WPP plc Price & Performance (WPP)

While we've achieved a lot in 2024, I do know that the main focus for many of you, and I've always come up in the Q and A, will be our net revenue growth. Came in at minus 1% are consistent with the lower end of our guidance range. We were conservative when we guided you [indiscernible] Q3, Now this performance does mask competing tailwinds And headwinds. Now I'd highlight robust performance within our top 25 clients, which grew 2% supported solid growth within medium production. On the other side of the coin, did face challenging trends in China and 80 basis point drag. And the impact of historical client losses [indiscernible] particularly focused in the fourth quarter. Despite this, we delivered a stronger headline operating margin at 15%, up 40 basis points year on year. And we did this and included within that £250,000,000 investment in AI and data, an incremental £30,000,000 over The course [indiscernible] We also made great progress in our strategic transformation, a simpler structure, our investment in WPP Open, and a stronger balance sheet. So if I'd say, up from what I think the three main takeaways were from what we achieved in 2024, there would be first, strong strategic progress.

Second, better new business performance in the second half. I'll highlight those wins. Thirdly, better cash conversion, which I know is something that's been on our shareholders' minds for some time. We do need to keen to get this new business improvement back to where we wanted to be to deliver growth that where we need to be. So I'll come back to you shortly to discuss why we remain confident. But let me first hand over to Joanne to take you through financial highlights. [indiscernible] Good morning, everyone. Let me take you through some more detail on our financial results for 2024, and I will start on Slide seven. Like for like revenue less pass through costs fell 1% for the full year 2024. At the end of Q3, our year to date like for like was a decline of 0.5%. Q4 performance was disappointingly soft and took our full year like for like to the bottom end of our guidance range. Despite the softer top line performance, we delivered a 40 basis point improvement in headline operating margin to 15%, benefiting from structural cost savings and continued disciplined cost management. Driving incremental investment in 86% WPP, benefiting from strong working capital management.

That together with the sale of FGS Global resulted in year end net debt of £1,700,000,000 point £8,000,000,000 reduction year on year. Turning to the headline income statement on Slide [indiscernible] Overall reported revenue less pass through costs was £11,400,000,000 a decrease of 4.2% year on year. FX contributed to a 3.1 percentage point drag, with M and A a further 0.1 percentage point headwind, leaving a like for like decline of 1%.

Apologies, everyone. It seems like we have lost connections. With our speakers' line. Please stand by while we try to reconnect. The call will resume shortly. [indiscernible] Sorry about that. Operating profit margin of 15% benefited from 0.4 percentage point improvement on a constant currency basis and was up 0.2 percentage points on a reported basis. Moving down the P and L, a reminder that income from associates IAS 28 due to nil current value on our balance sheet. Net finance costs of £280,000,000 increased year on year reflecting higher interest rates following our successful bond refinancing in 2024. Effective tax rate increased as expected one percentage point to 28% and non controlling interest of £87,000,000 were flat year on year. Headline diluted EPS of 88.3p was down 5.9% on a reported basis and broadly flat like for like. A flat final dividend of 24.4p, given a total dividend of $39.39.4 p for 2024, which is in line with 2023, and represents a cash return to shareholders of over £420,000,000 Moving to Slide nine and the reconciliation between our headline and reported operating profit. Headline operating profit of £1,700,000,000 adjusted for goodwill impairment of £237,000,000 The Reported gains on disposal before tax were £329,000,000 with £275,000,000 arising from the disposal of FGS, the adjustment for litigation and other charges include £68,000,000 relating to ongoing legal matters and claims.

Finally, restructuring and transformation costs of £277,000,000 includes costs relating to the creation of VML and Berson, the simplification of Group M, well as costs associated with our ongoing ERP and IT transformation and property related costs. As a result, our operating profit increased from £531,000,000 in 2023 to £1,300,000,000 in 2024. [indiscernible] Moving on now to Slide 10 and performance across our business. Global Integrated Agencies saw a like for like decline of 0.8% in the year. Group M grew 2.7% the full year was growth in Q4 of 2.4%. Across the second half, Group M saw an improved new business performance, which with Amazon and J and J wins and a successful outcome from the Unilever review despite some losses, including Volvo. Like for like for our global integrated creative agencies fell 3.9% in 2024 and was down 6.5% in the fourth quarter. Almost half of the full year decline was driven by the loss of a health care client assignment in 2023, with further impacts from a challenging environment in China the continued weakness in project based work weighing on AKQA's performance. [indiscernible] saw continued strong performance from Hogarth with full year like for like growing mid single digits.

We stepped iron in performance in Q4 reflected weaker client discretionary spend, as well as the WPP of a particularly strong quarter for variable client incentives in Q4 twenty three. Turning to 1.7% in 2024, reflected eleven months of good growth from FGS offset by a mid single digit decline at Berson. Berson's performance was the impacted by the loss of a healthcare client assignments, a more challenging environment for client discretionary spend. The merger integration has gone well at Berson and has been a key focus area for that leadership team in 2024. And finally, Specialist Agencies saw like for like revenue less pass through costs to declined 2.3% CMI Media Group, our specialist healthcare media agency, grew strongly offset by declines at Landor and Designbridge and Partners. [indiscernible] Turning to Slide 11 on our performance by region. North America declined by 0.7% in 2024, with growth across automotive, TME and financial services offset by lower revenues in Healthcare and a tougher comparison for CPG. [indiscernible] revenues from technology clients across North America moved back to growth in the second half. The United Kingdom declined by 2.7% in 2024, lapping a prior year mid single digit comparison. Our UK business was impacted by its higher weighting towards project based work, partially offset by growth at Group M and OgleVie.

