Strong performance driven by growth across
all key WPP agencies. Headline fully diluted EPS growth of over
25%. Expect LFL top-line growth of 3-5% and further progress on
operating margin to around 15% in 2023
WPP (NYSE: WPP) today reported its 2022 Preliminary Results.
Key figures
£ million
2022
+/(-)% = reported1
+/(-)% LFL2
2021
Revenue
14,429
12.7
6.7
12,801
Revenue less pass-through costs
11,799
13.5
6.9
10,397
Reported:
Operating profit
1,358
10.5
-
1,229
Profit before tax
1,160
22.0
-
951
Diluted EPS (p)
61.2
16.6
-
52.5
Dividends per share (p)
39.4
26.3
-
31.2
Headline3:
Operating profit
1,742
16.6
10.0
1,494
Operating profit margin
14.8%
0.4pt*
0.4pt*
14.4%
Profit before tax
1,602
17.3
-
1,365
Diluted EPS (p)
98.5
25.5
-
78.5
* Margin points
Full year and Q4 financial highlights
- FY reported revenue +12.7%, LFL revenue +6.7%
- FY LFL revenue less pass-through costs +6.9%; with good
performance in Q4 +6.4%
- Q4 LFL revenue less pass-through costs by major market: US
+3.5%, UK +12.0%, Germany +4.9%, China -8.4%, India +8.5%
- Three-year FY LFL revenue less pass-through costs +10.0%; Q4
+10.2%
- FY headline operating margin 14.8%, up 0.4 points LFL with
strong top-line growth and efficiency savings supporting investment
and margin expansion
- Reported diluted EPS 61.2 pence; headline diluted EPS up 25.5%
to 98.5 pence
- Adjusted net debt at 31 December 2022 £2.5 billion (2021: £0.9
billion) after investments and over £1.1 billion of cash returned
to shareholders. Average adjusted net debt to EBITDA ratio of
1.46x, slightly below the 1.5-1.75 target range
- Trade working capital adverse movement of £226 million4 at
year-end driven by mix and timing factors. Average trade working
capital across 2022 was flat year-on-year
- Final dividend of 24.4 pence proposed, up 30.5%, for a proposed
total dividend for 2022 of 39.4 pence, in line with our policy of
approximately 40% of headline diluted EPS
Strategic progress, shareholder returns and 2023
guidance
- Strong performance across major WPP agencies: continued
strength in GroupM 2022 with FY LFL revenue less pass-through costs
growth of +9.1%, with other Global Integrated Agencies delivering
5.0% LFL growth; Public Relations 8.2% and Specialist Agencies
5.6%
- Breadth and depth of capabilities resonating well with clients:
$5.9 billion5 of net new business won, including Audible, Danone,
SC Johnson and Verizon
- Recognised for creativity: most awarded company at the 2022
Cannes Lions Festival for the second year running
- Transformation programme gross annual savings of around £375
million against a 2019 base are ahead of the planned £300 million,
with savings in property, procurement and ways of working, enabling
additional investment in talent for growth areas. On track to reach
target of £600 million by 2025
- Over £1.1 billion returned to shareholders in 2022 comprising
£807 million of share buybacks completed and £365 million of
dividends paid
- 2023 guidance: LFL revenue less pass-through costs growth of 3
to 5%, and further margin improvement reflecting continued
operating leverage, to deliver a headline margin of around 15%
(excluding the impact of FX)
Mark Read, Chief Executive Officer, WPP:
“WPP delivered strong growth in 2022, despite the macro
challenges, reflecting the priority placed by our clients on
investing in communications, customer experience, commerce, data
and technology.
“The competitiveness of our offer drove net new business of $5.9
billion in 2022, including new assignments with Audible, SC
Johnson, and Verizon among many others and the quality of our work
was recognised at the Cannes Lions Festival of Creativity where WPP
was named Creative Company of the Year.
“Our transformation is now delivering measurable results. Over
the past three years, WPP has grown like-for-like net sales at a
compound average rate of 3.2%, including 3.3% in North America,
while improving our headline operating profit margin by 40 basis
points. Our adjusted net debt has declined from over £4 billion at
the end of 2018 to £2.5 billion, while over £3.4 billion has been
returned to shareholders via share buybacks and dividends.
“We enter 2023 in a strong financial position with good momentum
from new business and the many opportunities ahead of us. While
there will no doubt be challenges, the continued need for major
companies to build brands, sell products, reinvent and transform
their business, understand their data, invest in technology and
exploit the potential of AI remains, as does their need for modern
partners who can help them navigate this new world.”
