2019 Interim results - Politico Europe · website at , or can be obtained from the SEC by calling...

2019 INTERIM RESULTS

2019 INTERIM RESULTSLondon9 AUGUST 2019

1


SAFE HARBOUR STATEMENT

2

In order to utilise the ‘safe harbour’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), WPP plc is providing the following cautionary statement. This presentation contains certain forward-looking statements – that is, statements related to future, not past events and circumstances – which may relate to one or more of the financial conditions, results of operations and businesses of WPP plc and certain of the plans and objectives of WPP with respect to these items. These statements are generally, but not always, identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. Actual results may differ from those expressed in such statements, depending on a variety of factors including the risk factors set forth in our most recent Annual Report and Form 20-F under “Risk factors” and in any of our more recent public reports. Nothing in this presentation is intended as a forecast, nor should it be taken as such.

Our most recent Annual Report and Form 20-F and other period filings are available on our website at www.wpp.com, or can be obtained from the SEC by calling 1-800-SEC-0330 or on its website at www.sec.gov.



3

PROGRESS ON STRATEGY

CONCLUSION AND Q&A


SIX MONTHS OF GOOD STRATEGIC PROGRESS

4

• H1 revenue less pass-through costs -2.0%; signs of progress in Q2

• Encouraging areas of growth: media businesses, tech clients and faster-growth economies

• USA (Q1 -8.8%, Q2 -5.4%) remains a major area of focus

• Improved client retention and key new business wins: L’Oréal, eBay, Instagram

• Kantar transaction further simplifies WPP and significantly reduces leverage

• Many key hires now in place; more to come

• 2019 guidance unchanged; greater confidence in full year



5


FIRST HALF AND Q2 HIGHLIGHTS

6

• H1 LFL revenue less pass-through costs -2.0%

• Q2 LFL revenue less pass-through costs -1.4%, improved on Q1 -2.8%

• Q2 LFL revenue less pass-through costs improved significantly for North America -5.3% (Q1 -8.5%) and UK 1.3% (Q1 -0.9%)

• Western Continental Europe improved slightly in Q2, LFL revenue less pass-through costs flat (Q1 -0.3%). Belgium, France, Italy and Turkey performed well, Germany slower

• Asia Pacific, Latin America, Africa & M East and C&E Europe strongest performing region, LFL revenue less pass-through costs up 1.2% in Q2 (Q1 2.3%). Improvement in Latin America, Africa & M East, C&E Europe offset by slower growth in Asia Pacific

• H1 operating margin 11.9%, down 1.2 margin points LFL, reflecting revenue less pass-through costs trend; IFRS 16: Leases benefit to reported margin 0.5 margin points

• Average net debt £4.384B, down £595M (down £709M constant currency) year-on-year supported by disposal programme


SUMMARY UNAUDITED IFRS INCOME STATEMENT

7

1. % change in reported sterling2. % change at constant currency rates3. Operating profit includes net exceptional gain £10m (2018 gain £143m) and goodwill/intangible charges £67m (2018 charges £84m)4. PBIT includes net exceptional loss £3m (2018 gain £114m) and goodwill/intangible charges £67m (2018 charges £84m)5. PBT includes net exceptional loss £3m (2018 gain £114m), goodwill/intangible charges £67m (2018 charges £84m) and revaluation of financial instruments charge £57m (2018 credit £81m)

