Strong first half: broad-based growth,
sustained demand from clients, transformation programme on track.
2022 growth guidance upgraded again
WPP (NYSE: WPP) today reported its 2022 Interim Results.
Key figures
£ million
H1 2022
+/(-) % reported1
+/(-) % LFL2
H1 2021
Revenue
6,755
10.2
8.7
6,133
Revenue less pass-through costs
5,509
12.5
8.9
4,899
Reported:
Operating profit
539
11.4
484
Profit before tax
419
6.1
-
394
Diluted EPS (p)
22.7
10.2
-
20.6
Dividends per share (p)
15.0
20.0
-
12.5
Headline3:
Operating profit
639
8.2
-
590
Operating profit margin
11.6%
(0.5pt*)
-
12.1%
Profit before tax
562
12.0
-
502
Diluted EPS (p)
33.0
15.0
-
28.7
* Margin points
H1 and Q2 financial highlights
- Client demand strong across most segments and regions
- H1 reported revenue up 10.2%, LFL revenue 8.7% (Q2 9.3%)
- H1 revenue less pass-through costs up 12.5%, LFL revenue less
pass-through costs up 8.9% (up 9.4% on H1 2019)
- Q2 LFL revenue less pass-through costs up 8.3%: US 10.4%, UK
6.2%, Germany 11.5%, China (6.1)% (affected by lockdowns),
Australia 3.2%
- Strong new business performance: $3.4 billion net new billings
in H1
- H1 headline operating profit margin 11.6%, down 0.5pt on prior
year as expected, as a result of higher personnel costs and a
return to business travel
- Trade working capital cash outflow £232 million year-on-year;
still expected to be around flat year-on-year at year-end
- Adjusted net debt at 30 June 2022 £3.1 billion, up £1.6 billion
year-on-year after £1.1 billion of share buybacks since June
2021
Strategic progress, shareholder returns and outlook
- Continued recognition of extraordinary creativity: WPP awarded
most creative company at Cannes Lions for second year running
- Faster growth areas of experience, commerce and technology
around 39% of revenue less pass-through costs in Global Integrated
Agencies ex-GroupM in H1
- Strong performance by industry sector: H1 LFL revenue less
pass-through costs growth 12% in Technology, 7% in CPG and 7% in
Healthcare
- Investing for growth: enhancing our data capabilities through
Choreograph and launch of Everymile, direct-to-consumer ecommerce
offer
- Focused M&A: acquisition of Village Marketing to accelerate
creator economy growth and Bower House Digital, a leading marketing
technology agency
- Further simplification to enhance offer to clients: creation of
EssenceMediacom and Design Bridge and Partners
- Transformation programme on track to deliver expected £300
million of annual savings this year over a 2019 base
- £637 million share buybacks in H1, total of £800 million to be
completed in 2022; 15.0p 2022 interim dividend declared, +20%
- Full year 2022 LFL revenue less pass-through costs growth now
expected to be 6.0-7.0%; headline operating profit margin up around
50 bps
Mark Read, Chief Executive Officer of WPP, said:
“We have enjoyed a strong first half, with broad-based growth
across our creative, media and public relations businesses. This
reflects the improved competitive position of our creative
businesses, with their growing capabilities in commerce, experience
and technology, our continued strength in media and the resurgence
in demand for strategic communications advice from our public
relations agencies.
“Our services are business-critical – driving growth, building
brands, innovating and helping clients navigate an increasingly
complex marketing environment. As major advertisers increasingly
look to integrate their marketing investments, we are well
positioned to serve the world’s largest companies, demonstrated by
our success with Coca-Cola, which we are now onboarding at pace.
The second quarter saw significant assignment wins from Audi,
Audible, Danone and Nationwide.
“Our commitment to creativity was recognised at Cannes Lions in
June where WPP was awarded the most creative company, recognising
the quality of our work in all areas, spanning film, digital,
media, commerce and creative business transformation. It’s a
testament to our investment in creativity and the talent of our
people, and I am committed to making WPP the most creative company
in the world.
“Our clients are continuing to invest in WPP’s services, which
reflects our attractive industry exposure in technology and
healthcare, our broad global footprint, and the importance of what
we do for their businesses. The actions we have taken over the last
four years leave WPP much better positioned with a more uncertain
economic environment ahead.”
