TIDMWPP
RNS Number : 3046I
WPP PLC
04 August 2023
4 August 2023
2023 Interim Results
Resilient performance with second quarter impacted by lower
revenues in the US from technology clients and delays in spend
on technology projects. Now expect 2023 LFL growth of 1.5-3.0%.
Margin guidance remains at around 15% at 2022 rates
Key figures
+/(-) % +/(-) %
GBPm H1 2023 reported(1) LFL(2) H1 2022
================================ ======= ============ ======= =======
Revenue 7,221 6.9 3.5 6,755
================================ ======= ============ ======= =======
Revenue less pass-through costs 5,811 5.5 2.0 5,509
================================ ======= ============ ======= =======
Reported:
================================ ======= ============ ======= =======
Operating profit 306 (43.2) - 539
================================ ======= ============ ======= =======
Profit before tax 204 (51.2) - 419
================================ ======= ============ ======= =======
Diluted EPS (p) 10.3 (54.6) - 22.7
================================ ======= ============ ======= =======
Dividends per share (p) 15.0 - - 15.0
================================ ======= ============ ======= =======
Headline(3) :
================================ ======= ============ ======= =======
Operating profit 666 4.3 2.7 639
================================ ======= ============ ======= =======
Operating profit margin 11.5 % (0.1pt*) 0.1 pt* 11.6 %
================================ ======= ============ ======= =======
Profit before tax 546 (2.9) - 562
================================ ======= ============ ======= =======
Diluted EPS 33.1p 0.3 - 33.0 p
================================ ======= ============ ======= =======
* Margin points
H1 and Q2 financial highlights
-- H1 reported revenue +6.9%, LFL revenue +3.5% (Q2 +2.3%)
-- H1 revenue less pass-through costs +5.5%, LFL revenue less
pass-through costs +2.0% (Q2 +1.3%)
-- In Q2, ex-US growth accelerated to mid-single digits, with
China growing albeit less strongly than expected. North America
declined in Q2, primarily due to lower revenues from technology
clients
-- H1 headline operating profit margin 11.5%, down 0.1pt, and on
a constant FX basis improved by 0.1pt. Efficiency benefits offset
by investment in IT and higher severance costs
-- Trade working capital favourable movement of GBP165m
year-on-year. Non-trade working capital adverse movement of
GBP316m
-- Adjusted net debt at 30 June 2023 GBP3.5bn, up GBP0.3bn
year-on-year, GBP0.4bn lower than Q1 2023. Expect year end net debt
to be flat year-on-year
Performance, strategic progress and outlook
-- Global Integrated Agencies H1 LFL revenue less pass-through
costs growth +2.2% (Q2 +1.5%): within which GroupM, our media
planning and buying business +6.1% (Q2 +6.1%), partially offset by
a 0.8% LFL decline at other Global Integrated Agencies (Q2
-2.3%)
-- Solid new business performance: $2.0bn net new billings in H1
with the pipeline of potential new business larger than at the same
point in 2022
-- Acquisitions of Goat and Obviously in the fast-growth area of
influencer marketing and an investment in Majority, a diversity-led
creative agency
-- Transformation programme on track to deliver at least GBP450m
of annual savings this year over a 2019 base
-- Planned review of our property portfolio resulting in a
consolidation of our office space with an impairment charge for the
full year of approximately GBP220m which is largely non-cash (H1
2023: GBP180m)
-- 2023 interim dividend of 15.0p declared (2022: 15.0p)
-- Full year 2023 LFL growth of 1.5-3.0% (previously 3-5%); FY
2023 headline operating profit margin around 15.0% (excluding the
impact of FX)
Mark Read, Chief Executive Officer of WPP, said:
"Our performance in the first half has been resilient with Q2
growth accelerating in all regions except the USA, which was
impacted in the second quarter by lower spending from technology
clients and some delays in technology-related projects. This was
felt primarily in our integrated creative agencies. China returned
to growth in the second quarter albeit more slowly than expected.
In the near term, we expect the pattern of activity in the first
half to continue into the second half of the year.
"Our media business, GroupM, grew consistently across the first
six months as did our businesses in the UK, Europe, Latin America
and Asia-Pacific. Client spending in consumer packaged goods,
financial services and healthcare remained good and, despite
short-term challenges, our technology clients represent an
important driver of long-term growth. Our agencies performed
extremely well at the Cannes Lions Festival winning five Grand Prix
and 165 Lions with Mindshare recognised as the most-awarded media
agency. We won major new business assignments with clients
including: Reckitt, Mondelēz, easyJet, Lloyds Banking Group, Pernod
Ricard and India's second largest advertiser, Maruti Suzuki.
"We have exciting future plans in AI that build on our
acquisition of Satalia in 2021 and our use of AI across WPP. We are
leveraging our efforts with partnerships with the leading players
including Adobe, Google, IBM, Microsoft, Nvidia and OpenAI. We are
delivering work powered by AI for many clients including Nestlé,
Nike and Mondelēz. AI will be fundamental to WPP's future success
and we are committed to embracing it to drive long-term growth and
value."
This announcement contains information that qualifies or may
qualify as inside information. The person responsible for arranging
the release of this announcement on behalf of WPP plc is Balbir
Kelly-Bisla, Company Secretary.
For further information:
Investors and analysts
Tom Waldron +44 7788 695864
Anthony Hamilton +44 7464 532903
Caitlin Holt +44 7392 280178
irteam@wpp.com
Media
Chris Wade +44 20 7282 4600
Richard Oldworth +44 7710 130 634
Buchanan Communications +44 20 7466 5000
wpp.com/investors
(1) Percentage change in reported sterling.
(2) Like-for-like. LFL comparisons are calculated as follows:
current year, constant currency actual results (which include
acquisitions from the relevant date of completion) are compared
with prior year, constant currency actual results from continuing
operations, adjusted to include the results of acquisitions and
disposals for the commensurate period in the prior year. Both
periods exclude results from Russia.
(3) In this press release not all of the figures and ratios used
are readily available from the unaudited interim results included
in Appendix 1. Management believes these non-GAAP measures,
including constant currency and like-for-like growth, revenue less
pass-through costs and headline profit measures, are both useful
and necessary to better understand the Group's results. Where
required, details of how these have been arrived at are shown in
Appendix 2.
First half overview
First half revenue was GBP7.2bn, up 6.9% from GBP6.8bn in H1
2022, and up 3.5% like-for-like. Revenue less pass-through costs
was GBP5.8bn, up 5.5% from GBP5.5bn in H1 2022, and up 2.0%
like-for-like.
Q2 2023 % % % %
GBPm reported M&A FX LFL
-------------------------- ------- --------- ---- ------------- ----
Revenue 3,761 2.7 1.1 (0.7) 2.3
-------------------------- ------- --------- ---- ------------- ----
Revenue less pass-through
costs 2,982 1.6 0.9 (0.6) 1.3
-------------------------- ------- --------- ---- ------------- ----
H1 2023 % % % %
GBPm reported M&A FX LFL
-------------------------- ------- --------- ---- --- ----
Revenue 7,221 6.9 0.9 2.5 3.5
-------------------------- ------- --------- ---- --- ----
Revenue less pass-through
costs 5,811 5.5 0.9 2.6 2.0
-------------------------- ------- --------- ---- --- ----
Business segment review (4)
Business segments - revenue less pass-through costs
Global Public Relations Specialist Agencies
% LFL +/(-) Integrated Agencies
------------ -------------------- ---------------- -------------------
Q2 2023 1.5 2.0 (1.6)
------------ -------------------- ---------------- -------------------
H1 2023 2.2 2.1 0.2
------------ -------------------- ---------------- -------------------
Global Integrated Agencies : GroupM, our media planning and
buying business, grew consistently during the half and across all
regions, benefiting from continued client investment in media, with
like-for-like growth in revenue less pass-through costs of +6.1%
(Q2 +6.1%), partially offset by a 0.8% LFL decline at other Global
Integrated Agencies (Q2 -2.3%).
Ogilvy grew well, supported by recent new business wins
including Verizon and SC Johnson. Hogarth, our creative production
agency, continued to deliver good growth as it expands its
collaboration with other WPP agencies.
Other Global Integrated Agencies, Wunderman Thompson, VMLY&R
and AKQA Group, felt the greatest impact from reduced spend across
the technology sector and delays in technology-related projects. As
anticipated, revenue less pass-through costs in the retail sector
was impacted by known 2022 client losses.
Revenue less pass-through costs from our offer in experience,
commerce and technology was around 39% of our Global Integrated
Agencies, excluding GroupM, compared to around 35% in 2019 and
unchanged from H1 2022, impacted by the previously referenced
delays in technology-related projects. Our digital billings mix
within GroupM increased to 49%, compared to 48% in FY 2022.
Public Relations : FGS Global continued to grow strongly in the
first half. H+K Strategies delivered solid growth, lapping
double-digit growth in the first half 2022. BCW saw a small decline
in revenue less pass-through costs in the first half.
Specialist Agencies : good growth in design agency Landor &
Fitch, and our specialist healthcare media planning and buying
agency, CMI Media Group, was offset by declines at smaller agencies
affected by delays in client projects.
Regional review
Regional segments - revenue less pass-through costs
Western Continental
% LFL +/(-) North America United Kingdom Europe Rest of World
------------ ------------- -------------- ------------------- -------------
Q2 2023 (4.1) 9.0 3.9 4.3
------------ ------------- -------------- ------------------- -------------
H1 2023 (1.2) 8.2 3.7 3.1
------------ ------------- -------------- ------------------- -------------
North America declined by 1.2% in the first half reflecting the
lower revenues from technology clients, which predominantly
impacted our integrated creative agencies, and the expected impact
of 2022 client losses in the retail sector. This was partially
offset by growth in spending from consumer packaged goods,
healthcare and financial services. GroupM continued to grow well in
the region.
The United Kingdom grew strongly led by GroupM. CPG and
healthcare were the strongest client sectors. In Western
Continental Europe, strong performances in Germany and Spain offset
declines in France due to client losses.
The Rest of World saw good growth in the half. China grew 4.8%
in the second quarter, as that market continued to recover from
Covid-related impacts, albeit at a slower pace than anticipated.
India moved into growth in Q2 against a strong comparative of 48%
growth in Q2 2022.
Top five markets - revenue less pass-through costs
% LFL +/(-) USA UK Germany China India
------------ ----- --- ------- ----- -----
Q2 2023 (4.5) 9.0 6.6 4.8 2.5
------------ ----- --- ------- ----- -----
H1 2023 (1.2) 8.2 5.4 (4.0) 0.8
------------ ----- --- ------- ----- -----
Client sector review
Client sector - revenue less pass-through costs
H1 2023 % share % growth +/(-)
--------------------------------------- ------- --------------
CPG 26.1 15.1
--------------------------------------- ------- --------------
Tech & Digital Services 17.8 (4.9)
--------------------------------------- ------- --------------
Healthcare & Pharma 12.5 4.2
--------------------------------------- ------- --------------
Automotive 10.2 (0.2)
--------------------------------------- ------- --------------
Retail 9.5 (7.9)
--------------------------------------- ------- --------------
Telecom, Media & Entertainment 6.2 (1.4)
--------------------------------------- ------- --------------
Financial Services 6.1 10.0
--------------------------------------- ------- --------------
Other 5.5 (0.3)
--------------------------------------- ------- --------------
Travel & Leisure 3.6 8.9
--------------------------------------- ------- --------------
Government, Public Sector & Non-profit 2.5 3.6
--------------------------------------- ------- --------------
Strategic progress
There have never been more opportunities for advertisers to
reach consumers, reflected in the plethora of marketing channels
available. In this increasingly complex world, WPP's unique
position and offer is more relevant than ever. Our clients continue
to invest in their brands and seek our support as they navigate
this complexity.
Clients: We have won $2.0bn of net new business billings in the
first half (H1 2022: $3.4bn) including the potential loss of
certain Pfizer assignments currently held by WPP integrated
creative agencies. Key assignment wins included Maruti Suzuki
(media), Pernod Ricard (creative), Reckitt (media), Beko
(creative), and Costa Coffee (PR).
Our Vantage global client satisfaction survey has shown the key
measure of "Likely To Recommend" has remained at all-time high
levels with an increase in scores related to world-class
creativity.
Creativity and awards : Creativity is at the heart of our offer,
and we continue to be recognised for our creative excellence. WPP
had another successful year at Cannes Lions International Festival
of Creativity, winning a total of 165 Lions including one Titanium
Lion, five Grand Prix, and 24 Gold awards. Mindshare was also named
Media Network of the Year.
Earlier in the year, WARC named WPP the top company in all three
of their rankings, the Creative 100, Effective 100 and Media 100
lists. Ogilvy ranked as the top network of the year in both the
Creative 100 and Effective 100 while EssenceMediacom took first
place in the Media 100. In addition, the Effie Awards named WPP the
most effective communication company in the world, with Ogilvy
placing first in the most effective agency network rankings.
Investment for growth: We have invested in strategically
important areas and growth markets. We acquired Goat, a
London-based, data-driven influencer marketing agency; Obviously, a
New York-based, technology-led influencer marketing agency; 3K
Communication, a Frankfurt-based healthcare PR agency; and amp, one
of the world's leading sonic branding companies. We also made a
minority investment in Majority, a diversity-focused US creative
agency.
In July, KKR completed their minority investment to become a 29%
shareholder in FGS Global, after acquiring all of Golden Gate
Capital's equity and a proportion of the interests of WPP and FGS
Global management. WPP remains the majority owner at 51%. The
transaction valued FGS Global at $1.425bn.
We have invested organically in new technology platforms to
provide a future-facing offer to clients and innovate for the
medium term. The main areas of investment are in Choreograph, our
data company, and WPP Open, our AI-powered technology platform.
We believe that AI will be fundamental to WPP's business and are
excited by its transformational potential. Our expertise in the
application of AI to marketing is based on investments that we have
been making over many years, including the appointment of a Head of
Creative AI in 2019 and the acquisition of Satalia in 2021.
AI is used extensively across our business today, particularly
in GroupM and in Hogarth, our creative production business. Our
application of AI includes automation of workflows, speeding up the
process of ideation and concepting, and producing innovative
creative work for clients. An example is our work for Cadbury's in
India which used AI to allow Bollywood superstar Shah Rukh Khan to
produce personalised ads for local businesses which won a Titanium
Lion for Creativity at the 2022 Cannes Lions festival and won again
at the festival in 2023, securing a Grand Prix for Creative
Effectiveness.
