Resilient performance with second quarter
impacted by lower revenues in the US from technology clients and
delays in spend on technology projects. Now expect 2023 LFL growth
of 1.5-3.0%. Margin guidance remains at around 15% at 2022
rates
WPP (NYSE: WPP) today reported its 2023 Interim Results.
Key figures
£m
H1 2023
+/(-) % reported1
+/(-) % LFL2
H1 2022
Revenue
7,221
6.9
3.5
6,755
Revenue less pass-through costs
5,811
5.5
2.0
5,509
Reported:
Operating profit
306
(43.2)
-
539
Profit before tax
204
(51.2)
-
419
Diluted EPS (p)
10.3
(54.6)
-
22.7
Dividends per share (p)
15.0
-
-
15.0
Headline3:
Operating profit
666
4.3
2.7
639
Operating profit margin
11.5%
(0.1pt*)
0.1pt*
11.6%
Profit before tax
546
(2.9)
-
562
Diluted EPS
33.1p
0.3
-
33.0p
* Margin points
H1 and Q2 financial highlights
- H1 reported revenue +6.9%, LFL revenue +3.5% (Q2 +2.3%)
- H1 revenue less pass-through costs +5.5%, LFL revenue less
pass-through costs +2.0% (Q2 +1.3%)
- In Q2, ex-US growth accelerated to mid-single digits, with
China growing albeit less strongly than expected. North America
declined in Q2, primarily due to lower revenues from technology
clients
- H1 headline operating profit margin 11.5%, down 0.1pt, and on a
constant FX basis improved by 0.1pt. Efficiency benefits offset by
investment in IT and higher severance costs
- Trade working capital favourable movement of £165m
year-on-year. Non-trade working capital adverse movement of
£316m
- Adjusted net debt at 30 June 2023 £3.5bn, up £0.3bn
year-on-year, £0.4bn lower than Q1 2023. Expect year end net debt
to be flat year-on-year
Performance, strategic progress and outlook
- Global Integrated Agencies H1 LFL revenue less pass-through
costs growth +2.2% (Q2 +1.5%): within which GroupM, our media
planning and buying business +6.1% (Q2 +6.1%), partially offset by
a 0.8% LFL decline at other Global Integrated Agencies (Q2
-2.3%)
- Solid new business performance: $2.0bn net new billings in H1
with the pipeline of potential new business larger than at the same
point in 2022
- Acquisitions of Goat and Obviously in the fast-growth area of
influencer marketing and an investment in Majority, a diversity-led
creative agency
- Transformation programme on track to deliver at least £450m of
annual savings this year over a 2019 base
- Planned review of our property portfolio resulting in a
consolidation of our office space with an impairment charge for the
full year of approximately £220m which is largely non-cash (H1
2023: £180m)
- 2023 interim dividend of 15.0p declared (2022: 15.0p)
- Full year 2023 LFL growth of 1.5-3.0% (previously 3-5%); FY
2023 headline operating profit margin around 15.0% (excluding the
impact of FX)
Mark Read, Chief Executive Officer of WPP, said:
“Our performance in the first half has been resilient with Q2
growth accelerating in all regions except the USA, which was
impacted in the second quarter by lower spending from technology
clients and some delays in technology-related projects. This was
felt primarily in our integrated creative agencies. China returned
to growth in the second quarter albeit more slowly than expected.
In the near term, we expect the pattern of activity in the first
half to continue into the second half of the year.
“Our media business, GroupM, grew consistently across the first
six months as did our businesses in the UK, Europe, Latin America
and Asia-Pacific. Client spending in consumer packaged goods,
financial services and healthcare remained good and, despite
short-term challenges, our technology clients represent an
important driver of long-term growth. Our agencies performed
extremely well at the Cannes Lions Festival winning five Grand Prix
and 165 Lions with Mindshare recognised as the most-awarded media
agency. We won major new business assignments with clients
including: Reckitt, Mondelēz, easyJet, Lloyds Banking Group, Pernod
Ricard and India’s second largest advertiser, Maruti Suzuki.