To access WPP’s 2022 Interim Results financial tables, please
visit www.wpp.com/investors
First half overview
Market environment
The market has continued to be strong in the first half of the
year, with many sectors seeing significant growth in advertising
spend. GroupM now expects global advertising to grow by 8.4%4 in
2022, marginally lower than the 9.7% estimate in December 2021,
mainly due to a softer outlook for China amid ongoing
lockdowns.
GroupM expects 12% growth in digital advertising revenues in
2022, a deceleration from the 32% growth in 2021. Overall, digital
advertising on pure-play platforms represents 67% of total
advertising revenues. Retaining its critical brand-building role,
spend on television advertising is forecast to grow at 4% in
2022.
By geography, the US advertising market is expected to remain
robust, growing by 10.0%4 while the UK is expected to grow by 9.3%.
Germany, Europe’s second-largest advertising market, is forecast to
grow at a similarly high pace in 2022 at 9.1%. China is expected to
grow by 3.3% in 2022, a downgrade from the 10.2% forecast in
December 2021, reflecting the impact of the lockdowns during much
of the first half of 2022.
Performance and progress
Revenue in the first half was £6.8 billion, up 10.2% from £6.1
billion in the first half of 2021, and up 8.7% like-for-like.
Revenue less pass-through costs was £5.5 billion, up 12.5% from
£4.9 billion in the first half of 2021, and up 8.9%
like-for-like.
We have seen good momentum in the first half of the year, with
LFL growth in revenue less pass-through costs across most sectors
and most major markets. On a three-year basis LFL revenue less
pass-through costs is up 9.4% in the first half.
Client demand remains healthy across all services. Revenue less
pass-through costs from higher-growth areas of our offer in
experience, commerce and technology was 39% of our Global
Integrated Agencies, excluding GroupM, compared to 35% in 2019. Our
digital billings mix within GroupM increased to 46%, compared to
43% in the first half of 2021. In addition, we have seen strong
demand for commerce services, with GroupM’s commerce billings
increasing 26% year-on-year in the first half.
Clients and partners
In terms of client sector performance, we have seen good growth
in the technology, CPG and healthcare & pharma sectors, which
together represent around 54% of our revenue less pass-through
costs5 for designated clients. In the first half these sectors saw
LFL revenue less pass-through costs growth of 12%, 7% and 7%
respectively. Compared to 2019, their growth rates were 27%, 17%
and 20%. Travel and leisure has continued to rebound, growing 23%
in the first half, although the sector remains below 2019 levels.
We saw some softness in the automotive sector due to ongoing chip
shortages.
We have won $3.4 billion of net new business billings in the
first half, compared to $2.9 billion in the first half of 2021. Key
assignment wins include Audi, Audible, Danone, Mars and Nationwide.
Following the unprecedented account win last year, Coca-Cola has
been onboarded at pace. During the first half we unveiled the first
consistent, global ad platform for Sprite, with the ‘Heat Happens’
campaign which will be rolled out across 200 markets.
In addition, we have developed new, and expanded existing,
partnerships with global technology companies. During the period we
announced a partnership with Epic Games, the company behind
Fortnite and Unreal Engine, to help WPP agencies develop digital
experiences in the metaverse. We also unveiled a first-of-its-kind
partnership with Instacart, the leading online grocery platform in
North America, giving WPP early product insights, access to custom
features and a co-developed certification programme.
Creativity and awards
While data and technology play an increasingly important role in
modern marketing, creativity is still at the heart of our work,
because clients understand that the most effective campaigns start
with an insight or idea. We are committed to maintaining our
differentiation through sustained investment in creative talent,
and integrating creativity with our experience, commerce and
technology expertise.
WPP won the prestigious title of most creative company of the
year at the Cannes Lions International Festival of Creativity for
the second year in a row. WPP agencies collected a total of 176
Lions, including a Titanium Lion, 4 Grand Prix and 36 Gold Lions.
Ogilvy won global network of the year, recognised for its
investment in diverse talent, scaled technology and digital
capabilities, and thought leadership.
In the 2022 WARC rankings, Ogilvy also topped the creativity
ranking and placed second for effectiveness, becoming the only
agency to secure top rankings in both categories and reflecting the
breadth of its offer. WARC also named Mindshare the number one
media agency network for the third consecutive year. WPP agencies
also made their mark at the 2022 Clio awards, where work from AKQA
Group, Wunderman Thompson and Ogilvy was recognised with the most
prestigious, Grand Clio award.
