ACCELERATING GROWTH
CAPITAL MARKETS DAY
17 December 2020
WPP 1
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FORWARD-LOOKING STATEMENTS
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Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell WPP securities in any jurisdiction, or be treated or relied upon as a recommendation or advice by WPP.
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2
WPP IS A
CREATIVE TRANSFORMATION COMPANY
WPP 3
WE SERVE MANY OF THE WORLD'S
MOST SUCCESSFUL COMPANIES
WPP'S TOP 20 CLIENTS
CPG/PREMIUM | TECHNOLOGY/MEDIA | PHARMA AND HEALTHCARE | AUTOMOTIVE | ||||
WPP 4
WE HAVE MANY OF OUR INDUSTRY'S MOST POWERFUL
AND RESPECTED BRANDS
PR & PUBLIC | SPECIALIST | |||||
GLOBAL INTEGRATED AGENCIES | AFFAIRS | COMMUNICATIONS | ||||
CREATIVE AGENCIES | MEDIA AGENCIES |
WPP 5
GLOBAL REACH AND SCALE IN GROWTH MARKETS
NORTH AMERICA 37%1 | WESTERN EUROPE 33%1 | REST OF WORLD 30%1 |
10,000
7,000
19,000 | 2,000 |
2,000
6,500
2,000
4,000 | 8,000 |
1. % FY19 Revenue less pass-through costs Figures in chart are headcount at Q3 20
WPP 6
SIGNIFICANT STRENGTHS IN A TECHNOLOGY-DRIVEN WORLD
c.$30B
Annual GMV over WPP-installed
commerce platforms
c.40%
of media billings
are digital
Working on
ecommerce with
76 TOP 100 OFOUT
clients
25%
Of net sales attributable to clients in TMT sector2
1.6B | >20k | |
Audience pool updated | Accreditations | |
for planning and | in 2020 across | |
activation daily | technology partners1 | |
$10B | ||
Top 3 | ||
Client billings across Google, | Global partner to Adobe and | |
Amazon and Facebook | Salesforce in marketing tech | |
1. H1 20 figure
2. YTD Sep-20 | WPP | 7 |
OUR PURPOSE IS TO USE THE POWER OF CREATIVITY
TO BUILD A BETTER FUTURE FOR OUR…
PEOPLE PLANET CLIENTS COMMUNITIES
WPP 8
ACCELERATING GROWTH
PROGRESS SINCE DECEMBER 2018
ACCELERATING OUR GROWTH
- THE MARKET
- WPP'S STRATEGY
- BUILDING OUR CULTURE
- FINANCIAL PLAN
Q&A
PROGRESS SINCE DECEMBER 2018
2018: THE SITUATION
SLOWING GROWTH
- Negative growth for 4 quarters
- No growth in USA since Q4 2016
- 5 or 6 out of 6 peers in relative growth
CLIENT ISSUES
- Largest client under review
- $4 billion of client business being pitched
ORGANISATIONAL | • | No common WPP vision, culture or purpose |
COMPLEXITY | • | 9 separate creative or digital networks |
• | At least 500 brands |
UNSUSTAINABLE FINANCIAL MODEL
- Lack of capital allocation discipline
- Dividend close to 60% of earnings
- Debt approaching £5 billion
WPP 11
WHILE MEDIA AND DIGITAL PERFORMED WELL, OUR CREATIVE AGENCIES STRUGGLED
RELATIVE GROWTH OF MAJOR AGENCIES
(CONSTANT CURRENCY NET SALES GROWTH, INCLUDING M&A)
25%
20%
15%
10%
5%
0%
5 yr CAGR to 2014 | 5 yr CAGR to 2019 |
22.9%
12.0%
6.8% | 7.5% | 7.5% |
5.9% | ||
3.0% | 3.8% | 3.0% |
1.0% | ||
-1.5%
MEDIA
GroupM
DIGITAL
VML Wunderman
CREATIVE
JWT
Ogilvy
Y&R
Grey
-5%
-3.5%
-2.4%
-4.9%
-10%
BASIS OF PREP: All agencies exclude GTB and the effect of material intra-group transfers. Ogilvy excludes Geometry. All agencies include Hogarth. | WPP | 12 |
GROUPM HAS DELIVERED BOTH GROWTH AND MARGIN
GROUPM MARGIN VS DIGITAL SHARE OF MEDIA MARKET
OPERATING MARGIN
60% | ||||||||||
40% | 52% | MARKET | ||||||||
46% | 50% | |||||||||
35% | 40% | MEDIA | ||||||||
31% | OF | |||||||||
26% | 30% | |||||||||
17% | 20% | SHARE | ||||||||
22% | ||||||||||
20% | ||||||||||
10% | DIGITAL | |||||||||
0% | ||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||
Share of digital in advertising market | Group M operating margin | |
BASIS OF PREP: Headline OP GroupM excludes GTB, includes Hogarth | ||
