WPP plc Q1 FY2023 Earnings Call

Good morning, everybody. And welcome to our 2023 First Quarter Results Call. I'm here in Sea Containers with John Rogers, Tom Waldron, and our Investor Relations team. And I'll just take you briefly through the highlights before John takes you through our financial performance. And we'll come back to close to the end and take your questions. On page 2 of the presentation you should note our cautionary statement, which is important. So turning to page 3, and then 4, are highlights of the first quarter. I think we had a positive start to the year, reflecting continued momentum in the business and continued investment in our offer. We delivered first quarter growth of 2.9%. I think, pretty much in line with our expectations, and maybe even very slightly ahead against probably the toughest comp of last year. We saw growth across the business at 3% in our Integrated Agencies, 2.2% in our Public Relations, Public Affairs firm, and 1.9% in our Specialist Agencies. I should just call out strong performance from GroupM at 6.1% and also strong performance from Ogilvy. We continue to improve our work. We topped the WARC, the World Advertising Research Council ratings in media, in creative and effectiveness in all three categories, and delivered $1.5 billion in net new business in Q1. I should also point out Ogilvy's won Agency of the Year at the Clio's two nights ago and reflects continued investment in our creative capability. That has been supported by acquisitions, particularly in influencer markets, as we made two acquisitions, we'll come on to later, and chose the partnerships. KKR took a minority interest in FGS Global, we will talk a little bit about that later on, and what that means for us. And then overall, after a positive first quarter, we're leaving our guidance for the year unchanged, which remains at like-to-like revenue at 3% to 5%, and a headline operating margin of around 15%. So those are the highlights. John, you want to take us through their financial performance in more detail.

Thank you, Mark. So moving to the financials for the first quarter of 2023. So coming first to slide 6, revenue less pass-through costs. At a reported level, we've seen an increase of 9.9% for the quarter. This is supported by a 6.3% point tailwind in relation to FX, due to the weakness in Sterling relative to last year, and also our targeted M&A strategy that Mark has referred to, added 0.7 percentage points to reported growth. And actually stripping out the impact of the disposal of our business in Russia last year, the contribution was 1%. On a like-for-like basis, we saw 2.9% growth against 9.5% growth in the same quarter last year, very much in line with our expectations and slightly ahead of consensus forecasts. And looking forward as Mark just said, we reiterated our guidance at 3% to 5% growth for the full year 2023. So moving now on to Slide 7, and business sector performance. We continued to see broad-based growth across all of our business lines, starting with the integrated agencies at 3% on top of the very strong 8.6% growth this time last year. And as Mark just called out, GroupM in particular, saw strong growth of 6.1% on the back of 12.8% growth in Q1 last year. And our Creative Agencies had a slightly slower start to the year at plus 0.7% compared to 5.6% a year ago. And within this, we saw strong growth at Ogilvy driven by exposure to CPG clients that increased their spend by 15% across WPP in the quarter, and also driven by recent new business wins. However, this was partially offset by a slower start to the year at Wunderman Thompson reflecting lower spend from some technology clients and a soft start the year at Grey. In our PR businesses we saw like-for-like growth of 2.2% compared with 14.1% a year ago. FGS Global performed particularly strongly, but we saw a slightly softer performance at BCW and Hill+Knowlton. And finally, Specialist Agencies saw growth of 1.9% versus 13% in the same quarter last year, with particularly strong growth in CMI, specialist healthcare media agency and strong growth at Landor & Fitch. So turning now to Slide 8 and our top five markets, representing two-thirds of our overall net sales. So growth in the U.S. at 2.3% was driven by growth in spending from clients in the consumer packaged goods and financial services sectors offset by weaker spend by clients in the technology and digital services and retail sectors. In the tech sector, clients now have adjusted budgets post-COVID levels of spending on some categories of hardware. And in retail, we've seen an impact from recent consolidation in the U.S. supermarket sector. In the UK, growth was 7.4% on top of 8.1% in Q1 of 2022, with particularly strong demand from CPG clients, and Germany, our biggest European market was up 4% compared with 16% this time last year, with broad growth in Media and strength in the Travel and Leisure segment, partially offset by the run-off of a COVID-related government contract in Germany at one of our specialists agencies. As we take note of the prelims, China continues to be a challenging market, declining 13% in Q1, as we flagged. We face a tough comparison in China with 12% growth this time last year. Q1 also began with high levels of COVID infection as restrictions were lifted late last year. Towards the end of the period, we're encouraged by initial signs of recovery in the Media market in China, and economic indicators are actually positive. So we expect a bounce back in Q2 against easier comparatives. Actually excluding China, from our overall like-to-like growth would have delivered like-for-like growth for the quarter of 3.6%. India was also a little bit more challenging, down 1.4% in the first quarter, reflecting a tough comparison against Q1 2022, which grew at 25%. And there was some macro uncertainty at the beginning of the year. We expect a recovery to happen through the rest of the year, particularly around events such as the Cricket World Cup, and against easy comparisons in the second half. Coming on now to Slide 9 and looking at the main movements in our net debt through the quarter. So net debt at 31 of March, 2023 was £3.9 billion, representing an increase of £1.4 billion from the year end, driven by the usual networking capital movements, CapEx consistent with our full year guidance, the investment in the three M&A transactions that Mark's already mentioned, and a slight strengthening of Sterling year-to-date. The typical seasonal outflow of working capital since the year end reflects a small underlying improvement actually, versus the same period last year, benefiting from operational improvements and some reversal of the timing and mix factors that impacted our yearend position, and we discussed in detail at the prelims. And we remain confident that we can deliver a flat trade working capital performance in 2023. That combined with a small outflow on non-trade working capital of around £150 million or so, again, as I guided to on the prelims call, will result in a significant improvement in cash generation in 2023 over 2022. So moving to other items in the Bridge, on CapEx, we maintained our focus on organic investment, including our campus program, opening new sites in China and Manchester. And as I said before we continue to make bolt-on acquisitions of Goat, Obviously and 3K to strengthen our offer in the growth areas, with influencer marketing and healthcare. And with that, I'll hand it back to Mark.