Our media business, GroupM, retained its ranking as the world’s
largest media agency group, as calculated by COMvergence in their
2021 full year report. Once again, GroupM ranked number one in APAC
and EMEA and improved to joint second place in North America.
Investment for growth
During the first half we have invested in strategically
important capabilities, continuing our focused approach to
acquisitions. We announced the acquisitions of Village Marketing,
the industry leader in influencer marketing in North America and
Bower House Digital, a leading Australian marketing technology
services agency. In July we announced the acquisition of Corebiz, a
leading Latin American ecommerce agency specialising in VTEX
implementation, one of the largest enterprise digital commerce
platforms in the region.
We have invested organically in new platforms to provide a
future-facing offer to clients and innovate for the long term. The
main areas of our investment are Choreograph, to accelerate our
data capabilities; the launch of Everymile, our
commerce-as-a-service platform; and our market-leading programmatic
and connected TV businesses within GroupM Nexus. In addition, we
launched GroupM Premium Marketplace, a unified programmatic
marketplace supported by global partnerships.
Transformation programme
We continue to make good progress on our transformation plan,
designed to achieve £600 million in annual cost efficiencies by
2025. We are on target to achieve our annual runrate of £300
million in efficiencies this year, against a 2019 baseline.
In property, we now have around 50,000 people occupying 34
campuses, having opened new campuses in Santiago, Tokyo and Toronto
in 2022. By the end of the year, we aim to have 4 further campuses
opened and around half of our people working from a campus
building.
We are continuing to consolidate and modernise the tools used by
our people, predominantly through the roll-out of ERP systems
Workday and Maconomy. We are live with Workday in Wunderman
Thompson North America. On Maconomy, we now have around 18,500
users on a common technology platform, which is an important
stepping-stone for further process optimisation and finance shared
services deployment.
In our broader IT transformation, we have moved nearly 1,000
people from agency roles into WPP and established global hubs in
Chennai and Mexico. We have begun to realise opportunities
identified from a zero-based budgeting review across Corporate IT
and Ogilvy, and are commencing work on rolling out this approach
across the remaining IT spend in WPP.
In procurement, we hosted a supplier day for 30 key suppliers to
communicate our procurement strategy and align incentives, driving
incremental savings. We are implementing a new procurement
operating model leveraging our global scale, aligned around
categories and consolidating suppliers.
We have also merged more of our businesses to simplify our
organisation and respond to our clients’ needs. Within GroupM we
announced the merger of Essence and MediaCom to form
EssenceMediacom and the formation of Nexus which brings together
Finecast, Xaxis and GroupM Services to form one of the world’s
leading media performance organisations. Last month we announced
the merger of our specialist design agencies, Design Bridge and
Superunion to create a single leading design company, Design Bridge
and Partners.
Finally, we have made progress in streamlining our operating
model, reducing statutory entities by approximately a further 150
in the first half of the year.
Purpose and ESG
People
We have continued to invest in our people strategy in order to
attract, retain and grow top talent and ensure that we are an
employer of choice for all. We recently launched the Making Space
initiative, giving our people a company-wide break along with a
series of events across our campuses and offices to inspire and
reconnect. To support access to women’s healthcare across the
United States, we have updated our benefits plan to providing
funding for travel that allows consistent access to healthcare and
resources, including abortion care, across all regions.
WPP is working to accelerate change in diversity, equity, and
inclusion. We continue to link our DE&I goals to leaders’
compensation and performance reviews. WPP was named among the best
places to work for LGBTQ+ equality by the Human Rights Campaign;
and WPP Unite, our LGBTQ+ community, won Outstanding Employee
Network of the Year at the Burberry British Diversity Awards.
We are committed to our $30 million pledge to fund inclusion
programmes within WPP and to support external organisations, as
part of our Racial Equity Programme. During the period we invited
our global agencies to apply for the second round of funding for
resources to run impactful programmes to advance racial equity.
Successful second-round grants include GroupM GradX Africa Academy,
a 12-month media programme for people of colour in South Africa;
RGBlack project, an educational platform that helps to mitigate the
impacts of coded bias in AI-powered tools, originating from Brazil;
and GIZMOLOGY, a hands-on creative technology apprenticeship
programme for Black and historically marginalised communities
operating out of WPP’s Deeplocal’s studio in Pittsburgh.
