WPP Interim Results 2015

26 Aug 2015

  • Reported billings up 5.0% at £23.156 billion, up 5.0% in constant currency
  • Reported revenue up 6.8% at £5.839 billion in sterling, down 2.6% at $8.901 billion in dollars, up 19.9% at €7.990 billion in euros and up 14.6% in yen at ¥1.072 trillion
  • Constant currency revenue up 6.4%, like-for-like revenue up 4.9%
  • Constant currency net sales up 4.7%, like-for-like net sales up 2.3%
  • Reported net sales margin of 13.3%, up 0.3 margin points versus last year, up 0.4 margin points on a constant currency and like-for-like basis, well ahead of the full year margin target
  • Headline reported profit before interest and tax £669 million, up 7.6%, and up 7.9% in constant currency
  • Headline profit before tax £596 million up 12.1%, up 13.2% in constant currency
  • Profit before tax £710 million up 44.5%, up 45.6% in constant currency reflecting net exceptional gains
  • Reported profit after tax £601 million up 51.7%, up 51.8% in constant currency
  • Headline diluted earnings per share 33.5p up 14.7%, up 15.2% in constant currency
  • Reported diluted earnings per share 43.0p up 59.3%, up 58.8% in constant currency
  • Dividends per share 15.91p up 36.9%, a pay-out ratio of 47.5%, significantly higher than the traditionally lower first-half pay-out ratio and in line with achieving a 50% pay-out ratio in two years
  • Share buy-backs continue above target at £405 million in the first half, up from £390 million last year, equivalent to 2.0% of the issued share capital against 2.3% last year
  • Targeted dividend pay-out ratio of 50% likely to be achieved by the end of 2016
  • Return on equity for the 12 months to 30 June 2015 increased to 15.9% from 15.2% for the previous 12 month period
  • Including all associates and investments, revenue totals over $26 billion annually and people average over 190,000

Key figures
£ Million H1 2015 ? reported1 ? constant2 H1 2014
Billings 23,156 5.0% 5.0% 22,060
Revenue 5,839
6.8% 6.4% 5,469
Net sales 5,041
5.2% 4.7% 4,792
Headline EDITDA 3 782 6.7% 6.7% 733
Headline PBIT 4 669 7.6% 7.9% 622
Net sales margin 5 13.3% 0.36
0.4% 6
Profit before tax 710
44.5% 45.6% 491
Profit after tax 601
51.7% 51.8% 396
Headline diluted EPS 7 33.5p 14.7% 15.2% 29.2p
Diluted EPS 8 43.0p 59.3% 58.8% 27.0p
Dividends per share 15.91p 36.9% 36.9% 11.62p

First-half and Q2 highlights
  • Reported billings increased by 5.0% to £23.156bn, also up 5.0% in constant currency
  • Reported revenue growth of 6.8%, with like-for-like growth of 4.9%, 1.5% growth from acquisitions and 0.4% from currency, reflecting the weakness of sterling against the dollar, partly offset by the strength of sterling, primarily against the euro
  • Reported net sales up 5.2% in sterling (down 4.0% in dollars, up 18.1% in euros and up 12.9% in yen), with like-for-like growth of 2.3%, 2.4% growth from acquisitions and 0.5% from currency
  • Constant currency revenue growth in all regions and business sectors, characterised by particularly strong growth geographically in North America, the United Kingdom and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and functionally in advertising and media investment management and sub-sectors direct, digital and interactive and specialist communications
  • Like-for-like net sales growth of 2.3%, a slight reduction over the first quarter growth rate, with the gap compared to revenue growth less in the second quarter, as the scale of digital media purchases in media investment management and data investment management direct costs continued at a similar level to the first quarter
  • Reported headline EBITDA up 6.7%, with constant currency growth also 6.7%, delivered through strong like-for-like net sales growth and by margin improvement, with headline operating costs up 4.7%, rising less than revenue and net sales
  • Reported headline PBIT increased by 7.6%, and up 7.9% in constant currency with the reported net sales margin, a more accurate competitive comparator, increasing by 0.3 margin points, and by 0.4 margin points on a constant currency basis, well ahead of the Group’s full year target
  • Reported headline diluted EPS 33.5p, up 14.7%, and up 15.2% in constant currency. Dividends increased 36.9% to 15.91p, giving a pay-out ratio of 47.5% in the first half, compared with the traditionally lower first-half pay-out ratio of 40% last year and mid-way between the 45% pay-out ratio in 2014 and the target of 50% originally targeted to be reached over two to three years
  • Average net debt increased by £261m (+9%) to £3.131 billion compared to last year, at 2015 constant rates, continuing to reflect significant incremental net acquisition spend and share repurchases of £468 million in the twelve months to 30 June 2015, compared with the previous twelve months, more than offsetting the improvements in working capital in the same period
  • Return on equity for the 12 month period to 30 June 2015 increased to 15.9% from 15.2% for the previous 12 month period. The return was also up on the 15.0% achieved in the calendar year 2014, from 14.4% in 2013. This compares to a weighted average cost of capital of over 6%, also after tax
  • Creative and effectiveness domination recognised yet again in 2015 with the award of the Cannes Lion to WPP for the most creative Holding Company for the fifth successive year since the award’s inception and another to Ogilvy & Mather Worldwide for the fourth consecutive year as the most creative agency network. Three WPP agency networks, Ogilvy & Mather Worldwide, Grey and Y&R finished amongst the top four networks at Cannes in 2015, in positions one, three and four respectively, an outstanding achievement. Grey New York and Ogilvy Sao Paulo were also voted the second and third most creative agencies in the world. For the fourth consecutive year, WPP was awarded the EFFIE as the most effective Holding Company
  • Continued strong performance in all net new business tables and in current tsunami of primarily media new business reviews
  • Accelerated growth strategy continues with revenue ratios for fast growth markets and new media raised from 35-40% to 40-45% over next five years. Quantitative revenue target of 50% already achieved

Current trading and outlook

  • July 2015 | Strong July like-for-like revenue growth of 5.0% and net sales growth, up 3.7% like-for-like, indicating a likely stronger third quarter, as budgeted and 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 2015 is 4.9% and net sales growth 2.5%
  • FY 2015 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 increased, with revenue and net sales growth similar at over 3% and a stronger second half, partly reflecting easier comparatives in the second half of 2014. Headline net sales operating margin target improvement, as previously, of 0.3 margin points in constant currency
  • Dual Focus in 2015 | 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; 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

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

In this press release not all of the figures and ratios used are readily available from the unaudited interim results included in Appendix 1. Where required, details of how these have been arrived at are shown in the Appendices.

Download Appendix 1 of WPP Interim Results 2015 (pdf)

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

Kevin McCormack }
Fran Butera } +1 212 632 2235
Belinda Rabano } +86 1360 1078 488