We are working with technology from all the main AI companies,
including Adobe, Google, IBM, Microsoft, Nvidia, and OpenAI, with
dedicated enterprise platforms, proprietary to WPP, to deliver work
to clients that protects their information. We recognise the
challenges of AI to society and have implemented legal and ethical
guidelines to help us responsibly deploy this technology.
In May, WPP and Nvidia announced plans to develop a content
engine that harnesses NVIDIA Omniverse(TM) and AI to enable
creative teams to produce high-quality commercial content faster,
more efficiently and at scale while staying fully aligned with a
client's brand.
The new engine connects an ecosystem of 3D design, manufacturing
and creative supply chain tools, including those from Adobe and
Getty Images, letting WPP's artists and designers integrate 3D
content creation with generative AI. This enables our clients to
reach consumers in highly personalised and engaging ways, while
preserving the quality, accuracy and fidelity of their company's
brand identity, products and logos.
T alent : Our success is driven by our exceptional talent. We
have continued to invest to attract, engage and develop the best
talent in our industry. In May, we hired Corey duBrowa, one of the
industry's most highly regarded communications leaders, as Chief
Executive of BCW.
We have invested in education and training, including through
our Future Readiness Academies, a bespoke global learning programme
available to everyone across WPP. We also launched the second
cohort of our Creative Technology Apprenticeship, a nine-month
intensive programme where apprentices learn creative technology
skills using the latest software and hardware to prepare them for a
career in today's creative technology field. In addition, we
sponsored a cohort of WPP leaders through a Postgraduate Diploma in
AI for Business at Oxford University's Sa d Business School, with
28 senior executives graduating earlier this year.
Transformation: We are making progress on our transformation
plan which we set out in December 2020, designed to achieve GBP600m
in gross annual cost efficiencies by 2025. We are on target to
achieve our annual run-rate of GBP450m in efficiencies this year,
against a 2019 baseline.
We opened five new campuses, in Atlanta, Austin, Guangzhou,
Manchester and Paris, in the half, taking the total to 38 campuses.
By the end of the year, we intend to open two further campuses and
will accommodate around 60,000 of our people in campus
buildings.
A review of our property portfolio has led to ongoing actions
including the further consolidation of our operations in campuses
across the US, in New York and other cities.
Purpose and ESG
WPP's purpose is to use the power of creativity to build better
futures for our people, planet, clients and communities. During the
first six months of the year we have made good progress in
fulfilling our commitments in each pillar of our purpose
statement.
People : We are committed to our $30m pledge, set out in June
2020, to fund inclusion programmes within WPP and to support
external organisations, as part of our Racial Equity Programme. WPP
agencies globally apply to receive resources to create and run
impactful programmes to advance racial equity. During the quarter,
the programme received applications for its fourth round of
funding.
Planet: In 2021, we announced our commitment to reduce carbon
emissions from our own operations to net zero by 2025 and across
our supply chain by 2030. Our net zero pledges are backed by
science-based reduction targets, which have been verified by the
Science-Based Targets initiative. We have committed to reducing our
absolute Scope 1 and 2 emissions by at least 84% by 2025 and reduce
Scope 3 emissions by at least 50% by 2030, both from a 2019 base
year.
In April, our 2022 Sustainability Report reported that we have
delivered a reduction in Scope 1 and 2 emissions of 71% in absolute
terms since our 2019 baseline.
WPP maintained a low risk rating in the 2023 Sustainalytics risk
rating, which scores the ESG performance of companies. WPP has the
lowest risk rating of its peer group and saw an improvement in its
score from 12.1 in 2022 to 10.6 in 2023.
Clients: We are proud to enable our clients in their own
sustainability journeys and ensure client work is inclusive and
accessible. At the Cannes Lions Festival of Creativity 2023 we were
recognised for our purpose-driven client work including a Titanium
Lion for Corona's Extra Lime campaign in which Corona partnered
with local governments to equip and educate farmers to expand their
lime yield, and a Grand Prix for Dove's #TurnYourBack campaign
which raised awareness of the harmful impact of toxic beauty
content.
Communities: We make a positive contribution to the communities
in which we live and work. WPP collaborated with The One Club for
Creativity to introduce ONE School UK, a free intensive portfolio
programme spanning 16 weeks, aiming to provide opportunities for
promising Black creatives based in the UK. Funded by WPP's Racial
Equity Programme, the virtual ONE School UK welcomed its inaugural
cohort in March 2023.
Outlook
We are updating our guidance for 2023 as follows:
Like-for-like revenue less pass-through costs growth of 1.5-3.0%
for FY 2023 (previously 3-5%); guidance for FY 2023 headline operating
margin of around 15% (excluding the impact of FX) maintained
Other 2023 financial guidance:
-- Mergers and acquisitions will add 0.5-1.0% to revenue less pass-through costs growth
-- FX impact: current rates (at 31 July 2023) imply a c.2.0%
drag on FY 2023 revenues less pass-through costs and a c.0.25pt
drag on FY 2023 headline operating margin
-- Headline income from associates is expected to be around 40m (5)
-- Effective tax rate (measured as headline tax as a % of
headline profit before tax) of around 27%
-- Capex of around GBP250m (previously GBP300m)
-- Restructuring and property costs of around GBP400m,
consisting of costs of GBP180m detailed in prior guidance with the
addition of GBP220m of cost relating to the 2023 property review
(of which GBP200m is non-cash)
-- Trade working capital expected to be broadly flat
year-on-year, with operational improvement offsetting increased
client focus on cash management
-- Non-trade working capital expected to be an outflow of GBP150m
-- Average adjusted net debt/headline EBITDA within the range of 1.5x-1.75x
-- Year-end adjusted net debt flat year-on-year
Medium-term guidance
We remain confident in our ability to deliver annual revenue
less pass-through costs growth of 3-4% and headline operating
profit margin of 15.5-16%, as a result of the actions we have taken
to broaden and strengthen our services, to increase our exposure to
attractive industry segments and to leverage our global scale.
Financial results
Unaudited headline income statement(6) :
Six months ended (GBPm) 30 June 30 June +/(-) % +/(-) %
2023 2022 reported LFL
------------------------------------ ------- ------- --------- -------
Revenue 7,221 6,755 6.9 3.5
------------------------------------ ------- ------- --------- -------
Revenue less pass-through
costs 5,811 5,509 5.5 2.0
------------------------------------ ------- ------- --------- -------
Operating profit 666 639 4.3 2.7
------------------------------------ ------- ------- --------- -------
Operating profit margin
% 11.5% 11.6% (0.1pt*) 0.1 pt*
------------------------------------ ------- ------- --------- -------
Income from associates 8 12 (38.2)
------------------------------------ ------- ------- --------- -------
PBIT 674 651 3.5
------------------------------------ ------- ------- --------- -------
Net finance costs (128) (89) (43.5)
------------------------------------ ------- ------- --------- -------
Profit before tax 546 562 (2.9)
------------------------------------ ------- ------- --------- -------
Tax (148) (143) (3.1)
------------------------------------ ------- ------- --------- -------
Profit after tax 398 419 (5.0)
------------------------------------ ------- ------- --------- -------
Non-controlling interests (37) (43) 13.7
------------------------------------ ------- ------- --------- -------
Profit attributable to shareholders 361 376 (4.0)
------------------------------------ ------- ------- --------- -------
Diluted EPS 33.1p 33.0p 0.3
------------------------------------ ------- ------- --------- -------
*margin points
Reconciliation of profit before tax to headline operating
profit:
Six months ended (GBPm) 30 June 30 June
2023 2022
=================================================== ======= =======
Profit before taxation 204 419
=================================================== ======= =======
Finance and investment income (102) (56)
=================================================== ======= =======
Finance costs 231 145
=================================================== ======= =======
Revaluation and retranslation of financial
instruments (26) (33)
=================================================== ======= =======
Profit before interest and taxation 307 475
=================================================== ======= =======
(Earnings)/loss from associates - after interest
and tax (1) 64
=================================================== ======= =======
Operating profit 306 539
=================================================== ======= =======
Goodwill impairment 53 -
=================================================== ======= =======
Amortisation and impairment of acquired intangible
assets 36 31
=================================================== ======= =======
Investment and other impairment charges 11 -
=================================================== ======= =======
Losses on disposal of investments and subsidiaries 3 48
=================================================== ======= =======
Gains on remeasurement of equity interests
arising from a change in scope of ownership - (60)
=================================================== ======= =======
Litigation settlement (10) -
=================================================== ======= =======
Restructuring and transformation costs 87 81
=================================================== ======= =======
Property related costs 180 -
=================================================== ======= =======
Headline operating profit 666 639
=================================================== ======= =======
Business sector review(7)
Revenue analysis
Q2 H1
===================== ========================== ==========================
GBPm +/(-) +/(-) GBPm +/(-) +/(-)
% reported % LFL % reported % LFL
===================== ===== =========== ====== ===== =========== ======
Global Int. Agencies 3,211 3.3 2.9 6,107 7.2 4.0
===================== ===== =========== ====== ===== =========== ======
Public Relations 311 2.2 1.7 618 7.6 2.7
===================== ===== =========== ====== ===== =========== ======
Specialist Agencies 239 (4.7) (4.6) 496 3.0 (1.3)
===================== ===== =========== ====== ===== =========== ======
Total Group 3,761 2.7 2.3 7,221 6.9 3.5
===================== ===== =========== ====== ===== =========== ======
Revenue less pass-through costs analysis
Q2 H1
===================== ========================== ==========================
GBPm +/(-) +/(-) GBPm +/(-) +/(-)
% reported % LFL % reported % LFL
===================== ===== =========== ====== ===== =========== ======
Global Int. Agencies 2,474 1.8 1.5 4,782 5.4 2.2
===================== ===== =========== ====== ===== =========== ======
Public Relations 292 2.3 2.0 584 6.7 2.1
===================== ===== =========== ====== ===== =========== ======
Specialist Agencies 216 (1.8) (1.6) 445 4.5 0.2
===================== ===== =========== ====== ===== =========== ======
Total Group 2,982 1.6 1.3 5,811 5.5 2.0
===================== ===== =========== ====== ===== =========== ======
Headline operating profit analysis
GBPm 2023 % margin* 2022 % margin*
--------------------- ---- --------- ---- ---------
Global Int. Agencies 540 11.3 507 11.2
--------------------- ---- --------- ---- ---------
Public Relations 88 15.0 83 15.2
--------------------- ---- --------- ---- ---------
Specialist Agencies 38 8.6 49 11.4
--------------------- ---- --------- ---- ---------
Total Group 666 11.5 639 11.6
* Headline operating profit as a percentage of revenue less
pass-through costs
Regional review
Revenue analysis
Q2 H1
================== ======================== =======================
GBPm % reported % GBPm % reported %
LFL LFL
================== ===== ========== ===== ===== ========== ====
N. America 1,376 (1.6) (2.1) 2,744 6.1 0.4
================== ===== ========== ===== ===== ========== ====
United Kingdom 567 14.6 12.7 1,065 11.3 10.4
================== ===== ========== ===== ===== ========== ====
W Cont. Europe 781 6.8 4.3 1,477 9.3 5.0
================== ===== ========== ===== ===== ========== ====
AP, LA, AME, CEE* 1,037 (0.2) 2.3 1,935 4.0 3.6
================== ===== ========== ===== ===== ========== ====
Total Group 3,761 2.7 2.3 7,221 6.9 3.5
* Asia Pacific, Latin America, Africa & Middle East and
Central & Eastern Europe
Revenue less pass-through costs analysis
Q2 H1
================= ======================== ========================
GBPm % reported % GBPm % reported %
LFL LFL
================= ===== ========== ===== ===== ========== =====
N. America 1,134 (3.3) (4.1) 2,284 4.4 (1.2)
================= ===== ========== ===== ===== ========== =====
United Kingdom 419 9.0 9.0 796 8.0 8.2
================= ===== ========== ===== ===== ========== =====
W Cont. Europe 621 7.3 3.9 1,179 8.5 3.7
================= ===== ========== ===== ===== ========== =====
AP, LA, AME, CEE 808 1.2 4.3 1,552 3.6 3.1
================= ===== ========== ===== ===== ========== =====
Total Group 2,982 1.6 1.3 5,811 5.5 2.0
Headline operating profit analysis
GBPm 2023 % margin* 2022 % margin*
--------------- ---- --------- ---- ---------
N. America 287 12.6 300 13.7
--------------- ---- --------- ---- ---------
United Kingdom 98 12.3 67 9.1
--------------- ---- --------- ---- ---------
W Cont. Europe 111 9.4 99 9.1
--------------- ---- --------- ---- ---------
AP, LA, AME,
CEE 170 11.0 173 11.6
--------------- ---- --------- ---- ---------
Total Group 666 11.5 639 11.6
* Headline operating profit as a percentage of revenue less
pass-through costs
Operating profitability
Reported profit before tax was GBP204m, compared to GBP419m in
the prior period, principally reflecting the impairment taken as a
result of the 2023 property review.
Reported profit after tax was GBP149m compared to GBP301m in the
prior period.
Headline EBITDA (including IFRS 16 depreciation) for the first
half was up 2.9% to GBP767m. Headline operating profit was up 4.3%
to GBP666m.
Headline operating profit margin was down 10 basis points to
11.5% and up 10 basis points year on year on a constant currency
basis. Total operating costs were up 5.7% to GBP5.1bn. Staff costs,
excluding incentives, were up 5.4% year-on-year to GBP4.0bn,
including severance costs of GBP40m (H1 2022: GBP17m), partially
offset by good control over our freelance spend. Severance costs
increased as we aligned headcount to market conditions. Incentive
costs were GBP172m, compared to GBP164m in the first half of
2022.
Establishment costs were up 3.6% at GBP272m while IT costs were
up 13.6% at GBP350m, reflecting investment in our IT
infrastructure, cyber security and a move to cloud computing.
Personal costs rose 16.3% to GBP112m, reflecting higher
client-related business travel, and other operating expenses were
down 1.0% at GBP270m.
On a like-for-like basis, the average number of people in the
Group in the first half was 115,000 compared to 113,000 in the
first half of 2022. The total number of people as at 30 June 2023
was 114,000 compared to 115,000 as at 30 June 2022.
Adjusting items
The Group incurred GBP360m of adjusting items in the first half
of 2023, mainly relating to restructuring and transformation costs
and property and goodwill impairments. This compares with net
adjusting items in the first half of 2022 of GBP100m.
