2018 PRELIMINARY RESULTS London 1 MARCH 2019 2018 PRELIMINARY - - PowerPoint PPT Presentation

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2018 PRELIMINARY RESULTS London 1 MARCH 2019 2018 PRELIMINARY - - PowerPoint PPT Presentation

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2018 PRELIMINARY RESULTS London 1 MARCH 2019 2018 PRELIMINARY RESULTS 1 SAFE HARBOUR STATEMENT In order to utilise the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995 (the PSLRA), WPP

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2018 PRELIMINARY RESULTS

2018 PRELIMINARY RESULTS

London

1 MARCH 2019 1

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2018 PRELIMINARY RESULTS

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

  • bjectives 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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2018 PRELIMINARY RESULTS

2018 FINANCIAL RESULTS

3

OVERVIEW

STRATEGY UPDATE CONCLUSION AND Q&A

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2018 PRELIMINARY RESULTS

INTRODUCTION

4

  • 2018 at upper end of guidance in October
  • 2019 challenging due to headwinds from client losses in 2018, with greater first

half impact

  • Good initial progress on strategy, with a focus on execution and North America

– Simplifying the offer – Strengthening leadership team – Implementing the restructuring plans – 30 disposals raising £849m in 2018

  • Initial signs positive with clients, partners and talent - but work remains to be

done

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2018 PRELIMINARY RESULTS

2018 FINANCIAL RESULTS

5

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2018 PRELIMINARY RESULTS

FULL YEAR HIGHLIGHTS

6

  • Fourth quarter like-for-like revenue less pass-through costs down 0.7%, improved on third quarter

down 1.5%

  • Full year like-for-like revenue less pass-through costs down 0.4%, ahead of guidance
  • North America continued weakness with like-for-like revenue less pass-through costs in fourth quarter

down 5.7%, and down 4.2% for full year. Continuing difficulties in creative agencies, data investment management and healthcare

  • UK like-for-like revenue less pass-through costs in fourth quarter down 2.7%, against strong

comparative, and down 0.5% for full year. Media investment management and specialist communications businesses strong, data investment management improving

  • Western Continental Europe fourth quarter revenue less pass-through costs up 4.1%. Asia Pacific, Latin

America, Africa & Middle East and Central & Eastern Europe also improved with fourth quarter 2.6% growth

  • Significant reduction in net debt at 31 December, down £605m at 2018 exchange rates
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2018 PRELIMINARY RESULTS

SUMMARY UNAUDITED IFRS INCOME STATEMENT

7

  • 1. 2017 revenue and revenue less pass-through costs restated by £539m and £30m respectively for the implementation of IFRS 15
  • 2. % change in reported sterling
  • 3. % change at constant currency rates
  • 4. Operating profit includes net exceptional loss of £67m (2017 loss of £24m)
  • 5. PBIT/PBT includes net exceptional loss of £108m (2017 loss of £23m)

YEAR TO 31 DECEMBER 2018 £M 2017¹ £M Δ REPORTED² Δ CONSTANT CURRENCY³

Revenue 15,602 15,804

  • 1.3%

1.5% Gross profit 2,939 3,175

  • 7.4%
  • 5.0%

Operating profit⁴ 1,431 1,908

  • 25.0%
  • 22.2%

PBIT⁵ 1,475 2,022

  • 27.0%
  • 24.4%

Profit before tax⁵ 1,463 2,109

  • 30.6%
  • 28.1%

Tax rate 22.1% 9.3% Profit after tax 1,139 1,912

  • 40.4%
  • 38.5%

Reported diluted EPS 84.3p 142.4p

  • 40.8%
  • 38.9%
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2018 PRELIMINARY RESULTS

SUMMARY UNAUDITED HEADLINE¹ RESULTS

8

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, and revaluation of financial instruments 2 2017 revenue and revenue less pass-through costs restated by £539m and £30m respectively for implementation

  • f IFRS 15

3 Like-for-like growth at constant currency exchange rates and excluding effect of acquisitions and disposals 4 Headline PBIT before associates 5 Headline PBIT before associates as % of revenue less pass-through costs 6 Margin points 7 Headline PBIT as % of revenue less pass-through costs

