WPP Interim Results 2016

24 August, 2016

  • Reported billings up 9.3% at £25.319 billion, up 6.3% in constant currency
  • Reported revenue up 11.9% at £6.536 billion, up 5.2% at $9.367 billion, up 4.9% at €8.384 billion and down 2.7% at ¥1.042 trillion
  • Constant currency revenue up 8.9%, like-for-like revenue up 4.3%
  • Constant currency net sales up 8.1%, like-for-like net sales up 3.8%
  • Reported net sales margin of 13.7%, up 0.4 margin points versus last year, up 0.3 margin points in constant currency in line with the full year margin target and 0.3 margin points like-for-like
  • Headline reported profit before interest and tax £769 million up 14.9%, and up 10.3% in constant currency
  • Headline profit before tax £690 million up 15.8%, up 11.7% in constant currency
  • Profit before tax £425 million down 40.1%, down 45.5% in constant currency primarily reflecting net exceptional write-downs of £122 million, principally on the investment in comScore, in comparison to net exceptional gains of £203 million in the same period last year
  • Reported profit after tax £282 million down 53.1%, down 58.8% in constant currency
  • Headline diluted earnings per share 39.1p up 16.7%, up 11.5% in constant currency
  • Reported diluted earnings per share 18.9p down 56.0%, down 62.0% in constant currency
  • Dividends per share 19.55p up 22.9%, a pay-out ratio of 50%, in line with the revised target pay-out ratio of 50%
  • Share buy-backs of £197 million in the first half, down from £405 million last year, equivalent to 1.0% of the issued share capital against 2.0% last year
  • Return on equity slightly down at 15.5% for the 12 months to 30 June 2016 from 15.9% for the previous 12 month period, whilst weighted average cost of capital has fallen to 5.5% from 6.7%
  • Including associates and investments, revenue totals over $28 billion annually and people average over 200,000

Key figures
£ Million H1 2016 ∆ reported1 ∆ constant2 H1 2015
Billings 25,319 9.3% 6.3% 23,156
Revenue 6,536
11.9% 8.9% 5,839
Net sales 5,594
11.0% 8.1% 5,041
Headline EDITDA 3 880
13.7% 9.5% 782
Headline PBIT 4 769
14.9% 10.3% 622
Net sales margin 5 13.7% 0.46
0.3% 6
Profit before tax 425
-40.1% -45.5% 710
Profit after tax 282
-53.1% -58.8% 601
Headline diluted EPS 7 39.1p 16.7% 11.5% 33.5p
Diluted EPS 8 18.9p -56.0% -62.0% 43.0p
Dividends per share 19.55p 22.9% 22.9% 15.91p

1 Percentage change in reported sterling
2 Percentage change at constant currency rates
3 Headline earnings before interest, tax, depreciation and amortisation
4 Headline profit before interest and tax
5 Headline profit before interest and tax, as a percentage of net sales
6 Margin points
7 Diluted earnings per share based on headline earnings
8 Diluted earnings per share based on reported earnings