Restructuring costs related to IT and other transformation were
GBP87m in the first half of 2023 (H1 2022: GBP81m), in line with
expectations and as guided. Charges related to the 2023 property
review were GBP180m and relate to lease impairments, primarily in
the US, all of which are non-cash. For the full year 2023 we expect
adjusting items of around GBP400m, consisting of GBP180m detailed
in prior guidance with the addition of GBP220m of charges relating
to the 2023 property review (of which GBP200m is non-cash).
Goodwill impairment, amortisation of acquired intangibles and
investment write-downs were GBP101m in the first half (H1 2022:
GBP31m) .
Interest and taxes
Net finance costs (excluding the revaluation of financial
instruments) were GBP128m, an increase of GBP39m year-on-year, due
to higher levels of debt and lower investment income partially
offset by higher interest earned on cash.
The headline tax rate (based on headline profit before tax) was
27.0% (2022: 25.5%) and on reported profit before tax was 26.9%
(2022: 28.1%). The increase in the headline tax rate is driven by
changes in tax rates or tax bases in the markets in which we
operate. Given the Group's geographic mix of profits and the
changing international tax environment, the tax rate is expected to
increase over the next few years.
Earnings and dividend
Reported profit before tax was down 51.2% to GBP204m. Headline
profit before tax was down 2.9% to GBP546m.
Profits attributable to share owners were GBP112m, compared to a
profit of GBP258m in the prior period.
Headline diluted earnings per share from continuing operations
rose by 0.3% to 33.1p. Reported diluted earnings per share, on the
same basis, was 10.3p, compared to 22.7p in the prior period.
For 2023, the Board is declaring an interim dividend of 15.0p
(2022: 15.0p). The record date for the interim dividend is 13
October 2023, and the dividend will be payable on 3 November
2023.
Further details of WPP's financial performance are provided in
Appendix 1.
Cash flow highlights
Six months ended (GBP million) 30 June 30 June
2023 2022
======================================= ======= =======
Operating profit 306 539
======================================= ======= =======
Depreciation and amortisation 259 255
======================================= ======= =======
Impairments and investment write-downs 204 8
======================================= ======= =======
Lease payments (inc interest) (184) (190)
======================================= ======= =======
Non-cash compensation 76 67
======================================= ======= =======
Net interest paid (47) (60)
======================================= ======= =======
Tax paid (171) (163)
======================================= ======= =======
Capex (104) (117)
======================================= ======= =======
Earnout payments (12) (63)
======================================= ======= =======
Other (37) (9)
======================================= ======= =======
Trade working capital (522) (1,015)
======================================= ======= =======
Other receivables, payables
and provisions (523) (726)
======================================= ======= =======
Adjusted free cash flow (755) (1,474)
======================================= ======= =======
Disposal proceeds 14 34
======================================= ======= =======
Net initial acquisition payments (203) (46)
======================================= ======= =======
Share purchases (37) (681)
======================================= ======= =======
Net cash flow (981) (2,167)
Net cash outflow for the first half was GBP1.0bn, compared to
GBP2.2bn in the first half of 2022. The main drivers of the cash
flow performance year-on-year were lower reported operating profit
and higher consideration for acquisitions offset by a continued
focus on working capital management and lower share purchases. A
summary of the Group's unaudited cash flow statement and notes for
the six months to 30 June 2023 is provided in Appendix 1.
Balance sheet highlights
As at 30 June 2023 we had cash and cash equivalents of GBP1.5bn
(H1 2022: GBP1.5bn) and total liquidity, including undrawn credit
facilities, of GBP3.6bn. Average adjusted net
debt(8) in the first half was GBP3.6bn, compared to GBP2.6bn in
the prior period, at 2023 exchange rates. On 30 June 2023 adjusted
net debt was GBP3.5bn, against GBP3.1bn on 30 June 2022, an
increase of GBP0.3bn on reported basis and at 2023 exchange
rates.
We spent GBP37m on share purchases in the first half of the year
to offset dilution from share-based payments.
Our bond portfolio at 30 June 2023 had an average maturity of
5.8 years.
In May 2023, we refinanced the November 2023 EUR750m bond as
planned, issuing a May 2028 EUR750m bond priced at 4.125%.
The average adjusted net debt to EBITDA ratio in the 12 months
to 30 June 2023 is 1.68x, which excludes the impact of IFRS 16.
A summary of the Group's unaudited balance sheet and notes as at
30 June 2023 is provided in Appendix 1.
(4) Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Public Relations.
(5) In accordance with IAS 28: Investments in Associates and
Joint Ventures once an investment in an associate reaches zero
carrying value, the Group does not recognise any further losses,
nor income, until the cumulative share of income returns the
carrying value to above zero. WPP's cumulative reported share of
losses in Kantar reduced the carrying value of the investment to
zero at the end of December 2022.
(6) Non-GAAP measures in this table are reconciled in Appendix
1
(7) Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Public Relations.
(8) Average adjusted net debt calculated based on a month-end
average
Unaudited condensed consolidated interim income statement for
the six months ended 30 June 2023
Six months Six months
ended ended
GBP million Notes 30 June 2023 30 June 2022
=========================================== ===== ============================= ============================
Revenue 7 7,221.2 6,755.3
=========================================== ===== ============================= ============================
Costs of services 4 (6,157.0) (5,708.1)
=========================================== ===== ============================= ============================
Gross profit 1,064.2 1,047.2
=========================================== ===== ============================= ============================
General and administrative costs 4 (758.1) (508.5)
=========================================== ===== ============================= ============================
Operating profit 306.1 538.7
=========================================== ===== ============================= ============================
Earnings/(loss) from associates - after
interest and tax 5 1.0 (63.8)
=========================================== ===== ============================= ============================
Profit before interest and taxation 307.1 474.9
=========================================== ===== ============================= ============================
Finance and investment income 6 102.4 55.5
=========================================== ===== ============================= ============================
Finance costs 6 (230.7) (144.9)
=========================================== ===== ============================= ============================
Revaluation and retranslation of financial
instruments 6 25.5 33.1
=========================================== ===== ============================= ============================
Profit before taxation 204.3 418.6
=========================================== ===== ============================= ============================
Taxation 8 (55.0) (117.5)
=========================================== ===== ============================= ============================
Profit for the period 149.3 301.1
=========================================== ===== ============================= ============================
Attributable to:
=========================================== ===== ============================= ============================
Equity holders of the parent 112.0 257.9
=========================================== ===== ============================= ============================
Non-controlling interests 37.3 43.2
=========================================== ===== ============================= ============================
149.3 301.1
=========================================== ===== ============================= ============================
Earnings per share
=========================================== ===== ============================= ============================
Basic earnings per ordinary share 10 10.5p 23.1p
=========================================== ===== ============================= ============================
Diluted earnings per ordinary share 10 10.3p 22.7p
=========================================== ===== ============================= ============================
The accompanying notes form an integral part of this unaudited
condensed consolidated interim income statement.
Unaudited condensed consolidated interim statement of
comprehensive income for the six months ended 30 June 2023
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
================================================== ============================== ==============================
Profit for the period 149.3 301.1
=================================================== ============================== ==============================
Items that may be reclassified subsequently
to profit or loss:
================================================== ============================== ==============================
Foreign exchange differences on translation
of foreign operations (285.0) 459.7
=================================================== ============================== ==============================
Gain/(loss) on net investment hedges 77.8 (129.9)
=================================================== ============================== ==============================
Cash flow hedges:
================================================== ============================== ==============================
Fair value (loss)/gain arising on hedging
instruments (23.8) 18.7
=================================================== ============================== ==============================
Less: gain/(loss) reclassified to profit
or loss 24.4 (18.7)
=================================================== ============================== ==============================
Share of other comprehensive income of associates
undertakings - 30.7
=================================================== ============================== ==============================
(206.6) 360.5
================================================== ============================== ==============================
Items that will not be reclassified subsequently
to profit or loss:
================================================== ============================== ==============================
Movements on equity investments held at
fair value through other comprehensive income (3.8) (5.2)
=================================================== ============================== ==============================
(3.8) (5.2)
================================================== ============================== ==============================
Other comprehensive (loss)/income relating
to the period (210.4) 355.3
=================================================== ============================== ==============================
Total comprehensive (loss)/income relating
to the period (61.1) 656.4
=================================================== ============================== ==============================
Attributable to:
================================================== ============================== ==============================
Equity holders of the parent (76.0) 593.3
=================================================== ============================== ==============================
Non-controlling interests 14.9 63.1
=================================================== ============================== ==============================
(61.1) 656.4
================================================== ============================== ==============================
The accompanying notes form an integral part of this unaudited
condensed consolidated interim statement of comprehensive
income.
Unaudited condensed consolidated interim cash flow statement for
the six months ended 30 June 2023
Six months Six months
ended ended
30 June 30 June
GBP million Notes 2023 2022
=================================================== ===== ============================ ============================
Net cash outflow from operating activities
(1) 11 (444.1) (1,132.5)
=================================================== ===== ============================ ============================
Investing activities
=================================================== ===== ============================ ============================
Acquisitions (1) 11 (197.9) (81.0)
=================================================== ===== ============================ ============================
Disposals of investments and subsidiaries 11 10.3 29.2
=================================================== ===== ============================ ============================
Purchases of property, plant and equipment (80.7) (102.4)
=================================================== ===== ============================ ============================
Purchases of other intangible assets
(including capitalised computer software) (23.1) (14.6)
=================================================== ===== ============================ ============================
Proceeds on disposal of property, plant
and equipment 3.4 4.5
=================================================== ===== ============================ ============================
Net cash outflow from investing activities (288.0) (164.3)
=================================================== ===== ============================ ============================
Financing activities
=================================================== ===== ============================ ============================
Repayment of lease liabilities (135.1) (146.3)
=================================================== ===== ============================ ============================
Share option proceeds 0.7 1.1
Cash consideration for purchase of non-controlling
interests 11 (16.0) (6.2)
=================================================== ===== ============================ ============================
Share repurchases and buy-backs 11 (37.0) (680.5)
=================================================== ===== ============================ ============================
Proceeds from borrowings and issue of
bonds 11 1,044.5 247.2
=================================================== ===== ============================ ============================
Repayment of borrowings 11 (469.8) (220.6)
=================================================== ===== ============================ ============================
Financing and share issue costs (5.7) -
=================================================== ===== ============================ ============================
Dividends paid to non-controlling interests
in subsidiary undertakings (61.2) (37.2)
=================================================== ===== ============================ ============================
Net cash inflow/(outflow) from financing
activities 320.4 (842.5)
=================================================== ===== ============================ ============================
Net decrease in cash and cash equivalents (411.7) (2,139.3)
=================================================== ===== ============================ ============================
Translation of cash and cash equivalents (59.0) 88.0
=================================================== ===== ============================ ============================
Cash and cash equivalents at beginning
of period 1,985.8 3,540.6
=================================================== ===== ============================ ============================
Cash and cash equivalents at end of
period 12 1,515.1 1,489.3
=================================================== ===== ============================ ============================
The accom panying notes form an integral part of this unaudited
condensed consolidated interim cash flow statement.
(1) Earnout payments in excess of the amount determined at
acquisition are recorded as operating activities. Prior year excess
amounts were recorded as investing activities and have been
re-presented as operating activities. See note 11.
Unaudited condensed consolidated interim balance sheet as of 30
June 2023
30 June 31 December
GBP million Notes 2023 2022
=========================================== ===== ========================== ===========================
Non-current assets
=========================================== ===== ========================== ===========================
Intangible assets:
=========================================== ===== ========================== ===========================
Goodwill 13 8,296.8 8,453.4
=========================================== ===== ========================== ===========================
Other 1,500.9 1,451.9
=========================================== ===== ========================== ===========================
Property, plant and equipment 942.7 1,000.7
=========================================== ===== ========================== ===========================
Right-of-use assets 1,454.2 1,528.5
=========================================== ===== ========================== ===========================
Interests in associates and joint ventures 248.1 305.1
=========================================== ===== ========================== ===========================
Other investments 332.9 369.8
=========================================== ===== ========================== ===========================
Deferred tax assets 287.8 322.1
=========================================== ===== ========================== ===========================
Corporate income tax recoverable 102.4 74.1
=========================================== ===== ========================== ===========================
Trade and other receivables 14 156.8 218.6
=========================================== ===== ========================== ===========================
13,322.6 13,724.2
=========================================== ===== ========================== ===========================
Current assets
=========================================== ===== ========================== ===========================
Corporate income tax recoverable 110.8 107.1
=========================================== ===== ========================== ===========================
Trade and other receivables 14 11,058.1 12,499.7
=========================================== ===== ========================== ===========================
Cash and short-term deposits 1,962.6 2,491.5
=========================================== ===== ========================== ===========================
13,131.5 15,098.3
=========================================== ===== ========================== ===========================
Current liabilities
=========================================== ===== ========================== ===========================
Trade and other payables 15 (13,155.8) (15,834.9)
=========================================== ===== ========================== ===========================
Corporate income tax payable (324.1) (422.0)
=========================================== ===== ========================== ===========================
Short-term lease liabilities (298.2) (282.4)
=========================================== ===== ========================== ===========================
Bank overdrafts, bonds and bank loans (1,092.9) (1,169.0)
=========================================== ===== ========================== ===========================
(14,871.0) (17,708.3)
=========================================== ===== ========================== ===========================
Net current liabilities (1,739.5) (2,610.0)
=========================================== ===== ========================== ===========================
Total assets less current liabilities 11,583.1 11,114.2
=========================================== ===== ========================== ===========================
Non-current liabilities
=========================================== ===== ========================== ===========================
Bonds and bank loans (4,338.0) (3,801.8)
=========================================== ===== ========================== ===========================
Trade and other payables 16 (517.4) (490.9)
=========================================== ===== ========================== ===========================
Deferred tax liabilities (339.1) (350.8)
=========================================== ===== ========================== ===========================
Provisions for post-employment benefits (133.8) (137.5)
=========================================== ===== ========================== ===========================
Provisions for liabilities and charges (283.8) (244.6)
=========================================== ===== ========================== ===========================
Long-term lease liabilities (1,905.9) (1,928.2)
=========================================== ===== ========================== ===========================
(7,518.0) (6,953.8)
=========================================== ===== ========================== ===========================
Net assets 4,065.1 4,160.4
=========================================== ===== ========================== ===========================
Equity
=========================================== ===== ========================== ===========================
Called-up share capital 114.1 114.1
=========================================== ===== ========================== ===========================
Share premium account 576.6 575.9
=========================================== ===== ========================== ===========================
Other reserves 104.9 285.2
=========================================== ===== ========================== ===========================
Own shares (1,012.9) (1,054.1)
=========================================== ===== ========================== ===========================
Retained earnings 3,854.5 3,759.7
=========================================== ===== ========================== ===========================
Equity shareholders' funds 3,637.2 3,680.8
=========================================== ===== ========================== ===========================
Non-controlling interests 427.9 479.6
=========================================== ===== ========================== ===========================
Total equity 4,065.1 4,160.4
=========================================== ===== ========================== ===========================
The accompanying notes form an integral part of this unaudited
condensed consolidated interim balance sheet.