Thank you, John. I'll briefly cover some key business drivers at this time. We had a strong start to the year regarding new business and recognition of our work's quality. I want to highlight a few of our recent wins, including our partnership with Adobe Media in the Americas, production work alongside another partner at Mondelez, and notably the Maruti Suzuki win in India, which is the country's second largest advertiser. It's worth mentioning that India is now the world's most populous market, and we work with 45 of the top 50 clients there. Our achievements were acknowledged by WARC in six categories related to media, effectiveness, and creative, alongside our agencies Ogilvy, EssenceMediacom, and Wavemaker. Additionally, Ogilvy was named network of the year at the Clio Awards a couple of nights ago in New York. Along with our organic investments, we made three acquisitions this quarter and another shortly after, acquiring two companies in the influencer marketing space. As consumers spend more time on social media, our clients are looking to find effective ways to engage them, many of which involve influencers. These acquisitions will help our clients invest more in influencer marketing, which has been a significant challenge due to the need to maintain relationships with many influencers, assess their performance, and ensure their relevance in marketing strategies. We also acquired a healthcare specialist PR firm in Germany to enhance our presence in this rapidly growing sector. In April, Landor & Fitch acquired amp, an intriguing creative sonic branding agency based in Germany with operations globally. These acquisitions are further supported by strategic partnerships, as we continue to forge positive relationships with technology partners, mainly focusing on CRM through Braze and eCommerce, as well as establishing a noteworthy partnership in Japan with KDDI. This partnership signifies the first major collaboration for our new Japanese country manager, Kyoko Matsushito, demonstrating our ability to leverage our global strengths in that market. On the subject of the FGS Global transaction, KKR made a strategic investment in the company in March. To provide some background, FGS Global was created in January 2021 from the merger of three public relations firms—Finsbury, Glover Park, and Hering Schuppener—which operated independently in the UK, U.S., and Germany, respectively. One of the firms had minority employee investment. We managed to consolidate these businesses in preparation for an IPO with WPP as the majority owner. In October 2021, we recognized the opportunity to partner with a leading U.S. investor relations firm, leading to the formation of FGS Global. That business has performed exceptionally well, ranking first in each region for deal volume and values in M&A transactions last year. KKR recognized this success and invested to provide liquidity to the management team as part of the company’s evolution, while WPP retains a majority stake. KKR's involvement as a strategic investor will assist in the company's development over the next few years, underscoring the inherent value within the business and accelerating our progress. Regarding AI, which is an area of significant interest, we've utilized AI extensively in our business, particularly within our Media division, GroupM, and across other areas. We leverage it for media targeting, campaign optimization, and audience creation. In production through Hogarth, we use AI to produce work across all consumer channels. The past six months have seen a change in how we apply AI, especially generative AI in the creative process, enhancing our ability to create content in language, video, and images. There are numerous examples of our innovative use of AI, including a campaign from 2016 for ING in Holland and last year’s Diwali campaign in India for Cadbury's Mondelez. I would like to showcase some recent work, including Ogilvy's campaign for Mondelez and projects from AKQA Bloom and Wunderman Thompson. Before we proceed, let's take a moment to present Ogilvy's work for the Lacta brand by Mondelez in Greece. Please play the film. Thank you, Shahid. There's something useful in that for everyone on the call. So in summary, I think we had a positive start to the year, very much in line with our expectations. And we saw a strong demand for our services from clients. We made good progress against our strategic plan, in the areas of creativity, AI, acquisitions, and we choose to invest both organically and through acquisitions in those areas. The FGS Global transaction with KKR does highlight the value and growth potential of that company within WPP. So net-net I'm sure we'll get on to this question we made on-track deliver our guidance. And looking forward longer term, we're well placed in advance of increasing complexity, as AI changes our industry in a fundamental way, as a trusted partner to our clients, and a more modern and future-facing offer to prosper. Thank you very much. Now before we take questions, there's one topic, one person we would like to thank. And that's John Rogers. This is John's last call with us. John joined back in January 2020, just think, eight weeks before COVID struck, and we were locked up. And I have to say he steered us through COVID extremely well, and up to speed with a very complex business, I'd say in record time, and helping us really to navigate that very successfully financially. We had the same later with the challenge we faced following the Russian invasion in Ukraine. So as he moves on, I'd say he leaves us in better shape financially and better shape strategically. John, thank you very much. Thank you for your contribution. I wish you all the best in your next endeavors. So thank you, John. And I think we'll now open the line up to questions.

