WPP 2018 Preliminary Results

WPP (NYSE:WPP) today reported its 2018 Preliminary Results.

Mark Read, Chief Executive Officer, WPP:

Since September, we have made good progress in implementing the new strategy for WPP. We have set out our vision for a more client-centric WPP, simplified our offer through the creation of two new integrated networks, VMLY&R and Wunderman Thompson, realigned our US healthcare agencies with major networks, formed the Companys first executive committee and begun the process of seeking a financial and strategic partner for Kantar. Through 36 disposals since April 2018, we have strengthened our balance sheet and streamlined our business, raising £849 million of cash proceeds in 2018.

We are showing early signs of success in attracting new business and new talent to WPP. The newly formed VMLY&R, for example, has enjoyed a strong start, with client wins totalling $25 million in its first 90 days. The quality of our creative work has been exceptional, with six WPP spots featuring at this years Super Bowl and work such as Greys ˜The Best Men Can Be for Gillette demonstrating once again the global impact of what we do.

Our results for 2018 are at the upper end of the guidance we provided in October, with like-for-like revenue less pass-through costs down 0.4%.

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As we have said previously, 2019 will be challenging “ particularly in the first half “ due to headwinds from client losses in 2018. However, we start the year with fewer clients under review than we did in 2018, and investments in creativity and technology will further improve the competitiveness of our offer.

Our business is performing strongly in Western Continental Europe, Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and we are addressing our performance in the United States. Important wins such as Volkswagen in North America reflect our creative strengths, and we are making significant investments in talent in our largest market.

We are at the beginning of a three-year turnaround plan, but WPPs new positioning as a creative transformation company with stronger, more integrated, more tech-enabled agencies is already proving effective, having driven several of our recent new business successes. As we implement our strategy in 2019 we will continue to put creativity, technology and great work for clients at the heart of our own transformation.

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, revenue less pass-through costs and headline profit measures, management believes are both useful and necessary to better understand the Groups results. Where required, details of how these have been arrived at are shown in the Appendix.

Key figures

                   
£ million     2018    

ˆ† reported1

   

ˆ† constant2

   

ˆ† LFL3

   

20174

Billings     55,798     0.4%     3.3%     3.2%     55,585
Revenue     15,602     -1.3%     1.5%     0.8%     15,804
Revenue less pass-through costs     12,827     -2.6%     0.2%    

-0.4%

    13,170

Headline EBITDA5

    2,311     -8.8%     -6.4%           2,534

Headline operating profit6

    1,962     -8.9%     -6.6%           2,154

Headline operating margin7

    15.3%     -1.1*     -1.1*     -1.1*     16.4%

Headline PBIT8

    2,047     -9.7%     -7.4%           2,267

Headline PBIT margin9

    16.0%     -1.2*     -1.3*     -1.2*     17.2%
Profit before tax     1,463     -30.6%     -28.1%           2,109
Profit after tax     1,139     -40.4%     -38.5%           1,912

Headline diluted EPS10

    108.0p     -10.3%     -8.1%           120.4p

Diluted EPS11

    84.3p     -40.8%     -38.9%           142.4p
Dividends per share 60.0p 60.0p
 

* Margin points

  • 2018 at upper end of guidance given in October, with like-for-like revenue less pass-through costs -0.4%
  • As previously stated, 2019 challenging, particularly in the first half, due to headwinds from client losses in 2018
  • Business performing strongly in Western Continental Europe, Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and addressing performance in the United States
  • Profit before tax reflects impact of restructuring and transformation costs and goodwill impairment
  • Dividends per share of 60.0p, flat with last year
  • Year end net debt position improved by £466 million on same date in 2017 (an improvement of £605 million at 2018 exchange rates)
  • Good initial progress on implementing strategy

Review of results

Reported billings at £55.798 billion, up 0.4%, up 3.3% in constant currency and up 3.2% like-for-like.

Reported revenue was down 1.3% at £15.602 billion. Revenue on a constant currency basis was up 1.5% compared with last year, the difference to the reportable number reflecting the strength of the pound sterling against most currencies, particularly in the first half of the year. On a like-for-like basis, which excludes the impact of currency and acquisitions, revenue was up 0.8%.