To access WPP's 2022 preliminary results financial tables,
please visit www.wpp.com/investors
Overview and strategic progress
Market environment
The global marketing and advertising industry has demonstrated
great resilience as brands continue to invest in marketing despite
turbulence in the global economy. According to GroupM estimates,
global advertising spend6 grew by 6.5% in 2022, slightly lower than
the 8.4% forecast in June 2022, a change primarily due to lower
than expected growth in China.
Digital advertising has continued to grow. As the number of
scaled advertising platforms increases the market is becoming more
complex. GroupM estimates that global digital advertising spend
grew by 9.3% in 2022, following unprecedented 31.9% growth in 2021.
Digital advertising made up 67% of total advertising in 2022, up
from 64% in 2021. Retail media is one of the fastest growing
segments within digital advertising, reflecting the growth in
ecommerce post the pandemic. GroupM estimates retail media spending
will have reached $110.7 billion globally in 2022, around 20% of
overall digital spend.
Spend on TV is recovering to pre-pandemic levels as advertisers
value the medium’s effectiveness in satisfying reach and frequency
goals. GroupM estimates that TV advertising grew by 1.7% in 2022, a
slowdown in growth from 11.7% in 2021. The robustness of TV spend
has been supported by growth in connected TV inventory, which made
up 12.7% of the market in 2022, up from 11.0% in 2021. GroupM
expects connected TV to make up nearly a third of all US TV
advertising by 2027.
Global out of home advertising saw modest growth in 2022,
curtailed by lockdown restrictions in China – the largest market
for out of home advertising. Audio saw low-single-digit growth,
supported by growth in digital which represents nearly a quarter of
total audio advertising revenue. Print continues to face pressure
as publishers are diversifying their offerings and revenue
streams.
By geography, 2022 saw healthy growth in most major markets.
Based on GroupM findings, advertising spend in the US and UK grew
by 7.1% and 8.9% respectively. China was the only major market to
see declines in advertising spend in 2022 as lockdown restrictions
impacted consumer spending.
For 2023, GroupM expects global advertising spend to grow 5.9%
including a return to growth in China as the economy re-opens,
which is expected to grow 6.3% after a decline of 0.6% in 2022.
Ukraine
Since the war in Ukraine began in February 2022, our colleagues
in Ukraine have shown extraordinary resilience and bravery and we
remain in regular contact with our leaders in the country to
support our employees. This has included financial support packages
and other forms of assistance, including access to medical advice,
counselling, immigration and relocation support, language classes,
schooling for children and other practical resources.
WPP partnered with the UN’s Refugee Agency (UNHCR) to launch an
emergency appeal for families forced to flee their homes in
Ukraine. Our people donated $675,000 which WPP match-funded,
bringing the total to $1.35 million. Through GroupM, we secured
$1.5 million in pro bono media support for the wider public appeal
through our partners.
We also supported the Ukrainian government through a pro bono
initiative to encourage inward investment and help revitalise the
country’s economy. Advantage Ukraine launched in September 2022,
when we arranged for President Zelensky to virtually ring the
opening bell at the New York Stock Exchange.
In early March, the Board of WPP concluded that WPP's ongoing
presence in Russia would be inconsistent with our values as a
company and we have subsequently divested our businesses there.
This led to a loss on disposal of £63 million. Russia represented
approximately 0.8% of WPP’s revenue and 0.6% of revenue less
pass-through costs in 2021.
Performance and progress
Since 2019, WPP’s LFL revenue less pass-through costs have grown
10%, headline operating profit is 15% higher and headline EPS has
grown by 26%.
Revenue was £14.4 billion, up 12.7% from £12.8 billion in 2021,
and up 6.7% like-for-like. Revenue less pass-through costs was
£11.8 billion, up 13.5% from £10.4 billion in 2021, and up 6.9%
like-for-like.
We delivered a strong performance in 2022, with LFL growth in
revenue less pass-through costs across all our major creative,
media, public relations and specialist agencies. Client demand has
been strong, particularly for commerce services and in commerce
media. GroupM’s commerce billings increased 18% year-on-year in
2022 while the proportion of digital billings has grown to 48% in
2022, from 43% in 2021.
Revenue less pass-through costs from higher-growth areas of our
offer in experience, commerce and technology remained around a
quarter of the Group. Global revenue less pass-through costs from
experience, commerce and technology grew high-single digits in line
with expected market growth, but in 2022 this growth was matched by
the rest of the portfolio, including a resurgent performance in
broader creative, PR and other communications activities. For
Global Integrated Agencies, excluding GroupM, experience, commerce
and technology accounted for 39%, compared to 38% in 2021 and 35%
in 2019.
Clients and partners
By sector, we have had continued momentum from clients in the
technology, healthcare & pharma and consumer packaged goods
sectors, which together represent 55% of our revenue less
pass-through costs for designated clients. On a three-year basis,
these sectors recorded like-for-like growth of 27.9%, 19.4% and
21.4% respectively. At the client level, we also saw a broad
commitment to investing in marketing for growth, with 14 out of our
top 30 clients in 2022 showing double-digit growth.
