Wpp Plc · LSE:WPP
Wpp — H1 2024 Earnings Presentation
52 slides from Wpp's earnings presentation, Aug 7, 2024
Slide 1: Interim Results
INTERIM RESULTS 7 August 2024
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This document contains statements that are, or may be deemed to be, “forward-looking statements”. Forward-looking statements give the Company’s current expectations or forecasts of future events. These forward-looking statements may include,
Slide 3: Agenda
• H1 2024 HIGHLIGHTS • FINANCIAL PERFORMANCE • STRATEGIC PROGRESS • Q&A 3
Slide 4: Highlights
HIGHLIGHTS ’ * ~ ‘WPP 4 4
Slide 5: Highlights: Performance
HIGHLIGHTS: PERFORMANCE • H1 like-for-like net sales1 -1.0% reflects: – growth in GroupM, Ogilvy and Hogarth – known impact of 2023 client losses – macro pressure on project-related businesses and challenges in China • Sequential improvement in Q2 LFL net sales -0.5% (Q1: -1.6%) led by: – VML, Hogar
Slide 6: Highlights: Strategic Progress
HIGHLIGHTS: STRATEGIC PROGRESS Investment in AI Key strategic Success at and WPP Open initiatives Cannes Lions 6
Slide 7: Highlights: Sale of FGS Global
HIGHLIGHTS: SALE OF FGS GLOBAL STRATEGIC RATIONALE TRANSACTION HIGHLIGHTS • Accelerates value creation from FGS Global1 • c.50% stake acquired by KKR values FGS Global at c.$1.7bn, reflecting significant value accretion to WPP shareholders since 2020 • Reduces debt and strengthens WPP’s balance shee
Slide 8: Financial Performance
FINANCIAL PERFORMANCE 8
Slide 9: Revenue Less Pass-Through Costs Growth
REVENUE LESS PASS-THROUGH COSTS GROWTH H1 2024 -3.6% -2.9pt +0.3pt -1.0% Reported growth FX contribution to M&A contribution to Like-for-like growth (+5.5% in H1 ‘23) reported growth reported growth (+2.0% in H1 ‘23) 9
Slide 10: Unaudited Headline IFRS Income Statement
UNAUDITED HEADLINE IFRS INCOME STATEMENT ¹ HALF YEAR TO 30 JUNE 2024 £M 2023 £M Δ REPORTED Δ LFL 2 • LFL decline in revenue less pass- through costs of 1.0% Revenue 7,227 7,221 0.1% 2.6% • Foreign exchange headwind of Revenue less pass-through costs 5,599 5,811 (3.6)% (1.0)% 2.9pt on revenue less pa
Slide 11: Reconciliation of Headline Operating Profit to Reported Operating Profit
RECONCILIATION OF HEADLINE OPERATING PROFIT TO REPORTED OPERATING PROFIT 2024 2023 Δ • Amortisation and impairment of HALF YEAR TO 30 JUNE £M £M £M acquired intangibles includes an Headline operating profit 646 666 (20) accelerated amortisation charge for certain brands that no longer Goodwill impai
Slide 12: Global Integrated Agencies
GLOBAL INTEGRATED AGENCIES £M H1 2024 Δ REPORTED Δ VS 23 LFL GIA - Media (GroupM) LFL H1 +1.9%, Q2 +1.4% Revenue less pass-through costs 4,595 (3.5)% (0.7)% • GroupM: continued adverse impact of recent client assignment losses. US back to Headline operating profit 551 0.2% growth in Q2, China remain
Slide 13: Public Relations
PUBLIC RELATIONS £M H1 2024 Δ REPORTED Δ VS 23 LFL • Sequential improvement in Q2 driven by double-digit growth at Revenue less pass-through costs 568 (2.7)% (0.9)% FGS Global, our financial advisory and communications firm Headline operating profit 80 (9.1)% • Burson: continued negative Headline op
Slide 14: Specialist Agencies
SPECIALIST AGENCIES £M H1 2024 Δ REPORTED Δ VS 23 LFL • Sequential improvement in growth driven by CMI Media Revenue less pass-through costs 436 (6.6)% (4.7)% Group, our specialist healthcare unit, which returned to double- Headline operating profit 15 (46.4)% digit growth in Q2 Headline operating m
