WPP plc 6-K, filed Aug 5, 2022
WPP plc (WPP)
6-K
2022-08-05
For: 2022-08-05
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Added on
April 12, 2026
About this 6-K
WPP plc filed this 6-K on August 5, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 6-K
____________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the Month of August 2022
Commission File Number: 001-38303
______________________
WPP plc
(Translation of registrant's name into English)
________________________
Sea Containers, 18 Upper Ground
London, United Kingdom SE1 9GL
(Address of principal executive offices)
_________________________
Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F:
Form
20-F X Form 40-F
___
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): ___
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an
attached annual report to security holders.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ___
Note: Regulation S-T Rule 101(b)(7) only permits the
submission in paper of a Form 6-K if submitted to furnish a report
or other document that the registrant foreign private issuer must
furnish and make public under the laws of the jurisdiction in which
the registrant is incorporated, domiciled or legally organized (the
registrant’s “home country”), or under the rules
of the home country exchange on which the registrant’s
securities are traded, as long as the report or other document is
not a press release, is not required to be and has not been
distributed to the registrant’s security holders, and, if
discussing a material event, has already been the subject of a Form
6-K submission or other Commission filing on EDGAR.
Forward-Looking Statements
In
connection with the provisions of the U.S. Private Securities
Litigation Reform Act of 1995 (the ‘Reform Act’), the
Company may include forward-looking statements (as defined in the
Reform Act) in oral or written public statements issued by or on
behalf of the Company. These forward-looking statements may
include, among other things, plans, objectives, beliefs,
intentions, strategies, projections and anticipated future economic
performance based on assumptions and the like that are subject to
risks and uncertainties. These statements can be identified by the
fact that they do not relate strictly to historical or current
facts. They use words such as ‘anticipate’,
‘estimate’, ‘expect’, ‘intend’,
‘will’, ‘project’, ‘plan’,
‘believe’, ‘target’, and other words and
similar references to future periods but are not the exclusive
means of identifying such statements. As such, all forward-looking
statements involve risk and uncertainty because they relate to
future events and circumstances that are beyond the control of the
Company. Actual results or outcomes may differ materially from
those discussed or implied in the forward-looking statements.
Therefore, you should not rely on such forward-looking statements,
which speak only as of the date they are made, as a prediction of
actual results or otherwise. Important factors which may cause
actual results to differ include but are not limited to: the impact
of outbreaks, epidemics or pandemics, such as the Covid-19 pandemic
and ongoing challenges and uncertainties posed by the Covid-19
pandemic for businesses and governments around the world; the
unanticipated loss of a material client or key personnel; delays or
reductions in client advertising budgets; shifts in industry rates
of compensation; regulatory compliance costs or litigation; changes
in competitive factors in the industries in which we operate and
demand for our products and services; our inability to realise the
future anticipated benefits of acquisitions; failure to realise our
assumptions regarding goodwill and indefinite lived intangible
assets; natural disasters or acts of terrorism; the Company’s
ability to attract new clients; the economic and geopolitical
impact of the Russian invasion of Ukraine; the risk of global
economic downturn; technological changes and risks to the security
of IT and operational infrastructure, systems, data and information
resulting from increased threat of cyber and other attacks; the
Company’s exposure to changes in the values of other major
currencies (because a substantial portion of its revenues are
derived and costs incurred outside of the UK); and the overall
level of economic activity in the Company’s major markets
(which varies depending on, among other things, regional, national
and international political and economic conditions and government
regulations in the world’s advertising markets). In addition,
you should consider the risks described in Item 3D, captioned
“Risk Factors,” which could also cause actual results
to differ from forward-looking information. In light of these and
other uncertainties, the forward-looking statements included in
this document should not be regarded as a representation by the
Company that the Company’s plans and objectives will be
achieved. Neither the Company, nor any of its directors, officers
or employees, provides any representation, assurance or guarantee
that the occurrence of any events anticipated, expressed or implied
in any forward-looking statements will actually occur. The Company
undertakes no obligation to update or revise any such
forward-looking statements, whether as a result of new information,
future events or otherwise.
EXHIBIT INDEX
|
Exhibit No.
|
Description
|
|
1
|
2022 Interim Results dated 5 August 2022, prepared by WPP
plc.
|
5 August
2022
2022 Interim Results
|
Strong first half: broad-based growth, sustained demand from
clients, transformation programme on track. 2022 growth guidance
upgraded again
|
Key figures
|
£
million
|
H1 2022
|
+/(-) %
reported1
|
+/(-) %
LFL2
|
H1 2021
|
|
Revenue
|
6,755
|
10.2
|
8.7
|
6,133
|
|
Revenue
less pass-through costs
|
5,509
|
12.5
|
8.9
|
4,899
|
|
|
|
|
|
|
|
Reported:
|
|
|
|
|
|
Operating
profit
|
539
|
11.4
|
|
484
|
|
Profit
before tax
|
419
|
6.1
|
-
|
394
|
|
Diluted
EPS (p)
|
22.7
|
10.2
|
-
|
20.6
|
|
Dividends
per share (p)
|
15.0
|
20.0
|
-
|
12.5
|
|
|
|
|
|
|
|
Headline3:
|
|
|
|
|
|
Operating
profit
|
639
|
8.2
|
-
|
590
|
|
Operating
profit margin
|
11.6%
|
(0.5pt*)
|
-
|
12.1%
|
|
Profit
before tax
|
562
|
12.0
|
-
|
502
|
|
Diluted
EPS (p)
|
33.0
|
15.0
|
-
|
28.7
|
*
Margin points
H1 and Q2 financial highlights
●
Client demand strong across most segments and regions
●
H1 reported revenue up 10.2%, LFL revenue 8.7% (Q2
9.3%)
●
H1 revenue less pass-through costs up 12.5%, LFL revenue less
pass-through costs up 8.9% (up 9.4% on H1 2019)
●
Q2 LFL revenue less pass-through costs up 8.3%: US 10.4%, UK 6.2%,
Germany 11.5%, China (6.1)% (affected by lockdowns), Australia
3.2%
●
Strong new business performance: $3.4 billion net new billings in
H1
●
H1 headline operating profit margin 11.6%, down 0.5pt on prior year
as expected, as a result of higher personnel costs and a return to
business travel
●
Trade working capital cash outflow £232 million year-on-year;
still expected to be around flat year-on-year at
year-end
●
Adjusted net debt at 30 June 2022 £3.1 billion, up £1.6
billion year-on-year after £1.1 billion of share buybacks
since June 2021
1 Percentage change in reported
sterling.
2 Like-for-like. LFL comparisons are calculated as
follows: current year, constant currency actual results (which
include acquisitions from the relevant date of completion) are
compared with prior year, constant currency actual results from
continuing operations, adjusted to include the results of
acquisitions and disposals for the commensurate period in the prior
year. Both periods exclude results from Russia.
3 In this press release not all of the figures and
ratios used are readily available from the unaudited interim
results included in Appendix 1. Management believes these non-GAAP
measures, including constant currency and like-for-like growth,
revenue less pass-through costs and headline profit measures, are
both useful and necessary to better understand the Group’s
results. Where required, details of how these have been arrived at
are shown in Appendix 2.
Strategic progress, shareholder returns and outlook
●
Continued recognition of extraordinary creativity: WPP awarded most
creative company at Cannes Lions for second year
running
●
Faster growth areas of experience, commerce and technology around
39% of revenue less pass-through costs in Global Integrated
Agencies ex-GroupM in H1
●
Strong performance by industry sector: H1 LFL revenue less
pass-through costs growth 12% in Technology, 7% in CPG and 7% in
Healthcare
●
Investing for growth: enhancing our data capabilities through
Choreograph and launch of Everymile, direct-to-consumer ecommerce
offer
●
Focused M&A: acquisition of Village Marketing to accelerate
creator economy growth and Bower House Digital, a leading marketing
technology agency
●
Further simplification to enhance offer to clients: creation of
EssenceMediacom and Design Bridge and Partners
●
Transformation programme on track to deliver expected £300
million of annual savings this year over a 2019 base
●
£637 million share buybacks in H1, total of £800 million
to be completed in 2022; 15.0p 2022 interim dividend declared,
+20%
●
Full year 2022 LFL revenue less pass-through costs growth now
expected to be 6.0-7.0%; headline operating profit margin up around
50 bps
Mark Read, Chief Executive Officer of WPP, said:
“We
have enjoyed a strong first half, with broad-based growth across
our creative, media and public relations businesses. This reflects
the improved competitive position of our creative businesses, with
their growing capabilities in commerce, experience and technology,
our continued strength in media and the resurgence in demand for
strategic communications advice from our public relations agencies.
“Our
services are business-critical – driving growth, building
brands, innovating and helping clients navigate an increasingly
complex marketing environment. As major advertisers increasingly
look to integrate their marketing investments, we are well
positioned to serve the world’s largest companies,
demonstrated by our success with Coca-Cola, which we are now
onboarding at pace. The second quarter saw significant
assignment wins from Audi, Audible, Danone and
Nationwide.
“Our
commitment to creativity was recognised at Cannes Lions in June
where WPP was awarded the most creative company, recognising the
quality of our work in all areas, spanning film, digital, media,
commerce and creative business transformation.
It’s a testament to our investment in creativity
and the talent of our people, and I am committed to making WPP the
most creative company in the world.
“Our
clients are continuing to invest in WPP’s services, which
reflects our attractive industry exposure in technology and
healthcare, our broad global footprint, and the importance of what
we do for their businesses. The actions we have taken
over the last four years leave WPP much better positioned with a
more uncertain economic environment ahead.”
For
further information:
Investors and analysts
Peregrine
Riviere
}
+44 7909
907193
Anthony
Hamilton
}
+44 7464
532903
Caitlin
Holt
}
+44 7392
280178
Media
Chris
Wade
}
+44 20 7282
4600
Richard
Oldworth,
+44 7710 130
634
Buchanan
Communications
+44 20 7466
5000
wpp.com/investors
First half overview
Market environment
The market has continued to be strong in the first half of the
year, with many sectors seeing significant growth in advertising
spend. GroupM now expects global advertising to grow by
8.4%4 in 2022,
marginally lower than the 9.7% estimate in December 2021, mainly
due to a softer outlook for China amid ongoing
lockdowns.
GroupM expects 12% growth in digital advertising revenues in 2022,
a deceleration from the 32% growth in 2021. Overall, digital
advertising on pure-play platforms represents 67% of total
advertising revenues. Retaining its critical brand-building role,
spend on television advertising is forecast to grow at 4% in
2022.
By geography, the US advertising market is expected to remain
robust, growing by 10.0%4
while the UK is expected to grow by
9.3%. Germany, Europe’s second-largest advertising market, is
forecast to grow at a similarly high pace in 2022 at 9.1%. China is
expected to grow by 3.3% in 2022, a downgrade from the 10.2%
forecast in December 2021, reflecting the impact of the lockdowns
during much of the first half of 2022.
Performance and progress
Revenue in the first half was £6.8 billion, up 10.2% from
£6.1 billion in the first half of 2021, and up 8.7%
like-for-like. Revenue less pass-through costs was £5.5
billion, up 12.5% from £4.9 billion in the first half of 2021,
and up 8.9% like-for-like.
We have seen good momentum in the first half of the year, with LFL
growth in revenue less pass-through costs across most sectors and
most major markets. On a three-year basis LFL revenue less
pass-through costs is up 9.4% in the first half.
Client demand remains healthy across all services. Revenue less
pass-through costs from higher-growth areas of our offer in
experience, commerce and technology was 39% of our Global
Integrated Agencies, excluding GroupM, compared to 35% in 2019. Our
digital billings mix within GroupM increased to 46%, compared to
43% in the first half of 2021. In addition, we have seen strong
demand for commerce services, with GroupM’s commerce billings
increasing 26% year-on-year in the first half.
Clients and partners
In terms of client sector performance, we have seen good growth in
the technology, CPG and healthcare & pharma sectors, which
together represent around 54% of our revenue less pass-through
costs5 for
designated clients. In the first half these sectors saw LFL revenue
less pass-through costs growth of 12%, 7% and 7% respectively.
Compared to 2019, their growth rates were 27%, 17% and 20%. Travel
and leisure has continued to rebound, growing 23% in the first
half, although the sector remains below 2019 levels. We saw some
softness in the automotive sector due to ongoing chip
shortages.
We have won $3.4 billion of net new business billings in the first
half, compared to $2.9 billion in the first half of 2021. Key
assignment wins include Audi, Audible, Danone, Mars and Nationwide.
Following the unprecedented account win last year, Coca-Cola has
been onboarded at pace. During the first half we unveiled the first
consistent, global ad platform for Sprite, with the ‘Heat
Happens’ campaign which will be rolled out across 200
markets.
In addition, we have developed new, and expanded existing,
partnerships with global technology companies. During the period we
announced a partnership with Epic Games, the company behind
Fortnite and Unreal Engine, to help WPP agencies develop digital
experiences in the metaverse. We also unveiled a first-of-its-kind
partnership with Instacart, the leading online grocery platform in
North America, giving WPP early product insights, access to custom
features and a co-developed certification programme.
Creativity and awards
While data and technology play an increasingly important role in
modern marketing, creativity is still at the heart of our work,
because clients understand that the most effective campaigns start
with an insight or idea. We are committed to maintaining our
differentiation through sustained investment in creative talent,
and integrating creativity with our experience, commerce and
technology expertise.
WPP won the prestigious title of most creative company of the year
at the Cannes Lions International Festival of Creativity for the
second year in a row. WPP agencies collected a total of 176
Lions, including a Titanium Lion, 4 Grand Prix and 36 Gold
Lions. Ogilvy won global network of the year, recognised for its investment in diverse talent,
scaled technology and digital capabilities, and thought
leadership.
In the
2022 WARC rankings, Ogilvy also topped the creativity ranking and
placed second for effectiveness, becoming the only agency to secure
top rankings in both categories and reflecting the breadth of its
offer. WARC also named Mindshare the number one media agency
network for the third consecutive year. WPP agencies also made
their mark at the 2022 Clio awards, where work from AKQA Group,
Wunderman Thompson and Ogilvy was recognised with the most
prestigious, Grand Clio award.