We won $5.9 billion of net new billings in 2022. Key assignment
wins include Audible, Danone, Migros, SC Johnson, Nationwide and
Verizon. Key retentions included Sony Playstation, Tesco, Mars
Wrigley and MasterKong. Account losses included L’Oréal (US media)
and PepsiCo.
Following the Coca-Cola Company account win in 2021, this global
partnership of unprecedented scale in the industry has been
onboarded at pace, with expectations for further growth, as well as
a strong new business pipeline, helping to underpin our overall
guidance for 2023.
Our relationships with the world’s largest brands continue to
broaden, with 90% of WPP’s top 50 clients working with five or more
of our agencies, demonstrating the integrated nature of our
offer.
We continue to develop new strategic partnerships with leading
and emergent technology companies to build expertise, gain unique
insights and develop our offering for clients.
We have recently announced several partnerships to enhance our
commerce capabilities. These include a first-of-its-kind
partnership with Instacart, the leading online grocery platform in
North America, giving WPP early product insights, access to custom
features and a co-developed certification programme; a partnership
with financial infrastructure platform Stripe to enhance our
digital commerce capabilities across the business; and a
partnership with BigCommerce, a leading Open SaaS ecommerce
platform, giving WPP priority access to new product tools and data
sets that will enable WPP agencies to develop unique insights,
maximise omnichannel sales and optimise spend for both B2C and B2B
clients.
Agencies across WPP are using a broad range of generative
artificial intelligence tools to automate workflows, speed the
process of ideation and concepting, and produce innovative creative
work for clients.
Creativity and awards
Our success in 2022 was again underpinned by the strength of our
creative work. We were honoured to win the prestigious title of
most creative company of the year at Cannes Lions International
Festival of Creativity for the second year in a row. Ogilvy won
global network of the year, regaining the top spot it last won in
2016.
In the 2022 WARC rankings, Ogilvy also topped the creativity
ranking and placed second for effectiveness, becoming the only
agency to secure top rankings in both categories and reflecting the
breadth of its offer. WARC also named Mindshare the number one
media agency network for the third consecutive year.
VMLY&R was recognised by Forrester as a leader in Marketing
Creative and Content Services, AKQA secured two Grand Clio awards
and Wunderman Thompson won the inaugural Creative B2B Grand Prix
award at Cannes Lions.
Investments for growth
During the year we made a number of acquisitions investing net
£237m, excluding earnout payments, to expand our presence in fast
growing regions such as Latin America, and our global offer in
experience, commerce and technology. Key acquisitions included:
influencer marketing agency Village Marketing in North America;
Bower House Digital a leading marketing technology services agency
in Australia; Latin American ecommerce agency Corebiz;
JeffreyGroup, one of the most respected independent corporate
communications, public affairs, and marketing consulting firms in
Latin America; Passport Brand Design in the US; Diff, a leading
commerce agency based in Montreal; and New York-based digital
transformation agency Fenom Digital.
We also continued to make organic investments to drive
significant long-term growth opportunities, with a focus on
unifying and accelerating our data capabilities and partnerships,
embedding AI into our workflows through Satalia, and further
building out our proprietary software portfolio.
Choreograph, our data company, continues to invest in its data
products, allowing brands to predict relevance and drive deeper
customer connections, with recent innovative work for Ford,
Unilever and Bayer. Choreograph continues to play a central role in
key client assignment wins, including Verizon in 2022.
In April 2022, we launched GroupM Nexus, bringing together 9,000
practitioners globally across addressable TV (Finecast), AI, retail
media and commerce, programmatic (Xaxis), search and social to be
the performance engine for GroupM’s agencies and deliver
transformational outcomes for clients across digital channels and
platforms. We are continuing to see great potential for innovation
and growth in this area, as brands increasingly focus more of their
budgets on delivering cross-channel digital performance and as
traditional TV budgets continue to follow audiences onto new
platforms offering better addressability and measurement such as
Connected TV. Finecast added 150 new clients in 2022 and grew
strongly.
Transformation programme
Good progress has been made on our transformation programme,
designed to simplify WPP, build greater collaboration, drive
efficiency and free up funds for reinvestment in growth. By the end
of 2022 we had delivered around £375 million of gross annual
savings against a 2019 base, ahead of planned savings of £300
million, with savings across property, procurement and ways of
working.
We remain comfortably on target to achieve our goal of £600
million annual cost efficiencies against a 2019 base by 2025.
Transformation cost saving enabled additional investment in
talent in growth areas, allowing WPP to end 2022 with a better
balance of freelance and salaried staff.
