Annual Report & Accounts 2009 & Accounts Report Annual Advertising Media Investment Management Consumer Insight Public Relations & Public Affairs Branding & Identity Healthcare Communications Direct, Digital, Promotion & Relationship Marketing Specialist Communications 6 Ely Place Dublin 2 Tel +353 1669 0333 Fax +353 1669 0334 100 Park Avenue New York NY 10017 Tel +1 (212) 632 2200 Fax +1 (212) 632 2222 (from 7 June 2010) 27 Farm Street London W1J 5RJ Tel +44 (0)20 7408 2204 Fax +44 (0)20 7493 6819 Yebisu Garden Place Tower, 29/F 4-20-3 Ebisu Shibuya-ku Tokyo 151-0053 Tel +81 90 9688 1951 Fax +852 2280 5412 31/F The Center 989 Changle Road Shanghai Tel +86 21 2405 1649 Fax +86 21 2405 1600 www.wpp.com Annual Report & Accounts 2009 Contents The fast read What we think 2 A six-minute read 78 After the threat of apocalypse, new centres of gravity by Sir Martin Sorrell Who we are 102 Why a Ruritanian Poltergeist can be as Valuable as an Automated Processing Plant 10 Our companies & associates by Jeremy Bullmore Why we exist Who runs WPP 12 Our mission 104 Board of Directors 107 Advisors to the Board How we’re doing How we behave 15 Financial summary 18 Letter to share owners 109 Directors’ report 31 Reports from our operating brands 109 Review of the Company’s governance 32 Agency networks and the Nomination Committee 32 Ogilvy Group 113 Review of the Audit Committee 37 JWT 114 The Board of Directors 39 Young & Rubicam Brands 114 Election of directors 46 Grey Group 114 Conflicts of interest 49 United Network 115 Committee meetings 50 Bates 141 115 Share owner relations 51 Media Investment Management 115 Internal control 51 GroupM 117 Principal risks and uncertainties 53 Maxus 119 Sarbanes-Oxley section 404 54 MediaCom 119 Going concern Written and produced by WPP 55 MEC 119 Responsibilities in respect of the preparation Designed by Addison www.addison.co.uk 56 Mindshare of financial statements ©WPP 2010 57 Consumer Insight 119 Substantial share ownership 57 Kantar 120 Profits and dividends This Annual Report is printed on Revive 62 Public Relations & Public Affairs 120 Charitable donations 100 Pure Natural Silk. This paper is made from 100% de-inked post-consumer waste. 62 Hill & Knowlton 120 Significant agreements and change of control It is manufactured at a mill that is certified 63 Cohn & Wolfe 120 Articles of Association to ISO14001 and EMAS environmental 64 Burson-Marsteller 120 Group activities standards. It has been independently 64 Ogilvy Public Relations Worldwide 120 Share capital certified as meeting the standards of 65 Branding & Identity 121 Authority for purchase of own shares the Forest Stewardship Council (FSC). All pulps used by the mill are totally 65 B to D Group 121 Supplier payment policy chlorine free (TCF) and unbleached. 43 Landor Associates 121 Auditors The inks used in printing this Annual Report 67 The Brand Union 122 Corporate responsibility are all vegetable-based. 68 Fitch 122 CR and our business strategy 69 Healthcare Communications 122 How we manage CR risk and opportunity Printed at St Ives Westerham Press Ltd, ® 69 CommonHealth 123 The impact of our work ISO14001, FSC certified and CarbonNeutral . 70 ghg 124 Marketing ethics 70 GCI Health 125 WPP as an employer 71 Ogilvy Healthworld 128 Environment 71 Sudler & Hennessey 128 WPP’s carbon footprint 72 Specialist Communications 130 Supply chain 75 WPP Digital 130 Social investment How we’re rewarded About share ownership 132 Compensation Committee report 185 Information for share owners on behalf of the Board 185 Share owners’ register 133 2009 highlights 185 Analysis of shareholdings at 31 December 2009 133 What changed in 2009? 186 Dividends 134 Composition of the Compensation Committee 186 American Depositary Receipts (ADRs) 134 Advisors to the Compensation Committee 186 Financial calendar 134 The link between compensation and business 186 Share price objectives 187 Access numbers/Ticker symbols 135 The role of the Compensation Committee in 187 Online information improving risk management 187 Registrar and transfer office 135 TSR performance 187 American Depositary Receipts (ADRs) office 135 Key elements of short- and long-term 187 WPP registered office remuneration 187 Tax information 137 Share incentive dilution for 2005 to 2009 139 Directors’ remuneration and other statutory 189 Recognition for recent WPP Annual Reports information 190 About the artist 143 Directors’ interests Our 2009 financial Where to find us statements 192 Contact points 192 WPP offices 145 Accounting policies 192 Investor relations 152 Consolidated income statement 192 Investor information 153 Consolidated statement of comprehensive income 192 Media relations 154 Consolidated cash flow statement 192 Group information 155 Consolidated balance sheet 156 Consolidated statement of changes in equity 157 Notes to the consolidated financial statements 177 Company profit and loss account 177 Company balance sheet 178 Notes to the Company balance sheet 179 Independent auditors’ report 181 Five-year summary 182 Financial glossary This Annual Report, together with