Philip Lader

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Philip Lader. Chairman. Sir Martin Sorrell. CEO, WPP. Strategic Priorities. Short term: to continue to balance changes in revenues against staff costs and headcount Medium term: to continue the integration of TNS within Kantar - PowerPoint PPT Presentation

Transcript of Philip Lader

Page 1: Philip Lader

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Philip LaderChairman

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Sir Martin SorrellCEO, WPP

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Strategic Priorities

Short term: to continue to balance changes in revenues against staff costs and headcount

Medium term: to continue the integration of TNS within Kantar

Long term: to continue to develop our business in the faster-growing geographic areas of Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe and in the faster-growing functional areas of marketing services, particularly direct, internet, interactive and consumer insight – that is, new markets, new media and consumer insight

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Key Priorities, Objectives and Strategy

Faster growing markets to be one third of total group against approximately 27%¹ now (31%¹ including 100% of associates)

Marketing services including new media to be two thirds of total group against approximately 61%¹ now

Quantitative disciplines, basically consumer insight, to be one half of total group against approximately 38%¹ now

¹ Based on full year 2008 reported revenue adjusted to include a full year of TNS 6

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Key Priorities, Objectives and Strategy

Tomorrow

EuropeNorth America

Today including associates¹Today¹

Faster Growing Markets to be One Third of Total Group

¹ Based on full year 2008 reported revenue adjusted to include TNS for a full year

Central & Eastern EuropeAsia Pacific, Latin America, Africa & Middle East

Faster growing markets including Central & Eastern Europe 27%

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Key Priorities, Objectives and StrategyWPP’s Performance¹ Strong in BRIC Markets

China (including Hong Kong and Taiwan)

Brazil India Russia

Revenue $’m

2000 2007 2008 2000 2007 2008 2000 2007 2008 2000 2007 2008

Associates @ 100%

¹ 2008 adjusted to include a full year of TNS 8

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Key Priorities, Objectives and StrategyWPP’s Performance¹ in Other Faster Growing Markets

Middle East Eastern Europe Indonesia Vietnam

Revenue $’m

2000 2007 2008 2000 2007 2008 2000 2007 2008 2000 2007 2008

Associates @ 100%

¹ 2008 adjusted to include a full year of TNS 9

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1 Source: WPP - sterling revenues converted @ $1.85= £1 based on the average for 2008, adjusted to include a full year of TNS. Omnicom, Publicis and Havas - company presentations for 2008. 2 FX. Havas and Publicis assumes $1=€0.68 based on the average for 2008.3 OMC. Assumes “non Euro currency” Europe, ie Switzerland, Turkey, Norway, Denmark, Sweden and Eastern Europe are ca 3% of revenue and Canada is 1.5% of revenue.4 IPG. Assumes Canada is ca 1.5% of revenue.5Rest of World. Asia Pacific, Latin America, Middle East and Africa.6Aegis. EMEA and Asia = $1.7 bn

$15.4bn

Revenue by Geography

Key Priorities, Objectives and Strategy

5.17.1

3.9 2.90.7

6.84.8

1.8 2.6

3.6

1.3

1.3

1.5

1.3

WPP Omnicom IPG Publicis Havas Aegis

Asia Pacific, LatAm, Africa & Middle EastEuropeN America

$13.4bn

$7.0bn $6.9bn

$2.3bn $2.3bn 1.7

0.6

0.2

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Key Priorities, Objectives and Strategy

Tomorrow

Marketing Services Advertising & Media Investment Management

Today including associates¹Today¹

Marketing Services to be Two Thirds of Total Group

¹ Based on full year 2008 reported revenue adjusted to include a full year of TNS 11

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Source: 1 WPP sterling revenue converted at $1.85=£1 based on the average for 2008, adjusted to include a full year of TNS. 2 2008 Company Presentations; Aegis consensus estimate. 3 Media split based on Deutsche Bank estimates. 4 FX. Havas and Publicis assumes $1=€0.68 based on the average for 2008.

$15.4bn

Revenue by Discipline

Key Priorities, Objectives and Strategy

WPP Omnicom IPG Publicis Havas Aegis

Marketing ServicesAdvertisingMedia

$13.4bn

$7.0bn $6.9bn

$2.3bn $2.3bn

2.3 1.1 1.4 1.8 0.5 1.4

3.64.7

2.6 2.6

1.0

9.57.6

2.9 2.5

0.8 0.9

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Key Priorities, Objectives and Strategy

TomorrowToday including associates¹Today¹

Quantitative Disciplines to be One Half of Total Group

¹ Based on full year 2008 reported revenue, adjusted to include a full year of TNS

Advertising, Media Investment Management & Other Marketing Services

Information, Insight & Consultancy and Direct, Internet & Interactive

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Key Priorities, Objectives and Strategy

Information, Insight & Consultancy to represent over $4 billion including TNSCreates second largest Information, Insight & Consultancy group globallyCreates fourth largest business information group globally

Source: The Research Ratings Business Information 100, October 2008*Kantar/TNS based on Company filings

Source: Company filings(1) 2006A from Honomichl

Revenue Consultancy Groups 2007A ($m)

1 Nielsen 4,7072 Kantar/TNS 4,0303 IMS 2,1934 GfK 1,5935 Ipsos 1,2716 Synovate 8677 IRI (1) 6658 Westat (1) 426

9 Arbitron 338

Revenue Rank Companies 2007 ($m)1 Thomson Reuters 8,9192 Nielsen 4,7073 Bloomberg 4,7004 Kantar/TNS 4,030*5 IMS 2,1926 Experian 2,0207 McGraw-Hill 1,8028 Reed Elsevier 1,753 9 Equifax 1,696

Information ServicesInformation, Insight &

Quantitative Disciplines to be One Half of Total Group

Rank

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Key Priorities, Objectives and Strategy$’m

Digital, Internet and Interactive Networks(OgilvyOne, Wunderman, rmg:connect, G2 and WPP Digital)

2,421

% of Group revenues 16%Specialist Digital, Internet and Interactive resources: - Information, Insight & Consultancy² (Millward Brown, TNS, RI and Lightspeed) 960

- GroupM 336- Other 187

Total 2008 3,904% of Group revenues 25%

Total 2007 2,793% of Group revenues 23%

¹ 2008 revenues are adjusted to include a full year of TNS.² Defined to include total revenue from Direct, Digital and Interactive Networks from all sources.