Reported revenue less pass-through costs was down 2.6%, up 0.2% in constant currency and down 0.4% like-for-like. In the fourth quarter, like-for-like revenue was down 0.1%, a slight deterioration from the third quarter of +0.2%, with all regions, except North America, showing an improvement. On the same basis, revenue less pass-through costs in the fourth quarter was down 0.7%, an improvement over the third quarter of -1.5%, with North America and the United Kingdom slightly weaker, more than offset by stronger growth in Western Continental Europe and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe.

Operating profitability

Headline EBITDA was down 8.8% to £2.311 billion, from £2.534 billion the previous year and down 6.4% in constant currency. The Groups revenue is more weighted to the second half of the year across all regions and sectors, and, particularly, in the faster growing markets of Asia Pacific and Latin America. As a result, profitability and margin continue to be skewed to the second half of the year, with the Group earning approximately 40% of its profits in the first half and 60% in the second half. Headline profit before interest and tax for 2018 was down 9.7% to £2.047 billion, from £2.267 billion and down 7.4% in constant currencies.

Headline operating margin12 was down 1.1 margin points to 15.3%, and also down 1.1 margin points in both constant currency and like-for-like, at the upper end of the full year revised operating margin target. Headline PBIT margin13 was down 1.2 margin points to 16.0%, down 1.3 margin points in constant currency and down 1.2 margin points like-for-like. The Groups operating margin of 15.3% is after charging £37 million ($54 million) of severance costs, compared with £40 million ($52 million) in 2017 and £326 million ($435 million) of incentive payments, which were 14.2% of operating profit before incentives, a similar level to the £324 million ($421 million) or 13.1% in 2017. Achievement of target, at an individual operating company level, generally generates 15% of operating profit before bonus as an incentive pool and 20% at maximum.

On a reported basis, the Groups operating margin, before all incentives14 and income from associates, was 17.8%, down 1.0 margin point, compared with 18.8% last year. The Groups staff costs to revenue less pass-through costs ratio, including severance and incentives, increased by 0.5 margin points to 63.7% compared to 63.2% in 2017. In addition, there was an increase in the Groups general and administrative costs, principally in relation to an increase in the provision for bad debts and higher IT costs.

On a like-for-like basis, the average number of people in the Group, excluding associates, in 2018 was 133,903 compared to 135,521 in 2017, a decrease of 1.2%. On the same basis, the total number of people, excluding associates, at 31 December 2018 was 134,281 compared to 135,187 at 31 December 2017, a decrease of 906 or 0.7%.

Exceptional gains and restructuring and transformation costs

As outlined in the Investor Day on 11 December 2018, we have undertaken a strategic review of our operations. As part of that review, restructuring actions have been taken to right-size underperforming businesses, address high cost severance markets and simplify operational structures. This has included a number of WPPs operating companies having been merged, closed or sold. It also includes transformation costs with respect to strategic initiatives like co-locations in major cities, IT transformation and shared services.

£234 million of restructuring and transformation costs were recorded in the fourth quarter in relation to this plan. This included £63 million of non-cash write-offs and £171 million of actions that have a cash impact in 2018 and beyond. In 2018 the cash outflow was £50 million. The £171 million forms part of the anticipated £300 million total cash cost of the restructuring plan that we announced “ with the balance to be incurred in 2019, 2020 and 2021.

The total of restructuring and transformation costs in 2018 was £302 million. The remaining £68 million relates to severance restructuring costs recorded in the first half, together with costs in relation to the continuing global IT transformation program.

These exceptional costs of £302 million and £41 million of associate company exceptional losses have been partly offset by exceptional gains of £235 million, primarily relating to the gain on the sale of the Groups investment in Globant S.A.

This gives a net exceptional loss of £108 million and compares with a net exceptional loss in 2017 of £24 million.

Interest and taxes

Net finance costs (excluding the revaluation of financial instruments) were £184.5 million, compared with £174.6 million in 2017, an increase of £9.9 million. This is due to higher dollar interest rates.

The headline tax rate was 22.5% (2017 22.0%) and on reported profit before tax was 22.1% (2017 9.3%), the difference in the rates in 2017 was principally due to an exceptional tax credit, primarily relating to the re-measurement of deferred tax liabilities. Given the Groups geographic mix of profits and the changing international tax environment, the tax rate is expected to increase slightly over the next few years.

Earnings and dividend

Headline profit before tax was down 11.0% to £1.863 billion from £2.093 billion, and down 8.5% in constant currencies.

Reported profit before tax fell by 30.6% to £1.463 billion from £2.109 billion, the difference between the headline and reported figures reflecting principally the £302 million of restructuring and transformation costs and £184 million of goodwill impairment charges. In constant currencies, reported profit before tax fell by 28.1%.