SOURCE: GroupM 'This Year Next Year' report total advertising spend exc. political advertising in US | WPP | 13 |
IN DECEMBER 2018, WE SET OUT
FIVE STRATEGIC OBJECTIVES
VISION AND | CREATIVITY | DATA AND |
VISIONOFFERAND | TECHNOLOGYDATA AND | |
CREATIVITY | ||
OFFER | TECHNOLOGY | |
SIMPLER | PEOPLE AND |
SIMPLER | |
STRSTRUCTURET RE | CULTURE |
CULTURE |
WPP 14
WE EXPANDED OUR OFFER INTO FASTER-GROWTH AREAS
COMMUNICATIONS EXPERIENCE
COMMERCE TECHNOLOGY
GLOBAL MARKETING EXPENDITURE 2019
$1,000 | |||||||||||||||
$873B | Addressable | ||||||||||||||
$900 | |||||||||||||||
Not currently addressable | |||||||||||||||
$800 | 168 | ||||||||||||||
$700 | |||||||||||||||
$600 | $508B | ||||||||||||||
$500 | 54 | ||||||||||||||
$400 | |||||||||||||||
705 | $250+B | ||||||||||||||
$300 | |||||||||||||||
25 | |||||||||||||||
$200 | 454 | $151B | |||||||||||||
$100 | ~200+ | 63 | |||||||||||||
$- | 88 | ||||||||||||||
Communications Experience | Commerce | Technology | |||||||||||||
NOTES:
- Source for addressable spend all IDC, apart from Communications (GroupM/WPP)
- Sources for non-addressable spend: Communications - GroupM; Experience - IDC CX Spending Guide 2019; Commerce - estimate based on Experience ratios; Technology - WARC/BDO "Martech 2020 and beyond" (October 2019)
WPP 15
WE RENEWED OUR COMMITMENT TO CREATIVITY
Laura Jordan Bombach | Marcos Kotlhar | Taras Wayner |
Keith Cartwright | Debbie Vandeven | Walter Geer |
Noel Cottrell | Danilo Boer | Justine Armour |
Holding Company of the Decade
Pencils won by eight creative agencies
Most Effective Holding Company 2012-2020
No.1 Media Holding Company 3 years running
89 awards in 2019; top honours to Ogilvy and
AKQA
BCW no.1 in 2020 Global Creative Index
WPP 16
WE HAVE RADICALLY SIMPLIFIED OUR STRUCTURE
FROM | TO | ||
25 networks | 10 networks | ||
65+ speciality businesses | <40 speciality businesses | ||
500+ brands | 220 brands | ||
10,000 people in campuses | 38,000 people working from | ||
20 campuses | |||
ACTIONS | |||
100+ local office >£3.5bn raised from | 80+ business unit | ||
mergers | 60+ disposals | closures | |
WPP 17
OUR CLIENT SATISFACTION HAS
SYSTEMATICALLY IMPROVED
WPP CLIENT SATISFACTION
8.2 | 8.1 |
8
7.8
7.8 | 7.7 | 7.7 |
7.6
7.4
7.47.3
7.2
7
6.8
2018 H1 | 2018 H2 | 2019 H1 | 2019 H2 | 2020 H1 | COVID (April-Aug) |
SOURCE: WPP Vantage; 2.4K-59K+ client responses per period; scores out of 10 | WPP | 18 |
WE HAVE WON AND RETAINED MAJOR CLIENTS
Global / Oct 2020 | ||||||||||
RANK | HOLDING | |||||||||
OCTOBER | GROUP | REVENUE | NO. OF WINS | |||||||
1 | WPP | 3% | 1,590 | |||||||
2 | Publicis Groupe | 2% | 659 | |||||||
3 | Omnicom | 778 | ||||||||
4 | Dentsu | 898 | ||||||||
5 | Interpublic | 442 | ||||||||
WPP 19
TOGETHER, IMPROVED OUR RELATIVE PERFORMANCE
WPP VS. AVG ORGANIC GROWTH - USA | WPP vs. AVG ORGANIC GROWTH - GLOBAL |
% BY QUARTER, 2016-2020 | ||||||||||||||||||
4% | ||||||||||||||||||
1.9% | 2.1% | 2.1% | ||||||||||||||||
2% | 1.7% | |||||||||||||||||
0.8% | ||||||||||||||||||
0% | ||||||||||||||||||
-2% | -1.3%-1.2% | -1.8% | ||||||||||||||||
-2.2% | ||||||||||||||||||
-2.5% | ||||||||||||||||||
-4% | -3.3% | -4.0% | ||||||||||||||||
-4.3% | -4.1% | |||||||||||||||||
-6% | -5.4% | |||||||||||||||||
-6.2% | -6.1% | |||||||||||||||||
-8% | -7.3% | |||||||||||||||||
-10% | ||||||||||||||||||
-10.0% | ||||||||||||||||||
-12% | 1Q18 | 1Q20 | ||||||||||||||||
1Q16 | 2Q16 | 3Q16 | 4Q16 | 1Q17 | 2Q17 | 3Q17 | 4Q17 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | 2Q20 | 3Q20 | ||
2016 | 2017 | 2018 | 2019 | 2020 |
BASIS OF PREP: USA includes Dentsu 'Americas'. Dentsu does not disclose USA alone prior to Q3 2019.