HALF YEAR TO 30 JUNE 2019 £M 2018 £M Δ REPORTED¹Δ CONSTANT CURRENCY²

Revenue 7,616 7,493 1.6% 0.0%

Gross profit 1,226 1,274 -3.8% -5.1%

Operating profit³ 673 842 -20.1% -21.0%

PBIT⁴ 681 851 -20.0% -20.9%

Profit before tax⁵ 478 846 -43.5% -44.1%

Tax rate 26.9% 16.7%

Profit after tax 349 705 -50.5% -51.2%

Reported diluted EPS 24.8p 53.4p -53.6% -54.3%


SUMMARY UNAUDITED HEADLINE¹ RESULTS

8

HALF YEAR TO 30 JUNE 2019 £M 2018 £M Δ REPORTEDΔ CONSTANT

CURRENCYΔ LIKE-FOR-

LIKE²

Revenue 7,616 7,493 1.6% 0.0% -0.6%

Revenue less pass-through costs 6,149 6,149 0.0% -1.6% -2.0%

EBITDA³ 875 948 -7.7% -8.9%

Operating profit 730 783 -6.8% -8.0%

PBIT 751 821 -8.5% -9.6%

Operating profit margin⁴ 11.9% 12.7% -0.8⁵ -0.8⁵ -1.2⁵

PBIT margin⁴ 12.2% 13.3% -1.1⁵ -1.1⁵ -1.3⁵

Tax rate 22.8% 22.5% n/a n/a

Diluted EPS 34.2p 42.6p -19.7% -20.9%

Dividend per share 22.7p 22.7p - -

Average net debt (4,384) (4,979) -12.0% -13.9%

Rolling average net debt/EBITDA⁶ 2.1x 2.1x n/a n/a1. Figures before goodwill and intangibles charges, gains/losses on step-ups, gains/losses on disposals of

subsidiaries and investments, investment write-downs, share of exceptional gains/losses of associates, restructuring and transformation costs, litigation settlement, gain on sale of New York freehold property and revaluation of financial instruments

2. Like-for-like growth at constant currency exchange rates and excluding effect of acquisitions and disposals3. Headline EBITDA excluding reversal of depreciation of right-of-use assets

4. Margin as % of revenue less pass-through costs5. Margin points6. Average net debt/EBITDA for 12 months to 30 June


REVENUE LESS PASS-THROUGH COSTS GROWTH VS PRIOR YEAR

9

-0.7%

1.6%

0.5%

-2.8%

-3.9%

1.1%

0.7%

-5.0%

1.1%

0.3%

Q1 Q2 H1

0.7%

1.7%

0.4%

-1.4%

0.0%

1.6%

0.4%

-2.0%Like-for-like

Acquisitions

FX

Reported

Like-for-like

Acquisitions

FX

Reported

Like-for-like

Acquisitions

FX

Reported


IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS

10

-2.8%

1.6% 1.7%

3.9% 4.0%

2.8%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2018 FY ACT 2019 Q1 ACT 2019 Q2 ACT 2019 Q3 EST 2019 Q4 EST 2019 FY EST