Reported profit after tax fell by 40.4% to £1.139 billion from £1.912 billion. In constant currencies, profits after tax fell 38.5%.

Profits attributable to share owners fell 41.5% to £1.063 billion from £1.817 billion, again reflecting principally the £302 million of restructuring and transformation costs and £184 million of goodwill impairment. In constant currencies, profits attributable to share owners fell by 39.6%.

Headline diluted earnings per share fell by 10.3% to 108.0p from 120.4p. In constant currencies, earnings per share on the same basis fell by 8.1%. Reported diluted earnings per share fell by 40.8% to 84.3p from 142.4p and decreased 38.9% in constant currencies.

As outlined in our Investor Day presentation, despite the reduction in diluted earnings per share, your Board proposes to maintain the final dividend of 37.3p per share, which, together with the interim dividend of 22.7p per share, makes a total of 60.0p per share for 2018, the same as the prior year. This represents a dividend pay-out ratio of 56%, compared with 50% last year. The record date for the final dividend is 14 June 2019, payable on 8 July 2019.

Further details of WPPs financial performance are provided in Appendix 1.

Regional review

The pattern of revenue and revenue less pass-through costs growth differed regionally. The tables below give details of revenue and revenue less pass-through costs, revenue and revenue less pass-through costs growth by region for 2018, as well as the proportion of Group revenue and revenue less pass-through costs and operating profit and operating margin by region:

Revenue analysis

                           
£ million     2018     ˆ† reported    

ˆ† constant15

   

ˆ† LFL16

    % group     2017     % group
N. America     5,371     -5.1%     -1.9%     -3.0%     34.4%     5,659     35.8%
United Kingdom     2,189     2.6%     2.6%     1.5%     14.0%     2,133     13.5%
W Cont. Europe     3,335     3.2%     3.5%     1.7%     21.4%     3,231     20.4%

AP, LA, AME, CEE17

   

4,707

   

-1.6%

   

3.8%

   

4.4%

   

30.2%

   

4,781

   

30.3%

Total Group     15,602     -1.3%     1.5%     0.8%     100.0%     15,804     100.0%
 

Revenue less pass-through costs analysis

                           
£ million     2018     ˆ† reported     ˆ† constant     ˆ† LFL     % group     2017     % group
N. America     4,474     -6.7%     -3.5%     -4.2%     34.9%     4,794     36.4%
United Kingdom     1,691     0.2%     0.2%     -0.5%     13.2%     1,688     12.8%
W Cont. Europe     2,736     4.0%     4.1%     2.0%     21.3%     2,631     20.0%
AP, LA, AME, CEE    

3,926

   

-3.2%

   

2.0%

   

2.5%

   

30.6%

   

4,057

   

30.8%

Total Group     12,827     -2.6%     0.2%     -0.4%     100.0%     13,170     100.0%
 

Operating profit analysis (Headline PBIT)

               
£ million     2018     % margin*     2017     % margin*
N. America     804     18.0%     937     19.6%
United Kingdom     245     14.5%     280     16.6%
W Cont. Europe     372     13.6%     376     14.3%
AP, LA, AME, CEE     626     15.9%     674     16.6%
Total Group 2,047 16.0% 2,267 17.2%
 

* Headline PBIT as a percentage of revenue less pass-through costs

North America constant currency revenue less pass-through costs was down 4.5% in the final quarter, the same as the third quarter, and down 5.7% like-for-like, a slight deterioration on the third quarter of -5.3%. This reflects continuing challenges in our advertising businesses, with data investment management and healthcare also slower, partly offset by a significant improvement in public relations and public affairs. On a full year basis, constant currency revenue less pass-through costs was down 3.5%, with like-for-like down 4.2%.

United Kingdom constant currency revenue less pass-through costs was down 2.4% in the final quarter and down 2.7% like-for-like, slightly weaker than the -2.0% shown in quarter three. Media investment management and the specialist communications businesses were particularly strong with data investment management improving. Our public relations and public affairs and direct, interactive and eCommerce businesses were slower. On a full year basis, constant currency revenue less pass-through costs was up 0.2%, with like-for-like down 0.5%.