Thank you, sir. Our first question of the day is from Lena Gainer of BNP Paribas. Lena, please go ahead, your line is open.

Hi, everybody, Mark, John. Congratulations on my results. And John, well, all the best for what's next for you. I have three questions. The first one is obviously on the guidance. Sorry, not very original, but could you perhaps give a bit of color around Q2 and the trajectory of growth throughout the year? The second question is some kind of a follow-up to that, where it would be useful for us to understand the visibility and how much of the year is already known or guaranteed. I know it's never really guaranteed, but some idea, if you could quantify how many months you have known, for example? And my third question is on margins. I know this goal is not about the margins, but could you give us some elements around where you stood in your equipment in Q1 and your headcount plans for the coming months? Thank you.

Okay, well, why don't I give you some color in terms of the guidance overall and what we're hearing from clients? And John could talk about specifics on the phasing. I think we'll take the first two questions within one question, and then we'll go on to talk to you about the margin. Look, I think overall, we're three months into the year. We're six weeks away from giving you the guidance. I think we remain confident of being within the range of 3% to 5%. I don't think at this point, we'd say, no, that's changed really in any way from the last six months ago, despite some of the turbulence in the financial system. When we gave the guidance, we knew that Q1 would be the toughest comp because of the strong comparative last year. I think we flagged that at the time. I don't think anything's really changed. We've come in, I'd said in Q1, I'd say very, very marginally ahead of our expectations, which gives us confidence to make the numbers for the year. I think overall, in my discussions with clients, I didn't see any major change in client sentiment or client spending, any of those, those areas of the business that we knew would be slightly more challenged this year, like technology has continued to be very slightly more challenged than the physical phase. They've come more positive or more negative over the period, perhaps, in the stronger earnings from Google and Meta in Q1 than expected, gives us some confidence that they're not going to deteriorate further. So I think things are really very much as we thought, Lena. And John can talk more about what that means for you to understand the sort of Q1 and the second half. And we understand the challenges of looking at an acceleration during the year as well.