• 2019 H1 currency tailwind 1.6%

• 2019 currency tailwind 2.8%¹

• 2018 full year headwind -2.8%

1. Based on applying 31 July 2019 exchange rates of £/US 1.22 and £/€1.10 to H2 2019 revenue less pass-through costs


REVENUE LESS PASS-THROUGH COSTSBY REGION

11

HALF YEAR TO 30 JUNE % GROUP 2019 £M 2018 £M Δ REPORTEDΔ CONSTANT

CURRENCYΔ LIKE-

FOR-LIKE

North America 35.1 2,157 2,155 0.1% -5.7% -6.9%

UK 13.5 831 833 -0.2% -0.2% 0.2%

Western Continental Europe 21.2 1,306 1,319 -1.0% 0.2% -0.1%

Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe

30.2 1,855 1,842 0.7% 1.6% 1.7%

Total 100.0 6,149 6,149 0.0% -1.6% -2.0%


W. Cont. Europe %Q1 Q2

-0.3 0.0

UK %Q1 Q2

-0.9 1.3

REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGIONLIKE-FOR-LIKE %

12

% Q1 Q2 H1

Mature Markets -4.7 -2.5 -3.6

Faster Growing Markets 2.3 1.2 1.7

Total -2.8 -1.4 -2.0

North America %Q1 Q2

-8.5 -5.3

Africa & M. East %Q1 Q2

-4.7 -0.5

Latin America %Q1 Q2

8.0 9.3

C. & E. Europe %

Q1 Q25.0 6.3

Asia Pacific %Q1 Q21.4 -1.6


TOP 5 MARKETS

13

1. Like-for-like growth vs prior year

2. Includes Hong Kong and Taiwan

REVENUE LESS PASS-THROUGH COSTS GROWTH¹

2019 H1 -7.1% 0.2% -2.4% -2.9% -0.3%

2019 Q2 -5.4% 1.3% -5.0% -8.7% 0.9%

2019 Q1 -8.8% -0.9% 0.4% 4.5% -1.5%

2018 FY -4.2% -0.5% 0.0% 2.1% 0.1%

USA UK Germany Greater China² France

Headcount 23,000 14,000 8,000 10,000² 4,000


BRIC MARKETS

14



REVENUE LESS PASS-THROUGH COSTS GROWTH¹

2019 H1 -2.8% -2.9% 10.2% 12.6% 5.0%

2019 Q2 -10.1% -8.7% 11.6% 15.8% 11.1%

2019 Q1 6.6% 4.5% 8.6% 9.3% -1.1%

2018 FY 2.6% 2.1% 5.6% 5.5% 1.3%

Mainland China Greater China² Brazil India Russia

Headcount 8,000 10,000 7,000 11,000 2,000

2019 INTERIM RESULTS 15

HALF YEAR TO 30 JUNE % GROUP 2019 £M 2018£M Δ REPORTEDΔ CONSTANT

CURRENCYΔ LIKE-

FOR-LIKE

Global Integrated Agencies 62.8 3,858 3,844 0.4% -1.4% -1.8%

Data Investment Management 15.4 949 940 1.0% 0.6% 0.4%

Public Relations 7.2 442 430 2.8% -0.1% -1.5%

Specialist Agencies 14.6 900 935 -3.8% -5.5% -5.7%

Total 100.0 6,149 6,149 0.0% -1.6% -2.0%

REVENUE LESS PASS-THROUGH COSTSBY SECTOR¹

1. As outlined in the Group’s RNS statement on 5 August and following a review of the appropriateness of the existing sector reporting, this has been changed to bring it into line with the various structural changes that have taken place over the last year and the simplification of the Group’s structure. Comparatives have been restated to reflect these sector changes


HEADLINE¹ OPERATING PROFIT AND MARGINBY REGION

16

1. Figures before goodwill and intangibles charges, gains/losses on step-ups, gains/losses on disposals of subsidiaries and investments, investment write-downs, restructuring and transformation costs, litigation settlement and gain on sale of New York freehold property

2. Margin as % of revenue less pass-through costs

OPERATING PROFIT £M OPERATING MARGIN²

HALF YEAR TO 30 JUNE 2019 2018 2019 2018

North America 301 342 14.0% 15.9%

UK 107 107 12.8% 12.9%

Western Continental Europe 119 122 9.1% 9.3%

Asia Pacific, Latin America, Africa & MiddleEast and Central & Eastern Europe

203 212 11.0% 11.5%

Total 730 783 11.9% 12.7%


HEADLINE¹ OPERATING PROFIT AND MARGIN BY SECTOR²

17

OPERATING PROFIT £M OPERATING MARGIN³

HALF YEAR TO 30 JUNE 2019 2018 2019 2018

Global Integrated Agencies 471 485 12.2% 12.6%

Data Investment Management 101 110 10.7% 11.7%

Public Relations 70 69 15.7% 16.0%

Specialist Agencies 88 119 9.7% 12.7%

Total 730 783 11.9% 12.7%

1. Figures before goodwill and intangibles charges, gains/losses on step-ups, gains/losses on disposals of subsidiaries and investments, investment write-downs, restructuring and transformation costs, litigation settlement and gain on sale of New York freehold property

2. As outlined in the Group’s RNS statement on 5 August and following a review of the appropriateness of the existing sector reporting, this has been changed to bring it into line with the various structural changes that have taken place over the last year and the simplification of the Group’s structure. Comparatives have been restated to reflect this



