first quarter 2019 trading update - wpp · first quarter 2019 trading update 13 % group 2019 £m...

FIRST QUARTER 2019 TRADING UPDATE

FIRST QUARTER 2019 TRADING UPDATELondon26 APRIL 2019

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SAFE HARBOUR STATEMENT

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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.



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PROGRESS ON STRATEGY

CONCLUSION AND Q&A


• Continue to make good progress implementing our 3 year strategy to return WPP to sustainable growth

• As anticipated, first quarter trading update reflects impact of certain significant 2018 client losses, particularly in USA

• Financial guidance for full year unchanged

• Newly formed agencies showing initial signs of success in new business pitches:– Most recent merger Wunderman Thompson wins Duracell international creative account

– VMLY&R strong start, over $50M new business in first 6 months– BCW nearly $70M new business in first year

• Key 2019 priority is to address USA growth and we remain committed to taking all actions necessary to position WPP for future success

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INTRODUCTION



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FIRST QUARTER 2019 TRADING UPDATE 6

FIRST QUARTER 2019 HIGHLIGHTS• Reported revenue £3.588B up 0.9%, like-for-like -1.3%

• Reported revenue less pass-through costs £2.926B -0.7%, like-for-like -2.8%

• North America like-for-like revenue less pass-through costs -8.5%, weakest performing region, although in line with budgets, due to continued pressure and impact of automotive, pharmaceutical, FMCG assignments lost in 2018

• UK like-for-like revenue less pass-through costs -0.9%, slight decline on 2018 FY performance

• Western Continental Europe like-for-like revenue less pass-through costs -0.3%. Belgium, Denmark, Finland, Netherlands, Turkey up strongly. Austria, Italy, Spain more challenging

• Asia Pacific, Latin America, Africa & M East and C&E Europe strongest performing region, like-for-like revenue less pass-through costs up 2.3%. Strong growth Latin America, C&E Europe and SE Asia. Australia and New Zealand more difficult

• Significant reduction in average net debt for first quarter 2019 to £4.163B, down £712M at 2019 exchange rates


REVENUE LESS PASS-THROUGH COSTS GROWTH VS PRIOR YEAR

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-0.7%

1.6%

0.5%

-2.8%Like-for-like

Acquisitions

FX

Reported


IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS

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-2.8%

1.6%0.9%

-0.8%-1.2%

0.1%

-3%

-2%

-1%

0%

1%

2%2018 FY ACT 2019 Q1 ACT 2019 Q2 EST 2019 Q3 EST 2019 Q4 EST 2019 FY EST

• 2019 Q1 currency tailwind 1.6%

• 2019 expected currency neutral at latest exchange rates

• 2018 full year headwind 2.8%


REVENUE LESS PASS-THROUGH COSTSBY REGION

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% GROUP 2019 £M 2018 £M Δ REPORTEDΔ CONSTANT

CURRENCYΔ LIKE-

FOR-LIKE

North America 35.6 1,043 1,055 -1.2% -7.3% -8.5%

UK 13.7 400 405 -1.1% -1.1% -0.9%

Western Continental Europe 21.1 616 626 -1.6% 0.2% -0.3%

Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 29.6 867 862 0.6% 2.0% 2.3%

Total 100.0 2,926 2,948 -0.7% -2.3% -2.8%


W. Cont. Europe %FY/18 Q1/19

2.0 -0.3

UK %FY/18 Q1/19

-0.5 -0.9

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

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% FY/18 Q1/19Mature Markets -1.7 -4.7Faster Growing Markets 2.5 2.3Total -0.4 -2.8

North America %FY/18 Q1/19

-4.2 -8.5

Africa & M. East %FY/18 Q1/19

-3.1 -4.7

Latin America %FY/18 Q1/19

7.9 8.0

C. & E. Europe %FY/18 Q1/19

6.9 5.0

Asia Pacific %FY/18 Q1/19

1.2 1.4


MAJOR MARKETS

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1. Like-for-like growth vs prior year

2. Includes Hong Kong and Taiwan

REVENUE LESS PASS-THROUGH COSTS GROWTH¹

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 Greater China²Germany France


BRIC MARKETS

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2. Includes Hong Kong and Taiwan

Greater China² IndiaBrazil RussiaMainland China

REVENUE LESS PASS-THROUGH COSTS GROWTH¹

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

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

FIRST QUARTER 2019 TRADING UPDATE 13

% GROUP 2019 £M 2018 £M Δ REPORTEDΔ CONSTANT

CURRENCYΔ LIKE-

FOR-LIKE

Advertising and Media Investment Management

42.5 1,244 1,290¹ -3.6% -4.7% -4.8%

Data Investment Management 15.6 456 455 0.3% 0.3% 0.1%

Public Relations & Public Affairs 9.2 270 263 2.7% -0.2% -0.3%

Brand Consulting, Health & Wellness and Specialist Communications

32.7 956 940¹ 1.7% -0.7% -2.1%

Total 100.0 2,926 2,948 -0.7% -2.3% -2.8%

REVENUE LESS PASS-THROUGH COSTSBY SECTOR

1. In 2019 certain business units have been reclassified between advertising and media investment management, and brand consulting, health & wellness and specialist communications. As result the comparative data for 2018, together with the reported and constant currency growth rates, have been restated.


