WPP plc

Good morning, everybody, and welcome to WPP's 2024 first quarter trading update. I'm Mark Reid. I'm joined here by Joanne Wilson, our CFO, Tom Waldron, who heads up our investigations team and their team. So let's turn to the presentation. And before we get started, please do take notice of our cautionary statement on page two. On page Three, the agenda. I'm going to introduce the results briefly before Joanne takes you through the detail. Then I'll come back at the end to review quickly our strategic progress against the objectives set at the Capital Markets Day at the end of January. So to sum up on page four, I think we've been very focused in the first quarter on implementing the strategic moves that we outlined at the CMD in January. We'll come on to the specifics But, you know, my impression, our impression has been very well received by our people and particularly by our clients who can see the benefits of a simpler, more agile organization that we're moving to and the power that we can deliver by integrating technology and AI across it. Our first quarter performance, while not as strong as we would like, was very much in line with our expectations against the toughest compared to last year, really driven by continued pressure from technology clients and the impact of certain client losses in 2023, and indeed going back to 2022. That said, we do see momentum improving over the rest of the year. We expect technology clients to turn from a negative in Q1 to a positive over the course of the year, and the impacts of budget cuts will tell off why we have a strong new business pipeline. In addition, the new structure is making us more agile and more competitive, and the impact of AI is being seen in our conversations and discussions and meetings with clients. So that all leads us to really reiterating our guidance for the full year at this point. Turning to the highlights on page five, as I said, we did see pressure on the top line very much in line with our expectations, and Joanne will get into the trends within that. Had a good series of client wins, particularly in media with Nestle, but also in healthcare, where we have the ability now to serve clients in sectors where we may not have been able to before. From a awards perspective, the strength of both our creative and media agencies was recognised in Warg and the Drum Creative Rankings. We're very proud that Ogilvy was Ad Age's Global Network of the Year. I think an accolade they've received, certainly in the last decade, may be longer. So a fantastic job. There, by Devika, Liz, and the team, really making Ogilvy recognize the strongest creative network in the world. Strategically, a lot of our focus has been on implementing the actions we announced at the CMD. The structural changes at VML, GroupM, and Burson are going well. All three agencies are on track to deliver the savings. We've had a very positive response from clients and people with really very limited fallbacks. And in AI, we continue to invest very heavily. We're seeing continued growth in users of WPP open, now up to 50,000 people across the group. We're integrating the latest models, you know, Bria, the visual AI tool, the latest Google Gemini tools, and our most recent open AI releases as well. We demonstrated the first release of our performance brain at Google Next in Las Vegas earlier this month. This really allows you to make predictive judgments or predictive judgments on content and it's good to see that as a feature of the keynote event. I'd like to make the observation that our new simpler organization is both enabling us to move faster and in a more coordinated fashion and enabling the deployment of these AI tools across our organization. So NetNet, of course, very much as we expected. We don't see changes in the outlook, so we're reiterating our guidance for the year on both top and bottom line. So over to You're right. Thank you.

Thank you, Mark. And good morning, everyone. So let me take you through some more detail on our financial results for the first quarter. And I'll start on slide seven. Our revenue left pass-through costs fell 5% on a reported basis. And this includes a 3.9 percentage point headwind from FX due to sterling strengthening relative to last year and a 0.5 percentage point contribution from acquisitions. On a like-for-like basis, revenue left pass-through costs declined 1.6%. Our performance in the first quarter reflects continued lower year-on-year spending by technology clients, which we will start to lack in Q2, and the impact of client losses, including Pfizer. At a full year result two months ago, I noted that Q1 was the toughest comparison of the year at 2.9%. The first quarter played out very much as we expected, and we anticipate a return to growth across the balance of the year. I'm moving on to slide eight. Global integrated agencies declined 0.7% year-on-year in the quarter. Within this, Group M, our media planning and buying business, grew 2.4%, supported by continued growth in client investment in media, partially offset by the impact of U.S. client assignment losses from prior years and lower spending by technology clients. Our global integrated creative agencies saw a like-for-like decline of 3.3%, also impacted by lower spend from technology clients and by a full quarter impact of the roll-off of Pfizer. These pressures were partially offset by Ogilvy, which continues to grow, benefiting from a strong run of recent client assignment wins, and Hogarth, which continues to capitalise on the opportunities across production. Moving to public relations, which is around 10% of WPP, revenue-less pass-through costs declined 3.3% in the quarter. Within this, FGS Global, our leading strategic advisory and communications consultancy, grew against a tough comparison. This is, however, more than offset by a decline in BCW and Hill & Nilton, which saw some impact from the loss of Pfizer and cautious spending patterns in clients. And finally, our specialty agencies, which account for around 7% of WPP, declined 7.6%, with our smaller agencies seeing a continued impact from delays in project-based spending. CMI, our specialist healthcare media and buying agency, continued to deliver good growth. I'll turn now to slide nine on our performance by region. North America declined 5.2%, reflecting its relatively larger exposure to technology clients, the loss of Pfizer at our creative agencies, and client assignment losses at Group M. We continue to expand our strategic actions, or expect our strategic actions to deliver an improved performance in the region across the balance of 2024. The UK grew 0.3% compared to 7.4% a year ago, with growth in CPG offsetting declines in technology client spend. Western continental Europe grew 3.3%, with strength in France and Spain on client assignment wins partially offset by declines in Germany. The rest of the world declined 0.6%, primarily due to the decline in Asia-Pacific of 3.2%, with growth in India of 6.6%, reflecting last year's strong new business momentum, offset by a 15.4% decline in China, which continues to be impacted by a challenging macroeconomic and client environment. We have a new management team in place in China, and we've taken a cautious approach to budgeting for the rest of the year, which is embedded in our overall 0% to 1% guidance for the full year. Slide 10 shows Q1 performance across our client sectors, with continued strength in CPG, As we see clients in this sector continuing to invest strongly behind their brands and telecom media and entertainment benefiting from client wins in 2023. That growth was offset by continued lower spend from technology clients and the impact of previously disclosed assignment losses in healthcare and retail sectors. And moving now to slide 11, which shows movement in net debt to the end of March. with adjusted net debt broadly flat year-in-year, and the movement from December reflecting our typical cash cycle. We have reiterated our guidance for flat working capital in 2024 today, and we continue to expect net debt at the end of 2024 to be broadly flat versus 2023. In March, we successfully refinanced our 2024 and 2025 maturities by the issue of two bonds, a €600 million five-year bond with a coupon of 3.625%, and a €650 million nine-year bond with a coupon of 4%. Both issues were more than three times oversubscribed and priced at levels below our initial pricing expectations. And finally, for me on slide 12, you'll see that our guidance for the full year has not changed, although we now see a smaller drag from FX on revenue-less pass-through costs in 2024. At current exchange rates, that headwind is minus 1.3% versus prior guidance of minus 2%. Q1 faced the toughest year-in-year comparison of 2024, and we expect to return to growth in the balance of the year, supported by our new business pipeline and growth opportunities with existing clients. We are making good progress on our strategic initiatives, which gives us confidence on the cost savings that will support the expected 20 to 40 basis point improvement in operating margin in 2024. That improvement will be weighted towards the second half as year-in-year growth improves and structural cost savings ramp up. So thank you, and I will now hand you back to Mark.