Planet
Last year we announced our new commitments to reduce carbon
emissions from our own operations to net zero by 2025 and across
our supply chain by 2030. Our net zero pledges are backed by
equally ambitious science-based reduction targets, which have been
verified by the Science-Based Targets initiative. We have committed
to reducing our absolute Scope 1 and 2 emissions by at least 84% by
2025 and reduce Scope 3 emissions by at least 50% by 2030, both
from a 2019 base year.
During the half, WPP was awarded a ‘Prime’ ESG rating by ISS,
one of the world’s leading rating agencies for sustainable
investment. We are also proud to be rated A- by the Carbon
Disclosure Project (CDP) in 2021 and look forward to continuing to
take action in 2022.
Media accounts for more than half of WPP’s supply chain
emissions. In July GroupM launched a framework to measure and
reduce ad-based carbon emissions, an important first step to
standardise and accelerate carbon reduction across different media
channels.
Clients
Our clients are bringing purpose and sustainability to the
forefront of their brand strategies. Many of our successes at the
Cannes Lions International Festival of Creativity were in
recognition of purpose-driven work, including a Titanium Grand Prix
for Cadbury work by Ogilvy and Wavemaker, which uses personalised
adverts for local businesses hit by COVID-19; and a Grand Prix for
the I Will Always Be Me campaign on behalf of Dell and Intel by
VMLY&R to make life easier for people with motor neurone
disease. VMLY&R also won a Grand Prix for Maxx Flash’s The
Killer Pack, which helps combat, through biodegradable packaging,
deadly diseases like malaria and dengue caught outdoors in
India.
Communities
Our colleagues in Ukraine continue to show extraordinary
resilience and bravery and we remain in regular contact with our
leaders to support our employees. In early March, the Board of WPP
concluded that WPP's ongoing presence in Russia would be
inconsistent with our values as a company and we have subsequently
divested our businesses there. This led to a loss on disposal of
£65 million. Russia represented approximately 0.6% of WPP’s revenue
less pass-through costs in 2021.
WPP partnered with the UNHCR, the UN refugee agency, to support
an emergency fundraising appeal to help people forced to flee their
homes in Ukraine, raising over $150 million, including more than
$1.3 million from WPP’s employee match-funding programme. We are
also working in partnership with the Ukrainian Government on a new
campaign to support the country’s economic recovery. WPP agencies
from Ukraine, Poland and Czech Republic will work pro bono on
‘Advantage Ukraine’ to demonstrate that Ukraine is open for
business. The initiative will target business leaders within the
region and across the world to encourage inward investment to
support the economic recovery of the country.
2022 guidance
Performance in the first half of 2022 has been strong, and we
expect continued growth in the second half. As a result, we are
updating our guidance for 2022 as follows:
- Organic growth (defined as like-for-like revenue less
pass-through costs growth) of 6.0-7.0% (previously 5.5-6.5%)
- Headline operating profit margin up around 50 bps, reflecting
greater top-line momentum offset by inflationary cost pressures,
the impact of Chinese lockdowns and investment in growth areas
including Choreograph and Everymile
- Effective tax rate (measured as headline tax as a % of headline
profit before tax) of around 25.5%
- Capex £350-400 million with around £100 million relating to ERP
system deployment previously included in capex guidance now
included in restructuring costs
- Trade working capital expected to be flat year-on-year
- Current foreign exchange rates imply around a 4.5% tailwind to
reported revenue less pass-through costs from the movement in
sterling year-on-year
- We also anticipate mergers and acquisitions will add around
0.3% to revenue less pass-through costs growth, net of the
divestment of our Russian operations
- We expect to execute around £800 million of share buybacks in
2022, of which £637 million has already been completed
Medium-term guidance
We remain confident in our ability to deliver annual revenue
less pass-through costs growth of 3-4% and headline operating
profit margin of 15.5-16%, as a result of the actions we have taken
to broaden and strengthen our services, to increase our exposure to
attractive industry segments and to leverage our global scale.
We will provide guidance for the 2023 year at our 2022
preliminary results announcement in February 2023.
