Wpp Plc · LSE:WPP
Wpp — Investor Day (December 2020)
27 slides from Wpp's investor day presentation, Dec 17, 2020
Slide 1: Accelerating Growth - Capital Markets Day
ACCELERATING GROWTH CAPITAL MARKETS DAY 17 December 2020 WPP 1
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 by
Slide 3: WPP's Financial Plan
WPP’S FINANCIAL PLAN
Slide 4: WPP's Financial Plan
WPP’S FINANCIAL PLAN 1 2 3 4 ACCELERATED GROWTH FUNDED CLEAR CAPITAL ATTRACTIVE GROWTH THROUGH AND MARGINS ALLOCATION FINANCIAL INVESTMENT IMPROVED THROUGH FRAMEWORK OUTCOMES GROUP-WIDE TRANSFORMATION PROGRAMME WPP 63
Slide 5: Accelerated Growth Through Investment
1 ACCELERATED GROWTH THROUGH INVESTMENT M&A OF £200-400M ANNUALLY TO ADD 0.5-1.0% GROWTH P&L INVESTMENT RISING TO £400M ANNUALLY BY 2025 TO DRIVE INCREMENTAL 1.5% GROWTH “CORE” GROWTH 1-2% Core Growth P&L Investment M&A MEDIUM-TERM GROWTH POTENTIAL WPP 64
Slide 6: Targeting 40% of Our Business in Higher Growth Areas by 2025
1 TARGETING 40% OF OUR BUSINESS IN HIGHER GROWTH AREAS BY 2025 SALES MIX ACROSS OFFER PILLARS 12% 20% 8% 5% 8% Technology 17% Commerce Experience Communications 75% 55% WPP 2019 sales mix Market sales mix WPP 65 SOURCE: Market sales mix all IDC, apart from Communications (GroupM/WPP)
Slide 7: Shifting Sales Mix Towards Higher Growth Areas
1 SHIFTING SALES MIX TOWARDS HIGHER GROWTH AREAS SHIFTING THE OFFER MIX ADDRESSABLE GROWTH RATE +3.5% +4.8% +5.6% 25% 40% 50% 75% 60% 50% WPP sales mix 40/60 target 2024 TAM mix Communications Experience/Commerce/Technology WPP 66 SOURCE: Market sales mix all IDC, apart from Communications (GroupM/W
Slide 8: Targeting Sector Opportunities
1 TARGETING SECTOR OPPORTUNITIES RENEWED GROWTH WITH CONTINUE TO GROW COMPLETE RECOVERY FOCUS EFFORTS IN CPG SECTOR WITH TECH SECTOR IN PHARMA/HEALTHCARE UNDERWEIGHT SECTORS 27% E.G., FINANCIAL SERVICES 26% 18% 13% 12% 12% 6% 4% 2016 9M 2020 2016 9M 2020 2016 9M 2020 2016 9M 2020 PROPORTION OF REVEN
Slide 9: Innovative Engines of Growth in Media
1 INNOVATIVE ENGINES OF GROWTH IN MEDIA • Programmatic is 80-90% of digital display in US • 63% YoY growth in US internet-connected devices and UK usage, Q2 2020 • Xaxis expected to capture double-digits market • Roku (AVOD) nearly 50% of total US internet-based growth viewing minutes in Q2 • New ma
Slide 10: Investing in Higher-Growth Markets
1 INVESTING IN HIGHER-GROWTH MARKETS BRAZIL: 2.4% OF WPP CHINA: 6.7% OF WPP INDIA: 2.5% OF WPP 18 Total CAGR: 12.6% Total CAGR: 9.3% 18 Total CAGR: 16.7% 200 Digital CAGR: 10.4% 16 Digital CAGR: 9.8% Digital CAGR: 21.1% 16 14 14 150 12 12 10 10 8 100 8 6 6 4 50 4 2 2 - - - 2020 2021 2022 2023 2024 2
Slide 11: Summary Investment Plan
1 SUMMARY INVESTMENT PLAN Goal to grow in Communications, and to increase the share of our business in Experience, Commerce and Technology to 40% by 2025 £ MILLIONS ANNUAL REINVESTMENT COMMENTS BY 2025 INCENTIVE POOL c.100 Rebuild incentive pool to historical levels: target 3-4% of revenue less pass
Slide 12: Scalable M&A in Growth Areas
1 SCALABLE M&A IN GROWTH AREAS COMMUNICATIONS EXPERIENCE MEDIA CREATIVE SCALED CUSTOMER EXPERIENCE BUSINESSES • Enhance planning and • Exceptional creative • End to end digital customer journey design and implementation strategy offer agencies to underpin • Expand experience consulting and delivery
Slide 13: Growth Funded and Margins Improved Through Group-Wide Transformation Programme
2 GROWTH FUNDED AND MARGINS IMPROVED THROUGH GROUP-WIDE TRANSFORMATION PROGRAMME BY 2025… 250 200 FUNCTIONAL EFFECTIVENESS/ MARGIN IMPROVEMENT SHARED SERVICES 200 EFFICIENCY (PROCUREMENT AND PROPERTY) 400 REINVESTMENT 150 OPERATING MODEL Savings Outcomes WPP 72
Slide 14: Functional Effectiveness and Shared Services: £250 Million Opportunity
2 FUNCTIONAL EFFECTIVENESS AND SHARED SERVICES: £250 MILLION OPPORTUNITY MODEL TODAY FUTURE MODEL CURRENT COST • Dispersed, siloed and unbalanced • Single, federated approach to global OF FINANCE functions in Finance, HR, IT and legal business functions • c. 8,000 Finance employees • End-to-end proc