+14% vs 2007

WPP¹ Position in Direct, Internet and Interactive

+21% vs 2007

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3.9

2.2

0.40.3

1.31.0

2008 Digital Revenue

Key Priorities, Objectives and Strategy

WPP1 Omnicom2 IPG2 Publicis3 Havas3 Aegis3

Source: ¹ WPP is “wide” definition, adjusted to include a full year of TNS. ² Ad Age %s applied to FY US$ revenue. 3 Company Disclosure.

$ Billions

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Strategic Objectives

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 role of parent company

Emphasising revenue growth more as margins improve

Improving creative capabilities and reputation of all our businesses

We continue to focus on our key objectives

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Historic Headline PBIT¹ and Margins

1. Headline PBIT excludes finance income/ costs, taxation, goodwill and intangibles charges, investment gains, 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.

PBIT1 £’m PBIT1 margin %Long-term IFRS target 19%

2008 including full year of TNS

14.3%

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Financial Model

Revenue growth in line with the market (0%-5%)

Operating margin up 0.5 margin points each year

PBIT growth of 5%-10% per annum

Use of free cash to repay debt and small to mid sized acquisitions up to £100m in 2009 and 2010

Target EPS growth of 10%-15% per annum

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Results for 2008 - Earnings and EPS¹

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2003 2004 2005 2006 2007 2008

2004 UK GAAP IFRSEarnings (£m)

32.3p

27.9p

36.0p

42.0p

29%

45.8p

17%

9%

11%29.0p

55.5p21%

¹ Diluted Headline Earnings and Diluted Headline EPS 20

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Increasing flexibility in the cost base

We continue to focus on a more flexible cost structure inthree key areas:– Staff c. 57% of revenue– Property c. 7% of revenue– Bought in services c. 21% of revenue

Increased flexibility in all areas are important to combateconomic slowdown

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Increasing flexibility in the cost base

%%

Change in variable costs

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Using Free Cashflow to Enhance Share Owner Value

Continue to focus on faster growing geographical areas and marketing services, particularly direct, internet & interactive and information,insight & consultancy

During 2008 24 small and mid sized acquisitions were 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 US

Acquisition of TNS successfully completed in October 2008

Acquisitions

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Using Free Cashflow to Enhance Share Owner Value

Share RepurchasesDividends Paid Amount % of Share Base

2000 £25.6m £94.1m 1.3%2001 £44.4m £103.3m 1.4%2002 £55.6m £75.9m 1.1%2003 £67.0m £23.1m 0.5%2004 £81.7m £88.7m 1.4%2005 £100.2m £152.3m 2.1%2006 £118.9m £257.7m 3.1%2007 £138.9m £415.4m 4.7%¹20082009 (to date)

£161.8m £112.2m£9.5m

1.6%0.2%

Total 2000-2009 £794.1m £1,332.2m

2008 second interim dividend raised by 12.6% to 10.28p per shareDistributions to share owners:

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Key Priorities, Objectives and Strategy

£ millions

2.0%1.6%

2.7%

3.6%

4.8%

6.6%

¹ Sum of share buybacks and dividends paid divided by average shares in issue for the relevant period, as a % of the average share price for the relevant period

4.7%

Using Free Cashflow to enhance share owner value distributions to share owners¹

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Outlook

The unprecedented financial crisis has triggered recession across globe

Our revised forecasts show mid single-digit like-for-like revenue decline, and it will be difficult to maintain margins at 2008 level (including a full year of TNS)

2009 will be a very difficult year, particularly in first half and we are taking necessary steps to deal with any revenue downturn

By 2010 we believe impact of massive global fiscal and monetary injections and corrections should bring a recovery of sorts

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Conclusions

The Group continues to be well placed by region and discipline to benefit from key industry trends

The TNS acquisition represents a major competitive advantage for our Information, Insight & Consultancy or consumer insight business and the Group, as well as a source of margin improvement

In the long term the Group will be concentrating on positioning its top line in the highest growth functional and geographic sectors and improving the effectiveness of its cost structure

The Group will manage cashflow to return average net debt/EBITDA ratio to below 2x in the medium term

As the world exits from the financial crisis, whenever that is, the Group’s strategic focus on new geographical markets, new media and the application of technology and consumer insight, will prove to be even more effective

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WPP Today

Revenue and PBIT figures are 2008 reported sterling actuals

PBIT is stated before goodwill and impairment, fixed asset gains and investment write-downs

¹ Adjusted to include TNS revenue for full year 2008, WPP revenue is £8.6bn & Information, Insight & Consultancy revenue is £2.4bn

Revenue £3.3bn

PBIT £581m

Revenue £1.3bn¹

PBIT £148m

Revenue £752m

PBIT £125m

Revenue £2.1bn

PBIT £264m

Revenue £7.5bn¹

PBIT £1,118m

RevenueBroader £1.9bn(c 25%)

Information,Insight &

Consultancy

Public Relations &

Public Affairs

Branding & Identity,Healthcare and

SpecialistCommunications

WPP DigitalMedia

Investment Management

Advertising

WPP

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