WPP 2023 Interim Results
- WPP's Q2 2023 revenue grew by 6.9% compared to the previous year.
- Operating profit margin for the first half of 2023 was 11.5%.
- The company expects LFL growth of 1.5-3.0% for the full year 2023.
- Lower revenues from technology clients in the US impacted Q2 results.
- Delays in technology projects also affected overall performance.
- The company's margin guidance remains at around 15%.
Resilient performance with second quarter impacted by lower revenues in the US from technology clients and delays in spend on technology projects. Now expect 2023 LFL growth of 1.5
Key figures
£m |
H1 2023 |
+/(-) %
|
+/(-) %
|
H1 2022 |
Revenue |
7,221 |
6.9 |
3.5 |
6,755 |
Revenue less pass-through costs |
5,811 |
5.5 |
2.0 |
5,509 |
|
|
|
|
|
Reported: |
|
|
|
|
Operating profit |
306 |
(43.2) |
- |
539 |
Profit before tax |
204 |
(51.2) |
- |
419 |
Diluted EPS (p) |
10.3 |
(54.6) |
- |
22.7 |
Dividends per share (p) |
15.0 |
- |
- |
15.0 |
|
|
|
|
|
Headline3: |
|
|
|
|
Operating profit |
666 |
4.3 |
2.7 |
639 |
Operating profit margin |
|
(0.1pt*) |
0.1pt* |
|
Profit before tax |
546 |
(2.9) |
- |
562 |
Diluted EPS |
33.1p |
0.3 |
- |
33.0p |
* Margin points |
||||
H1 and Q2 financial highlights
-
H1 reported revenue +
6.9% , LFL revenue +3.5% (Q2 +2.3% ) -
H1 revenue less pass-through costs +
5.5% , LFL revenue less pass-through costs +2.0% (Q2 +1.3% ) -
In Q2, ex-US growth accelerated to mid-single digits, with
China growing albeit less strongly than expected.North America declined in Q2, primarily due to lower revenues from technology clients -
H1 headline operating profit margin
11.5% , down 0.1pt, and on a constant FX basis improved by 0.1pt. Efficiency benefits offset by investment in IT and higher severance costs -
Trade working capital favourable movement of
£165m year-on-year. Non-trade working capital adverse movement of£316m -
Adjusted net debt at 30 June 2023
£3.5b n, up£0.3b n year-on-year,£0.4b n lower than Q1 2023. Expect year end net debt to be flat year-on-year
Performance, strategic progress and outlook
-
Global Integrated Agencies H1 LFL revenue less pass-through costs growth +
2.2% (Q2 +1.5% ): within which GroupM, our media planning and buying business +6.1% (Q2 +6.1% ), partially offset by a0.8% LFL decline at other Global Integrated Agencies (Q2 -2.3% ) -
Solid new business performance:
$2.0b n - Acquisitions of Goat and Obviously in the fast-growth area of influencer marketing and an investment in Majority, a diversity-led creative agency
-
Transformation programme on track to deliver at least
£450m of annual savings this year over a 2019 base -
Planned review of our property portfolio resulting in a consolidation of our office space with an impairment charge for the full year of approximately
£220m which is largely non-cash (H1 2023:£180m ) - 2023 interim dividend of 15.0p declared (2022: 15.0p)
-
Full year 2023 LFL growth of 1.5
-3.0% (previously 3-5% ); FY 2023 headline operating profit margin around15.0% (excluding the impact of FX)
Mark Read, Chief Executive Officer of WPP, said:
“Our performance in the first half has been resilient with Q2 growth accelerating in all regions except the
“Our media business, GroupM, grew consistently across the first six months as did our businesses in the
“We have exciting future plans in AI that build on our acquisition of Satalia in 2021 and our use of AI across WPP. We are leveraging our efforts with partnerships with the leading players including Adobe, Google, IBM, Microsoft, Nvidia and OpenAI. We are delivering work powered by AI for many clients including Nestlé, Nike and Mondelēz. AI will be fundamental to WPP’s future success and we are committed to embracing it to drive long-term growth and value.”
This announcement contains information that qualifies or may qualify as inside information. The person responsible for arranging the release of this announcement on behalf of WPP plc is Balbir Kelly-Bisla, Company Secretary.
