WPP Third Quarter Trading Update 2015

26 Oct 2015

• Third quarter reported revenue up 5.9% at £2.927 billion, down 1.6% at $4.533 billion in dollars, up 17.0% at €4.075 billion in euros and up 15.4% at ¥554 billion in yen
• Third quarter constant currency revenue up 7.9%, like-for-like revenue up 4.6%
• Third quarter constant currency net sales up 6.1%, like-for-like net sales up 3.3%
• Nine months reported revenue up 6.5% at £8.766 billion, down 2.3% at $13.434 billion in dollars, up 18.9% at €12.065 billion in euros and up 14.9% at ¥1,625 billion in yen
• Nine months constant currency revenue up 6.9%, like-for-like revenue up 4.8%
• Nine months constant currency net sales up 5.2%, like-for-like net sales up 2.6%
• Nine months operating margin up 0.5 margin points in constant currency, 0.3 margin points in reported and targeted to be up 0.3 margin points in constant currency for full year in line with objective
• Average constant currency net debt up by £403 million for the first nine months of 2015 to £3.436 billion, reflecting increased acquisition activity and share buy-backs
• Net new business of £3.212 billion in first nine months giving leadership again in all net new business league tables
• Share buy-backs of £588 million in the first nine months, up significantly from £499 million in the same period last year and already at the full year target of 3.0% of the issued share capital, against 3.0% for the whole of last year

Revenue analysis

£ million	2015	? reported	? constant1	? LFL2	Acquisitions	2014
First half	5,839	6.8%	6.4%	4.9%	1.5%	5,469
Third quarter	2,927	5.9%	7.9%	4.6%	3.3%	2,763
First nine months	8,766	6.5%	6.9%	4.8%	2.1%	8,232

Net Sales analysis

£ million	2015	? reported	? constant1	? LFL2	Acquisitions	2014
First half	5,041	5.2%	4.7%	2.3%	2.4%	4,792
Third quarter	2,518	4.2%	6.1%	3.3%	2.8%	2,418
First nine months	7,559	4.9%	5.2%	2.6%	2.6%	7,210

_{1 Percentage change at constant currency exchange rates
2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals}


Quarter 3 and first nine months highlights

• Reported quarter 3 revenue growth of 5.9% in sterling, with constant currency growth of 7.9%, 3.3% growth from acquisitions and -2.0% from currency. The latter reflects the continuing weakness of the pound sterling against the US dollar, more than offset by the strength of sterling, primarily against the Euro and many currencies in the faster growth markets
• Reported quarter 3 net sales of 4.2% in sterling, with constant currency growth of 6.1%, 2.8% growth from acquisitions and -1.9% from currency
• Constant currency revenue growth in quarter 3 in all regions and business sectors, with 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 in quarter 3 of 3.3%, compared to 2.3% in the first half, partly the result of easier comparatives, with the gap compared to revenue growth less in the third quarter than the first half, as the scale of digital media purchases in media investment management and data investment management direct costs continued at a similar slightly lighter level to the second quarter
• Operating profits and operating margins in the first nine months well in line with target with an above target constant currency operating margin improvement of 0.5 margin points ahead of last year
• Average net debt for the first nine months increased by £403m to £3.436 billion compared to last year, at 2015 constant rates. This continued to reflect significant incremental net acquisition spend and share repurchases of £374 million in the twelve months to 30 September 2015, compared with the previous twelve months, more than offsetting the improvements in working capital over the same period
• Net new business of $3.057 billion in the third quarter and $5.139 billion in the first nine months, resulting in the number one position in all net new business tables. Results to date in the tsunami of largely United States based media investment management reviews have been highly satisfactory with major retentions and wins and limited losses, and with significant opportunities still to be decided, where we have relatively limited exposure

Current trading and outlook

• FY 2015 quarter 3 preliminary revised forecast | this remains to be formally reviewed and reflects characteristic caution in the fourth quarter forecast of like-for-like revenue and net sales growth, in comparison to the budgeted quarter 1 and quarter 2 revised forecasts. 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 (although competitors do not provide the latter metric) 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 cost to net sales ratio of 0.2 or more depending on net sales growth; net sales operating margin expansion of 0.3 margin points; 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

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

_{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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