WPP plc

Good morning, everybody, and welcome to our 2023 first quarter results call. I'm here in C Containers with John Rogers, Tom Waldrom, and our investor relations team. And I'll just take you briefly through the highlights before John takes you through our financial performance, and we'll come back to close at the end and take your questions. On page two of the presentation, you should note our cautionary statement, which is important. to turn into page three and then four, highlights of the first quarter. I think we had a positive start to the year, reflecting continued momentum in the business and continued investment in our offer. We delivered first quarter growth of 2.9%, I think pretty much in line with our expectations, or maybe even very slightly ahead against probably the toughest comp of last year. We saw growth across the business, 3% in our integrated agencies, 2.2% in our public relations, public affairs firm, and 1.9% in our specialist agencies. I should just call out, you know, strong performance from Group M at 6.1% and also strong performance from Ogilvy. We continue to improve our work. We topped the World Advertising Research Council ratings in media, in creative and effectiveness in all three categories. and delivered one and a half billion dollars in net new business in Q1. I should also point out Ogilvy won Agency of the Year at Clio's two nights ago and reflects continued investments in our creative capability. That has been supported by acquisitions, particularly in influencer marketing. We made two acquisitions, we'll come on to later, and a series of partnerships. KKR took a minority interest in FGS Global, and we'll talk a little bit about that later on and what that means for us. And then overall, after positive first quarter, we're leaving our guidance for the year unchanged, which remains at like-for-like revenue at 3% to 5%, and a headline operating margin of around 15%. So those are the highlights. John, do you want to take us through the financial performance in more detail?

Thank you, Mark. So moving to the financials for the first quarter of 2023. So coming first to slide six, revenue less pass-through costs. At the reported level, we've seen an increase of 9.9% for the quarter. This is supported by a 6.3% point tailwind in relation to FX due to the weakness in sterling relative to last year. And also our targeted M&A strategy that Mark just referred to added 0.7 percentage points to reported growth and actually stripping out the impact of the disposal of our business in Russia last year, the contribution was 1%. On a life-like basis, we saw 2.9% growth against 9.5% growth in the same quarter last year, very much in line with our expectations and slightly ahead of consensus forecast. And looking forward, as Mark just said, we've reiterated our guidance for 3% to 5% growth for the full year 2023. So moving now on to slide seven and business sector performance, we continue to see broad-based growth across all of our business lines. So starting with the integrated agencies at 3% on top of the very strong 8.6% growth this time last year. And as Mark just called out, Group M in particular showed strong growth of 6.1% on the back of 12.8% growth in Q1 last year. And our creative agencies had a slightly slower start to the year at plus 0.7% compared to 5.6% a year ago. And within this, we saw strong growth at Ogilvy driven by exposure to CPG clients and increased their spend by 15% across WPP in the quarter and also driven by recent new business wins. However, this was partially offset by a slower start to the year at Wannabin Thompson, reflecting lower spend from some technology clients and a softer start to the year at Gray. In our PR businesses, we saw like-for-like growth of 2.2% compared with 14.1% a year ago. FGS Global performed particularly strongly, but we saw a slightly softer performance at BCW and Hill & Knowlton. And finally, specialist agencies saw growth of 1.9% versus 13% in the same quarter last year, with particularly strong growth in CMIR Specialist Healthcare Media Agency and strong growth at Lander & Fit. So turning now to slide eight and our top five markets representing two thirds of our overall net sales. So growth in the US of 2.3% was driven by growth in spending from clients in the consumer packaged goods and financial services sectors, offset by weaker spend by clients in the technology and digital services and retail sectors. In the tech sector, clients now have adjusted budgets to post-COVID levels of spending on some categories of hardware. And in retail, we've seen an impact from recent consolidation in the US supermarket sector. In the UK, growth was 7.4% on top of 8.1% in Q1 of 2022, with particularly strong demand from CPG clients. And Germany, our biggest European market, was up 4% compared with 16% this time last year, with broad growth in media and strength in the travel and leisure segment, partially offset by the runoff of a COVID-related government contract in Germany at one of our specialist agencies. As we signaled at the prelims, China continues to be a challenging market, declining 13% in Q1, as we flagged. We faced a tough comparison in China with 12% growth this time last year. Q1 also began with high levels of COVID infection as restrictions were lifted late last year. Towards the end of the period, we were encouraged by initial signs of recovery in the media market in China, and economic indicators are actually positive. So we expect to bounce back in Q2 against easier comparatives. Actually, excluding China from our overall like-for-like growth, would have delivered like-for-like growth to the quarter of 3.6%. India was also a little bit more challenging, down 1.4% in the first quarter, reflecting a tough comparison against Q1 2022, which grew at 25%, and there was some macro uncertainty at the beginning of the year. We expect a recovery to happen through the rest of the year, particularly around events such as the Cricket World Cup, and against easier comparisons in the second half. Coming on now to slide nine and looking at the main movements in our net debt through the quarter. So net debt at the 31st of March 2023 was 3.9 billion, representing an increase of 1.4 billion from the year end, driven by the usual net working capital movements, CapEx consistent with our four-year guidance, the investment in the three M&A transactions that Mark's already mentioned, and a slight strengthening of Sterling year-to-date. The typical seasonal outflow of working capital since the year end reflects a small underlying improvement actually versus the same period last year, benefiting from operational improvements and some reversal of the timing and mixed factors that impacted our year end position and we discussed in detail at the prelims. And we remain confident that we can deliver a flat trade working capital performance in 2023. That combined with a small outflow on non-trade working capital of around 150 million or so Again, as I guided to on the premiums call, you know, will result in a significant improvement in cash generation in 2023 over 2022. So moving to other items in the bridge, on CapEx, we maintained our focus on organic investment, including our campus program, opening new sites in China and Manchester. And as I said before, we continue to make Bolton acquisitions go, obviously, in 3K to strengthen our offer in the growth areas of influencer marketing and healthcare. And with that, I'll hand you back to Mark. Thank you, John.