SOURCE: Company reports
% BY QUARTER, 2016-2020 | ||||||||||||||||||||
4% | ||||||||||||||||||||
2% | 1.0% | 1.4% | ||||||||||||||||||
0.3% | 0.3% | |||||||||||||||||||
0% | ||||||||||||||||||||
-0.1% | ||||||||||||||||||||
-1.0% | -0.7% | -0.6% | ||||||||||||||||||
-2% | -1.0% | -1.1%-1.5% | ||||||||||||||||||
-1.3%-1.3% | -1.4% | |||||||||||||||||||
-2.2% | -2.3% | |||||||||||||||||||
-4% | -3.1% | |||||||||||||||||||
-3.8% | -3.7% | |||||||||||||||||||
-6% | ||||||||||||||||||||
-8% | ||||||||||||||||||||
-10% | ||||||||||||||||||||
-12% | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 1Q17 | 2Q17 | 3Q17 | 4Q17 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 | |
WPP | 20 |
WE ENTER 2021 HAVING MADE SIGNIFICANT PROGRESS - MUCH OF IT DURING COVID
- Improved organic growth performance
- Growth ex-Chinapre-COVID
- Above peer group in last two quarters
- 3 out of 6 with the ambition to go further
- Stronger client performance
- 15 of top 30 clients grew in Q3
- Business at risk at low levels throughout 2020
- Industry-leadingnew business performance
- Improved financial position
- Net debt down to £2.3 billion at Q3
- Taken action during COVID to be ready for 2021
- Continued to attract top talent
- Responded rapidly on cost
- Positioned WPP for the future: AKQA Group, VMLY&R Commerce, Finsbury Glover Hering
WPP 21
ACCELERATING OUR GROWTH:
THE MARKET
COVID IS ACCELERATING EXISTING TRENDS
1 | 2 | 3 | 4 | 5 |
Growing | Technology | Collision of | CMOs are becoming | Marketing value |
importance of | reshaping old | communications, | Chief Growth | chain is evolving |
purpose and | consumer models - | content and | Officers requiring | with disruptive |
reputation | mass media, bricks & | commerce, | new skills and | entrants and |
mortar - with new | powered by data | support | operating models | |
expectations of | and technology | |||
personalisation & | ||||
immediacy | ||||
WPP 23
CONSUMERS EXPECT MORE FROM
COMPANIES
2.5X | 85% | 62% | 90% | ||||
BRAND VALUE | BELIEVE | PREFER | BELIEVE | ||||
for brands perceived | brands should be about | to buy | companies have an | ||||
as having a high positive | something more than | from sustainable | environmental and social | ||||
impact on society1 | profit2 | brands3 | responsibility4 | Gen Z | |||
Gen Z | Gen Z | ||||||
- Kantar Purpose 2020 Report
- Generation Z: Building a Better Normal, Wunderman Thompson Intelligence, Dec-20
- The State of Consumer Spending: Gen Z Shoppers Demand Sustainable Retail, Jan-20
4. Bank of America Gen Z Primer | WPP 24 |
DIGITAL IS NOW THE DOMINANT MEDIUM
MEDIA SPEND BY MEDIUM ($M)
300,000
250,000
200,000
150,000
100,000
50,000
-
US | CHINA | UK | BRAZIL | INDIA |
63%
DIGITAL
90%
DIGITAL
72%
DIGITAL
53%37%
DIGITALDIGITAL
2012 | 2020 | 2024 | 2012 | 2020 | 2024 | 2012 | 2020 | 2024 | 2012 | 2020 | 2024 | 2012 | 2020 | 2024 |
Digital TV Other
SOURCE: GroupM, The Advertising Association/WARC, IAB, Company Reports. | WPP | 25 |
ECOMMERCE HAS ACCELERATED DRAMATICALLY
ECOMMERCE AS % OF RETAIL SALES
35%
31%
30%
27%
25%
20% | |||||||||||||
20% | 18% | ||||||||||||
15% | 16% | 16% | |||||||||||
15% | 14% | ||||||||||||
11% | 12% | ||||||||||||
10% | |||||||||||||
10% | 9% | ||||||||||||
5% | |||||||||||||
2017 | 2018 | 2019 | Q1 20 | Q2 20 | Q3 20 | ||||||||
UK | US | ||||||||||||
PAGE 26 | |||||||||||||
SOURCE: US Consensus (Nov-20) and ONS Internet retail sales (UK). Q3 20 represents preliminary estimates. | WPP | 26 |
STREAMING SERVICES AND SOCIAL
VIDEO ARE EXPLODING
GLOBAL | SUBSCRIBERS | HOURS OF VIDEO WATCHED | ||
SVOD SUBS1 | TO DISNEY+ | ON YOUTUBE DAILY | ||
1.2BN | >230M | 1BN | ||
By 2025 | By 2024 | |||
TIKTOK | UNIQUE CREATORS | MONTHLY AD-SUPPORTED | ||
APP DOWNLOADS | STREAMING ON TWITCH | VIEWERS ON HULU | ||
>2BN | 6M+ | >92M | ||
Worldwide | Monthly | |||
1. Digital TV Research | WPP 27 |
CLIENT SPEND IS HOLDING UP - BUT IT IS SHIFTING
- What percentage of your company's total revenue is allocated to its total marketing expense budget?
