Very strong growth driven by demand for
digital services, ecommerce and technology; exceptional new
business performance; over £1 billion returned to shareholders;
sustained momentum into 2022
WPP (NYSE: WPP) today reported its 2021 Preliminary Results.
Key figures – continuing operations
£ million
2021
+/(-)% reported1
+/(-)%
LFL2
20203
Revenue
12,801
6.7
13.3
12,003
Revenue less pass-through costs
10,397
6.5
12.1
9,762
Reported:
Operating profit/(loss)
1,229
n/m
-
(2,278)
Profit/(loss) before tax
951
n/m
(2,791)
Diluted EPS (p)
52.5
n/m
-
(243.0)
Dividends per share (p)
31.2
30.0
-
24.0
Headline4:
Operating profit
1,494
18.5
26.8
1,261
Operating profit margin
14.4%
1.5pt*
1.7pt*
12.9%
Profit before tax
1,365
31.1
-
1,041
Diluted EPS (p)
78.5
30.6
-
60.1
* Margin points
Full year and Q4 financial highlights
- FY continuing operations reported revenue +6.7%, LFL revenue
+13.3%
- FY LFL revenue less pass-through costs +12.1%; Q4 +10.8%
- 2-year FY LFL revenue less pass-through costs +2.9%; Q4
+3.6%
- Q4 LFL revenue less pass-through costs by major market: US
+11.7%, UK +9.9%, Germany +3.4%, Greater China +13.6%, Australia
-2.2%
- FY headline operating margin 14.4%, up 1.7pt LFL on prior year
with strong top-line growth and efficiency savings supporting
significant reinvestment in incentives
- Reported diluted EPS 52.5 pence; headline diluted EPS up 30.6%
to 78.5 pence
- Free cash flow of £1.3 billion
- Adjusted net debt at 31 December 2021 £0.9 billion, after
significant growth investments and shareholder returns, reflecting
very strong cash generation
Strategic progress, shareholder returns and 2022
guidance
- Improving business mix: growth areas of experience, commerce
and technology around 38% of revenue less pass-through costs in
Global Integrated Agencies ex GroupM
- GroupM very strong: 2021 LFL revenue less pass-through costs
+16.1%
- Continued investment in client offer: creation of Choreograph,
acquisitions including Sard Verbinnen, Satalia, Cloud Commerce and
Numerator (Kantar)
- Breadth and depth of capabilities resonating well with clients:
market-leading $8.7 billion5 of net new business won, including
global Coca-Cola account
- Strong recognition of creativity and effectiveness: most
awarded company at the 2021 Cannes Lions Festival; ranked number
one across all three WARC rankings for media, creative and
effectiveness
- Transformation programme on track: around £245 million gross
savings, mainly in property, procurement and simplification; good
progress on shared services and IT transformation
- Final dividend of 18.7 pence proposed, up 33.6%; over £1
billion returned to shareholders in 2021 through share buybacks and
dividends
- 2022 guidance: LFL revenue less pass-through costs growth
around 5%; headline operating margin up around 50 bps; trade
working capital expected to be flat year-on-year; £800 million
share buyback, of which £129 million already completed; tax rate of
around 25.5% in 2022
Mark Read, Chief Executive Officer, WPP:
“It has been an outstanding year for WPP. Our top-line growth,
driven by strong demand for our services in digital marketing,
media, ecommerce and technology, has resulted in our fastest
organic growth for over 20 years. As a result, we are two years
ahead of our plan, hitting our 2023 revenue target in 2021.
“As clients seek to accelerate their growth and transform how
they reach customers, the depth, breadth and global scale of our
offer - which combines creativity with technology and data, through
Choreograph, and the largest global media platform in GroupM - is
proving its value for existing and new clients. The talent,
dynamism and commitment of our people have also shone through. Our
extensive partnership with The Coca-Cola Company, the expansion of
our work with Google and the continuation of our longstanding
relationship with Unilever demonstrate the value that three of the
world’s leading marketing organisations place in WPP.
“We have made substantial strategic progress, creating the
world’s leading board-level communications firm through the merger
of Finsbury Glover Hering and Sard Verbinnen, and acquiring
capabilities in AI, commerce and technology services to leverage
across all of WPP for future growth. Cash generation continues to
be very strong, underpinned by efficiencies achieved in our
transformation programme, allowing us to make significant
investments in our offer and reward our people for their huge
contribution, while returning over £1 billion in cash to
shareholders through dividends and share buybacks.