“We have exciting future plans in AI that build on our
acquisition of Satalia in 2021 and our use of AI across WPP. We are
leveraging our efforts with partnerships with the leading players
including Adobe, Google, IBM, Microsoft, Nvidia and OpenAI. We are
delivering work powered by AI for many clients including Nestlé,
Nike and Mondelēz. AI will be fundamental to WPP’s future success
and we are committed to embracing it to drive long-term growth and
value.”
This announcement contains information that qualifies or may
qualify as inside information. The person responsible for arranging
the release of this announcement on behalf of WPP plc is Balbir
Kelly-Bisla, Company Secretary.
To access WPP's 2023 interim results financial tables, please
visit: www.wpp.com/investors
First half overview
First half revenue was £7.2bn, up 6.9% from £6.8bn in H1 2022,
and up 3.5% like-for-like. Revenue less pass-through costs was
£5.8bn, up 5.5% from £5.5bn in H1 2022, and up 2.0%
like-for-like.
Q2 2023
£m
%
reported
%
M&A
%
FX
%
LFL
Revenue
3,761
2.7
1.1
(0.7)
2.3
Revenue less pass-through costs
2,982
1.6
0.9
(0.6)
1.3
H1 2023
£m
%
reported
%
M&A
%
FX
%
LFL
Revenue
7,221
6.9
0.9
2.5
3.5
Revenue less pass-through costs
5,811
5.5
0.9
2.6
2.0
Business segment review4
Business segments - revenue less pass-through costs
% LFL +/(-)
Global
Integrated Agencies
Public Relations
Specialist Agencies
Q2 2023
1.5
2.0
(1.6)
H1 2023
2.2
2.1
0.2
Global Integrated Agencies: GroupM, our media planning
and buying business, grew consistently during the half and across
all regions, benefiting from continued client investment in media,
with like-for-like growth in revenue less pass-through costs of
+6.1% (Q2 +6.1%), partially offset by a 0.8% LFL decline at other
Global Integrated Agencies (Q2 -2.3%).
Ogilvy grew well, supported by recent new business wins
including Verizon and SC Johnson. Hogarth, our creative production
agency, continued to deliver good growth as it expands its
collaboration with other WPP agencies.
Other Global Integrated Agencies, Wunderman Thompson, VMLY&R
and AKQA Group, felt the greatest impact from reduced spend across
the technology sector and delays in technology-related projects. As
anticipated, revenue less pass-through costs in the retail sector
was impacted by known 2022 client losses.
Revenue less pass-through costs from our offer in experience,
commerce and technology was around 39% of our Global Integrated
Agencies, excluding GroupM, compared to around 35% in 2019 and
unchanged from H1 2022, impacted by the previously referenced
delays in technology-related projects. Our digital billings mix
within GroupM increased to 49%, compared to 48% in FY 2022.
Public Relations: FGS Global continued to grow strongly
in the first half. H+K Strategies delivered solid growth, lapping
double-digit growth in the first half 2022. BCW saw a small decline
in revenue less pass-through costs in the first half.
Specialist Agencies: good growth in design agency Landor
& Fitch, and our specialist healthcare media planning and
buying agency, CMI Media Group, was offset by declines at smaller
agencies affected by delays in client projects.
Regional review
Regional segments - revenue less pass-through costs
% LFL +/(-)
North America
United Kingdom
Western Continental
Europe
Rest of World
Q2 2023
(4.1)
9.0
3.9
4.3
H1 2023
(1.2)
8.2
3.7
3.1
North America declined by 1.2% in the first half reflecting the
lower revenues from technology clients, which predominantly
impacted our integrated creative agencies, and the expected impact
of 2022 client losses in the retail sector. This was partially
offset by growth in spending from consumer packaged goods,
healthcare and financial services. GroupM continued to grow well in
the region.
The United Kingdom grew strongly led by GroupM. CPG and
healthcare were the strongest client sectors. In Western
Continental Europe, strong performances in Germany and Spain offset
declines in France due to client losses.