And in Western Continental Europe, France, Spain initially all grew during 2024. Our largest market, Germany, saw a like for like decline of 1%, reflecting macro pressures and client spending in automotive and travel and leisure sectors in particular. Q4 growth in Germany improved to 4%, partly reflecting a softer comp. The Rest of World declined 2.6% in 2024 with Q4 declining 4.8%. This was largely driven by China, which declined 20.8% In the year and 21.2% in Q4 reflecting persistent macroeconomic pressures and client assignment losses. We expect performance to continue to be challenging in China in the first half of twenty twenty five, some improvement later in the year, we begin to lap easier comparisons from the second sure. Slide 12 shows Q4 full year performance across our client sectors. CPG grew 5.1% in 2024, but was down slightly in Q4 reflecting both weaker client discretionary spend and tougher comparator of low double digit like for like in Q3 twenty twenty four. [indiscernible] The technology client sector should further sequential improvement with growth increasing to 2.5% in Q4 versus 1.3% in Q3 with growth weighted to North America. Healthcare and retail sectors continue to be impacted by 2023 client loss with the impact from those continuing to lessen.

The automotive client sector declined 3.3% in Q4 with full year growth of 1.3% reflecting the timing of client spend through the year. The waterfall chart on Slide 13, Bridges are our headline operating margin from 14.8% in 2023 to 15% in 2024. A 0.4 percentage point improvement in constant currency. We are pleased with the delivery of structural cost savings from the strategic initiatives we undertook in 2024. I'd like to take this opportunity to thank the teams involved for their hard work in making these so successful. Together, these initiatives delivered in year cost savings of £85,000,000 ahead of our original plan to deliver 40% to 50% of the savings in 2024. This contributed to 0.7 percentage point margin benefits and we are on track to deliver full year annualized savings in 2025. Staff incentives were broadly flat year on year as a percent of sales, and other savings resulted in a 0.3 percentage point benefit to margin. Latter reflects actions taken across our back office deliver greater efficiencies and to mitigate the impact of inflation. Overall, we saw a year on year reduction across our enterprise [indiscernible] our finance and real estate costs These actions enabled us to continue to invest in WPP WPP AI and data, which an incremental P and L investment of just over £30,000,000 representing a 0.3 percentage point impact on margin.

Investment was focused on enhancements to tools as well as deployment across our teams and rolling it out to new and existing clients. Looking forward to 2025, we will continue to prioritize investment in WPP WPP, in AI and the data on our plans include £50,000,000 of incremental cash spend. Slide 14 bridges the year on year movement on net debt, which ended 2024 at £1,700,000,000 £800,000,000 in 2023, Our adjusted operating cash flow before working capital was £1,300,000,000 and with a very strong focus on disciplined working capital management, we saw a net year on year inflow of £117,000,000 We saw an outflow of £133,000,000 comprising the net impact of dividends from associates and two minorities. And earn outs of £97,000,000 Earn outs increased due to accelerated payments in 2024 and against the prior year figure, which benefited from a one off settlement. Net interest and tax contributed to a $589,000,000 flow primarily driven by higher interest costs as expected with cash tax broadly in line year on year.

M and A spend was £153,000,000 All set. By disposals, which included the sale of FGS, which resulted in cash receipts of £163,000,000 in late Q4.

Five.

Cash dividends were GBP $425,000,000, broadly consistent with the prior year, which with buybacks and other items amounting to an outflow of £14,000,000 We Average adjusted net debt in 2024 was GBP 3,500,000,000.0 compared GBP 3,600,000,000.0 in 2023. The average adjusted net debt to headline EBITDA ratio for 2024 was 1.8 times which was slightly down versus 2023.

And finally, for me, turning to Slide 15, which sets out our guidance for the full year. Starting with like for like, we are guiding to like for like range of flat to minus two. This does reflect a degree of caution in light of the uncertain macro environment as well as our expectation of the impact of net new business as we go through the year. [indiscernible] expect our like for like performance to strengthen over the course of 2025, with the H1 impacted by the runoff of historical client losses, before recent wins fully ramp up. This will be reflected particularly in Group M's performance in the first half. On profit, we expect to hold headline operating margin flat excluding the impact of FX with the benefit of annualized structural cost savings and continued disciplined cost management offsetting that incremental investment in WPP Open, AI and data as well as the margin drag from the sale of FGS. To £110,000,000 versus GBP £275,000,000 in 2024, and adjusted operating cash flow before working capital of around £1,400,000,000 So thank you, and I will now hand you back to Mark, who will take you through our priorities for '25.

