Guidance for 2018 unchanged; fresh look at
strategy with focus on growth
- Reported revenue down 4.0% at £3.555
billion, currency headwinds of 6.0% resulting in constant currency
revenue up 2.0%, like-for-like revenue up 0.8%
- Reported revenue less pass-through
costs1 down 5.1% at £2.948 billion, currency
headwinds of 6.1% resulting in constant currency up 1.0%,
like-for-like revenue less pass-through costs down 0.1%
- Constant currency net debt at 31
March 2018 up £354 million on same date in 2017, with average net
debt in first quarter of 2018 up by £357 million over same period
in 2017
- Share buy-backs of £145 million,
representing 11.5 million shares or 0.9% of the issued share
capital purchased in first quarter
- Net new business of $1.737 billion
in billings won in the first quarter
WPP (NYSE: WPP) today reported its 2018 First Quarter Trading
Update.
Roberto Quarta, Executive Chairman, WPP:
“We are pleased to announce the Group’s first quarter trading
update, which is in line with our expectations. Our guidance for
2018 remains unchanged.
“WPP has high-quality management teams throughout the business,
and they continue to deliver for our clients.
“Mark Read and Andrew Scott are providing the stability and
leadership WPP requires, but there is no standing still. They have
my and the Board’s full backing to review the strategy, to come
back to us with recommendations, and to move forward decisively to
implement our vision for the Group.”
Mark Read and Andrew Scott, joint Chief Operating Officers,
WPP:
“In the last two weeks we have focused on spending time with our
clients and people, and the response has been very encouraging. As
expected, our people are getting on with business as usual, and our
clients have expressed their continued support for and confidence
in WPP.
“This should not come as a surprise. As we said to our people
across the Group, our companies and client teams are exceptionally
good at what they do. They have their own strong leaders, who hold
the primary client relationships. Clients have made it very clear
that they value their partners within WPP.
“WPP has unrivalled assets and capabilities: the world’s
most-awarded creative agencies; the number one media buying and
planning business; many of the world’s leading research, data and
insight companies; leading positions in fast-growth markets;
world-class digital brands; and strong mutual relationships with
technology companies such as Adobe, Amazon, Facebook, Google, IBM,
Microsoft and Salesforce – to name but a few.
“We intend to build on these strengths by taking a fresh look at
our strategy, developing a vision for the Group that recognises the
challenges and opportunities presented by the structural shifts in
our industry, and executing resolutely against it.
“Our priority is to focus on growth. We will proactively address
the under-performing parts of our business and we need to ensure
that our capital is deployed to those areas that will grow fastest
and maximise shareholder value.
“Looking ahead, we will get even closer to our clients, and
provide faster, more agile, more integrated solutions with data and
technology at their heart – making it simpler to access the wealth
of talent, creativity and capabilities we have within WPP.
“Concentrating our efforts on stimulating growth for our
clients, and organising the Group to make that possible, is the
best way to restore growth for WPP and all its stakeholders.”
Review of quarter one
Revenue and revenue less pass-through costs
In the first quarter of 2018, the Group’s like-for-like revenue
less pass-through costs was down marginally at 0.1%, with the
United Kingdom, Asia Pacific and Latin America up strongly, offset
by declines in North America and Western Continental Europe.
Functionally, media investment management, public relations &
public affairs and specialist communications (including direct,
digital & interactive) performed well, with advertising and
data investment management more difficult.
Regional review
Revenue analysis
£ million
2018 ∆ reported
∆ constant2
∆ LFL3
% group
20174
% group N. America 1,252 -10.6% 0.2%
-1.1% 35.2% 1,401 37.8% United Kingdom
532 6.6% 6.6% 5.4% 15.0%
499 13.5% W. Cont. Europe 760 2.5% 0.8%
-1.5% 21.4% 742 20.0%
AP, LA, AME, CEE5
1,011 -4.8% 2.9% 2.8% 28.4%
1,062 28.7%
Total Group 3,555
-4.0% 2.0% 0.8%
100.0% 3,704 100.0%
Revenue less pass-through costs
analysis
£ million
2018 ∆ reported ∆ constant ∆ LFL
% group
20174 % group N. America
1,055 -12.3% -1.7% -2.4% 35.9%
1,203 38.7% United Kingdom 405 2.1%
2.1% 1.6% 13.7% 396 12.8% W. Cont.