Western Continental Europe constant currency revenue less pass-through costs was up 4.1% in the final quarter, a significant improvement on the growth in quarter three of 1.3%. On a like-for-like basis revenue less pass-through costs was also up 4.1%, the strongest quarter of the year, and compared to -0.4% in quarter three. Twelve of the Groups top 14 markets showed significant growth in quarter four, particularly Austria, Belgium, Denmark, Finland, Germany, Italy, Netherlands, Portugal, Sweden and Turkey. For the year, Western Continental Europe constant currency revenue less pass-through costs grew 4.1% with like-for-like up 2.0%, the second strongest performing region.

In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, on a constant currency basis, revenue less pass-through costs was up 0.4% in the fourth quarter and up 2.6% like-for-like, slightly above the third quarter growth of 2.4%. In the fourth quarter, Latin America, grew over 7%, stronger than the third quarter, with Central & Eastern Europe showing double digit growth in the fourth quarter compared with almost 5% in quarter three. Asia Pacific and Africa & the Middle East were slightly weaker. On a full year basis, constant currency revenue less pass-through costs growth in the region was 2.0% with like-for-like growth 2.5%, the strongest performing region.

Business sector review

The pattern of revenue and revenue less pass-through costs growth also varied by sector and operating brand. The tables below give details of revenue and revenue less pass-through costs, revenue and revenue less pass-through costs growth by sector, as well as the proportion of Group revenue and revenue less pass-through costs for 2018 and operating profit and operating margin by sector:

Revenue analysis

                           
£ million     2018     ˆ† reported    

ˆ† constant18

   

ˆ† LFL19

    % group     2017     % group

AMIM20

    7,132     -3.2%     -0.4%     1.0%     45.6%     7,369     46.6%
Data Inv. Mgt.     2,582     -4.5%     -1.8%     -2.0%     16.6%     2,703     17.1%

PR & PA21

    1,211     0.6%     3.4%     3.1%     7.8%     1,204     7.6%

BC, HW & SC22

    4,677     3.3%     6.3%     1.5%     30.0%     4,528     28.7%
Total Group     15,602     -1.3%     1.5%     0.8%     100.0%     15,804     100.0%
 

Revenue less pass-through costs analysis

                           
£ million     2018     ˆ† reported     ˆ† constant     ˆ† LFL     % group     2017     % group
AMIM     5,530     -6.1%     -3.3%     -1.2%     43.1%     5,889     44.7%
Data Inv. Mgt.     1,966     -4.2%     -1.3%     -1.8%     15.3%     2,052     15.6%
PR & PA     1,136     -0.4%     2.5%     2.6%     8.9%     1,141     8.7%
BC, HW & SC     4,195     2.6%     5.6%     0.6%     32.7%     4,088     31.0%
Total Group     12,827     -2.6%     0.2%     -0.4%     100.0%     13,170     100.0%
 

Operating profit analysis (Headline PBIT)

               
£ million     2018     % margin*     2017     % margin*
AMIM     972     17.6%     1,109     18.8%
Data Inv. Mgt.     301     15.3%     350     17.1%
PR & PA     184     16.2%     183     16.1%
BC, HW & SC     590     14.1%     625     15.3%
Total Group 2,047 16.0% 2,267 17.2%
 

* Headline PBIT as a percentage of revenue less pass-through costs

Advertising and Media Investment Management

In constant currencies, advertising and media investment management revenue less pass-through costs was down 1.6% in the fourth quarter, a significant improvement on the -6.5% in the third quarter and the strongest quarter of the year. On a like-for-like basis revenue less pass-through costs was up 0.4% in the fourth quarter, the first quarter of positive growth, with both our advertising and media investment businesses showing considerable improvement over the third quarter. However, despite this improvement, our advertising businesses remain under pressure.

The strong revenue less pass-through costs growth across most of the Groups media investment management businesses, offset by slower growth in our advertising businesses in most regions, resulted in the combined reported operating margin of this sector being down 1.2 margin points at 17.6% and down 1.4 margin points in constant currency.

Data Investment Management

In constant currencies, data investment management revenue less pass-through costs was down 2.8% in the fourth quarter, and down 2.8% like-for-like. On a full year basis, constant currency revenue less pass-through costs was down 1.3%, down 1.8% like-for-like. Geographically, revenue less pass-through costs was up strongly in Asia Pacific and Latin America, but North America was weaker. Kantar Worldpanel and Kantar Media showed strong like-for-like revenue less pass-through costs growth, with Kantar Insights, Kantar Health, Kantar Public and Lightspeed less robust. Reported operating margins were down 1.8 margin points to 15.3% and down 1.8 margin points in constant currency.