So thank you very much, Joanne. So Capital Markets Day just over a year ago, we framed our strategy as being based around these four strategic pillars. Let's look at the progress we made on each of these in turn. On the first, AI data and technology, 2024 is really about cementing WPP Open as a single technology vision. Platform and team. And I think it's a significant departure where we've been historically where technology was often developed at an agency, sometimes even at an office level. This is allowing us to build a single platform that spans the whole company, integrates how we work and also how we work with our clients. With great investment in WPP Open now at £250,000,000 per annum, we're seeing greater adoption with 33,000 people using it in December and increasing deployment in our clients. And I'd remind you Joanne pointed out, that that incremental investment came within delivering 40 margin points of base basis points of margin improvement over the course of the year. Personally, I use it every day, showing CEOs and CMOs how it can transform their marketing efforts. On the second pillar, the benefits of creative transformation are coming through for our clients, with the top 10 clients growing 2.8% throughout the year, the top 25 clients growing 2%.

A tangible sign that our investment is bearing fruit. MediaStudio also played a crucial role in our Amazon, J and J and Univer wins, three of the very biggest media reviews in the second half of Yeah. Now new business performance is the proverbial supertanker, but I do remain encouraged by the improvement of our efforts in the second half of the year. Now as you know, 2024 is a year of heavy lifting in terms of network consolidation and simplification, the third pillar, something that required a lot of effort and intensity from our leaders as well as patience from our clients and talent. The good news is it's now largely complete. Our top six networks now represent 92% of our pro form a revenue, and we have a much stronger and more integrated proposition for our clients. And when I look at our growth, while I cannot point to significant losses, due to these combinations, I do believe that our teams are naturally more focused internally than externally. Particularly in the first half of the year, and that naturally had an impact on our new business performance. And finally, as Joanna said, we used these change deliver structural cost savings of £85,000,000 which helped to improve headline [indiscernible] and fund our investments in the business.

Latter coupled with the sale of SGS, also brings EUR1 net debt down 1.7%. As we turn to 2025, one of the most important message I want you to come away with is that WPP is leading in AI. We're excited about the prospect of AI augmenting human creativity, carefully and systematically impacted, and we believe it will be an opportunity for us as a company. It's going to impact and augment our people's creative talent and make them more [indiscernible] and is going to deliver greater integration grow the value of data that we have [indiscernible] [indiscernible] Now our approach to AI is not based around activating data ID is about applying it to the end to end marketing process deliver better returns to clients. So it's worth taking a detailed look to see how this works in practice. Now to show how WPP Open will deliver greater efficiency and effectiveness, let's look at how these three components Creative, Production and Media work together to integrate the end to end marketing process. Creative Studio is used by teams across the business to augment the creative process with AI. For example, and this is just some of functionality, it enables us to take briefs, surface new insights, come up with different territories and test them in real time against synthetic audiences.

These ideas then flow seamlessly into production studio which automates how we can turn it into content in a way that's safer brands are much, much [indiscernible] And finally, MediaSue takes those assets and automates the process of media planning and buying using AI transform how media is bought. We ability to automatically plan media campaigns and optimize them in real time. And the real power comes when these three components work together We're seeing a 29% improvement in productivity, an 86% reduction in delivery times and trillions more impression evaluated using [indiscernible] So how is this landing with our clients? I think a really important point to make is that we're worried like all our clients to adopt WPP Open is in no way a one size fits all solution in reality. In practice, we need to meet our customers where they are, rather than where we would like them to be. So here, we set out three examples of our largest customers who have embraced WPP Open. And it's important to note that how they've done that is different. For client A, the adoption of Open has come across alongside a massive process of consolidation moving for literally thousands of global suppliers to just one, Because of this, they were open to a transformative approach to creating custom solutions and embracing integrations.

It's worked. Very well for them. For them, WPP Open is increasingly being used to turn global ideas into local executions across different media from digital to retail. We've also built into the platform specific tool the Lambda create content multiple partners in market. Our client B is much more focused on using WPB Open to standardize and aspects digital meters drive efficiencies. Relied more heavily on the workflow capabilities of the platform and has seen strong early success. Encouragingly, we'll be progressively rolling out the use of production studio alongside MediShow Studio in 2025 to bring Media and Production more closely together. So here, WPP Open is enabling technological innovation and we're moving at the pace that the client wants. Client C meanwhile is very focused on technology led innovation. It's using WPP Open to create custom trained models, our brand brains, which it uses on a self-service basis. They're increasing signals as a managed service, but it's also making our relationship with them more sticky. [indiscernible] they are more focused on getting our input into strategy and planning As a CMO of that client said to me, and I never want to see a piece of content where an agency creative was not involved.

So it's a balance of [indiscernible] and human creativity, that's why we talk about augmenting human [indiscernible] And now we have the capability about making sure we get our go to market right and meet the clients where they want to be. And nowhere is this more important than at Group M. Where to be frank, we have not realized our full potential in the last eighteen to twenty four months. And key to closing the growth gap with our performing peers is making sure that we can leverage the full benefit of AI, data and technology at GroupM. With this in mind, we asked Brian to join us today and I wanted to introduce him properly before he talks to you about [indiscernible] plans are for Group M. And Brian joined us, or I should say rejoined us in September, having previously served as Chairman and CEO of Infosome. For those of you who don't know them, Infosum is a leading marketing data company with experience with both client and media data and connecting the two. Prior to that, Brian led Zander, the advertising business AT and T, What's also important is that Brian spent ten years at WPP WPP, before leaving us to join AT and T. He was latterly CEO of GroupM North America before that was the brains behind the creation of Zaxys, the agency world's first programmatic buying platform and probably the first technology led proprietary media business.

