- Reported revenue up 8.3% at £2.783
billion in sterling, down 1.1% at $4.211 billion in dollars and up
20.9% at €3.753 billion in euros reflecting volatile exchange
rates
- Constant currency revenue up 7.4%,
like-for-like revenue up 5.2%
- Constant currency net sales up 5.0%,
like-for-like net sales up 2.5%
- First quarter profits and margin
well above target
- Share buy-backs continue above
target rate with 10.5 million shares or 0.8% of share capital
purchased in first quarter
- Constant currency net debt at 31
March 2015 up £218 million on same date in 2014, with average net
debt in first quarter of 2015 up by £185 million over same period
in 2014 reflecting strong acquisition and buy-back
activities
- Recent new business activity and net
new business wins continue as clients react to past and potential
changes in the agency industry's structure
WPP (NASDAQ:WPPGY) today reported its 2015 First Quarter Trading
Update.
Quarter 1 highlights
- Revenue growth of 8.3%, with
constant currency growth of 7.4%, like-for-like growth of 5.2%,
2.2% growth from acquisitions and 0.9% from currency, reflecting
the weakness of sterling against the US dollar, partly offset by
the strength of sterling, primarily against the euro
- Net sales growth of 6.0% in
sterling (down 3.2% in dollars and up 18.3% in euros), with
constant currency growth of 5.0%, like-for-like growth of 2.5%,
2.5% growth from acquisitions and 1.0% from currency
- Like-for-like revenue growth in all
regions and business sectors, except data investment
management, characterised by particularly strong growth
geographically in 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
healthcare
- Like-for-like net sales growth
of 2.5%, with all regions and sectors, including data
investment management, showing growth. The gap compared to revenue
growth is similar to the first quarter of 2014, reflecting the
scale of digital media purchases in the media investment management
and data investment management direct costs
- Constant currency average net debt
in the first quarter increased by £185m (7%) to £2.734 billion
compared to the same period in 2014, continuing to reflect the
significant incremental net acquisition spend and share
re-purchases of £331 million in the twelve months to 31 March 2015,
compared with the previous twelve months, more than offsetting the
improvements in working capital seen in the second half and final
quarter of last year
- Net new business of almost exactly
$1.0 billion in the first quarter, compared to $1.275 billion
in the first quarter last year.
Current trading and outlook
- FY 2015 quarter 1 preliminary
revised forecasts | Similar to budget, with like-for-like
revenue and net sales growth up over 3%. Headline net sales margin
target of 0.3 margin points improvement on a constant currency
basis
- Dual focus in 2015 | 1. Stronger
than competitor revenue and net sales growth due to leading
position in faster growing geographic markets and digital, premier
parent company creative and effectiveness 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/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 and data investment management, including data analytics and
the application of new technology; improvement in staff costs/net
sales ratio of 0.2 per annum or more depending on net sales growth;
net sales operating margin expansion of 0.3 margin points or more
on a constant currency basis, with an ultimate goal of almost 20%;
and headline diluted EPS growth of 10% to 15% per annum from
revenue growth, margin expansion, strategically targeted small and
medium-sized acquisitions and share buy-backs
Review of quarter one
Revenue and net sales
In the first quarter of 2015, reported revenue was up 8.3% at
£2.783 billion. Revenue in constant currency was up 7.4%,
reflecting the slight currency tailwinds in the first quarter,
principally reflecting the weakness of sterling against the US
dollar, partly offset by the strength of sterling against the euro.
On a like-for-like basis, excluding the impact of acquisitions and
currency fluctuations, revenue was up 5.2%. Reported net sales were
up 6.0%, up 5.0% in constant currency and up 2.5% like-for-like. As
outlined in both the 2013 and 2014 Preliminary Announcements, due
to the increasing scale of digital media purchases within the
Group’s media investment management businesses and of direct costs
in data investment management, net sales is the more meaningful and
accurate reflection of top line growth, although currently none of
our competitors report net sales. As a result the tables and
commentary below give both revenue and net sales data.
