WPP ANNUA WPP ANNUAL REPORT & ACCOUNTS 2020 L REPORT & A & REPORT CC OU NTS 2020 NTS 240101803_WPP_AR2020_Cover&Spine_Design_190321_SD.indd All Pages 26/03/2021 15:45 OUR PEOPLE ARE OUR COMPANY This year the design of the Annual Report is inspired by our people who, despite the many challenges of Covid-19, have been totally committed to supporting our clients, looking after each other and serving the communities in which we live and work. Thank you to everyone across the Company who kindly volunteered their images for inclusion on this year’s front cover and throughout the Annual Report. STRATEGIC REPORT WHO WE ARE What you will find in this report STRATEGIC REPORT About us 2 WPP IS A CREATIVE Highlights 3 What we do 4 TRANSFORMATION Where we are 5 COMPANY. Chief Executive’s statement 6 Key events of the year 10 Our business model 12 WE USE THE POWER OF Investment case 16 The market 18 CREATIVITY TO BUILD Our strategy 22 Key performance indicators 54 BETTER FUTURES FOR OUR Chief Financial Officer’s statement 58 PEOPLE, PLANET, CLIENTS Financial review 61 Sustainability 66 AND COMMUNITIES. Assessing and managing our risks 90 Jeremy Bullmore’s essay 102 CORPORATE GOVERNANCE Chairman’s letter 108 Our Board 112 Our Executive Committee 115 How our Board engages 117 Division of responsibilities 120 Board activities 122 Composition, succession and evaluation 123 Nomination and Governance Committee report 126 Audit Committee report 128 Sustainability Committee report 133 Compensation Committee report 134 FINANCIAL STATEMENTS Accounting policies 158 Consolidated financial statements 165 Notes to the consolidated financial statements 170 Company financial statements 199 Notes to the Company financial statements 202 Independent auditor’s report 204 Reconciliation to non-GAAP measures of performance 212 This report provides an update ADDITIONAL INFORMATION on strategic progress, financial Task Force on Climate-related performance and sustainability Financial Disclosures statement 216 activities for the year ended 31 December 2020. Other statutory information 219 Shareholder information 220 Adjustment of 30 June 2020 To learn more see wpp.com goodwill impairment 223 This icon denotes more information Five-year summary 224 within the report Financial glossary 225 Where to find us 228 WPP ANNUAL REPORT 2020 1 STRATEGIC REPORT ABOUT US MARKET The profound changes to consumer The pandemic has accelerated the trends behaviour brought about by Covid-19 on which we based our vision – growing CONTEXT demand for digital services, ecommerce have increased the need for solutions and simple, integrated offerings companies to invest in digital that bring together creativity and skills in technology and data technologies, ecommerce and new customer experiences Read more on page 18 PURPOSE To use the power of creativity to Through our own actions and our work with build better futures for our people, clients we can help to build a sustainable future and a more inclusive society planet, clients and communities Read more on pages 8 and 66 STRATEGY – A new vision and contemporary offer Our strategy aims to return WPP to – Increased investment in creativity sustainable growth, by combining creativity with expertise in technology and data, – Harnessing our strengths in data building stronger agency brands within a and technology simpler company structure, and investing in talent, leadership and inclusive workplaces – A simpler structure – Investment in our people and culture Read more on page 22 OFFER WPP provides an integrated offer With our enhanced and modernised of communications, experience, offer to clients we deliver integrated campaigns globally across digital and commerce and technology traditional platforms Read more on page 14 VALUES We want all our people to experience a culture that is open, optimistic and committed to extraordinary work OPEN OPTIMISTIC EXTRAORDINARY Read more on page 46 We are targeting a recovery to 2019 FINANCIAL Our actions will enhance WPP’s revenue less pass-through costs levels by proposition to clients and drive 2022. And 3-4% annual growth in revenue our growth less pass-through costs from 2023 Read more on page 61 2 WPP ANNUAL REPORT 2020 STRATEGIC REPORT HIGHLIGHTS Although revenue has been impacted by Covid-19 our Company has been resilient and our performance has exceeded expectations – due to our actions over the last two years to simplify and strengthen WPP, our response to the pandemic and the work of our people. FINANCIAL PERFORMANCE £46.9bn £12.0bn £9.8bn Billings Revenue Revenue less pass‑through costs (2019: £53.1bn) (2019: £13.2bn) (2019: £10.8bn) CLIENTS 325 of the Fortune Global 500 30 62 61 of the Dow Jones 30 of the NASDAQ 100 of the FTSE 100 PEOPLE 100,000 people 40% 33% 21,000+ Women in executive leadership Employees in shared campuses Technology accreditations roles (2019: 37%) (2019: 26%) and certifications earned from partners SUSTAINABILITY 0.52tCO₂e 65% 64% Carbon emissions per person Electricity purchased from of our top 50 clients have from