The transformation of our property estate continues, with a
further five campuses opened in 2022 (Brussels, Düsseldorf,
Santiago, Tokyo, Toronto), taking the total to 36, accommodating
around half our people. In January we opened a new office in
Guangzhou, China, and we plan to open additional offices including
Atlanta, Paris and Manchester, in 2023. The programme has driven
significant savings to date and our goal remains to complete at
least 65 campuses, housing more than 85,000 people, by 2025.
As part of our transformation, we are consolidating and
modernising our Enterprise Resource Planning and Human Capital
Management tools by deploying Workday and Maconomy. We have also
established 24x7 IT services capabilities for the Group, moving
over 1,000 people from agency roles into WPP and establishing
global hubs in Chennai, Mexico, Bucharest and Kuala Lumpur.
We continue to implement a new procurement operating model
leveraging our global scale, aligned around categories and
consolidating suppliers. As part of this programme, we launched an
initiative in 2022 to optimise our use of flexible talent across
the Group.
We have also merged more of our businesses to simplify our
organisation and respond to our clients’ needs for integrated
solutions. Within GroupM we announced the merger of Essence and
MediaCom to form EssenceMediacom and the formation of GroupM Nexus.
In our specialist design agencies, we announced the merger of
Design Bridge and Superunion to create a single leading design
company, Design Bridge and Partners.
Purpose
WPP’s purpose is to use the power of creativity to build better
futures for our people, our planet, our clients and our
communities. We outlined our sustainability strategy at an ESG
event for stakeholders in June 2021. Since then, we have continued
to make good progress in our commitments across each pillar of our
purpose.
People
Throughout the year we have launched and expanded programmes
across our agencies to attract, engage and develop top talent,
including the Future Readiness Academies programme, a unique global
learning programme, based on the four elements of WPP’s offer:
communications, experience, commerce and technology; to help
everyone across the company gain the skills and knowledge needed
for success in a growing digital world.
WPP is committed to improving diversity, equity and inclusion
across the company. During the year we were pleased to appoint a
new Chief Talent and Inclusion Officer, LJ Louis, who will oversee
global initiatives and we continue to link our leaders’
compensation and performance reviews to our DE&I goals and
achievements.
Our Mental Health Allies programme has been rolled out in
Singapore, following the success of the UK initiative and its
extension to the United States, aimed at supporting our people and
reducing stigmas around mental health. So far, we have trained over
550 Mental Health Allies and aim to continue to expand into more
markets in 2023.
Recognising our commitment to building an inclusive culture, WPP
achieved a top score on the Corporate Equality Index and has been
named among the Best Places to Work for LGBTQ+ equality. In
partnership with Choreograph, WPP Unite our company-wide LGBTQ+
community published Beyond the Rainbow, a survey of over 7,500
people in the United States, UK and Canada to better understand
their perceptions and experiences of viewing LGBTQ+ identities in
media and advertising.
We continue to invest in programmes to drive greater gender
balance across the business. WPP’s women’s network, Stella, has
been expanded across EMEA aiming to connect, inspire and support
women across WPP to maximise their potential.
In June 2020, as part of a wider set of commitments to help
combat racial injustice, WPP pledged to invest $30 million over a
three-year period to fund inclusion programmes and support external
organisations. WPP agencies globally are invited to apply to
receive resources to create and run impactful programmes to advance
racial equity. Successful third-round proposals include:
Mindshare’s Impact Index, an AI Human safety tool that examines the
social impact of editorial content on historically underrepresented
communities; WPP Belgium’s Surboum from a WPP team in Belgium, a
platform for companies, organisations and creatives dedicated to
make the creative scene in Belgium more diverse; and Set Creative’s
Pathways Network, an industry-wide coalition to power diversity,
equity and inclusion in suppliers across the experiential event
marketing industry.
Planet
WPP has committed to reach net zero carbon emissions across its
direct operations by 2025 and across its supply chain by 2030. Our
net zero pledges are backed by science-based reduction targets,
which have been verified by the Science-Based Targets initiative.
We have committed to reducing our absolute Scope 1 and 2 emissions
by at least 84% by 2025 and reduce Scope 3 emissions by at least
50% by 2030, both from a 2019 base year.
WPP is the only marketing communications company to include the
emissions from media placement in our emissions reduction target.
Currently, media accounts for more than half of WPP’s supply chain
emissions. GroupM has launched a media decarbonisation framework
for measuring and reducing ad-based carbon emissions. Supporting
this, GroupM has created a client coalition uniting leading
advertisers, collectively representing $10 billion in global
advertising investment, with a shared commitment to accelerate the
decarbonisation of the world’s media supply chain.
