WPP plc 6-K, filed Aug 9, 2022
WPP plc (WPP)
6-K
2022-08-09
For: 2022-06-30
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Added on
April 12, 2026
About this 6-K
WPP plc filed this 6-K on August 9, 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
__________________________
(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 o
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): o
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): o
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.
Explanatory Note
WPP plc (“the Company”) and certain of its subsidiaries, including WPP Finance 2010, WPP 2005 Limited and WPP Jubilee Limited, may from time to time file registration statements for the registration of securities that may from time to time be offered by WPP Finance 2010 or other subsidiaries of the Company with guarantees of WPP plc, WPP 2005 Limited and WPP Jubilee Limited and, to the extent so indicated in an applicable prospectus supplement or otherwise established following the offer and sale of a series of debt securities, guarantees of other entities. The Company is furnishing this report on Form 6-K for the purpose of presenting its results for the six months ended 30 June 2022 in a format that can be incorporated by reference into any such registration statement.
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”, in the Company’s Form 20-F for the year ended 31 December 2021, 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 | |||||||||||
| 2 | |||||||||||
| (i) | Unaudited condensed consolidated interim income statement for the six months ended 30 June 2022 and 2021 | ||||||||||
| (ii) | Unaudited condensed consolidated interim statement of comprehensive income for the six months ended 30 June 2022 and 2021 | ||||||||||
| (iii) | Unaudited condensed consolidated interim cash flow statement for the six months ended 30 June 2022 and 2021 | ||||||||||
| (iv) | Unaudited condensed consolidated interim balance sheet as at 30 June 2022 and 31 December 2021 | ||||||||||
| (v) | Unaudited condensed consolidated interim statement of changes in equity for the six months ended 30 June 2022 and 2021 | ||||||||||
| (vi) | Notes to the unaudited condensed consolidated interim financial statements | ||||||||||
| 101.INS | Inline XBRL Instance Document* | ||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Linkbase Document* | ||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | ||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* | ||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | ||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | ||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* | ||||||||||
* Filed herewith | |||||||||||
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: 9 August 2022 | By: | /s/ Balbir Kelly-Bisla | ||||||
| Balbir Kelly-Bisla | ||||||||
| Company Secretary | ||||||||
Exhibit 1
Operating and Financial Review for the period ended 30 June 2022
Six months ended June 2022 compared with six months ended June 2021
Certain Non-GAAP measures included in this operating and financial review have been derived from amounts calculated in accordance with IFRS but are not themselves IFRS measures. They should not be viewed in isolation as alternatives to the equivalent IFRS measure, rather they should be read in conjunction with the equivalent IFRS measure. These and other operational metrics include constant currency, pro-forma (‘like-for-like’), headline operating profit, headline PBIT (Profit Before Interest and Taxation), headline PBT (Profit Before Taxation), billings and estimated net new business/billings, free cash flow, and adjusted net debt and average adjusted net debt, which we define, explain the use of and reconcile to the nearest IFRS measure for the Non-GAAP measures on pages 8 to 11.
Management believes that these measures are both useful and necessary to present herein because 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.
The exclusion of certain adjusting items may result in headline profit measures being materially higher or lower than reported profit measures, for example when significant impairments or restructuring charges are excluded but the related benefits are included headline profit measures will be higher. Headline profit measures should not be considered in isolation as they provide additional information to aid the understanding of the Group’s financial performance.
Unless the context otherwise requires, the terms "Company", "Group" and Registrant" as used herein shall also mean WPP.
First half overview
Introduction
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 we are 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.
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. We have seen good momentum in the first half of the year, with like-for-like growth in revenue across most sectors and most major markets.
Client demand remains healthy across all services. 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
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,
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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 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.
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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.
Review of Group results from operations
Revenue
Revenue from operations was up 10.2% at £6.8 billion in the first half of 2022 compared to £6.1 billion in the first half of 2021. Revenue on a constant currency basis was up 7.2% compared with the same period 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%. Billings were up 5.1% at £24.6 billion compared with the first half of 2021. In the second quarter, revenue was up 13.3% and like-for-like revenue was up 9.3%.
Costs of services, general and administrative costs
Costs of services increased by 9.9% in the first half of 2022 to £5.7 billion from £5.2 billion in the first half of 2021. General and administrative costs increased by 12.3% in the first half of 2022 to £509 million from £453 million in the first half of 2021.
Staff costs increased by 13.2% in the first half of 2022 to £3.9 billion from £3.5 billion in the first half of 2021. Staff costs, excluding incentives (cash-based and share-based incentive) payments of £164 million (2021: £244 million), 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. Personnel costs rose 84.6% to £96 million, reflecting the return of business travel, as expected.
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.
In the first half of 2022, the Group had £75 million of restructuring and transformation costs, £31 million of amortisation and impairment of acquired intangible assets, £6 million of restructuring costs in relation to COVID-19, and £48 million of losses on disposal of investments and subsidiaries. These costs were partially offset by £60 million of gains on the remeasurement of equity interests arising from a change in scope of ownership. This compares with £34 million of restructuring and transformation costs, £30 million of amortisation and impairment of acquired intangible assets, £22 million of litigation settlement, £20 million of restructuring costs in relation to COVID-19, and £1 million of losses on disposal of investments and subsidiaries in the first half of 2021.
Operating profitability
Operating profit was £539 million in the first half of 2022, compared to an operating profit of £484 million in the first half of 2021. Headline operating profit was up 8.2% to £639 million from £590 million in the first half of 2021. The difference between the headline operating profit and operating profit principally reflects the £75 million of restructuring and transformation costs, £48 million of losses on disposal of investments and subsidiaries, and £31 million of amortisation and impairment of acquired intangible assets charges, partially offset by £60 million of gains on remeasurement of equity interests arising from a change in scope of ownership, and in the first half of 2022.