Our
media business, GroupM, retained its ranking as the world’s
largest media agency group, as calculated by COMvergence in their
2021 full year report. Once again, GroupM ranked number one in APAC
and EMEA and improved to joint second place in North
America.
Investment for growth
During the first half we have invested in strategically important
capabilities, continuing our focused approach to acquisitions. We
announced the acquisitions of Village Marketing, the industry
leader in influencer marketing in North America and Bower House
Digital, a leading Australian marketing technology services agency.
In July we announced the acquisition of Corebiz, a leading Latin
American ecommerce agency specialising in VTEX implementation,
one of the largest enterprise digital commerce platforms in the
region.
We have invested organically in new platforms to provide a
future-facing offer to clients and innovate for the long term. The
main areas of our investment are Choreograph, to accelerate our
data capabilities; the launch of Everymile, our
commerce-as-a-service platform; and our market-leading programmatic
and connected TV businesses within GroupM Nexus. In
addition, we launched GroupM Premium Marketplace, a unified
programmatic marketplace supported by global
partnerships.
Transformation programme
We continue to make good progress on our transformation plan,
designed to achieve £600 million in annual cost efficiencies
by 2025. We are on target to achieve our annual runrate of
£300 million in efficiencies this year, against a 2019
baseline.
In property, we now have around 50,000 people occupying 34
campuses, having opened new campuses in Santiago, Tokyo and Toronto
in 2022. By the end of the year, we aim to have 4 further campuses
opened and around half of our people working from a campus
building.
We are continuing to consolidate and modernise the tools used by
our people, predominantly through the roll-out of ERP systems
Workday and Maconomy. We are live with Workday in Wunderman
Thompson North America. On Maconomy, we now have around 18,500
users on a common technology platform, which is an important
stepping-stone for further process optimisation and finance shared
services deployment.
In our broader IT transformation, we have moved nearly 1,000 people
from agency roles into WPP and established global hubs in Chennai
and Mexico. We have begun to realise opportunities identified from
a zero-based budgeting review across Corporate IT and Ogilvy, and
are commencing work on rolling out this approach across the
remaining IT spend in WPP.
In procurement, we hosted a supplier day for 30 key suppliers to
communicate our procurement strategy and align incentives, driving
incremental savings. We are implementing a new procurement
operating model leveraging our global scale, aligned around
categories and consolidating suppliers.
We have also merged more of our businesses to simplify our
organisation and respond to our clients’ needs. Within
GroupM we announced the merger of Essence and MediaCom to form
EssenceMediacom and the formation of Nexus which brings together
Finecast, Xaxis and GroupM Services to form one of the
world’s leading media performance organisations. Last month
we announced the merger of our specialist design agencies, Design
Bridge and Superunion to create a single leading design company,
Design Bridge and Partners.
Finally, we have made progress in streamlining our operating model,
reducing statutory entities by approximately a further 150 in the
first half of the year.
Purpose and ESG
People
We have
continued to invest in our people strategy in order to attract,
retain and grow top talent and ensure that we are an employer of
choice for all. We recently launched the Making Space initiative,
giving our people a company-wide break along with a series of
events across our campuses and offices to inspire and reconnect. To
support access to women’s healthcare across the United
States, we have updated our benefits plan to providing funding for
travel that allows consistent access to healthcare and resources,
including abortion care, across all regions.
WPP is
working to accelerate change in diversity, equity, and inclusion.
We continue to link our DE&I goals to leaders’
compensation and performance reviews. WPP was named among the best
places to work for LGBTQ+ equality by the Human Rights Campaign;
and WPP Unite, our LGBTQ+ community,
won Outstanding Employee Network of the Year at the Burberry
British Diversity Awards.
We are
committed to our $30 million pledge to fund inclusion programmes
within WPP and to support external organisations, as part of our
Racial Equity Programme. During the period we invited our global
agencies to apply for the second round of funding for resources to
run impactful programmes to advance racial equity. Successful
second-round grants include GroupM GradX Africa Academy, a 12-month
media programme for people of colour in South Africa; RGBlack project, an
educational platform that helps to mitigate the impacts of coded
bias in AI-powered tools, originating from Brazil; and GIZMOLOGY, a
hands-on creative technology apprenticeship programme for Black and
historically marginalised communities operating out of WPP’s
Deeplocal’s studio in Pittsburgh.
Planet
Last year we announced our new commitments to reduce carbon
emissions from our own operations to net zero by 2025 and across
our supply chain by 2030. Our net zero pledges are backed by
equally ambitious science-based reduction targets, which have been
verified by the Science-Based Targets initiative. We have committed
to reducing our absolute Scope 1 and 2 emissions by at least 84% by
2025 and reduce Scope 3 emissions by at least 50% by 2030, both
from a 2019 base year.
During the half, WPP was awarded a ‘Prime’ ESG rating
by ISS, one of the world’s leading rating agencies for
sustainable investment. We are also proud to be rated A- by the
Carbon Disclosure Project (CDP) in 2021 and look forward to
continuing to take action in 2022.
Media accounts for more than half of WPP’s supply chain
emissions. In July GroupM launched a framework to measure and
reduce ad-based carbon emissions, an important first step to
standardise and accelerate carbon reduction across different media
channels.
Clients
Our clients are bringing purpose and sustainability to the
forefront of their brand strategies. Many of our successes at the
Cannes Lions International Festival of Creativity were in
recognition of purpose-driven work, including a Titanium Grand Prix
for Cadbury work by Ogilvy and Wavemaker, which uses personalised
adverts for local businesses hit by COVID-19; and a Grand Prix for
the I Will Always Be Me campaign on behalf of Dell and Intel by
VMLY&R to make life easier for people with motor neurone
disease. VMLY&R also won a Grand Prix for Maxx Flash’s
The Killer Pack, which helps combat, through biodegradable
packaging, deadly diseases like malaria and dengue caught outdoors
in India.
Communities
Our colleagues in Ukraine continue to show extraordinary resilience
and bravery and we remain in regular contact with our leaders to
support our employees. In early March, the Board of WPP concluded
that WPP's ongoing presence in Russia would be inconsistent with
our values as a company and we have subsequently divested our
businesses there. This led to a loss on disposal of £65
million. Russia represented approximately 0.6% of WPP’s
revenue less pass-through costs in 2021.
WPP partnered with the UNHCR, the UN refugee agency, to support an
emergency fundraising appeal to help people forced to flee their
homes in Ukraine, raising over $150 million, including more than
$1.3 million from WPP’s employee match-funding programme. We
are also working in partnership with the Ukrainian Government on a
new campaign to support the country’s economic recovery. WPP
agencies from Ukraine, Poland and Czech Republic will work pro bono
on ‘Advantage Ukraine’ to demonstrate that Ukraine is
open for business. The initiative will target business leaders
within the region and across the world to encourage inward
investment to support the economic recovery of the
country.
2022 guidance
Performance in the first half of 2022 has been strong, and we
expect continued growth in the second half. As a result, we are
updating our guidance for 2022 as follows:
●
Organic
growth (defined as like-for-like revenue less pass-through costs
growth) of 6.0-7.0% (previously 5.5-6.5%)
●
Headline
operating profit margin up around 50 bps, reflecting greater
top-line momentum offset by inflationary cost pressures, the impact
of Chinese lockdowns and investment in growth areas including
Choreograph and Everymile
●
Effective
tax rate (measured as headline tax as a % of headline profit before
tax) of around 25.5%
●
Capex
£350-400 million with around £100 million relating to ERP
system deployment previously included in capex guidance now
included in restructuring costs
●
Trade
working capital expected to be flat year-on-year
●
Current
foreign exchange rates imply around a 4.5% tailwind to reported
revenue less pass-through costs from the movement in sterling
year-on-year
●
We
also anticipate mergers and acquisitions will add around 0.3% to
revenue less pass-through costs growth, net of the divestment of
our Russian operations
●
We
expect to execute around £800 million of share buybacks in
2022, of which £637 million has already been
completed
Medium-term guidance
We remain confident in our ability to deliver annual revenue less
pass-through costs growth of 3-4% and headline operating profit
margin of 15.5-16%, as a result of the actions we have taken to
broaden and strengthen our services, to increase our exposure to
attractive industry segments and to leverage our global
scale.
We will provide guidance for the 2023 year at our 2022 preliminary
results announcement in February 2023.
4 Excluding the impact of US political
advertising
5 For
designated clients, representing approximately 76% of total revenue
less pass-through costs
Financial results
Unaudited headline income statement:
|
Six
months ended (£ million)
|
30 June 2022
|
30 June 2021
|
+/(-) %
reported
|
+/(-) %
LFL
|
|
|
|
|
|
|
|
Revenue
|
6,755
|
6,133
|
10.2
|
8.7
|
|
Revenue
less pass-through costs
|
5,509
|
4,899
|
12.5
|
8.9
|
|
Operating
profit
|
639
|
590
|
8.2
|
|
|
Operating
profit margin %
|
11.6%
|
12.1%
|
(0.5)pt
|
|
|
Income
from associates
|
12
|
29
|
(56.5)
|
|
|
PBIT
|
651
|
619
|
5.3
|
|
|
Net
finance costs
|
(89)
|
(117)
|
23.7
|
|
|
Profit
before tax
|
562
|
502
|
12.0
|
|
|
Tax
|
(143)
|
(115)
|
(25.2)
|
|
|
Profit
after tax
|
419
|
387
|
8.2
|
|
|
Non-controlling
interests
|
(43)
|
(34)
|
(24.9)
|
|
|
Profit
attributable to shareholders
|
376
|
353
|
6.5
|
|
|
Diluted
EPS
|
33.0p
|
28.7p
|
15.0
|
|
Reconciliation of operating profit to headline operating
profit:
|
Six
months ended (£ million)
|
30 June 2022
|
30 June 2021
|
|
|
|
|
|
Operating profit
|
539
|
484
|
|
Amortisation
and impairment of acquired intangible assets
|
31
|
30
|
|
Losses
on disposal of investments and subsidiaries
|
48
|
1
|
|
Gains
on remeasurement of equity interests arising from a change in scope
of ownership
|
(60)
|
-
|
|
Litigation
settlement
|
-
|
22
|
|
Restructuring
and transformation costs
|
75
|
34
|
|
Restructuring
costs in relation to COVID-19
|
6
|
19
|
|
Headline operating profit
|
639
|
590
|
Reported
billings were £24.6 billion, up 5.1%, and up 3.9%
like-for-like.
Reported
revenue from continuing operations was up 10.2% at
£6.8 billion. Revenue
on a constant currency basis was up 7.2% compared with last year.
Net changes from acquisitions and disposals had a negative impact
of 1.5% on growth, leading to a like-for-like performance,
excluding the impact of currency and acquisitions, of
8.7%.
Reported
revenue less pass-through costs was up 12.5%, and up 9.2% on a
constant currency basis. Excluding the impact of acquisitions and
disposals, like-for-like growth was 8.9%. In the second quarter,
like-for-like revenue less pass-through costs was up
8.3%.
Business sector review
Revenue analysis
|
|
Q2
|
|
H1
|
||||
|
|
£m
|
+/(-) % reported
|
+/(-)
% LFL
|
|
£m
|
+/(-) % reported
|
+/(-) % LFL
|
|
Global
Int. Agencies
|
3,111
|
13.0
|
10.2
|
|
5,701
|
9.6
|
9.3
|
|
Public Relations
|
302
|
28.0
|
9.0
|
|
572
|
27.2
|
11.2
|
|
Specialist
Agencies
|
251
|
1.5
|
(0.3)
|
|
482
|
0.5
|
0.2
|
|
Total Group
|
3,664
|
13.3
|
9.3
|
|
6,755
|
10.2
|
8.7
|
Prior
year figures have been re-presented to reflect the reallocation of
a number of businesses between Global Integrated Agencies and
Specialist Agencies. This increases Global Integrated
Agencies’ Q2 and H1 2021 revenue by £18 million and
£33 million respectively and reduces Specialist
Agencies’ by the same amount.
Revenue less pass-through costs analysis
|
|
Q2
|
|
H1
|
||||
|
|
£m
|
+/(-) % reported
|
+/(-)
% LFL
|
|
£m
|
+/(-) % reported
|
+/(-) % LFL
|
|
Global
Int. Agencies
|
2,432
|
13.1
|
8.2
|
|
4,538
|
10.8
|
8.4
|
|
Public Relations
|
283
|
26.7
|
7.3
|
|
545
|
27.0
|
10.5
|
|
Specialist
Agencies
|
220
|
14.6
|
10.9
|
|
426
|
14.3
|
11.9
|
|
Total Group
|
2,935
|
14.4
|
8.3
|
|
5,509
|
12.5
|
8.9
|
Prior
year figures have been re-presented to reflect the reallocation of
a number of businesses between Global Integrated Agencies and
Specialist Agencies. This increases Global Integrated
Agencies’ Q2 and H1 2021 revenue less pass-through costs by
£15 million and £28 million respectively and reduces
Specialist Agencies’ by the same amount.
Headline operating profit analysis
|
£
million
|
2022
|
%
margin*
|
2021
|
%
margin*
|
|
Global
Int. Agencies
|
507
|
11.2
|
489
|
11.9
|
|
Public Relations
|
83
|
15.2
|
63
|
14.8
|
|
Specialist Agencies
|
49
|
11.4
|
38
|
10.3
|
|
Total Group
|
639
|
11.6
|
590
|
12.1
|
*
Headline operating profit as a percentage of revenue less
pass-through costs
Prior
year figures have been re-presented to reflect the reallocation of
a number of businesses between Global Integrated Agencies and
Specialist Agencies. This increases Global Integrated
Agencies’ H1 2021 headline operating profit by £6
million and reduces Specialist Agencies’ by the same
amount.