Public Relations and Public Affairs

In the fourth quarter, in constant currencies and like-for-like, our public relations and public affairs businesses were the strongest performing sector, as they were in the first half and third quarter, with growth of 3.3% and 1.2% respectively. On a full year basis, constant currency revenue less pass-through costs grew 2.5% with like-for-like growth 2.6%. Geographically, all regions showed strong growth, with the United Kingdom and Africa & the Middle East particularly strong. Cohn & Wolfe, H+K Strategies and the specialist public relations and public affairs businesses Finsbury, Hering Schuppener and Buchanan, performed particularly well. Overall operating margins improved 0.1 margin points to 16.2% and by 0.1 margin points in constant currency.

Brand Consulting, Health & Wellness and Specialist Communications

Our brand consulting, health & wellness and specialist communications businesses (including direct, interactive and eCommerce), performed less well in the fourth quarter with constant currency revenue less pass-through costs up 0.2%, compared with 6.5% in the third quarter, with like-for-like down 1.6%, as our healthcare businesses in North America and some direct, interactive and eCommerce businesses came under pressure. On a full year basis, revenue less pass-through costs was up 5.6% in constant currency and up 0.6% like-for-like. In brand consulting, Landor and FITCH performed strongly, and in the direct, interactive and eCommerce businesses, Wunderman, Hogarth, AKQA, Blue State Digital, F.biz and Deeplocal performed well. Operating margins, for the sector as a whole, were down by 1.2 margin points to 14.1% and down 1.3 margin points in constant currency, with operating margins negatively affected as parts of our direct, interactive and eCommerce, brand consulting and healthcare businesses in North America slowed.

Cash flow highlights

In 2018, operating profit was £1.431 billion, depreciation, amortisation and goodwill impairment £728 million, non-cash share-based incentive charges £85 million, working capital and provisions inflow £166 million, net interest paid £162 million, tax paid £384 million, capital expenditure £375 million, earnout payments £120 million and other net cash outflows £266 million, principally £235 million gains on disposal of investments and subsidiaries. Free cash flow available for debt repayment, acquisitions (excluding earnouts), share buy-backs and dividends was, therefore, £1.103 billion.

This free cash flow was enhanced by £849 million of proceeds from the disposal of associates and investments, offset by £289 million in cash acquisition costs (investments and new acquisition payments), £207 million in share buy-backs and £747 million in dividends, a net outflow of £394 million. This resulted in a net cash inflow of £709 million.

Free cash flow conversion23 in 2018 was 81%.

A summary of the Groups unaudited cash flow statement and notes as at 31 December 2018 are provided in Appendix 1.

Balance sheet highlights

Average net debt in 2018 was £4.966 billion, compared to £5.125 billion in 2017, at 2018 exchange rates. On 31 December 2018 net debt was £4.017 billion, against £4.483 billion on 31 December 2017, a decrease of £466 million (a decrease of £605 million at 2018 exchange rates). The reduced period end debt figure reflects the benefit of £849 million proceeds in relation to disposal of our interests in certain associates and investments, the principal of which were Globant S.A., Imagina, AppNexus and Bruin. This trend has continued in the first seven weeks of 2019, with average net debt of £3.954 billion, compared with £4.519 billion in the same period in 2018, a decrease of £565 million (a decrease of £691 million at 2019 exchange rates).

The net debt figure of £4.017 billion at 31 December, compares with a current market capitalisation of approximately £10.420 billion ($13.821 billion), giving an enterprise value of £14.437 billion ($19.149 billion). The average net debt to EBITDA ratio at 2.1x, is above the revised target range of 1.5-1.75x to be achieved by the end of 2021.

A summary of the Groups unaudited balance sheet and notes as at 31 December 2018 are provided in Appendix 1.

Return of funds to shareholders

Dividends paid in respect of 2018 will total approximately £753 million for the year. Funds returned to shareholders in 2018 totalled £955 million, including share buy-backs.

In 2018, 16.6 million shares, or 1.3% of the issued share capital, were purchased at a cost of £207 million.

Progress on growth strategy

In the last six months we have made significant progress in simplifying our operations to make them more client-centric and improving WPPs financial position.

Milestones include the launch of a new vision, offer and brand identity for WPP, the creation of two new integrated networks (VMLY&R and Wunderman Thompson), the realignment of the US healthcare agencies with major networks, the formation of WPPs first executive committee and the initiation of the process to find a financial and strategic partner for Kantar.