Unaudited condensed consolidated interim statement of changes in
equity for the for the six months ended 30 June 2023
Total
equity
Called-up Share share Non-
share premium Other Own Retained holders' controlling
GBP million capital account reserves shares earnings(1) funds interests Total
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Balance at 1 January
2023 114.1 575.9 285.2 (1,054.1) 3,759.7 3,680.8 479.6 4,160.4
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Ordinary shares issued - 0.7 - - - 0.7 - 0.7
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Share cancellations - - - - - - - -
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Treasury shares used
for share option schemes - - - 55.2 (55.2) - - -
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Profit for the period - - - - 112.0 112.0 37.3 149.3
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Foreign exchange
differences
on translation of foreign
operations - - (262.6) - - (262.6) (22.4) (285.0)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Gain on net investment
hedges - - 77.8 - - 77.8 - 77.8
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Cash flow hedges:
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Fair value loss
arising
on hedging
instruments - - (23.8) - - (23.8) - (23.8)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Less: gain
reclassified
to profit or loss - - 24.4 - - 24.4 - 24.4
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Share of other
comprehensive
income of associates
undertakings - - - - - - - -
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Movements on equity
investments held at
fair value through other
comprehensive income - - - - (3.8) (3.8) - (3.8)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Other comprehensive
loss - - (184.2) - (3.8) (188.0) (22.4) (210.4)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Total comprehensive
(loss)/income - - (184.2) - 108.2 (76.0) 14.9 (61.1)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Dividends paid - - - - - - (61.2) (61.2)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Non-cash share-based
incentive plans
(including
share options) - - - - 75.5 75.5 - 75.5
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Tax adjustment on
share-based
payments - - - - 2.4 2.4 - 2.4
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Net movement in own
shares held by ESOP
Trusts - - - (14.0) (23.0) (37.0) - (37.0)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Recognition/derecognition
of liabilities in respect
of put options - - 3.9 - (1.8) 2.1 - 2.1
Acquisition and disposal
of subsidiaries(2) - - - - (11.3) (11.3) (5.4) (16.7)
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
Balance at 30 June
2023 114.1 576.6 104.9 (1,012.9) 3,854.5 3,637.2 427.9 4,065.1
========================== =================== ==================== ==================== =================== ==================== ==================== ==================== ===================
The accompanying notes form an integral part of this unaudited
condensed consolidated interim statement of changes in equity.
(1) Accumulated losses on existing equity investments held at
fair value through other comprehensive income are GBP347.2 million
at 30 June 2023 (31 December 2022: GBP343.4 million).
(2) Acquisition and disposal of subsidiaries represents
movements in retained earnings and non-controlling interests
arising from changes in ownership of existing subsidiaries and
recognition of non-controlling interests on new acquisitions.
Unaudited condensed consolidated interim statement of changes in
equity for the six months ended 30 June 2023 (continued)
Total
equity
Called-up Share share Non-
share premium Other Own Retained holders' controlling
GBP million capital account reserves shares earnings funds interests Total
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Balance at 1 January
2022 122.4 574.7 (335.9) (1,112.1) 4,367.3 3,616.4 452.6 4,069.0
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Ordinary shares issued - 1.1 - - - 1.1 - 1.1
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Share cancellations (6.2) - 6.2 - (637.3) (637.3) - (637.3)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Treasury shares used
for share option schemes - - - - - - - -
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Profit for the period - - - - 257.9 257.9 43.2 301.1
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Foreign exchange
differences
on translation of foreign
operations - - 439.8 - - 439.8 19.9 459.7
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Loss on net investment
hedges - - (129.9) - - (129.9) - (129.9)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Cash flow hedges:
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Fair value gain arising
on hedging instruments - - 18.7 - - 18.7 - 18.7
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Less: loss reclassified
to profit or loss - - (18.7) - - (18.7) - (18.7)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Share of other
comprehensive
income of associates
undertakings - - 24.0 - 6.7 30.7 - 30.7
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Movements on equity
investments held at
fair value through other
comprehensive income - - - - (5.2) (5.2) - (5.2)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Other comprehensive
income - - 333.9 - 1.5 335.4 19.9 355.3
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Total comprehensive
income - - 333.9 - 259.4 593.3 63.1 656.4
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Dividends paid - - - - - - (37.2) (37.2)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Non-cash share-based
incentive plans
(including
share options) - - - - 67.3 67.3 - 67.3
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Tax adjustments on
share-based
payments - - - - (15.2) (15.2) - (15.2)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Net movement in own
shares held by ESOP
Trusts - - - 28.8 (72.0) (43.2) - (43.2)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Recognition/derecognition
of liabilities in respect
of put options - - 58.1 - (47.3) 10.8 - 10.8
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Share purchases - close
period commitments(1) - - 211.7 - - 211.7 - 211.7
Acquisition and disposal
of subsidiaries(2) - - - - (13.0) (13.0) - (13.0)
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
Balance at 30 June
2022 116.2 575.8 274.0 (1,083.3) 3,909.2 3,791.9 478.5 4,270.4
========================== ==================== ==================== ==================== =================== ==================== ==================== =================== ====================
The accompanying notes form an integral part of this unaudited
condensed consolidated interim statement of changes in equity.
(1) During 2021, the Company entered into an arrangement with a
third party to conduct share buybacks on its behalf in the close
period commencing on 16 December 2021 and ending on 18 February
2022, in accordance with UK listing rules. The commitment resulting
from this agreement constituted a liability at 31 December 2021 and
was recognised as a movement in other reserves in the year ended 31
December 2021. After the close period ended on 18 February 2022,
the liability was settled and the amount in other reserves was
reclassified to retained earnings.
(2) Acquisition of subsidiaries represents movements in retained
earnings and non-controlling interests arising from changes in
ownership of existing subsidiaries and recognition of
non-controlling interests on new acquisitions.
Notes to the unaudited condensed consolidated interim financial
statements
1. Basis of accounting
The unaudited condensed consolidated interim financial
statements are prepared under the historical cost convention,
except for the revaluation of certain financial instruments as
disclosed in our accounting policies.
2. Accounting policies
The unaudited condensed consolidated interim financial
statements comply with IAS 34 Interim Financial Reporting as issued
by the International Accounting Standards Board (IASB) and with the
accounting policies of WPP plc and its subsidiaries (the Group),
which were set out on pages 160 - 165 of the 2022 Annual Report and
Accounts. No changes have been made to the Group's accounting
policies in the period ended 30 June 2023.
The Group does not consider that the amendments to standards
adopted during the period have a significant impact on the
financial statements.
Statutory information and Independent Review
The unaudited condensed consolidated interim financial
statements for the six months to 30 June 2023 and 30 June 2022 do
not constitute statutory accounts. The statutory accounts for the
year ended 31 December 2022 have been delivered to the Jersey
Registrar and received an unqualified auditors' report. The interim
condensed consolidated financial statements are unaudited but have
been reviewed by the auditors and their report is set out on page
41.
The announcement of the interim results was approved by the
Board of Directors on 4 August 2023.
3. Currency conversion
The presentation currency of the Group is pounds sterling and
the unaudited condensed consolidated interim financial statements
have been prepared on this basis.
The period ended 30 June 2023 unaudited condensed consolidated
interim income statement is prepared using, among other currencies,
average exchange rates of US$1.23 to the pound (period ended 30
June 2022: US$1.30) and EUR1.14 to the pound (period ended 30 June
2022: EUR1.19). The unaudited condensed consolidated interim
balance sheet as at 30 June 2023 has been prepared using the
exchange rates on that day of US$1.27 to the pound (31 December
2022: US$1.21) and EUR1.16 to the pound (31 December 2022:
EUR1.13).
4. Costs of services and general and administrative costs
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
================================= =========================== ===========================
Costs of services 6,157.0 5,708.1
================================= =========================== ===========================
General and administrative costs 758.1 508.5
================================= =========================== ===========================
6,915.1 6,216.6
================================= =========================== ===========================
Costs of services and general and administrative costs
include:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
======================================================= =========================== ===========================
Staff costs 4,141.5 3,930.7
======================================================= =========================== ===========================
Establishment costs 272.1 262.8
======================================================= =========================== ===========================
Media pass-through costs 1,022.8 1,016.7
======================================================= =========================== ===========================
Other costs of services and general and administrative
costs(1) 1,478.7 1,006.4
======================================================= =========================== ===========================
6,915.1 6,216.6
======================================================= =========================== ===========================
Staff costs include:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
============================ ============================ ============================
Wages and salaries 2,944.0 2,718.5
============================ ============================ ============================
Cash-based incentive plans 91.7 93.5
============================ ============================ ============================
Share-based incentive plans 75.5 67.3
============================ ============================ ============================
Severance 40.1 17.4
============================ ============================ ============================
Other staff costs 990.2 1,034.0
============================ ============================ ============================
4,141.5 3,930.7
============================ ============================ ============================
(1) Other costs of services and general and administrative costs
include GBP387.2 million (period ended 30 June 2022: GBP229.1
million) of other pass-through costs.
Other costs of services and general and administrative costs
include :
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
==================================================== ============================= =============================
Amortisation and impairment of acquired intangible
assets 36.6 31.5
==================================================== ============================= =============================
Goodwill impairment 52.9 -
==================================================== ============================= =============================
Investment and other impairment charges 11.0 -
==================================================== ============================= =============================
Losses on disposals of investments and subsidiaries 2.9 48.1
==================================================== ============================= =============================
Gains on remeasurement of equity interests
arising from a change in scope of ownership - (60.4)
==================================================== ============================= =============================
Restructuring and transformation costs 86.8 81.2
==================================================== ============================= =============================
Property related costs 180.0 -
==================================================== ============================= =============================
Litigation settlement (10.0) -
==================================================== ============================= =============================
Amortisation and impairment of acquired intangible assets of
GBP36.6 million (2022: GBP31.5 million) includes an impairment
charge in the year of GBP1.7 million (2022: GBP1.3 million) in
regard to certain brand names that are no longer in use.
The goodwill impairment charge of GBP52.9 million in the period
ended 30 June 2023 (2022: GBPnil) relates to two businesses in the
Group where the current, local economic conditions and trading
circumstances are sufficiently severe to indicate impairment to the
carrying value.
Investment and other impairment charges of GBP11.0 million
(2022: GBPnil) relate to the same macro-economic factors noted
above.
Losses on disposal of investments and subsidiaries of GBP2.9
million in the period ended 30 June 2023 (2022: GBP48.1 million)
mainly relates to a disposal of the Group's investment in Astus
Australia, which completed in May 2023. The prior period primarily
includes a loss of GBP65.1 million on the divestment of the Group's
Russian interests which completed in May 2022.
In the prior period, gains on remeasurement of equity interests
arising from a change in scope of ownership of GBP60.4 million
comprises a gain in relation to the reclassification of the Group's
interest in Imagina in Spain from interests in associates to other
investments. There were no remeasurements of equity interest in the
period ended 30 June 2023.
Restructuring and transformation costs of GBP86.8 million (2022:
GBP81.2 million) include GBP53.9 million (2022: GBP59.5 million) in
relation to the Group's IT transformation programme. It includes
costs of GBP23.8 million (2022: GBP46.3 million) in relation to the
rollout of new ERP systems in order to drive efficiency and
collaboration throughout the Group and GBP15.2 million (2022:
GBPnil) incurred related to a transition programme to move to a
multi vendor environment. Included within restructuring and
transformation costs is GBP7.0 million (2022: GBP5.9 million) of
ongoing property costs, related to impairments the Group recognised
in response to the COVID-19 pandemic. The remaining GBP25.9 million
(2022: GBP15.8 million) relates to the continuing restructuring
plan. As part of that plan, restructuring actions have been taken
to right-size under-performing businesses, address high-cost
severance markets and simplify operational structures.
Property related costs of GBP180.0 million (2022: GBPnil) have
been incurred related to a review of the Group's property
requirements, following the stabilisation of return-to-work
practices post the COVID-19 pandemic and campus strategy. This
identified a number of properties that are surplus to requirements
and opportunities to further consolidate Agencies within the
existing Campus portfolio.
GBP10.0 million (2022: GBPnil) has been received by the Group
related to a previous litigation matter that settled in the
period.
5. Earnings/(loss) from associates - after interest and tax
Earnings/(loss) from associates - after interest and tax for the
period ended 30 June 2023 was GBP1.0 million (2022: loss of GBP63.8
million). In 2022 this includes GBP46.7 million of amortisation and
impairment of acquired intangible assets, and GBP24.8 million of
restructuring and one-off transaction costs within Kantar.
6. Finance and investment income, finance costs and revaluation
and retranslation of financial instruments
Finance and investment income includes:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
=============================== ============================= ============================
Income from equity investments 3.4 20.1
=============================== ============================= ============================
Interest income 99.0 35.4
=============================== ============================= ============================
102.4 55.5
=============================== ============================= ============================
Finance costs include:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
============================================== ============================ ============================
Interest payable and similar charges(1) 180.2 98.9
============================================== ============================ ============================
Interest expense related to lease liabilities 50.5 46.0
============================================== ============================ ============================
230.7 144.9
============================================== ============================ ============================
Revaluation and retranslation of financial instruments
include:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
================================================ ============================= ==============================
Movements in fair value of treasury instruments 4.4 1.9
================================================ ============================= ==============================
Revaluation of investments held at fair value
through profit or loss (24.2) 9.0
================================================ ============================= ==============================
Revaluation of put options over non-controlling
interests 7.1 19.6
================================================ ============================= ==============================
Revaluation of payments due to vendors (earnout
agreements) 25.7 (1.1)
================================================ ============================= ==============================
Retranslation of financial instruments 12.5 3.7
================================================ ============================= ==============================
25.5 33.1
================================================ ============================= ==============================
(1) Interest expense and similar charges are payable on bank
overdrafts, bonds and bank loans held at amortised cost.