Financial results
Unaudited headline income statement:
Six months ended (£ million)
30 June 2022
30 June 2021
+/(-) % reported
+/(-) % LFL
Revenue
6,755
6,133
10.2
8.7
Revenue less pass-through costs
5,509
4,899
12.5
8.9
Operating profit
639
590
8.2
Operating profit margin %
11.6%
12.1%
(0.5)pt
Income from associates
12
29
(56.5)
PBIT
651
619
5.3
Net finance costs
(89)
(117)
23.7
Profit before tax
562
502
12.0
Tax
(143)
(115)
(25.2)
Profit after tax
419
387
8.2
Non-controlling interests
(43)
(34)
(24.9)
Profit attributable to shareholders
376
353
6.5
Diluted EPS
33.0p
28.7p
15.0
Reconciliation of operating profit to headline operating
profit:
Six months ended (£ million)
30 June 2022
30 June 2021
Operating profit
539
484
Amortisation and impairment of acquired
intangible assets
31
30
Losses on disposal of investments and
subsidiaries
48
1
Gains on remeasurement of equity interests
arising from a change in scope of ownership
(60)
-
Litigation settlement
-
22
Restructuring and transformation costs
75
34
Restructuring costs in relation to
COVID-19
6
19
Headline operating profit
639
590
Reported billings were £24.6 billion, up 5.1%, and up 3.9%
like-for-like.
Reported revenue from continuing operations was up 10.2% at £6.8
billion. Revenue on a constant currency basis was up 7.2% compared
with last year. Net changes from acquisitions and disposals had a
negative impact of 1.5% on growth, leading to a like-for-like
performance, excluding the impact of currency and acquisitions, of
8.7%.
Reported revenue less pass-through costs was up 12.5%, and up
9.2% on a constant currency basis. Excluding the impact of
acquisitions and disposals, like-for-like growth was 8.9%. In the
second quarter, like-for-like revenue less pass-through costs was
up 8.3%.
Business sector review
Revenue analysis
Q2
H1
£m
+/(-) % reported
+/(-) % LFL
£m
+/(-) % reported
+/(-) % LFL
Global Int. Agencies
3,111
13.0
10.2
5,701
9.6
9.3
Public Relations
302
28.0
9.0
572
27.2
11.2
Specialist Agencies
251
1.5
(0.3)
482
0.5
0.2
Total Group
3,664
13.3
9.3
6,755
10.2
8.7
Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ Q2 and H1 2021 revenue by £18 million and £33 million
respectively and reduces Specialist Agencies’ by the same
amount.
Revenue less pass-through costs analysis
Q2
H1
£m
+/(-) % reported
+/(-) % LFL
£m
+/(-) % reported
+/(-) % LFL
Global Int. Agencies
2,432
13.1
8.2
4,538
10.8
8.4
Public Relations
283
26.7
7.3
545
27.0
10.5
Specialist Agencies
220
14.6
10.9
426
14.3
11.9
Total Group
2,935
14.4
8.3
5,509
12.5
8.9
Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ Q2 and H1 2021 revenue less pass-through costs by £15
million and £28 million respectively and reduces Specialist
Agencies’ by the same amount.
Headline operating profit analysis
£ million
2022
% margin*
2021
% margin*
Global Int. Agencies
507
11.2
489
11.9
Public Relations
83
15.2
63
14.8
Specialist Agencies
49
11.4
38
10.3
Total Group
639
11.6
590
12.1
* Headline operating profit as a
percentage of revenue less pass-through costs
Prior year figures have been re-presented to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ H1 2021 headline operating profit by £6 million and
reduces Specialist Agencies’ by the same amount.
Global Integrated Agencies like-for-like revenue less
pass-through costs was up 8.4% in the first half and up 8.2% in the
second quarter. All of our integrated agencies were in growth in
the first half. GroupM, representing 37% of WPP revenue less
pass-through costs saw 11.8% like-for-like growth in the half and
10.9% growth in the second quarter. VMLY&R and AKQA Group are
showing an improving growth trend year-on-year in the second
quarter. Wunderman Thompson and Ogilvy recorded encouraging
growth.
Public Relations like-for-like revenue less pass-through
costs was up 10.5% in the first half and up 7.3% in the second
quarter. All parts of the business grew in the second quarter, with
H+K being a particularly strong performer. Purpose-related
communications and ESG advisory remain a key growth driver. During
the period we launched FGS Global, the new name and branding for
the merger of Finsbury Glover Hering and Sard Verbinnen.
Specialist Agencies like-for-like revenue less
pass-through costs was up 11.9% in the first half and up 10.9% in
the second quarter. CMI and Landor & Fitch, the two largest
businesses within Specialist Agencies, continued to be stand-out
performers.