TRADE ESTIMATES OF ASSIGNMENT WINS (1)FIRST HALF

18Shaded are Q2 wins

WPP AGENCYMEDIA (M)/CREATIVE (C) INCUMBENT ACCOUNT OFFICE BILLINGS $M

MediaCom M OMC Signet N. America 360

Wavemaker M OMC Huawei China 350

Mindshare M DEN/PUB KangShiFu Drinks China 145

Essence M Wavemaker L’Oréal¹ UK/Ireland 130

Wunderman Thompson C N/A Duracell International 100

Mindshare M N/A GSK India 82

Wavemaker M DEN Eurostar Europe 80

Wavemaker M DEN William Hill UK 80

1. Transfer within WPP


TRADE ESTIMATES OF ASSIGNMENT WINS (2)FIRST HALF

19


Wavemaker M N/A Little Red Book China 66

Wavemaker M N/A Chimelong China 47

WPP C N/A Distell Global 45

MediaCom M DEN Adidas EMEA 42

MediaCom M PUB Coca-Cola Russia 40

Mindshare M OMC Newell Brands N. America 40

Grey C MDC Nokia Global 40

m/SIX M IND Regions Bank USA 36

Ogilvy C N/A Instagram Global >30

Shaded are Q2 wins


TRADE ESTIMATES OF ASSIGNMENT LOSSESFIRST HALF

20

WPP AGENCYMEDIA (M)/CREATIVE (C) WINNING AGENCY ACCOUNT OFFICE BILLINGS $M

Wavemaker M Essence L’Oréal¹ UK/Ireland 130

Essence M PUB NBC Entertainment USA 110

Shaded are Q2 wins



TRADE ESTIMATES OF ASSIGNMENT WINS/LOSSESSINCE 1 JULY



Mindshare M MediaCom Allergan¹ USA 378

MediaCom M OMC/PUB/IPG eBay N. America/China 250

WPP AGENCYMEDIA (M)/CREATIVE (C)

WINNING AGENCY ACCOUNT OFFICE BILLINGS $M

MediaCom M Mindshare Allergan¹ USA 378

WINS

LOSS


FREE CASH FLOW¹ AND FREE CASH FLOW CONVERSION

221. Cash flow presentation amended to reflect definitions of free cash flow set out in 11 December 2018 Investor Day “Financial Outlook” presentation available on wpp.com

2. 2019 includes impact of IFRS 16

HALF YEAR TO 30 JUNE 2019² £M 2018 £M

Operating profit 673 842

Depreciation & amortisation charges 360 211

- Depreciation & amortisation ex IFRS 16 192 211

- Depreciation of right to use assets 168 -

Lease payments (including interest) (156) -

Non-cash compensation 33 42

Net interest paid & similar charges (75) (50)

Tax paid (261) (251)

Capital expenditure (167) (178)

Earnout payments (58) (38)

Other (83) (231)

Free cash inflow pre working capital/provisions 266 347


USES OF CASH FLOW¹

23

1. Cash flow presentation amended to reflect definitions of free cash flow outlined in 11 December 2018 Investor Day “Financial Outlook” presentation available on wpp.com

2. Includes proceeds from disposals of property, plant & equipment (£167m), and investments and subsidiaries (£137m)

3. Net initial payments are net of cash acquired, and includes other investments and associates

HALF YEAR TO 30 JUNE 2019 £M 2018 £M

Free cash inflow pre working capital/provisions 266 347

Working capital and provisions (779) (556)

- Trade working capital (297) (192)

- Other receivables, payables & provisions (482) (364)

Free cash outflow (513) (209)

Net disposals/(acquisitions) ex earnout payments 278 348

- Disposal proceeds² 304 484

- Net initial payments³ (26) (136)

Net cash (outflow)/inflow before distributions (235) 139

Distributions to share owners - (201)

- Dividends - -

- Share buy-backs - (201)

Net cash outflow (235) (62)


DISPOSAL PROCEEDS¹

24

H1 2019 £M

Property - 3 Columbus Circle, New York City 159

Chime 54

The Farm 27

Blue State Digital Tools 20

Other disposals 44

Total 304



2018

AppNexus

CMC Content

Domo

Fullscreen

Fullsix

Imagine

Ooh!Media

Raine Capital II

Woven Inc/UpRoxx

YouEarnedIt

Zappistore

2019

BNTI

Gimlet

Information Resources UK1

IMAX

Wild Tangent

Investments

RESTRUCTURING : DISPOSALS

25

2018

Big Idea Group

Bruin Sports Capital

DASL

Globant

Imagina (Return of Capital)

OptimizeRx

Rediffusion

Teledirect

2019

Artistree

Captivate Group

Chime Communications

Etecture

Jan Kelley

Planorama1

Richard Attias

Associates/JV’s

2018

Grey Bulgaria

Grey Serbia

IEG

JWT Mirum Miami

Maxx Marketing

OnCall

Pace

PXP

Sudler & Hennessey India

TNS France CATI & F2F

2019

Action Line Brazil

Blue State Digital Tools

CEEOR

Mannov PR

The Farm

WPP Manufacturing1

Subsidiaries

2018 and H1 2019 Cash Inflow £986m 2018 PBIT Contribution £17m

1. H2 2019 disposals. Total Cash Inflow and 2018 PBIT Contribution relates to 2018 and H1 2019 disposals only


NET DEBT

26

HALF YEAR TO 30 JUNE: 2019 £M 2018 £M Δ £M

Average net debt¹ on constant currency basis (4,384) (5,093) 709

Average net debt¹ on reportable basis (4,384) (4,979) 595

Net debt¹ at 30 June on constant currency basis (4,271) (4,742) 471

Net debt¹ at 30 June on reportable basis (4,271) (4,632) 361

Headline finance costs¹,² (94) (86)