YEAR TO 31 DECEMBER 2018 £M 2017² £M Δ REPORTED Δ CONSTANT CURRENCY Δ LIKE-FOR- LIKE³

Revenue 15,602 15,804

  • 1.3%

1.5% 0.8% Revenue less pass-through costs 12,827 13,170

  • 2.6%

0.2%

  • 0.4%

Operating profit⁴ 1,962 2,154

  • 8.9%
  • 6.6%

PBIT 2,047 2,267

  • 9.7%
  • 7.4%

EBITDA 2,311 2,534

  • 8.8%
  • 6.4%

Operating profit margin⁵ 15.3% 16.4%

  • 1.1⁶
  • 1.1⁶
  • 1.1⁶

PBIT margin⁷ 16.0% 17.2%

  • 1.2⁶
  • 1.3⁶
  • 1.2⁶

Tax rate 22.5% 22.0% n/a n/a Diluted EPS 108.0p 120.4p

  • 10.3%
  • 8.1%

Dividend per share 60.0p 60.0p

  • Average net debt

(4,966) (5,143) 3.4% 3.1% Average net debt/EBITDA 2.1x 2.0x n/a n/a

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2018 PRELIMINARY RESULTS

  • 0.7%

0.1%

  • 0.1%
  • 0.7%
  • 2.9%
  • 2.0%

0.6%

  • 1.5%
  • 2.1%
  • 3.9%

1.1% 0.7%

REVENUE LESS PASS-THROUGH COSTS GROWTH VS 2017

9

  • 5.1%
  • 6.1%

1.1%

  • 0.1%

Q1 Q2 Q4

Like-for-like Acquisitions FX Reported Like-for-like Acquisitions FX Reported Like-for-like Acquisitions FX Reported Like-for-like Acquisitions FX Reported

Q3

  • 2.6%
  • 2.8%

0.6%

  • 0.4%

FULL YEAR

Like-for-like Acquisitions FX Reported

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2018 PRELIMINARY RESULTS

IMPACT OF FX ON REVENUE LESS PASS-THROUGH COSTS

10

4.6%

  • 6.1%
  • 3.9%
  • 2.0%

0.1%

  • 2.8%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6%

2017 FY ACT 2018 Q1 ACT 2018 Q2 ACT 2018 Q3 ACT 2018 Q4 ACT 2018 FY ACT

  • 2018 Q4 minimal

currency impact

  • 2018 full year headwind

almost 3%

  • 2019 full year headwind
  • c. 1% at budget

exchange rates

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2018 PRELIMINARY RESULTS

REVENUE LESS PASS-THROUGH COSTS BY REGION

11

  • 1. 2017 revenue less pass-through costs restated by £30m for the implementation of IFRS 15

% GROUP 2018 £M 2017¹ £M Δ REPORTED Δ CONSTANT CURRENCY Δ LIKE- FOR-LIKE

North America 34.9 4,474 4,794

  • 6.7%
  • 3.5%
  • 4.2%

UK 13.2 1,691 1,688 0.2% 0.2%

  • 0.5%

Western Continental Europe 21.3 2,736 2,631 4.0% 4.1% 2.0% Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 30.6 3,926 4,057

  • 3.2%

2.0% 2.5% Total 100.0 12,827 13,170

  • 2.6%

0.2%

  • 0.4%
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2018 PRELIMINARY RESULTS

  • W. Cont. Europe %

Q1 Q2 Q3 Q4 FY

  • 0.2

3.9

  • 0.4

4.1 2.0 UK % Q1 Q2 Q3 Q4 FY 1.6 1.4

  • 2.0
  • 2.7
  • 0.5

REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION

2018 LIKE-FOR-LIKE %

12

% Q1 Q2 Q3 Q4 FY Mature Markets

  • 1.0
  • 0.3
  • 3.3
  • 2.1
  • 1.7

Faster Growing Markets 2.3 2.9 2.4 2.6 2.5 Total

  • 0.1

0.7

  • 1.5
  • 0.7
  • 0.4

North America % Q1 Q2 Q3 Q4 FY

  • 2.4
  • 3.3
  • 5.3
  • 5.7
  • 4.2

Africa & M. East % Q1 Q2 Q3 Q4 FY

  • 3.2
  • 1.6
  • 3.1
  • 4.3
  • 3.1

Latin America % Q1 Q2 Q3 Q4 FY 9.1 8.6 6.8 7.3 7.9

  • C. & E. Europe %

Q1 Q2 Q3 Q4 FY 5.6 3.1 4.9 12.7 6.9

Asia Pacific % Q1 Q2 Q3 Q4 FY 0.7 1.8 1.5 0.9 1.2

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2018 PRELIMINARY RESULTS

MAJOR MARKETS

13

  • 1. Like-for-like growth vs prior year
  • 2. Includes Hong Kong and Taiwan

REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2018 FY

  • 4.2%
  • 0.5%

0.0% 2.1% 0.1% 2018 Q4

  • 5.7%
  • 2.7%

1.1%

  • 1.0%

4.0% 2018 Q3

  • 5.3%
  • 2.0%
  • 1.0%

1.8%

  • 4.5%

2018 Q2

  • 3.3%

1.4% 5.5% 6.5%

  • 0.1%

2018 Q1

  • 2.2%

1.6%

  • 5.7%

2.1% 0.7% 2017 FY

  • 3.2%

4.8%

  • 1.3%
  • 3.2%

0.4%

USA UK Greater China² Germany France

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2018 PRELIMINARY RESULTS

BRIC MARKETS

14

  • 1. Like-for-like growth vs prior year
  • 2. Includes Hong Kong and Taiwan

Greater China² India Brazil Russia

REVENUE LESS PASS-THROUGH COSTS GROWTH¹ 2018 FY 2.6% 2.1% 5.6% 5.5% 1.3% 2018 Q4

  • 3.0%
  • 1.0%

2.2% 7.4% 13.2% 2018 Q3 2.5% 1.8% 9.0% 12.9%

  • 0.8%

2018 Q2 9.0% 6.5% 5.9% 1.4%

  • 9.3%

2018 Q1 3.6% 2.1% 6.0% 0.3% 0.6% 2017 FY

  • 1.8%
  • 3.2%

1.6% 1.1%

  • 15.4%

Mainland China

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2018 PRELIMINARY RESULTS

REVENUE LESS PASS-THROUGH COSTS BY SECTOR

15

  • 1. 2017 revenue less pass-through costs restated by £30m for the implementation of IFRS 15

