Wpp Plc · LSE:WPP
Wpp — H1 2020 Earnings Presentation
49 slides from Wpp's earnings presentation, Aug 27, 2020
Slide 1: 2020 Interim Results
2020 INTERIM RESULTS 27 August 2020
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This presentation contains statements that are, or may be deemed to be, “forward-looking statements”. Forward- looking statements give the Group’s current expectations or forecasts of future events. An investor can identify these statements b
Slide 3: Agenda
AGENDA 1. FIRST HALF HIGHLIGHTS 2. FINANCIAL PERFORMANCE 3. BUSINESS UPDATE 4. Q&A
Slide 4: First Half: Resilient Performance in Challenging Environment
FIRST HALF: RESILIENT PERFORMANCE IN CHALLENGING ENVIRONMENT • Impact of COVID-19 significant. LFL revenue less pass-through costs -9.5% in H1: - Jan/Feb -0.6%, March -7.9%, Q2 -15.1%, July -9.2% - CPG/Tech/Pharma 56% of our business1, -0.7% in H1; Auto/Luxury/Travel 22%, -11.7% • Agile and collabor
Slide 5: Financial Performance
FINANCIAL PERFORMANCE
Slide 6: Unaudited Headline IFRS Income Statement
UNAUDITED HEADLINE¹ IFRS INCOME STATEMENT HALF YEAR TO 30 JUNE 2020 £M 2019² £M Δ REPORTED Δ LFL³ Continuing operations Revenue 5,583 6,368 -12.3% -11.5% • Disposals account for 0.8% Revenue less pass-through costs 4,668 5,199 -10.2% -9.5% reduction in revenue less pass- through costs with currency
Slide 7: Reconciliation of Headline Operating Profit to Reported Operating Profit
RECONCILIATION OF HEADLINE OPERATING PROFIT TO REPORTED OPERATING PROFIT • Investment write-downs 2020 2019 Δ primarily relates to impairment HALF YEAR TO 30 JUNE £M £M £M of certain investments in Headline Operating Profit 382 617 (235) associates, including Imagina (£210m) Goodwill impairment (2,5
Slide 8: Goodwill Impairment
GOODWILL IMPAIRMENT • Impairments of £2,741m (including £2,521m of goodwill impairments for subsidiaries and £220m for associates shown as investment and other write-downs): Half Year £M Total Impairments Wunderman Thompson 1,071 VMLY&R 472 Geometry Global 233 Imagina (associate) 210 Landor & FITCH
Slide 9: Global Integrated Agencies: Media More Impacted Than Creative
GLOBAL INTEGRATED AGENCIES: MEDIA MORE IMPACTED THAN CREATIVE BUT VMLY&R STANDS OUT Δ £M H1 2020 £M REPORTED Δ LFL H1 PERFORMANCE Revenue less pass-through 3,462 -10.3% -9.5% costs • VMLY&R the best performer, close to Headline operating profit 256 -44.8% flat LFL in H1 reflecting improving business
Slide 10: Public Relations: Strongest Sector, Operating Profit Up
PUBLIC RELATIONS: STRONGEST SECTOR, OPERATING PROFIT UP YEAR-ON-YEAR Δ £M H1 2020 £M REPORTED Δ LFL H1 PERFORMANCE Revenue less pass-through 426 -3.6% -4.5% costs • Good demand from clients for Headline operating profit 72 5.8% strategic stakeholder Headline operating margin 16.9% 1.5pt communicatio
Slide 11: Specialist Agencies: Mixed Performance
SPECIALIST AGENCIES: MIXED PERFORMANCE WITH AKQA AND GEOMETRY RELATIVELY STRONG Δ £M H1 2020 £M REPORTED Δ LFL H1 PERFORMANCE Revenue less pass-through 780 -13.3% -11.8% • AKQA and Geometry relative costs outperformers, with focus on Headline operating profit 54 -36.6% experience and commerce Headli