Interest cover¹ on headline operating profit 7.8x 9.1x

Headline EBITDA¹ 841 948

Rolling 12 month headline EBITDA¹ 2,204 2,466

Rolling average net debt/headline EBITDA¹ 2.1x 2.1x

1. Net debt, headline finance costs, interest cover, headline EBITDA, rolling 12 month headline EBITDA, rolling average net debt/headline EBITDA exclude impact of IFRS16

2. Headline finance costs of £94m excludes £52m IFRS 16 impact of all leases, which is £3m higher than £49m IFRS 16 impact of leases existing at 1 January 2019


USES OF FREE CASH FLOW

27

FY TARGET

JUNE YTD2019

JUNE YTD 2018

FY 2018

(Disposals)/acquisitions (excluding earnouts):

Acquisitions¹ c. £200M £26M £136M £288M

Less disposals² c. £(200M) £(304M) £(469M) £(849M)

Net (disposals)/acquisitions NEUTRAL £(278M) £(333M) £(561M)

Share buy-backs:% of issued share capital

--

--

£201M1.3%

£207M1.3%

Balance Sheet

Headroom: Undrawn facilities & surplus cash - £3.6B £3.6B £4.3B

Average net debt at 2019 exchange rates - £4.4B £5.1B £5.0B³

Target range of average net debt/EBITDA ratio⁴ of 1.5-1.75x to be achieved by end of 2021

1. Acquisitions are initial payments, net of cash acquired, and include other investments and associates


3. FY 2018 net debt stated at 2018 actual exchange rates

4. Net debt/EBITDA ratio calculated excluding impact of IFRS 16


DEBT MATURITY PROFILE £M AT 30 JUNE 2019

28

Exchange Rates £/$ 1.2695 £/€ 1.1175 £/A$ 1.8109

1 Swapped to £444m at 2.61%

2 These instruments are subject to financial covenants

Weighted Average Coupon 2.7%

Weighted Average Maturity 7.1 years

Available Liquidity £3,564M

0

100

200

300

400

500

600

700

£ TOTALCREDIT

£ TOTALDRAWN

◼ £ bonds £400M (2.875% Sep ’46) 400 400

◼ US bond $220M (5.625% Nov ’43) 173 173

◼ US bond $93M (5.125% Sep ’42) 73 73

◼ Eurobonds €600M (1.625% Mar ’30) 537 537

◼ Eurobonds €750M (2.25% Sep '26) 671 671

◼ Eurobond €500M (1.375% Mar ‘25)/£444M Swap1 444 444

◼ US bond $750M (3.75% Sep '24) 591 591

◼ Eurobonds €750M (3.0% Nov ’23) 671 671

◼ US bond $500M (3.625% Sep ’22) 394 394

◼ Eurobond €250M (3m EURIBOR + 0.45% Mar ’22) 224 224

◼ US bond $812M (4.75% Nov ’21) 640 640

◼ Eurobonds €250M (3m EURIBOR + 0.32% May ’20) 224 224

◼ Eurobonds €600M (0.75% Nov ’19) 537 537

Debt Facilities 5,579 5,579

Bank revolver2 WPP ($2,500M Mar ’24) 1,969 358

Bank revolver2 WPP AUNZ (A$520M Jun’20/Jun ‘21) 287 213

Net cash, overdrafts & other adjustments – (1,879)

Total Borrowing Capacity / Net Debt 7,835 4,271


IFRS 16 : OVERVIEW

29

IFRS 16 effective 1 January 2019:

• All leases treated the same, no finance and operating designation

• Primarily real estate (97%)