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.
Interest and taxes
Net finance costs, equal to finance and investment income less finance costs (excluding the revaluation and retranslation 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.
Revaluation and retranslation of financial instruments resulted in a gain of £33 million for the half year of 2022, an increase of £45 million from a loss of £12 million for the half year 2021 primarily as a result of revaluation of put options over non-controlling interests.
The tax rate on profit before tax was 28.1% (2021: 27.2%).
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Earnings and dividend
Profit before tax was £419 million, compared to £394 million in the prior period, principally reflecting higher operating profit and gains on the remeasurement of equity interests arising from changes in ownership, partially offset by the loss on the divestment of our Russian operations and higher restructuring and transformation costs. Headline profit before tax was up 12.0% at £562 million.
Profit after tax was £301 million compared to £287 million in the prior period. Profits attributable to share owners were £258 million, compared to a profit of £253 million in the prior period.
Diluted earnings per share was 22.7p, compared to diluted earnings per share of 20.6p in the prior period.
For 2022, the Board is declaring an interim dividend of 15.0p per ordinary share, 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.
Reportable segments review
The following tables give details of revenue and revenue less pass-through costs by reportable segment, as well as revenue and revenue less pass-through costs growth by reportable segment for the second quarter and first half of 2022. Headline operating profit and headline operating profit margin by reportable segment for the first half of 2022 are also provided below.
Revenue analysis
Three months ended 30 June 2022 | Reported change three months ended 30 June 2022 | Like-for-like change three months ended 30 June 2022 | Six months ended 30 June 2022 | Reported change six months ended 30 June 2022 | Like-for-like change six months ended 30 June 2022 | ||||||||||||||||||||||||||||||||||||||||||
| £m | £m | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Integrated 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 £17.9 million and £33.2 million respectively and reduces Specialist Agencies’ by the same amount.
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Revenue less pass-through costs1 analysis
Three months ended 30 June 2022 | Reported change three months ended 30 June 2022 | Like-for-like change three months ended 30 June 2022 | Six months ended 30 June 2022 | Reported change six months ended 30 June 2022 | Like-for-like change six months ended 30 June 2022 | ||||||||||||||||||||||||||||||||||||||||||
| £m | £m | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Integrated 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 | % | |||||||||||||||||||||||||||||||||||||
Note
1Revenue less pass-through costs is revenue less media and other 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. See note 4 to the Company's unaudited condensed consolidated interim financial statements, which appears in Exhibit 2, for more details of the 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’ Q2 and H1 2021 revenue less pass-through costs by £15.0 million and £28.4 million respectively and reduces Specialist Agencies’ by the same amount.
Headline operating profit analysis
Headline operating profit six months ended 30 June 2022 | Headline operating profit margin1 six months ended 30 June 2022 | Headline operating profit six months ended 30 June 2021 | Headline operating profit margin1 six months ended 30 June 2021 | ||||||||||||||||||||
| £m | % | £m | % | ||||||||||||||||||||
| Global Integrated 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 | 590 | |||||||||||||||||||||
Note
1Headline operating profit margin is calculated as 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 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. As a result, headline operating profit was up £18 million from £489 million for the six months ended 30 June 2021 to £507 million for the six months ended 30 June 2022.
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. As a result, headline operating profit was up £20 million from £63 million for the six months ended 30 June 2021 to £83 million for the six months ended 30 June 2022.
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. As a result, headline operating profit was up £11 million from £38 million for the six months ended 30 June 2021 to £49 million for the six months ended 30 June 2022.
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Regional review
The following tables give details of revenue and revenue less pass-through costs by region, as well as revenue and revenue less pass-through costs growth by region for the second quarter and first half of 2022. Headline operating profit by region is provided in note 7 of Exhibit 2.
Revenue analysis
Three months ended 30 June 2022 | Reported change three months ended 30 June 2022 | Like-for-like change three months ended 30 June 2022 | Six months ended 30 June 2022 | Reported change six months ended 30 June 2022 | Like-for-like change six months ended 30 June 2022 | ||||||||||||||||||||||||||||||||||||||||||
| £m | £m | ||||||||||||||||||||||||||||||||||||||||||||||
| 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, CEE1 | 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 | % | |||||||||||||||||||||||||||||||||||||
Note
1Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
Revenue less pass-through costs1 analysis
Three months ended 30 June 2022 | Reported change three months ended 30 June 2022 | Like-for-like change three months ended 30 June 2022 | Six months ended 30 June 2022 | Reported change six months ended 30 June 2022 | Like-for-like change six months ended 30 June 2022 | ||||||||||||||||||||||||||||||||||||||||||
| £m | £m | ||||||||||||||||||||||||||||||||||||||||||||||
| 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, CEE2 | 798 | 11.4 | % | 8.0 | % | 1,497 | 10.8 | % | 9.8 | % | |||||||||||||||||||||||||||||||||||||
Notes
1Revenue less pass-through costs is revenue less media and other 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. See note 4 to the Company's unaudited condensed consolidated interim financial statements, which appears in Exhibit 2, for more details of the pass-through costs.
2Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
North America like-for-like revenue less pass-through costs was up 9.5% in the first half. There was an improving trend in the second quarter, with like-for-like revenue less pass-through costs up 10.2%. Growth was driven predominantly by GroupM, along with strong growth in Hogarth, Superunion and H+K Strategies.