14
12.1% | |||||||
11.4% | |||||||
12 | 11.3% | ||||||
11.2% | 11.0% | ||||||
10.2% | 10.5% |
10 |
8
6
4
2
0
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
68%
of CMOs expecting martech budget increase
Spend on marketing technology
now exceeding
traditional agency fees
Digital will be 61%
of global ad spend in 2021
TV will be 18%
of UK ad spend in 2021
SOURCE: 2020 Gartner CMO Spend Survey | ||
n = 328 (2020); 342 (2019) N.America/U.K. Respondents; 618 (2018); 350 (2017); 375 (2016); 424 (2015); 363 (2014) | WPP | 28 |
OUR GROWTH OPPORTUNITY IS IN DIGITAL COMMUNICATIONS AND IN EXPERIENCE, COMMERCE AND TECHNOLOGY
$400 | ||
$350 | ||
$300 | $281B | |
$BN | $250 | 52 |
SPEND | 21 | |
$200
45
$150
$100
163
$50
$0
2017
Communications
SOURCE: All IDC, apart from Communications (GroupM/WPP)
CAGR | ||||
(21-24F) | ||||
$368B | 5.6% | |||
$310B | 84 | 9.8% | ||
63 | 33 | 9.8% | ||
25 | ||||
54 | 75 | 10.9% | ||
168 | 175 | 1.3% | ||
~48% digital | ~59% digital | |||
2019 | 2024F | |||
Experience | Commerce | Technology | ||
WPP | 29 |
COFFEE BREAK
EXTRAORDINARY AWARDS 5 MINS
WPP30
ACCELERATING OUR GROWTH:
WPP'S STRATEGY
WPP'S GROWTH STRATEGY
ACCELERATING OUR GROWTH
COMPANIES | CLIENTS | COUNTRIES |
Strong, growing | Partner to the world's | Scale in the markets |
brands | leading companies | of the future |
SCALED | CULTURE | GROUP-WIDE | ||
CAPABILITIES | TRANSFORMATION | |||
To deliver scale in | To be the | To provide an efficient and | ||
production, data and | employer of choice | effective platform to fund | ||
technology | for all | investment | ||
CAPITAL ALLOCATION: To provide sustainable returns to our shareholders
WPP 32
COMPANIES: OUR GROWTH PLATFORMS
12%
Specialist
Comms
8%
PR
CREATIVE
45% MEDIA
Creative
GROWTH PLATFORMS
- Digital communications
- Healthcare
- Ecommerce and experience
- Marketing technology
- Production
- Digital media: Search, social and programmatic
- New business models: Xaxis and Finecast
35%
Media
80%
Global Integrated
Agencies1
INTEGRATED | • Data and technology | ||
AGENCIES | PUBLIC RELATIONS | • Purpose and reputation | |
• Sustainability | |||
• Digital and social media | |||
SPECIALIST COMMS | • Brand experience and identity | ||
• Specialist services |
1. Includes AKQA and Geometry, previously in Specialist Comms | WPP 33 |
VMLY&R DEMONSTRATES BENEFITS OF INTEGRATION
VMLY&R QUARTERLY LFL NET SALES GROWTH
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
VML Y&R VMLY&R
BASIS OF PREP: All agencies excluding GTB and Hogarth. | WPP | 34 |
CREATIVE AGENCIES: EXCELLENCE IN
DIGITAL COMMUNICATIONS
Boots.com page views | Social impressions | Return on ad spend |
+95% YoY | +687% YoY | 223%over benchmark |
WPP 35
CREATIVE AGENCIES: EXPANSION INTO
ECOMMERCE
New category entrants | One of the world's largest | commerce sites | ||||
roll-outs of Adobe's B2C | ||||||
across three global brands | 10launched so far | |||||
commerce platform | ||||||
/ Germany | / United Kingdom | / Italy | ||
/ Columbia | / United Kingdom | / Poland |
WPP 36
CREATIVE AGENCIES: BUILDING NEW EXPERIENCES
1ST ONLINE RESERVATION PLATFORM
500K VISITORS IN FIRST 24 HOURS AFTER LAUNCH
23 MILLION CUSTOMERS HAVE VISITED BRONCO PAGES
45 MINS BRONCO SOLD OUT
8 DAYS FIRST EDITION MACH-E SOLD OUT
95% OF ALL MACH-E RESERVATIONS MADE ONLINE
IN MEDIA, WE CAN BUILD ON SIGNIFICANT MOMENTUM
2020 KEY MEDIA NEW BUSINESS WINS
SOURCE: COMvergence, Q1-Q3 2020 | WPP | 38 |
XAXIS CONTINUES TO GROW AND INNOVATE
CHALLENGE FROM VOLVO
• More customers and lower cost per conversion through relevant and tailored digital communications
APPROACH
• Combined WPP team across Xaxis, Mindshare and Grey
• First-party Google analytics data to define Volvo's target audience
• Leveraging machine learning to address relevant users at scale
• Dynamic Creative Optimization (DCO) testing of campaign elements to identify best creative combination
• Through AI, Volvo's creative messaging continually transformed based in real-time learnings to build 2,358 ads, each tailored to the end user
OUTCOME
66% 440%
Decrease in Cost per | Increase in |
Conversion | Conversion Rate |
AND CONNECTED TV REPRESENTS A SIMILAR OPPORTUNITY
DEEP UK CONNECTIVITY ACROSS BROADCASTERS AND PLATFORMS
50% | ALSO LIVE TODAY | ||
Monthly reach (UK households) | Australia | Germany | |
Canada | Indonesia | ||
USA | |||
+40,000,000 | NEW MARKETS BY END OF 2021 | ||
TV devices | Netherlands | Italy | |
India | Taiwan | ||
Thailand | |||
WPP 40
IN PUBLIC RELATIONS, WE HELP TO MAXIMISE THE
EFFECTIVENESS OF OUR CLIENTS' CAMPAIGNS
99.99%
Of households counted
Increase in Conversi n Rate
WPP 41
CLIENTS: EXPANDING OUR OFFER
EXPERIENCE | Brand Expression | Innovation | |
& Sonic Branding | |||
COMMERCE Dedicated
Amazon team
TECHNOLOGY | Single Customer | ||
View | |||
CRM Platform Build | |||
AND GROWING WITH THE CLIENT
NEW | ACQUISITIONS | EXPANSIONS | ||
PRODUCTS | ||||
42
COUNTRIES: CAPTURE THE OPPORTUNITY IN HIGHER GROWTH MARKETS
BRAZIL | CHINA | INDIA |
WPP 43
SCALED GLOBAL | DATA-DRIVEN |
PARTNERSHIPS | PRODUCTION |
OUR GROWTH IS SUPPORTED
BY A COMMON APPROACH TO
PRODUCTION, TECHNOLOGY
AND DATA
OPENDEEP
APPROACHSPECIALISATION
WPP 44
DATA AND TECHNOLOGY-DRIVEN PRODUCTION: HOGARTH
TECHNOLOGY: SCALED GLOBAL PARTNERSHIPS