% GROUP 2018 £M 2017¹ £M Δ REPORTED Δ CONSTANT CURRENCY Δ LIKE- FOR-LIKE

Advertising, Media Investment Management 43.1 5,530 5,889

  • 6.1%
  • 3.3%
  • 1.2%

Data Investment Management 15.3 1,966 2,052

  • 4.2%
  • 1.3%
  • 1.8%

Public Relations & Public Affairs 8.9 1,136 1,141

  • 0.4%

2.5% 2.6% Brand Consulting, Health & Wellness and Specialist Communications 32.7 4,195 4,088 2.6% 5.6% 0.6% Total 100.0 12,827 13,170

  • 2.6%

0.2%

  • 0.4%
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2018 PRELIMINARY RESULTS

LIKE-FOR-LIKE CHANGE IN HEADLINE¹ PBIT MARGIN²

16

  • 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, and revaluation of financial instruments

  • 2. Headline PBIT as % of revenue less pass-through costs
  • 3. 2017 proforma headline PBIT margin restated for implementation of IFRS 15

17.2%

  • 0.5%
  • 0.1%
  • 0.1%
  • 0.4%
  • 0.1%

16.0%

2017 Proforma³ Staff Costs ex Incentives Incentives Establishment Other Operating Costs Associate Income 2018 Actual

  • 1.2%
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2018 PRELIMINARY RESULTS

HEADLINE PBIT AND MARGIN BY REGION

17

  • 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, and revaluation of financial instruments

  • 2. Headline PBIT as % of revenue less pass-through costs
  • 3. 2017 headline PBIT margin restated for the implementation of IFRS 15

HEADLINE PBIT¹ £M HEADLINE PBIT MARGIN² YEAR TO 31 DECEMBER 2018 2017 2018 2017³

North America 804 937 18.0% 19.6% UK 245 280 14.5% 16.6% Western Continental Europe 372 376 13.6% 14.3% Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 626 674 15.9% 16.6% Total 2,047 2,267 16.0% 17.2%

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2018 PRELIMINARY RESULTS

HEADLINE PBIT AND MARGIN BY SECTOR

18

  • 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, and revaluation of financial instruments

  • 2. Headline PBIT as % of revenue less pass-through costs
  • 3. 2017 headline PBIT margin restated for the implementation of IFRS 15

HEADLINE PBIT¹ £M HEADLINE PBIT MARGIN² YEAR TO 31 DECEMBER 2018 2017 2018 2017³

Advertising, Media Investment Management 972 1,109 17.6% 18.8% Data Investment Management 301 350 15.3% 17.1% Public Relations & Public Affairs 184 183 16.2% 16.1% Brand Consulting, Health & Wellness and Specialist Communications 590 625 14.1% 15.3% Total 2,047 2,267 16.0% 17.2%

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2018 PRELIMINARY RESULTS

TRADE ESTIMATES OF ASSIGNMENT WINS (1)

19

Shaded are Q4 wins

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

MediaCom M PUB/OMC Mars Global 930 Wavemaker/Mindshare M DEN Mondelez EMEA, Asia Pacific 500 MediaCom M DEN Sky Europe 425 MediaCom M DEN/PUB Adidas Global 300 Essence M PUB T-Mobile N America 274 MediaCom M IND Hotels.com N America 175 VW Partnership C IPG Volkswagen N America 167 Wavemaker M DEN Danone N America 118 Wavemaker/VMLY&R M/C IND Altice USA 110

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2018 PRELIMINARY RESULTS

TRADE ESTIMATES OF ASSIGNMENT WINS (2)

20

Shaded are Q4 wins

  • 1. Internal transfer of business

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

Team Amplify M IPG Bose Global 80 MediaCom M PUB Ally Financial USA 70 MediaCom M PUB Hilton Hotels USA 68 Mindshare M OMC Unilever India 65 MediaCom/VMLY&R M/C OMC Office Depot NAFTA 62 Wavemaker M OMC Adobe Global 55 Wavemaker M MediaCom Yum! Brands Canada 50¹ VMLY&R C N/A Thrivent Financial USA 33 m/SIX M IND Regions Financial USA 30 Grey C IPG McCormick USA 28 VMLY&R C PUB/IND Alicorp L America 28

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SLIDE 21

2018 PRELIMINARY RESULTS

TRADE ESTIMATES OF ASSIGNMENT LOSSES

21

Shaded are Q4 losses

  • 1. Internal transfer of business

WPP AGENCY MEDIA (M)/ CREATIVE (C) WINNING AGENCY ACCOUNT OFFICE BILLINGS $M SIGNIFICANT ASSIGNMENTS RETAINED?