Yes. Hi, Lena. Thanks, Mark. So just in terms of phasing, I mean, I think the key message is no new news. It's only six weeks since we last gave the guidance. And we were very clear on the prelims call that we thought Q1 would be a little bit softer. And so hence, mathematically, we expect the second half to be a little bit stronger than the first half. I mean, I think it's as simple as that. And as Mark just said, we've delivered Q1, pretty much in line with expectations, maybe a little bit better than we thought, but not significantly. And I think if you think about the sort of two-year rack, which is about 11% to 12% or so, and if you maintain that through the year, then you'd end up at the top end of our range. That would give us a turn of about 5%. And if we were to maintain Q1's performance through the rest of the year that would obviously put us at the bottom end of our range at 3%. So that, I guess, gives you one way at least of bounding the range, but 3% to 5%, I think we are very comfortable with, albeit we expect the second half to be a little bit stronger than the first. In terms of visibility, again, I don't think any new news here. Typically, we have visibility of 80% to 90% of our spend looking forward 12 months. It very much varies business by business. While PR agencies typically have good visibility going out three months or so, our creative agencies will have visibility going out a little bit longer. But there's no material changes in our visibility from, for example, this time last year. And in terms of margin, I would say one way to think about that, well, I think partly because of the phasing of our investment in IT, which I talked about at the prelims, which is largely front-end loaded, and also because we expect the second half on a net sales basis to be slightly stronger than the first, then I think we'd expect directionally in the first half margin to be flat, maybe a little bit negative year-on-year in the first half. And we'd expect to outperform in the second half. But all of which would net out to a margin of around 15% on a constant currency basis at the year end. So entirely consistent with the guidance that we gave at the prelims. And I would say by and large in all aspects, actually, nothing unfortunately much has changed since the prelims, in terms of the underlying dynamics of the business. We're pretty much in line with where we thought we'd be. One thing I'd say on headcount, just as you asked detailed questions there, we're actually I think in the quarter itself, where we've got 1,000 fewer people at the end of the quarter than we had at the beginning of the quarter, that I think shows good discipline about keeping control over our cost base, actually 800 fewer permanent people and about 200 fewer freelance people. So good control over our costs. And actually if you look at the year-on-year position, in terms of our total headcount we're probably up at around 3%. So quarter-on-quarter we're up at around 3%. And on a freelance basis, we're down at around 15%. So if you remember this time last year, we had to employ quite a lot of additional freelancers because net sales were ahead of expectations. And so we had to support that client work with freelance resources. And this year, we've kept very good control over our freelance spend. So in terms of our numbers we're down about 15% year-on-year in terms of the number of freelancers. When you aggregate those two together, so the 3% increase in our permanent and 15% reduction in our freelancers, we're up roughly 1%, just over 1% year on year in terms of number of people, which again, is entirely consistent with the guidance that I gave on the prelims call only six weeks ago.

Understood, thank you very much.

Thank you.

Great. Our next question is from the line of Tom Singlehurst from Citi. Tom, your line is now open.

Hi, Tom.

Good morning, and thank you. I want to extend my appreciation to John for significantly enhancing the transparency of our communications and disclosures. That effort is truly valued, and I wish you all the best moving forward. I have three questions for you. First, regarding China, we saw a significant decline in the first quarter, but as we approach the second quarter, the comparisons become approximately 18 percentage points easier. My question is whether we can expect this to improve in the second quarter. You mentioned that the growth profile would be more apparent in the second half, but I'd like to know if we can anticipate positive trends starting in the second quarter. On the flip side, the comparisons in India will become much more challenging. When you analyzed India and Brazil previously, either Mark or you, John, indicated aspirations for growth in both markets. So my question is whether we still expect to be on track for that overall growth. Lastly, regarding the FGS Global stake sale, I appreciate your comments on the mechanics of the deal. I'm curious if this will lead to any concrete changes in how the business operates and whether it opens up possibilities for more minority stake sales in other parts of the organization, especially considering how high the multiples are compared to what you are currently trading at. Those are my three questions. Thank you.