I know Brian extremely well having worked closely with him back in 02/2007 when he joined WPP WPP the acquisition of twenty fourseven RealMedian WPP responsible for that business So I think you should see why we're excited for Brian to come back. As our business, data and technology the media business, both the buy side and the sell side. It's been with us for six months now. So we thought would be a good opportunity for him to share his thoughts and strategy.

Thank you, Mark. Good morning, everybody. I'm Brian Lesser, Global CEO of GroupM. It's great to be here with all of you [indiscernible] excited to share Group M's vision and how we're driving priorities to improve our offering. Today, I'm going to focus on two key areas. The first is Group M's five strategic priorities. And the second is our data strategy. So let's dive in. Since rejoining Group M, I've engaged extensively with [indiscernible] to understand their needs, The conversations have been insightful and several key themes have emerged. Clients are asking, how can we drive effectiveness through AI and technology. How can we enhance efficiency through greater integration? What structure makes it easier for clients to work with us?

To address these, have taken significant steps but above all, we remain relentlessly focused on client retention and growth. [indiscernible] We are focusing on making client experiences more seamless, and frictionless while delivering exceptional value. On the client growth and new business side, we're driving success through creating the most competitive offering backed by our investments in data and technology. And leveraging the strongest global network with WPP's assets for multi market. Advertisers. We've seen early progress with recent wins including Johnson and Johnson in The U. S, retaining and growing the Unilever business in The U. S, expanding our relationship with Unilever globally, securing Amazon's global business outside of The Americas. [indiscernible] Data, technology and Open Media Studio were fundamental to winning and expanding with these businesses. To drive change in these focus areas, I've defined five key priorities. First, [indiscernible] and technology. We are fearlessly embracing AI and technology with the future focused open platform designed for tomorrow. WPP Open and MediaStudio form the backbone of this approach. And we're driving towards 100% adoption from our clients. This will enable our shift from ID [indiscernible] That underpins our data strategy. Second, [indiscernible] We are up leveling our talent by investing in technical employees workforce development, ensuring alignment with our clients' future needs.

Additionally, within the global organization, I have restructured the team to focus on what's most important to our business, by pointing four new roles focused on clients, [indiscernible] transformation and operations and market expansion. Third, innovation. Are entirely focused on innovation. Introducing new proprietary trading models and next generation media products. Will allow us to offer more performance to our clients, at efficient prices using our expertise, [indiscernible] and data capabilities to redefine industry standards. Fourth, collaboration. We're improving internal and external collaboration across GroupM and WPP integrating media, creativity and production. More effectively. And finally, fifth is our org design. We are further simplifying our structure to become a unified company with one voice, to clients and partners. 2024, we made significant strides in eliminating complexity, but we know that we have to be simpler and there is more work to do. Now let's talk about our data strategy. And AI because AI is fundamentally transforming our industry. Is quickly becoming the norm in how we work. As Mark spoke about, consumers are engaging with AI in new ways, gaining a deeper understanding of its and risks. As this shift happens, Group M will fundamentally change the way we work.

Streamlining our media planning and buying via automation. We won't just react to this change, we will lead it. The market is quickly moving from identity based solutions to AI driven [indiscernible] Here's what that means. Believe that data connectivity is more important [indiscernible] owning a database. And the value of connectivity will only grow over time. No matter how many traditional IDs you own, it will never be [indiscernible] The real power lies in connecting data across publishers, partners, retailers platforms, and clients and thoughtfully using our own first party data as data in the world. The future is about connecting disparate data sets to extract insights, create predictive models, and drive Traditional ID solutions like those grounded in email addresses only learn from overlapping [indiscernible] Relying on outdated look alike models that limit Insights. Using technologies like federated learning, we can create shared knowledge and predictions across all of our partners without sharing raw data, and activate via simple connector. It's a game changer. And as Mark mentioned, this will drive significant efficiencies in audience targeting and real time campaign optimization, tailored to clients' unique needs based on their own data maturity.

By 02/1930, we'll be working with thousands of data partners to guide audience decisions. The only way to harness that scale is by leveraging [indiscernible] at every step of the process. No singular legacy database can manage that scale and complexity. Twenty twenty eight-five marks defining year for Group M. AI driven data strategy and commitment to innovation will position us as the industry We With our unparalleled global capabilities and relentless focus on simplification, efficiency, and growth we will drive results for our clients as true business partners. Thank you for your time. I look forward to driving success together in the years ahead. Now I'll hand it back to Mark and I look forward to taking your questions in the Q and and So thank you very much, Brian, and I'm sure there'll be a lot of questions for you in the Q and A, particularly on the refreshed data approach from ID to AI. So let me outline our priorities for 2025. And look, I need to start by acknowledging again that 2024 did not end quite as we wanted. And even if the minus 1% was technically in the guidance range, I know it would be a disappointment That said, we do need to look at the enormous progress we've made 2024 terms of the heavy lifting in network consolidation and simplification, and the step up In data, and technology and the progress we made on those financial metrics.