Global Integrated Agencies like-for-like revenue less
pass-through costs was up 8.4% in the first half and up 8.2% in the
second quarter. All of our integrated agencies were in growth in
the first half. GroupM, representing 37% of WPP revenue less
pass-through costs saw 11.8% like-for-like growth in the half and
10.9% growth in the second quarter. VMLY&R and AKQA Group are
showing an improving growth trend year-on-year in the second
quarter. Wunderman Thompson and Ogilvy recorded encouraging
growth.
Public Relations like-for-like revenue less pass-through
costs was up 10.5% in the first half and up 7.3% in the second
quarter. All parts of the business grew in the second quarter, with
H+K being a particularly strong performer. Purpose-related
communications and ESG advisory remain a key growth driver. During
the period we launched FGS Global, the new name and branding for
the merger of Finsbury Glover Hering and Sard
Verbinnen.
Specialist Agencies like-for-like revenue less pass-through
costs was up 11.9% in the first half and up 10.9% in the second
quarter. CMI and Landor & Fitch, the two largest businesses
within Specialist Agencies, continued to be stand-out
performers.
Regional review
Revenue analysis
|
|
Q2
|
|
H1
|
||||
|
|
£m
|
% reported
|
%
LFL
|
|
£m
|
% reported
|
%
LFL
|
|
N. America
|
1,399
|
24.9
|
12.4
|
|
2,586
|
18.4
|
10.9
|
|
United Kingdom
|
495
|
0.3
|
1.0
|
|
956
|
3.1
|
3.2
|
|
W
Cont. Europe
|
731
|
0.4
|
3.7
|
|
1,352
|
0.9
|
5.3
|
|
AP, LA, AME, CEE6
|
1,039
|
16.3
|
14.8
|
|
1,861
|
10.7
|
11.8
|
|
Total Group
|
3,664
|
13.3
|
9.3
|
|
6,755
|
10.2
|
8.7
|
Revenue less pass-through costs analysis
|
|
Q2
|
|
H1
|
||||
|
|
£m
|
% reported
|
%
LFL
|
|
£m
|
% reported
|
%
LFL
|
|
N. America
|
1,173
|
26.0
|
10.2
|
|
2,189
|
20.4
|
9.5
|
|
United Kingdom
|
385
|
7.2
|
6.2
|
|
737
|
8.4
|
7.1
|
|
W
Cont. Europe
|
579
|
3.6
|
6.6
|
|
1,086
|
3.4
|
7.7
|
|
AP, LA, AME, CEE
|
798
|
11.4
|
8.0
|
|
1,497
|
10.8
|
9.8
|
|
Total Group
|
2,935
|
14.4
|
8.3
|
|
5,509
|
12.5
|
8.9
|
Headline operating profit analysis
|
£
million
|
2022
|
%
margin*
|
2021
|
%
margin*
|
|
N. America
|
300
|
13.7
|
271
|
14.9
|
|
United
Kingdom
|
67
|
9.1
|
83
|
12.3
|
|
W Cont. Europe
|
99
|
9.1
|
104
|
9.9
|
|
AP, LA, AME, CEE
|
173
|
11.6
|
132
|
9.7
|
|
Total Group
|
639
|
11.6
|
590
|
12.1
|
*
Headline operating profit as a percentage of revenue less
pass-through costs
North America like-for-like revenue less pass-through costs
was up 9.5% in the first half and up 10.2% in the second quarter.
On a three-year basis, North America was up 10.5% like-for-like for
the first half, with an improving trend in the second quarter.
Growth was driven predominantly by GroupM, along with strong growth
in Hogarth, Superunion and H+K.
United Kingdom like-for-like revenue less pass-through costs
was up 7.1% in the first half and up 6.2% in the second quarter. On
a three-year basis, the UK was up 7.4% like-for-like for the first
half. Of our major agencies, AKQA Group, H+K and Landor & Fitch
all grew double digits in the first half. VMLY&R and GroupM saw
slower growth as a result of very strong performances in the prior
period.
Western Continental Europe like-for-like revenue less
pass-through costs was up 7.7% in the first half and up 6.6% in the
second quarter. We saw a strong performance in Germany, mainly
driven by GroupM, and Spain, while France continued to be impacted
by assignment losses from 2021.
In Asia
Pacific, Latin America, Africa & the Middle East and Central
& Eastern Europe, like-for-like revenue less
pass-through costs was up 9.8% in the first half and up 8.0% in the
second quarter. Latin America was the strongest region, with
continued double-digit growth led by Brazil. Asia Pacific also
grew, with sustained momentum in India offsetting a weak China
performance, which has been impacted by ongoing
lockdowns.
Operating profitability
Reported
profit before tax was £419 million, compared to £394
million in the prior period, principally reflecting stronger
business performance year-on-year gains on the remeasurement of
equity interests arising from changes in ownership, partly offset
by the loss on the divestment of our Russian operations and higher
restructuring and transformation costs (see table on page
9).
Reported
profit after tax was £301 million compared to £287
million in the prior period.
Headline
EBITDA (including IFRS 16 depreciation) for the first half was up
6.5% to £745 million. Headline operating profit was up 8.2% to
£639 million.
Headline
operating profit margin was down 50 basis points to 11.6%. Total
operating costs were up 13.0% to £4.9 billion. Staff costs,
excluding incentives, were up 16.7% year-on-year to £3.8
billion, reflecting higher headcount and the full year impact of
the salary reviews that took place in June 2021. Establishment
costs were down 0.8% at £263 million as we continued to
benefit from our campus roll-out. IT costs were up 11.3% at
£308 million, reflecting investment in products and services,
and other operating expenses were up 12.7% at £272 million.
Personal costs rose 84.6% to £96 million, reflecting the
return of business travel, as expected. Excluding incentive
payments as outlined below, operating costs were up 15.8%
year-on-year.
The
Group’s headline operating profit is net of £17 million
of severance costs, compared with £15 million in the first
half of 2021 and £164 million of incentive payments, compared
to £244 million in the first half of 2021.
On a
like-for-like basis, the average number of people in the Group in
the first half was 113,000 compared to 102,000 in the first half of
2021. The total number of people as at 30 June 2022 was 115,000
compared to 104,000 as at 30 June 2021.
Exceptional items
The
Group incurred a net exceptional loss of £100 million in the
first half of 2022, mainly relating to restructuring and
transformation costs, the loss on disposal from the divestment of
our Russian interests, and the amortisation and impairment of
acquired intangibles, partially offset by gains on remeasurement of
equity interests arising from a change in scope of ownership. This
compares with a net exceptional loss in the first half of 2021 of
£106 million.
Interest and taxes
Net
finance costs (excluding the revaluation of financial instruments)
were £89 million, a decrease of £28 million year-on-year,
due to higher investment income, lower bond debt and higher
interest earned on cash.
The
headline tax rate (based on headline profit before tax) was 25.5%
(2021: 22.8%) and on reported profit before tax was 28.1% (2021:
27.2%). Given the Group’s geographic mix of profits and the
changing international tax environment, the tax rate is expected to
increase over the next few years.
Earnings and dividend
Headline
profit before tax was up 12.0% to £562 million.
Profits
attributable to share owners were £258 million, compared to a
profit of £253 million in the prior period.
Headline
diluted earnings per share from continuing operations rose by 15.0%
to 33.0p. Reported diluted earnings per share, on the same basis,
was 22.7p, compared to 20.6p in the prior period.
For
2022, the Board is declaring an interim dividend of 15.0p, an
increase of 20% year-on-year. The record date for the
interim dividend is 14 October
2022, and the dividend will be payable on 1 November
2022.
Further
details of WPP’s financial performance are provided in
Appendix 1.
Cash flow highlights
|
Six months ended (£ million)
|
30 June 2022
|
30 June 2021
|
|
|
Operating profit
|
539
|
484
|
|
|
Depreciation and amortisation
|
255
|
250
|
|
|
Impairments and investment write-downs
|
8
|
8
|
|
|
Lease payments (inc interest)
|
(190)
|
(202)
|
|
|
Non-cash compensation
|
67
|
44
|
|
|
Net interest paid
|
(60)
|
(65)
|
|
|
Tax paid
|
(163)
|
(163)
|
|
|
Capex
|
(117)
|
(138)
|
|
|
Earnout payments
|
(63)
|
(14)
|
|
|
Other
|
(9)
|
(44)
|
|
|
Trade working capital
|
(1,015)
|
(464)
|
|
|
Other receivables, payables and provisions
|
(726)
|
(41)
|
|
|
Free cash flow
|
(1,474)
|
(345)
|
|
|
Disposal proceeds
|
34
|
43
|
|
|
Net initial acquisition payments
|
(46)
|
(252)
|
|
|
Share purchases
|
(681)
|
(298)
|
|
|
Net cash flow
|
(2,167)
|
(852)
|
|
Net cash outflow for the first half was £2.2 billion, compared
to £852 million in the first half of 2021. The main drivers of
the cash flow performance year-on-year were a partial reversal of
the strong working capital position at December 2021, the
significant increase in share purchases, the payment of bonuses in
April 2022 that were accrued in the 2021 financial year, and
specific temporary collection issues caused by the lockdowns in
China. A summary of the Group’s unaudited cash flow statement
and notes for the six months to 30 June 2022 is provided in
Appendix 1.
Balance sheet highlights
As at
30 June 2022 we had cash and cash equivalents of £1.5 billion
and total liquidity, including undrawn credit facilities, of
£3.4 billion. Average adjusted net debt in the first half was
£2.4 billion, compared to £1.4 billion in the prior
period, at 2022 exchange rates. On 30 June 2022 adjusted net debt
was £3.1 billion, against £1.5 billion on 30 June 2021,
an increase of £1.6 billion at reported and at 2022 exchange
rates.
We
spent £681 million on share purchases in the first half of the
year, of which £637 million related to share buybacks. Since
June 2021 we have completed £1.1 billion of share
buybacks.
Our
bond portfolio at 30 June 2022 had an average maturity of 6.8
years.
The
average adjusted net debt to EBITDA ratio in the 12 months to 30
June 2022 is 1.2x, which excludes the impact of IFRS 16. We also
expect to end the year slightly below our target leverage range of
average adjusted net debt/EBITDA of 1.5-1.75x.
A
summary of the Group’s unaudited balance sheet and notes as
at 30 June 2022 is provided in Appendix 1.
Appendix 1: Interim results for the six months ended 30 June
2022
Unaudited condensed consolidated interim income statement for the
six months ended 30 June 2022
|
£
million
|
Notes
|
Six months ended
30 June
2022
|
Six months ended
30 June
2021
|
|
Revenue
|
7
|
6,755.3
|
6,132.5
|
|
Costs
of services
|
4
|
(5,708.1)
|
(5,196.1)
|
|
Gross profit
|
|
1,047.2
|
936.4
|
|
General
and administrative costs
|
4
|
(508.5)
|
(452.8)
|
|
Operating profit
|
|
538.7
|
483.6
|
|
Share
of results of associates
|
5
|
(63.8)
|
40.0
|
|
Profit before interest and taxation
|
|
474.9
|
523.6
|
|
Finance
and investment income
|
6
|
55.5
|
30.1
|
|
Finance
costs
|
6
|
(144.9)
|
(147.2)
|
|
Revaluation
and retranslation of financial instruments
|
6
|
33.1
|
(12.1)
|
|
Profit before taxation
|
|
418.6
|
394.4
|
|
Taxation
|
8
|
(117.5)
|
(107.1)
|
|
Profit for the period
|
|
301.1
|
287.3
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity
holders of the parent
|
|
257.9
|
252.7
|
|
Non-controlling
interests
|
|
43.2
|
34.6
|
|
|
|
301.1
|
287.3
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
Basic
earnings per ordinary share
|
10
|
23.1p
|
20.9p
|
|
Diluted
earnings per ordinary share
|
10
|
22.7p
|
20.6p
|
The accompanying notes form an integral part of this unaudited condensed consolidated interim income statement.
Unaudited condensed consolidated interim statement of comprehensive
income for the six months ended 30 June 2022
|
£
million
|
|
Six months ended
30 June
2022
|
Six months ended
30 June
2021
|
|
Profit for the period
|
|
301.1
|
287.3
|
|
Items that may be reclassified subsequently to profit or
loss:
|
|
|
|
|
Exchange
adjustments on foreign currency net investments
|
|
459.7
|
(174.9)
|
|
(Loss)/gain on net investment hedges
|
|
(129.9)
|
73.4
|
|
Cash flow hedges:
|
|
|
|
|
Fair value gain/(loss) arising on hedging instruments
|
|
18.7
|
(31.4)
|
|
Less: (loss)/gain reclassified to profit or loss
|
|
(18.7)
|
31.4
|
|
Share of other comprehensive income of associates
undertakings
|
|
30.7
|
—
|
|
|
|
360.5
|
(101.5)
|
|
Items that will not be reclassified subsequently to profit or
loss:
|
|
|
|
|
Movements on equity
investments held at fair value through other comprehensive
income
|
|
(5.2)
|
27.2
|
|
|
|
(5.2)
|
27.2
|
|
Other comprehensive income/(loss) relating to the
period
|
|
355.3
|
(74.3)
|
|
Total comprehensive income relating to the period
|
|
656.4
|
213.0
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity
holders of the parent
|
|
593.3
|
183.9
|
|
Non-controlling
interests
|
|
63.1
|
29.1
|
|
|
|
656.4
|
213.0
|
The
accompanying notes form an integral part of this unaudited
condensed consolidated interim statement of comprehensive
income.