Let's begin with the question about the FGS Global stake sale. The answer is that it does not indicate any further stake sales. This was a unique situation where we combined three businesses, and I pointed out that there was already an employee and management investment involved. We also engaged with a financial partner who acquired an equity stake, and this transaction was made for operational reasons. From a structural standpoint, things remain largely the same following this transaction as they were before, with some changes in ownership percentages. WPP remains the majority investor, supported by a significant financial partner and management investment. Therefore, I don't believe anything has fundamentally changed, aside from the perceived disparity in the overall value of WPP compared to the private market and the growth potential of the business. We do not anticipate or have any plans for similar transactions in other areas of the business. This situation is quite unique given our starting point and the significant opportunities ahead of us. The cyber business, though not well-known in the UK, is very strong in the U.S., and we've established a robust partnership with Roland Rudd, Alex Guise, and their team, which will draw in top talent from the industry. Regarding China, we expect it to shift from being a drag in Q1 to positively affecting WPP's growth for the remainder of the year. This is complicated by a strong comparison from last year and the lockdowns in January, which have now eased. We're starting to see improvements in the media market in March and April, which we expect to carry through for the rest of the year. In India, we conducted an in-depth review and noted the strength of that business. Despite tough comparisons, we do expect it to grow throughout the remainder of the year.

Yeah, just to build on Mark's comments. I think across India, China, and Brazil for the full year, we expect all of those markets to be good growth opportunities for WPP, as they have been in the past. To your point, you've highlighted issues of phasing. And if we've covered China, I think already, but the comp gets a lot easier in Q2, and then even easier in Q3 and Q4. So we'd expect to return to growth in Q2. And indeed in Q3 and Q4, maybe step up a little bit more, because the comps get comparatively easier. In India, I think you raised the point that Q2 comp is pretty tough. I think we were up about 45% to last year. So we are seeing pretty strong growth in Q2. But we really would expect to return to growth in India in the second half when the comps do get somewhat easier. And on Brazil, I think we'd get some small growth in Q2 and again, stepping up again, growth higher in half on the back of slightly easier comps. But overall, good growth across all of those markets for the full year. They've been and continue to be good growth engines for our overall business.

Super, thank you very much.

Thanks, Tom.

Our next question today is from the line of Julien Roch from Barclays. Julien, please go ahead.

Yes, good morning, Mark, John and Tom and Caitlin and Anthony. Thank you, John for being so transparent on numbers. The bar is very high for your successor. So first question, coming back on FGS, can you give us some numbers because I calculate that KKR paid 70 times EBITDA when you trade online. So is it because FGS is expected to grow well above the peer group going forward? What have they grown out annually on an organic basis and pro forma since 2019, for instance? You told us 18% in 21. But what about '20 and '22? That's my first question. The second one, sorry to come back on China again. So you say we turn around in Q2, but are we talking zero to 5, 5 to 10, more than 10, some numbers there? And then the last one on AI. A long question, sorry. So you win a content creative budget where a client will spend 100. Historically, you run your business on a cost-plus basis. So you take your 15% margin spend 85 on delivering what the client wants. Thanks to AI, will cost you far less. So let's say you only spend 40. Don't think the client will let you get a 60% margin rather than 15%. So they're going to say why don't we share the spoils and we're going to pay you 60 to 70, and your margin is higher. So what do you think about this specific point, i.e. AI could lead to higher margin but lower revenue for content and creative budget? Thank you.

On FGS, we've provided the VA disclosure, and I prefer not to delve into further details about that performance at this moment. We'll need to observe how the business evolves. I concur with your point regarding comparative valuations. Regarding AI, I understand your earlier question, and while I hesitate to disagree, I don't entirely grasp your argument. When considering our work structure, we have creativity and the creative process, the production process, and the media process. All of these are fundamentally based on data and technology. Specifically in the creative process, separate from the production process, I don't believe AI will enhance creativity or shorten that process. The compensation we receive for ideation, strategy, and account management is, in my view, likely to remain largely unchanged. AI might even increase our workload as it will require a greater volume of assets. As channels multiply and formats shift, we will need to produce significantly more creative assets. When we merge media with creative, we'll utilize millions of diverse creative assets based on the data signals from our technology and media. Some of this work is billed hourly, while much is fixed price, making direct comparisons challenging. The impact of increased volume on pricing remains uncertain. Historically, in WPP's experience with technology, we've seen more job creation than loss, leading me to doubt the conclusion you've drawn. Additionally, we see an opportunity to gain market share by investing more to remain competitive. Some trends indicate that clients are looking to streamline partnerships with those capable of investing, presenting us with a chance to increase market share by effectively leveraging AI in our work.