“We look forward to 2022 with confidence. We are guiding to
strong top-line growth, improving profitability and continued
investment in our people and services.”
To access WPP's 2021 preliminary results financial tables,
please visit www.wpp.com/investors
Overview and strategic progress
Market environment
2021 was an extraordinary year for the global advertising
industry. Growth in spend was supported by a stronger-than-expected
macroeconomic environment, a consumption boost from pent-up saving
and structural growth in digital channels. According to GroupM
estimates, global advertising spend6 grew by 22.5% in 2021, a
considerably better outcome than the 12.3% forecast in December
2020.
The pace of growth in digital advertising has continued to
accelerate, reflecting the seismic shift in the way people consume
media. GroupM estimates that global digital advertising spend grew
by 30.5% in 2021, and now accounts for 64.4% of total spend, up
from 59.3% in 2020.
Within digital, one of the big drivers of growth has been the
explosion in ecommerce. The pandemic accelerated a widespread shift
towards shopping online, amplifying the number of opportunities for
brands to connect to consumers on digital channels, while also
levelling the playing field for challenger brands. GroupM estimates
that global retail ecommerce advanced 20.4% in 2021.
Two other factors are playing a significant role in the growth
in advertising spend. New, app-based or digital-first businesses
are able to afford to invest a greater proportion of their income
into marketing to grow scale fast because they lack the physical
presence (and associated costs such as rent) of traditional
businesses. In turn, more traditional advertisers such as consumer
packaged goods companies are investing in retail and commerce media
– engaging with customers closer to the digital point of sale. This
is blurring the lines between the marketing budget and the sales
promotion budget, significantly growing the addressable market for
marketing services businesses.
By geography, the UK, US and China remain the largest
contributors to growth in advertising spend, spurred by their
exposure to digital. By medium, TV had a strong year with global
advertising spend on TV growing by 11.7% in 2021, as advertisers
invested in their brand-building strategies. It also reflects the
growth of connected TV and the increased targeting and measurement
potential this brings to advertisers. Despite restrictions on
mobility, spend on outdoor also grew, supported by the increasing
availability of digital screens and programmatic options. Audio
also saw some growth reinforced by podcasting, while cinema has
been slower to recover. Print was the only medium to decline,
reflecting the trends in circulation.
We have seen the acceleration of two significant trends, in data
and purpose, that we expect to continue. The shift to digital and
omnichannel commerce is driving companies to increase investment in
data-driven marketing, which requires better (and
privacy-compliant) customer data as well as marketing technology
transformation. We are also witnessing very strong demand for
strategic advice on purpose, sustainability and broader social
issues. 85% of consumers believe that brands should represent
something more than just profit7, and brands perceived as having a
high positive impact on society are estimated to be more than twice
as valuable as brands that are not8.
Performance and progress
Revenue was £12.8 billion, up 6.7% from £12.0 billion in 2020,
and up 13.3% like-for-like. Revenue less pass-through costs was
£10.4 billion, up 6.5% from £9.8 billion in 2020, and up 12.1%
like-for-like.
We have seen an exceptional recovery in the year, with LFL
growth in revenue less pass-through costs across all our business
sectors and major markets. On a two-year basis we are 2.9% ahead of
2019 performance in terms of LFL revenue less pass-through costs,
reflecting the breadth and depth of our offer. Client demand has
been strong, particularly for ecommerce services and in commerce
media. GroupM’s commerce billings increased 41% year-on-year in
2021 while the proportion of digital billings has grown to 43% in
2021 from 41% in 2020. Revenue less pass-through costs from
higher-growth areas of our offer in experience, commerce and
technology increased to around 38% of our Global Integrated
Agencies, excluding GroupM, compared to 35% in 2019.
Clients and partners
By sector, we have had continued momentum in technology,
healthcare & pharma and consumer packaged goods which together
represent 53% of our revenue less pass-through costs for designated
clients. On a two-year basis, these sectors recorded like-for-like
growth of 15.1%, 10.5% and 5.7% respectively. At the client level,
we also saw widespread evidence of investing in marketing for
growth, with 18 out of our top 30 clients showing double-digit
two-year growth in 2021.
We won $8.7 billion of net new billings in 2021, including
important retentions of longstanding media partnerships with
Unilever and Bayer, demonstrating the strength of our client
relationships. We also expanded our relationship with Google to
handle the entirety of their media spend globally. Over the year we
also won new assignments from AstraZeneca, Beiersdorf, L’Oréal,
Sainsbury’s, TD Bank and Under Armour among others.