First-half and Q2 highlights
  • Reported billings increased by 9.3% to £25.319bn, up 6.3% in constant currency
  • Reported revenue growth of 11.9%, with like-for-like growth of 4.3%, 4.6% growth from acquisitions and 3.0% from currency, reflecting the weakness of sterling against the dollar and the euro
  • Reported net sales up 11.0% in sterling (up 4.3% in dollars, up 4.1% in euros but down 3.6% in yen), with like-for-like growth of 3.8%, 4.3% growth from acquisitions and 2.9% from currency
  • Constant currency revenue growth in all regions and business sectors, characterised by particularly strong growth geographically in Western Continental Europe and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and functionally in advertising and media investment management and branding & identity, healthcare and specialist communications (including direct, digital and interactive)
  • Like-for-like net sales growth of 3.8%, a significant improvement over the first quarter growth rate of 3.2%, with the gap compared to revenue growth reversing in the second quarter, as the Group’s investment in technology enhanced the growth of advertising and media investment management net sales and as data investment management direct costs have been reduced
  • Reported headline EBITDA up 13.7%, with constant currency growth up 9.5%, reflecting both strong like-for-like net sales growth and margin improvement, with reported headline operating costs up 10.3%, rising less than revenue and net sales
  • Reported headline PBIT increased by 14.9%, up 10.3% in constant currency with the reported net sales margin, a more accurate competitive comparator, increasing by 0.4 margin points, and by 0.3 margin points on a constant currency basis, in line with the Group’s full year margin target
  • Reported headline diluted EPS 39.1p, up 16.7%, up 11.5% in constant currency. Dividends increased 22.9% to 19.55p, achieving a pay-out ratio of 50% in the first half, in line with the recently newly targeted pay-out ratio of 50%
  • Average net debt increased by £612m (18%) to £3.986 billion compared to last year, at 2016 constant rates, continuing to reflect significant net acquisition spend and share repurchases of £831 million in the twelve months to 30 June 2016, more than offsetting the improvements in working capital in the same period
  • Return on equity for the 12 month period to 30 June 2016 slightly down to 15.5% from 15.9% for the previous 12 month period, reflecting the post-Brexit impact of a considerable weaker pound sterling on the Group’s net assets. This compares to a current weighted average after-tax cost of capital of 5.5% down from 6.7%
  • Creative and effectiveness domination recognised yet again in 2016 with the award of the Cannes Lion to WPP for most creative Holding Company for the sixth successive year since the award’s inception and another to Ogilvy & Mather Worldwide for the fifth consecutive year as the most creative agency network. Four WPP agency networks, Ogilvy & Mather Worldwide, Y&R, Grey and J. Walter Thompson Company finished in the top seven networks at Cannes in 2016, in positions one, three, six and seven respectively, an outstanding achievement. Grey New York and Ingo Stockholm were also voted the second and third most creative agencies in the world. For the fifth consecutive year, WPP was also awarded the EFFIE as the most effective Holding Company, with Ogilvy & Mather ranked the most effective agency
  • Continued strong performance in net new business despite recent hiccups
  • Particularly, following Brexit, accelerated implementation of growth strategy continues with revenue ratios for fast growth markets and new media raised from 35-40% to 40-45% over next four to five years. Quantitative revenue target of 50% already achieved

Current trading and outlook
  • July 2016 | July like-for-like revenue growth of 4.6% and net sales growth of 1.9% like-for-like, ahead of budget and the quarter 2 revised forecast. All regions and sectors (except data investment management) were positive, and showed a similar relative pattern to the first half, with advertising, media investment management, public relations and public affairs and specialist communications (including direct, digital and interactive) up strongly. Cumulative like-for-like revenue growth for the first seven months of 2016 is 4.3% and net sales growth 3.5%, ahead of target
  • FY 2016 quarter 2 revised forecast | Slight increase in like-for-like revenue growth from the quarter 1 revised forecast, as the scale of digital media purchases are forecast to increase, with revenue growth well over 3% and net sales growth over 3% and, following the strong first half, a slightly weaker second half, partly reflecting stronger comparatives in the second half of 2015. Headline net sales operating margin target improvement, as previously, of 0.3 margin points in constant currency
  • Dual Focus in 2016 | 1. Stronger than competitor revenue and net sales growth due to leading position in both faster growing geographic markets and digital, premier parent company creative position, new business, horizontality and strategically targeted acquisitions;                           2. Continued emphasis on balancing revenue and net sales growth with headcount increases and improvement in staff costs to net sales ratio to enhance operating margins
  • Long-term targets | Above industry revenue and net sales growth due to geographically superior position in new markets and functional strength in new media, in data investment management, including data analytics and the application of new technology, creativity, effectiveness and horizontality; improvement in staff costs to net sales ratio of 0.2 or more depending on net sales growth; net sales operating margin expansion of 0.3 margin points or more on a constant currency basis, with an ultimate goal of almost 20%; and headline diluted EPS growth of 10% to 15% p.a. from revenue and net sales growth, margin expansion, strategically targeted small and medium-sized acquisitions and share buy-backs

Download Appendix 1 of WPP Interim Results 2016 (pdf)

For further information:
Sir Martin Sorrell }
Paul Richardson }
Lisa Hau }               +44 20 7408 2204
Feona McEwan }
Chris Wade }

Kevin McCormack }
Fran Butera }          +1 212 632 2235

Juliana Yeh             +852 2280 3790

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.

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