Yeah, just on China. I mean, obviously, we've given quite a lot of guidance, and I really want to try and avoid getting drawn into guidance on a quarterly basis. But I guess mathematically, if you looked at the two-year wrap, and you have that consistent, Q2 versus Q1, then you'd be much more likely to be in the range of 5 to 10 than in the range of zero to 5, which were the two that you sort of suggested in your question. So that may be one way of looking at it.

Okay, thank you.

Thank you. Our next question of the day is from the line of Lisa Yang of Goldman Sachs. Lisa, your line is now open.

Good morning, and best wishes to you, John. I have a couple of questions. Firstly, regarding the full year guidance, you mentioned that the results on pricing will likely be in the three to four range, with the remainder coming from volume. Could you elaborate on how that mix has evolved in the first quarter? It seems you may not have had the three to four figure in Q1, so why do you anticipate the pricing contribution to increase throughout the year? My second question is about the strong performance in the UK during Q1; could you explain what is driving that? I believe the UK figures are robust, and I'm curious if you expect that trend to continue for the rest of the year. Lastly, concerning the restructuring, you indicated that the estimate of $180 million does not account for any potential additional restructuring arising from the property review. When can we expect updates on that property review, and can you provide any insight into the potential size of additional restructuring related to that this year? Thank you.

John, why don't you address that? I believe we have a very strong business in the UK. The growth demonstrates the diversity of our operations beyond just traditional media advertising, significantly outperforming the classic advertising market. This also highlights the UK's significance as a creative and media hub. Now, John, could you elaborate on the specifics regarding pricing in the UK?

Sure. Okay, well just Lisa in terms of your question on pricing, we said at the prelims that we expected price increases to be roughly 3% for 2023. And we maintain that guidance. That still holds, I would say in terms of Q1, the benefit of pricing, in our number would be 1.5% to 2%. So we are seeing volume growth in our Q1 and probably pricing around 1% or 2%. Why is that different? Well, because it's largely down to the timing of price negotiations with clients. That impacts that when we put price increases through. So that's why you'll see it slightly differ through the year. But we're very comfortable with the guidance we gave around 3% or so. In terms of restructuring from our property review, again, which we discussed in our prelims which was largely focused on the US, a market where we hold a lot of property, we would expect to update the market at our interims, on that, in terms of some of the details there. I don't want to be drawn at the moment in terms of quantum. I think we need to do the full review first and then we'll update in detail at the interim.

May I ask a follow up question?

Yeah.

So I think clearly market finding you very confident onto this call in terms of business changes versus the pre-results. It does look like Publicis, Omnicom was slightly more cautious in tone. So just curious, like any maybe reason why, I don't know, you're maybe not seeing what they're seeing, it may be some difference in geographic mix. And specifically on Omnicon said, it will be a stretch to reach to the top of their guide, which is 5%. Do you think the same would apply to WPP? Would you say you're as comfortable with 5% as you are with 4% or 3% at this point?

I don't think our tone is significantly different from theirs. We're simply expressing our perspective, which is that there hasn't been any substantial change since six weeks ago. The economy has faced challenges throughout the year. We anticipated that technology would be somewhat weaker and that China would improve gradually. Nothing has really shifted in that regard. To illustrate this, we had a growth of 9% in Q1 last year and 3% in Q1 this year, which averages to about 12%. For the year, if we maintain that 12% growth rate, it could lead us to a range of 3% to 5%. We're confident that we can achieve that target range, even if it may seem overly simplistic.

Okay, thank you.

Our next question today is from the line of Adrien de Saint Hilaire of Bank of America. Adrien, please go ahead now.

Thank you very much. And indeed Godspeed, John for the future. Thanks for your help. A few questions then. I'm a little confused with trends in the ad market right now. We've heard some of the digital guys talk about an improvement and some acceleration into Q2, but then we're also seeing weakness elsewhere and caution elsewhere. So what do you observe on your end? And how do you think this plays out for GroupM and the broader WPP? That's the first question. Then secondly, you give us some interesting color about what you expect for Brazil, India, China for the rest of the year. Could we do the same exercise with some of the bigger markets like U.S., UK, Germany? Thank you.