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. Of our major agencies, AKQA Group, H+K Strategies 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 of 2022 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 of 2022 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 weak China performance, which has been impacted by ongoing lockdowns.
Cash Flow and Balance Sheet
The Group’s unaudited condensed consolidated interim cash flow statement, balance sheet and notes as at 30 June 2022 are provided in Exhibit 2.
Net cash outflow from operating activities was £1,111 million in the first half of 2022, compared to a cash inflow of £39 million in the first half of 2021.
6
In the first half of 2022, operating profit was £539 million, depreciation and amortisation £255 million, impairments and investment and other write downs £8 million, non-cash share-based incentive charges £67 million, earnout payments £63 million, working capital and provisions outflow £1,741 million, net interest paid £60 million, tax paid £163 million, lease liabilities (including interest) paid £190 million, capital expenditure £117 million and other net cash outflows £9 million. Free cash flow was, therefore, an outflow of £1,474 million.
This free cash flow outflow was partially offset by £33.7 million disposal proceeds (of which £29.2 million was disposals of investments and subsidiaries net of cash disposed, and £4.5 million was proceeds on disposal of property, plant and equipment) and increased by £45.6 million in net initial acquisition payments and £681 million of share purchases (of which £637 million relate to share buybacks). Since June 2021 we have completed £1.1 billion of share buybacks.
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. Debt financing at 30 June 2022 was £4.9 billion, compared to £4.8 billion as of 31 December 2021. Average adjusted net debt in the first half of 2022 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.
Our bond portfolio at 30 June 2022 had an average maturity of 6.8 years.
Summarised financial information about Guarantors and Issuers of Guaranteed Securities
As at 30 June 2022, WPP Finance 2010 had in issue $93 million ($28 million was repaid in 2018 and $179 million was repaid in 2019 from the $300 million initially issued) of 5.125% bonds due September 2042 with WPP plc as parent guarantor and WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited and WPP Jubilee Limited as subsidiary guarantors.
In the event that WPP Finance 2010 fails to pay the holders of the securities, thereby requiring WPP plc, WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited or WPP Jubilee Limited to make payment pursuant to the terms of their full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited or WPP Jubilee Limited obtaining reimbursement for any such payments from WPP Finance 2010.
Summarised income statement information for WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
For the six months ended 30 June 2022 | For the year ended 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Revenue | — | — | |||||||||
| Costs of services | — | — | |||||||||
| Gross profit | — | — | |||||||||
Administrative income/(expenses) due from/to non-guarantors | 14.5 | 29.0 | |||||||||
| Share of results of associates | — | — | |||||||||
| Finance and investment income from non-guarantors | 16.3 | 44.2 | |||||||||
| Finance costs to non-guarantors | (191.3) | (226.4) | |||||||||
| (Loss)/profit for the period | (439.6) | 111.2 | |||||||||
Summarised balance sheet information for WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
At 30 June 2022 | At 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Due from Non-Guarantors-long term | 1,753.8 | 1,713.0 | |||||||||
| Non-current assets | 1,941.0 | 1,896.0 | |||||||||
| Due from Non-Guarantors-short term | 915.3 | 977.0 | |||||||||
| Current assets | 1,479.9 | 1,525.1 | |||||||||
| Due to Non-Guarantors-short term | (25,140.6) | (27,500.5) | |||||||||
| Current Liabilities | (25,247.1) | (27,822.3) | |||||||||
| Due to Non-Guarantors-long term | (1,356.3) | (1,543.5) | |||||||||
| Non-current liabilities | (2,332.2) | (2,440.4) | |||||||||
7
As at 30 June 2022, WPP Finance 2010 had in issue $750 million of 3.750% bonds due September 2024 and $220 million ($50 million was repaid in 2018 and $230 million was repaid in 2019 from the $500 million initially issued) of 5.625% bonds due November 2043, with WPP plc as parent guarantor and WPP Jubilee Limited and WPP 2005 Limited as subsidiary guarantors.
In the event that WPP Finance 2010 fails to pay the holders of the securities, thereby requiring WPP plc, WPP Jubilee Limited or WPP 2005 Limited to make payment pursuant to the terms of their full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Jubilee Limited or WPP 2005 Limited obtaining reimbursement for any such payments from WPP Finance 2010.
Summarised income statement information for WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
For the six months ended 30 June 2022 | For the year ended 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Revenue | — | — | |||||||||
| Costs of services | — | — | |||||||||
| Gross profit | — | — | |||||||||
Administrative income/(expenses) due from/to non-guarantors | 14.5 | 29.0 | |||||||||
| Share of results of associates | — | — | |||||||||
| Finance and investment income from non-guarantors | 16.3 | 44.2 | |||||||||
| Finance costs to non-guarantors | (191.3) | (226.4) | |||||||||
| (Loss)/profit for the period | (439.6) | 111.2 | |||||||||
Summarised balance sheet information for WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
At 30 June 2022 | At 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Due from Non-Guarantors-long term | 1,753.8 | 1,713.0 | |||||||||
| Non-current assets | 1,941.0 | 1,896.0 | |||||||||
| Due from Non-Guarantors-short term | 1,084.5 | 1,146.1 | |||||||||
| Current assets | 1,649.0 | 1,694.3 | |||||||||
| Due to Non-Guarantors-short term | (25,141.3) | (27,501.2) | |||||||||
| Current Liabilities | (25,247.7) | (27,822.8) | |||||||||
| Due to Non-Guarantors-long term | (1,356.3) | (1,543.5) | |||||||||
| Non-current liabilities | (2,332.2) | (2,440.4) | |||||||||
The issuer and guarantors of the bonds (issuer and subsidiary guarantors are 100% owned by WPP plc) are consolidated subsidiaries of WPP plc and are each subject to the reporting requirements under section 15(d) of the Securities Exchange Act of 1934. The summarised financial information for WPP Finance 2010 and the guarantors is presented on a combined basis with intercompany balances and transactions between the entities in the issuer and guarantors group eliminated. The summarized financial information is prepared in accordance with IFRS as issued by the IASB and is intended to provide investors with meaningful financial information, and is provided pursuant to Rule 13-01 of Regulation S-X which allows for alternative financial disclosures or narrative disclosures in lieu of the separate financial statements of WPP Finance 2010 and the guarantors. The financial information presented is that of the issuers and guarantors of the guaranteed security, and the financial information of non-issuer and non-guarantor subsidiaries has been excluded.