7. Segmental analysis
Substantially all of the Group's revenue is from contracts with
customers. Reported contributions by reportable segments were as
follows:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
===================================== ============================ ============================
Revenue(1,2)
===================================== ============================ ============================
Global Integrated Agencies 6,107.0 5,698.8
===================================== ============================ ============================
Public Relations 618.0 574.6
===================================== ============================ ============================
Specialist Agencies 496.2 481.9
===================================== ============================ ============================
7,221.2 6,755.3
===================================== ============================ ============================
Revenue less pass-through costs(1,3)
===================================== ============================ ============================
Global Integrated Agencies 4,781.6 4,536.0
===================================== ============================ ============================
Public Relations 584.4 547.6
===================================== ============================ ============================
Specialist Agencies 445.2 425.9
===================================== ============================ ============================
5,811.2 5,509.5
===================================== ============================ ============================
Headline operating profit(1,5)
===================================== ============================ ============================
Global Integrated Agencies 540.5 507.0
===================================== ============================ ============================
Public Relations 87.5 83.5
===================================== ============================ ============================
Specialist Agencies 38.3 48.6
===================================== ============================ ============================
666.3 639.1
===================================== ============================ ============================
Reported contributions by geographical area were as follows:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
============================================= ============================ ============================
Revenue(2)
============================================= ============================ ============================
North America(4) 2,744.0 2,586.5
============================================= ============================ ============================
United Kingdom 1,064.6 956.1
============================================= ============================ ============================
Western Continental Europe 1,477.1 1,352.0
============================================= ============================ ============================
Asia Pacific, Latin America, Africa & Middle
East and Central & Eastern Europe 1,935.5 1,860.7
============================================= ============================ ============================
7,221.2 6,755.3
============================================= ============================ ============================
Revenue less pass-through costs(3)
============================================= ============================ ============================
North America(4) 2,284.6 2,188.9
============================================= ============================ ============================
United Kingdom 796.2 737.0
============================================= ============================ ============================
Western Continental Europe 1,178.7 1,086.1
============================================= ============================ ============================
Asia Pacific, Latin America, Africa & Middle
East and Central & Eastern Europe 1,551.7 1,497.5
============================================= ============================ ============================
5,811.2 5,509.5
============================================= ============================ ============================
Headline operating profit(5)
============================================= ============================ ============================
North America(4) 287.1 299.7
============================================= ============================ ============================
United Kingdom 97.8 67.3
============================================= ============================ ============================
Western Continental Europe 111.1 98.7
============================================= ============================ ============================
Asia Pacific, Latin America, Africa & Middle
East and Central & Eastern Europe 170.3 173.4
============================================= ============================ ============================
666.3 639.1
============================================= ============================ ============================
(1) Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Public Relations.
(2) Intersegment sales have not been separately disclosed as
they are not material.
(3) Revenue less pass-through costs is defined in Appendix
2.
(4) North America includes the United States with revenue of
GBP2,578.7 million (2022: GBP2,440.9 million), revenue less
pass-through
costs of GBP2,144.2 million (2022: GBP2,052.1 million) and
headline operating profit of GBP268.1 million (2022: GBP280.9
million).
(5) A reconciliation from profit before taxation to headline
operating profit is provided in Appendix 2.
8. Taxation
The tax charge for the Group is calculated in accordance with
IAS 34, by applying management's best estimate of the effective tax
rate (excluding discrete items) expected to apply to total annual
earnings to the profit for the six month period ended 30 June 2023.
This is then adjusted for certain discrete items which occurred in
the interim period.
The tax rate on reported profit before tax was 26.9% (2022:
28.1%). Given the Group's geographic mix of profits and the
changing international tax environment, the tax rate is expected to
increase slightly over the next few years.
The tax charge may be affected by the impact of acquisitions,
disposals and other corporate restructuring, the resolution of open
tax issues, and the ability to use brought forward tax losses.
Changes in local or international tax rules, the OECD/G20 Inclusive
Framework on Base Erosion and Profit Shifting, and changes arising
from the application of existing rules or challenges by tax or
competition authorities, may expose the Group to additional tax
liabilities or impact the carrying value of deferred tax assets,
which could affect the future tax charge .
Liabilities relating to open and judgemental matters are based
upon an assessment of whether the tax authorities will accept the
position taken, after taking into account external advice where
appropriate. Where the final tax outcome of these matters is
different from the amounts which were initially recorded, such
differences will impact the current and deferred income tax assets
and liabilities in the period in which such determination is made.
The Group does not currently consider that judgements made in
assessing tax liabilities have a significant risk of resulting in
any material additional charges or credits in respect of these
matters, within the next financial year, beyond the amounts already
provided.
9. Ordinary dividends
The Board has recommended an interim dividend of 15.0p ( 2022 :
15.0p ) per ordinary share. This is expected to be paid on 3
November 2023 to shareholders on the register at 13 October 2023.
The Board recommended a final dividend of 24.4p per ordinary share
in respect of 2022. This was paid on 7 July 2023.
10. Earnings per share
Basic EPS
The calculation of basic EPS is as follows:
Six months Six months
ended ended
30 June 2023 30 June 2022
========================================== =========================== ===========================
Reported earnings(1) (GBP million) 112.0 257.9
========================================== =========================== ===========================
Weighted average shares used in basic EPS
calculation (million) 1,071.2 1,115.2
========================================== =========================== ===========================
Reported EPS 10.5p 23.1p
========================================== =========================== ===========================
Diluted EPS
The calculation of diluted EPS is as follows:
Six months Six months
ended ended
30 June 2023 30 June 2022
=========================================== =========================== ===========================
Diluted reported earnings(1) (GBP million) 112.0 257.9
=========================================== =========================== ===========================
Weighted average shares used in diluted
EPS calculation (million) 1,090.8 1,137.8
=========================================== =========================== ===========================
Diluted reported EPS 10.3p 22.7p
=========================================== =========================== ===========================
A reconciliation between the shares used in calculating basic
and diluted EPS is as follows:
Six months Six months
ended ended
million 30 June 2023 30 June 2022
========================================== ============================= =============================
Weighted average shares used in basic EPS
calculation 1,071.2 1,115.2
========================================== ============================= =============================
Dilutive share options outstanding 0.8 1.4
========================================== ============================= =============================
Other potentially issuable shares 18.8 21.2
========================================== ============================= =============================
Weighted average shares used in diluted
EPS calculation 1,090.8 1,137.8
========================================== ============================= =============================
At 30 June 2023 there were 1,141,513,196 (30 June 2022:
1,162,563,018) ordinary shares in issue, including treasury shares
of 66,675,497 (30 June 2022: 70,489,953).
(1) Reported earnings is equivalent to profit for the period
attributable to equity holders of the parent.
11. Analysis of cash flows
The following tables analyse the items included within the main
cash flow headings on page 18:
Net cash outflow from operating activities:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
===================================================== ============================== ==============================
Profit for the period 149.3 301.1
===================================================== ============================== ==============================
Taxation 55.0 117.5
===================================================== ============================== ==============================
Revaluation and retranslation of financial
instruments (25.5) (33.1)
===================================================== ============================== ==============================
Finance costs 230.7 144.9
===================================================== ============================== ==============================
Finance and investment income (102.4) (55.5)
===================================================== ============================== ==============================
(Earnings)/loss from associates - after interest
and tax (1.0) 63.8
===================================================== ============================== ==============================
Operating profit for the period 306.1 538.7
===================================================== ============================== ==============================
Adjustments for:
===================================================== ============================== ==============================
Non-cash share-based incentive plans (including
share options) 75.5 67.3
===================================================== ============================== ==============================
Depreciation of property, plant and equipment 83.7 79.9
===================================================== ============================== ==============================
Depreciation of right-of-use assets 129.3 129.9
===================================================== ============================== ==============================
Impairment charges included within adjusting
items(1) 140.4 8.1
===================================================== ============================== ==============================
Goodwill impairment 52.9 -
===================================================== ============================== ==============================
Amortisation and impairment of acquired intangible
assets 36.6 31.5
===================================================== ============================== ==============================
Amortisation of other intangible assets 9.0 13.6
===================================================== ============================== ==============================
Investment and other impairment charges 11.0 -
===================================================== ============================== ==============================
Losses on disposal of investments and subsidiaries 2.9 48.1
===================================================== ============================== ==============================
Gains on remeasurement of equity interests
arising from a change in scope of ownership - (60.4)
===================================================== ============================== ==============================
Gains on sale of property, plant and equipment (0.5) (1.1)
===================================================== ============================== ==============================
Operating cash flow before movements in
working capital and provisions 846.9 855.6
===================================================== ============================== ==============================
Movements in trade working capital(2,3) (521.9) (1,015.3)
===================================================== ============================== ==============================
Movements in other working capital and provisions(4) (522.7) (725.9)
===================================================== ============================== ==============================
Cash used in operations (197.7) (885.6)
===================================================== ============================== ==============================
Corporation and overseas tax paid (171.3) (162.7)
===================================================== ============================== ==============================
Interest and similar charges paid (155.9) (86.8)
===================================================== ============================== ==============================
Interest paid on lease liabilities (48.8) (44.1)
===================================================== ============================== ==============================
Interest received 108.5 26.9
===================================================== ============================== ==============================
Investment income 3.4 20.1
===================================================== ============================== ==============================
Dividends from associates 18.9 21.4
===================================================== ============================== ==============================
Earnout payments recognised in operating
activities(5) (1.2) (21.7)
===================================================== ============================== ==============================
Net cash outflow from operating activities (444.1) (1,132.5)
===================================================== ============================== ==============================
(1) Impairment charges included within restructuring costs
includes impairments for right-of-use assets and property, plant
and
equipment.
(2) Trade working capital represents trade receivables, work in
progress, accrued income, trade payables and deferred income. A
reconciliation is provided in Appendix 2.
(3) The Group typically experiences an outflow of working
capital in the first half of the financial year and an inflow in
the second half. This
is primarily due to the seasonal nature of working capital flows
associated with its media buying activities on behalf of
clients.
(4) Other working capital represents other receivables and other
payables.
(5) Earnout payments in excess of the amount determined at
acquisition are recorded as operating activities. Prior year excess
amounts
were recorded as investing activities and have been re-presented
as operating activities.
11. Analysis of cash flows (continued)
Acquisitions and disposals:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
====================================================== ============================== ==============================
Initial cash consideration (202.0) (35.0)
====================================================== ============================== ==============================
Cash and cash equivalents acquired 23.0 0.7
====================================================== ============================== ==============================
Earnout payments(1) (11.2) (41.6)
====================================================== ============================== ==============================
Purchase of other investments (including
associates) (7.7) (5.1)
====================================================== ============================== ==============================
Acquisitions (197.9) (81.0)
====================================================== ============================== ==============================
Proceeds on disposal of investments and
subsidiaries(2) 10.5 41.7
====================================================== ============================== ==============================
Cash and cash equivalents disposed (0.2) (12.5)
====================================================== ============================== ==============================
Disposals of investments and subsidiaries 10.3 29.2
====================================================== ============================== ==============================
Cash consideration for purchase of non-controlling
interests (16.0) (6.2)
====================================================== ============================== ==============================
Cash consideration for non-controlling interests (16.0) (6.2)
====================================================== ============================== ==============================
Net acquisition payments and disposal proceeds (203.6) (58.0)
====================================================== ============================== ==============================
Share repurchases and buy-backs:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
====================================== ============================= ============================
Purchase of own shares by ESOP Trusts (37.0) (43.2)
====================================== ============================= ============================
Shares purchased into treasury - (637.3)
====================================== ============================= ============================
(37.0) (680.5)
====================================== ============================= ============================
Proceeds from borrowings:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
========================================= ============================= =============================
Proceeds from EUR750 million bonds 644.5 -
========================================= ============================= =============================
Draw down from revolving credit facility 400.0 -
========================================= ============================= =============================
Increase in drawings on bank loans - 247.2
========================================= ============================= =============================
1,044.5 247.2
========================================= ============================= =============================
Repayments of borrowings:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
========================================= ============================= =============================
Repayment of bank loans - (11.3)
========================================= ============================= =============================
Repayment of revolving credit facility (400.0) -
========================================= ============================= =============================
Repayment of debt assumed on acquisition (69.8) -
========================================= ============================= =============================
Repayment of EUR250 million bonds - (209.3)
========================================= ============================= =============================
(469.8) (220.6)
========================================= ============================= =============================
(1) Earnout payments in excess of the amount determined at
acquisition are recorded as operating activities. Prior period
excess
amounts were recorded as investing activities and have been
re-presented as operating activities.
(2) Proceeds on disposal of investments and subsidiaries
includes return of capital from investments in associates.
12. Cash and cash equivalents and debt financing
30 June 31 December
GBP million 2023 2022
=========================================== =========================== ===========================
Cash at bank and in hand 1,682.8 2,271.6
=========================================== =========================== ===========================
Short-term bank deposits 279.8 219.9
=========================================== =========================== ===========================
Overdrafts(1) (447.5) (505.7)
=========================================== =========================== ===========================
Cash and cash equivalents 1,515.1 1,985.8
=========================================== =========================== ===========================
Bank loans, bonds and other due within one
year (645.4) (663.3)
Bank loans, bonds and other due after one
year (4,338.0) (3,801.8)
Adjusted net debt (3,468.3) (2,479.3)
=========================================== =========================== ===========================
The Group estimates that the fair value of corporate bonds is
GBP4,565.0 million at 30 June 2023 (31 December 2022: GBP4,049.1
million). The Group considers that the carrying amount of bank
loans approximates their fair value.