Unaudited condensed consolidated interim cash flow statement for
the six months ended 30 June 2022
|
£
million
|
Notes
|
Six months ended
30 June
2022
|
Six months ended
30 June
2021
|
|
Net cash (outflow)/inflow from operating activities
|
11
|
(1,110.8)
|
39.2
|
|
Investing activities
|
|
|
|
|
Acquisitions
|
11
|
(102.7)
|
(148.5)
|
|
Disposals
of investments and subsidiaries
|
11
|
29.2
|
1.3
|
|
Purchase
of property, plant and equipment
|
|
(102.4)
|
(111.6)
|
|
Purchase
of other intangible assets (including capitalised computer
software)
|
|
(14.6)
|
(26.7)
|
|
Proceeds
on disposal of property, plant and equipment
|
|
4.5
|
3.4
|
|
Net cash outflow from investing activities
|
|
(186.0)
|
(282.1)
|
|
Financing activities
|
|
|
|
|
Repayment
of lease liabilities
|
|
(146.3)
|
(157.4)
|
|
Share
option proceeds
|
|
1.1
|
—
|
|
Cash
consideration received from non-controlling interests
|
11
|
—
|
38.7
|
|
Cash
consideration for purchase of non-controlling
interests
|
11
|
(6.2)
|
(117.7)
|
|
Share
repurchases and buy-backs
|
11
|
(680.5)
|
(297.6)
|
|
Proceeds from borrowings
|
11
|
247.2
|
—
|
|
Repayment of borrowings
|
11
|
(220.6)
|
(35.9)
|
|
Financing
and share issue costs
|
|
—
|
(0.3)
|
|
Dividends
paid to non-controlling interests in subsidiary
undertakings
|
|
(37.2)
|
(74.5)
|
|
Net cash outflow from financing activities
|
|
(842.5)
|
(644.7)
|
|
Net decrease in cash and cash equivalents
|
|
(2,139.3)
|
(887.6)
|
|
Translation
of cash and cash equivalents
|
|
88.0
|
(102.6)
|
|
Cash
and cash equivalents at beginning of period
|
|
3,540.6
|
4,337.1
|
|
Cash and cash equivalents at end of period
|
12
|
1,489.3
|
3,346.9
|
The
accompanying notes form an integral part of this unaudited
condensed consolidated interim cash flow statement.
Unaudited condensed consolidated interim balance sheet as of 30
June 2022
|
£
million
|
Notes
|
30 June
2022
|
31 December
2021
|
|
Non-current assets
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
Goodwill
|
13
|
8,237.5
|
7,612.3
|
|
Other
|
|
1,469.2
|
1,359.5
|
|
Property,
plant and equipment
|
|
969.1
|
896.4
|
|
Right-of-use
assets
|
|
1,455.7
|
1,395.1
|
|
Interests
in associates and joint ventures
|
|
346.6
|
412.9
|
|
Other
investments
|
|
372.9
|
318.3
|
|
Deferred
tax assets
|
|
310.4
|
341.5
|
|
Corporate
income tax recoverable
|
|
55.5
|
46.6
|
|
Trade
and other receivables
|
14
|
198.2
|
152.6
|
|
|
|
13,415.1
|
12,535.2
|
|
Current assets
|
|
|
|
|
Corporate
income tax recoverable
|
|
109.5
|
90.4
|
|
Trade
and other receivables
|
14
|
11,716.1
|
11,362.3
|
|
Cash
and short-term deposits
|
|
1,775.0
|
3,882.9
|
|
|
|
13,600.6
|
15,335.6
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade
and other payables
|
15
|
(13,934.9)
|
(15,252.3)
|
|
Corporate
income tax payable
|
|
(365.2)
|
(386.2)
|
|
Short-term
lease liabilities
|
|
(293.6)
|
(279.7)
|
|
Bank
overdrafts, bonds and bank loans
|
|
(289.1)
|
(567.2)
|
|
|
|
(14,882.8)
|
(16,485.4)
|
|
Net current liabilities
|
|
(1,282.2)
|
(1,149.8)
|
|
Total assets less current liabilities
|
|
12,132.9
|
11,385.4
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Bonds
and bank loans
|
|
(4,620.7)
|
(4,216.8)
|
|
Trade
and other payables
|
16
|
(640.7)
|
(619.9)
|
|
Deferred
tax liabilities
|
|
(341.6)
|
(312.5)
|
|
Provisions
for post-employment benefits
|
|
(177.0)
|
(136.6)
|
|
Provisions
for liabilities and charges
|
|
(245.7)
|
(268.5)
|
|
Long-term
lease liabilities
|
|
(1,836.8)
|
(1,762.1)
|
|
|
|
(7,862.5)
|
(7,316.4)
|
|
Net assets
|
|
4,270.4
|
4,069.0
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Called-up
share capital
|
|
116.2
|
122.4
|
|
Share
premium account
|
|
575.8
|
574.7
|
|
Other
reserves
|
|
274.0
|
(335.9)
|
|
Own
shares
|
|
(1,083.3)
|
(1,112.1)
|
|
Retained
earnings
|
|
3,909.2
|
4,367.3
|
|
Equity shareholders’ funds
|
|
3,791.9
|
3,616.4
|
|
Non-controlling
interests
|
|
478.5
|
452.6
|
|
Total equity
|
|
4,270.4
|
4,069.0
|
|
|
|
|
|
The
accompanying notes form an integral part of this unaudited
condensed consolidated interim balance sheet.
|
£
million
|
Called-up
share capital
|
Share
premium account
|
Other reserves
|
Own shares
|
Retained earnings
|
Total equity
share
holders’ funds
|
Non-
controlling interests
|
Total
|
|
Balance at 1 January 2022
|
122.4
|
574.7
|
(335.9)
|
(1,112.1)
|
4,367.3
|
3,616.4
|
452.6
|
4,069.0
|
|
Ordinary shares issued
|
—
|
1.1
|
—
|
—
|
—
|
1.1
|
—
|
1.1
|
|
Share
cancellations
|
(6.2)
|
—
|
6.2
|
—
|
(637.3)
|
(637.3)
|
—
|
(637.3)
|
|
Profit
for the period
|
—
|
—
|
—
|
—
|
257.9
|
257.9
|
43.2
|
301.1
|
|
Exchange
adjustments on foreign currency net investments
|
—
|
—
|
439.8
|
—
|
—
|
439.8
|
19.9
|
459.7
|
|
Loss on net investment hedges
|
—
|
—
|
(129.9)
|
—
|
—
|
(129.9)
|
—
|
(129.9)
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
Fair value gain arising on hedging instruments
|
—
|
—
|
18.7
|
—
|
—
|
18.7
|
—
|
18.7
|
|
Less: loss reclassified to profit or loss
|
—
|
—
|
(18.7)
|
—
|
—
|
(18.7)
|
—
|
(18.7)
|
|
Share of other comprehensive income of associates
undertakings
|
—
|
—
|
24.0
|
—
|
6.7
|
30.7
|
—
|
30.7
|
|
Movements
on equity investments held at fair value through other
comprehensive income
|
—
|
—
|
—
|
—
|
(5.2)
|
(5.2)
|
—
|
(5.2)
|
|
Other
comprehensive income
|
—
|
—
|
333.9
|
—
|
1.5
|
335.4
|
19.9
|
355.3
|
|
Total
comprehensive income
|
—
|
—
|
333.9
|
—
|
259.4
|
593.3
|
63.1
|
656.4
|
|
Dividends
paid
|
—
|
—
|
—
|
—
|
—
|
—
|
(37.2)
|
(37.2)
|
|
Non-cash
share-based incentive plans (including share options)
|
—
|
—
|
—
|
—
|
67.3
|
67.3
|
—
|
67.3
|
|
Tax adjustment on share-based payments
|
—
|
—
|
—
|
—
|
(15.2)
|
(15.2)
|
—
|
(15.2)
|
|
Net
movement in own shares held by ESOP Trusts
|
—
|
—
|
—
|
28.8
|
(72.0)
|
(43.2)
|
—
|
(43.2)
|
|
Recognition/derecognition
of liabilities in respect of put options
|
—
|
—
|
58.1
|
—
|
(47.3)
|
10.8
|
—
|
10.8
|
|
Share
purchases – close period commitments1
|
—
|
—
|
211.7
|
—
|
—
|
211.7
|
—
|
211.7
|
|
Acquisition
and disposal of subsidiaries2
|
—
|
—
|
—
|
—
|
(13.0)
|
(13.0)
|
—
|
(13.0)
|
|
Balance at 30 June 2022
|
116.2
|
575.8
|
274.0
|
(1,083.3)
|
3,909.2
|
3,791.9
|
478.5
|
4,270.4
|
Unaudited condensed consolidated interim statement of changes in
equity for the for the six months ended 30 June 2022
The
accompanying notes form an integral part of this unaudited
condensed consolidated interim statement of changes in
equity.
1 During 2021, the Company entered into an arrangement with
a third party to conduct share buy-backs on its behalf in the close
period commencing on 16 December 2021 and ending on 18 February
2022, in accordance with UK listing rules. The commitment resulting
from this agreement constituted a liability at 31 December
2021 and was recognised as a movement in other reserves in the year
ended 31 December 2021. As the close period ended on 18 February
2022 the movement in other reserves has been reversed in the period
ended 30 June 2022.
2 Acquisition and disposal of subsidiaries represents
movements in retained earnings and non-controlling interests
arising from changes in ownership of existing subsidiaries and
recognition of non-controlling interests on new
acquisitions.
Unaudited condensed consolidated interim statement of changes in
equity for the for the six months ended 30 June 2022
(continued)
|
£
million
|
Called-up
share capital
|
Share
premium account
|
Other reserves1
|
Own shares
|
Retained earnings1
|
Total equity
share
holders’ funds1
|
Non-
controlling interests
|
Total1
|
|
Balance at 1 January 2021
|
129.6
|
570.3
|
196.0
|
(1,118.3)
|
5,070.7
|
4,848.3
|
318.1
|
5,166.4
|
|
Restatement1
|
—
|
—
|
(4.8)
|
—
|
(111.5)
|
(116.3)
|
—
|
(116.3)
|
|
Restated balance at 1 January 2021
|
129.6
|
570.3
|
191.2
|
(1,118.3)
|
4,959.2
|
4,732.0
|
318.1
|
5,050.1
|
|
Share
cancellations
|
(2.6)
|
—
|
2.6
|
—
|
(248.1)
|
(248.1)
|
—
|
(248.1)
|
|
Treasury
share allocations
|
—
|
—
|
—
|
3.7
|
(3.7)
|
—
|
—
|
—
|
|
Profit
for the period
|
—
|
—
|
—
|
—
|
252.7
|
252.7
|
34.6
|
287.3
|
|
Exchange
adjustments on foreign currency net investments
|
—
|
—
|
(169.4)
|
—
|
—
|
(169.4)
|
(5.5)
|
(174.9)
|
|
Gain on net investment hedges
|
—
|
—
|
73.4
|
—
|
—
|
73.4
|
—
|
73.4
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
Fair value loss arising on hedging instruments
|
—
|
—
|
(31.4)
|
—
|
—
|
(31.4)
|
—
|
(31.4)
|
|
Less: gain reclassified to profit or loss
|
—
|
—
|
31.4
|
—
|
—
|
31.4
|
—
|
31.4
|
|
Movements
on equity investments held at fair value through other
comprehensive income
|
—
|
—
|
—
|
—
|
27.2
|
27.2
|
—
|
27.2
|
|
Other
comprehensive (loss)/income
|
—
|
—
|
(96.0)
|
—
|
27.2
|
(68.8)
|
(5.5)
|
(74.3)
|
|
Total
comprehensive (loss)/income
|
—
|
—
|
(96.0)
|
—
|
279.9
|
183.9
|
29.1
|
213.0
|
|
Dividends
paid
|
—
|
—
|
—
|
—
|
—
|
—
|
(74.5)
|
(74.5)
|
|
Non-cash
share-based incentive plans (including share options)
|
—
|
—
|
—
|
—
|
43.9
|
43.9
|
—
|
43.9
|
|
Tax
adjustments on share-based payments
|
—
|
—
|
—
|
—
|
(4.6)
|
(4.6)
|
—
|
(4.6)
|
|
Net
movement in own shares held by ESOP Trusts
|
—
|
—
|
—
|
(0.2)
|
(49.3)
|
(49.5)
|
—
|
(49.5)
|
|
Recognition/derecognition
of liabilities in respect of put options
|
—
|
—
|
(146.0)
|
—
|
(0.2)
|
(146.2)
|
—
|
(146.2)
|
|
Acquisition
and disposal of subsidiaries2
|
—
|
—
|
—
|
—
|
(136.5)
|
(136.5)
|
38.7
|
(97.8)
|
|
Restated balance at 30 June 2021
|
127.0
|
570.3
|
(48.2)
|
(1,114.8)
|
4,840.6
|
4,374.9
|
311.4
|
4,686.3
|
The
accompanying notes form an integral part of this unaudited
condensed consolidated interim statement of changes in
equity.
1 Figures have been restated as described in note
2.
2 Acquisition and disposal of subsidiaries represents
movements in retained earnings and non-controlling interests
arising from changes in ownership of existing subsidiaries and
recognition of non-controlling interests on new
acquisitions.
Notes to the unaudited condensed consolidated interim financial
statements
1.
Basis
of accounting
The
unaudited condensed consolidated interim financial statements are
prepared under the historical cost convention, except for the
revaluation of certain financial instruments as disclosed in our
accounting policies.
2.
Accounting
policies
The
unaudited condensed consolidated interim financial statements
comply with IAS 34 Interim Financial Reporting as issued by the
International Accounting Standards Board (IASB) and with the
accounting policies of WPP plc and its subsidiaries (the Group),
which were set out on pages 158 - 163 of the 2021 Annual Report and
Accounts. With the exception of the adoption of hedge accounting
requirements under IFRS 9 Financial Instruments, which is discussed
below, no changes have been made to the Group’s accounting
policies in the period ended 30 June 2022.
The
Group does not consider that the amendments to standards adopted
during the period have a significant impact on the financial
statements.
Impact of the adoption of hedge accounting under IFRS 9 Financial
Instruments
The
Group has adopted the hedge accounting requirements of IFRS 9
Financial Instruments from 1 January 2022. The IFRS 9 hedge
accounting requirements are applied prospectively, and all hedge
arrangements in place at the point of transition are regarded as
continuing hedging relationships under IFRS 9. Accordingly, prior
year financial information has not been restated and will continue
to be reported under IAS 39. There has been no significant impact
on the financial statements as a result of the adoption of IFRS 9
hedge accounting requirements, both at the point of transition and
in the period ended 30 June 2022.