Slide 12: Top 5 Markets
TOP 5 MARKETS¹ USA UK Germany Greater China³ India Headcount 19,000 10,000 7,000 8,000 8,000 REVENUE LESS PASS-THROUGH COSTS GROWTH² 2020 July -6.1% -10.5% -7.2% -18.6% -15.5% 2020 H1 -5.8% -14.2% -8.1% -11.7% -10.6% 2020 Q2 -9.6% -23.3% -11.6% -3.1% -25.1% 2020 Q1 -1.9% -4.2% -4.3% -21.3% 6.1% 2019
Slide 13: Other Major Markets
OTHER MAJOR MARKETS France Italy Spain Brazil Headcount 2,000 2,000 2,000 4,000 REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2020 July -13.8% 4.1% -14.3% -12.8% 2020 H1 -16.7% -23.5% -7.9% -10.5% 2020 Q2 -27.9% -29.9% -17.2% -18.7% 2020 Q1 -4.0% -16.2% 3.8% -1.3% 2019 FY -7.1% -23.7% 0.0% -16.7% 1. Like-
Slide 14: Change in Headline Operating Margin
CHANGE IN HEADLINE¹ OPERATING MARGIN Continuing operations, reportable £ actuals 2020 2019 Δ • Reported net sales down by £531m or 10.2% HALF YEAR TO 30 JUNE £M £M £M % • Staff costs down by 4.9% with cost Net Sales 4,668 5,199 (531) -10.2% actions increasing in second quarter Staff Costs (3,330) (3
Slide 15: Headline Cost Savings by Month
HEADLINE¹ COST SAVINGS BY MONTH Continuing operations, reportable £ actuals Δ • First quarter saw minimal cost HALF YEAR TO 30 JUNE Jan Feb Mar Apr May Jun H1 savings with COVID-19 hitting net Staff Costs 0.2% - -1.7% 6.4% 11.5% 12.8% 4.9% sales from March onwards Establishment 12.1% -0.5% 3.4% 9.5%
Slide 16: Free Cash Flow and Free Cash Flow Conversion
FREE CASH FLOW AND FREE CASH FLOW CONVERSION HALF YEAR TO 30 JUNE 2020 £M 2019 £M Operating profit (2,443) 673 - Continuing Operations (2,453) 596 - Discontinued Operations 10 77 Depreciation & amortisation charges 306 360 - Depreciation & amortisation ex IFRS 16 151 192 - Depreciation of right-of-u
Slide 17: Uses of Cash Flow
USES OF CASH FLOW HALF YEAR TO 30 JUNE 2020 £M 2019 £M Free cash outflow (825) (513) Net disposals/(acquisitions) ex earnout payments 161 278 - Disposal proceeds¹ 207 304 - Net initial payments² (46) (26) Net cash outflow before distributions (664) (235) Distributions to shareholders (286) - - Divid
Slide 18: Significant Improvement in Net Debt Since June 2019
SIGNIFICANT IMPROVEMENT IN NET DEBT¹ SINCE 30 JUNE 2019 (£M) -2,726 -4,271 Notes: 1. Itemised movements in net debt represent management figures, which may vary from the presentation of the cash flow under IFRS 2. Acquisitions/disposals include earnout payments 2020 INTERIM RESULTS 18 3. Dividends t
Slide 19: Leverage Metrics
LEVERAGE METRICS Continuing operations HALF YEAR TO 30 JUNE 2020 £M 2019 £M Δ £M Average net debt¹ on constant currency basis (2,496) (4,460) 1,964 Average net debt¹ on reportable basis (2,496) (4,384) 1,888 Net debt¹ at 30 June on constant currency basis (2,726) (4,382) 1,656 Net debt¹ at 30 June o
Slide 20: Dividend and Buyback Update