I will take the first question, and John can address the second. GroupM anticipates that media advertising spend will be around 6% in 2023, which is a slight decline from 2022. They experienced approximately 6% growth in Q1. Tech companies are facing challenging comparisons. For example, if we look at Google, which reported a 3% increase, they and Meta both had 3% growth in Q1, but Google's year-over-year comparison was 23% last year. This puts them in a different situation. Our comparisons will ease slightly as the year progresses, but not significantly. Overall, the trend appears to be a bit softer than last year, with comparisons affecting the fourth quarter trends. To reiterate what John mentioned, we are looking at a range of 3% to 5%. While 5% is better than 3%, it isn’t necessarily tougher than 3%, except by definition. We are confident that this is where we will land. John?

Certainly. Regarding your question, I'm hesitant to provide a detailed market-by-market analysis, but I can share that in the U.S. market for Q1, we saw numbers around 2% for the UK, a strong 7% in another part of the UK, and 4% in Germany. These figures are useful indicators for our overall forecast for the year. While there might be some fluctuations throughout the quarters, they generally reflect a positive direction for those markets over the year.

Okay, thank you.

Our next question today is from the line of Omar Sheikh of Morgan Stanley. Omar, please go ahead. Your line is open.

Good morning, everyone. I have a couple of questions. First, I'd like to start with the creative business. It seems to have slowed down significantly this quarter, even though the comparisons from last year are a bit easier. Can you provide insight into what's happening there? You mentioned Wunderman and Grey; are there tight losses, any competitive factors at play, or is it related to the client mix? Some clarification would be appreciated. Secondly, regarding your organic growth over the past three or four quarters, there appears to be a growing gap between your performance and that of the big five holding companies, which are slightly underperforming. How do you account for that gap? Is it related to the client mix, less exposure to consulting or data analytics, or perhaps geographic differences? Any insights would be helpful. Thank you.

Okay, I think look on the first question, media versus creative, I think the GroupM's business, we've always been clear our media business is a fantastic business. And I think particularly in times of sort of normal advertising growth GroupM's top line is probably more driven by ad spend. If the market is growing at 6%, this year, GroupM did 6% in Q1. I don't think that could surprise us. Our creative businesses have somewhat different dynamics. And so I think have been a little bit softer in Q1. And as you correctly pointed out, we've had some business like Ogilvy do well, some business like Wunderman Thompson and Grey have a slightly slower start to the year. But if you look at the account wins that we've had, we've had a good performance there. In terms of the organic gap, I'd encourage you, one to wait till all the companies have reported. And secondly, to be careful in comparing revenue and net sales. And I'd point out that our revenue performance is similar to one, and our net sales performance is slightly lower than another. So, I think we're not yet through the reporting system. And I'd say we feel good about our top line performance, and we'd like it to be stronger. But I think we feel good about our top line performance.

Okay, thanks a lot.

Thanks.

Our last question today is from the line of Silvia Cuneo from Deutsche Bank. Silvia, please go ahead.

Thank you. Good morning, everyone. And thank you to John. Best of luck in your next phase. My first question is also on the creative agency that was called out. You talked about some areas of slowdown already. But I was wondering if you could talk a bit more about net sales from areas like Experience, Commerce, and technology within that mix? Is that still close to 40% of that segment ex-GroupM? And then the second question on the FX impact to date. So if we take the current FX rates for the rest of the year, what sort of impact should we expect for revenue and margin? Thank you.

Hey, John, do you want to tackle those?

Yes. So on the FX, I would say we saw in the first quarter, effectively a tailwind at 6%. And we'd expect if you translate the current rate through to the full year, with the sort of headwind of well, flat to 1%, something of that nature on the FX. And in terms of your question on the split between Experience and Commerce, and technology, we don't actually report on that on a quarterly basis. We'll give you a further update on that split at the interims, but I wouldn't expect any of those trends in the growth of those areas to differ markedly from what we reported at the prelims six weeks ago.

Thank you.

There are no further questions at this time. So I'd hand the call back over to Mr. Mark Read for closing remarks.

All right. Well, thank you all for joining. As we said, we had a good start to the year and remain on track to meet our guidance. I'd like to thank John for his contribution and say that Joanne started last week. She's here listening to the call, and she'll be on the next call at the half year. So thanks to everybody. And we'll all be here to answer any of your questions in more detail offline. Thank you.

Thanks, everyone.