Restatement
After
the unaudited condensed consolidated interim financial statements
for the period ended 30 June 2021 were issued, the Group determined
that the financial statements for the prior periods contained
errors relating to historic tax asset and liability adjustments
that had accumulated over a number of years in the Group
consolidation. As a result, previously reported corporate income
tax recoverable, corporate income tax payable and tax charge were
incorrect. The cumulative impact resulted in an overstatement of
equity as at 1 January 2021 of £116.3 million, which has been
corrected by reducing opening retained earnings by £111.5
million and other reserves by £4.8 million. There was no
impact on the tax charge in the period ended 30 June
2021.
Statutory information and Independent Review
The
unaudited condensed consolidated interim financial statements for
the six months to 30 June 2022 and 30 June 2021 do not constitute
statutory accounts. The financial information for the year ended 31
December 2021 does not constitute statutory accounts. The statutory
accounts for the year ended 31 December 2021 have been
delivered to the Jersey Registrar and received an unqualified
auditors’ report. The interim condensed consolidated
financial statements are unaudited but have been reviewed by the
auditors and their report is set out on page 40.
The
announcement of the interim results was approved by the Board of
Directors on 5 August 2022.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
3.
Currency
conversion
The
presentation currency of the Group is pounds sterling and the
unaudited condensed consolidated interim financial statements have
been prepared on this basis.
The
period ended 30 June 2022 unaudited condensed consolidated interim
income statement is prepared using, among other currencies, average
exchange rates of US$1.30 to the pound (period ended 30 June 2021:
US$1.39) and €1.19 to the pound (period ended 30 June 2021:
€1.15). The unaudited condensed consolidated interim balance
sheet as at 30 June 2022 has been prepared using the exchange
rates on that day of US$1.22 to the pound (31 December 2021:
US$1.35) and €1.16 to the pound (31 December 2021:
€1.19).
4.
Costs
of services and general and administrative costs
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Costs
of services
|
5,708.1
|
5,196.1
|
|
General
and administrative costs
|
508.5
|
452.8
|
|
|
6,216.6
|
5,648.9
|
Costs
of services and general and administrative costs
include:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Staff
costs
|
3,930.7
|
3,473.3
|
|
Establishment
costs
|
262.8
|
264.8
|
|
Media
pass-through costs
|
1,016.7
|
857.0
|
|
Other
costs of services and general and administrative costs1
|
1,006.4
|
1,053.8
|
|
|
6,216.6
|
5,648.9
|
Staff
costs include:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Wages
and salaries
|
2,718.5
|
2,329.8
|
|
Cash-based
incentive plans
|
93.5
|
200.2
|
|
Share-based
incentive plans
|
67.3
|
43.9
|
|
Severance
|
17.4
|
14.5
|
|
Other
staff costs
|
1,034.0
|
884.9
|
|
|
3,930.7
|
3,473.3
|
1 Other costs of services and general and administrative
costs include £229.1 million (period ended 30 June 2021:
£376.3 million) of other pass-through costs.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
4.
Costs
of services and general and administrative costs
(continued)
Other
costs of services and general and administrative costs
include:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Amortisation and impairment of acquired intangible
assets
|
31.5
|
30.1
|
|
Losses on disposals of investments and subsidiaries
|
48.1
|
1.0
|
|
Gains on remeasurement of equity interests arising from a change in
scope of ownership
|
(60.4)
|
—
|
|
Restructuring and transformation costs
|
75.3
|
34.3
|
|
Restructuring costs in relation to COVID-19
|
5.9
|
19.7
|
|
Litigation settlement
|
—
|
21.7
|
Restructuring
and transformation costs of £75.3 million (2021: £34.3
million) include £59.5 million in relation to the
Group’s IT transformation programme. This programme will
allow technology to become a competitive advantage in the market as
our clients, and their clients, move to an ever increasing digital
world. It includes costs of £46.3 million in relation to the
rollout of a new ERP system in order to drive efficiency and
collaboration throughout the Group. The remaining £15.8
million relates to restructuring actions to simplify operational
structures and co-locate our businesses.
Restructuring
costs in relation to COVID-19 of £5.9 million (2021:
£19.7 million) primarily relate to property costs which the
Group undertook in response to the COVID-19 pandemic. As management
continues to assess the impact of COVID-19 on long-term working
practices and the Group’s real estate portfolio, further
impairments may occur in the future.
Losses
on disposal of investments and subsidiaries of £48.1 million
in 2022 primarily includes a loss of £65.1 million on the
divestment of our Russian interests which completed in May
2022.
Gains
on remeasurement of equity interests arising from a change in scope
of ownership of £60.4 million comprises a gain in relation to
the reclassification of the Group’s interest in Imagina in
Spain from interests in associates to other
investments.
In the
period ended 30 June 2021, a provision of £21.7 million was
made for potential litigation settlements.
5.
Share
of results of associates
Share
of results of associates include:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Share
of profit before interest and taxation
|
93.3
|
85.9
|
|
Share
of exceptional (losses)/gains
|
(76.1)
|
11.7
|
|
Share
of interest and non-controlling interests
|
(58.9)
|
(39.1)
|
|
Share
of taxation
|
(22.1)
|
(18.5)
|
|
|
(63.8)
|
40.0
|
Share
of exceptional losses in the period ended 30 June 2022 of
£76.2 million primarily comprise amortisation of acquired intangible
assets and restructuring costs. In 2021, share of
exceptional gains of £11.7 million primarily comprised the
gain on disposal of certain Kantar businesses partially offset by
amortisation of acquired intangible assets.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
6.
Finance
and investment income, finance costs and revaluation and
retranslation of financial instruments
Finance
and investment income includes:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Income
from equity investments
|
20.1
|
5.0
|
|
Interest
income
|
35.4
|
25.1
|
|
|
55.5
|
30.1
|
Finance
costs include:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Interest
payable and similar charges
|
98.9
|
101.5
|
|
Interest
expense related to lease liabilities
|
46.0
|
45.7
|
|
|
144.9
|
147.2
|
Revaluation
and retranslation of financial instruments include:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Movements
in fair value of treasury instruments
|
1.9
|
4.7
|
|
Premium
on the early repayment of bonds
|
—
|
(13.1)
|
|
Revaluation
of investments held at fair value through profit or
loss
|
9.0
|
30.5
|
|
Revaluation
of put options over non-controlling interests
|
19.6
|
(44.4)
|
|
Revaluation
of payments due to vendors (earnout agreements)
|
(1.1)
|
(9.4)
|
|
Retranslation
of financial instruments
|
3.7
|
19.6
|
|
|
33.1
|
(12.1)
|
Notes to the unaudited condensed consolidated interim financial
statements (continued)
7.
Segmental
analysis
Reported
contributions by operating sector were as follows:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Revenue1
|
|
|
|
Global
Integrated Agencies
|
5,701.0
|
5,202.9
|
|
Public
Relations
|
572.4
|
449.9
|
|
Specialist
Agencies
|
481.9
|
479.7
|
|
|
6,755.3
|
6,132.5
|
|
Revenue less pass-through costs1,2
|
|
|
|
Global
Integrated Agencies
|
4,538.2
|
4,097.3
|
|
Public
Relations
|
545.4
|
429.4
|
|
Specialist
Agencies
|
425.9
|
372.5
|
|
|
5,509.5
|
4,899.2
|
|
Headline operating profit1,3
|
|
|
|
Global
Integrated Agencies
|
507.5
|
488.6
|
|
Public
Relations
|
83.0
|
63.5
|
|
Specialist
Agencies
|
48.6
|
38.3
|
|
|
639.1
|
590.4
|
Reported
contributions by geographical area were as follows:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Revenue
|
|
|
|
North
America4
|
2,586.5
|
2,183.7
|
|
United
Kingdom
|
956.1
|
927.0
|
|
Western
Continental Europe
|
1,352.0
|
1,340.6
|
|
Asia
Pacific, Latin America, Africa & Middle East and Central &
Eastern Europe
|
1,860.7
|
1,681.2
|
|
|
6,755.3
|
6,132.5
|
|
Revenue less pass-through costs2
|
|
|
|
North
America4
|
2,188.9
|
1,817.6
|
|
United
Kingdom
|
737.0
|
679.7
|
|
Western
Continental Europe
|
1,086.1
|
1,050.0
|
|
Asia
Pacific, Latin America, Africa & Middle East and Central &
Eastern Europe
|
1,497.5
|
1,351.9
|
|
|
5,509.5
|
4,899.2
|
|
Headline operating profit3
|
|
|
|
North
America4
|
299.7
|
271.4
|
|
United
Kingdom
|
67.3
|
83.5
|
|
Western
Continental Europe
|
98.7
|
103.7
|
|
Asia
Pacific, Latin America, Africa & Middle East and Central &
Eastern Europe
|
173.4
|
131.8
|
|
|
639.1
|
590.4
|
1 Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies.
2 Revenue less pass-through costs is defined in Appendix
2.
3 Headline operating profit is defined in Appendix
2.
4 North America includes the US with revenue of
£2,440.9 million (2021: £2,046.9 million), revenue less
pass-through costs of
£2,052.1
million (2021: £1,695.9 million) and headline operating profit
of £280.9 million (2021: £254.1 million).
Notes to the unaudited condensed consolidated interim financial
statements (continued)
8.
Taxation
The tax
charge for the Group is calculated in accordance with IAS 34, by
applying management’s best estimate of the effective tax rate
(excluding discrete items) expected to apply to total annual
earnings to the profit for the six month period ended 30 June 2022.
This is then adjusted for certain discrete items which occurred in
the interim period.
The tax
rate on reported profit before tax was 28.1% (2021: 27.2%). Given
the Group’s geographic mix of profits and the changing
international tax environment, the tax rate is expected to increase
slightly over the next few years.
The tax
charge may be affected by the impact of acquisitions, disposals and
other corporate restructurings, the resolution of open tax issues,
and the ability to use brought forward tax losses. Changes in local
or international tax rules, for example, increasing tax rates as a
consequence of the financial support programmes implemented by
governments during the COVID-19 pandemic, the OECD/G20 Inclusive
Framework on Base Erosion and Profit Shifting, and changes arising
from the application of existing rules, or challenges by tax or
competition authorities, may expose the Group to additional tax
liabilities or impact the carrying value of deferred tax assets,
which could affect the future tax charge.
Liabilities
relating to open and judgemental matters are based upon an
assessment of whether the tax authorities will accept the position
taken, after taking into account external advice where appropriate.
Where the final tax outcome of these matters is different from the
amounts which were initially recorded, such differences will impact
the current and deferred income tax assets and liabilities in the
period in which such determination is made. The Group does not
currently consider that judgements made in assessing tax
liabilities have a significant risk of resulting in any material
additional charges or credits in respect of these matters, within
the next financial year, beyond the amounts already
provided.
9.
Ordinary
dividends
The
Board has recommended an interim dividend of 15.0p (2021: 12.5p)
per ordinary share. This is expected to be paid on 1 November 2022
to shareholders on the register at 14 October 2022. The Board
recommended a final dividend of 18.7p per ordinary share in respect
of 2021. This was paid on 8 July 2022.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
10.
Earnings
per share
Basic EPS
The
calculation of basic reported and headline EPS is as
follows:
|
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Reported
earnings1 (£ million)
|
257.9
|
252.7
|
|
Headline
earnings2 (£ million)
|
375.7
|
352.7
|
|
Weighted
average shares used in basic EPS calculation (million)
|
1,115.2
|
1,211.9
|
|
Reported
EPS
|
23.1p
|
20.9p
|
|
Headline
EPS
|
33.7p
|
29.1p
|
Diluted EPS
The
calculation of diluted reported and headline EPS is as
follows:
|
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Reported
earnings (£ million)
|
257.9
|
252.7
|
|
Headline
earnings (£ million)
|
375.7
|
352.7
|
|
Weighted
average shares used in diluted EPS calculation
(million)
|
1,137.8
|
1,229.0
|
|
Diluted
reported EPS
|
22.7p
|
20.6p
|
|
Diluted
headline EPS
|
33.0p
|
28.7p
|
A
reconciliation between the shares used in calculating basic and
diluted EPS is as follows:
|
£ million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Weighted
average shares used in basic EPS calculation
|
1,115.2
|
1,211.9
|
|
Dilutive
share options outstanding
|
1.4
|
0.8
|
|
Other
potentially issuable shares
|
21.2
|
16.3
|
|
Weighted
average shares used in diluted EPS calculation
|
1,137.8
|
1,229.0
|
At
30 June 2022 there were 1,162,563,018 (30 June 2021:
1,270,102,274) ordinary shares in issue, including treasury shares
of 70,489,953 (30 June 2021: 70,489,953).
1 Reported earnings is equivalent to profit for the period
attributable to equity holders of the parent.
2 Headline earnings is defined in Appendix 2.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
11.
Analysis
of cash flows
The
following tables analyse the items included within the main cash
flow headings on page 17:
Net cash (outflow)/inflow from operating activities:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Profit for the period
|
301.1
|
287.3
|
|
Taxation
|
117.5
|
107.1
|
|
Revaluation
and retranslation of financial instruments
|
(33.1)
|
12.1
|
|
Finance
costs
|
144.9
|
147.2
|
|
Finance
and investment income
|
(55.5)
|
(30.1)
|
|
Share
of results of associates
|
63.8
|
(40.0)
|
|
Operating profit for the period
|
538.7
|
483.6
|
|
Adjustments
for:
|
|
|
|
Non-cash
share-based incentive plans (including share options)
|
67.3
|
43.9
|
|
Depreciation
of property, plant and equipment
|
79.9
|
71.2
|
|
Depreciation
of right-of-use assets
|
129.9
|
139.3
|
|
Impairment
charges included within restructuring costs
|
8.1
|
7.9
|
|
Amortisation
and impairment of acquired intangible assets
|
31.5
|
30.1
|
|
Amortisation
of other intangible assets
|
13.6
|
9.4
|
|
Loss on
disposal of investments and subsidiaries
|
48.1
|
1.0
|
|
Gains
on remeasurement of equity interests arising from a change in scope
of ownership
|
(60.4)
|
—
|
|
Gains
on sale of property, plant and equipment
|
(1.1)
|
(1.2)
|
|
Operating cash flow before movements in working capital and
provisions
|
855.6
|
785.2
|
|
Movements
in trade working capital1,2
|
(1,015.3)
|
(464.1)
|
|
Movements
in other working capital and provisions
|
(725.9)
|
(41.2)
|
|
Cash (used in)/generated by operations
|
(885.6)
|
279.9
|
|
Corporation
and overseas tax paid
|
(162.7)
|
(162.7)
|
|
Interest
and similar charges paid
|
(86.8)
|
(90.1)
|
|
Interest
paid on lease liabilities
|
(44.1)
|
(44.7)
|
|
Interest
received
|
26.9
|
25.1
|
|
Investment
income
|
20.1
|
5.0
|
|
Dividends
from associates
|
21.4
|
26.7
|
|
Net cash (outflow)/inflow from operating activities
|
(1,110.8)
|
39.2
|
1 Trade working capital represents trade receivables, work
in progress, accrued income, trade payables and deferred
income.
