WPP : 2017 Preliminary Results

• Another record year, with strong currency tailwinds, particularly in the second half
• Reported billings up 16.0% at £55.245 billion, up 5.5% in constant currency and 3.3% like-for-like
• Reported revenue up 17.6% at £14.389 billion, up 3.7% at $19.379 billion, up 3.9% at €17.527 billion and down 7.0% at ¥2.107 trillion
• Constant currency revenue up 7.2%, like-for-like revenue up 3.0%
• Constant currency net sales up 7.4%, like-for-like net sales up 3.1%
• Reported net sales margin of 17.4%, up 0.5 margin points against last year, up 0.2 margin points on a constant currency, up 0.3 margin points on a like-for-like basis, in line with the full year margin target adjusted for the merger with STW Communications Group Limited
• Headline EBITDA £2.420 billion, up 20.8%, up 8.0% in constant currency
• Headline profit before interest and tax £2.160 billion, over £2 billion for the first time, up 21.8% and up 8.5% in constant currency
• Headline profit before tax £1.986 billion, up 22.4% and up 9.1% in constant currency
• Profit before tax £1.891 billion, up 26.7%, up 12.5% in constant currency
• Profit after tax £1.502 billion, up 20.6%, up 7.2% in constant currency
• Headline diluted earnings per share of 113.2p, up 20.9%, up 7.7% in constant currency
• Return on equity at 16.2% in 2016, down marginally from 16.3% in 2015 versus a weighted average cost of capital of 6.4% in 2016, also down from 6.7% in 2015
• Dividends per share of 56.60p, up 26.7%, reaching the recently targeted pay-out ratio of 50% one year ahead of schedule and up from 47.7% last year
• Net debt £4.131 billion at 31 December 2016, an increase of £920 million on same date in 2015, with average net debt in 2016 at £4.340 billion against £3.562 billion in 2015, primarily reflecting the weakness of sterling, although the average net debt to EBITDA ratio remains under 1.8x almost in the middle of the target range
• Net new business of £4.360 billion ($6.757 billion) in the year continuing the good overall performance seen in the first nine months, but slower than the previous year
• Including associates and investments, revenue totals over $26 billion annually and people average over 205,000

