First Quarter Trading Update
|
Q1 performance in line with
expectations. 2024 guidance reiterated. Strong progress on
strategic initiatives across Burson, GroupM and
VML
|
Key
figures
|
First Quarter
|
£
million
|
+/(-) %
reported1
|
+/(-) %
LFL2
|
|
Revenue
|
3,412
|
(1.4)
|
2.1
|
|
Revenue less pass-through
costs
|
2,687
|
(5.0)
|
(1.6)
|
• Q1
revenue -1.4%; LFL revenue +2.1%
• Q1 LFL
revenue less pass-through costs -1.6% (Q1
2023: +2.9%) with growth in the UK and
Western Continental Europe offset by declines in North America and
Asia Pacific, which saw strong growth in India offset by a decline
in China
• Global Integrated Agencies
revenue less pass-through costs declined 0.7%, with 2.4% growth in
GroupM offset by a 3.3% decline at
integrated creative agencies with the loss of assignments at a
healthcare client and reduced spend at technology
companies
• New client assignment wins
from AstraZeneca, Canon, Molson Coors, Daiichi Sankyo, Nestlé,
Perfetti, Perrigo, Rightmove and Telefónica. Q1 net new billings of
$0.8bn (Q1 2023: $1.5bn)
• Strong progress on the
strategic initiatives laid out at our CMD in January. Burson,
GroupM and VML on track to deliver targeted in-year savings and
well-placed to benefit from a strong pipeline
• Continued strategic progress
on AI initiatives. WPP Open adopted by over 50,000 of our people
and at the heart of Nestlé Oceania, ASEAN and Nestlé Health Science
US wins. Collaboration with Google to integrate Gemini 1.5 Pro in
WPP Open announced in April. WPP named NVIDIA Industry Innovation
Partner of the Year in
EMEA
• 2024 guidance reiterated: LFL
revenue less pass-through costs growth expected to be 0-1%; with headline operating margin improvement of
20-40bps (excluding the impact of
FX)
Mark Read, Chief Executive Officer of WPP,
said:
"The first quarter of 2024 was very
much in line with our expectations with performance reflecting the
toughest comparator of the year.
"Strategically, we have progressed
well on the priorities set out at our Capital Markets Day at the
end of January. We've rolled out multiple AI tools through our
intelligent marketing operating system WPP Open, including the
latest foundation models from Bria, Google and OpenAI, and at
Google Cloud Next we launched our Performance
Brain to predict the best-performing content ahead of
campaigns going live. These products are being deployed at scale,
together with investment in training for our people. WPP Open was
also at the heart of our most recent new business successes,
including major media wins with Nestlé.
"Structurally, VML is now well
established and is on track to deliver savings. GroupM is
progressing well with its simplification and Burson will be
operational in July. I'm very pleased with
the progress we are making and we are already seeing the benefits
of a simpler and more agile structure for our clients.
"Our outlook for the full year is
reiterated. We remain on track to return to growth in the balance
of the year, supported by an encouraging new business pipeline and
the strength of our business creatively and in media, both powered
by new AI capabilities, while our simpler structure will drive
organisational flexibility and stronger cash
conversion."
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
|
press@wpp.com
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. Throughout
the commentary in this release growth rates are LFL unless stated
otherwise.
Overview
Revenue in the first quarter was
£3.4bn, down 1.4%
from £3.5bn in Q1 2023, and up 2.1% like-for-like. Revenue less pass-through costs was
£2.7bn, down 5.0%
from £2.8bn in Q1 2023, and down
1.6% like-for-like.
|
£
million
|
Q1 2024
|
%
reported
|
%
FX
|
%
M&A
|
%
LFL
|
|
Revenue
|
3,412
|
(1.4)
|
(4.2)
|
0.7
|
2.1
|
|
Revenue less pass-through costs
|
2,687
|
(5.0)
|
(3.9)
|
0.5
|
(1.6)
|
Business segment review3 - revenue less
pass-through costs
|
£
million
|
Q1 2024
|
Q1 2023
|
+/(-) %
reported
|
+/(-) %
LFL
|
|
Global Integrated
Agencies
|
2,202
|
2,305
|
(4.5)
|
(0.7)
|
|
Public Relations
|
276
|
292
|
(5.5)
|
(3.3)
|
|
Specialist Agencies
|
209
|
232
|
(9.9)
|
(7.6)
|
|
Total Group
|
2,687
|
2,829
|
(5.0)
|
(1.6)
|
Global Integrated
Agencies: GroupM, our media planning
and buying business, saw growth in revenue less pass-through costs
of 2.4% in Q1 (Q1 2023: +6.1%), with continued growth in client investment in
media, partially offset by the impact of US client
assignment losses from prior years and lower spending by technology
clients.
