Annual Report & Accounts 2017 Accounts & Report Annual Annual Report & Accounts 2017 Report &Annual Accounts Visit us online Annual Report wpp.com/annualreport2017 Pro bono work 2017 wpp.com/probono/2017 You can sign up to receive WPP’s public monthly online news bulletin at wpp.com/subscriptions Follow us on Twitter twitter.com/wpp Become a fan on Facebook facebook.com/wpp Watch us on YouTube youtube.com/wpp Connect with us on LinkedIn linkedin.com/company/wpp This year, our Annual Report takes its visual cue from commissioned work created especially for us by illustrator Christopher Corr. The brief was simple. Convey in images the global creative strength that distinguishes WPP – with its unrivalled repertory of talent, a global team of 203,000 people, possessing between them every skill required to launch, defend, reimagine and expand clients’ businesses. More information on the artist, see inside back cover. Contents The big picture How we behave and how we’re rewarded 2 The fast read 81 Letter from the Chairman of the Company 4 Who we are 83 Review of the Company’s governance and 6 What we do the Nomination and Governance Committee 8 Where we are 86 Review of the Audit Committee 89 Letter from the Chairman of the How we’re doing Compensation Committee 90 Performance at a glance 11 Financial summary 92 Compensation Committee Report 14 Strategic report to share owners 105 Implementation of reward policy for 16 Geographic performance management outside the Board 18 Sector performance 20 Financial commentary About share ownership 24 Assessing and managing our risks 107 Information for share owners 32 Our four strategic priorities 110 Other statutory information 33 Outlook for 2018 36 Sustainability review Our 2017 consolidated financial statements 42 Sustainability and our client work 113 Accounting policies 47 Our people 122 Consolidated income statement 54 Environment 123 Consolidated statement of 59 Supply chain comprehensive income 61 Social investment 124 Consolidated cash flow statement 125 Consolidated balance sheet The annual essay 126 Consolidated statement of changes 63 A 20th Century Lesson for 21st Century in equity Brands by Jeremy Bullmore 128 Notes to the consolidated financial statements 159 Company profit and loss account Who runs WPP 160 Company balance sheet 67 Board of Directors 161 Company statement of changes in equity 71 The role of the Board 162 Notes to the Company financial statements 164 Independent auditors’ report Our leaders 170 Five-year summary 74 Company Leaders 171 Financial glossary 76 Client Team Leaders 78 Country and Regional Managers IBC Where to find us 1 WPP Annual Report 2017 The fast read Who we are Specialist WPP is the world leader Media Data Communications in communications Investment Investment Public Relations Brand Health (including digital, Advertising Management Management & Public Aairs Consulting & Wellness direct and interactive) services. Client Teams Country and Regional Managers Digital transformation, ecommerce and shopper Production management Shared services Our mission Where we work Partners for growth WPP has one simple purpose: 203,000 3,000 112 people offices countries to create growth for our clients. (including associates) We believe in data-driven insight and the transformative power of technology. Even more than that, we The Group works with 369 of the Fortune Global 500, all 30 of the believe in the application of human Dow Jones 30, and 71 of the NASDAQ 100. Some 913 clients are served in intelligence, vision and creativity to three disciplines. 629 are served in four disciplines; these clients account for over 53% of Group revenues. The Group also works with 477 clients the task of solving business problems. in six or more countries. That’s why we’ve assembled a global powerhouse of talent, with every capability required to understand and reach audiences, build brands, Industry recognition sell products and services, and prepare organisations for the future. As a worldwide team, we have the scale, flexibility and speed to deploy those skills where and when they are most needed, and to deliver the most effective and efficient growth Cannes International Effie Global WARC 100 solutions for our partners. Festival of Creativity Effectiveness Index World’s Top Holding Company Most Effective Holding Holding Company of the Year Company of the Year 2015, 2016, 2017 2011, 2012, 2013, 2014, 2012, 2013, 2014, 2015, 2016, 2017 2015, 2016, 2017 2 WPP Annual Report 2017 Our 4 strategic priorities in 2017 Horizontality New markets New media Technology, data & content Advance horizontality by Increase share of Increase share of Maintain share of more harnessing the Group’s revenues from faster- revenues from new measurable marketing collective capabilities