NON-GAAP INFORMATION
As introduced on page 1, the following are the Group’s Non-GAAP performance measures.
Constant currency
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, profit, and other relevant financial statement line items 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.
8
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.
Pro-forma (‘like-for-like’)
Management 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 period to that of prior periods.
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.
The following table reconciles reported revenue growth for the three month and six month periods ended 30 June 2022 and 2021, to like-for-like revenue growth for the same periods.
| Three months ended 30 June | Six months ended 30 June | ||||||||||||||||||||||
| Revenue | Revenue | ||||||||||||||||||||||
| £m | % | £m | % | ||||||||||||||||||||
| 2021 Reported | 3,235.1 | 6,132.5 | |||||||||||||||||||||
| Impact of exchange rate changes | 177.4 | 5.5 | 183.2 | 3.0 | |||||||||||||||||||
| Impact of acquisitions and disposals | (48.4) | (1.5) | (91.6) | (1.5) | |||||||||||||||||||
| Like-for-like growth | 299.9 | 9.3 | 531.2 | 8.7 | |||||||||||||||||||
| 2022 Reported | 3,664.0 | 13.3 | 6,755.3 | 10.2 | |||||||||||||||||||
Headline operating profit
Headline operating profit is one of the measures that management uses to assess the performance of the business.
Headline operating profit is calculated as 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.
Adjustments to operating profit described above are included in costs of services and general administrative costs as provided in note 4 of the unaudited condensed consolidated interim financial statements, which appears in Exhibit 2, and are components of operating profit.
A tabular reconciliation of operating profit to headline operating profit is provided in note 20 of the unaudited condensed consolidated interim financial statements of the Company, which appears in Exhibit 2.
Headline PBIT
Headline PBIT is one of the measures that management uses to assess the performance of the business.
Headline PBIT is calculated as 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.
9
A tabular reconciliation of profit before interest and taxation to headline PBIT is shown below.
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Profit before interest and taxation | 474.9 | 523.6 | |||||||||
| 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 | |||||||||
| Share of exceptional losses of associates | 76.1 | (11.7) | |||||||||
| Headline PBIT | 651.4 | 618.7 | |||||||||
Headline PBT
Headline PBT is one of the measures that management uses to assess the performance of the business.
Headline PBT is calculated as 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.
A tabular reconciliation of profit before taxation to headline PBT is shown below.
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| 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 | |||||||||
Billings and estimated net new business/billings
Billings and estimated net new business/billings are metrics that management uses to assess the performance of the business.
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 business/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.
Free cash flow
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). This computation may not be comparable to that of similarly titled measures presented by other companies.
10
Free cash flow is calculated as net cash flow from operating activities including share option proceeds less earnout payments, purchases of property, plant and equipment, purchases of other intangible assets, repayment of lease liabilities and dividends paid to non-controlling interests in subsidiary undertakings.
A tabular reconciliation of net cash flow from operating activities to free cash flow is shown below:
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Net cash (outflow)/inflow from operating activities | (1,110.8) | 39.2 | |||||||||
| Share option proceeds | 1.1 | — | |||||||||
| Earnout payments | (63.3) | (14.1) | |||||||||
| 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) | |||||||||
| Dividends paid to non-controlling interests in subsidiary undertakings | (37.2) | (74.5) | |||||||||
| Free cash flow | (1,473.5) | (345.1) | |||||||||
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, though our cash resources could be used to repay the debt concerned.
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. Average adjusted net debt is calculated as the average daily net borrowings of the Group.
The following table is an analysis of adjusted net debt:
30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| 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) | |||||||||
11
Exhibit 2
Unaudited Condensed Consolidated Interim Financial Statements of WPP plc
WPP plc
Unaudited condensed consolidated interim income statement
for the six months ended 30 June 2022 and 2021
| Notes | Six months ended 30 June 2022 | Six months ended 30 June 2021 | |||||||||||||||
| £m | £m | ||||||||||||||||
| Revenue | 7 | ||||||||||||||||
| Costs of services | 4 | ( | ( | ||||||||||||||
| Gross profit | |||||||||||||||||
| General and administrative costs | 4 | ( | ( | ||||||||||||||
| Operating profit | |||||||||||||||||
| Share of results of associates | 5 | ( | |||||||||||||||
| Profit before interest and taxation | |||||||||||||||||
| Finance and investment income | 6 | ||||||||||||||||
| Finance costs | 6 | ( | ( | ||||||||||||||
| Revaluation and retranslation of financial instruments | 6 | ( | |||||||||||||||
| Profit before taxation | |||||||||||||||||
| Taxation | 8 | ( | ( | ||||||||||||||
| Profit for the period | |||||||||||||||||
| Attributable to: | |||||||||||||||||
| Equity holders of the parent | |||||||||||||||||
| Non-controlling interests | |||||||||||||||||
| Earnings per share | |||||||||||||||||
| Basic earnings per ordinary share | 10 | p | p | ||||||||||||||
| Diluted earnings per ordinary share | 10 | p | p | ||||||||||||||
Note
The accompanying notes form an integral part of this unaudited condensed consolidated interim income statement.