Europe 626 4.4% 2.7% -0.2% 21.2%
600 19.3% AP, LA, AME, CEE 862 -5.0%
2.7% 2.3% 29.2% 908 29.2%
Total Group 2,948 -5.1% 1.0%
-0.1% 100.0% 3,107 100.0%
North America, with like-for-like revenue less
pass-through costs down 2.4%, was the weakest-performing region,
with advertising, data investment management and healthcare weaker,
partly offset by strong growth in the Group’s media investment
management and direct, digital & interactive businesses.
The United Kingdom, with like-for-like revenue and
revenue less pass-through costs growth of 5.4% and 1.6%, performed
well, with particularly strong growth in the Group’s advertising,
public relations & public affairs, health & wellness and
direct, digital & interactive businesses. All sectors, except
brand consulting, grew.
Western Continental Europe, with like-for-like revenue
and revenue less pass-through costs down 1.5% and 0.2%, was
challenging, particularly in Germany against strong comparatives
last year. The Netherlands, Italy, Scandinavia, Spain and Turkey
were up strongly, with Austria, Belgium, France, Greece, Ireland
and Switzerland difficult.
Asia Pacific, Latin America, Africa & the Middle East and
Central & Eastern Europe like-for-like revenue less
pass-through costs was up 2.3%, with strong growth in Asia Pacific,
Latin America and Central & Eastern Europe. In Asia Pacific,
Greater China, India, Japan, Thailand and Korea, representing five
of the Group’s top six markets in Asia, showed strong growth, with
Singapore more challenging. In Latin America, all of the Group’s
top five markets showed particularly strong growth, in all sectors,
especially the Group’s advertising and media investment management,
data investment management and direct, digital & interactive
businesses. In Central & Eastern Europe, Hungary, Poland and
Romania were up strongly, with the Czech Republic and Russia more
difficult.
Business sector review
Revenue analysis
£ million
2018 ∆ reported
∆ constant6
∆ LFL7
% group
20178
% group
AMIM9
1,612 -5.7% 0.0% 1.2% 45.4%
1,709 46.1% Data Inv. Mgt. 596 -6.9%
-2.3% -2.6% 16.8% 640 17.3%
PR & PA10
275 -6.7% 0.5% 1.5% 7.7%
296 8.0%
BC, HW & SC11
1,072 1.2% 8.4% 2.0% 30.1%
1,059 28.6%
Total Group 3,555
-4.0% 2.0% 0.8% 100.0% 3,704
100.0%
Revenue less pass-through costs
analysis
£ million
2018 ∆ reported ∆
constant ∆ LFL % group
20178
% group AMIM 1,257 -8.4% -2.8%
-0.9% 42.7% 1,373 44.2% Data Inv. Mgt.
455 -6.0% -1.1% -1.7% 15.4% 484
15.6% PR & PA 263 -7.1% 0.0%
1.1% 8.9% 282 9.1% BC, HW & SC 973
0.6% 7.8% 1.5% 33.0% 968
31.1%
Total Group 2,948 -5.1% 1.0%
-0.1% 100.0% 3,107 100.0%
In the first quarter of 2018, like-for-like revenue less
pass-through costs in the Group’s media investment management,
public relations & public affairs and brand consulting, health
& wellness and specialist communications (including direct,
digital & interactive) businesses showed the strongest growth,
with data investment management and advertising under continued
pressure, particularly in the mature markets.
Balance sheet highlights
During the quarter, 11.5 million shares, or 0.9% of the issued
share capital, were purchased at a cost of £145 million and an
average price of £12.59.