During the year, WPP was awarded a ‘Prime’ ESG rating by ISS,
one of the world’s leading rating agencies for sustainable
investment. WPP received an ‘A-‘ rating in CDP’s 2022 climate
change assessment for the second year in a row.
Clients
Purpose is at the heart of our offer, and we continue to support
our clients on their own diversity, equity and inclusion goals. For
example, Mindshare Inclusive Innovation hosted a panel with key
clients and Mindshare leaders for TikTok's NextGen Diverse Creator
Cohort. The goal of the panel was empower diverse creators and
provide insight on the role of influencer marketing for brands, how
media agencies work, on how to land a brand partnership.
In our annual survey of our client satisfaction, our key
Likelihood to recommend score was 8 out of a possible 10, with
Quality of work scored at 8.1 and Diversity, Equity and Inclusion
scored at 8.2, maintaining the high levels achieved in the 2021
survey and showing a significant improvement over 2018-2020.
Communities
WPP is committed to making a positive contribution to the
communities in which we operate. Earlier this year, WPP launched
Creative Data School a learning programme for 6,000 young people
aged 10-25 across the UK, designed by WPP's data and AI team,
aiming to inspire young people and build their confidence in Data
and AI.
In November, WPP published The Consumer Equality Equation
report, a study into the relationship between ethnicity and the
consumer experience in the UK, urging brands to rethink assumptions
and address inequality. The report, supported by the WPP Racial
Equity Programme, is an important milestone in our commitment to be
a catalyst towards greater consumer equality.
Outlook for 2023
WPP is entering 2023 with a compelling client offer, good
momentum from new business wins, and a robust balance sheet.
Our guidance for 2023 is as follows:
Like-for-like revenue less
pass-through costs growth of 3-5%; further margin improvement
reflecting continued operating leverage to deliver a headline
margin of around 15% (excluding the impact of FX)
Other 2023 financial guidance:
- We also anticipate mergers and acquisitions will add 0.5-1.0%
to revenue less pass-through costs growth
- Headline income from associates is expected to be around £40
million*
- Effective tax rate (measured as headline tax as a % of headline
profit before tax) of around 27.0%
- Capex £300 million
- Restructuring costs of around £180 million
- Trade working capital expected to be broadly flat year-on-year
with operational improvement offsetting increased client focus on
cash management
- Average net debt/EBITDA within the range of 1.5x-1.75x
*Kantar associate income
In accordance with IAS 28: Investments in Associates and Joint
Ventures once an investment in an associate reaches zero carrying
value, the Group does not recognise any further losses, nor income,
until the cumulative share of income returns the carrying value to
above zero. At the end of 2022 WPP’s cumulative reported share of
losses in Kantar has reduced the carrying value of the investment
to zero. This means that we expect that around £40-50 million of
Kantar headline income will not be recognised in our headline
income from associates during 2023.
Medium-term guidance
We remain confident in our ability to deliver annual revenue
less pass-through costs growth of 3-4% and headline operating
profit margin of 15.5-16%, as a result of the actions we have taken
to broaden and strengthen our services, to increase our exposure to
attractive industry segments and to leverage our global scale.
Financial results
Unaudited headline income statement7:
£ million
2022
2021
+/(-) % reported
+/(-) % LFL
Revenue
14,429
12,801
12.7
6.7
Revenue less pass-through costs
11,799
10,397
13.5
6.9
Operating profit
1,742
1,494
16.6
10.0
Operating profit margin %
14.8%
14.4%
0.4pt
0.4pt
Income from associates
74
86
(14.2)
PBIT
1,816
1,580
14.9
Net finance costs
(214)
(215)
0.1
Profit before tax
1,602
1,365
17.3
Tax
(409)
(328)
(24.7)
Profit after tax
1,193
1,037
15.0
Non-controlling interests
(93)
(83)
(11.7)
Profit attributable to shareholders
1,100
954
15.3
Diluted EPS
98.5p
78.5p
25.5
Reconciliation of profit before taxation to headline
operating profit:
£ million
2022
2021
Profit before taxation
1,160
951
Finance and investment income
145
70
Finance costs
(359)
(284)
Revaluation and retranslation of financial
instruments
76
(88)
Profit before interest and
taxation
1,298
1,253
Earnings from associates – after interest
and tax
60
(24)
Operating profit
1,358
1,229
Goodwill impairment
38
2
Amortisation and impairment of acquired
intangible assets
62
98
Investment and other impairment
charges/(reversals)
48
(42)
Intangible asset impairment
29
-
Restructuring and transformation costs
204
146
Restructuring costs in relation to
COVID-19
15
30
Property related costs
18
-
Losses on disposal of investments and
subsidiaries
36
10
Gains on remeasurement of equity interests
arising from a change in scope of ownership
(66)
-
Litigation settlement
-
21
Headline operating profit
1,742
1,494
Reported revenue was up 12.7% at £14.4 billion. Reported revenue
on a constant currency basis was up 7.0% compared with last year.
