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WPP

WPP. 2008 Interim Results London August 2008. 2008 Interim Results. 1. Key Priorities, Objectives and Strategy. 2. Conclusions. 3. WPP. 2008 Interim Results. 1. WPP. 2008 Interim Results. Billings up almost 12% to £16.871 billion.

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WPP

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  1. WPP 2008 Interim Results London August 2008

  2. 2008 Interim Results 1 Key Priorities, Objectives and Strategy 2 Conclusions 3 WPP

  3. 2008 Interim Results 1 WPP

  4. 2008 Interim Results Billings up almost 12% to £16.871 billion. Reported revenue up 14.3%. On a constant currency basis, revenue up 8.1%. Like-for-like revenue up 4.3%. Headline PBIT up 18.4% to £453.4m from £383.1m, up 9.2% in constant currency. Headline operating margin up 0.5 margin points to 13.6% from 13.1% in line with objectives.

  5. 2008 Interim Results Headline PBT up 15.1% to £389.1m from £338.0m, up 4.9% in constant currency. Tax rate on headline profits was down 0.9 percentage points to 26.0% from 26.9%. Diluted headline EPS up 21.4% to 22.1p from 18.2p, up 9.3% in constant currency. Interim dividend up 20% to 5.19p per share. Estimated net new business billings of £1.292 billion ($2.519 billion).

  6. 2008 Interim Results%growth vs prior period ¹ Translated into US$, using among other currencies, average exchange rates of US$ /£ for H1 2008 of $1.974, compared to $1.970 for H1 2007. ²Figures before goodwill and intangibles charges, investment gains and write-downs, share of exceptional gains of associates, and revaluation of financial instruments.

  7. 2008 Interim ResultsUnaudited Headline¹ IFRS Income Statement ¹Figures before goodwill and intangibles charges, investment gains and write-downs, share of exceptional gains of associates, and revaluation of financial instruments ²Margin points

  8. 2008 Interim ResultsUnaudited IFRS Income Statement

  9. 2008 Interim ResultsRevenue by Discipline

  10. 2008 Interim ResultsRevenue by Region

  11. 2008 Interim ResultsHeadline PBIT¹ and Margin¹ by Discipline ¹Headline PBIT/margin: profit before finance income/costs, taxation, goodwill and intangibles charges, investment gains and write-downs, and share of exceptional gains of associates

  12. 2008 Interim ResultsHeadline PBIT¹ and Margin¹ by Region ¹Headline PBIT/ margin: profit before finance income/ costs, taxation, goodwill and intangibles charges, investment gains and write-downs, and share of exceptional gains of associates

  13. 2008 Interim ResultsGrowth by Country 1 Constant currency ² Like-for-like growth

  14. 2008 Interim ResultsRevenue Growth by Category 1Constant currency

  15. 2008 Interim Results Effects of Strength of Sterling Sterling was stronger on average in the first half of 2008 than in 2007 by 0.2% against the dollar, weaker by 12.9% against the euro and weaker by 12.4% against the Japanese yen. Impact of currency increased revenue growth by 6.2%, from 8.1% constant currency to 14.3% on a reportable basis. Headline PBT¹ of £389m would have been £356m had sterling remained at the same levels as 2007. ¹Figures before goodwill and intangibles charges, investment gains and write-downs, share of exceptional gains of associates, and revaluation of financial instruments

  16. 2008 Interim ResultsTrade Estimates of Major New Business Wins ¹ Estee Lauder transferred from Maxus to MindShare Underlinedfigures are Q2 wins ² Playtex transferred from MediaCom to mec

  17. 2008 Interim ResultsTrade Estimates of Major New Business Losses ¹ Estee Lauder transferred from Maxus to MindShare Underlined figures are Q2losses ² Playtex transferred from MediaCom to mec

  18. 2008 Interim ResultsInternal Estimates of Net New Business Wins

  19. 2008 Interim ResultsTrade Estimates of Major New Business Wins & Losses Since 1 July WINS LOSSES ¹ Novartis transferred from MindShare to mec

