Q1 performance in line with expectations.
2024 guidance reiterated. Strong progress on strategic initiatives
across Burson, GroupM and VML
WPP (NYSE: WPP) today reported its 2024 First Quarter Trading
Update.
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.”
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.
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)
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
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.
___________________
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.
3. Prior year figures have been
re-presented to reflect the reallocation of a number of businesses
between Global Integrated Agencies and Specialist Agencies.
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.
5. Adjusted operating cash flow divided by
headline operating profit.
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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
Grafico Azioni WPP (NYSE:WPP)
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Grafico Azioni WPP (NYSE:WPP)
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