The pattern of net sales growth in 2015 has started similarly to
the final quarter of 2014, with both constant currency and
like-for-like growth showing continuing improvement across all
geographies and sectors. On a like-for-like basis, advertising and
media investment management and branding & identity, healthcare
and specialist communications (including direct, digital and
interactive), were the strongest sectors, with data investment
management showing significant improvement compared with the final
quarter of 2014. Public relations & public affairs was slower
than the final quarter of 2014, which was the strongest quarter
last year for this sector. Our budgets for 2015 indicated
like-for-like revenue and net sales growth of over 3% against last
year. For the first three months actual performance was ahead of
budget, due to the stronger than budgeted performance in the
Group’s data investment management, public relations and public
affairs and specialist communications (including direct, digital
and interactive) businesses. A preliminary look at our quarter one
revised forecasts for the full year, again, indicates revenue
growth and net sales growth up over 3%.
Regional review
The pattern of revenue and net sales growth differed regionally.
The tables below give details of revenue and net sales, revenue and
net sales growth by region for the first quarter of 2015, as well
as the proportion of Group revenue and net sales by region;
Revenue analysis
£ million
2015 ∆ reported
∆ constant1
∆ LFL2
% group
2014 % group N. America 1,036
13.2 % 4.1 % 4.4 % 37.3 % 915
35.6 % United Kingdom 417 16.7 % 16.7 %
8.1 % 15.0 % 357 13.9 % W. Cont. Europe 547
-7.6 % 2.5 % 2.7 % 19.6 % 592
23.0 %
AP, LA, AME, CEE3
783 10.9 % 11.1 % 6.8 % 28.1 %
706 27.5 %
Total Group 2,783 8.3
% 7.4 % 5.2 % 100.0
% 2,570 100.0 %
Net sales analysis
£ million
2015 ∆ reported ∆
constant ∆ LFL % group
2014 %
group N. America 915 10.7 % 1.8 % 2.1 %
37.8 % 827 36.2 % United Kingdom 350
10.5 % 10.5 % 3.6 % 14.5 % 317
13.9 % W. Cont. Europe 462 -8.2 % 1.7 %
0.3 % 19.1 % 504 22.1 % AP, LA, AME,
CEE 692 8.9 % 9.1 % 4.0 % 28.6 %
635 27.8 %
Total Group 2,419 6.0
% 5.0 % 2.5 % 100.0
% 2,283 100.0 %
North America, with constant currency net sales growth of
1.8% and like-for-like growth of 2.1%, was stronger than the last
quarter of 2014, with advertising and media investment management,
direct, digital and interactive and healthcare performing well.
The United Kingdom’s rate of net sales growth, which
slowed in the final quarter of 2014, grew strongly in the first
quarter of 2015, with constant currency growth of 10.5% and
like-for-like growth 3.6%, the second strongest region in the first
quarter. The Group’s advertising and media investment management
and direct, digital and interactive operations performed strongly,
partly offset by pressure on branding & identity and data
investment management.
Western Continental Europe, constant currency net sales
grew at 1.7%, with like-for-like growth 0.3%, compared with 1.7% in
the first quarter of 2014 which was the strongest quarter of the
year. There were some brighter spots, with Germany, Greece, Italy,
Portugal and Spain growing more strongly, but Austria, France,
Norway, Sweden and Switzerland were more difficult.
Asia Pacific, Latin America, Africa & the Middle East and
Central & Eastern Europe, was the strongest region in the
first quarter, with constant currency net sales growth of 9.1% and
like-for-like growth 4.0%. In Asia Pacific, all markets, except
Korea and Japan, grew strongly, with Mainland China, the Group’s
largest market in the region, up 9.0% like-for-like, driven by
media investment management, data investment management and public
relations and public affairs. India, the Group’s second largest
market in the region, was up almost 10% like-for-like, with
advertising and media investment management, data investment
management and direct, digital and interactive performing
particularly well. Africa also showed strong growth, with
like-for-like net sales up almost 9%, compared with over 7% in the
final quarter of 2014, which was the strongest quarter last year,
with the Middle East and Central & Eastern Europe
both up 2.5% like-for-like. In the BRICs4,
like-for-like net sales growth was 4.8%, reflecting the strength of
China and India and, somewhat surprisingly, Russia (up over 4%),
being somewhat offset by a slowdown in Brazil.