So just touch on a few of the sort of business drives at the moment. So on page 10, I think, call out, we had a strong start to the year in terms of new business and in terms of recognition of the quality of our work. I'd highlight a few of the new business wins, the Adobe Media win in the Americas, win of production work alongside another partner at Mondelez, And then particularly the Maruti Suzuki win in India. It's actually India's second largest advertiser. Point out that India is now, I think, the world's most populous market. We now work with 45 out of the top 50 clients in India. Our business was recognized by Walk in all three categories, in media, in effectiveness, and in creative. as were our agencies, actually Ogilvy, Essence MediaCom, and WaveMaker. And I mentioned earlier, Ogilvy topped the Clios, the Agents Network of the Year, and the Clios two nights ago in New York. On top of the organic investment for business on page 11, we did make three acquisitions in the quarter, and one subsequent to the quarter, we acquired two businesses in the influence and marketing space. Given the amount of time consumers are spending on the social media platforms, Our clients are increasingly looking for ways to reach them, and many of those ways do involve influencers. Both of these businesses enable clients to invest more money behind influencer marketing. It's probably been the biggest challenge that they face through maintaining relationships with several hundreds of thousands of influencers, understanding their performance, their relevance, and helping clients use them in their marketing. We also acquired a small healthcare specialist PR business in Germany to further invest behind that fast growing sector. And then in April Landor and Fitch acquired AMP, a really interesting, creative, sonic branding agency based in Germany, but with some operations around the world. And those acquisitions are supported by a strategic partnership. We continue to develop our relationships with technology partners in a positive direction. I think I'd highlight that these span primarily the areas of CRM through Graze and e-commerce, and also both global in nature, and then a very interesting partnership in Japan with KDDI, and that represents Kyoko Matsushita, our new Japanese country manager's first major partnership in that market, and shows how we can sort of bring the strength of our global offer to bear in that country. On page 12, it's worth briefly touching on the FGS Global Transaction. KKR took a strategic investment in the company in March. And maybe just go back in history to the creation of FGS Global and what this means for us strategically. Back in January 2021, we brought together Finsbury, Glover Park, and Herring Schuettner. They were three public relations and financial PR firms that operated totally independently within WPP based in the UK, the US and Germany respectively. And one of the businesses had a minority employee investment. We brought those businesses together on a transaction with management heading towards an IPO with WPP as the majority owner. In October 2021, we saw the opportunity to bring that business together with Saad Vibinan, probably the leading US investor relations financial communications company in the US. So we formed FGS Global back in October 2021. That business has really performed extremely well. If you look at the merchant market tables for last year, they were number one by some measure in each region of the world in terms of deal volume and deal values for M&A transactions. That was recognised by KKR, who've come in to take out, in part, Golden Gate Capital, who's one of the investors in Saad Labinen, provide some liquidity to the management of the company, which is naturally changing somewhat. And we remain in a partnership with WPP, owning a majority stake, with the management of that business, and with KKR now as a strategic investor, online to develop that company over the next few years. It really highlights the value inside that company and accelerates the progress that we're making. Touch briefly on AI on page 13. I know it's a topic of a lot of interest to people. I think that at WPP we've been using AI extensively in our business for a number of years, primarily in our media business in Group M. through Zaxis and other parts of the company. We used it to target media, to optimize campaigns, to create audiences. And in the production part of this, Hogarth used AI extensively to create, you know, to produce work for all of the channels that consumers need. I think what's changed over the last six months is the application of AI, you know, through generative AI into the creative process of the production of language, video, imagery through AI. And that's really allowed us the opportunity to use it much more creatively in the company. There are many examples of the work we've done. It actually goes back to 2016, a campaign that Jay Walter Thompson then did for ING in Holland, or the work we did last year in India for Cadbury's Mondelez on Diwali. So I think we'd highlight three examples. The work that Ogilvy did from one list, which I'll show you in a second. AKQA Bloom have been using it to promote NotCo. It's a plant-based meat company from Chile, actually, and it uses it to show what would happen as animals age. It's great work from AKQA Bloom. And then Wunderman Thompson have been doing some work with the Iranian Democracy Council to highlight the future for women in Iran. And you can look at each of those pieces of work offline. But before we go on, I think we should show the work that Ogilvy did for the Mondelez brand Lacta in Greece. So could you play the film of his operator?