MARKETING TECHNOLOGY | DIGITAL MEDIA+ |
CLOUD & AI | CREATIVE & PRODUCTION |
$400M SERVICE | 3,200+ EXPERTS | 170+ CLIENTS |
REVENUE | ASSIGNMENTS | |
WPP 46
TECHNOLOGY: DEEP SPECIALISATION
DIGITAL AGENCIES | CX | ADOBE |
Gartner Magic Quadrant for | IDC Worldwide CX | Forrester Adobe |
Global Digital Agencies, Feb 2020 | Improvement Services, 2020 | Implementation Services |
- 4/10 Leaders | - WPP/AKQA clear leader | Wave Leaders, Q2 2020 |
WPP 47
OPEN DATA APPROACH: DELIVERING MASS PERSONALISATION
- Integrated WPP team across creative, media, data, technology and public relations
-
WBA-ownedidentity graph to activate
WBA's first party data in all channels - Third party platforms, fully integrated with partners
WPP 48
ACCELERATING OUR GROWTH:
BUILDING THE CULTURE
BUILDING CULTURE THROUGH PURPOSE
Using the power of creativity to build better futures
PEOPLE | PLANET | CLIENTS | COMMUNITIES |
Attract, retain | Accelerate the transition | Deliver extraordinary | Drive change in the |
and develop our | to a sustainable world | work through the | world around us |
people in a | |||
best people and a | |||
culture that is | |||
open, optimistic | unifying purpose | ||
and extraordinary |
WPP 50
THE SITUATION TODAY
SIGNIFICANT AREAS OF STRENGTH…
- 100k+ employees - highly skilled and motivated
- Strong response to COVID from our people who demonstrated resilience and commitment - supported by a broad and deep wellbeing programme
- Progress on collaboration including cross- agency client wins
- Excellent gender balance at junior/manager level - more than 50% women
…BUT OPPORTUNITIES FOR IMPROVEMENT
- Much more work to do on racial diversity overall. Still working towards 50-50 gender split at leadership levels
- Approx. 60-65% of hires come from outside WPP = need to improve career opportunities for our people
- Lowering employee churn
- Multiple systems with poor integration
WPP 51
OUR PEOPLE ARE OUR COMPANY
Attraction
Retention
The Best Talent Delivering
for our Clients
Growth
WPP 52
OUR PEOPLE STRATEGY
CREATIVE TRANSFORMATION
1 | 2 | 3 |
EMPLOYER OF | MODERNISATION | GROWTH |
CHOICE FOR ALL | OF EXPERIENCES |
TECHNOLOGY & DATA & INSIGHTS
WPP 53
DIVERSITY AND DIFFERENCE DRIVES CREATIVITY
Diverse companies are more likely to financially outperform their peers by at least 25%
36% | |
25% | |
Gender Diversity | Ethnic Diversity |
Companies with more diverse leadership teams report 19 percent points higher innovation revenue
26%
average
innovation
revenue
Companies with below-average diversity scores
45%
average
innovation
revenue
A diverse workforce is better at developing innovative products and services
Diversity policies won't lead to
overnight improvements in innovation, but a diverse company will see about two new additional product announcements over 10 years
Companies with above-average diversity scores
Source: McKinsey Diversity Wins Report | BCG Diversity and Innovation Survey 2017 | North Carolina State University Study 2018 |
WPP 54
1 EMPLOYER OF CHOICE FOR ALL
CELEBRATING DIVERSITY AND
DEMONSTRATING PURPOSE
- Commitments on racial equity including investing $30 million over three years and publishing our diversity data annually
- New Inclusion Index to better understand our people's experience of inclusion and belonging
- Partnerships including Valuable 500, Unstereotype Alliance, LaGrant foundation and others
- Signatory of Women's Empowerment Principles
- Public commitments on Sustainability
- New Supplier Diversity policy
WPP 55
2 MODERNISATION OF EXPERIENCES
OUR LONG TERM PLAN
OUR PEOPLE
- Improved experience as new joiner
- User-friendlyself service tools
- Easy mobile access
- AI-drivenview of performance, development and career opportunities
- Access to live job opportunities across WPP brands
- Access to global mobility programme with standardised processes
- Employee data secure
OUR LEADERS
- Real-timedata and analytics for better decision-making
- Improved measurement and reporting DE&I KPIs
- Ability to quickly resource accounts with right talent
- Career framework for talent development and succession planning
- Ensured performance-based compensation decisions
- Able to more easily deliver data for audit
OUR CLIENTS
- Better able to match employee skills with client needs
- Client lead performance measured and development plans aligned with client needs
- Build diverse client teams
- Data availability will facilitate new business opportunities
- Expand core skills, capabilities, and offerings
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3 GROWTH
GROW YOURSELF | GROW YOUR TEAM | GROW YOUR BUSINESS | ||
• Doubling investment in leadership | Endless career path | Walgreens Boots Alliance win, | ||
development programmes for 2021 | using cross-agency teams | |||
• Investment in capabilities learning | ||||
for the future | ||||
• Inclusion training and workshops |
New Career Explorer
WPP 57
LONG TERM FINANCIAL INVESTMENT
EMPLOYER OF CHOICE FOR ALL
- Embedding Diversity, Equity and Inclusion into talent processes
- More inclusive employee experience informed by analytics
- Build out early career diverse talent pipeline partnerships
MODERNISATION OF EXPERIENCES
- Analytics on skills, certifications, productivity, mobility & client impact