Latin America was slower in the first quarter than the
final quarter of 2014, with like-for-like net sales growth of 0.3%,
with the Group’s advertising businesses in Brazil and call centre
operations in Chile under pressure. Growth in the Next
115 and CIVETS6 was 4.2% and 6.4%
respectively, on the same basis.
In the first quarter of 2015, the seasonally smallest quarter
for faster growth markets, 28.6% of the Group’s reported net sales
came from Asia Pacific, Latin America, Africa and the Middle East
and Central & Eastern Europe. This was almost 1.0 percentage
point higher compared with the previous year, and moving towards
the Group’s strategic objective of 40-45% in the next five
years.
Business sector review
The pattern of revenue and net sales growth also varied by
communications services sector and operating brand. The tables
below give details of revenue and net sales and revenue and net
sales growth by communications services sector, as well as the
proportion of Group revenue and net sales by those sectors;
Revenue analysis
£ million
2015 ∆ reported
∆ constant7
∆ LFL8
% group
2014 % group
AMIM9
1,236 13.5 % 12.6 % 10.7 % 44.4
% 1,089 42.4 % Data Inv. Mgt. 558 -1.4
% 0.3 % 0.0 % 20.1 % 566 22.0 %
PR & PA10
224 5.2 % 2.3 % 0.9 % 8.0 %
212 8.2 %
BI, HC & SC11
765 8.8 % 6.5 % 2.4 % 27.5 %
703 27.4 %
Total Group 2,783 8.3
% 7.4 % 5.2 % 100.0
% 2,570 100.0 %
Net sales analysis
£ million
2015 ∆ reported ∆
constant ∆ LFL % group
2014 %
group AMIM 1,061 6.3 % 5.7 % 3.8 %
43.8 % 998 43.7 % Data Inv. Mgt. 407
0.4 % 1.6 % 1.2 % 16.8 % 406
17.8 % PR & PA 219 4.5 % 1.6 %
1.2 % 9.1 % 210 9.2 % BI, HC & SC
732 9.4 % 7.0 % 1.6 % 30.3 %
669 29.3 %
Total Group 2,419 6.0
% 5.0 % 2.5 % 100.0
% 2,283 100.0 %
In the first quarter of 2015, almost 37% of the Group’s revenue
came from direct, digital and interactive, up 1.1 percentage points
from the previous year and closer to the Group’s strategic
objective of 40-45% in the next five years. Digital revenue across
the Group was up almost 11% in constant currency and 5.1%
like-for-like.
Advertising and Media Investment Management
In constant currencies, advertising and media investment
management revenue grew by 12.6% with like-for-like growth of
10.7%, the strongest performing sector. On the same bases, net
sales grew 5.7% and 3.8% respectively. The Group’s advertising
businesses remain challenged in the mature markets, where most of
the restructuring costs incurred in 2014 were directed, but Y&R
and Grey performed well in Asia Pacific, with J. Walter Thompson
Worldwide, Ogilvy and Grey up strongly in Latin America. Growth in
the Group’s media investment management businesses has been
consistently strong over the last two years and this has continued
into the first quarter of 2015, with constant currency net sales
and like-for-like growth both up double digits.
The Group gained a total of £624 million (almost $1.0 billion)
in net new business wins (including all losses) in the first
quarter, compared to £797 million ($1.275 billion) in the same
period last year. Of this, J. Walter Thompson Worldwide, Ogilvy
& Mather, Y&R and Grey generated net new business billings
of £173 million ($277 million). Also, of the Group total, GroupM,
the Group’s media investment management company, which includes
Mindshare, MEC, MediaCom, Maxus, GroupM Search and Xaxis, together
with tenthavenue, generated net new business billings of £264
million ($422 million).