  20. 2008 Interim ResultsCash Flow ¹ Includes £22m of 1% rolled-up coupon on maturity of the £450m 3% convertible

  21. 2008 Interim ResultsUses of Cash Flow ¹ Net initial payments are net of disposal proceeds and includes other investments including associates

  22. 2008 Interim ResultsNet Finance Costs/ (Income)

  23. 2008 Interim ResultsNet Debt - 30 June 2008 ¹ Headline PBIT: profit before finance income/ costs, taxation, goodwill and intangibles charges, investment gains and write-downs, and share of exceptional gains of associates

  24. 2008 Interim ResultsDebt Maturity Profile $m¹ ¹Constant currency

  25. Net Trading Working CapitalHalf Yearly Position $m¹ (431) (814) ¹Constant currency

  26. 2008 Interim ResultsShare Buy-Backs and Capital Allocation • Following a review of the capital structure the company decided to increase share buy-backs to 4%-5% (£400-500 million) in each of 2007 and 2008, when market conditions are appropriate. • Share buy-backs in 2007 totalled 57.2m shares (£402.7 million) or 4.6% of issued capital. In addition 2.0m shares (£12.7 million) were purchased and held as treasury stock. • In the first half of 2008, share buy-backs totalled 18.8m shares (£112.2 million) or 1.6% of issued capital. All of these shares were cancelled. The annual rate is currently running at around 3%, lower than target, partly reflecting the requirement to withdraw from the market in the midst of the bid for TNS, discussions on which started at the beginning of May.

  27. 2008 Interim ResultsOrdinary Shares - Basic -3.6% -3.8% ¹ Buy-back for cancellation

  28. 2008 Interim ResultsOrdinary Shares – Diluted -3.8% -5.6%

  29. Key Priorities, Objectives and Strategy 2 WPP

  30. Globalisation /Americanisation /BRICs Overcapacity, shortage of human capital The Web (internet penetration, e-commerce, mobile) Internal communications Retail concentration Corporate responsibility and the environment Global and local structures Key Priorities, Objective and StrategyLong-term factors

  31. Faster growing markets to be one third of total group Marketing services to be two thirds of total group Quantitative disciplines to be one half of total group Key Priorities, Objectives and Strategy

  32. Key Priorities, Objectives and StrategyFaster Growing Markets To Be One Third of Total Group Today Including Associates¹ Today¹ Tomorrow Faster growing markets including Central & Eastern Europe 25% N. America Europe Asia Pacific, Latin America, Africa & Middle East Central & Eastern Europe ¹ Based on full year 2007 reported revenue.

  33. Key Priorities, Objectives and Strategy WPP’s Performance Strong in BRIC Markets Revenue $’m China (including Hong Kong and Taiwan) Brazil India Russia

  34. Key Priorities, Objectives and StrategyWPP’s Performance in Other Faster Growing Markets Revenue $’m Middle East Central & Eastern Europe Vietnam Indonesia

  35. Key Priorities, Objectives and Strategy WPP in Faster Growing Markets 1 Source RECMA 2006 Definitive share of networks as issued August 2007. 2 Year to 30 June 2008 including associates, people at 30 June 2008. 3 Greater China is China, Hong Kong and Taiwan. 4 Africa/Middle East has large independents with over 50% of the market. 5 WPP estimate.

  36. Key Priorities, Objective and StrategyRevenue by Geography $12.7bn $12.4bn $6.6bn $6.4bn $2.1bn 1. Source: WPP - sterling revenues converted @ $2.00= £1 based on the average for 2007. Omnicom, Publicis and Havas - company presentations for 2007. IPG – analysts’ estimates. 2. FX. Havas and Publicis assumes $1= €0.731 based on the average for 2007. 3. OMC. Assumes “non Euro currency” Europe, ie Switzerland, Turkey, Norway, Denmark, Sweden and Eastern Europe are ca 5.5% of revenue and Canada is 1.5% of revenue. 4. IPG. Assumes Canada is ca 1.5% of revenue. 5. Rest of World. Asia Pacific, Latin America, Middle East and Africa.