The Rest of World saw good growth in the half. China grew 4.8%
in the second quarter, as that market continued to recover from
Covid-related impacts, albeit at a slower pace than anticipated.
India moved into growth in Q2 against a strong comparative of 48%
growth in Q2 2022.
Top five markets - revenue less pass-through costs
% LFL +/(-)
USA
UK
Germany
China
India
Q2 2023
(4.5)
9.0
6.6
4.8
2.5
H1 2023
(1.2)
8.2
5.4
(4.0)
0.8
Client sector review
Client sector - revenue less pass-through costs
H1 2023
% share
% growth +/(-)
CPG
26.1
15.1
Tech & Digital Services
17.8
(4.9)
Healthcare & Pharma
12.5
4.2
Automotive
10.2
(0.2)
Retail
9.5
(7.9)
Telecom, Media & Entertainment
6.2
(1.4)
Financial Services
6.1
10.0
Other
5.5
(0.3)
Travel & Leisure
3.6
8.9
Government, Public Sector &
Non-profit
2.5
3.6
Strategic progress
There have never been more opportunities for advertisers to
reach consumers, reflected in the plethora of marketing channels
available. In this increasingly complex world, WPP’s unique
position and offer is more relevant than ever. Our clients continue
to invest in their brands and seek our support as they navigate
this complexity.
Clients: We have won $2.0bn of net new business billings
in the first half (H1 2022: $3.4bn) including the potential loss of
certain Pfizer assignments currently held by WPP integrated
creative agencies. Key assignment wins included Maruti Suzuki
(media), Pernod Ricard (creative), Reckitt (media), Beko
(creative), and Costa Coffee (PR).
Our Vantage global client satisfaction survey has shown the key
measure of “Likely To Recommend” has remained at all-time high
levels with an increase in scores related to world-class
creativity.
Creativity and awards: Creativity is at the heart of our
offer, and we continue to be recognised for our creative
excellence. WPP had another successful year at Cannes Lions
International Festival of Creativity, winning a total of 165 Lions
including one Titanium Lion, five Grand Prix, and 24 Gold awards.
Mindshare was also named Media Network of the Year.
Earlier in the year, WARC named WPP the top company in all three
of their rankings, the Creative 100, Effective 100 and Media 100
lists. Ogilvy ranked as the top network of the year in both the
Creative 100 and Effective 100 while EssenceMediacom took first
place in the Media 100. In addition, the Effie Awards named WPP the
most effective communication company in the world, with Ogilvy
placing first in the most effective agency network rankings.
Investment for growth: We have invested in strategically
important areas and growth markets. We acquired Goat, a
London-based, data-driven influencer marketing agency; Obviously, a
New York-based, technology-led influencer marketing agency; 3K
Communication, a Frankfurt-based healthcare PR agency; and amp, one
of the world’s leading sonic branding companies. We also made a
minority investment in Majority, a diversity-focused US creative
agency.
In July, KKR completed their minority investment to become a 29%
shareholder in FGS Global, after acquiring all of Golden Gate
Capital’s equity and a proportion of the interests of WPP and FGS
Global management. WPP remains the majority owner at 51%. The
transaction valued FGS Global at $1.425bn.
We have invested organically in new technology platforms to
provide a future-facing offer to clients and innovate for the
medium term. The main areas of investment are in Choreograph, our
data company, and WPP Open, our AI-powered technology platform.
We believe that AI will be fundamental to WPP’s business and are
excited by its transformational potential. Our expertise in the
application of AI to marketing is based on investments that we have
been making over many years, including the appointment of a Head of
Creative AI in 2019 and the acquisition of Satalia in 2021.
AI is used extensively across our business today, particularly
in GroupM and in Hogarth, our creative production business. Our
application of AI includes automation of workflows, speeding up the
process of ideation and concepting, and producing innovative
creative work for clients. An example is our work for Cadbury’s in
India which used AI to allow Bollywood superstar Shah Rukh Khan to
produce personalised ads for local businesses which won a Titanium
Lion for Creativity at the 2022 Cannes Lions festival and won again
at the festival in 2023, securing a Grand Prix for Creative
Effectiveness.