Data Investment Management
On a constant currency basis, data investment management net
sales grew 1.6%, with like-for-like net sales up 1.2%, compared
with -1.0% in the final quarter of 2014. All regions, except the
United Kingdom, grew in the first quarter, with particularly strong
growth in Asia Pacific, Latin America and Africa, whilst North
America and Continental Europe were up just under 1.0%.
Public Relations and Public Affairs
In constant currencies, public relations and public affairs net
sales were up 1.6% and up 1.2% like-for-like, a slower rate of
growth than the final quarter of 2014, but similar to the first
quarter of last year. All regions, except the United Kingdom and
Continental Europe, were up, with strong growth in Asia Pacific,
Latin America, Africa and the Middle East.
Branding and Identity, Healthcare and Specialist
Communications
In constant currencies, the Group’s branding and identity,
healthcare and specialist communications businesses (including
direct, digital and interactive) net sales growth was up strongly
at 7.0%, with like-for-like growth of 1.6%. All of the Group’s
businesses in this sector, except branding & identity, grew in
the first quarter, with particularly strong growth in the Group’s
direct, digital and interactive businesses.
Operating profitability
In the first quarter, on a constant currency basis, revenue, net
sales, profits and operating margins were ahead of budget and well
ahead of last year, and well ahead of the full year margin targeted
improvement of 0.3 margin points. Slightly lower severance costs
were offset by increased incentive accruals, when compared with the
first quarter of last year.
We are in the process of reviewing our quarter one preliminary
revised forecasts, but early indications are that full year
like-for-like revenue and net sales growth will be up over 3%, with
a stronger second half, partly the result of easier
comparatives.
The number of people in the Group, on a proforma basis excluding
associates, was down 1.9% or 2,407 at 31 March 2015 to 122,505, as
compared to 31 March 2014, against an increase in revenue on the
same basis of 5.2% and net sales of 2.5%. This reflected, in part,
the transfer of approximately 1,200 people to IBM in February and
March 2015, as part of the strategic partnership agreement and IT
transformation programme. Similarly, the average number of people
in the Group in the first quarter of this year was down 1.1% to
122,846 compared to 124,203 for the same period last year. Since 1
January 2015, on a like-for-like basis, the number of people in the
Group has decreased by 1.7% or over 2,000 at 31 March 2015 to
122,505, reflecting continued caution by the Group’s operating
companies in hiring and the usual seasonality of a relatively
smaller first quarter in comparison to all other quarters. As noted
above, the preliminary quarter one revised forecast indicates a
similar improvement in revenue and net sales, whilst forecast
headcount at the end of the year remains well balanced.
Balance sheet highlights
The Group continues to implement its strategy of using free cash
flow to enhance share owner value through a balanced combination of
capital expenditure, acquisitions, share repurchases and dividends.
In the twelve months to 31 March 2015, the Group’s free cash flow
was £1.246 billion (over $1.9 billion). Over the same period,
acquisitions, share repurchases and dividends was £1.369 billion
(over $2.1 billion).
During the quarter, share buy-backs continued at an annualised
rate ahead of the Group’s target of 3% of the issued share capital,
with 10.5 million shares, or 0.8% of the issued share capital,
purchased at an average price of £14.86, 7.0 million shares being
held as Treasury stock and 3.5 million shares held by the ESOP
Trusts.