Net changes from acquisitions, disposals had a negative impact of
0.3% on growth.
Like-for-like revenue growth for 2022 excluding the impact of
currency, acquisitions and disposals, and the other adjustments,
was 6.7%.
Reported revenue less pass-through costs was up 13.5%, and up
7.6% on a constant currency basis. Excluding the impact of
acquisitions and disposals and the other adjustments, like-for-like
growth was 6.9%. In the fourth quarter, like-for-like revenue less
pass-through costs was up 6.4%.
Business sector review
Revenue analysis
£ million
2022
2021
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
12,191
10,890
11.9
6.9
Public Relations
1,228
959
28.1
9.4
Specialist Agencies
1,010
952
6.1
1.9
Total Group
14,429
12,801
12.7
6.7
Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ Q4 and FY 2021 revenue by £13 million and £54 million
respectively and reduces Specialist Agencies’ by the same
amount.
Revenue less pass-through costs analysis
£ million
2022
2021
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
9,742
8,683
12.2
6.9
Public Relations
1,157
910
27.1
8.2
Specialist Agencies
900
804
11.9
5.6
Total Group
11,799
10,397
13.5
6.9
Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ Q4 and FY 2021 revenue less pass-through costs by £11
million and £44 million respectively and reduces Specialist
Agencies’ by the same amount.
Headline operating profit analysis
£ million
2022
% margin*
2021
% margin*
Global Int. Agencies
1,432
14.7
1,222
14.1
Public Relations
191
16.5
143
15.7
Specialist Agencies
119
13.2
129
16.0
Total Group
1,742
14.8
1,494
14.4
* Headline operating profit as a percentage of revenue less
pass-through costs
Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ 2021 headline operating profit by £6 million and reduces
Specialist Agencies’ by the same amount.
Global Integrated Agencies reported revenue was up 18.7%
in the final quarter. Like-for-like revenue less pass-through costs
was up 6.6% in the final quarter, and up 9.8% on a three-year
basis. GroupM, which represented 37% of WPP’s revenue less
pass-through costs in the fourth quarter, was up 8.8%
like-for-like. The other integrated agencies all recorded broadly
similar levels of growth. For the full year, like-for-like revenue
less pass-through costs for the segment was up 6.9%, and up 9.5%
over three years.
Public Relations reported revenue was up 30.1% in the
final quarter. Like-for-like revenue less pass-through costs was up
6.5% in the final quarter, and up 17.5% on a three-year basis. All
agencies continued to grow well, with Hill + Knowlton Strategies
growing strongly. During the period we launched FGS Global, the new
name and branding for the merger of Finsbury Glover Hering and Sard
Verbinnen. For the full year, like-for-like revenue less
pass-through costs for the segment was up 8.2%, and up 15.9% over
three years.
Specialist Agencies reported revenue was up 19.3% in the
final quarter. Like-for-like revenue less pass-through costs was up
4.4% in the final quarter, and up 8.7% on a three-year basis. For
the full year, like-for-like revenue less pass-through costs for
the segment was up 5.6%, and up 13.8% over three years.
Regional review
Revenue analysis
£ million
2022
2021
+/(-) % reported
+/(-) % LFL
N. America
5,550
4,494
23.5
7.8
United Kingdom
2,004
1,867
7.3
6.3
W. Cont Europe
2,876
2,786
3.2
4.8
AP, LA, AME, CEE8
3,999
3,654
9.5
7.0
Total Group
14,429
12,801
12.7
6.7
Revenue less pass-through costs analysis
£ million
2022
2021
+/(-) % reported
+/(-) % LFL
N. America
4,688
3,849
21.8
6.6
United Kingdom
1,537
1,414
8.7
7.6
W. Cont Europe
2,319
2,226
4.2
5.5
AP, LA, AME, CEE
3,255
2,908
11.9
8.0
Total Group
11,799
10,397
13.5
6.9
Headline operating profit analysis
£ million
2022
% margin*
2021
% margin*
N. America
771
16.4
656
17.0
United Kingdom
187
12.3
181
12.8
W Cont. Europe
301
13.0
289
13.0
AP, LA, AME, CEE
483
14.8
368
12.7
Total Group
1,742
14.8
1,494
14.4
* Headline operating profit as a percentage of revenue less
pass-through costs
North America reported revenue was up 30.6% in the final
quarter. Like-for-like revenue less pass-through costs was up 3.4%
in the final quarter, and up 8.6% on a three-year basis. The US
continued to grow at a high-single-digit rate, led by Ogilvy,
Hogarth and GroupM. On a full year basis, like-for-like revenue
less pass-through costs in North America was up 6.6%, and up 10.2%
over three years.