As I look at 2025, there are really three things that we need do as a company. Of WPP Open, Get Group N back to growth. And win more new business. And each of these are really related WPV Open, we need to push it harder. We're investing more but we need to get all of our client facing people using it by the end of the year. We shouldn't underestimate the progress though. I don't think there's many companies out there that have thousand of their own people using a proprietary AI platform every month. So that is an achievement. For GroupM, you heard Brian's plan. He has a great sense of urgency around data. Around proprietary media and around new business with a focus on The U. S. And in new business, we need to continue to use WP Open deliver and improve our new business success. In the last year, we saw pitches with WPP Open at the heart having a 10% increase in success rate this year We don't want any pitches without it. And we need to unlock more integrated pitches with different commercial models allowing us and our clients to share in the value we create and deal with some of the pricing pressures that we sometimes see.

And finally, we need to do all of this with more efficient operations and strict capital allocation areas that Joanne is very focused on. Success on this [indiscernible] deliver our medium term financial framework. And the central point is that while performance is not where we wanted it to be. We do believe that the strategy we outlined this time last year on track. Reflecting this, we remain confident in our medium term targets, are for the group to deliver 3% -plus organic net revenue growth over time, achieve 16% to 17% margins while also delivering 85 cash conversion. Now final word before we dive into Q and A, I am extremely proud of teams who worked very hard in 2024 across many dimensions, whether it's the creation, deployment of WPP Open, the integration of Unmager, integrated creative and PR networks or the simplification of Group M I'm very grateful to them and to our clients. Their continued trust and perseverance. So thank you. Excited about building on the hard work in 2025. And showing what we can do and delivering the benefits of creative transformation to our clients. Thanks for listening. With that, available to take your questions, which we do both in the room and on the phone.

I think we'll do it sitting down. And we'll start, I guess Adam was up there.

I've got three questions, if I can. Okay.

Think the first question is Adam Berlin from UBS. Yes, thanks.

Midpoint of the guidance for next year is I think everyone's a bit confused about why we're not going to get an improvement next year given you did do better in account wins in 2024 than 2023. China is a really easy comp and a few other things that kind of went wrong this year. You just give us a bit more of a breakdown maybe by segment just help us understand why you're not guiding for an improvement in organic growth? That's the first question. Second, a similar type question on margin. How are you going to deliver flat margins with negative growth? Does that mean staff incentives are going to remain low again what else is there that means we should believe that you can deliver the flat margins in that [indiscernible] And third question is, you helpfully give this metric of average net debt divided by headline EBITDA to give us a kind of average leverage. That number was still quite high, 24%, but that's probably because the FGS revenue receipts weren't in there. So can you give us any guidance on where you expect that metric to be at the end of 'twenty five because I assume that's how you think about capital allocation [indiscernible] First, because it's easy.

So our average leverage, we'd expect that to come down towards the midpoint of our target range, which is 1.5 to 1.75 times. As you said, the FTS proceeds were received in December, so very small impact on the average metric in 2024. On our guidance, we've guided to flat to minus two, and you're right, the midpoint is in line with 2024. As we think about the bottom end and the top end of that guidance, there's a couple of things to consider. Q4 was softer for us than we were expecting. We talked about softer client discretionary spend. And in the first couple of months of the year, the macro uncertainty has not improved if anything in the last few weeks. I think it's got more uncertain. And that makes us cautious particularly in the first half from the perspective of project based spend. Client discretionary spend. And that's really reflected in that range on the bottom end. The second factor is our net new business. Look, we were encouraged the progress we made in the second half of net new business. Net new business for 2024 was flat with 2023, but it was higher in the second half, so skewed to that second half.

The important thing to think about net new business is the sequencing of that and how it translates to like for like. So in the first half of the year, as I said, we will see bigger impact from client losses particularly in the first half of twenty twenty four, before we see the full ramp up of some of those client wins. So some of those client wins, which were fantastic will be great clients for us, will not start to ramp up until Q2. So I think that's important to think about those two levers in the guidance. And at the bottom end, as I say, it assumes a more cautious macro perspective as we go throughout 2025. And it also assumes that we don't see continued momentum in our net new business, which we are expecting to. At the top end of the guidance, obviously, you see the flip of that The macro, I think, will remain challenging in Q1, but we start to see an improved improvement as we go through the year. And we continue to build on that net new business momentum. And the pipeline is healthy and we've got many good opportunities. So that's really where we are.

On the guidance. In terms of our margins, we've made I'm really pleased with the progress we made in 2024, and that was really driven, as I said, the structural cost savings, the back office efficiencies, but we're also continuing to make progress on the commercial delivery that we talked about at the CMD. And that's enabled us to invest importantly in WFE OpenAI and Data And it's important that we continue to do that in 2025. We Our guidance reflects fact that wherever we land the top line, we do expect to retain flat margins for the year. I think we'll continue to make more progress on those efficiencies throughout 2025 to be able to fund that. You mentioned specifically staff incentives. I think it's important to call out 2024 was softer on the top line, but we held incentives flat as a percent of net sales. And that's certainly not supporting the margin progress we made in 2024.

I mean, there's still low versus history, let's say. Will you disagree?

They're low if you tick the last three to four years, we had max incentive payouts in 2021 and a high level of incentive payouts in 2022. So they have come down from those highs, but I don't think it's an issue for us in terms of staff retention. There are other ways that we look to reward our staff. I think just on the year, I'd say, as Joanne said, the new business pipeline is is strong. I think there's a number of big opportunities I do think some of the nature of those means they're taking longer to close than we'd expect. They're quite complex. There's lots of things going that are more complex. I think it's important to think about the client our growth of our major, our top 10 clients last year grew at 2.8%. Our top 25 grew 2% and our top 50 grew 1.1%. So we are seeing good growth in stronger clients. And I think we did guide to sort of We were cautious in Q3 about Q4 because we were concerned about the impact of project related businesses. And I think impacted, as you see, through the numbers in The UK and some of our businesses.