1
WPP plc
Unaudited condensed consolidated interim statement of comprehensive income
for the six months ended 30 June 2022 and 2021
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Profit for the period | |||||||||||
| Items that may be reclassified subsequently to profit or loss: | |||||||||||
| Exchange adjustments on foreign currency net investments | ( | ||||||||||
| (Loss)/gain on net investment hedges | ( | ||||||||||
| Cash flow hedges: | |||||||||||
| Fair value gain/(loss) arising on hedging instruments | ( | ||||||||||
| Less: (loss)/gain reclassified to profit or loss | ( | ||||||||||
| Share of other comprehensive income of associates undertakings | |||||||||||
| ( | |||||||||||
| Items that will not be reclassified subsequently to profit or loss: | |||||||||||
| Movements on equity investments held at fair value through other comprehensive income | ( | ||||||||||
| ( | |||||||||||
| Other comprehensive income/(loss) relating to the period | ( | ||||||||||
| Total comprehensive income relating to the period | |||||||||||
| Attributable to: | |||||||||||
| Equity holders of the parent | |||||||||||
| Non-controlling interests | |||||||||||
Note
The accompanying notes form an integral part of this unaudited condensed consolidated interim statement of comprehensive income.
2
WPP plc
Unaudited condensed consolidated interim cash flow statement
for the six months ended 30 June 2022 and 2021
| Notes | Six months ended 30 June 2022 | Six months ended 30 June 2021 | |||||||||||||||
| £m | £m | ||||||||||||||||
| Net cash (outflow)/inflow from operating activities | 11 | ( | |||||||||||||||
| Investing activities | |||||||||||||||||
| Acquisitions | 11 | ( | ( | ||||||||||||||
| Disposals of investments and subsidiaries | 11 | ||||||||||||||||
| Purchase of property, plant and equipment | ( | ( | |||||||||||||||
| Purchase of other intangible assets (including capitalised computer software) | ( | ( | |||||||||||||||
| Proceeds on disposal of property, plant and equipment | |||||||||||||||||
| Net cash outflow from investing activities | ( | ( | |||||||||||||||
| Financing activities | |||||||||||||||||
| Repayment of lease liabilities | ( | ( | |||||||||||||||
| Share option proceeds | |||||||||||||||||
| Cash consideration received from non-controlling interests | 11 | ||||||||||||||||
| Cash consideration for purchase of non-controlling interests | 11 | ( | ( | ||||||||||||||
| Share repurchases and buy-backs | 11 | ( | ( | ||||||||||||||
| Proceeds from borrowings | 11 | ||||||||||||||||
| Repayment of borrowings | 11 | ( | ( | ||||||||||||||
| Financing and share issue costs | ( | ||||||||||||||||
| Dividends paid to non-controlling interests in subsidiary undertakings | ( | ( | |||||||||||||||
| Net cash outflow from financing activities | ( | ( | |||||||||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||||||||
| Translation of cash and cash equivalents | ( | ||||||||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||||||||
| Cash and cash equivalents at end of period | 12 | ||||||||||||||||
Note
The accompanying notes form an integral part of this unaudited condensed consolidated interim cash flow statement.
3
WPP plc
Unaudited condensed consolidated interim balance sheet
as at 30 June 2022 and 31 December 2021
| Notes | 30 June 2022 | 31 December 2021 | |||||||||||||||
| £m | £m | ||||||||||||||||
| Non-current assets | |||||||||||||||||
| Intangible assets: | |||||||||||||||||
| Goodwill | 13 | ||||||||||||||||
| Other | |||||||||||||||||
| Property, plant and equipment | |||||||||||||||||
| Right-of-use assets | |||||||||||||||||
| Interests in associates and joint ventures | |||||||||||||||||
| Other investments | |||||||||||||||||
| Deferred tax assets | |||||||||||||||||
| Corporate income tax recoverable | |||||||||||||||||
| Trade and other receivables | 14 | ||||||||||||||||
| Current assets | |||||||||||||||||
| Corporate income tax recoverable | |||||||||||||||||
| Trade and other receivables | 14 | ||||||||||||||||
| Cash and short-term deposits | |||||||||||||||||
| Current liabilities | |||||||||||||||||
| Trade and other payables | 15 | ( | ( | ||||||||||||||
| Corporate income tax payable | ( | ( | |||||||||||||||
| Short-term lease liabilities | ( | ( | |||||||||||||||
| Bank overdrafts, bonds and bank loans | ( | ( | |||||||||||||||
| ( | ( | ||||||||||||||||
| Net current liabilities | ( | ( | |||||||||||||||
| Total assets less current liabilities | |||||||||||||||||
| Non-current liabilities | |||||||||||||||||
| Bonds and bank loans | ( | ( | |||||||||||||||
| Trade and other payables | 16 | ( | ( | ||||||||||||||
| Deferred tax liabilities | ( | ( | |||||||||||||||
| Provisions for post-employment benefits | ( | ( | |||||||||||||||
| Provisions for liabilities and charges | ( | ( | |||||||||||||||
| Long-term lease liabilities | ( | ( | |||||||||||||||
| ( | ( | ||||||||||||||||
| Net assets | |||||||||||||||||
| Equity | |||||||||||||||||
| Called-up share capital | |||||||||||||||||
| Share premium account | |||||||||||||||||
| Other reserves | ( | ||||||||||||||||
| Own shares | ( | ( | |||||||||||||||
| Retained earnings | |||||||||||||||||
| Equity shareholders’ funds | |||||||||||||||||
| Non-controlling interests | |||||||||||||||||
| Total equity | |||||||||||||||||
Note
The accompanying notes form an integral part of this unaudited condensed consolidated interim balance sheet.