We are working with technology from all the main AI companies,
including Adobe, Google, IBM, Microsoft, Nvidia, and OpenAI, with
dedicated enterprise platforms, proprietary to WPP, to deliver work
to clients that protects their information. We recognise the
challenges of AI to society and have implemented legal and ethical
guidelines to help us responsibly deploy this technology.
In May, WPP and Nvidia announced plans to develop a content
engine that harnesses NVIDIA Omniverse™ and AI to enable creative
teams to produce high-quality commercial content faster, more
efficiently and at scale while staying fully aligned with a
client’s brand.
The new engine connects an ecosystem of 3D design, manufacturing
and creative supply chain tools, including those from Adobe and
Getty Images, letting WPP’s artists and designers integrate 3D
content creation with generative AI. This enables our clients to
reach consumers in highly personalised and engaging ways, while
preserving the quality, accuracy and fidelity of their company’s
brand identity, products and logos.
Talent: Our success is driven by our exceptional talent.
We have continued to invest to attract, engage and develop the best
talent in our industry. In May, we hired Corey duBrowa, one of the
industry’s most highly regarded communications leaders, as Chief
Executive of BCW.
We have invested in education and training, including through
our Future Readiness Academies, a bespoke global learning programme
available to everyone across WPP. We also launched the second
cohort of our Creative Technology Apprenticeship, a nine-month
intensive programme where apprentices learn creative technology
skills using the latest software and hardware to prepare them for a
career in today’s creative technology field. In addition, we
sponsored a cohort of WPP leaders through a Postgraduate Diploma in
AI for Business at Oxford University’s Saїd Business School, with
28 senior executives graduating earlier this year.
Transformation: We are making progress on our
transformation plan which we set out in December 2020, designed to
achieve £600m in gross annual cost efficiencies by 2025. We are on
target to achieve our annual run-rate of £450m in efficiencies this
year, against a 2019 baseline.
We opened five new campuses, in Atlanta, Austin, Guangzhou,
Manchester and Paris, in the half, taking the total to 38 campuses.
By the end of the year, we intend to open two further campuses and
will accommodate around 60,000 of our people in campus
buildings.
A review of our property portfolio has led to ongoing actions
including the further consolidation of our operations in campuses
across the US, in New York and other cities.
Purpose and ESG
WPP’s purpose is to use the power of creativity to build better
futures for our people, planet, clients and communities. During the
first six months of the year we have made good progress in
fulfilling our commitments in each pillar of our purpose
statement.
People: We are committed to our $30m pledge, set out in
June 2020, to fund inclusion programmes within WPP and to support
external organisations, as part of our Racial Equity Programme. WPP
agencies globally apply to receive resources to create and run
impactful programmes to advance racial equity. During the quarter,
the programme received applications for its fourth round of
funding.
Planet: In 2021, we announced our commitment to reduce
carbon emissions from our own operations to net zero by 2025 and
across our 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.
In April, our 2022 Sustainability Report reported that we have
delivered a reduction in Scope 1 and 2 emissions of 71% in absolute
terms since our 2019 baseline.
WPP maintained a low risk rating in the 2023 Sustainalytics risk
rating, which scores the ESG performance of companies. WPP has the
lowest risk rating of its peer group and saw an improvement in its
score from 12.1 in 2022 to 10.6 in 2023.
Clients: We are proud to enable our clients in their own
sustainability journeys and ensure client work is inclusive and
accessible. At the Cannes Lions Festival of Creativity 2023 we were
recognised for our purpose-driven client work including a Titanium
Lion for Corona’s Extra Lime campaign in which Corona partnered
with local governments to equip and educate farmers to expand their
lime yield, and a Grand Prix for Dove’s #TurnYourBack campaign
which raised awareness of the harmful impact of toxic beauty
content.