Average net debt in the first quarter of 2015 was £2.734
billion, compared to £2.549 billion in 2014, at 2015 exchange
rates, an increase of £185 million. Net debt at 31 March 2015 was
£3.175 billion, compared to £2.957 billion in 2014 (at 2015
exchange rates), an increase of £218 million. The increased average
and period end debt figures, reflect both the significant
incremental net acquisition spend of £158 million and incremental
share re-purchases of £173 million in the twelve months to 31 March
2015, compared with the previous twelve months, more than
offsetting the improvements in working capital seen in the second
half and final quarter of last year. The net debt figure of £3.175
billion at 31 March, compares with a market capitalisation of
approximately £21.1 billion, giving an enterprise value of £24.3
billion.
In the quarter, a €600 million 15 year bond was issued at a
coupon of 1.625%, in conjunction with a three year exchange offer
of €252 million at 0.43% for part of the existing €750 million
6.625% bond due in May 2016. This continues the plan to extend
maturities and take advantage of current low interest rates.
In June 2013, the Board decided to target a further increase in
the pay-out ratio to 45% over the next two years and, as a result,
declared total dividends of 34.21p for 2013 an overall increase of
20%. This represented a dividend pay-out ratio of 42%, compared to
a pay-out ratio of 39% in 2012. Given the strong progress in 2014,
the Board declared total dividends of 38.20p per share for 2014, an
overall increase of 11.7%. This represented a dividend pay-out
ratio of 45%, compared to a pay-out ratio of 42% in 2013. The
achievement of the targeted 45% dividend pay-out ratio one year
ahead of schedule now raises the question of whether the pay-out
ratio target should be raised further, a question your Board will
be considering shortly.
Acquisitions
In line with the Group’s strategic focus on new markets, new
media and data investment management, the Group completed 7
transactions in the first quarter; 2 acquisitions and investments
were in new markets and 5 in quantitative and digital. Of these, 1
was in new markets and quantitative and digital. Two further
transactions have recently been announced and are due for
completion in the second quarter. They involved the purchases of a
controlling interest in IBOPE in data investment management in
Latin America and a minority interest in comScore, also in data
investment management in the United States, and will total an
investment of approximately £380 million, more medium-sized than
usual.
Specifically, in the first quarter of 2015, acquisitions and
increased equity stakes have been completed in data investment
management in the United States; in direct, digital and
interactive in the United States, Sweden and Peru; in
healthcare in Australia.
Outlook
Macroeconomic and industry context – reasonable top line
growth, with strong bottom line improvement
Following the Group’s record year in 2014, 2015’s first quarter
top line growth has been reasonably above budget, particularly
given that worldwide GDP growth, both nominal and real, has slowed
in the second half of last year and the first quarter of this year.
However, bottom line growth and operating margin improvement has
been strong, well beyond budget, target and last year. Net sales
growth was also better than the final quarter of 2014, with all
geographies and sectors growing net sales on both a constant
currency and like-for-like basis. Like-for-like net sales were up
2.5% compared with 3.8% in the same quarter last year, which was
the second strongest quarter, and 2.1% in the fourth quarter of
last year. Our operating companies are still hiring cautiously and
responding to any geographic, functional and client changes in
revenue – positive or negative. On a constant currency basis,
operating profit is above budget and well ahead of last year and
the increase in the net sales margin is well above the Group’s full
year target of a 0.3 margin point improvement.
Geopolitical issues remain top of business leaders’ concerns.
The Ukraine and consequent Russian sanctions, continued tensions in
the Middle East and North Africa and, the increasing likelihood of
a "Grexit" from the European Community top the agenda. Lower oil
prices and first time quantitative easing in Europe and continued
easing in Japan may bottom or underpin the recovery and a
continued, but somewhat patchy, United States recovery and United
Kingdom and Indian strength may help confidence, but concerns about
China and Brazil remain, although we remain unabashed bulls of
both. Countries like Indonesia, the Philippines, Vietnam, Egypt,
Nigeria, Mexico, Colombia and Peru add to confidence (and maybe
even Cuba and Iran will), along with a mild recovery in Western
Continental Europe, chiefly in Germany, Spain and Italy. France
remains soft, although there are some small signs of improvement.