As part of the restructuring plan we outlined in the Investor Day presentation, 70 of the 100 planned office mergers have been completed, 57 of the 80 offices have been closed and approximately 2,650 of the 3,500 planned redundancies have been actioned. The anticipated gross savings remain in line with the £160 million estimate in December. As we outlined in the Investor Day a proportion of these gross savings will be reinvested in talent and technology development.

In addition, 30 disposals were completed in 2018 realising proceeds of £849 million, helping to strengthen the Groups balance sheet and improve leverage. The disposal programme will continue in 2019 and a further 6 disposals have been completed year-to-date.

Outlook

Financial guidance

Our 2019 targets are:

  • Like-for-like revenue less pass-through costs down 1.5% to 2.0%, with stronger headwinds in the first half, due to client losses in 2018
  • Headline operating margin to revenue less pass-through costs down around 1.0 margin point on a constant currency basis (excluding the impact of IFRS 16: Leases)

In 2019, our primary focus will remain on addressing our issues in North America. We will achieve this through investment in leadership, creative talent and technology and delivering on the potential of the newly merged businesses of VMLY&R and Wunderman Thompson. In addition, ensuring the gross benefits from the restructuring actions taken in 2018 and continuing to be taken in 2019 are realised. To help drive top-line growth, the incentive plans for 2019 will include up to half of the incentive pools being funded based on improving growth in revenue less pass-through costs, with the remaining proportion based on growth in operating profit and margin.

Medium-term financial targets

At our Investor Day in December, we set out our new medium-term financial targets that will allow us to invest in talent and technology, improve our competitive position and deliver sustainable long-term growth rates. Our targets, to be achieved by the end of 2021, are:

  • Organic growth (defined as like-for-like revenue less pass-through costs growth) in line with peers
  • Headline operating margin (excluding the impact of IFRS 16: Leases) of at least 15%
  • Free cash flow conversion of 80%-90%

Uses of funds

As per the Investor Day in December, over the next three years we will prioritise the dividend over share buy-backs and will balance targeted M&A with divestments.

To access WPP’s 2018 preliminary results financial tables, please visit www.wpp.com/investors

This announcement has been filed at the Company Announcements Office of the London Stock Exchange and is being distributed to all owners of Ordinary shares and American Depository Receipts. Copies are available to the public at the Companys registered office.

The following cautionary statement is included for safe harbour purposes in connection with the Private Securities Litigation Reform Act of 1995 introduced in the United States of America. This announcement may contain forward-looking statements within the meaning of the US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially including adjustments arising from the annual audit by management and the Companys independent auditors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings by the Company with the Securities and Exchange Commission. The statements in this announcement should be considered in light of these risks and uncertainties.

1 Percentage change in reported sterling 2 Percentage change at constant currency exchange rates 3 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals 4 Prior year figures have been restated for the impact of the adoption of IFRS 15: Revenue from Contracts with Customers as described in note 2 of Appendix 1 5 Headline earnings before interest, tax, depreciation and amortisation 6 Headline profit before interest, tax and share of results of associates 7 Headline operating profit as a percentage of revenue less pass-through costs 8 Headline profit before interest and tax 9 Headline profit before interest and tax as a percentage of revenue less pass-through costs, previously referred to as revenue less pass-through costs margin 10 Diluted earnings per share based on headline earnings 11 Diluted earnings per share based on reported earnings 12 Headline operating profit (excluding income from associates) as a percentage of revenue less pass-through costs 13 Headline PBIT as a percentage of revenue less pass-through costs 14 Short and long-term incentives and the cost of share-based incentives 15 Percentage change at constant currency exchange rates 16 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals 17 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 18 Percentage change at constant currency exchange rates 19 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals 20 Advertising, Media Investment Management 21 Public Relations & Public Affairs 22 Brand Consulting, Health & Wellness and Specialist Communications (including direct, interactive and eCommerce) 23 Free cash flow conversion is the ratio of free cash flow to headline earnings. Free cash flow is after earnouts and changes in working capital and before new acquisition spend, disposals and shareholder distributions

Mark Read
Andrew Scott
Paul Richardson
Lisa Hau
Chris
Wade
+44 20 7282 4600

Kevin McCormack
Fran Butera
+1
212 632 2235

Juliana Yeh
+852 2280 3790

Richard
Oldworth,
Buchanan Communications
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