Regional review
Revenue analysis
Q2
H1
£m
% reported
% LFL
£m
% reported
% LFL
N. America
1,399
24.9
12.4
2,586
18.4
10.9
United Kingdom
495
0.3
1.0
956
3.1
3.2
W Cont. Europe
731
0.4
3.7
1,352
0.9
5.3
AP, LA, AME, CEE6
1,039
16.3
14.8
1,861
10.7
11.8
Total Group
3,664
13.3
9.3
6,755
10.2
8.7
Revenue less pass-through costs analysis
Q2
H1
£m
% reported
% LFL
£m
% reported
% LFL
N. America
1,173
26.0
10.2
2,189
20.4
9.5
United Kingdom
385
7.2
6.2
737
8.4
7.1
W Cont. Europe
579
3.6
6.6
1,086
3.4
7.7
AP, LA, AME, CEE
798
11.4
8.0
1,497
10.8
9.8
Total Group
2,935
14.4
8.3
5,509
12.5
8.9
Headline operating profit analysis
£ million
2022
% margin*
2021
% margin*
N. America
300
13.7
271
14.9
United Kingdom
67
9.1
83
12.3
W Cont. Europe
99
9.1
104
9.9
AP, LA, AME, CEE
173
11.6
132
9.7
Total Group
639
11.6
590
12.1
* Headline operating profit as a
percentage of revenue less pass-through costs
North America like-for-like revenue less pass-through
costs was up 9.5% in the first half and up 10.2% in the second
quarter. On a three-year basis, North America was up 10.5%
like-for-like for the first half, with an improving trend in the
second quarter. Growth was driven predominantly by GroupM, along
with strong growth in Hogarth, Superunion and H+K.
United Kingdom like-for-like revenue less pass-through
costs was up 7.1% in the first half and up 6.2% in the second
quarter. On a three-year basis, the UK was up 7.4% like-for-like
for the first half. Of our major agencies, AKQA Group, H+K and
Landor & Fitch all grew double digits in the first half.
VMLY&R and GroupM saw slower growth as a result of very strong
performances in the prior period.
Western Continental Europe like-for-like revenue less
pass-through costs was up 7.7% in the first half and up 6.6% in the
second quarter. We saw a strong performance in Germany, mainly
driven by GroupM, and Spain, while France continued to be impacted
by assignment losses from 2021.
In Asia Pacific, Latin America, Africa & the Middle East
and Central & Eastern Europe, like-for-like revenue less
pass-through costs was up 9.8% in the first half and up 8.0% in the
second quarter. Latin America was the strongest region, with
continued double-digit growth led by Brazil. Asia Pacific also
grew, with sustained momentum in India offsetting a weak China
performance, which has been impacted by ongoing lockdowns.
Operating profitability
Reported profit before tax was £419 million, compared to £394
million in the prior period, principally reflecting stronger
business performance year-on-year gains on the remeasurement of
equity interests arising from changes in ownership, partly offset
by the loss on the divestment of our Russian operations and higher
restructuring and transformation costs (see table on page 9).
Reported profit after tax was £301 million compared to £287
million in the prior period.
Headline EBITDA (including IFRS 16 depreciation) for the first
half was up 6.5% to £745 million. Headline operating profit was up
8.2% to £639 million.
Headline operating profit margin was down 50 basis points to
11.6%. Total operating costs were up 13.0% to £4.9 billion. Staff
costs, excluding incentives, were up 16.7% year-on-year to £3.8
billion, reflecting higher headcount and the full year impact of
the salary reviews that took place in June 2021. Establishment
costs were down 0.8% at £263 million as we continued to benefit
from our campus roll-out. IT costs were up 11.3% at £308 million,
reflecting investment in products and services, and other operating
expenses were up 12.7% at £272 million. Personal costs rose 84.6%
to £96 million, reflecting the return of business travel, as
expected. Excluding incentive payments as outlined below, operating
costs were up 15.8% year-on-year.
The Group’s headline operating profit is net of £17 million of
severance costs, compared with £15 million in the first half of
2021 and £164 million of incentive payments, compared to £244
million in the first half of 2021.
On a like-for-like basis, the average number of people in the
Group in the first half was 113,000 compared to 102,000 in the
first half of 2021. The total number of people as at 30 June 2022
was 115,000 compared to 104,000 as at 30 June 2021.
Exceptional items
The Group incurred a net exceptional loss of £100 million in the
first half of 2022, mainly relating to restructuring and
transformation costs, the loss on disposal from the divestment of
our Russian interests, and the amortisation and impairment of
acquired intangibles, partially offset by gains on remeasurement of
equity interests arising from a change in scope of ownership. This
compares with a net exceptional loss in the first half of 2021 of
£106 million.