• All leases on balance sheet except short-term and low value leases

• Balance sheet gross up at 30 June 2019 includes £1.8B right-of-use asset and £ 2.3B lease

liabilities shown on balance sheet

• Right-of-use asset = lease liability + lease payments prior to commencement + direct costs +

costs to restore the site or asset – incentives

• Lease liability = PV of future lease payments

• Higher total expense initially as interest front loaded


IFRS 16: HEADLINE¹ P&L IMPACTBASED ON 1 JANUARY 2019 LEASES

30

1. Figures before goodwill and intangibles charges, gains/losses on step-ups, gains/losses on disposals of subsidiaries and investments, investment write-downs, share of exceptional gains/losses of associates, restructuring and transformation costs, litigation settlement, gain on sale of New York freehold property and revaluation of financial instruments


2019 H1 2018 H1

P&L impact £M EX IFRS 16

P&LIMPACT IFRS 16

EX RIGHT-OF-USE

DEP’NRIGHT-OF-USE DEP’N

AS REPORTED

AS REPORTED

EBITDA 841 34 875 169 1,044 948

Operating profit 696 34 730 - 730 783

Operating margin² 11.4% 0.5% 11.9% - 11.9% 12.7%

PBIT 717 34 751 - 751 821

Net finance costs (97) (49) (146) - (146) (86)

Profit before tax 620 (15) 605 - 605 735

Diluted EPS 35.0p (0.8p) 34.2p - 34.2p 42.6p

No cash impact


KANTAR TRANSACTION¹STRENGTHENS BALANCE SHEET, LIMITS DILUTION

31

• Successfully executed: simplification and de-leverage

• Net proceeds c. $3.1B

• “First Completion” (≥86% of Kantar and associated proceeds) expected early 2020

• Subsequent completion(s) and remainder of proceeds within 12 months of announcement

• Takes leverage to low end of target range well ahead of plan with c. $1.9B of proceeds used to reduce debt

• c. $1.2B to be returned to shareholders, expected to minimise earnings dilution

• Potential value upside for WPP shareholders through retained 40% equity stake

1. Transaction completion conditional upon:• WPP shareholder vote (simple majority)• Antitrust clearances• Kantar legal reorganisation


OUTLOOK

32

Our 2019 financial targets remain as:

• Like-for-like revenue less pass-through costs -1.5% to -2.0%

• Headline operating margin¹ down around 1.0 margin point on constant currency basis (excluding impact of IFRS 16)



PROGRESS ON STRATEGY

33


RADICAL EVOLUTION: A STRATEGY FOR GROWTH

CREATIVITY DATA AND

TECHNOLOGY VISION AND

OFFER

CULTURESIMPLER

STRUCTURE

34


CLIENTS’ NEEDS SIGNIFICANTLY GROWING OUR ADDRESSABLE MARKET

35

EXPERIENCE COMMERCE TECHNOLOGYCOMMUNICATIONS

$1 trillion market: +/- 3% growth1

>$100 billion market: 5-10% growth2

Platform spend $9.5bn: 15% growth3

$300 billion market: 5-10% growth2

1. GroupM forecast2. Exane BNP Paribas3. Forrester (Data Commerce Platform Technology Forecast)


India+13%

Brazil +10%

Xaxis+16%

“Big Tech” clients1

+16%

Luxury Goods clients

+7%

ENCOURAGING GROWTH AREAS IN H1

36

1. “Big Tech” represents 13 technology companies in our top 100 clients


RECENT CAMPAIGNS INTEGRATE TECH, PURPOSE AND CREATIVITY

37


IMPROVED OFFER REFLECTED IN NEW AND EXPANDED/ RETAINED BUSINESS

38

NEWCLIENTS

EXPANDED REMIT/RETENTION

Highlights 2019 YTD


• Transformative approach to reaching customers based on a clear data strategy. Advanced use of tech, Essence tools and deep knowledge of Google stack to support greater ecommerce focus

SCOPE AND VALUE

HOW IT WILL OPERATE

WPP AGENCIES INVOLVED

CLIENT VIEW

NEW BUSINESS CASE STUDY: L’ORÉAL BEAUTY TECH LAB

• Client and agency teams share the same software, tools and processes. Location-agnostic – teamworking on both client site and Essence offices

• Switch from Wavemaker to Essence. Agency is the gateway to all expertise within WPP (eg Wunderman Thompson for ecommerce) on a “sprint” basis