  37. Key Priorities, Objectives and StrategyMedia Billings by Geography Worldwide ranking by Group as % of the Six Groups Source: RECMA Billings report – August 2007, Definitive 2006 network key data, table 1b.

  38. Key Priorities, Objectives and StrategyMarketing Services To Be Two Thirds of Total Group Today¹ Today including associates¹ Tomorrow Marketing Services Advertising & Media Investment Management ¹ Based on full year 2007 reported revenue.

  39. Key Priorities, Objective and StrategyRevenue by Discipline $12.7bn $12.4bn $6.6bn $6.4bn $2.1bn Source: 1. 2007 Company Presentations. 3. IPG revenue based on analysts’ estimates. 2. Media based on Deutsche Bank estimates. 4. FX. Havas and Publicis assumes $1=€0.731 based on the average for 2007.

  40. Key Priorities, Objectives and StrategyQuantitative Disciplines To Be One Half of Total Group ¹ ¹ Today Today including associates Tomorrow Information, Insight & Consultancy andDirect, Internet & Interactive Advertising, Media Investment Management & Other Marketing Services ¹ Based on full year 2007 reported revenue.

  41. Key Priorities, Objectives and StrategyWPP Position in Direct, Internet and Interactive +13% vs 2007 +17% vs 2007 ¹ Wide definition revenue includes total revenue from Direct, Digital and Interactive Networks from all sources.

  42. Improving operating margins Increasing flexibility in the cost base Using free cash flow to enhance share owner value, and improve return on capital employed Developing the role of the parent company Emphasising revenue growth more as margins improve Improving the creative capabilities and reputation of all our businesses Key Priorities, Objectives and Strategy We continue to focus on our key objectives

  43. Key Priorities, Objectives and Strategy Historic headline PBIT¹ and margins PBIT1£’m PBIT1 margin % Long-term IFRS target 19% • Headline PBIT excludes goodwill and intangibles charges, write offs of fixed asset investments and share of exceptional gains of associates. For 2004 onwards, Headline PBIT has been prepared under IFRS. 2003 and prior periods are in accordance with previous UK GAAP.

  44. Key Priorities, Objectives and Strategy Increasing flexibility in the cost baseChange in variable costs %

  45. 2008 interim dividend raised by 20% to 5.19p per share. Distributions to share owners: Key Priorities, Objectives and Strategy Using Free Cash Flow to Enhance Share Owner ValueDividends and Share Repurchases ¹ Of which 4.6% relates to share cancellations.

  46. Key Priorities, Objectives and StrategyUsing Free Cashflow to Enhance Share Owner ValueDistributions to Share owners¹ £ millions 4.8% 3.6% 3.3% 2.7% 3.2% 1.6% 1.6% 1.8% ¹ Sum of share buy-backs and dividends paid divided by average shares in issue for the relevant period, as a % of the average share price for the relevant period

  47. Focus on the faster growing geographical areas and marketing services, particularly direct, internet & interactive and information, insight & consultancy. During 2008 to date 29 small and mid size acquisitions have been completed in executing this strategy. Acquisitions in advertising are used to address specific client or local agency needs. We continue to find opportunities at earnings enhancing multiples, particularly outside the USA. Key Priorities, Objectives and StrategyUsing Free Cashflow to Enhance Share Owner ValueAcquisitions

  48. 2008 Interim ResultsAcquisitions¹ and Investments Faster Growing Markets Quantitative and Digital ¹ Excludes equity step ups ² Investment ³ July 2008 acquisitionsCAPITALS ARE Q2 ACQUISITIONS

  49. 2008 Interim ResultsAcquisitions¹ ¹ Excludes equity step ups CAPITALS ARE Q2 ACQUISITIONS

  50. By placing greater emphasis on recruitment. By recognising creative success tangibly and intangibly. By acquiring highly regarded creative businesses. By placing greater emphasis on awards. Key Priorities, Objectives and Strategy Improving the Creative Capabilities and Reputation of all our Businesses

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