direct operations renewable sources committed to setting (scope 1 and 2) (2019: 37%)1 science‑based carbon 1 (2019: 0.82tCO2e) reduction targets COMMUNITIES 10th Leader 100% in the FTSE 100 Rankings for in the Bloomberg Gender in the Human Rights Campaign Women on Boards, Hampton‑ Equality Index for the third Foundation’s Corporate Alexander Review (2019: 12th) year in a row Equality Index (2019: 85%) 1 These figures have been restated due to the integration of new best practice carbon emissions reporting and data reviews upon joining RE100. WPP ANNUAL REPORT 2020 3 STRATEGIC REPORT WHAT WE DO We now provide services to clients REVENUE LESS PASSTHROUGH COSTS BY BUSINESS SECTOR through fewer, stronger, integrated % ● Global Integrated creative agencies, industry-leading Agencies 75% ● Public Relations 9% media agencies, global public relations ● Specialist Agencies 16% agencies and specialist agencies. GLOBAL INTEGRATED AGENCIES Our creative services include advertising, marketing and brand strategies and campaigns across all media. We are increasing our share in targeted fast-growth areas including digital communications, healthcare, 1 ecommerce, experience, marketing technology and production. Our media offer includes the full range of media planning and buying services, delivered primarily through GroupM, the world’s leading media investment company, and its agencies. Targeted growth segments are digital media (search, social and programmatic), new business models such as Xaxis and Finecast, and data and technology. PUBLIC RELATIONS Our PR firms help clients communicate with all their stakeholders, from consumers and investors to governments and NGOs. Purpose and reputation, sustainability, and digital and social media are key growth areas. SPECIALIST AGENCIES Our specialist agencies provide services by region or type. Brand experience and 1 identity, and specialist, targeted services are the principal growth segments. 1 The visual above reflects the structure of the Company in 2020. Following the alignment of AKQA and Grey, and the creation of VMLY&R Commerce, from January 2021 AKQA and VMLY&R Commerce are reported within Global Integrated Agencies. 4 WPP ANNUAL REPORT 2020 STRATEGIC REPORT WHERE WE ARE WPP companies operate in 111 countries, REVENUE BY REGION % providing us with global reach and scale. ● North America 37% ● United Kingdom 14% Here we show our presence by region in ● Western Continental Europe 20% terms of revenue and people. ● ROW (AP, LA, AME, CEE) 29% NORTH AMERICA UNITED KINGDOM WESTERN CENTRAL & CONTINENTAL EUROPE EASTERN EUROPE (CEE) PEOPLE REVENUE PEOPLE REVENUE PEOPLE REVENUE PEOPLE REVENUE 5,000 £0.3bn 10,000 £1.6bn 21,000 21,000 £2.4bn £4.5bn Revenue Denotes the collective figure for all WPP companies in a given region or country. People1 Denotes the number of people employed by LATIN AMERICA (LA) AFRICA & MIDDLE EAST (AME) ASIA PACIFIC (AP) WPP companies in a given region or country. PEOPLE REVENUE PEOPLE REVENUE PEOPLE REVENUE 5,000 As at 31 December 2020. 10,000 £0.5bn £0.3bn £2.4bn 27,000 1 Excludes 1,000 head office employees. WPP ANNUAL REPORT 2020 5 STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT We have made significant progress on our strategy, with stronger agency brands, new leadership, a simpler structure and a healthy balance sheet. “ OUR COMPANY’S 2020 was a tough year for everyone, from the £3.5 billion raised by asset sales, PERFORMANCE HAS including our people as they faced the meant that we entered 2020 in a strong personal and professional challenges of financial position. BEEN REMARKABLY Covid-19. Since March 16 last year, most of RESILIENT, THANKS TO them have been working, for most of the In March 2020 we took action to strengthen THE EFFORTS OF OUR time, from their homes – and dealing with all our business further, including the suspension PEOPLE AND THE the difficulties this brings. Their commitment of the Kantar share buyback scheme and final to our clients, support for one another and dividend for 2019, and a comprehensive DEMONSTRABLE VALUE contribution to the communities we serve programme of cost reduction and cash OF WHAT WE DO FOR have been a constant source of inspiration conservation initiatives, with the aim of OUR CLIENTS.” and pride. protecting as many jobs as possible. More than 3,000 senior executives, beginning Our Company’s performance has been with the Board and Executive Committee, remarkably resilient, thanks to the efforts of volunteered to take a 20% cut in their fees our people and the demonstrable value of or salary for a three-month period. what we do for our clients. While revenues were significantly impacted as clients reduced We saw five years’ worth of innovation in spending, particularly in the second quarter, five weeks as society and the economy were our performance exceeded our own digitised at amazing speed. Platforms like expectations and those of the market TikTok – with whom we signed an exclusive throughout the year. global partnership at the beginning of 2021 – saw record growth.