The following table is an analysis of future anticipated cash
flows in relation to the Group's debt, on an undiscounted basis
which, therefore, differs from the carrying value:
30 June 31 December
GBP million 2023 2022
=============================================== ============================ ===========================
Within one year (779.7) (791.6)
=============================================== ============================ ===========================
Between one and two years (1,129.2) (724.3)
=============================================== ============================ ===========================
Between two and three years (99.1) (524.2)
=============================================== ============================ ===========================
Between three and four years (1,376.0) (740.3)
=============================================== ============================ ===========================
Between four and five years (711.6) (719.9)
=============================================== ============================ ===========================
Over five years (1,904.9) (1,963.7)
=============================================== ============================ ===========================
Debt financing (including interest) under
the Revolving Credit Facility and in relation
to unsecured loan notes (6,000.5) (5,464.0)
=============================================== ============================ ===========================
Short-term overdrafts - within one year (447.5) (505.7)
=============================================== ============================ ===========================
Future anticipated cash flows (6,448.0) (5,969.7)
=============================================== ============================ ===========================
Effect of discounting/financing rates 1,017.1 998.9
=============================================== ============================ ===========================
Debt financing (5,430.9) (4,970.8)
=============================================== ============================ ===========================
Cash and short-term deposits 1,962.6 2,491.5
=============================================== ============================ ===========================
Adjusted net debt (3,468.3) (2,479.3)
=============================================== ============================ ===========================
13. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings decreased by
GBP156.6 million in the period. This movement primarily relates to
the impact of currency translation of GBP320.8 million and
impairment charges of GBP52.9 million. This is offset by the
recognition of goodwill and fair value adjustments arising from
M&A activity in the current and prior year of GBP217.1
million.
The contribution to revenue and operating profit of acquisitions
completed in the period was not material. There were no material
acquisitions completed during the period ended 30 June 2023 or
between 30 June 2023 and the date the interim financial statements
were approved.
(1) Bank overdrafts are included in cash and cash equivalents
because they form an integral part of the Group's cash
management.
14. Trade and other receivables
Amounts falling due within one year:
30 June 31 December
GBP million 2023 2022
========================================== ============================= =============================
Trade receivables (net of loss allowance) 6,167.8 7,403.9
========================================== ============================= =============================
Work in progress 292.7 352.4
========================================== ============================= =============================
VAT and sales taxes recoverable 425.5 448.1
========================================== ============================= =============================
Prepayments 305.7 236.6
========================================== ============================= =============================
Accrued income 3,193.4 3,468.3
========================================== ============================= =============================
Fair value of derivatives 2.4 5.1
========================================== ============================= =============================
Other debtors 670.6 585.3
========================================== ============================= =============================
11,058.1 12,499.7
========================================== ============================= =============================
Amounts falling due after more than one year:
30 June 31 December
GBP million 2023 2022
========================== ============================= =============================
Prepayments 2.2 3.9
========================== ============================= =============================
Fair value of derivatives 15.3 0.6
========================== ============================= =============================
Other debtors 139.3 214.1
========================== ============================= =============================
156.8 218.6
========================== ============================= =============================
The Group has applied the practical expedient permitted by IFRS
15 to not disclose the transaction price allocated to performance
obligations unsatisfied (or partially unsatisfied) as of the end of
the reporting period as contracts typically have an original
expected duration of a year or less.
Other debtors falling due after more than one year for 30 June
2023 includes GBP16.0 million (31 December 2022: GBP15.4 million)
in relation to pension plans in surplus.
Impairment losses on work in progress, accrued income and other
debtors were immaterial for the periods presented.
The Group considers that the carrying amount of trade and other
receivables approximates their fair value.
A bad debt credit of GBP5.4 million (period ended 30 June 2022:
expense of GBP11.5 million) on the Group's trade receivables in the
period is a result of the decrease in expected credit losses since
31 December 2022. The loss allowance is equivalent to 0.8% (31
December 2022: 1.0%) of gross trade receivables.
15. Trade and other payables: amounts falling due within one year
30 June 31 December
GBP million 2023 2022
================================================ ============================ ============================
Trade payables 9,351.1 11,182.3
================================================ ============================ ============================
Deferred income 1,310.5 1,599.0
================================================ ============================ ============================
Payments due to vendors (earnout agreements) 73.3 62.0
================================================ ============================ ============================
Liabilities in respect of put option agreements
with vendors 14.9 18.8
================================================ ============================ ============================
Fair value of derivatives 40.2 58.0
================================================ ============================ ============================
Other creditors and accruals 2,365.8 2,914.8
================================================ ============================ ============================
13,155.8 15,834.9
================================================ ============================ ============================
The Group considers that the carrying amount of trade and other
payables approximates their fair value.
16. Trade and other payables: amounts falling due after more than one year
30 June 31 December
GBP million 2023 2022
================================================ ============================ =============================
Payments due to vendors (earnout agreements) 114.6 98.1
================================================ ============================ =============================
Liabilities in respect of put option agreements
with vendors 305.9 323.3
================================================ ============================ =============================
Fair value of derivatives 12.6 -
================================================ ============================ =============================
Other creditors and accruals 84.3 69.5
================================================ ============================ =============================
517.4 490.9
================================================ ============================ =============================
The Group considers that the carrying amount of trade and other
payables approximates their fair value.
The following table sets out payments due to vendors, comprising
contingent consideration and the Directors' best estimates of
future earnout related obligations:
30 June 31 December
GBP million 2023 2022
====================== ============================ ============================
Within one year 73.3 62.0
====================== ============================ ============================
Between 1 and 2 years 37.8 19.5
====================== ============================ ============================
Between 2 and 3 years 34.8 27.6
====================== ============================ ============================
Between 3 and 4 years 28.8 28.6
====================== ============================ ============================
Between 4 and 5 years 13.2 22.4
====================== ============================ ============================
187.9 160.1
====================== ============================ ============================
The Group's approach to payments due to vendors is outlined in
note 19.
The Group does not consider there to be any material contingent
liabilities as at 30 June 2023.
17. Related party transactions
The Group enters into transactions with its associate
undertakings. The Group has continuing transactions with Kantar,
including sales, purchases, the provision of IT services, subleases
and property related items.
In the period ended 30 June 2023, revenue of GBP111.8 million
(period ended 30 June 2022: GBP82.7 million) was reported in
relation to Compas, an associate in the USA, and revenue of GBP6.6
million (period ended 30 June 2022: GBP7.4 million) was reported in
relation to Kantar. All other transactions in the periods presented
were immaterial.
The following amounts were outstanding at 30 June 2023:
30 June 31 December
GBP million 2023 2022
================================ ============================== ============================
Amounts owed by related parties
================================ ============================== ============================
Kantar 24.7 26.1
================================ ============================== ============================
Other 50.5 62.4
================================ ============================== ============================
75.2 88.5
================================ ============================== ============================
Amounts owed to related parties
================================ ============================== ============================
Kantar (7.4) (10.5)
================================ ============================== ============================
Other (55.2) (65.2)
================================ ============================== ============================
(62.6) (75.7)
================================ ============================== ============================
18. Going concern and liquidity risk
In considering going concern and liquidity risk, the Directors
have reviewed the Group's future cash requirements and earnings
projections. The Directors believe these forecasts have been
prepared on a prudent basis and have also considered the impact of
a range of potential changes to trading performance. The Group
modelled a range of revenue less pass-through costs compared with
the year ended 31 December 2022 and a number of mitigating cost
actions that are available to the Group. Considering the Group's
bank covenant and liquidity headroom and cost mitigation actions
which could be implemented, the Group would be able to operate with
appropriate liquidity and within its banking covenants and be able
to meet its liabilities as they fall due with a decline in revenue
less pass-through costs up to 18% in 2023 and up to 12% in 2024
compared to the corresponding prior periods. The likelihood of such
a decline is considered remote. The Directors have concluded that
the Group will be able to operate within its current facilities and
comply with its banking covenants for the foreseeable future and
therefore believe it is appropriate to prepare the financial
statements of the Group on a going concern basis and that there are
no material uncertainties which gives rise to a significant going
concern risk.
Given its debt maturity profile and available facilities, the
Directors believe the Group has sufficient liquidity to match its
requirements for the foreseeable future.
19. Financial instruments
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into levels 1 to 3 based on the degree to which
the fair value is observable, or based on observable inputs:
GBP million Level 1 Level 2 Level 3
======================== ============================= ============================== =============================
30 June 2023
======================== ============================= ============================== =============================
Derivatives in
designated hedge
relationships
======================== ============================= ============================== =============================
Derivative assets - 14.8 -
======================== ============================= ============================== =============================
Derivative liabilities - (51.0) -
======================== ============================= ============================== =============================
Held at fair value
through profit
or loss
======================== ============================= ============================== =============================
Other investments 0.4 - 257.5
======================== ============================= ============================== =============================
Derivative assets - 2.9 -
======================== ============================= ============================== =============================
Derivative liabilities - (1.8) -
======================== ============================= ============================== =============================
Payments due to vendors
(earnout
agreements) - - (187.9)
======================== ============================= ============================== =============================
Liabilities in respect
of put options - - (320.8)
======================== ============================= ============================== =============================
Held at fair value
through other
comprehensive income
======================== ============================= ============================== =============================
Other investments 7.2 - 67.8
======================== ============================= ============================== =============================
Reconciliation of level 3 fair value measurements:
Payments Liabilities
due to vendors in respect
GBP million (earnout agreements) of put options Other investments
======================== ============================= ============================== =============================
1 January 2023 (160.1) (342.1) 358.5
======================== ============================= ============================== =============================
Gains/(losses)
recognised in the
income statement 25.7 7.1 (24.7)
======================== ============================= ============================== =============================
Gains recognised in
other comprehensive
income - - 0.1
======================== ============================= ============================== =============================
Additions (66.7) (2.4) 1.8
======================== ============================= ============================== =============================
Disposals - - (10.4)
======================== ============================= ============================== =============================
Cancellations - 2.8 -
======================== ============================= ============================== =============================
Settlements 12.4 1.8 -
======================== ============================= ============================== =============================
Exchange adjustments 0.8 12.0 -
======================== ============================= ============================== =============================
30 June 2023 (187.9) (320.8) 325.3
======================== ============================= ============================== =============================
The fair values of financial assets and liabilities are based on
quoted market prices where available. Where the market value is not
available, the Group has estimated relevant fair values on the
basis of available information from outside sources. There have
been no movements between level 3 and other levels.
Payments due to vendors and liabilities in respect of put
options
Future anticipated payments due to vendors in respect of
contingent consideration (earnout agreements) are recorded at fair
value, which is the present value of the expected cash outflows of
the obligations. Liabilities in respect of put option agreements
are initially recorded at the present value of the redemption
amount in accordance with IAS 32 and subsequently measured at fair
value in accordance with IFRS 9. Both types of obligations are
dependent on the future financial performance of the entity and it
is assumed that future profits are in line with Directors'
estimates. The Directors derive their estimates from internal
business plans together with financial due diligence performed in
connection with the acquisition.
At 30 June 2023, the weighted average growth rate in estimating
future financial performance was 11.6%, which reflects the
prevalence of recent acquisitions in the faster growing markets and
new media sectors. The weighted average risk adjusted discount rate
applied to these obligations at 30 June 2023 was approximately
7.4%.
19. Financial instruments (continued)
A one percentage point increase or decrease in the growth rate
in estimated future financial performance would increase or
decrease the combined liabilities due to earnout agreements and put
options by approximately GBP8.6 million and GBP8.3 million,
respectively. A 0.5 percentage point increase or decrease in the
risk adjusted discount rate would decrease or increase the combined
liabilities by approximately GBP6.3 million and GBP6.5 million,
respectively. An increase in the liability would result in a loss
in the revaluation and retranslation of financial instruments (note
6), while a decrease would result in a gain.
Other investments
The fair value of other investments included in level 1 are
based on quoted market prices. Other investments included in level
3 are unlisted securities, where market value is not readily
available. The Group has estimated relevant fair values on the
basis of information from outside sources using the most
appropriate valuation technique, including all external funding
rounds, revenue and EBITDA multiples, the share of fund net asset
value and discounted cash flows. The sensitivity to changes in
unobservable inputs is specific to each individual investment. A
change to one or more of these unobservable inputs to reflect a
reasonably possible alternative assumption would not result in a
significant change to the fair value.
Principal risks and uncertainties
The Board regularly reviews the principal and emerging risks and
uncertainties affecting the Group and these are summarised
below:
Strategic and External Risks
Economic Risk
-- Adverse economic conditions, including those caused by the
Ukrainian conflict, severe and sustained inflation in key markets
where the Group operates, supply chain issues affecting the
distribution of clients' products and/or disruption in credit
markets, pose a risk the Group's clients may reduce or cancel
spend, or be unable to satisfy obligations.
Geopolitical Risk
-- Growing geopolitical tension and conflicts continue to have a
destabilising effect in markets where the Group has operations.
This rise in geopolitical activity continues to have an adverse
effect upon the economic outlook, the general erosion of trust and
an increasing trend of national ideology and regional convergence
over global cooperation and integration. Such factors and economic
conditions may reflect in clients' confidence in making longer term
investments and commitments in marketing spend.
Pandemic
-- The impact of a pandemic on our business will depend on
factors that we are not able to accurately predict, including the
duration and scope of a pandemic, any existing or new variants,
government actions to mitigate the effects of a pandemic and the
continuing and long term impact of a pandemic on our clients'
spending plans.
Strategic Plan
-- The failure to successfully complete the strategic plan
updated in December 2020 - to simplify the Group structure,
continue to introduce market leading products and services,
identify cost savings and successfully integrate acquisitions - may
have a material adverse effect on the Group's market share and its
business revenues, results of operation, financial condition, or
prospects.
IT Transformation
-- The IT Transformation programme prioritises the most critical
changes necessary to support the Group's Strategic Plan whilst
maintaining the operational performance and security of core Group
systems. The Group is also reliant on third parties for the
performance of a significant portion of our worldwide information
technology and operations functions. A failure to provide these
functions could have an adverse effect on our business.
Operational Risks
Client Loss
-- The Group competes for clients in a highly competitive
industry which has been evolving and undergoing structural change.
Client net loss to competitors or as a consequence of client
consolidation, insolvency or a reduction in marketing budgets due
to a geopolitical change or shift in client spending would have a
material adverse effect on our market share, business, revenues,
results of operations, financial condition and prospects.
Client Concentration
-- The Group receives a significant portion of its revenues from
a limited number of large clients and the net loss of one or more
of these clients could have a material adverse effect on the
Group's prospects, business, financial condition and results of
operations.
Reputation
-- The Group is subject to increased reputational risk
associated with working on client briefs perceived to be
environmentally detrimental and/or misrepresenting environmental
claims.
People, Culture and Succession
-- The Group's performance could be adversely affected if we do
not react quickly enough to changes in our market and fail to
attract, develop and retain key and diverse creative, commercial
technology and management talent or are unable to retain and
incentivise key and diverse talent.