GTB C OMC/IND Ford Global 800 MediaCom/Mindshare M PUB Glaxo SmithKline Global 600 Mindshare M IPG American Express Global 400 Mindshare M OMC HSBC Global 400 Grey, MediaCom C/M N/A,IPG Revlon Global 194 Wavemaker M PUB Campbell Soup Co. USA, ANZ, Indonesia 189 Wavemaker M PUB Marriott Global 140 Grey C N/A Ally Financial USA 87 MediaCom M PUB P&G Australia 80 Wavemaker M DEN United Airlines Global 60 VMLY&R C N/A Pepsico Global 50 JWT C IPG Edgewell Global 50 MediaCom M Wavemaker Yum! Brands Canada 50¹ Grey C PUB Smuckers USA 40

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2018 PRELIMINARY RESULTS

FREE CASH FLOW¹ AND FREE CASH FLOW CONVERSION

22

  • 1. 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. Other outflows of £266m include reversal of £235m of gain on disposals of investments and subsidiaries

YEAR TO 31 DECEMBER 2018 £M 2017 £M

Operating profit 1,431 1,908 Depreciation & amortisation charges 728 489 Non-cash compensation 85 105 Working capital and provisions 166 (532) Net interest paid & similar charges (162) (170) Tax paid (384) (425) Capital expenditure (375) (326) Earnout payments (120) (199) Other (266)² (41) Free cash flow 1,103 809 Headline profit attributable to share owners 1,363 1,537 Free cash flow conversion 81% 53%

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2018 PRELIMINARY RESULTS

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

YEAR TO 31 DECEMBER 2018 £M 2017 £M

Free cash flow 1,103 809 Net disposals/(acquisitions) ex earnout payments 560 (30)

  • Disposal proceeds

849 296

  • Net initial payments²

(289) (326)

Net cash inflow before distributions 1,663 779 Distributions to share owners (954) (1,256)

  • Dividends

(747) (752)

  • Share buy-backs

(207) (504)

Net cash inflow/(outflow) 709 (477)

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SLIDE 24

2018 PRELIMINARY RESULTS

DISPOSAL PROCEEDS

24

2018 £M

Globant 254 AppNexus 169 Imagina (return of capital from associate) 108 Fullscreen 41

  • Oh!media

38 Teledirect 21 DA & Search Link 20 Other 198 Full Year 849

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2018 PRELIMINARY RESULTS

NET DEBT – 31 DECEMBER 2018

25

YEAR TO 31 DECEMBER: 2018 £M 2017 £M Δ £M

Average net debt on constant currency basis (4,966) (5,125) 159 Average net debt on reportable basis (4,966) (5,143) 177 Net debt at 31 December on constant currency basis (4,017) (4,622) 605 Net debt at 31 December on reportable basis (4,017) (4,483) 466 Headline finance costs (184) (174) Interest cover on headline PBIT 11.1x 13.0x Headline EBITDA 2,311 2,534 Average net debt/headline EBITDA 2.1x 2.0x

FIRST 7 WEEKS OF 2019: 2019 £M 2018 £M Δ £M

Average net debt on constant currency basis (3,954) (4,645) 691 Average net debt on reportable basis (3,954) (4,519) 565

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2018 PRELIMINARY RESULTS

USES OF FREE CASH FLOW

26

  • 1. Acquisitions are initial payments, net of cash acquired and disposal proceeds, and include other investments and associates
  • 2. FY 2017 net debt stated at 2018 actual exchange rates

TARGET FY 2018 FY 2017

(Disposals)/acquisitions (excluding earnouts)¹: Acquisitions

  • C. £200M

£288M £326M Less disposals

  • C. £(200M)

£(849M) £(296M) Net (disposals)/acquisitions NEUTRAL £(561M) £30M Share buy-backs: % of issued share capital

  • £207M

1.3% £504M 2.5% Balance Sheet Headroom: Undrawn facilities & surplus cash

  • £4.3B

£3.2B Target range of average net debt/EBITDA ratio of 1.5-1.75x to be achieved by end of 2021

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SLIDE 27

2018 PRELIMINARY RESULTS

DEBT MATURITY PROFILE £M AT 31 DECEMBER 2018

27

Exchange Rates £/$ 1.2746 £/€ 1.1130 £/A$ 1.8097

  • 1. Swapped to £444m at 2.61%
  • 2. Swapped to 6 month $Libor + 1.52%
  • 3. Swapped to 6 month $Libor + 2.34%
  • 4. These instruments are subject to financial covenants