- New technology and better systems integration designed with a people-first lens
GROWTH
- Leadership development programmes
- Learning focused on the capabilities of the future
- Mobility & career pathing to ensure retention
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HOW WE WILL MEASURE SUCCESS
KEY PERFORMANCE INDICATORS FOR PEOPLE
- Improvement in Employee Net Promoter Score (ENPS)
- Improvement in diversity, equity & inclusion metrics
- Client satisfaction & wins metrics
- Learning and certification metrics
- Attrition/churn metrics
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BUILDING CULTURE THROUGH PURPOSE
Using the power of creativity to build better futures
PEOPLE | PLANET | CLIENTS | COMMUNITIES |
Attract, retain | Accelerate the transition | Deliver extraordinary | Drive change in the |
and develop our | to a sustainable world | work through the | world around us |
people in a | |||
best people and a | |||
culture that is | |||
open, optimistic | unifying purpose | ||
and extraordinary |
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COFFEE BREAK
WPP TV 5 MINS
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WPP'S FINANCIALPLAN
WPP'S FINANCIAL PLAN
1 | 2 | 3 | 4 |
ACCELERATED | GROWTH FUNDED | CLEAR CAPITAL | ATTRACTIVE |
GROWTH THROUGH | AND MARGINS | ALLOCATION | FINANCIAL |
INVESTMENT | IMPROVED THROUGH | FRAMEWORK | OUTCOMES |
GROUP-WIDE | |||
TRANSFORMATION | |||
PROGRAMME |
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1 ACCELERATED GROWTH THROUGH INVESTMENT
M&A OF £200-400M
P&L INVESTMENT
ANNUALLY TO ADD 0.5-1.0% GROWTH
RISING TO £400M
ANNUALLY BY 2025 TO
DRIVE INCREMENTAL 1.5%
GROWTH
"CORE"
GROWTH 1-2%
Core Growth | P&L Investment | M&A | ||
MEDIUM-TERM GROWTH POTENTIAL
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1 TARGETING 40% OF OUR BUSINESS IN HIGHER GROWTH AREAS BY 2025
SALES MIX ACROSS OFFER PILLARS
12%
8%
20%
5%8%
Technology
Commerce
17%
Experience
Communications
75%
55%
WPP 2019 sales mix | Market sales mix |
SOURCE: Market sales mix all IDC, apart from Communications (GroupM/WPP)
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1 SHIFTING SALES MIX TOWARDS HIGHER GROWTH AREAS
SHIFTING THE OFFER MIX
ADDRESSABLE GROWTH RATE
+3.5%+4.8%
25%
40%
75%
60%
+5.6%
50%
50%
WPP sales mix | 40/60 target | 2024 TAM mix | ||
Communications | Experience/Commerce/Technology | |||
SOURCE: Market sales mix all IDC, apart from Communications (GroupM/WPP)
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1 TARGETING SECTOR OPPORTUNITIES
RENEWED GROWTH WITH | CONTINUE TO GROW | COMPLETE RECOVERY | FOCUS EFFORTS IN | |||||
CPG SECTOR | WITH TECH SECTOR | IN PHARMA/HEALTHCARE | UNDERWEIGHT SECTORS | |||||
27% | 26% | E.G., FINANCIAL SERVICES | ||||||
18% | ||||||||
12% | 13% | 12% | ||||||
6% | ||||||||
4% |
2016 | 9M 2020 | 2016 | 9M 2020 | 2016 | 9M 2020 | 2016 | 9M 2020 |
PROPORTION OF REVENUE LESS PASS-THROUGH COSTS FROM OUR TOP 200
CLIENTS FOR EACH SECTOR
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1 INNOVATIVE ENGINES OF GROWTH IN MEDIA
- Programmatic is 80-90% of digital display in US and UK
- Xaxis expected to capture double-digitsmarket growth
- New markets (in Europe and Latam), new clients
- Omnichannel video powered by AI (Copilot)
- Native and influencer with strong momentum
- Audio, DOOH moving to programmatic
- 63% YoY growth in US internet-connected devices usage, Q2 2020
- Roku (AVOD) nearly 50% of total US internet-based viewing minutes in Q2
- Finecast progress:
- Deep technology integration with broadcasters
- Supported by GroupM purchasing scale
- +27% LFL revenue less pass-through costs in H1; H2 acceleration forecast
- Rapid footprint expansion: 11 markets by end 2021
* eMarketer, 2019 - Programmatic Digital Display Ad Spending report | WPP | 68 |
1 INVESTING IN HIGHER-GROWTH MARKETS
BRAZIL: 2.4% OF WPP | CHINA: 6.7% OF WPP | INDIA: 2.5% OF WPP | ||||||||||||||||||
18 | ||||||||||||||||||||
Total CAGR: 9.3% | ||||||||||||||||||||
Total CAGR: 12.6% | 200 | 18 | Total CAGR: 16.7% | |||||||||||||||||
16 | Digital CAGR: 9.8% | Digital CAGR: 10.4% | Digital CAGR: 21.1% | |||||||||||||||||
16 | ||||||||||||||||||||
14 | 150 | 14 | ||||||||||||||||||
12 | 12 | |||||||||||||||||||
10 | 100 | 10 | ||||||||||||||||||
8 | 8 | |||||||||||||||||||
6 | 6 | |||||||||||||||||||
4 | 50 | 4 | ||||||||||||||||||
2 | 2 | |||||||||||||||||||
- | - | - | ||||||||||||||||||
2020 | 2021 | 2022 | 2023 | 2024 | 2020 | 2021 | 2022 | 2023 | 2024 | 2020 | 2021 | 2022 | 2023 | 2024 |
DigitalNon-Digital
SOURCE: GroupM 'This Year Next Year' report total advertising spend | WPP | 69 |
1 SUMMARY INVESTMENT PLAN
Goal to grow in Communications, and to increase the share of our business in Experience, Commerce and Technology to 40% by 2025
£ MILLIONS | ANNUAL REINVESTMENT | COMMENTS |
BY 2025 | ||
INCENTIVE POOL | c.100 | Rebuild incentive pool to historical levels: target 3-4% |
of revenue less pass-through costs from c. 2.5% today | ||
TECHNOLOGY | c.150 | Increased investment in technology and enterprise IT |
TALENT | c.150 | Increase in fee-earning heads in growth areas, |
investment in training to build capability | ||
TOTAL | 400 | |
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1 SCALABLE M&A IN GROWTH AREAS