Communities: We make a positive contribution to the
communities in which we live and work. WPP collaborated with The
One Club for Creativity to introduce ONE School UK, a free
intensive portfolio programme spanning 16 weeks, aiming to provide
opportunities for promising Black creatives based in the UK. Funded
by WPP’s Racial Equity Programme, the virtual ONE School UK
welcomed its inaugural cohort in March 2023.
Outlook
We are updating our guidance for 2023 as follows:
Like-for-like revenue less
pass-through costs growth of 1.5-3.0% for FY 2023 (previously
3-5%); guidance for FY 2023 headline operating margin of around 15%
(excluding the impact of FX) maintained
Other 2023 financial guidance:
- Mergers and acquisitions will add 0.5-1.0% to revenue less
pass-through costs growth
- FX impact: current rates (at 31 July 2023) imply a c.2.0% drag
on FY 2023 revenues less pass-through costs and a c.0.25pt drag on
FY 2023 headline operating margin
- Headline income from associates is expected to be around
40m5
- Effective tax rate (measured as headline tax as a % of headline
profit before tax) of around 27%
- Capex of around £250m (previously £300m)
- Restructuring and property costs of around £400m, consisting of
costs of £180m detailed in prior guidance with the addition of
£220m of cost relating to the 2023 property review (of which £200m
is non-cash)
- Trade working capital expected to be broadly flat year-on-year,
with operational improvement offsetting increased client focus on
cash management
- Non-trade working capital expected to be an outflow of
£150m
- Average adjusted net debt/headline EBITDA within the range of
1.5x-1.75x
- Year-end adjusted net debt flat year-on-year
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
statement6:
Six months ended (£m)
30 June 2023
30 June 2022
+/(-) % reported
+/(-) % LFL
Revenue
7,221
6,755
6.9
3.5
Revenue less pass-through costs
5,811
5,509
5.5
2.0
Operating profit
666
639
4.3
2.7
Operating profit margin %
11.5%
11.6%
(0.1pt*)
0.1pt*
Income from associates
8
12
(38.2)
PBIT
674
651
3.5
Net finance costs
(128)
(89)
(43.5)
Profit before tax
546
562
(2.9)
Tax
(148)
(143)
(3.1)
Profit after tax
398
419
(5.0)
Non-controlling interests
(37)
(43)
13.7
Profit attributable to shareholders
361
376
(4.0)
Diluted EPS
33.1p
33.0p
0.3
*margin points
Reconciliation of profit before tax to
headline operating profit:
Six months ended (£m)
30 June 2023
30 June 2022
Profit before taxation
204
419
Finance and investment income
(102)
(56)
Finance costs
231
145
Revaluation and retranslation of financial
instruments
(26)
(33)
Profit before interest and
taxation
307
475
(Earnings)/loss from associates - after
interest and tax
(1)
64
Operating profit
306
539
Goodwill impairment
53
–
Amortisation and impairment of acquired
intangible assets
36
31
Investment and other impairment
charges
11
–
Losses on disposal of investments and
subsidiaries
3
48
Gains on remeasurement of equity interests
arising from a change in scope of ownership
–
(60)
Litigation settlement
(10)
–
Restructuring and transformation costs
87
81
Property related costs
180
–
Headline operating profit
666
639
Business sector review7
Revenue analysis
Q2
H1
£m
+/(-) % reported
+/(-) % LFL
£m
+/(-) % reported
+/(-) % LFL
Global Int. Agencies
3,211
3.3
2.9
6,107
7.2
4.0
Public Relations
311
2.2
1.7
618
7.6
2.7
Specialist Agencies
239
(4.7)
(4.6)
496
3.0
(1.3)
Total Group
3,761
2.7
2.3
7,221
6.9
3.5
Revenue less pass-through costs analysis
Q2
H1
£m
+/(-) % reported
+/(-) % LFL
£m
+/(-) % reported
+/(-) % LFL
Global Int. Agencies
2,474
1.8
1.5
4,782
5.4
2.2
Public Relations
292
2.3
2.0
584
6.7
2.1
Specialist Agencies
216
(1.8)