But there are other "grey swans", chiefly two. First, what impact
will the much anticipated Federal Reserve tightening have on bond
and equity markets. Although interest rates are likely to remain
lower, longer than many anticipate, when the tightening comes, as
it inevitably will, it may have a dramatic impact on bond and
equity valuations. Secondly, the result of the "Morton's Fork"
United Kingdom General Election will probably result either in a
Labour-led coalition, which does not favour business and causes
jitters in sterling exchange rates and stock markets, or a
Conservative-led coalition, which will result in an
uncertainty-stimulating European Union referendum. In either case,
any coalition will have to re-address reducing the still remaining,
substantial, United Kingdom budget deficit.
So all in all, whilst clients are certainly more confident than
they were in September 2008 post-Lehman, with stronger balance
sheets (over $7 trillion in net cash and limited leverage),
sub-trend global GDP growth at around 3.0-3.5% real and 5.0-5.5%
nominal, combined with these levels of geopolitical uncertainty,
low inflation or fears of deflation, resulting in limited pricing
power, short-term focused activist investors and strengthened
corporate governance scrutiny, make them unwilling to take further
risks and, therefore, focus on costs, rather than revenue growth.
Procurement and finance tends to take the lead over marketing and
investment and suppliers are encouraged to play the additional
roles of banks and/or insurance companies. At best, clients focus
on a strategy of adding capacity and brand building in both fast
growth geographic markets and functional markets, like digital, and
containing or reducing capacity, perhaps with brand building to
maintain or increase market share, in the mature, slow growth
markets. This approach also has the apparent virtue of limiting
fixed cost increases and increasing variable costs, although we
naturally believe that marketing is an investment, not a cost. We
see little reason, if any, for this pattern of behaviour to change
in 2015, with continued caution being the watchword. There is
certainly no evidence to suggest any such change in behaviour so
far in 2015, although one or two institutional investors are saying
that they are tiring with some companies’ total focus on short-term
cost cutting and would favour strategies based more on the
long-term and top line growth.
The pattern for 2015 looks very similar to 2014, but with no
maxi- or mini-quadrennial events like the Olympics, FIFA World Cup
or United States Presidential Election (as there will be in 2016)
to boost marketing investments. Forecasts of worldwide real GDP
growth still hover around 3.0 to 3.5%, with inflation of 2.0%
giving nominal GDP growth of around 5.0 to 5.5% for 2015, although
they have been reduced recently and may be reduced further in due
course. Advertising as a proportion of GDP should at least remain
constant overall. Although it is still at relatively depressed
historical levels, particularly in mature markets, post-Lehman, it
should be buoyed by incremental branding investments in the
under-branded faster growing markets.
Although consumers and corporates both seem to be increasingly
cautious and risk averse, the latter should continue to purchase or
invest in brands in both fast and slow growth markets to stimulate
top line sales growth. Merger and acquisition activity may be
regarded as an alternative way of doing this, particularly funded
by cheap long-term debt, but we believe clients may regard this as
a more risky way than investing in marketing and brand and hence
growing market share, particularly as equity valuations are
strong.
All in all, 2015 looks to be another demanding year, although a
weaker UK pound against a stronger US dollar may continue to
provide some modest currency tailwind, partly offset by a stronger
pound against the euro, although a modest impact on profits, unlike
the fierce currency headwind in 2014.
Financial guidance
The budgets for 2015 were prepared on a cautious basis as usual
(hopefully), but continue to reflect the faster growing
geographical markets of Asia Pacific, Latin America, Africa &
the Middle East and Central & Eastern Europe and faster growing
functional sectors of advertising, media investment management and
direct, digital and interactive to some extent moderated by the
slower growth in the mature markets of Western Continental Europe,
although a recovery does appear to be developing. Our quarter one
preliminary revised forecast are in line with budget at the net
sales level and show the following;
- Like-for-like revenue and net sales
growth of over 3%
- Target net sales margin improvement of
0.3 margin points, excluding the impact of currency
In 2015, our prime focus will remain on growing revenue and net
sales faster than the industry average, driven by our leading
position in the new markets, in new media, in data investment
management, including data analytics and the application of
technology, creativity, effectiveness and horizontality. At the
same time, we will concentrate on meeting our operating margin
objectives by managing absolute levels of costs and increasing our
flexibility in order to adapt our cost structure to significant
market changes and by ensuring that the benefits of the
restructuring investments taken in 2014 continue to be realised.