TOTAL CREDIT £M TOTAL DRAWN £M

£ bonds £400M (2.875% Sep ’46) 400 400 US bond $450M (5.625% Nov ’43) 353 353 US bond $272M (5.125% Sep ’42) 213 213 Eurobonds €600M (1.625% Mar ’30) 539 539 Eurobonds €750M (2.25% Sep '26) 674 674 Eurobond €500M (1.375% Mar ‘25)/£444M Swap1 444 444 US bond $750M (3.75% Sep '24) 589 589 Eurobonds €750M (3.0% Nov ’23) 674 674 US bond $500M (3.625% Sep ’22)2 392 392 Eurobond €250M (3m EURIBOR + 0.45% Mar ’22) 225 225 US bond $812M (4.75% Nov ’21)3 637 637 £ bonds £200M (6.375% Nov ’20) 200 200 Eurobonds €250M (3m EURIBOR + 0.32% May ’20) 225 225 Eurobonds €600M (0.75% Nov ’19) 539 539 Debt Facilities 6,104 6,104 Bank revolver4 WPP ($2,500M Jul’21) 1,961

  • Bank revolver4 WPP AUNZ (A$520M Jun ’19/Jun ‘21)

287 173 Net cash, overdrafts & other adjustments – (2,260) Total Borrowing Capacity/Net Debt 8,352 4,017

100 200 300 400 500 600 700 800 2 1 9 2 2 2 2 1 2 2 2 2 2 3 2 2 4 2 2 5 2 2 6 2 3 2 4 2 2 4 3 2 4 6

Weighted Average Coupon 3.0% Weighted Average Maturity 8.3 years Available Liquidity £4,335M

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SLIDE 28

2018 PRELIMINARY RESULTS

IFRS 16 : OVERVIEW

28

  • 1. As disclosed on P. 131 of WPP plc 2017 annual report
  • Pre IFRS16. Historically disclosed future minimum amounts payable under all lease commitments. For

2017, total of £3.9B¹. No discounting factor applied

  • IFRS16 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 £2.3B-£2.7B, right-of-use asset, and 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

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SLIDE 29

2018 PRELIMINARY RESULTS

  • No cash impact
  • Estimated 2019 P&L impact based on 31 December 2018 leases:

Operating expenses - although higher total expenses as interest front loaded Operating profit Operating profit margin +0.4 to +0.6 margin points PBT Diluted EPS -1.3p to -1.6p

  • PBT and EPS neutral point expected 2023

IFRS 16: HEADLINE¹ P&L IMPACT

29

  • 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, and revaluation of financial instruments

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SLIDE 30

2018 PRELIMINARY RESULTS

IFRS 16 : 14 LARGEST LEASES

REPRESENTING C. 45% OF PORTFOLIO

30

EPS

  • 1.3p to
  • 1.6p

EPS Neutral 2001-2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030-2039 Lease #1 11.8 Yrs 21.3 Years Lease #2 8.4 Yrs 15.4 Years Lease #3 13.7 Yrs 24.7 Years Lease #4 5.7 Yrs 10.5 Years Lease #5 11.3 Yrs 20.1 Years Lease #6 5.6 Yrs 10.4 Years Lease #7 21.3 Yrs 34 Years Lease #8 6.7 Yrs 12.6 Years Lease #9 5.7 Yrs 10 Years Lease #10 4.8 Yrs 10 Years Lease #11 5.7 Yrs 10 Years Lease #12 5.7 Yrs 10 Years Lease #13 5.5 Yrs 10 Years Lease #14 3.8 Yrs 7 Years Pre-transition Post-transition EPS Negative EPS Positive

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SLIDE 31

2018 PRELIMINARY RESULTS

OUTLOOK

31

  • Our 2019 financial targets are:

– Like-for-like revenue less pass-through costs down 1.5%-2.0%, with stronger headwinds in first half, due to client losses in 2018 – Headline operating margin down around 1 margin point on a constant currency basis (excluding impact of IFRS 16)

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SLIDE 32

2018 PRELIMINARY RESULTS

PROGRESS ON STRATEGY

32

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SLIDE 33

2018 PRELIMINARY RESULTS

RADICAL EVOLUTION: A STRATEGY FOR GROWTH

CREATIVITY DATA AND TECHNOLOGY VISION AND OFFER CULTURE SIMPLER STRUCTURE

33

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SLIDE 34

2018 PRELIMINARY RESULTS

WPP is a creative transformation company

What we do

Commerce Experience Communications Technology

Our offer to clients

Clients

Empowered leadership to deliver seamless solutions, connecting technology, data and creativity

Companies

Stronger operating brands covering each discipline, well positioned for growth

Countries

Deeply connected, diverse communities working together to serve clients locally, leverage local scale and attract talent Structure To bring together brilliant people to build better futures for our clients Our purpose

Optimistic Extraordinary Open

How we behave

34 2018 PRELIMINARY RESULTS

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SLIDE 35
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SLIDE 36

2018 PRELIMINARY RESULTS

CLIENTS RESPONDING WELL TO NEW STRATEGY

36

slide-37
SLIDE 37

2018 PRELIMINARY RESULTS

STRONG CREATIVE WORK

37

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SLIDE 38

2018 PRELIMINARY RESULTS

GILLETTE RESULTS

38

  • 1. Ace Metrix
  • 2. ”Does Woke Advertising Work?”, Barclays, 21 February 2019
  • 3. Morning Consult