Slide 15: Performance by Region
PERFORMANCE BY REGION LFL REVENUE LESS PASS-THROUGH COSTS GROWTH (%) 9.0 5.1 5.3 3.9 4.3 3.3 2.8 2.0 1.1 1.1 0.3 0.3 (0.8) (0.6) (2.2) (4.1) (4.1) (4.1) (5.2) (5.3) Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 N. America UK W. Continental Europe RoW 39% OF WPP1 14% OF WPP1 21% OF WPP1 26% OF WPP1 • US: H
Slide 16: Client Sector Mix
CLIENT SECTOR MIX 1 LFL REVENUE LESS PASS-THROUGH COSTS Q2 ’24 (H1 ‘24) 4% 3% 5% Telecoms, media & 6% 28% CPG +5.1% (+7.2%) entertainment +5.1% (+5.9%) Financial services +1.9% (+0.5%) 7% Tech & digital services -1.0% (-5.1%) Other -15.7% (-15.3%) Healthcare & pharma -9.7% (-9.0%) Travel & leisure +
Slide 17: Change in Operating Margin Year-on-Year
CHANGE IN OPERATING MARGIN YEAR-ON-YEAR • Margin: stable YoY as cost reductions across all key (Decrease) areas offset revenue pressure (£m) (132) (24) (9) (18) (9) • Staff costs pre incentives: £132m reduction YoY as lower permanent headcount 11.6% and freelancers more than 11.5% 11.5% offset salar
Slide 18: Levers to Unlock More Profitable Growth
LEVERS TO UNLOCK MORE PROFITABLE GROWTH STRUCTURAL SAVINGS & SIMPLIFICATION TARGET: • c.£125m annualised net savings by 2025 (c. 40-50% expected to be realised in 2024), with c.£125m restructuring costs (to be incurred in 2024) PROGRESS: • Net savings on track to achieve >50% of targeted 2025 saving
Slide 19: Net Debt Movement
NET DEBT MOVEMENT HALF YEAR TO 30 JUNE 2024 £M 2023 £M Adjusted net debt as at December (2,504) (2,479) • Net debt reduced £0.1bn to Headline EBITDA less associates 851 888 £3.4bn over LTM3 Rent (repayment of lease liabilities and related • Non-cash compensation (187) (184) interest) movement in lin
Slide 20: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION RETURN OF ORGANIC DIVIDEND M&A EXCESS INVESTMENT CAPITAL Disciplined P&L Progressive Disciplined approach Excess capital and balance sheet dividend with to M&A returned via investment in around 40% buybacks or special technology and AI payout of headline dividends and
Slide 21: 2024 Guidance
2024 GUIDANCE LFL revenue less pass-through costs growth of -1% to 0% Headline operating margin improvement of 20-40bps at constant currency OTHER FY 2024 FINANCIAL INDICATIONS: • Mergers and acquisitions: to add <0.5% to revenue less pass-through costs growth (previously 0.5-1.0%) • FX impact: curr
Slide 22: Strategic Progress
STRATEGIC PROGRESS 22
Slide 23: 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 23
Slide 24: Significant AI Adoption Across WPP
1 SIGNIFICANT AI ADOPTION ACROSS WPP HOW WE HOW CONSUMERS HOW WE WORK PRODUCE WORK EXPERIENCE WORK 24
Slide 25: AI: How We Work - Rapid Adoption
1 AI: HOW WE WORK - RAPID ADOPTION JANUARY - JULY 2024 GROWTH (%) CREATIVE STUDIO 241% 176% MEDIA STUDIO 74% Monthly active LLM usage Image users generation 25
Slide 26: AI: How We Work: WPP Open
1 AI: HOW WE WORK: WPP OPEN MULTIPLE LLM PARTNERS ACTIVE CLIENTS 26
Slide 27: AI: How We Produce Work - Leading Innovation
1 AI: HOW WE PRODUCE WORK - LEADING INNOVATION A NEW END-TO-END AI-ENABLED 3D MODELLING AND GENERATIVE AI PRODUCTION APPLICATION LIVE WITH CLIENTS Personalised, multi-channel variants of Multi-year partnership producing brand-compliant content at scale using the NVIDIA generative 3D landscapes and w
Slide 28: Video
VIDEO 28
Slide 29: AI: The Work Consumer Experience