COMMUNICATIONS | EXPERIENCE | |
MEDIA
- Enhance planning and strategy offer
- Offshore / flexible delivery models
- Performance media
CREATIVE | SCALED CUSTOMER EXPERIENCE BUSINESSES |
• Exceptional creative | • End to end digital customer journey design and implementation |
agencies to underpin | • Expand experience consulting and delivery in USA and Asia |
our creative core | |
COMMERCE | TECHNOLOGY | |||||
DIGITAL COMMERCE | MOBILE & SOCIAL COMMERCE | MARTECH | EXPANSION | DATA SCIENCE | ||
• Scale existing solutions to | • Functional specialists to | CONSULTING & | INTO CORE IT | AND PREDICTIVE | ||
IMPLEMENTATION | CONSULTING | ANALYTICS | ||||
meet global demand | build global capability | |||||
TO COMPLEMENT
MARTECH OFFER
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2 GROWTH FUNDED AND MARGINS IMPROVED THROUGH GROUP-WIDE TRANSFORMATION PROGRAMME
BY 2025…
250 | 200 | |||
MARGIN IMPROVEMENT | ||||
FUNCTIONAL EFFECTIVENESS/ | ||||
SHARED SERVICES | ||||
200 | ||||
EFFICIENCY | 400 | |||
(PROCUREMENT AND PROPERTY) | ||||
REINVESTMENT | ||||
150 | ||||
OPERATING MODEL | ||||
Savings | Outcomes |
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2 FUNCTIONAL EFFECTIVENESS AND SHARED SERVICES: £250 MILLION OPPORTUNITY
CURRENT COST OF FINANCE
c. 4%
OF REVENUE LESS PASS-THROUGH COSTS
MODEL TODAY
- Dispersed, siloed and unbalanced functions in Finance, HR, IT and legal
- c. 8,000 Finance employees
- > 3,000 business units in c. 100 countries, > 300 financial systems
- Non-standardisedways of working
- Very detailed reporting requirements
FUTURE MODEL
- Single, federated approach to global business functions
- End-to-endprocess simplification and standardisation
- Automation, shared services at scale
- Streamlined reporting and control framework
- Data-driveninsights for improved decision-making - leading not lagging indicators
- Agencies empowered to focus on winning and delivering client business
- Improved talent mobility
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2 EFFICIENCY:
£200 MILLION OPPORTUNITY
REAL ESTATE
CURRENT ESTABLISHMENT COSTS
c. 6%
OF REVENUE LESS PASS-THROUGH COSTS
PROCUREMENT
INDIRECT SPEND
c. £2B
MODEL TODAY
- Campus strategy in place since 2018
- Already a third of people in 20 campuses
- Still multi-site even in cities with campuses, eg London, NYC. Scope for further consolidation
MODEL TODAY
- Inconsistent centralisation and pooling of scale
- Many goods and services still separately negotiated at agency level
- Prices can range by +/-25% by brand for same goods/services
FUTURE MODEL
- Post COVID opportunity to utilise space more intensively within existing and future campuses
- Increase levels of shared/flexible space within campuses
- Target of 85k people in 65 cities on campus by 2025
- Reduce space requirements by 15-20%
FUTURE MODEL
- Optimised and diverse supplier network
- Simplification of processes -mindful contracting
- Full adoption of analytic tool during 2021
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2 OPERATING MODEL:
£150 MILLION OPPORTUNITY
MODEL TODAY | FUTURE MODEL | ||||
• 10+ different, opaque country | • | 3 clearly-defined country | |||
operating models | models | ||||
• Long tail of small agencies in | • Significant consolidation of local | ||||
unprofitable countries | agency operations | ||||
• Too many management layers | • | Simplified org. structures | |||
• Duplication of effort in eg | • | Standard, connected global | |||
technology, production assets | platforms, leveraging our scale | ||||
• Significant travel and personal | • Permanent change to ways of | ||||
costs | working post COVID |
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2 SAVINGS UNLOCKED BY SIGNIFICANT CAPITAL INVESTMENT
- Capex forecast at £450-500 million in 2021 and 2022
- Partially relates to delayed 2020 capex
- Investments in campuses, ERP and shared service centres driving the majority of efficiency savings
600
500
400
300
200
100
0
2021 | 2022 | 2023 | 2024 | 2025 | ||||
Property | IT | Other/range | ||||||
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2 APPROXIMATE PHASING OF THE GROSS SAVINGS TARGET
700
600
600
525
500 | 450 |
400
300
300
200
200
100
0
2021 | 2022 | 2023 | 2024 | 2025 | |||
Operating model | Efficiency | Functional/shared services | |||||
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3 CLEAR CAPITAL ALLOCATION FRAMEWORK
- Invest in growth, with a goal to increase net sales from Experience, Commerce and Technology to 40% by 2025
- Provide shareholders with an attractive and sustainable return, combining capital growth and income
- Maintain a strong and flexible balance sheet (leverage target of 1.5 - 1.75x average net debt/ EBITDA), with excess capital returned to shareholders
Capex investment in our estate,
technology and capabilities
Recommence remaining £620m Kantar buyback in 2021; Return any subsequent surplus capital via buyback or special dividend, as appropriate
A sustainable, progressive dividend, set at around 40% of
headline EPS
Targeted acquisitions, £200-400m annually, to enhance our offer in key growth areas
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4 STRONG FINANCIAL OUTCOMES
RAPID POST-COVID
RECOVERY