So it does need to be cautious in Q1, but I think we are we do see a lot of opportunities ahead. For this for this year. And certainly, as a team, we're gunning for the top end of the guidance. [indiscernible] Yes.

Thank you. This is Adrian from Bank of America.

So a couple of questions if you don't mind. To come back on the point about the cuts in discretionary spending in Q4, I think you noted CPG was flat in Q4 versus I think it was up eight in Q3. We had comments from WPP and G Talking about reducing their fees to agencies because of greater in housing. Is there a correlation between these two information? Secondly, perhaps for Brian, you talked about not necessarily owning traditional ID, but moving into AI. Do you think WPP needs to make an acquisition or investment into a dataset like your competitors have done? And then to come back on the second half story, much of that is based around existing new business? And how much is it based around new business that you think you're going to gain? Thank you.

Why don't you take the first and third question? [indiscernible] [indiscernible] So again, I'll start with your third question, Adrian. Thank you for the question. Questions. The second half, so we've talked about strengthening performance through the second half. And Really, there's a couple of factors within that. China will start to lap softer comps in Q2. And also that sequencing of net new business that you asked about I would expect it to be an improvement in H2 based on existing net new business. And so as I talked about, those existing losses will hit really from Q1 some of those wins will only really ramp up from Q2. So we'll see an improved performance in H2 as a result of that. In terms of CPG, look, in 2024, we delivered mid single digit growth in WPP. And it's our largest sector We would expect to see continued growth in 2025. I think, again, that growth will be weighted probably to the second half. And what we are seeing in Q4 was about over 50% of that impact was really driven by some of the factors that we've seen earlier in the year but also that variable incentive that I talked about really impacted that CPG sector.

And so I would consider that a one off. We go into Q1 and Q2, I think we've seen mixed comments from CPG clients. I think that's reflected perhaps in some of the softer discretionary spend that we saw in Q4. [indiscernible] But they are many of our clients are talking about continue to invest in their brands the importance of AMP, And so it's a very strong sector for us In terms of the in housing, and Brian may want to add on this, I think some of our some some companies that are talking about in high senior round marketing services to the extent of that is probably an outlier. Think if anything and I'm Mark, quoted a client in his script today. I think we're seeing less of a risk from in housing as a result of AI and what clients are looking to do is more marketing transformation, more integrated services working with agencies to help them do that. And we see that as an opportunity. Of course, there's always areas of their marketing service that will make sense for them to in house but we're not seeing that as an overriding risk for our business.

Adrian, on the question of whether we need to buy a database, I think it's important to understand that the world of advertising is shifting [indiscernible] the notion that you have to ground everything into a traditional CRM database, [indiscernible] a world where you can build predictive models using more sources of data. And disparate sources of data and data that's not available to a traditional CRM database. So we're very focused on moving from ID to AI. And what I mean by that is if all you ever do is ground something in a cookie or a email address or a mobile ID then you're severely limiting your view of consumer behavior across an increasingly complex and fragmented. Marketplace. Data in a CRM database is not going to help you With TikTok or Meta. We have proprietary data. At WPP, and that's important And I'm not saying that having data is not important, But what's just as important, if not more important, is having the technology and the modeling capabilities to build predictive performance at scale to really meet consumers where they are. In this fragmented landscape. So of course, we're constantly looking at what we can [indiscernible] In terms of building out that model.

But no, we're not focused on a legacy database at the moment.

Good. That's Steve.

Thanks. Steve Lishti from Deutsche News. First question, a few parts really. Just looking back on fiscal twenty twenty four, just to help us, can you just remind us of the building blocks of the drags that were there? And the nine months figures, I think, we sort of talked about various things. So I'm thinking in terms of new business, you said the new business net net was about neutral at the nine months on a kind of pro form a basis. So what would it be at the twelve month period. And also just remind us in terms of what the drag in like for like for China and tech was specifically We can kind of work it out, but just helpful to get your insights there. And then finally, just a question for Brian. In terms of the plan, to move to where you want to move to I know it's everything's changing fast. But kind of where are you in that journey in terms of your go to market? When do you think your go to market strategy will be absolutely right for what you want to do. So just thanks for the question, Steve.

Look, there were three factors on that weighed on 2024, and we've talked about those consistently through the year.

The first was Net new business and client losses, the largest being that healthcare client assignment, which we talked about as having on around a 1% like for like impact in 2024. That will be fully rolled off by Q2. Second factor, as you talked about, was China. China was an 80 basis point drag for the full year 2024. As we go into 2025, we start to lap softer comps from Q2 for China. I would China to continue to be a challenge in H1 Q1, in particular, And then potentially stabilizing in the second half, and that's reflected in our guidance. And the third factor we talked about was project based spend. And that impacted agencies like AKQA, Lamdoor and Design Bridge, and that was also about 80 basis point drag. So overall, those three factors were about a two basis point drag 2024. I think in net new business, the comment that you're referring to is we've said in the past in a good or bad year, that new business can be plusminus 1.5%. I think we were asked in Q3 about it be net neutral going into 2025. And I think as I I've explained, I think we'll see a different impact in H1 versus H2.