Thanks very much, Joanne. So I'll make a few comments on our progress since our Capital Markets Day. Page 14, which you recall, we called Innovating to Lead. We set out four objectives, and I'd say we're making very good progress against each of them. The first, our objective to lead through investments in AI, data, and technology. I talked about the increased deployment of WPP, our intelligent marketing operating system. is resonating well with people inside WPP with increasing take-up across the world and the clients. Just yesterday, we had 1,500 people join a webinar to hear about new features being deployed on the platform. We're integrating new, more powerful models into WPP Open. We see this ability to be almost model agnostic as a competitive advantage for us and particularly for our clients. Rather than being tied into a particular foundational model, We're building intelligence and data on top of the models, allowing our clients both better results and strategic flexibility to adopt the best model for their purposes. It's at the heart of our new business efforts, as well as being deployed within existing clients. Most recently, as I mentioned, it was featured at Google Next, where we demonstrated the first prototype of our performance brain that allows us to predict the content, so the performance of content, creative content, before it's deployed using AI. And lastly, our partnership with Nvidia continues to grow and progress. We're recognized by them as their innovation partner of the year in Europe. Our second objective is to drive growth through the power of creative transformation. And here, we do continue to see strong demand from clients for simpler, more integrated solutions. We believe we have a very well-balanced offer with the leading positions in media, creative, production, digital and public relations, as well as an unparalleled global footprint. That, along with the recognition of our creative agencies, gives us cause to see the strength of that combined offer with clients. Our third objective is to build strong, world-class brands. We're now doing a lot of work in this area. I'd remind you that six brands now make up 90% of WPP. And if we take them in terms, I'd say that Ogilvy is growing very well. It's recognized as agency of the year. winning new business, growing strongly in the US for the first time in a number of years. The VMO Merge has been very well received by clients delivering a stronger offer and they're taking the required cost actions as they streamline and restructure the business. They have made a lot of progress appointing leadership teams in really most of the world. AKQA being at the forefront of technology, digital transformation innovation has had a tougher time in this transformation space. We are seeing some stability there in revenue from technology clients. Group M, I'd say the synergy work that we outlined at the CMD is really a significant effort. There's a real focus on improving our performance in the United States and strengthening our new business performance. I think that that will come through, though it will take some time. Hogarth, the world's number one production firm, has grown well and winning business. And Burstyn, now we think the second largest PR firm in the world, is building a very strong top team. Nikori Dubrow, who joins us from Alphabet and Google, and Anna-Marie have been attracting some of the world's best talent, and that's resonating very well with clients. So together, I think all that contributes to our fourth objective to drive stronger financial performance, both in terms of margin performance and cash conversion. That's something we're very focused on and delivering the targets that we set out on page 15 in terms of 3% plus organic revenue growth, 16% to 17% headline operating margins, 85% adjusted operating cash flow conversion and getting our net debt in the range of 1.5 to 1.75. And I'd say that we stand by these targets and can see we're making consistent progress. We're one quarter in, we're making consistent progress in line really with our expectations we outlined in January. So in summary on page 16, I think we have every confidence in the strategy that lands well with clients and across the business. We delivered Q1 very much as we expected, and we continue to expect to see momentum improving through the balance of the year. As a result, we're reiterating our guidance for the full year. So thank you very much. That concludes our opening statements, and we're ready to take questions.