DIVIDEND AND BUYBACK UPDATE • 2019 final dividend cancelled; maintaining lower leverage to offset COVID-19 impact on profitability and cash flow • Interim dividend of 10p declared • Share buyback remains under review; intention to restart when environment stabilises • Capital markets event later thi
Slide 21: 2020 Guidance
2020 GUIDANCE • 2020 financial performance expected to be within the range of current market expectations: LFL revenue less pass-through costs -10.0% to -11.5% Headline operating margin 10.4% to 12.5% • Small working capital outflow for the full year • Capex c. £300m • Average net debt/EBITDA in
Slide 22: Business Update
BUSINESS UPDATE
Slide 23: During Lockdown, We Continue to Make Progress on Our Strategy
DURING LOCKDOWN, WE CONTINUE TO MAKE PROGRESS ON OUR STRATEGY • Vision and offer - Strong performance in digital media and commerce - New business and retention • Creativity - Hired new creative talent - Effies win for ninth successive year - Cannes Lions Holding Company of the Decade • Data and tec
Slide 24: Critical Partner to Our Clients
CRITICAL PARTNER TO OUR CLIENTS Top 200 clients +1.4% in Q1, -8.4% in Q2 SIGNIFICANTLY IMPACTED BALANCED RESPONSE MORE RESILIENT 22% 22% 56% Automotive 13% Telco, Media, Ent 7% CPG 26% Luxury, Premium 6% Retail 6% Tech 18% Travel, Leisure 3% Financial services 4% Healthcare, Pharma 12% Other 5% -4.6
Slide 25: Significant Wins, Limited Losses
SIGNIFICANT WINS, LIMITED LOSSES Wins BILLINGS Losses BILLINGS 2 ACCOUNT M/C REGION WPP AGENCY $M ACCOUNT M/C REGION WPP AGENCY $M C Global 800 M Global 300 M China 500 Prod Global 802 M Global 350 C Global 400 C NA 258 M Global 225 C&M Global 150 M Global 84 C APAC 51 M UK 32 Note: trade-reported n
Slide 26: Leading in New Business Q2 and YTD
LEADING IN NEW BUSINESS Q2 AND YTD 26
Slide 27: COVID-19 Is Accelerating Existing Trends
COVID-19 IS ACCELERATING EXISTING TRENDS ECOMMERCE: MEDIA MIX: PURPOSE AND ESG: 4-6 YEAR ACCELERATION DIGITAL NOW DOMINATES RISING UP THE AGENDA • UK ecommerce now 30% • Digital rising to 54% of • Complex up from 19% (July) mix in 2020 (2019: 48%)1 communications issues • China ecommerce now • Shift
Slide 28: Accelerating Growth in Experience, Commerce and Technology
ACCELERATING GROWTH IN EXPERIENCE, COMMERCE AND TECHNOLOGY WPP’S OFFER COMMUNICATIONS EXPERIENCE COMMERCE TECHNOLOGY 2020 INTERIM RESULTS 28
Slide 29: Strategic, Technical and Creative Support on Ecommerce
STRATEGIC, TECHNICAL AND CREATIVE SUPPORT ON ECOMMERCE Actively engaged with 8 of our top 10 clients on ecommerce PLATFORM MULTI-CHANNEL D2C MARKETPLACES • One of the world’s • All-new Bronco • Launch and • Performance largest roll-outs of reveal optimisation of Lever, marketing, paid media Adobe’s
Slide 30: Ecommerce Increasingly Driving Media Spend
ECOMMERCE INCREASINGLY DRIVING MEDIA SPEND DIGITAL % OF CPG ECOMM MEDIA ECOMM INCREASINGLY A GROUPM BILLINGS BUDGETS TYPICALLY MULTI-PLATFORM STRATEGY +39% 2x Up 5.5 pt in H1 to Post $7.4 billion COVID ECOMM BILLINGS CPG CLIENT TYPICAL YOY GROWTH ECOMM SALES INCREASE 19% Now 18% of digital, $1.4 bil