So I think a drag in H1 and more positive in H2.

Sorry, could I just go back on that particular point? So if we were neutral at the nine month figures, are we still neutral at the fiscal 'twenty four year end? And I understand what you're point about the phasing. But on a kind of profile, I'm asking what happened in the fourth So look, I think it's we talked about 4,500,000,000.0 net new business in 2024, which was consistent with 2023, that was more weighted to the second half. It doesn't I'd love it to, but it doesn't translate right through to like for like in the same way every year. So it's a sequencing of those losses and wins that impact And so in Q4, we had some great wins. We also had a loss, so I think it's broadly similar to where we were at the end of Q3.

In terms of where we are on our journey and sort of satisfied with our go to market. Have some more work to do in terms of simplifying the GroupM organization. Our client expectation is that we bring them the best of the group in every engagement. But we're in terms of our go to market, we're there now. I competing effectively. We are winning pitches. We are building businesses with our clients we have everything We need to compete win and retain clients now. Only constant in this industry is change. So you'll see us evolve, but that's the expectation of our clients. [indiscernible] Good morning. It's Joe Thomas from HSBC.

Three from me as well, please. The first thing is the AI investment and the step up. Would Just what's the thinking behind the need to do that? And it OpEx? CapEx? And how is that changing? The second thing, Brian, if I could ask you sort of the same question in a slightly different way. There's been a lot of debate about what was wrong with Group M in the past. You've talked about what you're doing right now, but perhaps you could identify what you think was wrong there and fundamentally how that's changing. I know you put five priorities up on the screen. And then finally, question on the interest, the changing interest line. This year. So the guidance has gone up a bit. What has moved there to to do that really?

Why don't I just start on the AI question? Look, I think if you look If you look at where we come from, we acquired Sotalia in 2022.

It was an AI research company at the time that had 100 people It today has 300 people. And is actually selling work externally, but many of these people are working on our own platform. So we've used an acquisition to build an important capability. I think we're seeing it resonate to such a degree with clients that we know we need to invest more And it's about getting the right balance between the margin improvement and growth. And if I think about if I think about the financial metrics for 2024, so top line, disappointing, okay? No, I'm not going to argue with that. We did flag Q4 a little bit at Q3. But I think even there, the decline in project expense will be a bit more intense than we Q3.

But I think if I look at the margin improvement, we delivered 40 basis points holding the incentive and a 30 basis point investment in WPP Open. So we are becoming a more efficient and effective company to the restructuring is bearing [indiscernible] we're using that to invest in WPP Open in 2024.

Now if we don't think about the margin guidance in '25, we're saying we're going to hold it flat. Despite some WPP line Now what would happen? Some of the savings from 2024 flow through on an annualized basis in 2025, so that will help.

We're increasing the investment in AI by sort of similar amount because we think that it will bear fruit in our new business what we don't want to do is cut investments in the business to stop the growth. So I think that is very much the approach that we're taking. And I think the increase in investment [indiscernible] is less about is more about because we see the opportunity, than less about we feel kind of the need to do it. We think we are ahead. Everyone is quite cautious about showing their platforms in public, but that's what we hear [indiscernible] And I think that it is going to be big opportunity for us to have very, very different conversations with clients. We said in the statement, maybe I should have said in my remarks, I think the way that clients buy what we do is becoming much more like technology services. It used to be and it's still creative of the but it's much more like technology. They're taking a more strategic approach. They're thinking about who their partners are. They want to look at simplifying and rationalizing those rosters. I was with a client, a consumer health company, the other day, they had 1,400 people in their marketing teams around the world.

And if you can read it fourteen fifty agencies.

And more than one agency for every person. And that is not uncommon. And if you're the CEO or the CMO or the CIO trying to drive change, can't do that with a roster of agencies that are so complex and deploy deploy this technology. And it's not I know sometimes you feel like there's a danger that it's sort of a diversion a diversion from the reality. I don't think this is a diversion from the reality. I think it's what we need to do to get the business back to growth. I don't think that it's impacting there's been some comments out there that maybe it's impacting pricing and revenue and that's why I saw the softness in the I don't think that's the case. I think that if I look at and you can look through the numbers, the parts of the business that have most impact [indiscernible] AKQA that's very project related, those parts of the business.

And by the way, technology services not been immune to some pressure on top line. I think Group N and Ogru okay, but nowhere near where it needs to be from a competitive performance. And if you look at we need to do to close the gap with our peers, is really about It's really about group M. So there's no pressure on Brian.

We're probably 10% delta for where we need to be and it's half our business. It's a 5% delta. Now the other thing I'd point out is that we don't all report the top line in the same way. If we reported our top line by Omnicom for their top line, we'd be at 2.1%. So I think that's something else that we sort of need to consider. So it's a bit of a long winded preamble, but I think it's important to sort of talk think about AI and our investments there in the right context. It's an investment we need to make because we see the potential. And I think that it will fund growth in the business and will deliver [indiscernible] in In that, I mean, just on that as well, you asked about OpEx and CapEx, it's balanced the $50,000,000 incremental is balanced pretty equally between OpEx and CapEx. And interest, look, I think this is pretty straightforward. Our interest cost or net interest cost in 2024 was lower than what we guided to we're guiding in 2025 to flat interest. We are benefiting from the very successful bond buyback. We used the FGS proceeds to do.