Other Global Integrated Agencies
declined 3.3% (Q1 2023: +0.7%), also impacted by lower
year-on-year spending by technology clients and the first full
quarter impact of the loss of Pfizer creative assignments. Against
that backdrop, VML and AKQA declined in the quarter, with continued
growth at Hogarth and Ogilvy, supported by recent client
wins.
Public
Relations: BCW and Hill &
Knowlton, which together will merge to form Burson in July, saw a
combined decline due to the loss of Pfizer assignments and the
impact of macroeconomic uncertainty on client spending. FGS Global
grew against a tough comparison.
Specialist
Agencies: Landor, Design Bridge and
Partners, and a number of our smaller specialist agencies continued
to be affected by delays in project-based spending. CMI Media Group, our specialist healthcare media planning
and buying agency, continued to grow well, building on strong prior
year performance.
3. Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies.
Regional review - revenue less pass-through
costs
|
£
million
|
Q1 2024
|
Q1 2023
|
+/(-) %
reported
|
+/(-) %
LFL
|
|
N. America
|
1,055
|
1,150
|
(8.3)
|
(5.2)
|
|
United Kingdom
|
383
|
377
|
1.6
|
0.3
|
|
W Cont. Europe
|
556
|
558
|
(0.4)
|
3.3
|
|
AP, LA, AME, CEE
|
693
|
744
|
(6.9)
|
(0.6)
|
|
Total Group
|
2,687
|
2,829
|
(5.0)
|
(1.6)
|
North America had a challenging
quarter as expected, declining 5.2% due to
a year-on-year reduction in spend from technology clients, the loss
of Pfizer at our creative agencies, and client
assignment losses at GroupM. We continue to expect our
strategic actions to drive improved performance in the region
across the balance of 2024.
The United Kingdom grew 0.3% against a tough comparison (Q1 2023: +7.4%) with growth in CPG offsetting declines in
technology client spend. Western
Continental Europe saw strength in France and Spain offset
by a decline in Germany.
Rest of World declined
0.6% primarily due to a decline in Asia
Pacific of 3.2%. Growth in India of
6.6%, reflecting last year's strong new
business momentum, was offset by a 15.4%
decline in China, due to a challenging macro and client
environment.
There was continued growth in Latin
America (+2.3%) and Middle East &
Africa (+7.8%). Central & Eastern
Europe was flat (-0.1%).
Top
five markets - revenue less pass-through costs
|
%
LFL +/(-)
|
USA
|
UK
|
Germany
|
China
|
India
|
|
Q1 2024
|
(5.4)
|
0.3
|
(1.9)
|
(15.4)
|
6.6
|
Client sector review
Client sector - revenue less pass-through
costs
|
Q1 2024
|
% share, revenue less
pass-through costs4
|
% LFL +/(-)
|
|
CPG
|
28.0
|
9.5
|
|
Tech & Digital
Services
|
17.1
|
(9.0)
|
|
Healthcare & Pharma
|
11.6
|
(8.2)
|
|
Automotive
|
10.6
|
(0.7)
|
|
Retail
|
8.9
|
(9.1)
|
|
Telecom, Media &
Entertainment
|
6.8
|
6.8
|
|
Financial Services
|
6.2
|
(0.9)
|
|
Other
|
4.7
|
(14.8)
|
|
Travel & Leisure
|
3.7
|
4.0
|
|
Government, Public Sector &
Non-profit
|
2.4
|
(6.6)
|
4. Proportion of WPP revenue less pass-through costs in Q1 2024;
table made up of clients representing 77%
of WPP total revenue less pass-through costs.
Operating and strategic progress
Lead through AI, data and
technology
At the Capital Markets Day in
January, WPP set out its strategy to leverage its first-mover
advantage in applying AI to marketing. During the quarter we
continued to invest in WPP Open, our intelligent marketing
operating system powered by AI, as part of our annual investment of
£250m in AI, data and tech. WPP Open is already used by more than
50,000 of our people and adopted by key
clients, including The Coca-Cola Company
and L'Oréal. Most recently, WPP Open was leveraged in a bespoke
agency model, OpenMind, to win media assignments at Nestlé Oceania,
ASEAN and Nestlé Health Science US.
In April, WPP announced a
collaboration with Google Cloud to integrate Google's Gemini 1.5
Pro models with WPP Open, with a range of Gemini powered
applications demoed during the keynote session of the annual Google
Cloud Next conference, including WPP Open Creative Studio and an
upgraded AI Performance
BrainTM.