United Kingdom reported revenue was up 24.3% in the final
quarter. Like-for-like revenue less pass-through costs was up 12.0%
in the final quarter, and up 14.0% on a three-year basis. GroupM
and Hogarth were the strongest performers. On a full year basis,
like-for-like revenue less pass-through costs was up 7.6%, and up
10.8% over three years.
Western Continental Europe reported revenue was up 12.7%
in the final quarter. Like-for-like revenue less pass-through costs
was up 8.7% in the final quarter, and up 12.7% on a three-year
basis. Spain was the strongest performer in the quarter, up 38.6%
driven by good growth Ogilvy and Wunderman Thompson. France
declined 12.2% in the quarter and 18.7% over three years reflecting
the full year impact of client losses in 2021. On a full year
basis, like-for-like revenue less pass-through costs in the region
was up 5.5%, and up 11.0% over three years.
In Asia Pacific, Latin America, Africa & the Middle East
and Central & Eastern Europe, reported revenue was up 10.4%
in the final quarter. Like-for-like revenue less pass-through costs
was up 5.9% in the final quarter, and up 8.7% on a three-year
basis. In Latin America growth benefited from a strong performance
in Brazil and very strong growth in Argentina, while Asia Pacific
continued to be negatively impacted by COVID-related restrictions
in China. On a full year basis, like-for-like revenue less
pass-through costs was up 8.0%, and up 8.8% over three years.
The decline of like-for-like revenue less pass-through costs in
China in Q4 reflected widespread COVID-related lockdowns during the
quarter. Policy changes and the subsequent re-opening late in the
quarter is expected to benefit WPP later in 2023 with media and
programmatic business recovering first, followed by creative
activities.
Operating profitability
Reported profit before tax was £1.2 billion, compared to a
profit of £1.0 billion in 2021, reflecting the strong operating
performance.
Reported profit after tax was £0.8 billion compared to a profit
in 2021 of £0.7 billion.
Headline EBITDA (including IFRS 16 depreciation) for 2022 was up
14.5% to £2.0 billion, compared to £1.8 billion the previous year.
Headline operating profit was up 16.6% to £1.7 billion. The
significant growth in profitability year-on-year reflects revenue
growth and the progress on our transformation programme, with £375
million of gross savings towards our 2025 annual run rate target of
£600 million.
Headline operating profit margin was up 40 basis points to
14.8%, and up 40 basis points like-for-like. Staff costs
pre-incentives were a 240 basis points drag on margin, reflecting
the tight labour market and inflationary backdrop. Personal costs
were a 50 basis points drag as travel and in-person meetings
recommenced. Offsetting tailwinds were staff incentives (210 basis
points), establishment costs (50 basis points), IT costs (30 basis
points) and other operating costs (40 basis points).
The Group’s headline operating profit margin is after charging
£44 million of severance costs, compared with £42 million in 2021
and £424 million of incentive payments, compared to £592 million in
2021.
The average number of people in the Group in 2022 was 114,129
compared to 104,808 in 2021. The total number of people at 31
December 2022 was 115,473 compared to 109,382 at 31 December
2021.
Adjusting items
The Group incurred a net loss from adjusting items of £341
million in 2022. This comprises the Group’s share of adjusting
items from associates (£134 million), restructuring and
transformation costs (£219 million) and other net gains from
adjusting items (£12 million). Restructuring and transformation
costs mainly comprise severance and property-related costs arising
from the continuing structural review of parts of the Group’s
operations, investments in IT and ERP systems as part of our
transformation programme. This compares with a net loss from
adjusting items in 2021 of £270 million.
Interest and taxes
Net finance costs (excluding the revaluation and retranslation
of financial instruments) were £214 million, a decrease of £1
million year-on-year.
The reported tax charge was £384 million (2021: £230 million).
The headline tax rate (measured on headline profit before tax,
including associate income) was 25.5% (2021: 24.0%). Given the
Group’s geographic mix of profits and the changing international
tax environment, the tax rate is expected to be around 27.0% in
2023, and to continue to increase in the next few years.
Earnings and dividend
Reported profit before tax was up 22.0% to £1.2 billion.
Headline profit before tax was up 17.3% to £1.6 billion, and
headline profits attributable to share owners were £1.1
billion.
Reported diluted earnings per share were 61.2 pence, compared to
52.5 pence in the prior period. Headline diluted earnings per share
were up 25.5% to 98.5 pence.
The Board is proposing a final dividend for 2022 of 24.4 pence
per share, which together with the interim dividend paid in
November 2022 gives a full-year dividend of 39.4 pence per share.
The record date for the final dividend is 9 June 2023, and the
dividend will be payable on 7 July 2023.
Further details of WPP’s financial performance are provided in
Appendix 1.