To access WPP's 2023 interim results financial tables, please visit: www.wpp.com/investors
First half overview
First half revenue was
|
Q2 2023 £m |
% reported |
% M&A |
% FX |
% LFL |
Revenue |
3,761 |
2.7 |
1.1 |
(0.7) |
2.3 |
Revenue less pass-through costs |
2,982 |
1.6 |
0.9 |
(0.6) |
1.3 |
|
H1 2023 £m |
% reported |
% M&A |
% FX |
% LFL |
Revenue |
7,221 |
6.9 |
0.9 |
2.5 |
3.5 |
Revenue less pass-through costs |
5,811 |
5.5 |
0.9 |
2.6 |
2.0 |
Business segment review4
Business segments - revenue less pass-through costs
% LFL +/(-) |
Global Integrated Agencies |
Public Relations |
Specialist Agencies |
Q2 2023 |
1.5 |
2.0 |
(1.6) |
H1 2023 |
2.2 |
2.1 |
0.2 |
Global Integrated Agencies: GroupM, our media planning and buying business, grew consistently during the half and across all regions, benefiting from continued client investment in media, with like-for-like growth in revenue less pass-through costs of +
Ogilvy grew well, supported by recent new business wins including Verizon and SC Johnson. Hogarth, our creative production agency, continued to deliver good growth as it expands its collaboration with other WPP agencies.
Other Global Integrated Agencies, Wunderman Thompson, VMLY&R and AKQA Group, felt the greatest impact from reduced spend across the technology sector and delays in technology-related projects. As anticipated, revenue less pass-through costs in the retail sector was impacted by known 2022 client losses.
Revenue less pass-through costs from our offer in experience, commerce and technology was around
Public Relations: FGS Global continued to grow strongly in the first half. H+K Strategies delivered solid growth, lapping double-digit growth in the first half 2022. BCW saw a small decline in revenue less pass-through costs in the first half.
Specialist Agencies: good growth in design agency Landor & Fitch, and our specialist healthcare media planning and buying agency, CMI Media Group, was offset by declines at smaller agencies affected by delays in client projects.
Regional review
Regional segments - revenue less pass-through costs
% LFL +/(-) |
|
United
|
Western
|
Rest of World |
Q2 2023 |
(4.1) |
9.0 |
3.9 |
4.3 |
H1 2023 |
(1.2) |
8.2 |
3.7 |
3.1 |
The
The Rest of World saw good growth in the half.
Top five markets - revenue less pass-through costs
% LFL +/(-) |
|
|
|
|
|
Q2 2023 |
(4.5) |
9.0 |
6.6 |
4.8 |
2.5 |
H1 2023 |
(1.2) |
8.2 |
5.4 |
(4.0) |
0.8 |
Client sector review
Client sector - revenue less pass-through costs
H1 2023 |
% share |
% growth +/(-) |
CPG |
26.1 |
15.1 |
Tech & Digital Services |
17.8 |
(4.9) |
Healthcare & Pharma |
12.5 |
4.2 |
Automotive |
10.2 |
(0.2) |
Retail |
9.5 |
(7.9) |
Telecom, Media & Entertainment |
6.2 |
(1.4) |
Financial Services |
6.1 |
10.0 |
Other |
5.5 |
(0.3) |
Travel & Leisure |
3.6 |
8.9 |
Government, Public Sector & Non-profit |
2.5 |
3.6 |
Strategic progress
There have never been more opportunities for advertisers to reach consumers, reflected in the plethora of marketing channels available. In this increasingly complex world, WPP’s unique position and offer is more relevant than ever. Our clients continue to invest in their brands and seek our support as they navigate this complexity.
Clients: We have won
Our Vantage global client satisfaction survey has shown the key measure of “Likely To Recommend” has remained at all-time high levels with an increase in scores related to world-class creativity.
Creativity and awards: Creativity is at the heart of our offer, and we continue to be recognised for our creative excellence. WPP had another successful year at Cannes Lions International Festival of Creativity, winning a total of 165 Lions including one Titanium Lion, five Grand Prix, and 24 Gold awards. Mindshare was also named Media Network of the Year.
Earlier in the year, WARC named WPP the top company in all three of their rankings, the Creative 100, Effective 100 and Media 100 lists. Ogilvy ranked as the top network of the year in both the Creative 100 and Effective 100 while EssenceMediacom took first place in the Media 100. In addition, the Effie Awards named WPP the most effective communication company in the world, with Ogilvy placing first in the most effective agency network rankings.
Investment for growth: We have invested in strategically important areas and growth markets. We acquired Goat, a
In July, KKR completed their minority investment to become a
We have invested organically in new technology platforms to provide a future-facing offer to clients and innovate for the medium term. The main areas of investment are in Choreograph, our data company, and WPP Open, our AI-powered technology platform.
We believe that AI will be fundamental to WPP’s business and are excited by its transformational potential. Our expertise in the application of AI to marketing is based on investments that we have been making over many years, including the appointment of a Head of Creative AI in 2019 and the acquisition of Satalia in 2021.