4
WPP plc
Unaudited condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2022 and 2021
| Called-up share capital | Share premium account | Other reserves | Own shares | Retained earnings | Total equity shareholders’ funds | Non- controlling interests | Total | ||||||||||||||||||||||||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||||||||||||||||
| Balance at 1 January 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Ordinary shares issued | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Share cancellations | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Profit for the period | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Exchange adjustments on foreign currency net investments | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Loss on net investment hedges | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value gain arising on hedging instruments | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Less: loss reclassified to profit or loss | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Share of other comprehensive income of associates undertakings | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Movements on equity investments held at fair value through other comprehensive income | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Non-cash share-based incentive plans (including share options) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Tax adjustment on share-based payments | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net movement in own shares held by ESOP Trusts | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Recognition/derecognition of liabilities in respect of put options | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||
Share purchases – close period commitments1 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Acquisition and disposal of subsidiaries2 | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance at 30 June 2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Called-up share capital | Share premium account | Other reserves3 | Own shares | Retained earnings3 | Total equity shareholders’ funds3 | Non- controlling interests | Total3 | ||||||||||||||||||||||||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||||||||||||||||
| Balance at 1 January 2021 | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Restatement3 | — | — | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Restated balance at 1 January 2021 | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share Cancellations | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Treasury share allocations | — | — | — | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Profit for the period | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Exchange adjustments on foreign currency net investments | — | — | ( | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Gain on net investment hedges | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value loss arising on hedging instruments | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Less: gain reclassified to profit or loss | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Movements on equity investments held at fair value through other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss)/income | — | — | ( | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Total comprehensive (loss)/income | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Non-cash share-based incentive plans (including share options) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Tax adjustment on share-based payments | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net movement in own shares held by ESOP Trusts | — | — | — | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Recognition/derecognition of liabilities in respect of put options | — | — | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Acquisition and disposal of subsidiaries2 | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Restated balance at 30 June 2021 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Notes
The accompanying notes form an integral part of this unaudited condensed consolidated interim statement of changes in equity.
1During 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.
2Acquisition 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.
3Figures have been restated as described in Note 2: Accounting Policies.
5
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 F-3 to F-11 of the 2021 Annual Report on 20-F. 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.
The unaudited condensed consolidated interim financial statements were approved by the board of directors and authorized for issue on 9 August 2022.
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
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Costs of services | |||||||||||
| General and administrative costs | |||||||||||
6
Notes to the unaudited condensed consolidated interim financial statements (continued)
4. Costs of services and general and administrative costs (continued)
Costs of services and general and administrative costs include:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Staff costs | |||||||||||
| Establishment costs | |||||||||||
| Media pass-through costs | |||||||||||
Other costs of services and general and administrative costs1 | |||||||||||
Note
1Other 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.
Staff costs include:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Wages and salaries | |||||||||||
| Cash-based incentive plans | |||||||||||
| Share-based incentive plans | |||||||||||
| Severance | |||||||||||
| Other staff costs | |||||||||||
Other costs of services and general and administrative costs include:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Amortisation and impairment of acquired intangible assets | |||||||||||
| Losses on disposals of investments and subsidiaries | |||||||||||
| Gains on remeasurement of equity interests arising from a change in scope of ownership | ( | ||||||||||
| Restructuring and transformation costs | |||||||||||
| Restructuring costs in relation to COVID-19 | |||||||||||
| Litigation settlement | |||||||||||
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.
7
Notes to the unaudited condensed consolidated interim financial statements (continued)
5. Share of results of associates
Share of results of associates include:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Share of profit before interest and taxation | |||||||||||
| Share of exceptional (losses)/gains | ( | ||||||||||
| Share of interest and non-controlling interests | ( | ( | |||||||||
| Share of taxation | ( | ( | |||||||||
| ( | |||||||||||
Share of exceptional losses in the period ended 30 June 2022 of £76.1 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.
6. Finance and investment income, finance costs and revaluation and retranslation of financial instruments
Finance and investment income includes:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Income from equity investments | |||||||||||
| Interest income | |||||||||||
Finance costs include:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Interest payable and similar charges | |||||||||||
| Interest expense related to lease liabilities | |||||||||||
Revaluation and retranslation of financial instruments include:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Movements in fair value of treasury instruments | |||||||||||
| Premium on the early repayment of bonds | ( | ||||||||||
| Revaluation of investments held at fair value through profit or loss | |||||||||||
| Revaluation of put options over non-controlling interests | ( | ||||||||||
| Revaluation of payments due to vendors (earnout agreements) | ( | ( | |||||||||
| Retranslation of financial instruments | |||||||||||
| ( | |||||||||||
8
Notes to the unaudited condensed consolidated interim financial statements (continued)
7. Segmental analysis
Reported contributions by reportable segments were as follows:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
Revenue1 | |||||||||||
| Global Integrated Agencies | |||||||||||
| Public Relations | |||||||||||
| Specialist Agencies | |||||||||||
Revenue less pass-through costs1,2 | |||||||||||
| Global Integrated Agencies | |||||||||||
| Public Relations | |||||||||||
| Specialist Agencies | |||||||||||
Headline operating profit1,3 | |||||||||||
| Global Integrated Agencies | |||||||||||
| Public Relations | |||||||||||
| Specialist Agencies | |||||||||||
Notes
1Prior year figures have been re-presented to reflect the reallocation of a number of businesses between Global Integrated Agencies and Specialist Agencies.