Cash flow highlights
Twelve months ended (£ million)
31 December 2022
31 December 2021
Operating profit
1,358
1,229
Depreciation and amortisation
513
542
Investment and other impairment
charges/(reversals)
158
(1)
Lease payments (inc interest)
(402)
(409)
Non-cash compensation
122
100
Net interest paid
(121)
(126)
Tax paid
(391)
(391)
Capex
(223)
(293)
Earnout payments
(71)
(57)
Other
(43)
(31)
Trade working capital
(328)
319
Other receivables, payables and
provisions
(519)
383
Adjusted free cash flow9
53
1,265
Disposal proceeds
51
77
Net initial acquisition payments
(274)
(464)
Dividends
(365)
(315)
Share repurchases and buybacks
(863)
(819)
Net cash flow
(1,398)
(256)
In 2022, net cash outflow was £1,398 million, compared to a £256
million outflow in 2021. The main driver of the cash flow
performance year-on-year was the £328 million adverse movement in
trade working capital lapping positive movement in the prior year,
driven by year-end mix and timing factors, the £519 million adverse
movement in other receivables, payables and provisions was driven
by a reduction in staff incentives payable, prepayments and
year-end mix and timing factors associated with VAT, growth in the
dividend and the increase in the share buyback. A summary of the
Group’s unaudited cash flow statement and notes for the twelve
months to 31 December 2022 is provided in Appendix 1.
Balance sheet highlights
As at 31 December 2022 we had cash and cash equivalents of £2.1
billion and total liquidity, including undrawn credit facilities,
of £4.1 billion. Average adjusted net debt in 2022 was £2.9
billion, compared to £1.6 billion in the prior period, at 2022
exchange rates. On 31 December 2022 adjusted net debt was £2.5
billion, against £0.9 billion on 31 December 2021, an increase of
£1.4 billion at 2022 exchange rates. The higher adjusted net debt
figure mainly reflects the £1,172 million returned to shareholders
in 2022 comprising £807 million of share buybacks completed and
£365 million of dividends paid.
We spent £863 million on share purchases during the year, of
which £807 million related to share buybacks.
Around £50 million of share repurchases planned for 2023
continuing to offset dilution from share-based payments.
Our bond portfolio at 31 December 2022 had an average maturity
of 6.4 years.
The average adjusted net debt to EBITDA ratio in the 12 months
to 31 December 2022 is 1.46x, which excludes the impact of IFRS 16.
This is slightly below our target range of 1.5 – 1.75x average
adjusted net debt to EBITDA.
A summary of the Group’s unaudited balance sheet and notes as at
31 December 2022 is provided in Appendix 1.
Foreign exchange sensitivity
Foreign exchange rates at 22nd February 2023 imply around a 1%
tailwind to reported revenue less pass-through costs in 2023 from
the movement in sterling year-on-year.
Management change
In November, we announced that Chief Financial Officer John
Rogers has decided to step down from the company. The Board has
appointed Joanne Wilson to succeed John as Chief Financial Officer.
Joanne is currently Chief Financial Officer at Britvic plc
(LSE:BVIC), the UK-listed international soft drinks company. It is
expected that Joanne will join WPP in the first half of 2023. To
ensure a smooth transition, John will remain available until later
in 2023.
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 Group’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 ‘anticipate’, ‘estimate’, ‘expect’, ‘intend’,
‘will’, ‘project’, ‘plan’, ‘believe’, ‘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 outbreaks, epidemics or pandemics; 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; 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 conflict in Ukraine; the risk of global economic
downturn; 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; 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). In addition, you
should consider the risks described under Item 3D ‘Risk Factors’ in
the Group’s Annual Report on Form 20-F for 2021, which could also
cause actual results to differ from forward-looking information.
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, adjusted to reflect the results of acquisitions and
disposals.
3 In this press release not all of the
figures and ratios used are readily available from the unaudited
preliminary results included in Appendix 1. Management believes
these non-GAAP measures, including constant currency and
like-for-like growth, revenue less pass-through costs and headline
profit measures, are both useful and necessary to better understand
the Group’s results. Where required, details of how these have been
arrived at are shown in Appendix 2.
4 Includes a benefit of £102 million due
to more favourable FX rates at year end compared to the prior
year
5 Billings, as defined in the
glossary.
6 All references to estimates and
forecasts for advertising spend exclude US political
advertising.
7 Non-GAAP measures in this table are
reconciled in Appendix 2.
8 Asia Pacific, Latin America, Africa
& Middle East and Central & Eastern Europe.
9 Adjusted free cash flow is reconciled to
cash generated by operations in Appendix 2.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230222006095/en/
Investors and analysts Tom Waldron +44 7867 975920
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
wpp.com/investors
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