Average net debt in the first quarter of 2018 was £4.766
billion, compared to £4.409 billion in 2017, (at 2018 exchange
rates), an increase of £357 million. Net debt at 31 March 2018 was
£5.198 billion, compared to £4.844 billion in 2017 (at 2018
exchange rates), an increase of £354 million.
In March 2018, a €500 million seven-year bond was issued at a
coupon of 1.375% and was swapped into pounds Sterling at a fixed
cost of 2.61%. In addition, a €250 million four-year floating rate
note was issued at an interest rate of three-month EURIBOR plus
0.45%.
Over the last few years the average net debt/EBITDA ratio has
risen steadily to the top end of our target range of 1.5-2.0x.
Given the current outlook, it has been decided to revise downwards
the upper limit of the target range to 1.5-1.75x. The revised
reduction in the ratio to be achieved over the next 12 to 18
months.
Outlook
Financial guidance
Our quarter one preliminary revised forecasts are in line with
budget, with a slightly stronger second half, at the revenue less
pass-through costs level and show the following:
- Flat like-for-like revenue and revenue
less pass-through costs
- Revenue less pass-through costs
operating margin flat on a constant currency basis
Long-term targets
Our business remains well positioned to compete successfully and
to deliver on our long-term targets:
- Revenue and revenue less pass-through
costs growth at least in line with the industry average
- Improvement in revenue less
pass-through costs operating margin of between zero and 0.3 margin
points, excluding the impact of currency
- Annual headline diluted EPS growth of
5% to 10% p.a. delivered through revenue growth, margin expansion,
acquisitions and share buy-backs
- Revised target range of average net
debt/EBITDA ratio lowered to 1.5-1.75x
This announcement has been filed at the Company Announcements
Office of the London Stock Exchange and is being distributed to all
owners of Ordinary shares and American Depository Receipts. Copies
are available to the public at the Company’s registered office.
The following cautionary statement is included for safe harbour
purposes in connection with the Private Securities Litigation
Reform Act of 1995 introduced in the United States of America. This
announcement may contain forward-looking statements within the
meaning of the US federal securities laws. These statements are
subject to risks and uncertainties that could cause actual results
to differ materially including adjustments arising from the annual
audit by management and the Company’s independent auditors. For
further information on factors which could impact the Company and
the statements contained herein, please refer to public filings by
the Company with the Securities and Exchange Commission. The
statements in this announcement should be considered in light of
these risks and uncertainties.
_________________________
1
The Group has changed the description of
‘net sales’ to ‘revenue less pass-through costs’ based on the
adoption of new accounting standards and recently issued regulatory
guidance and observations. There has been no change in the way that
this measure is calculated
2 Percentage change at constant currency exchange rates 3
Like-for-like growth at constant currency exchange rates and
excluding the effects of acquisitions and disposals 4 Following the
implementation of IFRS 15, 2017 results restated resulting in an
increase in revenue of £107m and an increase in revenue less
pass-through costs of £7m 5 Asia Pacific, Latin America, Africa
& Middle East and Central & Eastern Europe 6 Percentage
change at constant currency exchange rates 7 Like-for-like growth
at constant currency exchange rates and excluding the effects of
acquisitions and disposals 8 Following the implementation of IFRS
15, 2017 results restated resulting in an increase in revenue of
£107m and an increase in revenue less pass-through costs of £7m 9
Advertising, Media Investment Management 10 Public Relations &
Public Affairs 11 Brand Consulting, Health & Wellness and
Specialist Communications (including direct, digital &
interactive)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180430005522/en/
WPP+44 20 7408 2204www.wppinvestor.comMark ReadAndrew ScottPaul
RichardsonLisa HauChris WadeorKevin McCormack/Fran Butera, +1 212
632 2235orJuliana Yeh, +852 2280 3790orBuchananRichard Oldworth,
+44 7710 130 634 / +44 20 7466 5000
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