We are proud to have been appointed The Coca-Cola Company’s
Global Marketing Network Partner. This is a partnership of
unprecedented scale in the industry – covering creative, media and
data across more than 200 countries and territories – and reflects
the breadth and reach of WPP across the globe.
We continued to deepen and broaden our relationships with
established and emerging technology partners globally, to build our
expertise and develop leading services for clients. For example, we
are a Global Partner with Google, with nearly 6,000 of our people
now certified as Google Marketing Platform consultants; through
Wavemaker, we achieved a global first through our access to Amazon
Advertising’s Overlapping Audiences API; and we launched a
ground-breaking global agency partnership with TikTok giving our
agencies early access to advertising products in development and
collaborating with a diverse network of creators.
Creativity
Underpinning our success this year is the strength of our
creative work. We were honoured to be recognised as the
most-awarded company at the 2021 Cannes Lions Festival, with
winners representing 38 different countries. Each of our global
integrated creative agencies won a Grand Prix. In addition, WPP
topped WARC’s 2021 global agency rankings across all three
categories – creative, media and effectiveness – reflecting the
breadth of our capabilities.
The metaverse presents a new frontier of creative opportunities
for brands to engage with consumers, through virtual worlds
connecting gaming, augmented and virtual reality, NFTs and the
blockchain. Clients are seizing the opportunity and seeking our
partnership to experiment in ways to bring experiences to life in
this new channel. Our agencies are already delivering metaverse
projects for clients including Wendy’s, Under Armour and Pfizer. To
take the ideas to the next level, Hogarth recently announced the
launch of The Metaverse Foundry, a global team of over 700
creatives, producers, visual artists and technologists focused on
delivering the most creative and compelling metaverse experiences
for our clients.
Investments for growth
During the year we made a number of acquisitions, including
Satalia, a market-leading artificial intelligence business; Cloud
Commerce Group, a technology company helping brands to market, sell
and deliver products across ecommerce platforms globally; and Made
Thought, a London-based branding and design agency. We also merged
Finsbury Glover Hering and Sard Verbinnen, a transaction which has
created a leading global strategic communications firm. Kantar, in
which we own a 40% stake, acquired Numerator, a technology-driven
consumer and market intelligence company.
These acquisitions are aligned with our accelerated growth
strategy and focused M&A approach to build on existing
capabilities in growth areas. For example, Satalia’s highly
specialised artificial intelligence capabilities have been
leveraged across WPP to solve for a range of complex optimisation
problems. Alongside applications for client engagements, the tools
have been applied to internal opportunities including
cross-platform media optimisation, workforce utilisation and
content intelligence. The transaction has already added significant
value both to clients and internal WPP product development.
We also stepped up organic investment to drive significant
long-term growth opportunities. The main areas of focus for this
investment are the formation and development of Choreograph to
unify and accelerate our data capabilities, the creation of a
commerce-as-a-service platform to complement our broader expertise
in commerce, and further innovation in our market-leading
programmatic and connected TV businesses, Xaxis and Finecast.
Choreograph is working to design innovative ways to future-proof
our clients’ approach to data. We believe there will not be a
single solution to addressing the challenges presented by the
deprecation of third-party cookies and other identifiers. As such
we are exploring and investing in multiple privacy-preserving
solutions including machine learning graphs, identity networks,
cohort analysis and the use of contextual signals. Choreograph has
already played a central role in the retention of the Unilever
media account and the Coca-Cola partnership.
Transformation programme
Good progress has been made on our transformation programme,
designed to simplify WPP, build greater collaboration, drive
efficiency and free up funds for reinvestment in growth. We remain
comfortably on target to achieve our goal of £600 million annual
cost efficiencies by 2025, with around £245 million of gross annual
savings achieved so far against a 2019 base.
The transformation of our property estate continues, despite the
constraints of COVID, with a further nine campuses opened in 2021,
taking the total to 30. We aim to complete at least 65 campuses,
housing more than 85,000 people, by 2025. In procurement, we are
beginning to consolidate our spend more effectively, improving
terms for our agencies with our purchasing scale. Telecoms savings
and software licenses were areas of significant efficiency in 2021.
In terms of simplification, the combination of sub-scale agencies
in smaller markets is leading to a significant improvement in
performance; we have removed around 500 legal entities from the
group structure, with a similar figure targeted for 2022; and we
have acquired the minorities in WPP AUNZ, taking us to 100%
ownership to improve control and governance of our fifth largest
geography.