• “Buying media technology is not our job; our job is beauty”

WHY WE WON

• UK&I media planning/buying. Total media billings £106m. Top 5 UK&I advertiser


• WPP’s ability to deliver a unique integrated client model

• access to best in class talent across all disciplines

• Strong vindication of campus strategy

SCOPE AND VALUE

HOW IT WILL OPERATE

WPP AGENCIES INVOLVED

CLIENT VIEW

NEW BUSINESS CASE STUDY: VODAFONE ZIGGO/GO ONE

• Wunderman Thompson, Greenhouse, Kantar, GroupM, Wavemaker, VBAT

WHY WE WON

• Multi-disciplinary strategic marketing and communications partnership model

• 2018 media billings €140m; top 5 NL advertiser

• Core WPP/client team leadership team

• Partly open ecosystem including in-house capability, WPP agencies and outside partners

• Flexible, customer-centric and efficient structure

• "With the arrival of new competitors in the agency world, more and more integrated, customer-focused control models arise. WPP proved to be the best partner for us to work with in future.”


CAMPUSES DRIVING ENGAGEMENT FOR CLIENTS AND OUR PEOPLE

MUMBAI BUENOS AIRES

AMSTERDAM MILAN

41

NEW YORK MADRID


SIMPLER STRUCTURE: INCREASED EFFICIENCY

42

Investor Day Target Current Status

Business UnitRationalisation

Business Unit Closures

Gross HeadcountReduction

100 planned mergers(at local office level)

by end of 2019

80 planned closures by end of 2019

3,500 by end of 2019

102 completed or in progress

68 closed or in progress

3,100

On Plan?

Expected 2019 OP Benefitfrom Gross Savings

£160m £160m


SUMMARY

43

• Good operational execution of our strategic plan to date

• H1 financial performance in line, and Q2 sequentially better

• Kantar transaction successfully executed: simplification and de-leverage

• Fewer, stronger businesses to drive better retention and new business

• Further progress in H2 but 2018 assignment losses will continue to drag

• On track to meet three year targets


OTHER FINANCIAL INFORMATION

44


UNAUDITED IFRS INCOME STATEMENT

451. Figures before goodwill and intangibles charges, gains/losses on step-ups, gains/losses on disposals of subsidiaries and investments, investment write-downs, share of exceptional gains/losses of

associates, restructuring and transformation costs, litigation settlement, gain on sale of New York freehold property and revaluation of financial instruments


CURRENCY

Revenue 7,616 7,493 1.6% 0.0%

Gross profit 1,226 1,274 -3.8% -5.1%

Operating profit pre exceptional & goodwill/intangibles¹ 730 783 -6.8% -8.0%

Net exceptional gain 10 143 - -

Goodwill/intangible charges (67) (84) 20.4% 20.6%


Income from associates 21 38 -43.4% -43.3%

Share of associate exceptional loss (13) (29) -55.2% -52.9%

PBIT 681 851 -20.0% -20.9%

Net finance costs (203) (5) - -

Profit before tax 478 846 -43.5% -44.1%

Tax (129) (141) 8.7% 7.9%

Profit after tax 349 705 -50.5% -51.2%

Non-controlling interests (37) (33) -11.8% -12.7%

Attributable to share owners 312 672 -53.5% -51.2%

Reported diluted EPS 24.8p 53.4p -53.6% -54.3%


IMPACT OF NON HEADLINE ITEMS ON PBT

46

2019 2018 Δ REPORTEDΔ CONSTANT

CURRENCY

HALF YEAR TO 30 JUNE £M £M £M % %

Exceptional (loss)/gain (3) 114 (117)

Goodwill/intangible charges (67) (84) 17

Revaluation of financial instruments¹ (57) 81 (138)

Non headline items (127) 111 (238)

Reported PBT 478 846 (368) -43.5% -44.1%

Headline PBT 605 735 (130) -17.6% -18.4%

1. Revaluation of financial instruments comprises movements in fair value of treasury instruments -£25m (2018 £4m), revaluation of investments held at fair value through P&L £2m (2018 £26m), revaluation of put options over non-controlling interests -£26m (2018 £21m) and revaluation of payments due to vendors (earnout agreements) -£8m (2018 £30m)


NET EXCEPTIONAL GAIN/(LOSS)