1 AI: THE WORK CONSUMER EXPERIENCE SNICKERS OWN GOAL COKE SOUNDZ BOURNVITA ‘D’ FOR DREAMS • A personalised AI José Mourinho • An AI-powered instrument creating • Uses advanced AI technology to coach fans out of their “own uplifting tunes from Coca-Cola's to offer children personalised goals” iconic
Slide 30: Creative Transformation: Cannes Lions 2024
2 CREATIVE TRANSFORMATION: CANNES LIONS 2024 160 LIONS 1 6 27 43 83 Titanium Grand Gold Silver Bronze Prix 30
Slide 31: Creative Transformation
2 CREATIVE TRANSFORMATION First ever Creative Brand of the Year Creative Marketer of the Year 18 Lions won (17 from WPP) The most awarded client at Cannes with 35 Lions First Grand Prix in a decade for Recycle Me WPP won 13 Lions for Unilever; more than any other company 31
Slide 32: World Class Brands: VML
3 WORLD CLASS BRANDS: VML SIZE AND SCALE STRATEGIC PROGRESS #1 CONNECTED CREATIVITY OPERATIONAL EFFICIENCY NEW CLIENT ASSIGNMENTS The world’s largest creative agency Market synergies SIMPLIFIED WPP OFFERING VML, Y&R, Wunderman and J Walter Thompson into one simple Integrated enterprise brand offerin
Slide 33: World Class Brands: Burson
3 WORLD CLASS BRANDS: BURSON SIZE AND SCALE STRATEGIC PROGRESS STRONGER OPERATIONAL NEW CLIENT Top 2 OFFER EFFICIENCY ASSIGNMENTS PR firm New Burson brand, Retirement of 10+ SIMPLIFICATION drawing upon equity in legacy brands BCW and Hill & Knowlton combined into the most our heritage comprehensive,
Slide 34: World Class Brands: GroupM
3 WORLD CLASS BRANDS: GROUPM SIZE AND SCALE STRATEGIC PROGRESS LEADERSHIP SIMPLIFICATION RETAIL MEDIA #1 PARTNERSHIPS The world’s largest media agency ($63bn billings)1 #1 in EMEA and APAC, #2 in N. America New CEO A simpler Go-to- Brian Lesser Market offer powered by Media Studio 5bn #1 consumer pr
Slide 35: Medium-Term Financial Framework
4 MEDIUM-TERM FINANCIAL FRAMEWORK Organic growth Headline Adjusted Operating Average Net Debt / Revenue less pass- Operating Margin Cash Flow Conversion Headline EBITDA1 through costs DISCIPLINED CAPITAL ALLOCATION Potential for M&A to accelerate growth by up to 1% p.a. 1. Average adjusted net debt/
Slide 36: Q&A
Q&A 36
Slide 37: Contacts and Further Resources
CONTACTS AND FURTHER RESOURCES TOM WALDRON INVESTOR WEBSITE Group Investor Relations Director wpp.com/investors [email protected] Tel: +44 (0) 7788 695 864 CAPITAL MARKETS DAY 2024 Materials linked here ANTHONY HAMILTON Investor Relations Director INVESTOR WEBINARS [email protected] A serie
Slide 38: Appendix
APPENDIX WPP 38
Slide 39: Revenue Less Pass-Through Costs by Sector
REVENUE LESS PASS-THROUGH COSTS BY SECTOR1 HALF YEAR TO 30 JUNE 2024 £M 2023 £M Δ REPORTED Δ LFL Global Integrated Agencies 4,595 4,760 (3.5)% (0.7)% Public Relations 568 584 (2.7)% (0.9)% Specialist Agencies 436 467 (6.6)% (4.7)% Total 5,599 5,811 (3.6)% (1.0)% 1. Prior year figures have been re-pr
Slide 40: Revenue Less Pass-Through Costs by Region
REVENUE LESS PASS-THROUGH COSTS BY REGION HALF YEAR TO 30 JUNE 2024 £M 2023 £M Δ REPORTED Δ LFL North America 2,207 2,284 (3.4)% (1.6)% UK 779 796 (2.1)% (2.6)% Western Continental Europe 1,164 1,179 (1.3)% 1.7% Asia Pacific, Latin America, Africa & Middle 1,449 1,552 (6.6)% (1.4)% East and Central
Slide 41: Revenue Less Pass-Through Costs Growth
REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION LIKE-FOR-LIKE % Central & Eastern Europe % Q1 ‘24 Q2 ’24 H1 ’24 (0.1) 3.4 1.7 UK % Q1 ’24 Q2 ’24 H1 ’24 0.3 (5.3) (2.6) North America % Q1 ‘24 Q2 ’24 H1 ’24 (5.2) 2.0 (1.6) Western Continental Europe % Q1 ’24 Q2 ’24 H1 ‘24 3.3 0.3 1.7 Asia Pacific % Q