The initiatives taken by the parent company in the areas of human
resources, property, procurement, information technology and
practice development continue to improve the flexibility of the
Group’s cost base. Flexible staff costs (including incentives,
freelance and consultants) remain close to historical highs of
around 8% of net sales and continue to position the Group extremely
well should current market conditions deteriorate.
The Group continues to improve co-operation and co-ordination
among its operating companies in order to add value to our clients’
businesses and our people’s careers, an objective which has been
specifically built into short-term incentive plans. We have, in
addition, decided that an even more significant proportion,
one-third, of operating company incentive pools are funded and
allocated on the basis of Group-wide performance in 2015. This may
be increased to one-half in 2016. Horizontality has been
accelerated through the appointment of 46 global client leaders for
our major clients, accounting for over one third of total revenue
of almost $19 billion and 16 country and regional managers in a
growing number of test markets and sub-regions, amounting to about
half of the 111 countries in which we operate. Emphasis has been
laid on knowledge-sharing in the areas of media investment
management, healthcare, sustainability, government, new
technologies, new markets, retailing, shopper marketing, internal
communications, financial services and media and entertainment. The
Group continues to lead the industry, in co-ordinating investment
geographically and functionally through parent company initiatives
and winning Group pitches. For example, the Group has been very
successful in the recent wave of consolidation in the
pharmaceutical and shopper marketing industries and the resulting
"team" pitches. Whilst talent and creativity (in its broadest
sense) remain the key potential differentiators between us and our
competitors, increasingly differentiation can also be achieved in
three additional ways – through application of technology, for
example, Xaxis and AppNexus; through integration of data investment
management, for example, Kantar, Rentrak and comScore; and lastly
investment in content, for example, Imagina, Vice, Media Rights
Capital, Fullscreen, Indigenous Media, China Media Capital and
Bruin.
Our business remains geographically and functionally well
positioned to compete successfully and to deliver on our long-term
targets:
- Revenue and net sales growth greater
than the industry average
- Improvement in net sales margin of 0.3
margin points or more, excluding the impact of currency, depending
on net sales growth and staff cost to net sales ratio improvement
of 0.2 margin points or more
- Annual headline diluted EPS growth of
10% to 15% p.a. delivered through revenue growth, margin expansion,
acquisitions and share buy-backs
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.
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 3 Asia Pacific, Latin America, Africa & Middle East
and Central & Eastern Europe 4 Brazil, Russia, India and China,
which accounted for over $610 million revenue, including
associates, in the first quarter 5 Bangladesh, Egypt, Indonesia,
South Korea, Mexico, Nigeria, Pakistan, Philippines, Vietnam and
Turkey (the Group has no operations in Iran), which accounted for
almost $200 million revenue, including associates, in the first
quarter 6 Colombia, Indonesia, Vietnam, Egypt, Turkey and South
Africa, which accounted for almost $210 million revenue, including
associates, in the first quarter 7 Percentage change at constant
currency exchange rates 8 Like-for-like growth at constant currency
exchange rates and excluding the effects of acquisitions and
disposals 9 Advertising, Media Investment Management 10 Public
Relations & Public Affairs 11 Branding and Identity, Healthcare
and Specialist Communications
WPPSir Martin Sorrell, Paul Richardson, Chris Sweetland, Feona
McEwan, Chris Wade+44 20 7408 2204orKevin McCormack, Fran Butera+1
212 632 2235orBelinda Rabano, +86 1360 1078
488www.wppinvestor.com
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