.4 3.8 Mexico 0.8 24% 2 0.1 1.5 Argent
Slide 36: Revenue by Geography
Key Priorities, Objective and Strategy Revenue by Geography $10.9bn $11.4bn 1.0 Asia Pacific, LatAm, Africa & Middle East 2.3 Europe N America 4.0 $6.2bn 4.3 $5.5bn 1.0 1.0 1.5 6.4 2.2 4.3 $1.8bn 3.7 0.2 2.3 0.9 0.7 WPP Omnicom IPG Publicis Havas 1 Source: WPP - sterling revenues converted @ $1.84=
Slide 37: Media Billings by Geography
Key Priorities, Objectives and Strategy Media Billings by Geography Worldwide ranking by Group as % of the Six Groups 40 35 30 WPP 25 Publicis 20 Omnicom IPG 15 Aegis 10 Havas 5 0 Americas Europe Asia Pacific Worldwide Source: RECMA Billings report – August 2007, Definitive 2006 network key data, ta
Slide 38: Marketing Services To Be Two Thirds of Total Group
Key Priorities, Objectives and Strategy Marketing services To be Two Thirds of Total Group Today¹ Today including associates¹ Tomorrow 33% 48% 48% 52% 67% 52% Advertising & Media Investment Management Marketing Services ¹ Based on full year 2006 revenue 38
Slide 39: Revenue by Discipline
Key Priorities, Objective and Strategy Revenue by Discipline $11.4bn $10.9bn $6.2bn $5.5bn $1.8bn WPP Omnicom IPG Publicis Havas Media Advertising Marketing Services Source: ¹ 2006 Company Presentations. ² Media based on Deutsche Bank estimates. 39 ³ IPG based on analysts estimates
Slide 40: Quantitative Disciplines To Be One Half of Total Group
Key Priorities, Objectives and Strategy Quantitative Disciplines To Be One Half of total Group Today ¹ Today including associates ¹ Tomorrow 33% 50% 34% 67% 66% 50% Information, Insight & Consultancy and Direct, Internet & Interactive Advertising, Media Investment Management & Other Marketing Servic
Slide 41: WPP Position in Direct and Digital
Key Priorities, Objectives and Strategy WPP Position in Direct and Digital First Half 2007 $ millions Digital/ Wide¹ Interactive Definition +10% vs 2006 Direct/Digital Networks 284 997 (OgilvyOne, Wunderman, rmg:connect and G2) % of Group revenues 5% 18% Digital/Interactive resources: - Information,
Slide 42: 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 reven
Slide 43: Historic headline PBIT and margins
Key Priorities, Objectives and Strategy Historic headline PBIT¹ and margins PBIT 1 PBIT1 margin 1000£’m % Long-term IFRS target 19% 20% Long- 900 Objectives: 800 16% 859 2010 16.5% 14.0% 14.1% 14.0% 14.5% 2009 16.0% 700 13.0% 12.3% 13.0% 755 2008 15.5% 13.1% 600 12.6% 12% 2007 15.0% 500 561 534 560
Slide 44: Increasing flexibility in the cost base
Key Priorities, Objectives and Strategy Increasing flexibility in the cost base Change in variable costs % 14 2002 H1 2006 H1 12 11.7 11.6 2007 H1 10 8 7.6 7.1 6.9 6 4.3 4 2 0 Variable Staff costs as a % of Staff costs Variable Staff costs as a % of Revenue 44
Slide 45: Using Free Cash Flow to Enhance Share Owner Value
Key Priorities, Objectives and Strategy Using Free Cash Flow to Enhance Share Owner Value Dividends and Share Repurchases 2007 interim dividend raised by 20% to 4.32p per share Distributions to share owners: Share Repurchases Dividends Paid Amount % of Share Base 2000 £21.1m £94.1m 1.3% 2001 £25.6m
Slide 46: Distributions to Share Owners
Key Priorities, Objectives and Strategy Using Free Cashflow to Enhance Share Owner Value Distributions to Share owners¹ £ millions 400 4.8% Buy-Backs 350 Dividends Declared 3.3% 300 Dividends paid 3.6% 250 258 2.8% 200 209 2.7% 152 150 162 1.6% 1.8% 89 100 1.6% 103 76 23 119 50 82 100 90 67 76 26 44
Slide 47: Acquisitions
Key Priorities, Objectives and Strategy Using Free Cashflow to Enhance Share Owner Value Acquisitions Continued focus on small and mid-sized strategic acquisitions – 27 completed during 2007 to date Major focus continues to be on information, insight and consultancy and the faster growing sectors wi
Slide 48: First Half 2007 Acquisitions and Investments
First Half 2007 Acquisitions¹ and Investments Quantitative and Faster Growing Markets 24/7 Real Media (USA) Digital All Global (UK) DataCore (USA) Foresight (USA) etcO (Brazil) Aqua Online (S. Africa) Global Strategies (USA) Interflow (Pakistan) Lee & Jang (S. Korea) iconmobile (Germany) DBA Live (C
Slide 49: First Half 2007 Acquisitions and Investments
First Half 2007 Acquisitions¹ and Investments Advertising and Media Investment Management Badjar (Australia) Clemmow Hornby Inge (UK) Laundry (Finland) MediaX (Austria) TAPSA (Spain) Healthcare WestawayGillis (UK) ¹ Excludes equity step ups Underlined are acquisitions since 1 July 2007 49
Slide 50: 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 recognizing creative success tangibly and intangibly By acquiring highly regarded creative businesses By placing greater emphasis on awards F
Slide 51: Conclusions
WPP 4 Conclusions 51
Slide 52: Conclusions
Conclusions The Group continues to be well placed by region and discipline to benefit from key industry trends There is scope for further margin improvement, cost flexibility, and use of free cashflow to enhance share owner value In the long term the Group will be concentrating on positioning its to
Slide 53: WPP
WPP 2007 Interim Results London August 2007 53