+300,000%

PEAK GROWTH IN GILLETTE’S TWEET VOLUME COMPARED TO PRE-VIDEO LEVELS2

#3

MOST SEARCHED TERM ON GOOGLE IN THE US THE DAY AFTER LAUNCH

TOP 10

TRENDING VIDEO WORLDWIDE ON YOUTUBE

+65% OF VIEWERS

INDICATED THE AD MADE THEM MORE/MUCH MORE LIKELY TO PURCHASE FROM GILLETTE1

+29% INCREASE

IN CONSUMERS WHO AGREE THAT GILLETTE ”SHARED THEIR VALUES” FOLLOWING THE AD3

+4,000

EARNED MEDIA PLACEMENTS

15B+

IMPRESSIONS EARNED

The response has been incredible… We’re only a week into it but I think we will see the positive responses go up more and more and people will see, especially among millennials that Gillette stands for

  • something. David Taylor, CEO, Procter & Gamble ”
slide-39
SLIDE 39

2018 PRELIMINARY RESULTS

PROGRESS ON TECHNOLOGY

39

  • Building out central technology team with new data and creative

technology appointments

  • Launched cloud migration project across GroupM, Wunderman Thompson

and Hogarth

  • Deployed AI-driven search tools in 30 additional clients
  • Formed first-to-market partnership with Waze to give clients access to

unique in-car advertising experience and mobility data

slide-40
SLIDE 40

2018 PRELIMINARY RESULTS

BUILDING THE TEAM

  • 1. External appointments

Stephan Pretorius Chief Technology Officer, WPP Jacqui Canney1 Global Chief People Officer, WPP Jon Cook CEO, VMLY&R Shane Atchison1 North America CEO, Wunderman Thompson Laurent Ezekiel1 Chief Marketing and Growth Officer, WPP Judy Jackson Global Head of Culture, WPP Mel Edwards CEO, Wunderman Thompson Piyush Pandey CCO Worldwide and Executive Chairman India, Ogilvy Annette Male1 APAC CEO, Wunderman Thompson Leslie Sims Chief Creative Officer US, Ogilvy Beth Ann Kaminkow Global CEO, Geometry

40

Brian Wieser1 Global President - Business Intelligence, GroupM

slide-41
SLIDE 41

2018 PRELIMINARY RESULTS

BUILDING A COLLABORATIVE & GROWTH FOCUSED CULTURE

  • Executive Committee formed
  • Chief People Officer appointed
  • Incentive programs being refocused

– Increasing % based on WPP performance – 50% based on top-line growth/50% based on operating profit and margin

  • USA client growth collaboration

41

slide-42
SLIDE 42

2018 PRELIMINARY RESULTS

SIMPLIFICATION

42

1. More integrated solutions to clients

  • 2. Better positioned for growth
  • 3. Simpler to manage
  • 4. Eliminate overhead

AMOUNTS TO C.23% OF THE COMPANY

FEWER FEWER STRONGE GER

slide-43
SLIDE 43

2018 PRELIMINARY RESULTS

RESTRUCTURING: EFFICIENCY

Investor Day Target Current Status

Business Unit Rationalisation Business Unit Closures Gross Headcount Reduction 100 planned mergers (at local office level) by end of 2019 80 planned closures by end of 2019 3,500 by end of 2019 70 completed or in progress 57 closed 2,650

ü ü ü ü

On Plan?

Expected 2019 OP Benefit from Gross Savings £160m £160m

43

slide-44
SLIDE 44

2018 PRELIMINARY RESULTS

AppNexus CMC Content Domo Fullscreen Fullsix Imagine Ooh!Media Raine Capital II Woven Inc / UpRoxx YouEarnedIt Zappistore

Investments

RESTRUCTURING: DISPOSALS

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

Big Idea Group BNTI1 Bruin Sports Capital DASL Etecture1 Globant Imagina (Return of Capital) Jan Kelley1 OptimizeRx Rediffusion Richard Attias1 Teledirect

Associates / JV’s

CEEOR1 Grey Bulgaria Grey Serbia IEG JWT Mirum Miami Mannov PR1 Maxx Marketing On Call Pace PXP Sudler & Hennessey India TNS France CATI & F2F

Subsidiaries Total 2018 Cash Inflow £849m 2018 PBIT Contribution £4m

44

slide-45
SLIDE 45

2018 PRELIMINARY RESULTS

  • 1,250
  • 1,000
  • 750
  • 500
  • 250

250 500 750 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19

BETTER CAPITAL DISCIPLINE

YEAR ON YEAR CHANGE IN NET DEBT – CONSTANT CURRENCY¹

45

  • 1. Constant currency - PY net debt recalculated at CY actual exchange rates

Decrease £m

slide-46
SLIDE 46

2018 PRELIMINARY RESULTS

SUMMARY

  • Good initial progress on implementing strategy
  • Promising response from clients, talent and partners
  • Simplifying and repositioning the business for growth
  • Disposals and capital discipline to have an impact
  • Preparations for Kantar progressing well, launch of sale process

imminent, expected to announce outcome in second quarter

46

slide-47
SLIDE 47

2018 PRELIMINARY RESULTS

OTHER FINANCIAL INFORMATION

HARD COPY ONLY 47

slide-48
SLIDE 48

2018 PRELIMINARY RESULTS

UNAUDITED IFRS INCOME STATEMENT

48

  • 1. 2017 revenue restated by £539m for the implementation of IFRS 15
  • 2. 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, and revaluation of financial instruments