2Revenue less pass-through costs is revenue less media, and other 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. See note 4 for more details of the pass-through costs.
3A reconciliation from operating profit to headline operating profit is provided in note 20.
Reported contributions by geographical area were as follows:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Revenue | |||||||||||
North America1 | |||||||||||
| United Kingdom | |||||||||||
| Western Continental Europe | |||||||||||
| Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | |||||||||||
Revenue less pass-through costs2 | |||||||||||
North America1 | |||||||||||
| United Kingdom | |||||||||||
| Western Continental Europe | |||||||||||
| Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | |||||||||||
Headline operating profit3 | |||||||||||
North America1 | |||||||||||
| United Kingdom | |||||||||||
| Western Continental Europe | |||||||||||
| Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | |||||||||||
Notes
1North 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).
2Revenue less pass-through costs is revenue less media and other 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. See note 4 for more details of the pass-through costs.
3A reconciliation from operating profit to headline operating profit is provided in note 20.
9
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 profit before tax was 28.1 % (2021: 27.2 %).
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 15.0 p (2021: 12.5 p) 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 18.7 p per ordinary share in respect of 2021. This was paid on 8 July 2022.
10. Earnings per share
Basic EPS
The calculation of basic EPS is as follows:
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
Earnings1 (£ million) | |||||||||||
| Weighted average shares used in basic EPS calculation (million) | |||||||||||
| EPS | |||||||||||
Note
1Earnings is equivalent to profit for the period attributable to equity holders of the parent.
Diluted EPS
The calculation of diluted EPS is as follows:
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| Diluted earnings (£ million) | |||||||||||
| Weighted average shares used in diluted EPS calculation (million) | |||||||||||
| Diluted EPS | |||||||||||
10
Notes to the unaudited condensed consolidated interim financial statements (continued)
10. Earnings per share (continued)
A reconciliation between the shares used in calculating basic and diluted EPS is as follows:
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| m | m | ||||||||||
| Weighted average shares used in basic EPS calculation | |||||||||||
| Dilutive share options outstanding | |||||||||||
| Other potentially issuable shares | |||||||||||
| Weighted average shares used in diluted EPS calculation | |||||||||||
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 ).
11
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 3:
Net cash (outflow)/inflow from operating activities:
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Profit for the period | |||||||||||
| Taxation | |||||||||||
| Revaluation and retranslation of financial instruments | ( | ||||||||||
| Finance costs | |||||||||||
| Finance and investment income | ( | ( | |||||||||
| Share of results of associates | ( | ||||||||||
| Adjustments for: | |||||||||||
| Non-cash share-based incentive plans (including share options) | |||||||||||
| Depreciation of property, plant and equipment | |||||||||||
| Depreciation of right-of-use assets | |||||||||||
| Impairment charges included within restructuring costs | |||||||||||
| Amortisation and impairment of acquired intangible assets | |||||||||||
| Amortisation of other intangible assets | |||||||||||
| Loss on disposal of investments and subsidiaries | |||||||||||
| Gains on remeasurement of equity interests arising from a change in scope of ownership | ( | ||||||||||
| Gains on sale of property, plant and equipment | ( | ( | |||||||||
Movements in trade working capital1, 2 | ( | ( | |||||||||
| Movements in other working capital and provisions | ( | ( | |||||||||
| Corporation and overseas tax paid | ( | ( | |||||||||
| Interest and similar charges paid | ( | ( | |||||||||
| Interest paid on lease liabilities | ( | ( | |||||||||
| Interest received | |||||||||||
| Investment income | |||||||||||
| Dividends from associates | |||||||||||
| Net cash (outflow)/inflow from operating activities | ( | ||||||||||
Notes
1Trade working capital represents trade receivables, work in progress, accrued income, trade payables, and deferred income.
2The 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.
12
Notes to the unaudited condensed consolidated interim financial statements (continued)
11. Analysis of cash flows (continued)
Acquisitions and disposals:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Initial cash consideration | ( | ( | |||||||||
| Cash and cash equivalents acquired | |||||||||||
| Earnout payments | ( | ( | |||||||||
| Purchase of other investments (including associates) | ( | ( | |||||||||
| Acquisitions | ( | ( | |||||||||
Proceeds on disposal of investments and subsidiaries1 | |||||||||||
| Cash and cash equivalents disposed | ( | ( | |||||||||
| Disposals of investments and subsidiaries | |||||||||||
| Cash consideration received from non-controlling interests | |||||||||||
| Cash consideration for purchase of non-controlling interests | ( | ( | |||||||||
| Cash consideration for non-controlling interests | ( | ( | |||||||||
| Net acquisition payments and disposal proceeds | ( | ( | |||||||||
Note
1Proceeds on disposal of investments and subsidiaries includes return of capital from investments in associates.