We're seeing an impact from the successful refinancing in 2024 bonds. So we've got that full year effect of those higher blended rate as a result of that. There's a little bit lower interest income and there's a bit of a from FX as well. Joe, on your question, what was wrong in the past? I mean, there was nothing wrong in the past. Group M is a a big vibrant business. I would say the one thing I've observed is [indiscernible] was too complex and not focused enough on And we've made those changes and we'll continue to make those changes. We're relentlessly focused on our clients and through the five priorities I discussed, we'll invest in our our platform. We have a market leading platform And I think some of our competition has been good about positioning legacy data assets as a future forward strategy. And we have a different take on that, and we're winning business with that strategy. [indiscernible] focus on our platform, our people, We will build the culture of innovation. Many of the innovations that have come out of the media industry originated at Group M. And we will get back that culture.

Who's next? Richard, then we should start to take if there are questions on online, we should take those. I'll try to be very brief. Question for Brian and one for Mark. For Brian, you mentioned AI tools. We see a rising portion of spend go through Big Tech.

They all are seeing a rising portion go through their own AI tools. You see ad tech intermediaries talking about curation and data marketplaces. What portion of the market do you see addressable for incremental spend that you can pull into Group M or incremental margin you can pull into Group M? And a simple question for Mark.

Two of your major competitors are proposing to undertake a very messy merger What speaks against investing margin this year to take more market share and finally deliver the growth I think investors are mostly looking for. Thanks.

Okay. Brian, do you want to Yes.

I mean, in terms of Our big technology partners investing in AI. That's That's our expectation and that's a good thing for us. Their investments in AI don't mean that we're disintermediated from helping our clients spend across platforms. In fact, The more complex platforms get, the more valuable our services and technology is to our clients. So in terms of where we can offer incremental margin, our two fastest growing sectors are retail media and addressable television or CTV. And we've already delivered a lot of efficiency and performance to those categories and we'll continue to innovate in those categories and I expect those to become a bigger part of what we do with Group M. But it's not just limited to that. I mean, one of our fastest growing trading partners is TikTok and you wouldn't have necessarily predicted that five years ago, but they're a good partner of ours and five years from now, there will be a media company that we've never heard of that will be trading very effective with. So I think there's nothing but upside in terms of how we help our clients engage consumers, how we predict consumer behavior at scale And I think we have the best model to do that.

So look on your question, as I talk to clients about the strengths of WPP, we have a very well balanced business across creative, Production and Media. I point out that creatively, WPP were to the extent that they master and they do they do to some clients, they don't to all, Creative Company of the Year, can. Ogleview was network of the year and our client Coke was Brand of the Year and our client Unilever Creative Market Of The Year, So Creatively Was Strong. Production Business In Hogarth, I'd say, is the biggest in the industry. And Group Hem, as Brian has said, is very strong. And even post the merger, Group M will be by a smidgen number two based on the pro form a figures. Number one, still in Europe and Asia, which is probably the markets where scale counts the most. So I think our our business is in a strong position. And then secondly, we have through WPP Open, I think, a single platform that spans the whole company that I think is extremely powerful. And then the last point I'd make is that the restructuring is behind us. Now I have no doubt I don't think there are specific client losses we can point [indiscernible] in these mergers.

But I do think people do become more internally focused than externally focused. I think that will be weighed on the business over the course of the year.

We've had good I've got a nice sort of good client win in VML. Yes, yesterday. I think, AKQA, it's had a very strong start to the year in terms of new business, one three major clients the first two months of the year. Look, none of that is not trying to change our guide. I'm just saying that there are positive things, as you say, in terms of the client comments. And the points I'd make to clients that I talk to is have a strong platform, strong technology, strong capabilities, excellent people, and we can start to engage in these more complex discussions because the types of marketing transformations the clients are looking for are complex to some extent they take longer. I don't think that it's a question of sacrificing [indiscernible] to drive to drive growth. Yes, we have to be competitive on margin. And yes, we have to use all the tools in our armory offshoring, moving people to cheaper locations, centralizing services. So all of the discussions we have with clients are [indiscernible] how we deliver to them more efficiently, because that's absolutely what they want, But I don't think that's simply a case of sort of a straightforward trade off between price and margin that somehow if we reinvested X amount, we'd grow X amount faster.

I think it's more complex than that. Let's take some questions online. So I'm going to [indiscernible] [indiscernible] Okay, they're coming.

There's three questions online or three people online.

In my experience, nine questions.

While we wait, is there anyone anyone in the audience has a question or will to get the online questions Okay. So apparently the three questions that were online [indiscernible] not come. So everyone wants to come. Okay. So look, there's no more questions. Thank you very much for attending. And taking the time to come and be with us, the person you know. At WPP. We believe in in person working is better in the long run for the organization than [indiscernible] [indiscernible] So pleased to see you all here. And Joanne, Brian and I really appreciate your interest in WPP. And it is a challenging macro environment out there, but I am very positive about the plans that we have and look forward to updating you on the progress over the coming months. Thank you very much. And thank you everyone who joined online.