Slide 42: Like-for-Like Growth: Top Markets
LIKE-FOR-LIKE REVENUE LESS PASS-THROUGH COSTS GROWTH TOP MARKETS USA UK GERMANY Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 30% 30% 20% 20% 20% 10% 6.6% 10% 9.0% 10% 5.1% 2.6% 1.1% - 0.3% - - (1.9%) (3.8%) (5.3%) (4.5%) (4.2%) (4.5%) (5.4%
Slide 43: Like-for-Like Growth: Top Markets
LIKE-FOR-LIKE REVENUE LESS PASS-THROUGH COSTS GROWTH TOP MARKETS BRAZIL AUSTRALIA CANADA Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 20% 20% 20% 10% 10% 10% 0.5% 0.9% 1.4% - - - (0.9%) (0.9%) (0.8%) (0.3%) (1.4%) (2.2%) (4.5%) (3.4%) (3.1%
Slide 44: Exchange Rate Analysis
EXCHANGE RATE ANALYSIS STERLING IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS GROWTH HALF YEAR TO 30 JUNE 2024 2023 (WEAKER)/STRONGER US$ 1.27 1.23 3.3% Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 € 1.17 1.14 2.6% Chinese Renminbi 9.13 8.55 6.8% 6.3% Indian Rupee 105.3 101.4 3.8% Brazilian Real 6.43
Slide 45: Headline Operating Profit and Margin by Sector
HEADLINE OPERATING PROFIT AND MARGIN BY SECTOR 1,2 OPERATING PROFIT £M OPERATING MARGIN3 HALF YEAR TO 30 JUNE 2024 2023 2024 2023 Global Integrated Agencies 551 550 12.0 % 11.6 % Public Relations 80 88 14.1 % 15.1 % Specialist Agencies 15 28 3.4 % 6.0 % Total 646 666 11.5 % 11.5 % 1 Figures before g
Slide 46: Headline Operating Profit and Margin by Region
HEADLINE OPERATING PROFIT AND MARGIN BY REGION 1,2 OPERATING PROFIT £M OPERATING MARGIN3 HALF YEAR TO 30 JUNE 2024 2023 2024 2023 North America 336 287 15.2% 12.6% UK 78 98 10.0% 12.3% Western Continental Europe 117 111 10.1% 9.4% Asia Pacific, Latin America, Africa & 115 170 7.9% 11.0% Middle East
Slide 47: Change in Headline Operating Margin
CHANGE IN HEADLINE OPERATING MARGIN 1 2024 2023 Δ HALF YEAR TO JUNE £M £M £M % Revenue less pass-through costs 5,599 5,811 (212) (3.6) Staff costs pre incentives (3,837) (3,969) 132 3.3 Establishment (242) (272) 30 11.1 IT (341) (350) 9 2.6 Personal (103) (112) 9 8.0 Other operating expenses (282) (
Slide 48: Restructuring Costs
RESTRUCTURING COSTS HALF YEAR TO JUNE 2024 £M 2023 £M Δ IT transformation 47 54 (7) o/w1 ERP 27 24 3 Restructuring costs 76 26 50 o/w VML, GroupM, Burson 72 - 72 Other transformation 8 7 1 Restructuring and transformation costs 131 87 44 Property (including 2023 NYC/Global review) 22 180 (158) Total
Slide 49: Debt Maturity Profile
DEBT MATURITY PROFILE AT JUNE 30, 2024 (£M) £ TOTAL £ TOTAL EUR GBP USD Bonds (currency of issuance) Bonds post swaps CREDIT DRAWN 700 £ bonds £400m (2.875% Sep ’46) 380 380 US bond $220m (5.625% Nov ’43) 174 174 600 New New US bond $93m (5.125% Sep ’42) 73 73 500 Eurobonds €650m (4.0% Sep ’
Slide 50: Leverage Calculation
LEVERAGE CALCULATION TO PERIOD END JUNE 2024 £M DEC 2023 £M JUNE 2023 £M Adjusted net debt on a reportable basis (at 30 June) (3,371) (2,504) (3,468) Available liquidity (4,011) (3,845) (3,564) Non-lease headline net finance costs1 (89) (155) (77) Interest cover1 on headline operating profit 7.3x 11
Slide 51: New Business
NEW BUSINESS RECENT NEW CLIENT ASSIGNMENTS1 Media Media Media Media Media Oceania, ASEAN and US EMEA Canada Italy Health Science US AOR Commerce Creative Creative PR Influencer Europe Global Oncology South Africa Global marketing UK 1 Includes publicly announced wins and retentions that expand scope
Slide 52: Thank You
THANK YOU