TRADE ESTIMATES OF ASSIGNMENT WINS¹

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Underlined are Q2 wins1. No significant losses reported

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

Wunderman Thompson C N/A Duracell International 100

Mindshare M N/A GSK India 82

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

Mindshare M OMC Newell Brands N. America 40

Grey C MDC Nokia Global 40


NET DEBT

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31 MARCH YTD: 2019 £M 2018 £M Δ £M

Average net debt on constant currency basis (4,163) (4,875) 712

Average net debt on reportable basis (4,163) (4,773) 610

Net debt at 31 March on constant currency basis (4,624) (5,500) 876

Net debt at 31 March on reportable basis (4,624) (5,343) 719


USES OF FREE CASH FLOW

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FY TARGET

MARCH YTD2019

MARCH YTD 2018

FY 2018

(Disposals)/acquisitions (excluding earnouts):

Acquisitions¹ C. £200M £18M £80M £288M

Less disposals² C. £(200M) £(179M) £(44M) £(849M)

Net (disposals)/acquisitions NEUTRAL £(161M) £36M £(561M)

Share buy-backs:% of issued share capital

--

--

£145M0.9%

£207M1.3%

Balance Sheet

Headroom: Undrawn facilities & surplus cash - £3.3B £2.6B £4.3B

Average net debt at 2019 exchange rates - £4.2B £4.9B £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 associates2. Disposals include proceeds from sale of property, other investments and associates3. FY 2018 net debt stated at 2018 actual exchange rates4. Net debt/EBITDA ratio calculated excluding impact of IFRS16: Leases


DISPOSAL PROCEEDS

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Q1 2019 £M

Property - 3 Columbus Circle, New York City 157

Sale of other investments and associates 22

Total 179


OUTLOOK

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Our 2019 financial targets remain as:

• Like-for-like revenue less pass-through costs -1.5% to -2.0%, with stronger headwinds in first half, due to client assignment losses in latter 2018

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


PROGRESS ON STRATEGY

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RADICAL EVOLUTION: A STRATEGY FOR GROWTH

CREATIVITY DATA AND TECHNOLOGY

VISION AND OFFER

CULTURESIMPLER STRUCTURE

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• New strategy resonating well with clients

• Solid new business performance and client stability

• Strengthening team and leadership

• Technology: partnership with Adobe, Microsoft and SAP on the Open Data Initiative

• Disposals of £179M including property – average net debt for first quarter 2019 down £712M

• Continuing progress on disposal of Kantar

• Restructuring on track

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FIRST QUARTER STRATEGY UPDATE


OTHER FINANCIAL INFORMATION

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REVENUE LESS PASS-THROUGH COSTS GROWTHBY COUNTRY

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2. Australia and New Zealand not disclosed as WPP AUNZ has not reported Q1 trading3. Includes Hong Kong and Taiwan

REVENUE LESS PASS-THROUGH COSTS GROWTH¹ TOP COUNTRIES²

More than 10% Argentina, Belgium, Denmark, Turkey

5% to 10% Brazil, Mainland China, India, Mexico, Poland

0% to 5% Greater China³, Germany, Indonesia, Netherlands, Sweden

Less than 0%Canada, Colombia, Dubai, France, Italy, Japan, Russia, Singapore, South Africa, South Korea, Spain, Switzerland, Thailand, UK, USA


REVENUE LESS PASS-THROUGH COSTS GROWTH BY CATEGORY

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REVENUE LESS PASS-THROUGH COSTS GROWTH¹ CATEGORIES

5% to 10% Government

0% to 5% Food, Media & Entertainment, Retail

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


EFFECTS OF CURRENCY

2019 2018STERLING

(WEAKER)/STRONGER

US$ 1.30 1.39 -6%

€ 1.15 1.13 2%

¥ 143 151 -5%

Chinese Renminbi 8.8 8.9 -1%

Brazilian Real 4.90 4.52 8%

Australian $ 1.83 1.77 3%

Canadian $ 1.73 1.76 -2%

Indian Rupee 92 90 2%

Singapore $ 1.76 1.84 -4%

Russian Rouble 86 79 9%

South African Rand 18.2 16.6 10%

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

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


FIRST QUARTER 2019 TRADING UPDATELondon26 APRIL 2019

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first quarter 2019 trading update - wpp · first quarter 2019 trading update 13 % group 2019 £m...

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