2 The Group typically experiences an outflow of working
capital in the first half of the financial year and an inflow in
the second half.
This is
primarily due to the seasonal nature of working capital flows
associated with its media buying activities on behalf of
clients.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
11.
Analysis
of cash flows (continued)
Acquisitions and disposals:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Initial
cash consideration
|
(35.0)
|
(41.2)
|
|
Cash and cash equivalents acquired
|
0.7
|
4.0
|
|
Earnout
payments
|
(63.3)
|
(14.1)
|
|
Purchase
of other investments (including associates)
|
(5.1)
|
(97.2)
|
|
Acquisitions
|
(102.7)
|
(148.5)
|
|
|
|
|
|
Proceeds
on disposal of investments and subsidiaries1
|
41.7
|
3.1
|
|
Cash
and cash equivalents disposed
|
(12.5)
|
(1.8)
|
|
Disposals of investments and subsidiaries
|
29.2
|
1.3
|
|
|
|
|
|
Cash consideration received from non-controlling
interests
|
—
|
38.7
|
|
Cash consideration for purchase of non-controlling
interests
|
(6.2)
|
(117.7)
|
|
Cash consideration for non-controlling interests
|
(6.2)
|
(79.0)
|
|
|
|
|
|
Net acquisition payments and disposal proceeds
|
(79.7)
|
(226.2)
|
Share repurchases and buy-backs:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Purchase
of own shares by ESOP Trusts
|
(43.2)
|
(49.5)
|
|
Shares
purchased into treasury
|
(637.3)
|
(248.1)
|
|
|
(680.5)
|
(297.6)
|
Proceeds from borrowings:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Increase
in drawings on bank loans
|
247.2
|
—
|
Repayments of borrowings:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Repayment
of bank loans
|
(11.3)
|
(35.9)
|
|
Repayment of €250 million bonds
|
(209.3)
|
—
|
|
|
(220.6)
|
(35.9)
|
1 Proceeds on disposal of investments and subsidiaries
includes return of capital from investments in
associates.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
12.
Cash
and cash equivalents and adjusted net debt
|
£
million
|
30 June
2022
|
31 December 2021
|
|
|
Cash at
bank and in hand
|
1,679.6
|
2,776.6
|
|
|
Short-term
bank deposits
|
95.4
|
1,106.3
|
|
|
Overdrafts1
|
(285.7)
|
(342.3)
|
|
|
Cash and cash equivalents
|
1,489.3
|
3,540.6
|
|
|
Bonds
due within one year
|
—
|
(210.2)
|
|
|
Loans
due within one year
|
(3.4)
|
(14.7)
|
|
|
Bonds due after one year
|
(4,373.0)
|
(4,216.8)
|
|
|
Loans
due after one year
|
(247.7)
|
—
|
|
|
Adjusted net debt
|
(3,134.8)
|
(901.1)
|
|
The
Group estimates that the fair value of corporate bonds is
£4,119.2 million at 30 June 2022 (31 December 2021:
£4,790.3 million). The Group considers that the carrying
amount of bank loans approximates their fair value.
The
following table is an analysis of future anticipated cash flows in
relation to the Group’s debt, on an undiscounted basis which,
therefore, differs from the carrying value:
|
£
million
|
30 June
2022
|
31 December 2021
|
|
Within
one year
|
(121.6)
|
(326.8)
|
|
Between
one and two years
|
(755.9)
|
(745.4)
|
|
Between
two and three years
|
(1,129.7)
|
(646.5)
|
|
Between
three and four years
|
(73.2)
|
(492.8)
|
|
Between
four and five years
|
(1,352.2)
|
(698.0)
|
|
Over
five years
|
(1,940.0)
|
(2,546.3)
|
|
Debt financing (including interest) under the Revolving Credit
Facility and in relation to unsecured loan notes
|
(5,372.6)
|
(5,455.8)
|
|
Short-term
overdrafts – within one year
|
(285.7)
|
(342.3)
|
|
Future anticipated cash flows
|
(5,658.3)
|
(5,798.1)
|
|
Effect
of discounting/financing rates
|
748.5
|
1,014.1
|
|
Debt financing
|
(4,909.8)
|
(4,784.0)
|
|
Cash
and short-term deposits
|
1,775.0
|
3,882.9
|
|
Adjusted net debt
|
(3,134.8)
|
(901.1)
|
1 Bank overdrafts are included in cash and cash equivalents
because they form an integral part of the Group’s cash
management.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
13.
Goodwill
and acquisitions
Goodwill
in relation to subsidiary undertakings increased by £625.2
million primarily due to the effect of currency
translation.
The
contribution to revenue and operating profit of acquisitions
completed in the period was not material. There were no material
acquisitions completed during the period ended 30 June 2022 or
between 30 June 2022 and the date the interim financial statements
were approved. There were no indicators of impairment of goodwill
identified in the six months ended 30 June 2022.
14.
Trade
and other receivables
Amounts falling due within one year:
|
£
million
|
30 June
2022
|
31 December 2021
|
|
Trade
receivables (net of loss allowance)
|
6,491.7
|
6,600.5
|
|
Work in
progress
|
343.8
|
254.0
|
|
VAT and
sales taxes recoverable
|
398.8
|
350.3
|
|
Prepayments
|
295.0
|
215.3
|
|
Accrued
income
|
3,516.4
|
3,435.7
|
|
Fair
value of derivatives
|
2.2
|
2.5
|
|
Other
debtors
|
668.2
|
504.0
|
|
|
11,716.1
|
11,362.3
|
Amounts falling due after more than one year:
|
£
million
|
30 June
2022
|
31 December 2021
|
|
Fair
value of derivatives
|
—
|
0.5
|
|
Prepayments
and other debtors
|
198.2
|
152.1
|
|
|
198.2
|
152.6
|
The
Group considers that the carrying amount of trade and other
receivables approximates their fair value.
A bad
debt expense of £11.5 million (period ended 30 June 2021:
credit of £10.6 million) on the Group’s trade
receivables in the period is a result of the increase in expected
credit losses since 31 December 2021. The loss allowance is
equivalent to 1.1% (31 December 2021: 1.1%) of gross trade
receivables.
Prepayments
and other debtors falling due after more than one year for 30 June
2022 includes £33.0 million in relation to pension plans in
surplus. The corresponding figure for 31 December 2021 is included
in provision for post-employment benefits.
6 Asia Pacific, Latin America, Africa & Middle
East and Central & Eastern Europe.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
15.
Trade
and other payables: amounts falling due within one
year
|
£
million
|
30 June
2022
|
31 December 2021
|
|
Trade
payables
|
9,674.4
|
10,596.9
|
|
Deferred
income
|
1,457.2
|
1,334.0
|
|
Payments
due to vendors (earnout agreements)
|
40.0
|
85.6
|
|
Liabilities
in respect of put option agreements with vendors
|
68.3
|
58.4
|
|
Fair
value of derivatives
|
3.9
|
6.4
|
|
Share
repurchases – close period commitments1
|
—
|
211.7
|
|
Other
creditors and accruals
|
2,691.1
|
2,959.3
|
|
|
13,934.9
|
15,252.3
|
The
Group considers that the carrying amount of trade and other
payables approximates their fair value.
16.
Trade
and other payables: amounts falling due after more than one
year
|
£
million
|
30 June
2022
|
31 December 2021
|
|
Payments
due to vendors (earnout agreements)
|
133.1
|
111.1
|
|
Liabilities
in respect of put option agreements with vendors
|
329.5
|
333.1
|
|
Fair
value of derivatives
|
64.2
|
47.2
|
|
Other
creditors and accruals
|
113.9
|
128.5
|
|
|
640.7
|
619.9
|
The
Group considers that the carrying amount of trade and other
payables approximates their fair value.
The
following table sets out payments due to vendors, comprising
contingent consideration and the directors’ best estimates of
future earnout related obligations:
|
£
million
|
30 June
2022
|
31 December 2021
|
|
Within
one year
|
40.0
|
85.6
|
|
Between
1 and 2 years
|
46.2
|
24.0
|
|
Between
2 and 3 years
|
48.2
|
35.7
|
|
Between
3 and 4 years
|
17.5
|
51.4
|
|
Between
4 and 5 years
|
10.8
|
—
|
|
Over 5
years
|
10.4
|
—
|
|
|
173.1
|
196.7
|
The
Group’s approach to payments due to vendors is outlined in
note 19.
The
Group does not consider there to be any material contingent
liabilities as at 30 June 2022.
1 During 2021, the Company entered into an arrangement with
a third party to conduct share buy-backs on its behalf in the close
period commencing on 16 December 2021 and ending on 18 February
2022, in accordance with UK listing rules. The commitment resulting
from this agreement constituted a liability at 31 December
2021 and was recognised as a movement in other reserves in the year
ended 31 December 2021. As the close period ended on 18 February
2022 the movement in other reserves has been reversed in the period
ended 30 June 2022.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
17.
Related
party transactions
The
Group enters into transactions with its associate
undertakings.
The
Group has continuing transactions with Kantar, including sales,
purchases, the provision of IT services, subleases and property
related items.
In the
period ended 30 June 2022, revenue of £39.9 million
(period ended 30 June 2021: £93.5 million) was reported in
relation to Compas, an associate in the USA. All other transactions
in the periods presented were immaterial.
The
following amounts were outstanding at 30 June
2022:
|
£ million
|
30 June
2022
|
31 December 2021
|
|
Amounts owed by related parties
|
|
|
|
Kantar
|
27.9
|
30.3
|
|
Other
|
42.8
|
45.7
|
|
|
70.7
|
76.0
|
|
Amounts owed to related parties
|
|
|
|
Kantar
|
(6.3)
|
(6.2)
|
|
Other
|
(66.5)
|
(51.4)
|
|
|
(72.8)
|
(57.6)
|
18.
Going concern and liquidity risk
In
considering going concern and liquidity risk, the Directors have
reviewed the Group’s future cash requirements and earnings
projections. The Directors believe these forecasts have been
prepared on a prudent basis and have also considered the impact of
a range of potential changes to trading performance. The Company
modelled a range of revenue less pass-through costs compared with
the year ended 31 December 2021 and a number of mitigating cost actions that
are available to the Company. Considering the Group's bank covenant
and liquidity headroom and cost mitigation actions which could be
implemented, the Company and the Group would be able to operate
with appropriate liquidity and within its banking covenants and be
able to meet its liabilities as they fall due with a decline in
revenue less pass-through costs up to 12% in 2022 and up to 11% in
2023 compared to the corresponding prior periods.
The
likelihood of such a decline is considered remote. The Directors
have concluded that the Group will be able to operate within its
current facilities and comply with its banking covenants for the
foreseeable future and therefore believe it is appropriate to
prepare the financial statements of the Group on a going concern
basis and that there are no material uncertainties which gives rise
to a significant going concern risk.
Given its debt maturity profile and available facilities, the
Directors believe the Group has sufficient liquidity to match its
requirements for the foreseeable future.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
19.
Financial
instruments
The
following table provides an analysis of financial instruments that
are measured subsequent to initial recognition at fair value,
grouped into levels 1 to 3 based on the degree to which the fair
value is observable, or based on observable inputs:
|
£
million
|
Level 1
|
Level 2
|
Level 3
|
|
30 June 2022
|
|
|
|
|
Derivatives in designated hedge relationships
|
|
|
|
|
Derivative
liabilities
|
—
|
(64.2)
|
—
|
|
Held at fair value through profit or loss
|
|
|
|
|
Other
investments
|
0.4
|
—
|
241.1
|
|
Derivative
assets
|
—
|
2.2
|
—
|
|
Derivative
liabilities
|
—
|
(3.9)
|
—
|
|
Payments
due to vendors (earnout agreements)
|
—
|
—
|
(173.1)
|
|
Liabilities
in respect of put options
|
—
|
—
|
(397.8)
|
|
Held at fair value through other comprehensive income
|
|
|
|
|
Other
investments
|
19.2
|
—
|
112.2
|
Reconciliation of level 3 fair value measurements:
|
£
million
|
Payments due to vendors (earnout agreements)
|
Liabilities in respect of put options
|
Other investments
|
|
1 January 2022
|
(196.7)
|
(391.5)
|
290.0
|
|
(Losses)/gains
recognised in the income statement
|
(1.1)
|
19.6
|
9.0
|
|
Gains
recognised in other comprehensive income
|
—
|
—
|
3.6
|
|
Additions
|
(22.6)
|
—
|
66.7
|
|
Disposals
|
—
|
—
|
(16.0)
|
|
Cancellations
|
—
|
5.0
|
—
|
|
Settlements
|
63.3
|
5.8
|
—
|
|
Exchange
adjustments
|
(16.0)
|
(36.7)
|
—
|
|
30 June 2022
|
(173.1)
|
(397.8)
|
353.3
|
Payments due to vendors and liabilities in respect of put
options
Future
anticipated payments due to vendors in respect of contingent
consideration (earnout agreements) are recorded at fair value,
which is the present value of the expected cash outflows of the
obligations. Liabilities in respect of put option agreements are
initially recorded at the present value of the redemption amount in
accordance with IAS 32 and subsequently measured at fair value in
accordance with IFRS 9. Both types of obligations are dependent on
the future financial performance of the entity and it is assumed
that future profits are in line with Directors’ estimates.