Across IT, Finance and HR transformation, significant groundwork
has been undertaken as we modernise and move to a more standardised
approach, with target operating models approved for all three. In
IT, transformation plans including network infrastructure, cloud
acceleration and platform rationalisation are all on track. The
shared services programme is progressing, with a significant
portion of finance processes migrated from the UK to Mumbai, and
new deployments in the Middle East, Asia and Latin America. We
have, however, experienced some delays to the deployment of
Workday, our new ERP platform, but we are confident of meeting our
revised timetable starting in the first half of 2022.
Purpose and ESG
WPP’s purpose is to use the power of creativity to build better
futures for our people, our planet, our clients and our
communities. We outlined our sustainability strategy at an ESG
event for stakeholders in June 2021. Since then, we have continued
to make good progress in our commitments across each pillar of this
purpose statement.
People
Our success is powered by our people. This year we have launched
and developed a number of initiatives across our agencies to foster
an open and inclusive culture. The pilot of our Inclusive
Leadership in a Hybrid World programme equipped 1,000 managers
across five companies and four countries with a roadmap to becoming
a more inclusive leader. Our long-term goal is to make this
learning experience available to everyone across WPP, starting with
40,000 managers globally in 2022.
As part of our commitment to ensure the best possible culture,
we also launched our Mental Health Allies programme, providing
mental health training to 500 leaders, HR professionals and
employees across the UK and US. We will expand into more regions in
2022.
With the support of our first company-wide LGBTQ+ community, WPP
Unite, we developed the LGBTQ+ Inclusive Marketing programme, to
equip our people with the knowledge, skills and resources to ensure
more inclusive marketing. WPP Unite was spearheaded in the UK and
US and will expand to other regions. We also joined the Business
Coalition for the Equality Act and were named among the Best Places
to Work for LGBTQ+ Equality by the Human Rights Campaign for the
second consecutive year.
We continue to focus on driving greater gender balance
throughout the company with women now representing more than half
of our senior managers and, at the most senior level of our
company, women now make up 39%. Fourteen leaders from across WPP
were named in the 2021 HERoes Women Role Model Lists for their work
driving change in gender diversity, and we are now ranked in the
top 10 for gender representation among senior leaders and at board
level in the FTSE Women Leaders Review. In addition, WPP was
recognised in the Bloomberg Gender-Equality Index for the fourth
consecutive year.
We know we have more to do to ensure WPP represents the
diversity of the societies in which we operate, which is why we are
placing diversity, equity and inclusion at the centre of our
recruitment and development processes, using analytics to provide a
more inclusive employee experience. We have formed partnerships
with leading inclusion and diversity organisations such as the
Unstereotype Alliance, The Valuable 500 and the LAGRANT Foundation.
We are also funding a number of local initiatives to advance racial
equity, focusing on developing skills and increasing interest in
joining our industry.
To help lower the barriers to entry into the creative industry
we launched our second NextGen Leaders series. Built with inclusion
at its core, this cohort comprised 1,400 participants (50% of
participants in the US & UK identified as Black, Asian or
LatinX and 60% identified as female).
As part of our Racial Equity Programme, in June 2021 we invited
our global network of agencies to apply to receive resources to
create and run innovative and impactful programmes to advance
racial equity. Based on the ideas and initiatives that were felt to
align most closely with WPP’s purpose and hold the greatest
potential to effect change, we made the first nine grants.
Supported projects include Life Through the Eyes of the UK Black
Community, a new race equity organisation with a unique focus on
dismantling all aspects of racism faced by Black people in the UK;
and SOMA+, a platform focused on expanding the professional
knowledge of Black, Indigenous, and low-income students in
Brazil.
In addition, WPP committed in June 2020 to match personal
donations by employees to several non-profit organisations up to
$1,000 per person, to a total of $1 million.
Planet
Earlier in the year we made an industry-leading commitment to
reduce carbon emissions from our own operations to net zero by 2025
and across our supply chain by 2030, including media buying – an
industry first. Supporting this we have committed to equally
ambitious carbon emission reduction targets in line with climate
science, and validated by the Science Based Targets initiative, to
reduce our absolute Scope 1 and 2 emissions by at least 84% by 2025
and reduce Scope 3 emissions by at least 50% by 2030, both from a
2019 base year.
In November 2021 WPP successfully amended and supplemented the
$2.5 billion revolving credit facility to link the margin on the
facility to specific sustainability measures, an important first
milestone in WPP’s journey to embed its carbon reduction targets
and broader sustainability commitments into its financing
arrangements.