WPP was proud to be recognised by
the NVIDIA Partner Network as the Industry Innovation Partner of
the Year in EMEA.
Accelerate growth through the
power of creative transformation
Creativity is what sets WPP apart,
and when combined with AI, technology, data and the largest global
media platform, we have an unparalleled offer to
clients.
During the quarter, WPP topped the
WARC Media 100 for the seventh year running and topped the WARC
Creative 100 for the second consecutive year. All three of WARC's
top creative directors work at WPP agencies. WPP also topped The
Drum's World Creative Rankings 2024 for the third year in a
row.
Ogilvy was named the 2024 Global
Agency Network of the Year by Ad Age and also topped both the WARC
Effective 100 and Creative 100 rankings. VML was third in the WARC
Creative 100. Mindshare New York was named the number one media
agency in the WARC Effective 100 rankings.
VML's 'Waiting to Live' campaign
with NHS Blood and Transplant won two Gold Clio awards.
At this year's Super Bowl, WPP
integrated creative agencies were responsible for 12 of the 57
advertising spots shown during coverage of the game. GroupM secured
the media for 19 spots.
Build world-class,
market-leading brands
Good progress has been made on each
of our strategic initiatives with integration and cost actions
relating to VML expected to be broadly complete in early Q2. The
GroupM simplification and Burson merger also remain on
track.
Across all three agencies, we have a
strong pipeline of new business and we are encouraged by conversion
in Q1. VML won a global assignment for Perrigo and a US
assignment from Daiichi Sankyo and AstraZeneca for their medicine
Enhertu in breast cancer.
GroupM won Nestlé Oceania, ASEAN and Health Sciences in the US and
Burson won Kellanova.
GroupM agency Wavemaker was named
the number one global media agency network in the COMvergence Final
2023 Global New Business Barometer with a total new business value
of $2.4bn including retentions.
Execute efficiently to drive
financial returns through margin and cash
As well as the initiatives above we
are making good progress against our enterprise IT roadmap and
workforce optimisation across finance and IT.
In the UK, Workday HCM access was
rolled out across more than 10,000 employees. In the US, VML
and GroupM ERP deployment plans are tracking in line with our
plans. Several smaller markets in EMEA are preparing for the
rollout of Maconomy in the second quarter.
Our cloud migration continues at
pace with over 50% of legacy on-premise workloads migrated to the
cloud by the end of Q1, with three more data centres closed in
Germany, North America and Brazil during the period.
No new campuses were opened in the
quarter, but several new campus openings are planned for the second
half of 2024.
Purpose and ESG
WPP's purpose is to use the power of
creativity to build better futures for our people, planet, clients
and communities. Read more on the ways WPP is working to deliver
against its purpose in our 2023
Sustainability Report.
Balance sheet highlights
Average adjusted net debt in the
first three months of 2024 was £3.5bn,
compared to £3.4bn reported in the first
quarter of 2023, with no material impact from FX.
Adjusted net debt at 31 March
2024 was £4.0bn, against £3.9bn as at 31 March 2023.
In March, WPP issued two bonds as
part of a planned refinancing of two upcoming debt maturities,
issuing a €600m 3.625% bond due 2029 and a €650m 4.0% bond due
2033.
Outlook
We are reaffirming our guidance for
2024 as follows:
|
Like-for-like revenue less pass-through costs growth of
0-1%.
Headline operating margin improvement of 20-40bps (excluding the impact of FX)
|
Other 2024 financial
indications:
• Mergers
and acquisitions will add 0.5-1.0% to
revenue less pass-through costs growth
• FX impact:
current rates (at 19 April 2024) imply a c.1.1% drag on FY 2024
revenue less pass-through costs, with no meaningful impact expected
on FY 2024 headline operating margin
• Headline
income from associates and non-controlling interests at similar
levels to 2023
• Net
finance costs of around £295m
• Effective
tax rate (measured as headline tax as a % of headline profit before
tax) of around 28%
• Capex of
around £260m
• Cash
restructuring costs of around £285m
• Working
capital expected to be broadly flat year-on-year
Medium-term targets
In January 2024, we presented an
updated medium-term financial framework including the following
three targets:
•
3%+ LFL growth in revenue less pass-through
costs
•
16-17% headline operating profit
margin
• Adjusted
operating cash flow conversion of 85%+5
5. Adjusted operating cash flow divided by headline operating
profit.
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 conflicts in Ukraine and Gaza; 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)
and Generative AI technologies and partnerships in our business;
risks related to our environmental, social and governance goals and
initiatives, including impacts from regulators and other
stakeholders, and the impact of factors outside of our control on
such goals and initiatives; 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). 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.
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 on the date of this document.