The Directors derive their estimates from internal business plans
together with financial due diligence performed in connection with
the acquisition. At 30 June 2022, the weighted average growth rate
in estimating future financial performance was 14.7%, which
reflects the prevalence of recent acquisitions in the faster
growing markets and new media sectors. The weighted average risk
adjusted discount rate applied to these obligations at 30 June 2022
was approximately 7.7%.
A one
percentage point increase or decrease in the growth rate in
estimated future financial performance would increase or decrease
the combined liabilities due to earnout agreements and put options
by approximately £8.7 million and £9.0 million,
respectively. A 0.5 percentage point increase or decrease in the
risk adjusted discount rate would decrease or increase the combined
liabilities by approximately £8.2 million and £8.4
million, respectively. An increase in the liability would result in
a loss in the revaluation and retranslation of financial
instruments (note 6), while a decrease would result in a
gain.
Notes to the unaudited condensed consolidated interim financial
statements (continued)
19.
Financial
instruments (continued)
Other investments
The
fair value of other investments included in level 1 are based on
quoted market prices. Other investments included in level 3 are
unlisted securities, where market value is not readily available.
The Group has estimated relevant fair values on the basis of
publicly available information from outside sources. The
sensitivity to changes in unobservable inputs for certain other
investments is specific to each individual investment.
Principal risks and uncertainties
The
Board regularly reviews the principal and emerging risks and
uncertainties affecting the Group and these are summarised
below:
COVID-19 Pandemic
●
The extent of the
continued impact of the COVID-19 pandemic on our business will
depend on numerous factors that we are not able to accurately
predict, including the duration and scope of the pandemic, any
existing or new variants, government actions to mitigate the
effects of the pandemic and the intermediate and long-term impact
of the pandemic on our clients’ spending plans.
Strategic Risks
The Group updated
its strategic plan in December 2020, to return the business to
growth and simplify the Group structure. A failure or delay in
implementing and fully realising the benefits from the strategic
plan, may have a material adverse effect on the Group’s
market share and its business, revenues, results of operations,
financial condition, or prospects.
Operational Risks
Clients
●
The Group competes
for clients in a highly competitive and evolving industry which is
undergoing structural change which has been accelerated by the
COVID-19 pandemic. Client loss or consolidation or a reduction in
marketing budgets due to recessionary economic conditions triggered
by the pandemic, the invasion of Ukraine by Russia, or a
geopolitical change or shift in client spending, may have a
material adverse effect on the Group’s market share and its
business, revenues, results of operations, financial condition or
prospects.
●
The Group receives
a significant portion of its revenues from a limited number of
large clients and the net loss of one or more of these clients
could have a material adverse effect on the Group’s
prospects, business, financial condition and results of
operations.
People, Culture and Succession
●
The Group’s
performance could be adversely affected if we do not react quickly
enough to changes in our market and fail to attract, develop and
retain key and diverse creative, commercial technology and
management talent or are unable to retain and incentivise key and
diverse talent.
Cyber and Information Security
●
The Group is
undertaking a series of IT transformation programmes to support the
Group’s strategic plan and a failure or delay in implementing
the IT programmes may have a material adverse effect on its
business, revenues, results of operations, financial conditions or
prospects. The Group is reliant on third parties for the
performance of a significant part of its information technology and
operational functions. A failure to provide these functions
including as a result of a cyber event, could have an adverse
effect on the Group's business. A significant percentage of the
Group’s people continue to work remotely as a consequence of
the COVID-19 pandemic which has the potential to increase the risk
of compromised data security and cyber-attacks. The Group has in
the past and may in the future experience a cyber-attack which
results in disruption to one or more of our businesses or the
security of data being compromised.
Financial Risks
●
Economic conditions
have a direct impact on our business, results of operations and
financial position. Adverse economic conditions, including those
caused by the pandemic, invasion of Ukraine by Russia, severe and
sustained inflation in key markets where we operate, supply chain
issues affecting the distribution of our clients' products and/or
disruption to credit markets, pose a risk our clients may reduce,
suspend or cancel spend with us or be unable to satisfy
obligations. The Group is subject to credit risk through the
default of a client or other counterparty.
Compliance Risks
●
The Group is
subject to strict data protection and privacy legislation in the
jurisdictions in which we operate and rely extensively on
information technology systems. The Group stores, transmits and
relies on critical and sensitive data. Security of this type of
data is exposed to escalating external cyber threats that are
increasing in sophistication as well as internal
breaches.
●
The Group’s
performance could be adversely impacted if it failed to ensure
adequate internal control procedures are in place generally. We
have previously identified material weaknesses in our internal
control over financial reporting. If we failed to properly
remediate these material weaknesses or new material weaknesses are
identified, they could adversely affect our results of operations,
investor confidence in the Group and the market price of our ADSs
and ordinary shares.
●
Principal risks and uncertainties (continued)
Regulatory, Sanctions, Anti-Trust and Taxation
●
The Group may be
subject to regulations restricting its activities or effecting
changes in taxation, for example, as a consequence of the financial
support programmes implemented by governments during the COVID-19
pandemic.
●
The Group is
subject to anti-corruption, anti-bribery and anti-trust legislation
and enforcement in the countries in which it operates and
violations could have an adverse effect on our business and
reputation.
●
Civil liabilities
or judgements against the Company or its Directors or officers
based on United States federal or state securities laws may not be
enforceable in the United States or in England and Wales or in
Jersey.
●
The Group is
subject to the laws of the United States, EU, the UK and other
jurisdictions regulating and imposing sanctions on the supply of
services to certain countries. Failure to comply with these laws
could expose the Group to civil and criminal penalties. The Russian
invasion of Ukraine has caused the adoption of comprehensive
sanctions by among others, the EU, the United States and the UK,
which restrict a wide range of trade and financial dealings with
Russia and Russian persons.
Emerging Risks
●
The Group’s
operations could be disrupted by an increased frequency of extreme
weather and climate related natural disasters as a consequence of
the physical impacts of climate change.
●
The Group is
subject to increased reputational risk associated with working on
environmentally detrimental client briefs and/or misrepresenting
environmental claims.
●
The Group could be
subject to increased costs to comply with potential future changes
in environmental laws and regulations and to meet its net zero
commitments
Cautionary statement regarding forward-looking
statements
This
document contains statements that are, or may be deemed to be,
“forward-looking statements”. Forward- looking
statements give the Group’s current expectations or forecasts
of future events. An investor can identify these statements by the
fact that they do not relate strictly to historical or current
facts. They use words such as ‘anticipate’,
‘estimate’, ‘expect’, ‘intend’,
‘will’, ‘project’, ‘plan’,
‘believe’, ‘target’ and other words and
terms of similar meaning in connection with any discussion of
future operating or financial performance.
These
forward-looking statements may include, among other things, plans,
objectives, projections and anticipated future economic performance
based on assumptions and the like that are subject to risks and
uncertainties. As such, actual results or outcomes may differ
materially from those discussed in the forward- looking statements.
Important factors which may cause actual results to differ include
but are not limited to: the unanticipated loss of a material client
or key personnel, delays or reductions in client advertising
budgets, shifts in industry rates of compensation, regulatory
compliance costs or litigation, natural disasters or acts of
terrorism, the Company’s exposure to changes in the values of
other major currencies (because a substantial portion of its
revenues are derived and costs incurred outside of the UK) and the
overall level of economic activity in the Company’s major
markets (which varies depending on, among other things, regional,
national and international political and economic conditions and
government regulations in the world’s advertising markets).
In addition, you should consider the risks described under Item 3D
‘Risk Factors’ in the Group’s Annual Report on
Form 20-F for 2021 and any impacts of the COVID-19 pandemic which
could also cause actual results to differ from forward-looking
information. In light of these and other uncertainties, the
forward-looking statements included in this document should not be
regarded as a representation by the Company that the
Company’s plans and objectives will be achieved. Other than
in accordance with its legal or regulatory obligations (including
under the Market Abuse Regulation, the UK Listing Rules and the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority), the Group undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise. The reader should, however, consult any
additional disclosures that the Group may make in any documents
which it publishes and/or files with the SEC. All readers, wherever
located, should take note of these disclosures. Accordingly, no
assurance can be given that any particular expectation will be met
and investors are cautioned not to place undue reliance on the
forward-looking statements.
Any
forward looking statements made by or on behalf of the Group speak
only as of the date they are made and are based upon the knowledge
and information available to the Directors on the date of this
document
Directors’ responsibility statement
The
Directors confirm that to the best of their knowledge:
a.
the condensed set
of financial statements, which has been prepared in accordance with
the applicable set of accounting standards, gives a true and fair
view of the assets, liabilities, financial position and profit or
loss of the issuer, or the undertakings included in the
consolidation as a whole as required by DTR 4.2.4R;
b.
the interim
management report includes a fair review of the information
required by DTR 4.2.7R; and
c.
the interim
management report includes a fair review of the information
required by DTR 4.2.8R.
The
names and functions of the WPP plc Board can be found at:
wpp.com/about/our-leadership/the-wpp-board
This
responsibility statement is approved by the Board of Directors and
is signed on its behalf by:
J
Rogers
Chief
Financial Officer
5
August 2022
Independent review report to WPP plc
Conclusion
We have
been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the condensed
consolidated interim income statement, statement of comprehensive
income, the cash flow statement, the balance sheet, the statement
of changes in equity and related notes 1 to 19.
Based
on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2022
is not prepared, in all material respects, in accordance with
United Kingdom adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United
Kingdom’s Financial Conduct Authority.
Basis for conclusion
We
conducted our review in accordance with International Standard on
Review Engagements (UK) 2410 “Review of Interim Financial
Information Performed by the Independent Auditor of the
Entity” issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As
disclosed in note 2, the annual financial statements of the group
are prepared in accordance with International Financing Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with United Kingdom adopted International Accounting
Standard 34, “Interim Financial
Reporting”.
Conclusion relating to going concern
Based
on our review procedures, which are less extensive than those
performed in an audit as described in the Basis for Conclusion
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This
conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going
concern.
Responsibilities of the directors
The
directors are responsible for preparing the half-yearly financial
report in accordance with the Disclosure Guidance and Transparency
Rules of the United Kingdom’s Financial Conduct
Authority.
In
preparing the half-yearly financial report, the directors are
responsible for assessing the group’s ability to continue as
a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities for the review of the financial
information
In
reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This
report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410
“Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have
formed.
Deloitte LLP
Statutory
Auditor
London,
United Kingdom
5
August 2022
Appendix
2: Alternative performance measures for the six months ended 30
June 2022
The
Group presents alternative performance measures, including headline
operating profit, headline profit before interest and tax, headline
EBITDA, headline profit before tax, headline earnings, headline
EPS, revenue less pass-through costs and adjusted net debt. They
are used by management for internal performance analyses; the
presentation of these measures facilitates comparability with other
companies, although management’s measures may not be
calculated in the same way as similarly titled measures reported by
other companies; and these measures are useful in connection with
discussions with the investment community.
In the
calculation of headline profit, judgement is required by management
in determining which revenues and costs are considered to be
significant, non-recurring or volatile items that are to be
excluded.
The
exclusion of certain adjusting items may result in headline
earnings being materially higher or lower than reported earnings,
for example when significant impairments or restructuring charges
are excluded but the related benefits are included headline
earnings will be higher. Headline measures should not be considered
in isolation as they provide additional information to aid the
understanding of the Group’s financial
performance.
Reconciliation of revenue to revenue less pass-through
costs:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Revenue
|
6,755.3
|
6,132.5
|
|
Media
pass-through costs
|
(1,016.7)
|
(857.0)
|
|
Other
pass-through costs
|
(229.1)
|
(376.3)
|
|
Revenue less pass-through costs
|
5,509.5
|
4,899.2
|
Pass-through
costs comprise fees paid to external suppliers when they are
engaged to perform part or all of a specific project and are
charged directly to clients, predominantly media and data
collection costs. This includes the cost of media where the Group
is buying digital media for its own account on a transparent opt-in
basis and, as a result, the subsequent media pass-through costs
have to be accounted for as revenue, as well as billings.
Therefore, management considers that revenue less pass-through
costs gives a helpful reflection of top-line growth.
Reconciliation of operating profit to headline operating
profit:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Operating profit
|
538.7
|
483.6
|
|
Amortisation
and impairment of acquired intangible assets
|
31.5
|
30.1
|
|
Losses
on disposal of investments and subsidiaries
|
48.1
|
1.0
|
|
Gains
on remeasurement of equity interests arising from a change in scope
of ownership
|
(60.4)
|
—
|
|
Litigation
settlement
|
—
|
21.7
|
|
Restructuring
and transformation costs
|
75.3
|
34.3
|
|
Restructuring
costs in relation to COVID-19
|
5.9
|
19.7
|
|
Headline operating profit
|
639.1
|
590.4
|
|
|
|
|
|
Finance
and investment income
|
55.5
|
30.1
|
|
Finance
costs (excluding interest expense related to lease
liabilities)
|
(98.9)
|
(101.5)
|
|
|
(43.4)
|
(71.4)
|
|
|
|
|
|
Interest cover1 on headline operating
profit
|
14.7 times
|
8.3
times
|
Headline
operating profit is one of the metrics that management uses to
assess the performance of the business.
1 Interest expense related to lease liabilities is excluded
from interest cover as lease liabilities are excluded from the
Group’s key leverage metrics.
Headline operating profit margin before and after share of results
of associates:
|
£
million
|
Margin
|
Six months ended
30 June 2022
|
Margin
|
Six months ended
30 June 2021
|
|
Revenue less pass-through costs
|
|
5,509.5
|
|
4,899.2
|
|
Headline operating profit
|
11.6%
|
639.1
|
12.1%
|
590.4
|
|
Share
of results of associates (excluding exceptional
gains/losses)
|
|
12.3
|
|
28.3
|
|
Headline PBIT
|
11.8%
|
651.4
|
12.6%
|
618.7
|
Headline
PBIT is one of the metrics that management uses to assess the
performance of the business.