(1.6)
445
4.5
0.2
Total Group
2,982
1.6
1.3
5,811
5.5
2.0
Headline operating profit analysis
£m
2023
% margin*
2022
% margin*
Global Int. Agencies
540
11.3
507
11.2
Public Relations
88
15.0
83
15.2
Specialist Agencies
38
8.6
49
11.4
Total Group
666
11.5
639
11.6
* Headline operating profit as a percentage of revenue less
pass-through costs
Regional review
Revenue analysis
Q2
H1
£m
% reported
%
LFL
£m
% reported
%
LFL
N. America
1,376
(1.6)
(2.1)
2,744
6.1
0.4
United Kingdom
567
14.6
12.7
1,065
11.3
10.4
W Cont. Europe
781
6.8
4.3
1,477
9.3
5.0
AP, LA, AME, CEE*
1,037
(0.2)
2.3
1,935
4.0
3.6
Total Group
3,761
2.7
2.3
7,221
6.9
3.5
* Asia Pacific, Latin America, Africa
& Middle East and Central & Eastern Europe
Revenue less pass-through costs analysis
Q2
H1
£m
% reported
%
LFL
£m
% reported
%
LFL
N. America
1,134
(3.3)
(4.1)
2,284
4.4
(1.2)
United Kingdom
419
9.0
9.0
796
8.0
8.2
W Cont. Europe
621
7.3
3.9
1,179
8.5
3.7
AP, LA, AME, CEE
808
1.2
4.3
1,552
3.6
3.1
Total Group
2,982
1.6
1.3
5,811
5.5
2.0
Headline operating profit analysis
£m
2023
% margin*
2022
% margin*
N. America
287
12.6
300
13.7
United Kingdom
98
12.3
67
9.1
W Cont. Europe
111
9.4
99
9.1
AP, LA, AME, CEE
170
11.0
173
11.6
Total Group
666
11.5
639
11.6
* Headline operating profit as a
percentage of revenue less pass-through costs
Operating profitability
Reported profit before tax was £204m, compared to £419m in the
prior period, principally reflecting the impairment taken as a
result of the 2023 property review.
Reported profit after tax was £149m compared to £301m in the
prior period.
Headline EBITDA (including IFRS 16 depreciation) for the first
half was up 2.9% to £767m. Headline operating profit was up 4.3% to
£666m.
Headline operating profit margin was down 10 basis points to
11.5% and up 10 basis points year on year on a constant currency
basis. Total operating costs were up 5.7% to £5.1bn. Staff costs,
excluding incentives, were up 5.4% year-on-year to £4.0bn,
including severance costs of £40m (H1 2022: £17m), partially offset
by good control over our freelance spend. Severance costs increased
as we aligned headcount to market conditions. Incentive costs were
£172m, compared to £164m in the first half of 2022.
Establishment costs were up 3.6% at £272m while IT costs were up
13.6% at £350m, reflecting investment in our IT infrastructure,
cyber security and a move to cloud computing.
Personal costs rose 16.3% to £112m, reflecting higher
client-related business travel, and other operating expenses were
down 1.0% at £270m.
On a like-for-like basis, the average number of people in the
Group in the first half was 115,000 compared to 113,000 in the
first half of 2022. The total number of people as at 30 June 2023
was 114,000 compared to 115,000 as at 30 June 2022.
Adjusting items
The Group incurred £360m of adjusting items in the first half of
2023, mainly relating to restructuring and transformation costs and
property and goodwill impairments. This compares with net adjusting
items in the first half of 2022 of £100m.
Restructuring costs related to IT and other transformation were
£87m in the first half of 2023 (H1 2022: £81m), in line with
expectations and as guided. Charges related to the 2023 property
review were £180m and relate to lease impairments, primarily in the
US, all of which are non-cash. For the full year 2023 we expect
adjusting items of around £400m, consisting of £180m detailed in
prior guidance with the addition of £220m of charges relating to
the 2023 property review (of which £200m is non-cash).
Goodwill impairment, amortisation of acquired intangibles and
investment write-downs were £101m in the first half (H1 2022:
£31m).