Slide 15: Efficiency: £200 Million Opportunity
2 EFFICIENCY: £200 MILLION OPPORTUNITY REAL ESTATE MODEL TODAY FUTURE MODEL CURRENT • Campus strategy in place since 2018 • Post COVID opportunity to utilise space ESTABLISHMENT COSTS more intensively within existing and • Already a third of people in 20 future campuses campuses c. 6% OF REVENUE LES
Slide 16: Operating Model: £150 Million Opportunity
2 OPERATING MODEL: £150 MILLION OPPORTUNITY MODEL TODAY FUTURE MODEL • 10+ different, opaque country • 3 clearly-defined country operating models models • Long tail of small agencies in • Significant consolidation of local unprofitable countries agency operations • Too many management layers • Simpl
Slide 17: Savings Unlocked by Significant Capital Investment
2 SAVINGS UNLOCKED BY SIGNIFICANT CAPITAL INVESTMENT • Capex forecast at £450-500 600 million in 2021 and 2022 500 • Partially relates to delayed 2020 capex 400 • Investments in campuses, ERP and shared service 300 centres driving the majority of efficiency savings 200 100 0 2021 2022 2023 2024 2025
Slide 18: Approximate Phasing of the Gross Savings Target
2 APPROXIMATE PHASING OF THE GROSS SAVINGS TARGET 700 600 600 525 500 450 400 300 300 200 200 100 0 2021 2022 2023 2024 2025 Operating model Efficiency Functional/shared services WPP 77
Slide 19: Clear Capital Allocation Framework
3 CLEAR CAPITAL ALLOCATION FRAMEWORK A sustainable, Capex progressive investment dividend, set at in our estate, around 40% of • Invest in growth, with a goal to technology and headline EPS increase net sales from Experience, capabilities Commerce and Technology to 40% by 2025 • Provide shareholders
Slide 20: Strong Financial Outcomes
4 STRONG FINANCIAL OUTCOMES RAPID POST-COVID ACCELERATED IMPROVED RECOVERY MEDIUM-TERM GROWTH PROFITABILITY LFL revenue less pass-through Targeting revenue less pass- Targeting headline operating costs to grow mid-single- through costs growth of 3–4% margin of 15.5–16.0% in 2023 digits % in 2021 and
Slide 21: 2020 Out-turn and Initial 2021 Guidance
4 2020 OUT-TURN AND INITIAL 2021 GUIDANCE 2020 Q4 CURRENT TRADING 2021 OUTLOOK • LFL revenue less pass-through costs • Mid-single-digit growth in LFL revenue –6.7% Oct/Nov 2020 less pass-through costs • -8.4% YTD • Returning to growth in Q2 • Full year outcome expected to be in • Headline operating
Slide 22: WPP's Financial Plan - Summary
WPP’S FINANCIAL PLAN - SUMMARY 1 2 3 4 GROWTH FUNDED AND MARGINS ACCELERATED GROWTH CLEAR CAPITAL ATTRACTIVE IMPROVED THROUGH GROUP-WIDE THROUGH INVESTMENT ALLOCATION FRAMEWORK FINANCIAL OUTCOMES TRANSFORMATION PROGRAMME • Accelerating through growth in • Plans in place to target £600 million of ann
Slide 23: How We Will Deliver This Programme
HOW WE WILL DELIVER THIS PROGRAMME Steering Committee (ExCo) 1 2 3 4 Simplified and stronger Incentives and Accelerated Functional effectiveness brands and countries performance management capability building Intra-brand simplification Finance Incentives Talent & development2 (Brand CEOs1) (Jacqui C
Slide 24: Additional Analysis/Disclosure
ADDITIONAL ANALYSIS/ DISCLOSURE • Aim to provide split of business by four pillars at full year and half year: • Communications, experience, commerce, technology • From H1 2021 • Increased GroupM insight • Revenue, revenue less pass-through costs • Billings breakdown between digital/ traditional • O
Slide 25: Summary
SUMMARY
Slide 26: Summary
SUMMARY • Focus on growth, profitability and returns, driven by client demand for our services • Converting size into scale: data, media, technology • People, culture and ESG at its heart • Reducing inefficiency, investing in faster-growing areas • Greater insight into underlying business performanc
Slide 27: Commercial Break
COMMERCIAL BREAK 10 MINS