YEAR TO 31 DECEMBER 2018 £M 2017¹ £M Δ REPORTED Δ CONSTANT CURRENCY Revenue 15,602 15,804

  • 1.3%

1.5% Gross profit 2,939 3,175

  • 7.4%
  • 5.0%

Operating profit pre exceptional & goodwill/intangibles² 1,962 2,154

  • 8.9%
  • 6.6%

Net exceptional loss (67) (24)

  • Goodwill/intangible charges

(464) (222)

  • 108.8%
  • 109.4%

Operating profit 1,431 1,908

  • 25.0%
  • 22.2%

Income from associates 86 113

  • 24.4%
  • 23.2%

Share of associate exceptional (loss)/gain (41) 1

  • PBIT

1,475 2,022

  • 27.0%
  • 24.4%

Net finance (costs)/income (12) 87

  • Profit before tax

1,463 2,109

  • 30.6%
  • 28.1%

Tax (324) (197)

  • 64.4%
  • 74.4%

Profit after tax 1,139 1,912

  • 40.4%
  • 38.5%

Non-controlling interests (76) (96) 20.1% 17.8% Attributable to share owners 1,063 1,817

  • 41.5%
  • 39.6%

Reported diluted EPS 84.3p 142.4p

  • 40.8%
  • 38.9%
slide-49
SLIDE 49

2018 PRELIMINARY RESULTS

NET EXCEPTIONAL GAIN

49

  • 1. As outlined in the Investor Day on 11 December 2018, the Group has undertaken a strategic review of its operations. As part of that review, restructuring actions have been taken to right-size

underperforming businesses, address high cost severance markets and simplify operational structures. This has included a number of WPP’s operating companies having been merged, closed or sold. It also includes transformation costs with respect to strategic initiatives like co-locations in major cities, IT transformation and shared services. £234 million of restructuring and transformation costs were recorded in the fourth quarter in relation to this plan. This included £63 million of non-cash write-offs and £171 million of actions that will have a cash impact in 2018 and beyond. In 2018 the cash outflow was £50 million. The £171 million forms part of the anticipated £300 million total cash cost of the restructuring plan that we announced – and further restructuring and transformation costs will be incurred in 2019, 2020 and 2021. The total of restructuring and transformation costs in 2018 was £302 million. The remaining £68 million relates to severance restructuring costs recorded in the first half, together with costs in relation to the continuing global IT transformation program.

YEAR TO 31 DECEMBER 2018 £M

Gain on disposals of investments and subsidiaries (Globant £185m) 235¹ Restructuring and transformation costs (302)¹ Net exceptional loss (67)¹ Share of associate exceptionals (41)¹ Net exceptional loss including associate exceptionals (108)¹

slide-50
SLIDE 50

2018 PRELIMINARY RESULTS

UNAUDITED HEADLINE¹ IFRS INCOME STATEMENT

50

  • 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, and revaluation of financial instruments

  • 2. 2017 revenue and revenue less pass-through costs restated by £539m and

£30m respectively for the implementation of IFRS 15

  • 3. Headline PBIT before associates
  • 4. Headline PBIT before associates as % of revenue less pass-through costs
  • 5. Margin Points
  • 6. Headline PBIT as % of revenue less pass-through costs

YEAR TO 31 DECEMBER 2018 £M 2017² £M Δ REPORTED Δ CONSTANT CURRENCY Δ LIKE-FOR- LIKE Revenue 15,602 15,804

  • 1.3%

1.5% 0.8% Revenue less pass-through costs 12,827 13,170

  • 2.6%

0.2%

  • 0.4%

Operating profit³ 1,962 2,154

  • 8.9%
  • 6.6%

Income from associates 85 113

  • 24.4%
  • 23.2%

PBIT 2,047 2,267

  • 9.7%
  • 7.4%

Net finance costs (184) (174)

  • 5.7%
  • 5.5%

Profit before tax 1,863 2,093

  • 11.0%
  • 8.5%

Tax at 22.5% (2017: 22.0%) (419) (460) 9.0% 5.6% Profit after tax 1,444 1,633

  • 11.5%
  • 9.3%

Non-controlling interests (81) (96) 15.2% 12.7% Attributable to share owners 1,363 1,537