Engaging with rating agencies and benchmarking organisations is
key to holding ourselves accountable for our progress. We are
delighted that the Carbon Disclosure Project has upgraded our ESG
score to an A- in their 2021 ratings, reflecting the ambition of
our new net zero strategy, emissions reductions targets and
strengthened governance.
Clients
We have supported many of our clients with their own
sustainability goals. For example, we helped to design the world’s
first carbon-neutral TV (Sky), designed and created an immersive
experience on the plastic crisis in our oceans (SC Johnson) and
launched an AI-powered campaign supporting local businesses across
India for Diwali (Mondelez). Demand for advice on brand purpose,
and support on everything from environmental product design to
recycling and changing customer behaviour is a major driver of
growth for a number of our agencies.
Communities
In partnership with the WHO Foundation, we created and delivered
the $5 vaccine campaign, encouraging people across the globe to
spend the price of a coffee on a donation to fund COVID-19 vaccines
for lower-income countries. We also donated 10,000 vaccines on
behalf of our clients and matched every vaccine bought by
employees. Since the start of the pandemic, we have been proud to
partner with the WHO to produce public awareness campaigns to help
limit the spread and impact of COVID-19 which have reached tens of
millions of people across 167 countries in more than 20
languages.
Outlook for 2022
WPP is entering 2022 with a strong balance sheet, good momentum
from new business wins, and a comprehensive client offer.
Our guidance for 2022 is as follows:
- Like-for-like revenue less pass-through costs growth of around
5%
- Headline operating margin improvement of around 50 bps,
excluding the impacts of M&A and foreign exchange
- Effective tax rate (measured as headline tax as a % of headline
profit before tax) of around 25.5%
- Capex £350-400 million, with around £100 million relating to
ERP system deployment previously included in capex guidance now
included in restructuring costs
- Trade working capital expected to be flat year-on-year
- Current foreign exchange rates imply around a 0.5% drag on
reported revenue less pass-through costs from the movement in
sterling year-on-year
- We also anticipate mergers and acquisitions will add 0.5-1.0%
to revenue less pass-through costs growth
- Given our low leverage and continued strong cash generation, we
expect to execute around £800 million of share buybacks in 2022, of
which £129 million has already been completed
Medium-term guidance
At our Capital Markets Day in December 2020, we set out our new
medium-term financial targets that will allow us to invest in
talent, incentives and technology, improve our competitive position
and deliver sustainable long-term growth. These remain:
- 3-4% annual growth in revenue less pass-through costs from
2023, including M&A benefit of 0.5-1.0% annually
- 15.5-16.0% headline operating margin in 2023
- Dividend: intention to grow annually with a pay-out ratio
around 40% of headline diluted EPS
- Average adjusted net debt/EBITDA maintained in the range
1.5-1.75x
Financial results
Unaudited headline income statement:
£ million
2021
20209
+/(-) % reported
+/(-) % ∆ LFL
Continuing operations
Revenue
12,801
12,003
6.7
13.3
Revenue less pass-through costs
10,397
9,762
6.5
12.1
Operating profit
1,494
1,261
18.5
26.8
Operating profit margin %
14.4%
12.9%
1.5pt
1.7pt
Income from associates
86
10
n/m
PBIT
1,580
1,271
24.3
Net finance costs
(215)
(230)
(6.6)
Profit before tax
1,365
1,041
31.1
Tax
(328)
(240)
36.7
Profit after tax
1,037
801
29.5
Non-controlling interests
(83)
(59)
40.9
Profit attributable to shareholders
954
742
28.6
Diluted EPS
78.5p
60.1p
30.6
Reconciliation of operating profit/(loss) to headline
operating profit:
£ million
2021
2020
Continuing operations
Operating profit/(loss)
1,229
(2,278)
Amortisation and impairment of acquired
intangible assets
98
89
Goodwill impairment
2
2,823
Losses/(gains) on disposal of investments
and subsidiaries
11
(8)
Gains on remeasurement of equity interests
arising from a change in scope of ownership
-
(1)
Investment and other impairment
(reversals)/charges
(43)
296
Litigation settlement
21
26
Restructuring and transformation costs
146
81
Restructuring costs in relation to
COVID-19
30
233
Headline operating profit
1,494
1,261
Reported billings were £50.7 billion, up 8.0%, and up 14.4%
like-for-like.