for the developing markets media to 40-45%. services at 50% maximum benefit of clients. to 40-45%. of revenues. Our global brands How we’re doing AKQA Billings* Headline PBIT* Headline PBT* Reported diluted EPS* Burson Cohn & Wolfe Finsbury £55,563m £2,267m £2,093m 142.4p Geometry Global Reported +0.6% Reported +4.9% Reported +5.4% Reported +31.9% Constant -3.9% Constant +1.5% Constant +1.9% Constant +26.9% Grey GroupM: Revenue Revenue less pass- Reported Dividends Essence through costs margin* PBT per share MediaCom Mindshare £15,265m 17.3 % £2,109m 60.0p Reported +6.1% Reported -0.11 Reported +11.6% Reported +6.0% Wavemaker Constant +1.6% Constant 0.01 Constant +7.7% Constant +6.0% Xaxis GTB Revenue less pass- Reported Headline diluted (% change from Hill+Knowlton Strategies through costs* PBIT EPS* 2016 in reported and constant currency) Hogarth * Refer to financial J. Walter Thompson £13,140m £2,022m 120.4p summary on page 11 for Reported +6.0% Reported -4.3% Reported +6.4% additional information. Kantar Constant +1.4% Constant -7.5% Constant +2.7% 1 Margin points. Landor Ogilvy Training Social Reduction in carbon footprint Superunion investment contribution per £m revenue since 2006 tenthavenue VML £44.9m £49.4m 67% WPP Health & Wellness Women Women company Women Women Wunderman Non-Executive directors and senior total Directors executive leaders managers employees Y&R 33% 35% 49% 54% 3 WPP Annual Report 2017 Who we are. And why. No company in the world has a greater or more varied repertory of talent. 203,000 people work for WPP companies. Between them, they offer more than 80 distinct skills on which our clients can draw. They can do figures and they can do fantasy. They can learn from the past to make sense of the future. They can buy time and space with a heavyweight’s efficiency and they can fill that time and space with a storyteller’s delicacy. No two clients are alike, so the task of client management is both complex and simple. You need first to understand each client’s needs: in depth and in detail. And then you need to know which of those 80-something skills – working in harmony and ignoring traditional divisions – will best meet those needs. The management skill lies in the tailored application of talent to task. Because it disdains the vertical silos that can deter liberated collaboration, we call it horizontality. • 4 WPP Annual Report 2017 5 WPP Annual Report 2017 What we do Media Data Investment Investment Advertising Management Management Client Teams Country and Regional Managers Digital transformation, ecommerce and shopper Production management Shared services 6 WPP Annual Report 2017 Specialist Communications Public Relations Brand Health (including digital, & Public Affairs Consulting & Wellness direct and interactive) 7 WPP Annual Report 2017 Where we are WPP companies operate in 112 countries. Here we show the Group’s strength in the faster- growing markets of the world as well as some of our key mature markets.* Russia $170m Germany 2,000 $1.3bn 8,000 Turkey UK USA $2.9bn Greater China 17,000 $1.4bn $7.0bn $120m 13,000 South 25,000 France 1,400 Korea $700m 4,500 Pakistan $300m 1,400 Bangladesh Japan Spain $40m 1,800 $600m Vietnam 4,000 Mexico $2.1bn Egypt $11m 9,000 450 Philippines $200m 2,400 $20m $100m 600 1,300 Colombia India Nigeria $90m $600m 1,200 Brazil East 19,000 $10m Africa Indonesia $80m $500m 150 1,900 7,000 $50m Australia & South 1,600 $100m New Zealand Argentina Africa 1,700 * Top 10, BRIC, Next 11 (the Group has no $600m $450m $800m operations in Iran), 4,400 CIVETS and MIST. 8,000 28,000** See definitions on page 17. ** Includes fieldforce 8 of 25,000. WPP Annual Report 2017 Revenues denote the People denotes the collective figure for number of people employed all WPP companies by WPP companies (including associates) (including associates) in a given country and in a given country. are reported at 2017 constant currency rates. As at 31 December 2017. Russia $170m Germany 2,000 $1.3bn 8,000 Turkey UK USA $2.9bn Greater China 17,000 $1.4bn $7.0bn $120m 13,000 South 25,000 France 1,400 Korea $700m 4,500 Pakistan $300m 1,400 Bangladesh Japan Spain $40m 1,800 $600m Vietnam 4,000 Mexico $2.1bn Egypt $11m 9,000 450 Philippines $200m 2,400 $20m $100m 600 1,300 Colombia India Nigeria $90m $600m 1,200 Brazil East 19,000 $10m Africa Indonesia $80m $500m 150 1,900 7,000 $50m Australia & South 1,600 $100m New Zealand Argentina Africa 1,700 $600m $450m $800m 8,000 28,000** 4,400 9 WPP Annual Report 2017 10 WPP Annual Report 2017 How we’re doing Financial summary 2017 2016 Change % Billings1 £55,563m £55,245m +0.6 Revenue £15,265m £14,389m +6.1 Revenue less pass-through costs1,2 £13,140m £12,398m +6.0 Headline EBITDA3 £2,534m £2,420m +4.7 Headline operating profit3 £2,154m £2,095m