Calculation of headline EBITDA:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Headline
PBIT
|
651.4
|
618.7
|
|
Depreciation
of property, plant and equipment
|
79.9
|
71.2
|
|
Amortisation
of other intangible assets
|
13.6
|
9.4
|
|
Headline EBITDA (including depreciation of right-of-use
assets)
|
744.9
|
699.3
|
|
Depreciation
of right-of-use assets
|
129.9
|
139.3
|
|
Headline EBITDA
|
874.8
|
838.6
|
Headline
EBITDA is a key metric that private equity firms, for example, use
for valuing companies, and is one of the metrics that management
uses to assess the performance of the business. Headline EBITDA
(including depreciation of right-of-use assets) is used in the
Group’s key leverage metric.
Reconciliation of profit before taxation to headline PBT and
headline earnings:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Profit before taxation
|
418.6
|
394.4
|
|
Amortisation
and impairment of acquired intangible assets
|
31.5
|
30.1
|
|
Losses on disposal of investments and subsidiaries
|
48.1
|
1.0
|
|
Gains on remeasurement of equity interests arising from a change in
scope of ownership
|
(60.4)
|
—
|
|
Restructuring
and transformation costs
|
75.3
|
34.3
|
|
Restructuring
costs in relation to COVID-19
|
5.9
|
19.7
|
|
Share
of exceptional losses/(gains) of associates
|
76.1
|
(11.7)
|
|
Litigation
settlement
|
—
|
21.7
|
|
Revaluation
and retranslation of financial instruments
|
(33.1)
|
12.1
|
|
Headline PBT
|
562.0
|
501.6
|
|
Headline
tax charge
|
(143.1)
|
(114.3)
|
|
Headline
non-controlling interests
|
(43.2)
|
(34.6)
|
|
Headline earnings
|
375.7
|
352.7
|
Headline
PBT and headline earnings are metrics that management use to assess
the performance of the business.
Calculation of headline taxation:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Headline PBT
|
562.0
|
501.6
|
|
Tax
charge
|
117.5
|
107.1
|
|
Tax
charge relating to gains on disposal of investments and
subsidiaries
|
(3.2)
|
(3.8)
|
|
Tax
credit relating to restructuring and transformation costs and
COVID-19
|
26.6
|
18.5
|
|
Tax
credit relating to litigation settlement
|
—
|
1.5
|
|
Deferred tax impact
of the amortisation of acquired intangible assets and other
goodwill items
|
2.2
|
(2.0)
|
|
Deferred
tax relating to gains on disposal of investments and
subsidiaries
|
—
|
(7.0)
|
|
Headline tax charge
|
143.1
|
114.3
|
|
Headline
tax rate
|
25.5%
|
22.8%
|
The
Group re-assessed the measure of headline tax rate, as disclosed in
Group’s 2021 annual report, and considers the most
appropriate metric was to use the headline tax charge as a
percentage of headline PBT (that includes the share of headline
results of associates). The
headline tax rate on headline PBT including the share of headline
results of associates was 25.5% (2021: 22.8%).
Reconciliation of free cash flow:
|
£
million
|
Six months ended 30 June 2022
|
Six months ended 30 June 2021
|
|
Cash (used in)/generated by operations
|
(885.6)
|
279.9
|
|
Plus:
|
|
|
|
Interest
received
|
26.9
|
25.1
|
|
Investment
income received
|
20.1
|
5.0
|
|
Dividends
from associates
|
21.4
|
26.7
|
|
Share
option proceeds
|
1.1
|
—
|
|
Less:
|
|
|
|
Earnout
payments
|
(63.3)
|
(14.1)
|
|
Interest
and similar charges paid
|
(86.8)
|
(90.1)
|
|
Purchase
of property, plant and equipment
|
(102.4)
|
(111.6)
|
|
Purchase
of other intangible assets (including capitalised computer
software)
|
(14.6)
|
(26.7)
|
|
Repayment
of lease liabilities
|
(146.3)
|
(157.4)
|
|
Interest
paid on lease liabilities
|
(44.1)
|
(44.7)
|
|
Corporation
and overseas tax paid
|
(162.7)
|
(162.7)
|
|
Dividends
paid to non-controlling interests in subsidiary
undertakings
|
(37.2)
|
(74.5)
|
|
Free cash flow
|
(1,473.5)
|
(345.1)
|
The
Group bases its internal cash flow objectives on free cash flow.
Management believes free cash flow is meaningful to investors
because it is the measure of the Group’s funds available for
acquisition related payments, dividends to shareholders, share
repurchases and debt repayment. The purpose of presenting free cash
flow is to indicate the ongoing cash generation within the control
of the Group after taking account of the necessary cash
expenditures of maintaining the capital and operating structure of
the Group (in the form of payments of interest, corporate taxation,
and capital expenditure).
Adjusted net debt and average adjusted net debt
Management
believes that adjusted net debt and average adjusted net debt are
appropriate and meaningful measures of the debt levels within the
Group. This is because of the seasonal swings in our working
capital generally, and those resulting from our media buying
activities on behalf of our clients in particular.
Adjusted
net debt at a period end consists of cash and short-term deposits,
bank overdraft, bonds and bank loans due within one year and bonds
and bank loans due after one year.
Reconciliation
of adjusted net debt:
|
£
million
|
30 June 2022
|
31 December 2021
|
|
Cash
and short-term deposits
|
1,775.0
|
3,882.9
|
|
Bank
overdrafts, bonds and bank loans due within one year
|
(289.1)
|
(567.2)
|
|
Bonds and bank loans due after one year
|
(4,620.7)
|
(4,216.8)
|
|
Adjusted net debt
|
(3,134.8)
|
(901.1)
|
Average
adjusted net debt is calculated as the average daily net borrowings
of the Group. Adjusted net debt excludes lease
liabilities.
Future restructuring and transformation costs
Further
restructuring and transformation costs are expected in the second
half of 2022 to 2025, with approximately £350 million in
relation to the continued rollout of the Group’s new ERP
system in order to drive efficiency and collaboration throughout
the Group. Costs of between £200 and £250 million are
also expected in relation to other IT transformation projects,
shared service centres and co-locations.
Constant currency and pro forma
(‘like-for-like’)
The
condensed consolidated interim financial statements are presented
in pounds sterling. However, the Group’s significant
international operations give rise to fluctuations in foreign
exchange rates. To neutralise foreign exchange impact and
illustrate the underlying change in revenue and profit from one
year to the next, the Group has adopted the practice of discussing
results in both reportable currency (local currency results
translated into pounds sterling at the prevailing foreign exchange
rate) and constant currency.
Management
also believes that discussing pro forma or like-for-like
contributes to the understanding of the Group’s performance
and trends because it allows for meaningful comparisons of the
current year to that of prior years.
Further
details of the constant currency and pro forma methods are given in
the glossary on page 46.
Reconciliation
of reported revenue less pass-through costs to like-for-like
revenue less pass-through costs:
|
£
million
|
Six months ended
30 June 2022
|
|
|
Revenue less pass-through costs
|
|
|
|
2021
Reported
|
4,899.2
|
|
|
Impact
of exchange rate changes
|
161.1
|
3.3%
|
|
Impact
of acquisitions and disposals
|
14.7
|
0.3%
|
|
Like-for-like growth
|
434.5
|
8.9%
|
|
2022 Reported
|
5,509.5
|
12.5%
|
Appendix 3: Re-presented segmental analysis for the year ended 31
December 2021
During
2022, the Group re-presented prior year figures to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. For information purposes, the
re-presented reported contributions by operating sector for the
year ended 31 December 2021 are presented below:
|
£
million
|
Year ended 31 December 2021
|
|
Revenue
|
|
|
Global
Integrated Agencies
|
10,890.5
|
|
Public
Relations
|
959.0
|
|
Specialist
Agencies
|
951.6
|
|
|
12,801.1
|
|
Revenue less pass-through costs1
|
|
|
Global
Integrated Agencies
|
8,683.1
|
|
Public
Relations
|
909.7
|
|
Specialist
Agencies
|
804.4
|
|
|
10,397.2
|
|
Headline operating profit2
|
|
|
Global
Integrated Agencies
|
1,221.8
|
|
Public
Relations
|
143.1
|
|
Specialist
Agencies
|
128.6
|
|
|
1,493.5
|
1 Revenue less pass-through costs is defined in Appendix
2.
2 Headline operating profit is defined in Appendix
2.
Glossary and basis of preparation
Average adjusted net debt and adjusted net debt
Average
adjusted net debt is calculated as the average daily net borrowings
of the Group. Adjusted net debt at a period end consists of cash
and short-term deposits, bank overdraft, bonds and bank loans due
within one year and bonds and bank loans due after one year.
Adjusted net debt excludes lease liabilities.
Billings and estimated net new billings
Billings
comprise the gross amounts billed to clients in respect of
commission-based/fee-based income together with the total of other
fees earned. Net new billings represent the estimated annualised
impact on billings of new business gained from both existing and
new clients, net of existing client business lost. The estimated
impact is based upon initial assessments of the clients’
marketing budgets, which may not necessarily result in actual
billings of the same amount.
Constant currency
The
Group uses US dollar-based, constant currency models to measure
performance. These are calculated by applying budgeted 2022
exchange rates to local currency reported results for the current
and prior year, which excludes any variances attributable to
foreign exchange rate movements.
Exceptional gains/losses
Exceptional
gains/losses include gains/losses on disposal of investments and
subsidiaries, gains/losses on remeasurement of equity interests
arising from a change in scope of ownership, investment and other
impairment (reversals)/charges, litigation settlement,
restructuring and transformation costs, restructuring costs in
relation to COVID-19 and share of exceptional gains/losses of
associates.
Free cash flow
Free
cash flow is calculated as cash generated by operations plus
dividends received from associates, interest received, investment
income received, and proceeds from the issue of shares, less
corporation and overseas tax paid, interest and similar charges
paid, dividends paid to non-controlling interests in subsidiary
undertakings, repayment of lease liabilities (including interest),
earnout payments and purchases of property, plant and equipment and
purchases of other intangible assets.
General and administrative costs
General
and administrative costs include marketing costs, certain
professional fees, and an allocation of other costs, including
staff and establishment costs, based on the function of employees
within the Group.
Headline earnings
Headline
PBT less headline tax charge and headline non-controlling
interests.
Headline EBITDA
Profit
before finance income/costs and revaluation and retranslation of
financial instruments, taxation, gains/losses on disposal of
investments and subsidiaries, investment and other impairment
(reversals)/charges, goodwill impairment and other goodwill
write-downs, amortisation and impairment of acquired intangible
assets, amortisation of other intangibles, depreciation of
property, plant and equipment, depreciation of right-of-use assets,
restructuring and transformation costs, restructuring costs in
relation to COVID-19, litigation settlement, share of exceptional
gains/losses of associates and gains/losses on remeasurement of
equity interests arising from a change in scope of
ownership.
Headline operating profit
Operating
profit before gains/losses on disposal of investments and
subsidiaries, investment and other impairment (reversals)/charges,
goodwill impairment and other goodwill write-downs, amortisation
and impairment of acquired intangible assets, restructuring and
transformation costs, restructuring costs in relation to COVID-19,
litigation settlement, and gains/losses on remeasurement of equity
interests arising from a change in scope of ownership.
Headline PBIT
Profit
before finance and investment income/costs and revaluation and
retranslation of financial instruments, taxation, gains/losses on
disposal of investments and subsidiaries, investment and other
impairment (reversals)/charges, goodwill impairment and other
goodwill write-downs, amortisation and impairment of acquired
intangible assets, restructuring and transformation costs,
restructuring costs in relation to COVID-19, litigation settlement,
share of exceptional gains/losses of associates and gains/losses on
remeasurement of equity interests arising from a change in scope of
ownership.
Headline operating profit margin
Headline
operating profit margin is calculated as headline operating profit
as a percentage of revenue less pass-through costs.
Headline PBT
Profit
before taxation, gains/losses on disposal of investments and
subsidiaries, investment and other impairment (reversals)/charges,
goodwill impairment and other goodwill write-downs, amortisation
and impairment of acquired intangible assets, restructuring and
transformation costs, restructuring costs in relation to COVID-19,
litigation settlement, share of exceptional gains/losses of
associates, gains/losses arising from the revaluation and
retranslation of financial instruments and gains/losses on
remeasurement of equity interests arising from a change in scope of
ownership.
Headline tax charge
Taxation
excluding tax/deferred tax relating to gains/losses on disposal of
investments and subsidiaries, goodwill impairment and other
goodwill write-downs, restructuring and transformation costs,
restructuring costs in relation to COVID-19, litigation settlement,
and the deferred tax impact of the amortisation of acquired
intangible assets and other goodwill items.
Net working capital
The
movement in net working capital consists of movements in trade
working capital and movements in other working capital and
provisions per the analysis of cash flows note.
Pass-through costs
Pass-through
costs comprise fees paid to external suppliers where they are
engaged to perform part or all of a specific project and are
charged directly to clients, predominantly media
costs.
Pro forma (‘like-for-like’)
Pro
forma comparisons are calculated as follows: current year, constant
currency actual results (which include acquisitions from the
relevant date of completion) are compared with prior year, constant
currency actual results, adjusted to include the results of
acquisitions and disposals, the reclassification of certain
businesses to associates in 2021 and the restatement of agency
arrangements under IFRS 15 for the commensurate period in the prior
year. Both periods exclude results from Russia. The Group uses the
terms ‘pro forma’ and ‘like-for-like’
interchangeably.
Revenue less pass-through costs
Revenue
less pass-through costs is revenue less media and other
pass-through costs.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
WPP
PLC
|
|
|
(Registrant)
|
|
Date: 5
August 2022
|
By:
______________________
|
|
|
Balbir
Kelly-Bisla
|
|
|
Company
Secretary
|