Reported revenue from continuing operations was up 6.7% at £12.8
billion. Revenue on a constant currency basis was up 11.6% compared
with last year. Net changes from acquisitions, disposals and other
adjustments10 had a negative impact of 1.7% on growth.
Like-for-like revenue growth for 2021, excluding the impact of
currency, acquisitions and disposals, and the other adjustments,
was 13.3%.
Reported revenue less pass-through costs was up 6.5%, and up
11.5% on a constant currency basis. Excluding the impact of
acquisitions and disposals and the other adjustments, like-for-like
growth was 12.1%. In the fourth quarter, like-for-like revenue less
pass-through costs was up 10.8%.
Regional review
Revenue analysis
£ million
2021
2020
+/(-) % reported
+/(-) % LFL
N. America
4,494
4,465
0.7
9.4
United Kingdom
1,867
1,637
14.0
15.0
W. Cont Europe
2,786
2,442
14.1
19.2
AP, LA, AME, CEE11
3,654
3,459
5.6
13.3
Total Group
12,801
12,003
6.7
13.3
Revenue less pass-through costs analysis
£ million
2021
2020
+/(-) % reported
+/(-) % LFL
N. America
3,849
3,744
2.8
9.7
United Kingdom
1,414
1,234
14.6
15.0
W. Cont Europe
2,226
2,019
10.2
14.5
AP, LA, AME, CEE
2,908
2,765
5.2
12.3
Total Group
10,397
9,762
6.5
12.1
Headline operating profit analysis
£ million
2021
% margin*
2020
% margin*
N. America
656
17.0
612
16.3
United Kingdom
181
12.8
138
11.2
W Cont. Europe
289
13.0
199
9.8
AP, LA, AME, CEE
368
12.7
312
11.3
Total Group
1,494
14.4
1,261
12.9
* Headline operating profit as a
percentage of revenue less pass-through costs
North America like-for-like revenue less pass-through
costs was up 11.4% in the final quarter, and up 5.1% on a two-year
basis. The USA continued to grow at a double-digit rate, led by
GroupM, VMLY&R and Hogarth, and Canada also performed strongly.
On a full year basis, like-for-like revenue less pass-through costs
in North America was up 9.7%, and up 3.3% over two years.
United Kingdom like-for-like revenue less pass-through
costs was up 9.9% in the final quarter, and up 1.8% on a two-year
basis. AKQA Group and VMLY&R were the strongest performers. On
a full year basis, like-for-like revenue less pass-through costs
was up 15.0%, and up 2.9% over two years.
Western Continental Europe like-for-like revenue less
pass-through costs was up 7.9% in the final quarter, and up 3.7% on
a two-year basis. The strongest performers in the period were
Italy, the Netherlands and France. On a full year basis,
like-for-like revenue less pass-through costs was up 14.5%, and up
5.2% over two years.
In Asia Pacific, Latin America, Africa & the Middle East
and Central & Eastern Europe, like-for-like revenue less
pass-through costs was up 12.5% in the final quarter, and up 2.6%
on a two-year basis. Latin America was boosted by a very strong
performance in Brazil, while Asia Pacific continued to be
negatively impacted by COVID-related restrictions in Australia. On
a full year basis, like-for-like revenue less pass-through costs
was up 12.3%, and up 0.7% over two years.
Business sector review
During 2020, we announced that we would bring together Grey and
AKQA under the AKQA Group, and we brought Geometry and GTB into
VMLY&R, and International Healthcare into VMLY&R and
Ogilvy. As a result AKQA Group, Geometry, GTB and International
Healthcare are now reported within Global Integrated Agencies,
having previously been reported within Specialist Agencies. Prior
year figures have been re-presented to reflect these changes.
Revenue analysis
£ million
2021
2020
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
10,836
10,266
5.6
12.6
Public Relations
959
893
7.4
12.6
Specialist Agencies
1,006
844
19.1
22.5
Total Group
12,801
12,003
6.7
13.3
Revenue less pass-through costs analysis
£ million
2021
2020
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
8,638
8,194
5.4
11.3
Public Relations
910
854
6.5
11.5
Specialist Agencies
849
714
19.0
21.8
Total Group
10,397
9,762
6.5
12.1
Headline operating profit analysis
£ million
2021
% margin*
2020
% margin*
Global Int. Agencies
1,216
14.1
1,060
12.9
Public Relations
143
15.7
142
16.5
Specialist Agencies
135
15.9
59
8.3
Total Group
1,494
14.4
1,261
12.9
* Headline operating profit as a
percentage of revenue less pass-through costs
Global Integrated Agencies like-for-like revenue less
pass-through costs was up 10.0% in the final quarter, and up 3.1%
on a two-year basis. GroupM, which represented 38% of WPP’s revenue
less pass-through costs in the fourth quarter, was up 12.3%
like-for-like. The other integrated agencies all recorded broadly
similar levels of growth. For the full year, like-for-like revenue
less pass-through costs for the segment was up 11.3%, and up 2.5%
over two years.