Full Year highlights

• Reported billings at £55.245 billion, up 5.5% in constant currency and up 3.3% like-for-like
• Revenue growth of 17.6%, with like-for-like growth of 3.0%, 4.2% growth from acquisitions and 10.4% from currency
• Like-for-like revenue growth in all regions, led by strong growth in Western Continental Europe and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and in all sectors, except data investment management, with particularly strong growth in advertising and media investment management and branding and identity, healthcare and specialist communications (including direct, digital and interactive)
• Like-for-like net sales growth at 3.1%, with the gap compared to revenue growth reversing in the second half, as the Group's investment in technology enhanced the growth of advertising and media investment management net sales and as data investment management direct costs have been reduced
• Headline EBITDA of £2.420 billion, up 20.8%, and up 8.0% in constant currency, reflecting currency tailwinds and the reported 17.4% net sales margin, up 0.5 margin points compared with last year, with like-for-like operating costs (up 2.7%) rising less than net sales at 3.1%
• Headline PBIT increase of 21.8% to £2.160 billion, over £2 billion for the first time, up 8.5% in constant currency
• Net sales margin, a more accurate competitive comparator than revenue margin, up 0.5 margin points to an industry leading 17.4%, up 0.2 margin points in constant currency, up 0.3 margin points like-for-like, in-line with target, adjusted for the merger of STW Communications Group Limited (STW) in April 2016
• Exceptional gains of £277 million, largely representing re-measurement gains in relation to the Group's interest in Imagina and gains on the sale of the Group's interest in Grass Roots
• Headline diluted EPS of 113.2p up 20.9%, up 7.7% in constant currency and reported diluted EPS up 22.2%, up 8.5% in constant currency, reflecting strong like-for-like revenue and net sales growth, margin improvement and acquisitions
• Final ordinary dividend of 37.05p up 28.7% and full year dividends of 56.60p per share up 26.7%
• Dividend pay-out ratio of 50% in 2016 versus 47.7% in 2015, effectively one year ahead of the newly targeted dividend pay-out ratio of 50% in 2017
• Return on equity down marginally at 16.2% in 2016, compared with 16.3% in 2015, versus a weighted average cost of capital of 6.4% in 2016 and 6.7% in 2015. During 2016 the value of the Group's non-controlled investments rose by £151 million, to £1.310 billion from £1.159 billion, reflecting the value of its content businesses, primarily Vice and Refinery29, and the Group's investment in comScore, which merged with Rentrak in the first half of 2016
• Average net debt up £382 million, at £4.340 billion compared to last year, at 2016 exchange rates, continuing to reflect the significant net acquisition spend, share re-purchases and dividends of over £1.7 billion in 2016
• Creative and effectiveness domination recognised yet again in 2016 with the award of the Cannes Lion to WPP for most creative Holding Company for the sixth successive year since the award's inception and another to Ogilvy & Mather Worldwide for the fifth consecutive year as the most creative agency network. Four WPP agency networks, Ogilvy & Mather Worldwide, Y&R, Grey and J. Walter Thompson Company finished in the top seven networks at Cannes in 2016, in positions one, three, six and seven respectively, an outstanding achievement. Grey New York and Ingo Stockholm were also voted the second and third most creative agencies in the world. For the fifth consecutive year, WPP was also awarded the EFFIE as the most effective Holding Company, with Ogilvy & Mather ranked the most effective agency
• Particularly, following Brexit, accelerated implementation of growth strategy continues with revenue ratio targets for fast growth markets and new media raised from 35-40% to 40-45% over the next four to five years. Quantitative revenue target of 50% already achieved

• January 2017 | Like-for-like revenue up 1.5% for the month, ahead of budget, with like-for-like net sales, up 1.2%, ahead of budget and against a stronger comparative last year
• FY 2017 budget | Given continued tepid economic growth and recent weaker comparative net new business trends, the budgets for 2017, on a like-for-like basis, have been set conservatively at around 2% for both revenue and net sales, but with a headline operating margin target improvement on net sales of 0.3 margin points, in constant currency
• Dual focus in 2017 | 1. Revenue and net sales growth from leading position in horizontality, faster growing geographic markets and digital, premier parent company creative and effectiveness position, new business and strategically targeted acquisitions; 2. Continued emphasis on balancing revenue growth with headcount increases and improvement in staff costs/net sales ratio to enhance operating margins
• Long-term targets | Above industry revenue growth, due to effective implementation of horizontality, geographically superior position in new markets and functional strength in new media, data investment management, including data analytics and the application of new technology, creativity, effectiveness and horizontality; improvement in staff costs/net sales ratio of 0.2 or more depending on net sales growth; net sales operating margin expansion of 0.3 margin points or more on a constant currency basis, with an ultimate goal of almost 20%; and headline diluted EPS growth of 10% to 15% p.a. from revenue and net sales growth, margin expansion, strategically targeted small- and medium-sized acquisitions and share buy-backs

In this press release not all of the figures and ratios used are readily available from the unaudited preliminary results included in Appendix 1. These non-GAAP measures, including constant currency and like-for-like growth, and headline profit measures, management believes 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 the Appendices.

Download Appendix 1: Preliminary results for the year ended 31 December 2016 (pdf)

For further information:
Sir Martin Sorrell }
Paul Richardson }
Lisa Hau } +44 20 7408 2204
Feona McEwan }
Chris Wade }

Kevin McCormack }
Fran Butera } +1 212 632 2235
Juliana Yeh } +852 2280 3790

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wpp_preliminary_results_mar17.pdf