AI is used extensively across our business today, particularly in GroupM and in Hogarth, our creative production business. Our application of AI includes automation of workflows, speeding up the process of ideation and concepting, and producing innovative creative work for clients. An example is our work for Cadbury’s in
We are working with technology from all the main AI companies, including Adobe, Google, IBM, Microsoft, Nvidia, and OpenAI, with dedicated enterprise platforms, proprietary to WPP, to deliver work to clients that protects their information. We recognise the challenges of AI to society and have implemented legal and ethical guidelines to help us responsibly deploy this technology.
In May, WPP and Nvidia announced plans to develop a content engine that harnesses NVIDIA Omniverse™ and AI to enable creative teams to produce high-quality commercial content faster, more efficiently and at scale while staying fully aligned with a client’s brand.
The new engine connects an ecosystem of 3D design, manufacturing and creative supply chain tools, including those from Adobe and Getty Images, letting WPP’s artists and designers integrate 3D content creation with generative AI. This enables our clients to reach consumers in highly personalised and engaging ways, while preserving the quality, accuracy and fidelity of their company’s brand identity, products and logos.
Talent: Our success is driven by our exceptional talent. We have continued to invest to attract, engage and develop the best talent in our industry. In May, we hired Corey duBrowa, one of the industry’s most highly regarded communications leaders, as Chief Executive of BCW.
We have invested in education and training, including through our Future Readiness Academies, a bespoke global learning programme available to everyone across WPP. We also launched the second cohort of our Creative Technology Apprenticeship, a nine-month intensive programme where apprentices learn creative technology skills using the latest software and hardware to prepare them for a career in today’s creative technology field. In addition, we sponsored a cohort of WPP leaders through a Postgraduate Diploma in AI for Business at Oxford University’s Saїd Business School, with 28 senior executives graduating earlier this year.
Transformation: We are making progress on our transformation plan which we set out in December 2020, designed to achieve
We opened five new campuses, in
A review of our property portfolio has led to ongoing actions including the further consolidation of our operations in campuses across the US, in
Purpose and ESG
WPP’s purpose is to use the power of creativity to build better futures for our people, planet, clients and communities. During the first six months of the year we have made good progress in fulfilling our commitments in each pillar of our purpose statement.
People: We are committed to our
Planet: In 2021, we announced our commitment 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 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
In April, our 2022 Sustainability Report reported that we have delivered a reduction in Scope 1 and 2 emissions of
WPP maintained a low risk rating in the 2023 Sustainalytics risk rating, which scores the ESG performance of companies. WPP has the lowest risk rating of its peer group and saw an improvement in its score from 12.1 in 2022 to 10.6 in 2023.
Clients: We are proud to enable our clients in their own sustainability journeys and ensure client work is inclusive and accessible. At the Cannes Lions Festival of Creativity 2023 we were recognised for our purpose-driven client work including a Titanium Lion for Corona’s Extra Lime campaign in which Corona partnered with local governments to equip and educate farmers to expand their lime yield, and a Grand Prix for Dove’s #TurnYourBack campaign which raised awareness of the harmful impact of toxic beauty content.
Communities: We make a positive contribution to the communities in which we live and work. WPP collaborated with The One Club for Creativity to introduce ONE School
Outlook
We are updating our guidance for 2023 as follows:
Like-for-like revenue less pass-through costs growth of 1.5
|
Other 2023 financial guidance:
-
Mergers and acquisitions will add 0.5
-1.0% to revenue less pass-through costs growth -
FX impact: current rates (at 31 July 2023) imply a c.