Slide 31: Purpose Rising Up the Corporate Agenda
PURPOSE RISING UP THE CORPORATE AGENDA • Pfizer’s goal is to lift reputation as a patient-focused scientific leader within the Biopharma industry • Campaign results: - 55% of viewers have more favourable view of Pfizer - 40% have more favourable view of Pharma overall - Best earned media outcome for
Slide 32: Purpose Rising Up the Corporate Agenda
PURPOSE RISING UP THE CORPORATE AGENDA • P&G The Pause aimed to help educate people about the unspoken hesitation and anxiety that members of the LGBTQ+ community face in their everyday interactions • 5.2 million views on YouTube and 34 million views on Twitter • 82.6 million social impressions and
Slide 33: Embracing Increased Speed and Agility
EMBRACING INCREASED SPEED AND AGILITY • More client engagement, less travel, much faster delivery times • Huge uptake of collaborative tools: - 6x increased usage of Teams • WPP employee survey: - 91% believe they have the resources and technology available to do their job - 92% satisfied with inter
Slide 34: Summary
SUMMARY • Resilient performance, Q2 the toughest quarter; cautious on speed of recovery • COVID-19 accelerating industry changes. We have the right strategy • Clients value our advice and services more than ever • Looking to embed lessons of lockdown: - Faster, more agile ways of working - Less trav
Slide 35: Q&A
Q&A
Slide 36: Other Financial Information
OTHER FINANCIAL INFORMATION
Slide 37: Unaudited IFRS Income Statement
UNAUDITED IFRS INCOME STATEMENT Δ Δ CONSTANT HALF YEAR TO 30 JUNE 2020 £M 2019¹ £M REPORTED CURRENCY Continuing operations Revenue 5,583 6,368 -12.3% -12.4% Gross profit 778 1,039 -25.1% -25.6% • Share of associate Operating profit pre exceptional & goodwill/intangibles² 382 617 -38.1% -38.8% except
Slide 38: Revenue Less Pass-Through Costs Growth vs Prior Year
REVENUE LESS PASS-THROUGH COSTS GROWTH VS PRIOR YEAR Q1 Q2 H1 Continuing Operations: Reported -4.3% Reported -15.6% Reported -10.2% FX -0.3% FX 0.4% FX 0.1% Acquisitions/ -0.7% Acquisitions/ -0.9% Acquisitions/ -0.8% disposals disposals disposals LFL -3.3% LFL -15.1% LFL -9.5% 2020 INTERIM RESULTS 3
Slide 39: Revenue Less Pass-Through Costs by Sector
REVENUE LESS PASS-THROUGH COSTS BY SECTOR HALF YEAR TO 30 JUNE 2020 £M 2019 £M Δ REPORTED Δ LFL Global Integrated Agencies 3,462 3,858 -10.3% -9.5% Public Relations 426 442 -3.6% -4.5% Specialist Agencies 780 899 -13.3% -11.8% Total Continuing Operations 4,668 5,199 -10.2% -9.5% 2020 INTERIM RESULTS
Slide 40: Revenue Less Pass-Through Costs by Region
REVENUE LESS PASS-THROUGH COSTS BY REGION HALF YEAR TO 30 JUNE 2020 £M 2019 £M Δ REPORTED Δ LFL North America 1,856 1,951 -4.9% -6.1% UK 586 692 -15.4% -14.2% Western Continental Europe 920 1,042 -11.7% -11.7% Asia Pacific, Latin America, Africa & Middle 1,306 1,514 -13.7% -10.1% East and Central &
Slide 41: Revenue Less Pass-Through Costs Growth by Region