Cyber and Information Security
-- The Group has in the past and may in the future experience a
cyber attack that leads to harm or disruption to our operations,
systems or services. Such an attack may also affect suppliers and
partners through the unauthorised access, manipulation, corruption
or the destruction of data.
Credit risk
-- We are subject to credit risk through the default of a client or other counterparty.
-- Challenging economic conditions, heightened geopolitical
issues, shocks to consumer confidence, disruption in credit markets
and challenges in the supply chain disrupting our client operations
can lead to a worsening of the financial strength and outlook for
our clients who may reduce, suspend or cancel spend with us,
request extended payment terms beyond 60 days or be unable to
satisfy obligations.
Internal Controls
-- The Group's performance could be adversely impacted if we
failed to ensure adequate internal control procedures are in
place.
-- The Group has previously identified material weaknesses in
internal control over financial reporting and a failure to properly
remediate these or any new material weaknesses could adversely
affect our results of operations, investor confidence in the Group
and the market price of our ADSs and ordinary shares.
Compliance Risks
Data Privacy
-- The Group is subject to strict data protection and privacy
legislation in the jurisdictions in which we operate and rely
extensively on information technology systems. The Group stores,
transmits and relies on critical and sensitive data. Security of
this type of data is exposed to escalating external cyber threats
that are increasing in sophistication as well as internal
breaches.
Environment Regulation and Reporting
-- The Group could be subject to increased costs to comply with
potential future changes in environmental law and regulations and
increasing carbon offset pricing to meet net zero commitments.
Regulatory, Sanctions, Anti-Trust and Taxation
-- The Group may be subject to regulations restricting its
activities or effecting changes in taxation.
-- The Group is subject to anti-corruption, anti-bribery and
anti-trust legislation and enforcement in the countries in which it
operates and violations could have an adverse effect on our
business and reputation.
-- Civil liabilities or judgements against the Company or its
Directors or officers based on United States federal or state
securities laws may not be enforceable in the United States or in
England and Wales or in Jersey.
-- The Group is subject to the laws of the United States, the EU
and other jurisdictions that impose sanctions and regulate the
supply of services to certain countries. The Ukraine conflict has
caused the adoption of comprehensive sanctions by, among others,
the EU, the United States and the UK, which restrict a wide range
of trade and financial dealings with Russia and Russian persons.
Failure to comply which these laws could expose the Group to civil
and criminal penalties.
Emerging Risks
-- The Group's operations could be disrupted by an increased
frequency of extreme weather and climate related natural
disasters.
-- A failure to manage the complexity in carbon emission
accounting for marketing & media or to consider scope 3
emissions in new technology and business model innovation across
the supply chain could have an adverse effect on our business and
reputation.
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.
An investor can identify these statements by the fact that they do
not relate strictly to historical or current facts.
These forward-looking statements may include, among other
things, plans, objectives, beliefs, intentions, strategies,
projections and anticipated future economic performance based on
assumptions and the like that are subject to risks and
uncertainties. These statements can be identified by the fact that
they do not relate strictly to historical or current facts. They
use words such as 'aim', 'anticipate', 'believe', 'estimate',
'expect', 'forecast', 'guidance', 'intend', 'may', 'will',
'should', 'potential', 'possible', 'predict', 'project', 'plan',
'target', and other words and similar references to future periods
but are not the exclusive means of identifying such statements. As
such, all forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances that are
beyond the control of the Company. Actual results or outcomes may
differ materially from those discussed or implied in the
forward-looking statements. Therefore, you should not rely on such
forward-looking statements, which speak only as of the date they
are made, as a prediction of actual results or otherwise. Important
factors which may cause actual results to differ include but are
not limited to: the impact of epidemics or pandemics including
restrictions on businesses, social activities and travel; the
unanticipated loss of a material client or key personnel; delays or
reductions in client advertising budgets; shifts in industry rates
of compensation; regulatory compliance costs or litigation; changes
in competitive factors in the industries in which we operate and
demand for our products and services; changes in client
advertising, marketing and corporate communications requirements;
our inability to realise the future anticipated benefits of
acquisitions; failure to realise our assumptions regarding goodwill
and indefinite lived intangible assets; natural disasters or acts
of terrorism; the Company's ability to attract new clients; the
economic and geopolitical impact of the Russian invasion of
Ukraine; the risk of global economic downturn; slower growth,
increasing interest rates and high and sustained inflation; supply
chain issues affecting the distribution of our clients' products;
technological changes and risks to the security of IT and
operational infrastructure, systems, data and information resulting
from increased threat of cyber and other attacks; effectively
managing the risks, challenges and efficiencies presented by using
Artificial Intelligence (AI) technologies and partnerships in our
business; the Company's exposure to changes in the values of other
major currencies (because a substantial portion of its revenues are
derived and costs incurred outside of the UK); and the overall
level of economic activity in the Company's major markets (which
varies depending on, among other things, regional, national and
international political and economic conditions and government
regulations in the world's advertising markets). In addition, you
should consider the risks described in Item 3D, captioned 'Risk
Factors' in the Group's Annual Report on Form 20-F for 2022, which
could also cause actual results to differ from forward-looking
information. Neither the Company, nor any of its directors,
officers or employees, provides any representation, assurance or
guarantee that the occurrence of any events anticipated, expressed
or implied in any forward-looking statements will actually occur.
Accordingly, no assurance can be given that any particular
expectation will be met and investors are cautioned not to place
undue reliance on the forward-looking statements.
Other than in accordance with its legal or regulatory
obligations (including under the Market Abuse Regulation, the UK
Listing Rules and the Disclosure and Transparency Rules of the
Financial Conduct Authority), The Company undertakes no obligation
to update or revise any such forward-looking statements, whether as
a result of new information, future events or otherwise.
Any forward looking statements made by or on behalf of the Group
speak only as of the date they are made and are based upon the
knowledge and information available to the Directors at the
time.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
a. the condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.4R;
b. the interim management report includes a fair review of the
information required by DTR 4.2.7R; and
c. the interim management report includes a fair review of the
information required by DTR 4.2.8R.
The names and functions of the WPP plc Board can be found at:
wpp.com/about/our-leadership/the-wpp-board
This responsibility statement is approved by the Board of
Directors and is signed on its behalf by:
J Wilson
Chief Financial Officer
4 August 2023
Independent review report to WPP plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the condensed
consolidated interim income statement, statement of comprehensive
income, the cash flow statement, the balance sheet, the statement
of changes in equity and related notes 1 to 19.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financing
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB). The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with this ISRE (UK) 2410; however future events or
conditions may cause the entity to cease to continue as a going
concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
4 August 2023
Appendix 2: Alternative performance measures for the six months
ended 30 June 2023
The Group presents alternative performance measures, including
headline operating profit, headline operating profit margin,
headline profit before interest and tax, headline profit before
tax, headline earnings, headline EPS, headline EBITDA, revenue less
pass-through costs, adjusted net debt and adjusted free cash flow.
They are used by management for internal performance analyses; the
presentation of these measures facilitates comparability with other
companies, although management's measures may not be calculated in
the same way as similarly titled measures reported by other
companies; and these measures are useful in connection with
discussions with the investment community.
In the calculation of headline profit measures, judgement is
required by management in determining which revenues and costs are
considered to be significant, non-recurring or volatile items that
are to be excluded.
The exclusion of certain adjusting items may result in headline
earnings being materially higher or lower than reported earnings,
for example when significant impairments or restructuring charges
are excluded but the related benefits are included headline
earnings will be higher. Headline measures should not be considered
in isolation as they provide additional information to aid the
understanding of the Group's financial performance.
Reconciliation of revenue to revenue less pass-through
costs:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
================================ =========================== ===========================
Revenue 7,221.2 6,755.3
================================ =========================== ===========================
Media pass-through costs (1,022.8) (1,016.7)
================================ =========================== ===========================
Other pass-through costs (387.2) (229.1)
================================ =========================== ===========================
Revenue less pass-through costs 5,811.2 5,509.5
================================ =========================== ===========================
Pass-through costs comprise fees paid to external suppliers when
they are engaged to perform part or all of a specific project and
are charged directly to clients. This includes the cost of media
where the Group is buying digital media for its own account on a
transparent opt-in basis and, as a result, the subsequent media
pass-through costs have to be accounted for as revenue, as well as
billings. Therefore, management considers that revenue less
pass-through costs gives a helpful reflection of top-line
growth.
Reconciliation of profit before taxation to headline operating
profit:
Six months Six months
GBP million ended ended
Margin 30 June Margin 30 June
% 2023 % 2022
=================================== =========== =========================== =========== ==========================
Profit before taxation 204.3 418.6
=================================== =========== =========================== =========== ==========================
Finance and investment income (102.4) (55.5)
=================================== =========== =========================== =========== ==========================
Finance costs 230.7 144.9
=================================== =========== =========================== =========== ==========================
Revaluation and retranslation of
financial instruments (25.5) (33.1)
=================================== =========== =========================== =========== ==========================
Profit before interest and taxation 307.1 474.9
=================================== =========== =========================== =========== ==========================
(Earnings)/loss from associates -
after interest and tax (1.0) 63.8
=================================== =========== =========================== =========== ==========================
Operating profit 5.3 306.1 9.8 538.7
=================================== =========== =========================== =========== ==========================
Goodwill impairment 52.9 -
=================================== =========== =========================== =========== ==========================
Amortisation and impairment of
acquired
intangible assets 36.6 31.5
=================================== =========== =========================== =========== ==========================
Investment and other impairment
charges 11.0 -
Restructuring and transformation
costs 86.8 81.2
Property related costs 180.0 -
=================================== =========== =========================== =========== ==========================
Losses on disposal of investments
and subsidiaries 2.9 48.1
=================================== =========== =========================== =========== ==========================
Gains on remeasurement of equity
interests arising from a change in
scope of ownership - (60.4)
=================================== =========== =========================== =========== ==========================
Litigation settlement (10.0) -
=================================== =========== =========================== =========== ==========================
Headline operating profit 11.5 666.3 11.6 639.1
=================================== =========== =========================== =========== ==========================
Finance and investment income 102.4 55.5
=================================== =========== =========================== =========== ==========================
Finance costs (excluding interest
expense related to lease
liabilities) (180.2) (98.9)
=================================== =========== =========================== =========== ==========================
(77.8) (43.4)
=================================== =========== =========================== =========== ==========================
Interest cover(1) on headline
operating
profit 8.6 times 14.7 times
=================================== =========== =========================== =========== ==========================
Headline operating profit and headline operating margin are
metrics that management use to assess the performance of the
business.
Headline operating profit margin before and after share of
results of associates:
Six months Six months
ended ended
Margin 30 June Margin 30 June
GBP million % 2023 % 2022
====================================== ========== =========================== ========== =========================
Revenue less pass-through costs 5,811.2 5,509.5
====================================== ========== =========================== ========== =========================
Headline operating profit 11.5 666.3 11.6 639.1
====================================== ========== =========================== ========== =========================
Earnings from associates (after
interest
and tax, excluding adjusting items) 7.6 12.3
====================================== ========== =========================== ========== =========================
Headline PBIT 11.6 673.9 11.8 651.4
====================================== ========== =========================== ========== =========================
Headline PBIT is one of the metrics that management uses to
assess the performance of the business.
(1) Interest expense related to lease liabilities is excluded
from interest cover as lease liabilities are excluded from the
Group's key
leverage metrics.
Calculation of headline EBITDA:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
============================================== ============================= ============================
Headline PBIT 673.9 651.4
============================================== ============================= ============================
Depreciation of property, plant and equipment 83.7 79.9
============================================== ============================= ============================
Amortisation of other intangible assets 9.0 13.6
============================================== ============================= ============================
Headline EBITDA (including depreciation of
right-of-use assets) 766.6 744.9
============================================== ============================= ============================
Depreciation of right-of-use assets 129.3 129.9
============================================== ============================= ============================
Headline EBITDA 895.9 874.8
============================================== ============================= ============================
Headline EBITDA is used for valuing companies, and is one of the
metrics that management uses to assess the performance of the
business. Headline EBITDA (including depreciation of right-of-use
assets) is used in the Group's key leverage metric.
Reconciliation of profit before taxation to headline PBT and
headline earnings:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
=================================================== ============================= =============================
Profit before taxation 204.3 418.6
=================================================== ============================= =============================
Goodwill impairment 52.9 -
=================================================== ============================= =============================
Amortisation and impairment of acquired intangible
assets 36.6 31.5
=================================================== ============================= =============================
Investment and other impairment charges 11.0 -
Restructuring and transformation costs 86.8 81.2
Property related costs 180.0 -
=================================================== ============================= =============================
Losses on disposal of investments and subsidiaries 2.9 48.1
=================================================== ============================= =============================
Gains on remeasurement of equity interests
arising from a change in scope of ownership - (60.4)
=================================================== ============================= =============================
Litigation settlement (10.0) -
=================================================== ============================= =============================
Share of adjusting items of associates 6.6 76.1
=================================================== ============================= =============================
Revaluation and retranslation of financial
instruments (25.5) (33.1)
=================================================== ============================= =============================
Headline PBT 545.6 562.0
=================================================== ============================= =============================
Headline tax charge (147.5) (143.1)
=================================================== ============================= =============================
Headline non-controlling interests (37.3) (43.2)
=================================================== ============================= =============================
Headline earnings 360.8 375.7
=================================================== ============================= =============================
Headline PBT and headline earnings are metrics that management
use to assess the performance of the business.
Calculation of headline taxation:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
====================================================== ============================== ==============================
Headline PBT 545.6 562.0
====================================================== ============================== ==============================
Tax charge 55.0 117.5
====================================================== ============================== ==============================
Tax charge relating to gains on disposal of
investments and subsidiaries - (3.2)
====================================================== ============================== ==============================
Tax credit relating to restructuring and
transformation
costs and property related costs 88.9 26.6
====================================================== ============================== ==============================
Tax charge relating to litigation settlement (3.2) -
====================================================== ============================== ==============================
Deferred tax impact of the amortisation of
acquired intangible assets and other goodwill
items 11.0 2.2
====================================================== ============================== ==============================
Deferred tax relating to gains and losses
on disposal of investments and subsidiaries (4.2) -
====================================================== ============================== ==============================
Headline tax charge 147.5 143.1
====================================================== ============================== ==============================
Headline tax rate 27.0% 25.5%
====================================================== ============================== ==============================
The headline tax rate as a percentage of headline PBT (that
includes the share of headline results of associates) is 27.0%
(2022: 25.5%). Given the Group's geographic mix of profits and the
changing international tax environment, the headline tax rate is
expected to increase slightly over the next few years.