2.0% drag on FY 2023 revenues less pass-through costs and a c.0.25pt drag on FY 2023 headline operating margin - Headline income from associates is expected to be around 40m5
-
Effective tax rate (measured as headline tax as a % of headline profit before tax) of around
27% -
Capex of around
£250m (previously£300m ) -
Restructuring and property costs of around
£400m , consisting of costs of£180m detailed in prior guidance with the addition of£220m of cost relating to the 2023 property review (of which£200m is non-cash) - Trade working capital expected to be broadly flat year-on-year, with operational improvement offsetting increased client focus on cash management
-
Non-trade working capital expected to be an outflow of
£150m - Average adjusted net debt/headline EBITDA within the range of 1.5x-1.75x
- Year-end adjusted net debt flat year-on-year
Medium-term guidance
We remain confident in our ability to deliver annual revenue less pass-through costs growth of 3
Financial results
Unaudited headline income statement6: |
||||
Six months ended (£m) |
30 June 2023 |
30 June 2022 |
+/(-) % reported |
+/(-) % LFL |
|
|
|
|
|
Revenue |
7,221 |
6,755 |
6.9 |
3.5 |
Revenue less pass-through costs |
5,811 |
5,509 |
5.5 |
2.0 |
Operating profit |
666 |
639 |
4.3 |
2.7 |
Operating profit margin % |
|
|
(0.1pt*) |
0.1pt* |
Income from associates |
8 |
12 |
(38.2) |
|
PBIT |
674 |
651 |
3.5 |
|
Net finance costs |
(128) |
(89) |
(43.5) |
|
Profit before tax |
546 |
562 |
(2.9) |
|
Tax |
(148) |
(143) |
(3.1) |
|
Profit after tax |
398 |
419 |
(5.0) |
|
Non-controlling interests |
(37) |
(43) |
13.7 |
|
Profit attributable to shareholders |
361 |
376 |
(4.0) |
|
Diluted EPS |
33.1p |
33.0p |
0.3 |
|
*margin points |
||||
Reconciliation of profit before tax to headline operating profit: |
||
Six months ended (£m) |
30 June 2023 |
30 June 2022 |
|
|
|
Profit before taxation |
204 |
419 |
Finance and investment income |
(102) |
(56) |
Finance costs |
231 |
145 |
Revaluation and retranslation of financial instruments |
(26) |
(33) |
Profit before interest and taxation |
307 |
475 |
(Earnings)/loss from associates - after interest and tax |
(1) |
64 |
Operating profit |
306 |
539 |
Goodwill impairment |
53 |
– |
Amortisation and impairment of acquired intangible assets |
36 |
31 |
Investment and other impairment charges |
11 |
– |
Losses on disposal of investments and subsidiaries |
3 |
48 |
Gains on remeasurement of equity interests arising from a change in scope of ownership |
– |
(60) |
Litigation settlement |
(10) |
– |
Restructuring and transformation costs |
87 |
81 |
Property related costs |
180 |
– |
Headline operating profit |
666 |
639 |
Business sector review7
Revenue analysis
|
Q2 |
|
H1 |
||||
|
£m |
+/(-) %
|
+/(-) % LFL |
|
£m |
+/(-) %
|
+/(-) % LFL |
Global Int. Agencies |
3,211 |
3.3 |
2.9 |
|
6,107 |
7.2 |
4.0 |
Public Relations |
311 |
2.2 |
1.7 |
|
618 |
7.6 |
2.7 |
Specialist Agencies |
239 |
(4.7) |
(4.6) |
|
496 |
3.0 |
(1.3) |
Total Group |
3,761 |
2.7 |
2.3 |
|
7,221 |
6.9 |
3.5 |
Revenue less pass-through costs analysis
|
Q2 |
|
H1 |
||||
|
£m |
+/(-) %
|
+/(-) % LFL |
|
£m |
+/(-) %
|
+/(-) % LFL |
Global Int. Agencies |
2,474 |
1.8 |
1.5 |
|
4,782 |
5.4 |
2.2 |
Public Relations |
292 |
2.3 |
2.0 |
|
584 |
6.7 |
2.1 |
Specialist Agencies |
216 |
(1.8) |
(1.6) |
|
445 |
4.5 |
0.2 |
Total Group |
2,982 |
1.6 |
1.3 |
|
5,811 |
5.5 |
2.0 |
Headline operating profit analysis
£m |
2023 |
% margin* |
2022 |
% margin* |
Global Int. Agencies |
540 |
11.3 |
507 |
11.2 |
Public Relations |
88 |
15.0 |
83 |
15.2 |
Specialist Agencies |
38 |
8.6 |
49 |
11.4 |
Total Group |
666 |
11.5 |
639 |
11.6 |
* Headline operating profit as a percentage of revenue less pass-through costs
Regional review
Revenue analysis
|
Q2 |
|
H1 |
||||
|
£m |
% reported |
% LFL |
|
£m |
% reported |
% LFL |
N. America |
1,376 |
(1.6) |
(2.1) |
|
2,744 |
6.1 |
0.4 |
|
567 |
14.6 |
12.7 |
|
1,065 |
11.3 |
10.4 |
W Cont. |
781 |
6.8 |
4.3 |
|
1,477 |
9.3 |
5.0 |
AP, LA, AME, CEE* |
1,037 |
(0.2) |
2.3 |
|
1,935 |
4.0 |
3.6 |
Total Group |
3,761 |
2.7 |
2.3 |
|
7,221 |
6.9 |
3.5 |
* |
|||||||
Revenue less pass-through costs analysis
|
Q2 |
|
H1 |
||||
|
£m |
% reported |
% LFL |
|
£m |
% reported |
% LFL |
N. America |
1,134 |
(3.3) |
(4.1) |
|
2,284 |
4.4 |
(1.2) |
|
419 |
9.0 |
9.0 |
|
796 |