REVENUE LESS PASS-THROUGH COSTS GROWTH¹ BY REGION LIKE-FOR-LIKE % C. & E. Europe % Q1 Q2 H1 July 4.7 -7.0 -1.5 -0.7 UK % North America % Q1 Q2 H1 July -4.2 -23.3 -14.2 -10.5 Q1 Q2 H1 July -1.9 -10.2 -6.1 -6.2 W. Cont. Europe % Q1 Q2 H1 July -3.7 -18.8 -11.7 -7.7 Asia Pacific % Q1 Q2 H1 July -8.6 -14
Slide 42: BRIC Markets
BRIC MARKETS Mainland China Greater China² Brazil India Russia Headcount 6,000 8,000 4,000 8,000 1,000 REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2020 July -18.8% -18.6% -12.8% -15.5% -15.7% 2020 H1 -9.2% -11.7% -10.5% -10.6% 5.4% 2020 Q2 3.5% -3.1% -18.7% -25.1% -0.1% 2020 Q1 -23.4% -21.3 % -1.3% 6.1%
Slide 43: Headline Operating Profit and Margin by Sector
HEADLINE¹ OPERATING PROFIT AND MARGIN By Sector OPERATING PROFIT £M OPERATING MARGIN² HALF YEAR TO 30 JUNE 2020 2019 2020 2019 Global Integrated Agencies 256 463 7.4% 12.0% Public Relations 72 68 16.9% 15.4% Specialist Agencies 54 86 7.0% 9.6% Total Continuing Operations 382 617 8.2% 11.9% 1 Figures
Slide 44: Headline Operating Profit and Margin by Region
HEADLINE¹ OPERATING PROFIT AND MARGIN By Region OPERATING PROFIT £M OPERATING MARGIN² HALF YEAR TO 30 JUNE 2020 2019 2020 2019 North America 215 278 11.6% 14.3% UK 35 87 6.1% 12.5% Western Continental Europe 44 96 4.8% 9.3% Asia Pacific, Latin America, Africa & Middle 88 156 6.7% 10.3% East and Cent
Slide 45: Client Sector Mix
CLIENT SECTOR MIX Travel & leisure Luxury & premium 3% 6% Financial services 4% CPG Other 26% 5% Retail 6% Telecom, media & entertainment 7% Automotive 13% Healthcare & pharma 12% Tech 18% 1. % of total top 200 designated clients attributable to each industry for continuing operations. These compris
Slide 46: Debt Maturity Profile at June 30, 2020
DEBT MATURITY PROFILE £M AT JUNE 30, 2020 £ TOTAL £ TOTAL CREDIT DRAWN 700 New €750m £ bonds £400m (2.875% Sep ’46) 400 400 Bond Issue US bond $220m (5.625% Nov ’43) 178 178 600 US bond $93m (5.125% Sep ’42) 75 75 500 £ bonds £250m (3.75% May ’32) NEW 250 250 New £250m Eurobonds €600m (1.6
Slide 47: Uses of Free Cash Flow
USES OF FREE CASH FLOW FY JUNE YTD JUNE YTD FY TARGET 2020 2019 2019 (Disposals)/acquisitions (excluding earnouts): Acquisitions¹ c. £200M £46M £26M £94M Less disposals² c. £(200M) £(207M) £(304M) £(2,315M) Net (disposals)/acquisitions NEUTRAL £(161M) £(278M) £(2,221M) Share buybacks: - £286M - £44M
Slide 48: Effects of Currency
EFFECTS OF CURRENCY STERLING FIRST HALF 2020 2019 (WEAKER)/STRONGER US$ 1.26 1.29 -2% € 1.14 1.15 -1% • Currency movements accounted for 0.1% Chinese Renminbi 8.86 8.78 1% increase¹ in revenue less pass-through costs Brazilian Real 6.17 4.97 24% • £ sterling not moved Australian $ 1.92 1.83 5% signi
Slide 49: Impact of FX on Revenue Less Pass-Through Costs
IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS¹ 19/FY Act 20/Q1 Act 20/Q2 Act 20/Q3 Est 20/Q4 Est 20/FY Est 2% • 2020 H1 currency 1.2% tailwind 0.1% 0.4% 0% • 2020 full year -0.3% -0.7% headwind -1.1% at -1.1% latest exchange rates² • 2019 full year currency -3.7% tailwind 1.2% -2% -4% 1. Continuin