Public Relations like-for-like revenue less pass-through
costs was up 15.1% in the final quarter, and up 10.4% on a two-year
basis. BCW and H+K Strategies continued to grow strongly. In
October, we announced the merger of Finsbury Glover Hering with
Sard Verbinnen to create a leading global strategic communications
firm. For the full year, like-for-like revenue less pass-through
costs for the segment was up 11.5%, and up 7.0% over two years.
Specialist Agencies like-for-like revenue less
pass-through costs was up 13.9% in the final quarter, and up 4.1%
on a two-year basis. We continued to see strong demand from clients
across most of our businesses, although the overall growth rate
slowed from the third quarter as the contribution from the
COVID-related contract in Germany eased. For the full year,
like-for-like revenue less pass-through costs for the segment was
up 21.8%, and up 7.8% over two years.
Operating profitability
Reported profit before tax was £951 million, compared to a loss
of £2.8 billion in 2020, reflecting principally the £3.1 billion of
impairment charges and investment write-downs and £313 million of
restructuring and transformation costs during the prior period.
Reported profit after tax was £721 million compared to a loss in
2020 of £2.9 billion.
Headline EBITDA (including IFRS 16 depreciation) for 2021 was up
18.2% to £1.8 billion, compared to £1.5 billion the previous year.
Headline operating profit was up 18.5% to £1.5 billion. The
significant growth in profitability year-on-year reflects the
strong recovery from the impact of COVID-19 on revenue less
pass-through costs, as well as improvement in our competitive
performance and the progress on our transformation programme, with
£245 million of gross savings towards our 2025 annual run rate
target of £600 million.
Headline operating margin was up 150 basis points to 14.4%, and
up 170 basis points like-for-like. Operating costs were up 4.7%,
but were flat year-on-year excluding the impact of incentives.
Staff costs pre-incentives rose 3.2% but property costs fell 17.1%
reflecting the campus roll-out and the continued impact of COVID.
IT costs were flat, and other costs were down 13.2%, driven by
lower office costs and bad debt.
The Group’s headline operating margin is after charging £42
million of severance costs, compared with £68 million in 2020 and
£592 million of incentive payments, compared to £185 million in
2020 and £294 million in 2019.
The average number of people in the Group in 2021 was 104,808
compared to 102,822 in 2020. The total number of people at 31
December 2021 was 109,382 compared to 99,830 at 31 December
2020.
Exceptional items
The Group incurred a net exceptional loss of £270 million in
2021. This comprises the Group’s share of associate company
exceptional losses (£62 million), restructuring and transformation
costs (£176 million) and other net exceptional losses (£32
million). Restructuring and transformation costs mainly comprise
severance and property-related costs arising from the continuing
structural review of parts of the Group’s operations, investments
in IT and ERP systems as part of our transformation programme, and
our response to the COVID-19 situation. This compares with a net
exceptional loss in 2020 of £477 million.
Interest and taxes
Net finance costs (excluding the revaluation and retranslation
of financial instruments) were £215 million, a decrease of £15
million year-on-year, primarily as a result of the repayment of the
$500 million 3.625% September 2022 bond in July 2021 and foreign
exchange movements.
The reported tax charge was £230 million (2020: £127 million).
The headline tax rate (measured on headline profit before tax,
including associate income) was 24.0% (2020: 23.0%). Given the
Group’s geographic mix of profits and the changing international
tax environment, the tax rate is expected to be around 25.5% in
2022, and to continue to increase in subsequent years.
Earnings and dividend
Headline profit before tax was up 31.1% to £1.4 billion, and
profits attributable to share owners were £954 million.
Reported diluted earnings per share were 52.5 pence, compared to
a loss per share of 243.0 pence in the prior period. Headline
diluted earnings per share were up 30.6% to 78.5 pence.
The Board is proposing a final dividend for 2021 of 18.7 pence
per share, which together with the interim dividend paid in
November 2021 gives a full-year dividend of 31.2 pence per share.