Interest and taxes
Net finance costs (excluding the revaluation of financial
instruments) were £89 million, a decrease of £28 million
year-on-year, due to higher investment income, lower bond debt and
higher interest earned on cash.
The headline tax rate (based on headline profit before tax) was
25.5% (2021: 22.8%) and on reported profit before tax was 28.1%
(2021: 27.2%). Given the Group’s geographic mix of profits and the
changing international tax environment, the tax rate is expected to
increase over the next few years.
Earnings and dividend
Headline profit before tax was up 12.0% to £562 million.
Profits attributable to share owners were £258 million, compared
to a profit of £253 million in the prior period.
Headline diluted earnings per share from continuing operations
rose by 15.0% to 33.0p. Reported diluted earnings per share, on the
same basis, was 22.7p, compared to 20.6p in the prior period.
For 2022, the Board is declaring an interim dividend of 15.0p,
an increase of 20% year-on-year. The record date for the interim
dividend is 14 October 2022, and the dividend will be payable on 1
November 2022.
Further details of WPP’s financial performance are provided in
Appendix 1.
Cash flow highlights
Six months ended (£ million)
30 June 2022
30 June 2021
Operating profit
539
484
Depreciation and amortisation
255
250
Impairments and investment write-downs
8
8
Lease payments (inc interest)
(190)
(202)
Non-cash compensation
67
44
Net interest paid
(60)
(65)
Tax paid
(163)
(163)
Capex
(117)
(138)
Earnout payments
(63)
(14)
Other
(9)
(44)
Trade working capital
(1,015)
(464)
Other receivables, payables and
provisions
(726)
(41)
Free cash flow
(1,474)
(345)
Disposal proceeds
34
43
Net initial acquisition payments
(46)
(252)
Share purchases
(681)
(298)
Net cash flow
(2,167)
(852)
Net cash outflow for the first half was £2.2 billion, compared
to £852 million in the first half of 2021. The main drivers of the
cash flow performance year-on-year were a partial reversal of the
strong working capital position at December 2021, the significant
increase in share purchases, the payment of bonuses in April 2022
that were accrued in the 2021 financial year, and specific
temporary collection issues caused by the lockdowns in China. A
summary of the Group’s unaudited cash flow statement and notes for
the six months to 30 June 2022 is provided in Appendix 1.
Balance sheet highlights
As at 30 June 2022 we had cash and cash equivalents of £1.5
billion and total liquidity, including undrawn credit facilities,
of £3.4 billion. Average adjusted net debt in the first half was
£2.4 billion, compared to £1.4 billion in the prior period, at 2022
exchange rates. On 30 June 2022 adjusted net debt was £3.1 billion,
against £1.5 billion on 30 June 2021, an increase of £1.6 billion
at reported and at 2022 exchange rates.
We spent £681 million on share purchases in the first half of
the year, of which £637 million related to share buybacks. Since
June 2021 we have completed £1.1 billion of share buybacks.
Our bond portfolio at 30 June 2022 had an average maturity of
6.8 years.
The average adjusted net debt to EBITDA ratio in the 12 months
to 30 June 2022 is 1.2x, which excludes the impact of IFRS 16. We
also expect to end the year slightly below our target leverage
range of average adjusted net debt/EBITDA of 1.5-1.75x.
A summary of the Group’s unaudited balance sheet and notes as at
30 June 2022 is provided in Appendix 1.
________________________________
1
Percentage change in reported sterling.
2
Like-for-like. LFL comparisons are calculated as follows: current
year, constant currency actual results (which include acquisitions
from the relevant date of completion) are compared with prior year,
constant currency actual results from continuing operations,
adjusted to include the results of acquisitions and disposals for
the commensurate period in the prior year. Both periods exclude
results from Russia.
3
In this press release not all of the figures and ratios used are
readily available from the unaudited interim results included in
Appendix 1. Management believes these non-GAAP measures, including
constant currency and like-for-like growth, revenue less
pass-through costs and headline profit measures, are both useful
and necessary to better understand the Group’s results. Where
required, details of how these have been arrived at are shown in
Appendix 2.
4
Excluding the impact of US political advertising
5
For designated clients, representing approximately 76% of total
revenue less pass-through costs
6
Asia Pacific, Latin America, Africa & Middle East and Central
& Eastern Europe.
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