You can sign up to receive For information in a mobile format trading statements, news releases, WPP’s public monthly online news please visit presentations, and previous Annual bulletin by e-mail at m.wpp.com Reports, is available online at www.wpp.com/ewire www.wpp.com WPP ANNUAL REPORT 2009 1 Who we are The fast WPP is the world leader in communications services. It comprises leading companies read in all these disciplines: Advertising Media Investment Management Consumer Insight Public Relations & Public Affairs Branding & Identity Healthcare Communications Direct, Digital, Promotion & Relationship Marketing Specialist Communications There are more than 150 companies within the Group – and For a quick, pre-digested, highly- each is a distinctive brand in its own right. Each has its own compressed version of this Annual identity, commands its own loyalty, and is committed to its Report: read the next six pages. own, specialist expertise. That is their individual strength. Clients seek their talent and their experience on a brand-by- brand basis. Between them, our companies work with 354 The full story starts on page 8. of the Fortune Global 500, 28 of the Dow Jones 30, 60 of the Please read that, too. NASDAQ 100 and 33 of the Fortune e-50. It is also of increasing value to clients that WPP companies can work together, as increasingly they do: providing a tailor-made range of integrated communications services. Almost 700 clients are now served in three distinct disciplines. More than 440 clients are served in four disciplines, and these clients account for over 56% of Group revenues. Group companies now work with over 327 clients across six or more countries. Collectively, over 138,000* people work for WPP companies; out of almost 2,400 offices in 107 countries. * Including associates. Our companies and their websites are listed on pages 10 and 11. 2 WPP ANNUAL REPORT 2009 Why we exist What we think Our mission After the threat of apocalypse, To develop and manage talent; new centres of gravity to apply that talent, by Sir Martin Sorrell throughout the world, 2009 was very tough, a year of two halves, moving from for the benefit of clients; staring into the abyss to a less-worse performance. Although to do so in partnership; 2010 has been flat so far, we expect top-line growth in the to do so with profit. second quarter, albeit through easier comparatives. Mini- quadrennial events this year, including the FIFA World Cup Within the WPP Group, our clients have access to companies and the Shanghai Expo, will further bolster results. We see with all the necessary marketing and communications skills; similarly mild growth in 2011. companies with strong and distinctive cultures of their own; As we recover from the recession, a pattern is emerging famous names, many of them. of three-speed growth: slow in Western Europe, quicker WPP, the parent company, complements these companies in the US, and fastest in the BRICs and Next 11 countries, in three distinct ways. as identified by Goldman Sachs. First, it relieves them of much administrative work. Crosscut with this trend are big changes in function and Financial matters (such as planning, budgeting, reporting, technology in our industry – greater concentration on the control, treasury, tax, mergers, acquisitions, investor traditional below-the-line disciplines of marketing services, relations, legal affairs and internal audit) are co-ordinated growing migration to the internet and other technologies centrally. For the operating companies, every administrative at the expense of older media forms. hour saved is an extra hour to be devoted to the pursuit WPP is well-placed to make the most of all these of professional excellence. developments. Price pressure from global retailers, overcapacity Second, the parent company encourages and enables in industry and subsequent discounting, the shortage of operating companies of different disciplines to work together human capital, the growing needs of government as client and for the benefit of clients. Such collaborations have the the power of the internet to shatter business models, point to additional benefit of enhancing the job satisfaction of our the ever greater need for creativity, branding and innovation people. The parent company also plays an across-the-Group – basically what we do. role in the following functions: the management of talent, including recruitment and training; in property management; Sir Martin Sorrell’s article begins on page 78. in procurement and information technology; in knowledge sharing and practice development. And, finally, WPP itself can function as the 21st-century equivalent of the full-service agency. For some clients, Why a Ruritanian Poltergeist can predominantly those with a vast geographical spread and a be as Valuable as an Automated need for marketing services ranging from advertising through Processing Plant design and website construction to research and internal by Jeremy Bullmore communications, WPP can act as a portal to provide a single point of contact and accountability.