Share repurchases and buybacks:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Purchase of own shares by ESOP Trusts | ( | ( | |||||||||
| Shares purchased into treasury | ( | ( | |||||||||
| ( | ( | ||||||||||
Proceeds from borrowings:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Increase in drawings on bank loans | |||||||||||
Repayment of borrowings:
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Repayment of bank loans | ( | ( | |||||||||
Repayment of € | ( | ||||||||||
| ( | ( | ||||||||||
13
Notes to the unaudited condensed consolidated interim financial statements (continued)
12. Cash and cash equivalents and debt financing
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Cash at bank and in hand | |||||||||||
| Short-term bank deposits | |||||||||||
Overdrafts1 | ( | ( | |||||||||
| Cash and cash equivalents | |||||||||||
Note
1 Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group’s cash management.
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:
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Within one year | ( | ( | |||||||||
| Between one and two years | ( | ( | |||||||||
| Between two and three years | ( | ( | |||||||||
| Between three and four years | ( | ( | |||||||||
| Between four and five years | ( | ( | |||||||||
| Over five years | ( | ( | |||||||||
| Debt financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes | ( | ( | |||||||||
| Short-term overdrafts – within one year | ( | ( | |||||||||
| Future anticipated cash flows | ( | ( | |||||||||
| Effect of discounting/financing rates | |||||||||||
| Debt financing | ( | ( | |||||||||
13. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings increased by £625.2 million (30 June 2021: decreased by £63.7 million) in the period. This movement is 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
Notes to the unaudited condensed consolidated interim financial statements (continued)
14. Trade and other receivables
Amounts falling due within one year:
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Trade receivables (net of loss allowance) | |||||||||||
| Work in progress | |||||||||||
| VAT and sales taxes recoverable | |||||||||||
| Prepayments | |||||||||||
| Accrued income | |||||||||||
| Fair value of derivatives | |||||||||||
| Other debtors | |||||||||||
Amounts falling due after more than one year:
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Fair value of derivatives | |||||||||||
| Prepayments and other debtors | |||||||||||
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.
15. Trade and other payables: amounts falling due within one year
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Trade payables | |||||||||||
| Deferred income | |||||||||||
| Payments due to vendors (earnout agreements) | |||||||||||
| Liabilities in respect of put option agreements with vendors | |||||||||||
| Fair value of derivatives | |||||||||||
Share repurchases - close period commitments1 | |||||||||||
| Other creditors and accruals | |||||||||||
Note
1During 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.
The Group considers that the carrying amount of trade and other payables approximates their fair value.
15
Notes to the unaudited condensed consolidated interim financial statements (continued)
16. Trade and other payables: amounts falling due after more than one year
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Payments due to vendors (earnout agreements) | |||||||||||
| Liabilities in respect of put option agreements with vendors | |||||||||||
| Fair value of derivatives | |||||||||||
| Other creditors and accruals | |||||||||||
The Group considers that the carrying amount of trade and other payables approximates their fair value.
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Within one year | |||||||||||
| Between 1 and 2 years | |||||||||||
| Between 2 and 3 years | |||||||||||
| Between 3 and 4 years | |||||||||||
| Between 4 and 5 years | |||||||||||
| Over 5 years | |||||||||||
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.
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:
| 30 June 2022 | 31 December 2021 | ||||||||||
| £m | £m | ||||||||||
| Amounts owed by related parties | |||||||||||
| Kantar | |||||||||||
| Other | |||||||||||
| Amounts owed to related parties | |||||||||||
| Kantar | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| ( | ( | ||||||||||
16
Notes to the unaudited condensed consolidated interim financial statements (continued)
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.
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:
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| £m | £m | £m | |||||||||||||||
| 30 June 2022 | |||||||||||||||||
| Derivatives in designated hedge relationships | |||||||||||||||||
| Derivative liabilities | ( | ||||||||||||||||
| Held at fair value through profit or loss | |||||||||||||||||
| Other investments | |||||||||||||||||
| Derivative assets | |||||||||||||||||
| Derivative liabilities | ( | ||||||||||||||||
| Payments due to vendors (earnout agreements) | ( | ||||||||||||||||
| Liabilities in respect of put options | ( | ||||||||||||||||
| Held at fair value through other comprehensive income | |||||||||||||||||
| Other investments | |||||||||||||||||
Reconciliation of level 3 fair value measurements:
| Payments due to vendors (earnout agreements) | Liabilities in respect of put options | Other investments | |||||||||||||||
| £m | £m | £m | |||||||||||||||
| 1 January 2022 | ( | ( | |||||||||||||||
| (Losses)/gains recognised in the income statement | ( | ||||||||||||||||
| Gains recognised in other comprehensive income | |||||||||||||||||
| Additions | ( | ||||||||||||||||
| Disposals | ( | ||||||||||||||||
| Cancellations | |||||||||||||||||
| Settlements | |||||||||||||||||
| Exchange adjustments | ( | ( | |||||||||||||||
| 30 June 2022 | ( | ( | |||||||||||||||
17
Notes to the unaudited condensed consolidated interim financial statements (continued)
19. Financial instruments (continued)
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.
Other investments
20. Reconciliation of operating profit to headline operating profit
Six months ended 30 June 2022 | Six months ended 30 June 2021 | ||||||||||
| £m | £m | ||||||||||
| Operating profit | |||||||||||
| Amortisation and impairment of acquired intangible assets | |||||||||||
| Losses on disposal of investments and subsidiaries | |||||||||||
| Gains on remeasurement of equity interests arising from a change in scope of ownership | ( | ||||||||||
| Litigation settlement | |||||||||||
| Restructuring and transformation costs | |||||||||||
| Restructuring costs in relation to COVID-19 | |||||||||||
| Headline operating profit | |||||||||||
Headline operating profit is one of the metrics that management uses to assess the performance of the business. Reconciling items in the above table are components of operating profit, which are included in note 4.
18