LFL revenue less pass-through costs to grow mid-single-digits % in 2021 and 2022
ACCELERATED | IMPROVED | |
MEDIUM-TERM GROWTH | PROFITABILITY | |
Targeting revenue less pass- | Targeting headline operating | |
through costs growth of 3-4% | margin of 15.5-16.0% in 2023 | |
annually from 2023 |
WPP 79
4 2020 OUT-TURN AND INITIAL 2021 GUIDANCE
2020 Q4 CURRENT TRADING
-
LFL revenue less pass-through costs
-6.7% Oct/Nov 2020 - -8.4%YTD
- Full year outcome expected to be in line with YTD performance
- Headline operating margin 12.5-13.0%
- Year-endnet debt around £1.6 billion, continued working capital focus
2021 OUTLOOK
- Mid-single-digitgrowth in LFL revenue less pass-through costs
- Returning to growth in Q2
- Headline operating margin 13.5-14.0%
- Net finance costs similar to 2020
- Pre-associatestax rate c 24%, rising c. 0.5% annually
- Capex £450-500 million
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WPP'S FINANCIAL PLAN - SUMMARY
1
23
4
ACCELERATED GROWTH THROUGH INVESTMENT
- Accelerating through growth in Communications and expanding Experience, Commerce and Technology from 25% today to 40% by 2025
- Targeting sector opportunities eg CPG, Tech, Healthcare
- Innovative engines of growth in media eg Xaxis, Finecast
- Capturing the opportunity in higher growth markets eg Brazil, China, India
- 2021-2022- recovery
- 2023 onwards - accelerated growth
o 1-2% core business growth potential medium-term
o c 1.5% incremental growth from investing c£400m p.a. in technology, talent and incentives
o 0.5-1.0% incremental growth from investing £200-400m p.a. in high growth, scalable acquisitions
GROWTH FUNDED AND MARGINS IMPROVED THROUGH GROUP-WIDE TRANSFORMATION PROGRAMME
- Plans in place to target £600 million of annual gross-cost savings by 2025
- Annual net cost savings of £200 million expected by 2025 after £400 million reinvestment in growth
- Savings phased over the next five years
-
Key areas of efficiency:
o Operating model savings (e.g. new ways of working, consolidating data and technology investment, simplified country structure, stream-lined organisational structures);
o Efficiency savings (Procurement, Real estate); and
o Functional Effectiveness & Shared Service savings (Legal, Finance, HR, & IT)
o Efficiencies unlocked by significant capital investment in our campus programme, ERP systems and shared service centres - Efficiency measures will also enhance effectiveness: improving business insight and talent management, leaving agencies free to focus on growth
CLEAR CAPITAL
ALLOCATION FRAMEWORK
- Capex £450-500m p.a. expected in 2021 and 2022, reverting to £300- 350m p.a. from 2023 to fund cost savings programme
- Intention to pay a progressive dividend at around 40% pay-out ratio
- £200-400mp.a. for high-growth, scalable M&A
- Average net debt/EBITDA maintained in target range 1.5- 1.75x
- Kantar share buyback programme to resume in 2021
ATTRACTIVE
FINANCIAL OUTCOMES
- Rapid post-COVID recovery: LFL revenue less pass through costs is anticipated to grow mid-single digits over each of the next two years, recovering to 2019 levels through 2022.
- Accelerated medium-term growth: revenue less pass through costs anticipated to grow 3-4% from 2023 onwards
- Improved profitability: targeting 15.5%-16.0% operating margin in 2023
- Double-digitEPS growth over the next three years
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HOW WE WILL DELIVER THIS PROGRAMME
1
Simplified and stronger brands and countries
Intra-brand simplification
(Brand CEOs1)
Country
(Andrew Scott + Brand CEOs)
Steering Committee (ExCo)
2 | 3 | |
Functional effectiveness | Incentives and | |
performance management | ||
Finance | Incentives | |
HR | (Jacqui Canney) | |
Enterprise IT | Performance mgmt. | |
(John Rogers) | ||
(John Rogers + Global CFOs | ||
Jacqui Canney + Global CPOs |
Rachel Higham + Global CIOs)
4
Accelerated
capability building
Talent & development2
(Jacqui Canney)
Data and tech2
(Stephan Pretorius)
Production
(Richard Glasson)
Integrated plan/ Programme management | |
Integrated plan | Programme management |
(John Rogers) | (John Rogers) |
Change communications
(David Henderson)
1. Includes Specialist Communications | ||
2. Starting point is offer articulation | WPP | 82 |
ADDITIONAL ANALYSIS/ DISCLOSURE
- Aim to provide split of business by four pillars at full year and half year:
- Communications, experience, commerce, technology
- From H1 2021
- Increased GroupM insight
- Revenue, revenue less pass-through costs
- Billings breakdown between digital/ traditional
- Ongoing updates to Group transformation programme
- Ongoing updates to our People strategy & KPIs
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SUMMARY
SUMMARY
- Focus on growth, profitability and returns, driven by client demand for our services
- Converting size into scale: data, media, technology
- People, culture and ESG at its heart
- Reducing inefficiency, investing in faster-growing areas
- Greater insight into underlying business performance
- Clear and investible capital allocation
WPP 85
COMMERCIAL BREAK
10 MINS
Q&A
ONE HOUR
THANK YOU
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WPP plc published this content on 17 December 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 December 2020 09:02:06 UTC