The record date for the final dividend is 10 June 2022, and the
dividend will be payable on 8 July 2022.
Further details of WPP’s financial performance are provided in
Appendix 1.
Cash flow highlights
Twelve months ended (£ million)
31 December 2021
31 December 2020
Operating profit/(loss) of continuing
and discontinued operations
1,229
(2,267)
Depreciation and amortisation
542
631
Investment and other impairment
(reversals)/charges
(1)
3,316
Lease payments (inc interest)
(409)
(399)
Non-cash compensation
100
74
Net interest paid
(126)
(100)
Tax paid
(391)
(372)
Capex
(293)
(273)
Earnout payments
(57)
(115)
Other
(31)
(50)
Trade working capital
319
780
Other receivables, payables and
provisions
383
58
Free cash flow
1,265
1,283
Disposal proceeds
77
284
Net initial acquisition payments
(464)
(144)
Dividends
(315)
(122)
Share repurchases and buybacks
(819)
(290)
Net cash flow
(256)
1,011
In 2021, net cash outflow was £256 million, compared to a £1.0
billion inflow in 2020. The main drivers of the cash flow
performance year-on-year were the higher operating profit and
continued improvements in working capital, offset by increased
spend on acquisitions, growth in the dividend and the significant
increase in the share buyback. A summary of the Group’s unaudited
cash flow statement and notes for the twelve months to 31 December
2021 is provided in Appendix 1.
Balance sheet highlights
As at 31 December 2021 we had cash and cash equivalents of £3.5
billion and total liquidity, including undrawn credit facilities,
of £5.5 billion. Average adjusted net debt in 2021 was £1.6
billion, compared to £2.3 billion in the prior period, at 2020
exchange rates. On 31 December 2021 adjusted net debt was £0.9
billion, against £0.7 billion on 31 December 2020, an increase of
£0.2 billion at 2021 exchange rates. The slightly higher adjusted
net debt figure reflects mainly the significant increase in share
buybacks year-on-year.
During the year, we converted the majority of our cash pool
arrangements to zero-balancing cash pools, whereby the cash and
overdrafts within these cash pools are physically swept to the
header accounts on a daily basis, resulting in a reduction of the
large gross cash and overdraft positions at 31 December 2020. Our
bond portfolio at 31 December 2021 had an average maturity of 7.0
years. In July 2021 we repaid the $500 million 3.625% September
2022 bond. A €250 million Eurobond at 3-month EURIBOR +0.45% is due
to mature in March 2022.
The average adjusted net debt to EBITDA ratio in the 12 months
to 31 December 2021 is 0.90x, which excludes the impact of IFRS 16.
This is below our target range of 1.5 – 1.75x average adjusted net
debt to EBITDA.
A summary of the Group’s unaudited balance sheet and notes as at
31 December 2021 is provided in Appendix 1.
________________________________ 1 Percentage change in reported
sterling. 2 Like-for-like. LFL comparisons are calculated as
follows: current year, constant currency actual results (which
include acquisitions from the relevant date of completion) are
compared with prior year, constant currency actual results,
adjusted to reflect the results of acquisitions and disposals and
the reclassification of certain businesses to associates in 2021
and the reassessment of agency arrangements under IFRS 15 for the
commensurate period in the prior year. 3 Figures have been restated
as described in the accounting policies in Appendix 1. 4 In this
press release not all of the figures and ratios used are readily
available from the unaudited preliminary results included in
Appendix 1. Management believes these non-GAAP measures, including
constant currency and like-for-like growth, revenue less
pass-through costs and headline profit measures, are both useful
and necessary to better understand the Group’s results. Where
required, details of how these have been arrived at are shown in
Appendix 2. 5 Billings, as defined in the glossary on page 45. 6
All references to estimates and forecasts for advertising spend
exclude US political advertising 7 Generation Z: Building a Better
Normal, Wunderman Thompson Intelligence, December 2020 8 Kantar
Purpose 2020 Report 9 Figures have been restated as described in
the accounting policies in Appendix 1. 10 Certain businesses were
reclassified to associates as the Group no longer controls them. In
addition, certain media billings recognised as revenue earlier in
the year have been re-assessed under IFRS 15: “Revenue from
Contracts with Customers” and have been excluded from revenue, but
have no impact on revenue less pass-through costs. There are no
adjustments to previously reported revenue in the first three
quarters of 2021 or the 2020 financial year. 11 Asia Pacific, Latin
America, Africa & Middle East and Central & Eastern Europe
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