47

HALF YEAR TO 30 JUNE 2019 £M

Gain on disposals of investments and subsidiaries 40

Litigation settlement 17

Gain on sale of New York freehold property 8

Restructuring and transformation costs (55)

Net exceptional gain 10

Share of associate exceptionals (13)

Net exceptional loss including associate exceptionals (3)


UNAUDITED HEADLINE¹ IFRS INCOME STATEMENT

48

1. Figures before goodwill and intangibles charges, gains/losses on step-ups, gains/losses on disposals of subsidiaries and investments, investment write-downs, share of exceptional gains/losses of associates, restructuring and transformation costs, litigation settlement, gain on sale of New York freehold property and revaluation of financial instruments

2. Margin as % of revenue less pass-through costs3. Margin points4. Headline EBITDA excluding reversal of depreciation of right-of-use assets


CURRENCYΔ LIKE-FOR-

LIKE

Revenue 7,616 7,493 1.6% 0.0% -0.6%

Revenue less pass-through costs 6,149 6,149 0.0% -1.6% -2.0%


Income from associates 21 38 -43.4% -43.3%

PBIT 751 821 -8.5% -9.6%

Net finance costs (146) (86) -69.6% -63.1%

Profit before tax 605 735 -17.6% -18.4%

Tax at 22.8% (2018: 22.5%) (138) (165) 16.6% 12.9%

Profit after tax 467 570 -18.0% -20.0%

Non-controlling interests (37) (33) -11.8% -12.7%

Attributable to share owners 430 537 -20.0% -22.0%

Diluted EPS 34.2p 42.6p -19.7% -20.9%

Operating profit margin² 11.9% 12.7% -0.8³ -0.8³ -1.2³

PBIT margin² 12.2% 13.3% -1.1³ -1.1³ -1.3³

EBITDA⁴ 875 948 -7.7% -8.9%


REVENUE LESS PASS-THROUGH COSTS GROWTHBY COUNTRY

49


2. Australia and New Zealand not disclosed as WPP AUNZ has not reported Q2 trading


REVENUE LESS PASS-THROUGH COSTS GROWTH¹ TOP COUNTRIES²

More than 10% Argentina, Belgium, Brazil, India, Turkey

5% to 10% Denmark, Mexico, Poland, Russia

0% to 5%Colombia, Indonesia, Italy, Netherlands, Singapore, Sweden, Switzerland, UK

Less than 0%Canada, Mainland China, Greater China³, Dubai, France, Germany, Japan, South Africa, South Korea, Spain, Thailand, USA


REVENUE LESS PASS-THROUGH COSTS GROWTH BY CATEGORY

50


REVENUE LESS PASS-THROUGH COSTS GROWTH¹ CATEGORIES

More than 10% Government

0% to 10% Tech, Food, Retail, Telecommunications

Less than 0%Automotive, Drinks, Electronics, Financial Services, Media & Entertainment, Oil, Personal Care & Drugs, Travel & Airline


REVENUE LESS PASS-THROUGH COSTS BY INDUSTRY

Auto12%

Consumer Products

6%

Personal Care

10%

Healthcare11%

Food & Drink14%

Financial Services7%

Oil

2%

Government2%

Retail

7%

Technology6%

Telecommunications

5%

Travel & Entertainment7%

Other

11%

Chart represents the amount of revenue less pass-through costs attributed to each industry expressed as a percentage of the total revenue less pass-through costs from WPP’s designated clients (over 3,000) for the period ended 30 June 2019


EFFECTS OF CURRENCY

2019 2018STERLING

(WEAKER)/STRONGER

US$ 1.29 1.38 -7%

€ 1.15 1.14 1%

¥ 142 150 -5%

Chinese Renminbi 8.8 8.8 -

Brazilian Real 4.97 4.71 6%

Australian $ 1.83 1.78 3%

Canadian $ 1.73 1.76 -2%

Indian Rupee 91 90 1%

Singapore $ 1.76 1.83 -4%

Russian Rouble 84 82 2%

South African Rand 18.4 16.9 9%

52

• Currency movements accounted for 1.6% increase in revenue less pass-through costs

• Reflects overall weakness of £ sterling, primarily against US$


2019 INTERIM RESULTSLondon9 AUGUST 2019

53

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