Interest and taxes
Net finance costs (excluding the revaluation of financial
instruments) were £128m, an increase of £39m year-on-year, due to
higher levels of debt and lower investment income partially offset
by higher interest earned on cash.
The headline tax rate (based on headline profit before tax) was
27.0% (2022: 25.5%) and on reported profit before tax was 26.9%
(2022: 28.1%). The increase in the headline tax rate is driven by
changes in tax rates or tax bases in the markets in which we
operate. Given the Group’s geographic mix of profits and the
changing international tax environment, the tax rate is expected to
increase over the next few years.
Earnings and dividend
Reported profit before tax was down 51.2% to £204m. Headline
profit before tax was down 2.9% to £546m.
Profits attributable to share owners were £112m, compared to a
profit of £258m in the prior period.
Headline diluted earnings per share from continuing operations
rose by 0.3% to 33.1p. Reported diluted earnings per share, on the
same basis, was 10.3p, compared to 22.7p in the prior period.
For 2023, the Board is declaring an interim dividend of 15.0p
(2022: 15.0p). The record date for the interim dividend is 13
October 2023, and the dividend will be payable on 3 November
2023.
Further details of WPP’s financial performance are provided in
Appendix 1.
Cash flow highlights
Six months ended (£ million)
30 June 2023
30 June 2022
Operating profit
306
539
Depreciation and amortisation
259
255
Impairments and investment write-downs
204
8
Lease payments (inc interest)
(184)
(190)
Non-cash compensation
76
67
Net interest paid
(47)
(60)
Tax paid
(171)
(163)
Capex
(104)
(117)
Earnout payments
(12)
(63)
Other
(37)
(9)
Trade working capital
(522)
(1,015)
Other receivables, payables and
provisions
(523)
(726)
Adjusted free cash flow
(755)
(1,474)
Disposal proceeds
14
34
Net initial acquisition payments
(203)
(46)
Share purchases
(37)
(681)
Net cash flow
(981)
(2,167)
Net cash outflow for the first half was £1.0bn, compared to
£2.2bn in the first half of 2022. The main drivers of the cash flow
performance year-on-year were lower reported operating profit and
higher consideration for acquisitions offset by a continued focus
on working capital management and lower share purchases. A summary
of the Group’s unaudited cash flow statement and notes for the six
months to 30 June 2023 is provided in Appendix 1.
Balance sheet highlights
As at 30 June 2023 we had cash and cash equivalents of £1.5bn
(H1 2022: £1.5bn) and total liquidity, including undrawn credit
facilities, of £3.6bn. Average adjusted net debt8 in the first half
was £3.6bn, compared to £2.6bn in the prior period, at 2023
exchange rates. On 30 June 2023 adjusted net debt was £3.5bn,
against £3.1bn on 30 June 2022, an increase of £0.3bn on reported
basis and at 2023 exchange rates.
We spent £37m on share purchases in the first half of the year
to offset dilution from share-based payments.
Our bond portfolio at 30 June 2023 had an average maturity of
5.8 years.
In May 2023, we refinanced the November 2023 €750m bond as
planned, issuing a May 2028 €750m bond priced at 4.125%.
The average adjusted net debt to EBITDA ratio in the 12 months
to 30 June 2023 is 1.68x, which excludes the impact of IFRS 16.
A summary of the Group’s unaudited balance sheet and notes as at
30 June 2023 is provided in Appendix 1.
____________________________
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. Both periods exclude results
from Russia.3 In this press release not all of the figures and
ratios used are readily available from the unaudited interim
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 2.4Prior year figures have been re-presented to reflect
the reallocation of a number of businesses between Global
Integrated Agencies and Public Relations.5In 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. WPP’s
cumulative reported share of losses in Kantar reduced the carrying
value of the investment to zero at the end of December
2022.6Non-GAAP measures in this table are reconciled in Appendix
1.7Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Public Relations.8Average adjusted net debt calculated
based on a month-end average.
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version on businesswire.com: https://www.businesswire.com/news/home/20230803030749/en/
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
wpp.com/investors
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