Headline earnings per share:
The calculation of basic headline EPS is as follows:
Six months Six months
ended ended
30 June 2023 30 June 2022
========================================== =========================== ===========================
Headline earnings (GBP million) 360.8 375.7
========================================== =========================== ===========================
Weighted average shares used in basic EPS
calculation (million) 1,071.2 1,115.2
========================================== =========================== ===========================
Headline EPS 33.7p 33.7p
========================================== =========================== ===========================
The calculation of diluted headline EPS is as follows:
Six months Six months
ended ended
30 June 2023 30 June 2022
============================================ =========================== ===========================
Diluted headline earnings (GBP million) 360.8 375.7
============================================ =========================== ===========================
Weighted average shares used in diluted EPS
calculation (million) 1,090.8 1,137.8
============================================ =========================== ===========================
Diluted headline EPS 33.1p 33.0p
============================================ =========================== ===========================
Reconciliation of adjusted free cash flow:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
================================================ ============================= =============================
Cash used in operations (197.7) (885.6)
================================================ ============================= =============================
Plus:
================================================ ============================= =============================
Interest received 108.5 26.9
================================================ ============================= =============================
Investment income received 3.4 20.1
================================================ ============================= =============================
Dividends from associates 18.9 21.4
================================================ ============================= =============================
Share option proceeds 0.7 1.1
================================================ ============================= =============================
Less:
================================================ ============================= =============================
Earnout payments (12.4) (63.3)
================================================ ============================= =============================
Corporation and overseas tax paid (171.3) (162.7)
================================================ ============================= =============================
Interest and similar charges paid (155.9) (86.8)
================================================ ============================= =============================
Interest paid on lease liabilities (48.8) (44.1)
================================================ ============================= =============================
Repayment of lease liabilities (135.1) (146.3)
================================================ ============================= =============================
Purchase of property, plant and equipment (80.7) (102.4)
================================================ ============================= =============================
Purchases of other intangible assets (including
capitalised computer software) (23.1) (14.6)
================================================ ============================= =============================
Dividends paid to non-controlling interests
in subsidiary undertakings (61.2) (37.2)
================================================ ============================= =============================
Adjusted free cash flow (754.7) (1,473.5)
================================================ ============================= =============================
The Group bases its internal cash flow objectives on adjusted
free cash flow. Management believes adjusted free cash flow is
meaningful to investors because it is the measure of the Group's
funds available for acquisition related payments, dividends to
shareholders, share repurchases and debt repayment. The purpose of
presenting adjusted free cash flow is to indicate the ongoing cash
generation within the control of the Group after taking account of
the necessary cash expenditures of maintaining the capital and
operating structure of the Group (in the form of payments of
interest, corporate taxation and capital expenditure).
Adjusted net debt and average adjusted net debt
Management believes that adjusted net debt and average adjusted
net debt are appropriate and meaningful measures of the debt levels
within the Group.
Adjusted net debt at a period end consists of cash and
short-term deposits, bank overdraft, bonds and bank loans due
within one year and bonds and bank loans due after one year .
Presentation of adjusted net debt:
30 June 31 December 30 June
GBP million 2023 2022 2022
================================ ========================== ========================== ===========================
Cash and short-term deposits 1,962.6 2,491.5 1,775.0
================================ ========================== ========================== ===========================
Bank overdrafts, bonds and bank
loans due within one year (1,092.9) (1,169.0) (289.1)
================================ ========================== ========================== ===========================
Bonds and bank loans due after
one year (4,338.0) (3,801.8) (4,620.7)
================================ ========================== ========================== ===========================
Adjusted net debt (3,468.3) (2,479.3) (3,134.8)
================================ ========================== ========================== ===========================
Average adjusted net debt is calculated as the average monthly
net borrowings of the Group. Adjusted net debt excludes lease
liabilities .
Future restructuring and transformation costs
Restructuring and transformation costs are expected from 2023 to
2025, with approximately GBP250 million in relation to the
continued rollout of the Group's new ERP system in order to drive
efficiency and collaboration throughout the Group. Costs of between
GBP100 million and GBP150 million are also expected in relation to
other IT transformation projects, shared service centres and
co-locations.
Constant currency and pro forma ('like-for-like')
The condensed consolidated interim financial statements are
presented in pounds sterling. However, the Group's significant
international operations give rise to fluctuations in foreign
exchange rates. To neutralise foreign exchange impact and
illustrate the underlying change in revenue and profit from one
year to the next, the Group has adopted the practice of discussing
results in both reportable currency (local currency results
translated into pounds sterling at the prevailing foreign exchange
rate) and constant currency.
Management also believes that discussing pro forma or
like-for-like contributes to the understanding of the Group's
performance and trends because it allows for meaningful comparisons
of the current year to that of prior years.
Further details of the constant currency and pro forma methods
are given in the glossary on page 50.
Reconciliation of reported revenue to like-for-like revenue:
GBP million
======================================= ============================ =============
Revenue
======================================= ============================ =============
Six months ended 30 June 2022 reported 6,755.3
======================================= ============================ =============
Impact of exchange rate changes 168.7 2.5%
======================================= ============================ =============
Impact of acquisitions and disposals 60.8 0.9%
======================================= ============================ =============
Like-for-like growth 236.4 3.5%
======================================= ============================ =============
Six months ended 30 June 2023 reported 7,221.2 6.9%
======================================= ============================ =============
Reconciliation of reported revenue less pass-through costs to
like-for-like revenue less pass-through costs:
GBP million
======================================= ============================ =============
Revenue less pass-through costs
======================================= ============================ =============
Six months ended 30 June 2022 reported 5,509.5
======================================= ============================ =============
Impact of exchange rate changes 142.6 2.6%
======================================= ============================ =============
Impact of acquisitions and disposals 49.4 0.9%
======================================= ============================ =============
Like-for-like growth 109.7 2.0%
======================================= ============================ =============
Six months ended 30 June 2023 reported 5,811.2 5.5%
======================================= ============================ =============
Earnings/(loss) from associates - after interest and tax
Management reviews the 'earnings/(loss) from associates - after
interest and tax' by assessing the underlying component movements
including 'share of profit before interest and taxation of
associates', 'share of adjusting items of associates', 'share of
interest and non-controlling interests of associates', and 'share
of taxation of associates', which are derived from the Income
Statements of the associate undertakings.
The following table is an analysis of 'earnings/(loss) from
associates - after interest and tax' and underlying component
movements:
Six months Six months
ended ended
GBP million 30 June 2023 30 June 2022
================================================= ============================== ============================
Share of profit before interest and taxation 65.9 93.3
================================================= ============================== ============================
Share of adjusting items of associates (6.6) (76.1)
================================================= ============================== ============================
Share of interest and non-controlling interests (55.1) (58.9)
================================================= ============================== ============================
Share of taxation (3.2) (22.1)
================================================= ============================== ============================
Earnings/(loss) from associates - after interest
and tax 1.0 (63.8)
================================================= ============================== ============================
Share of adjusting items of associates of GBP6.6 million (2022:
GBP76.1 million). In 2022, this included GBP46.7 million of
amortisation and impairment of acquired intangible assets, and
GBP24.8 million of restructuring and one-off transaction costs
within Kantar.
Trade working capital
Trade working capital is a metric that is directly associated
with everyday business operations and used by management to assess
the ability of the Group to meet the short-term obligations.
30 June 31 December 30 June
GBP million 2023 2022 2022
====================== =========================== =========================== ===========================
Trade receivables 6,167.8 7,403.9 6,491.7
====================== =========================== =========================== ===========================
Accrued income 3,193.4 3,468.3 3,516.4
====================== =========================== =========================== ===========================
Work in progress 292.7 352.4 343.8
====================== =========================== =========================== ===========================
Trade payables (9,351.1) (11,182.3) (9,674.4)
====================== =========================== =========================== ===========================
Deferred income (1,310.5) (1,599.0) (1,457.2)
====================== =========================== =========================== ===========================
Trade working capital (1,007.7) (1,556.7) (779.7)
====================== =========================== =========================== ===========================
Appendix 3: Re-presented segmental analysis for the year ended
31 December 2022
During 2023, the Group re-presented prior year figures to
reflect the reallocation of a number of businesses between Global
Integrated Agencies and Public Relations. For information purposes,
the re-presented reported contributions by operating sector for the
year ended 31 December 2022 are presented below:
Year ended
31 December
GBP million 2022
=================================== =========================
Revenue
=================================== =========================
Global Integrated Agencies 12,186.8
=================================== =========================
Public Relations 1,232.5
=================================== =========================
Specialist Agencies 1,009.4
=================================== =========================
14,428.7
=================================== =========================
Revenue less pass-through costs(1)
=================================== =========================
Global Integrated Agencies 9,738.6
=================================== =========================
Public Relations 1,161.2
=================================== =========================
Specialist Agencies 899.5
=================================== =========================
11,799.3
=================================== =========================
Headline operating profit(2)
=================================== =========================
Global Integrated Agencies 1,431.3
=================================== =========================
Public Relations 191.9
=================================== =========================
Specialist Agencies 118.6
=================================== =========================
1,741.8
=================================== =========================
(1) Revenue less pass-through costs is defined in Appendix 2.
(2) Headline operating profit is defined in Appendix 2.
Glossary and basis of preparation
Adjusted free cash flow
Adjusted free cash flow is calculated as cash used in operations
plus dividends received from associates, interest received,
investment income received, and share option proceeds, less
corporation and overseas tax paid, interest and similar charges
paid, dividends paid to non-controlling interests in subsidiary
undertakings, repayment of lease liabilities (including interest),
earnout payments and purchases of property, plant and equipment and
purchases of other intangible assets.
Adjusting items
Adjusting items include gains/losses on disposal of investments
and subsidiaries, gains/losses on remeasurement of equity interests
arising from change in scope of ownership, investment and other
charges/reversals, litigation settlement, restructuring and
transformation costs, property related costs, goodwill impairment,
amortisation and impairment of acquired intangible assets,
intangible asset impairment, property related costs and share of
adjusting items of associates.
Average adjusted net debt and adjusted net debt
Average adjusted net debt is calculated as the average daily net
borrowings of the Group. Adjusted net debt at a period end consists
of cash and short-term deposits, bank overdraft, bonds and bank
loans due within one year and bonds and bank loans due after one
year. Adjusted net debt excludes lease liabilities.
Billings and estimated net new billings
Billings comprise the gross amounts billed to clients in respect
of commission-based/fee-based income together with the total of
other fees earned. Net new billings represent the estimated
annualised impact on billings of new business gained from both
existing and new clients, net of existing client business lost. The
estimated impact is based upon initial assessments of the clients'
marketing budgets, which may not necessarily result in actual
billings of the same amount.
Constant currency
The Group uses US dollar-based, constant currency models to
measure performance. These are calculated by applying budgeted 2023
exchange rates to local currency reported results for the current
and prior year, which excludes any variances attributable to
foreign exchange rate movements.
General and administrative costs
General and administrative costs include marketing costs,
certain professional fees, and an allocation of other costs,
including staff and establishment costs, based on the function of
employees within the Group.
Headline earnings
Headline PBT less headline tax charge and headline
non-controlling interests.
Headline EBITDA
Profit before finance income/costs and revaluation and
retranslation of financial instruments, taxation, gains/losses on
disposal of investments and subsidiaries, investment and other
charges/reversals, goodwill impairment, amortisation and impairment
of acquired intangible assets, intangible asset impairment,
amortisation of other intangibles, depreciation of property, plant
and equipment, depreciation of right-of-use assets, restructuring
and transformation costs, property related costs, litigation
settlement, share of adjusting items of associates and gains/losses
on remeasurement of equity interests arising from a change in scope
of ownership.
Headline operating profit
Operating profit before gains/losses on disposal of investments
and subsidiaries, investment and other charges/(reversals),
goodwill impairment, amortisation and impairment of acquired
intangible assets, intangible asset impairment, restructuring and
transformation costs, property related costs, litigation
settlement, and gains/losses on remeasurement of equity interests
arising from a change in scope of ownership.
Headline PBIT
Profit before finance income/costs and revaluation and
retranslation of financial instruments, taxation, gains/losses on
disposal of investments and subsidiaries, investment and other
charges/reversals, goodwill impairment, amortisation and impairment
of acquired intangible assets, intangible asset impairment,
restructuring and transformation costs, property related costs,
litigation settlement, share of adjusting items of associates and
gains/losses on remeasurement of equity interests arising from a
change in scope of ownership.
Headline operating profit margin
Headline operating profit margin is calculated as headline
operating profit (defined above) as a percentage of revenue less
pass-through costs.
Headline PBT
Profit before taxation, gains/losses on disposal of investments
and subsidiaries, investment and other charges/reversals, goodwill
impairment, amortisation and impairment of acquired intangible
assets, intangible asset impairment, restructuring and
transformation costs, property related costs, litigation
settlement, share of adjusting items of associates, gains/losses
arising from the revaluation and retranslation of financial
instruments and gains/losses on remeasurement of equity interests
arising from a change in scope of ownership.
Headline tax charge
Taxation excluding tax/deferred tax relating to gains/losses on
disposal of investments and subsidiaries, investment and other
charges/reversals, goodwill impairment, restructuring and
transformation costs, property related costs, litigation
settlement, and the deferred tax impact of the amortisation of
acquired intangible assets and other goodwill items.
Net working capital
The movement in net working capital consists of movements in
trade working capital and movements in other working capital and
provisions per the analysis of cash flows note.
Pass-through costs
Pass-through costs comprise fees paid to external suppliers
where they are engaged to perform part or all of a specific project
and are charged directly to clients, predominantly media costs.
Pro forma ('like-for-like')
Pro forma comparisons are calculated as follows: current year,
constant currency actual results (which include acquisitions from
the relevant date of completion) are compared with prior year,
constant currency actual results, adjusted to include the results
of acquisitions and disposals, and the reclassification of certain
businesses to associates in 2022. Both periods exclude results from
Russia. The Group uses the terms 'pro forma' and 'like-for-like'
interchangeably.
Revenue less pass-through costs
Revenue less pass-through costs is revenue less media and other
pass-through costs.
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END
IR EAEPLEAFDEEA
(END) Dow Jones Newswires
August 04, 2023 02:00 ET (06:00 GMT)
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