8.0 |
8.2 |
W Cont. |
621 |
7.3 |
3.9 |
|
1,179 |
8.5 |
3.7 |
AP, LA, AME, CEE |
808 |
1.2 |
4.3 |
|
1,552 |
3.6 |
3.1 |
Total Group |
2,982 |
1.6 |
1.3 |
|
5,811 |
5.5 |
2.0 |
Headline operating profit analysis
£m |
2023 |
% margin* |
2022 |
% margin* |
N. America |
287 |
12.6 |
300 |
13.7 |
|
98 |
12.3 |
67 |
9.1 |
W Cont. |
111 |
9.4 |
99 |
9.1 |
AP, LA, AME, CEE |
170 |
11.0 |
173 |
11.6 |
Total Group |
666 |
11.5 |
639 |
11.6 |
* Headline operating profit as a percentage of revenue less pass-through costs |
||||
Operating profitability
Reported profit before tax was
Reported profit after tax was
Headline EBITDA (including IFRS 16 depreciation) for the first half was up
Headline operating profit margin was down 10 basis points to
Establishment costs were up
Personal costs rose
On a like-for-like basis, the average number of people in the Group in the first half was 115,000 compared to 113,000 in the first half of 2022. The total number of people as at 30 June 2023 was 114,000 compared to 115,000 as at 30 June 2022.
Adjusting items
The Group incurred
Restructuring costs related to IT and other transformation were
Goodwill impairment, amortisation of acquired intangibles and investment write-downs were
Interest and taxes
Net finance costs (excluding the revaluation of financial instruments) were
The headline tax rate (based on headline profit before tax) was
Earnings and dividend
Reported profit before tax was down
Profits attributable to share owners were
Headline diluted earnings per share from continuing operations rose by
For 2023, the Board is declaring an interim dividend of 15.0p (2022: 15.0p). The record date for the interim dividend is 13 October 2023, and the dividend will be payable on 3 November 2023.
Further details of WPP’s financial performance are provided in Appendix 1.
Cash flow highlights
Six months ended (£ million) |
30 June 2023 |
30 June 2022 |
Operating profit |
306 |
539 |
Depreciation and amortisation |
259 |
255 |
Impairments and investment write-downs |
204 |
8 |
Lease payments (inc interest) |
(184) |
(190) |
Non-cash compensation |
76 |
67 |
Net interest paid |
(47) |
(60) |
Tax paid |
(171) |
(163) |
Capex |
(104) |
(117) |
Earnout payments |
(12) |
(63) |
Other |
(37) |
(9) |
Trade working capital |
(522) |
(1,015) |
Other receivables, payables and provisions |
(523) |
(726) |
Adjusted free cash flow |
(755) |
(1,474) |
Disposal proceeds |
14 |
34 |
Net initial acquisition payments |
(203) |
(46) |
Share purchases |
(37) |
(681) |
Net cash flow |
(981) |
(2,167) |
Net cash outflow for the first half was
Balance sheet highlights
As at 30 June 2023 we had cash and cash equivalents of
We spent
Our bond portfolio at 30 June 2023 had an average maturity of 5.8 years.
In May 2023, we refinanced the November 2023
The average adjusted net debt to EBITDA ratio in the 12 months to 30 June 2023 is 1.68x, which excludes the impact of IFRS 16.
A summary of the Group’s unaudited balance sheet and notes as at 30 June 2023 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 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. 4Prior year figures have been re-presented to reflect the reallocation of a number of businesses between Global Integrated Agencies and Public Relations. 5In accordance with IAS 28: Investments in Associates and Joint Ventures once an investment in an associate reaches zero carrying value, the Group does not recognise any further losses, nor income, until the cumulative share of income returns the carrying value to above zero. WPP’s cumulative reported share of losses in Kantar reduced the carrying value of the investment to zero at the end of December 2022. 6Non-GAAP measures in this table are reconciled in Appendix 1. 7Prior year figures have been re-presented to reflect the reallocation of a number of businesses between Global Integrated Agencies and Public Relations. 8Average adjusted net debt calculated based on a month-end average. |
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Investors and analysts
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Media
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+44 7710 130 634
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+44 20 7466 5000
Source: WPP
FAQ
What was WPP's revenue growth in Q2 2023?
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