  • 11.3%
  • 9.1%

Diluted EPS 108.0p 120.4p

  • 10.3%
  • 8.1%

Operating profit margin⁴ 15.3% 16.4%

  • 1.1⁵
  • 1.1⁵
  • 1.1⁵

PBIT margin⁶ 16.0% 17.3%

  • 1.3⁵
  • 1.3⁵
  • 1.2⁵

EBITDA 2,311 2,534

  • 8.8%
  • 6.4%
slide-51
SLIDE 51

2018 PRELIMINARY RESULTS

REVENUE LESS PASS-THROUGH COSTS GROWTH

BY COUNTRY

51

  • 1. Like-for-like growth vs prior year
  • 2. Includes Hong Kong and Taiwan

REVENUE LESS PASS-THROUGH COSTS GROWTH¹ TOP COUNTRIES

More than 10% Argentina, Poland 5% to 10% Brazil, Denmark, India, Mexico, South Korea, Sweden 0% to 5% Greater China², Mainland China, Colombia, France, Germany, Italy, Japan, Netherlands, Russia, Spain, Thailand, Turkey Less than 0% Australia, Belgium, Canada, Dubai, Indonesia, New Zealand, Singapore, South Africa, Switzerland, UK, USA

slide-52
SLIDE 52

2018 PRELIMINARY RESULTS

REVENUE LESS PASS-THROUGH COSTS GROWTH

BY CATEGORY

52

  • 1. Like-for-like growth vs prior year

REVENUE LESS PASS-THROUGH COSTS GROWTH¹ CATEGORIES

5% to 10% Retail, Travel & Airline 0% to 5% Automotive, Electronics, Entertainment, Government Less than 0% Computers, Drinks, Financial Services, Food, Media & Oil, Personal Care & Drugs, Telecommunications

slide-53
SLIDE 53

2018 PRELIMINARY RESULTS

REVENUE LESS PASS-THROUGH COSTS BY INDUSTRY

53

Auto 13% Consumer Products 6% Personal Care 10% Healthcare 12% Food & Drink 13% Financial Services 8% Oil 2% Government 2% Retail 7% Technology 6% Telecommunications 5% Travel & Entertainment 7% Other 9%

Chart represents revenue attributed to each industry expressed as % of total revenue from WPP’s designated clients (over 3,000) for year ended 31 December 2018

slide-54
SLIDE 54

2018 PRELIMINARY RESULTS

NET FINANCE COSTS/(INCOME)

YEAR TO 31 DECEMBER 2018 £M 2017 £M Δ £M

Net debt interest 191 180 (11) Investment income (15) (16) (1) Pensions 8 10 2 Sub-total (7) (6) 1 Headline finance costs 184 174 (10) Financial instruments (172) (261) (89) Net finance costs/(income) 12 (87) (99)

54

slide-55
SLIDE 55

2018 PRELIMINARY RESULTS

PENSIONS DEFICIT

55

  • 1. Primarily due to a 46 basis point increase in discount rates in 2018 (3.23%) compared with 2017 (2.77%)

YEAR TO 31 DECEMBER £M 2018 2017

Deficit B/F (206) (277) Service cost (16) (13) Plan liabilities interest charge (31) (33) Funding 45 68 Investment returns (18) 40 Δ valuation assumptions¹ 53 4 Other movements (4) (3) Movements excluding FX 29 63 Foreign exchange impact (7) 8 Deficit C/F (184) (206)

Asset Allocation 2018 2017 Bonds & insured annuities 76% 75% Equities 9% 13% Other 15% 12%

slide-56
SLIDE 56

2018 PRELIMINARY RESULTS

EARNOUT ACCRUAL

YEAR TO 31 DECEMBER £M 2018

Accrual B/F 631 Earnouts paid (120) New acquisitions 49 Revised estimates taken to goodwill (68) Revaluations of payments (83) Excluding FX 409 Foreign exchange impact 6 Accrual C/F 415

56

EXPECTED PAYMENTS £M

2019 148 2020 140 2021 39 2022 50 2023 20 2024+ 18 Total 415

slide-57
SLIDE 57

2018 PRELIMINARY RESULTS

ORDINARY SHARES - DILUTED

NUMBER SHARES MILLION 2018 2017 Δ

Average Basic 1,248 1,261 1.1% Share Option Dilution 1 2 Other Potentially Issuable Shares 12 13 Average Diluted 1,261 1,276 1.1%

57

slide-58
SLIDE 58

2018 PRELIMINARY RESULTS

ORDINARY SHARES - BASIC

NUMBER SHARES MILLION 2018 2017 Δ

1 January 1,333 1,332 Option exercise

  • 1

31 December 1,333 1,333

  • Weighted Average

1,333 1,332

  • 0.1%

ESOP, Treasury & Other (85) (71) Average Basic 1,248 1,261 1.1%

58

slide-59
SLIDE 59

2018 PRELIMINARY RESULTS

EFFECTS OF CURRENCY

2018 2017 STERLING STRONGER/(WEAKER)

US$ 1.34 1.29 4% € 1.13 1.14

  • 1%

¥ 147 145 1% Chinese Renminbi 8.8 8.7 1% Brazilian Real 4.87 4.11 18% Australian $ 1.79 1.68 7% Canadian $ 1.73 1.67 4% Indian Rupee 91 84 8% Singapore $ 1.80 1.78 1% Russian Rouble 84 75 12% South African Rand 17.6 17.2 2%

59

  • Currency movements

accounted for 3% decrease revenue less pass-through costs

  • Reflects strengthening
  • f £ sterling against

most currencies

slide-60
SLIDE 60

2018 PRELIMINARY RESULTS

2018 PRELIMINARY RESULTS

London

1 MARCH 2019 60