Earnings Call: Q1 2021

Apr 28, 2021

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the WPP First Quarter Trading Update Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Today's conference is being recorded. At this time, I would like to hand the conference over to WPP's CEO, Mr. Mark Reid. Please go ahead, sir. Thank you, and good morning, everybody, and welcome to WPP's First Quarter twenty twenty one results. I'm here in Sea Containers in London joined by John Rogers, our CFO and Pergan Riviere, who heads up investor relations for you. I'm pleased to take you through, I think, a strong quarter for WPP this year. So on Page two of the presentation, we should read the cautionary statement and just pause on that. So on Page three, the agenda, I'll talk quickly through the highlights before handing over to John, talk in detail through our financial performance, then we'll come back at the end for quick business update and then Q and A. So on Page four, I think it's fair to say that we had a strong start to the year. We beat, I think, both the market expectations and our own expectations back in December in the first quarter with a pretty broad based recovery, as you can see, across all of our markets or across all of our regions, we grew in 15 of our top 20 markets and across the key business lines, particularly strong growth in Group M and in our specialist areas. We'll come on to that in a little bit more detail. It's going to be a busy year for new business, but we had a good start to the year. We need the absolute creative work, the JPMorgan Chase Media business, some creative work for Salesforce on their technology, BML Y and R won the Sam's Club creative work. And we're very pleased that we've retained our relationship with the U. S. Navy. From a strategic perspective, we continued to execute against the commitments we made back in December. We launched Choreograph, a new data unit, bringing together our data capabilities across WPP into a new privacy first data business. We'll talk a bit about that later. We've made a number of acquisitions that are very much on strategy. We've bought out minorities in Australia, again, delivering simplification for WPP, and we committed to deliver a net zero target for 02/1930, something that's very important to our clients and our people. And we've reiterated our 2021 guidance, and John will talk about that in a little bit more detail later. So I think a good start or strong start to the year, more work to do, but I think we remain positive about the outlook for the year overall. So John, do you want to talk us through the details? Thanks, Mark, and good morning, everyone. I'll take you through quickly the financial results for the first quarter. So as Mark's already highlighted, pleased to report a 3.1% like for like growth on revenue less passed through costs for the quarter, a step up from quarter four and actually almost flat on a two year basis, so strong performance. And on a reported basis, a decline of 1.4%, reflecting, of course, a circa 4.3% drag due to foreign currency exchange adjustments as we indeed signaled at the prelims. So turning now to the global integrated agencies. We saw a strong recovery in this sector led by VEOMA Y and R and GroupM delivering like for like growth of 2.8% in the quarter, continuing the improving trend that we saw through 2020 and broadly flat on a two year basis. Important to note that this sector now includes AKQA Group as well as Geometry and GTV, which now form part of VML Y and R. So those have come from the specialty agencies into the GIA sector. VML Y and R was our best performer, continuing the strong momentum already established through 2020. And as Mark highlighted, GroupM was also strong, delivering a like for like of 5.8%. And as we've highlighted, we're intending to report our GroupM performance on a quarterly basis, giving you that like for like number. Wannam and Thompson also returned to growth in the quarter. Whilst Ogevy and AKQA Group were negative, but certainly demonstrating an improving trend. So turning now to Slide eight, Public Relations delivered solid growth in the quarter of 2%. Actually, this was the least impacted, of course, of all our sectors through COVID, as you can see from the chart. And indeed, we were able to demonstrate growth on a two year basis in this first quarter of this year, principally driven by growth at Hill and Knowlton and also our specialist PR business, Finsbury, Glover Herring, which showed very strong performance in the quarter. So moving now to Slide nine. And our specialist agencies saw a strong rebound, and this was, in fact, our most impacted sector through COVID, as you can again see from the graph, but pleased to report a strong rebound in the quarter of 7.5% like for like growth, particularly driven by our brand consultancy business, which saw a strong rebound in Landor and Superunion and also by a Specialist Healthcare Media business that we have called CMI, which grew significantly in the quarter. So solid performance in that sector. Coming on now to Slide 10 and looking across at our market performance. USA, again, was our least impacted market through COVID. It was relatively robust and very pleasing to see growth in the first quarter of 0.7%, a solid improvement on Q4. UK, in particular, was one of our best performing markets delivering like for like rate of 3.9% and actually almost flat on a two year basis. So you see the 4.2% decline in Q1 of last year. We pretty much offset that in the first quarter of this year. It's a very encouraging performance. Germany, a little bit behind The UK, growth at 2.5%, but nonetheless, very pleasing trajectory. And then looking at Greater China, you can see, obviously, what is clearly a big bounce back there. Obviously, Q1 of last year particularly impacted in China through COVID, down twenty one point three percent. And you saw us recover most of that lost volume in Q1 of this year with a plus 18.4% growth, so encouraging performance there. And of course, India showing steady recovery through 2020, slightly negative in Q1 but still moving in the right direction, albeit clearly our main focus in this market at the moment is certainly how we look after our people given the challenges of COVID-nineteen that we're experiencing in that geography at the moment. So coming on now to Slide 11 and some of our other major markets. France delivering reasonable performance, maybe slightly disappointing at down minus 1% in the quarter, but it is showing good recovery through 2020 and into the first quarter. Italy was up 12.4%, albeit partly reflecting the fact that, if you remember this time last year, Italy was one of the first markets to be impacted in Europe by COVID-nineteen, down 16.2% in this quarter last year. So we saw a bounce back come through in Italy. Spain, perhaps slightly disappointing again, performance down 4.7% in the quarter, albeit with quite a strong comparison. So this time last year, we were up 3.8%. So and again, but we're seeing the consistent recovery evident through the back half of twenty twenty and coming into Q1. And then Brazil, particularly strong actually at 8.5% growth in the quarter, very encouraging despite some of the COVID challenges that we're clearly facing in our operations in that part of the world. But good to see the recovery coming through in Q1 at 8.5% growth. So turning now to Slide 12, and this is just a reminder of the foreign currency headwinds we are facing in this financial year that we signal to you at the prelims. In fact, just as a reminder, we saw a 1.2% headwind in 2020 and we saw a 4.3% headwind in the first quarter of this year. And assuming those currency exchange rates maintained through the rest of this year, we'd expect that to translate into a headwind of 4.4% for the full year, again, in line with what we signal to you at our prelims. And because, of course, a significant portion of our cost base is in sterling, we'd expect to see that to have a small impact on our overall operating margin as those costs sterling costs disproportionately drop through. Coming on now to our movements in net debt, shown on Slide 13. And you can see the movement in net debt in Q1 of twenty twenty versus Q1 of twenty twenty one. Worth noting that the movement in trade networking capital in the first quarter of this year is slightly larger than the equivalent quarter for last year, albeit reflecting at least some of the unwind of the very strong position that we deliver at the year end in 2020. But it's very much in line with the guidance that we gave and we're now reiterating for the full year. Nonetheless, important to note that actually the net debt of GBP 1,400,000,000.0 as of the March is GBP 1,400,000,000.0 less than it was at the same time last year. So significantly reflecting, as you're already familiar with, the de gearing deleveraging of the WPP balance sheet. So moving to my final slide, Slide 14, which is the 2020 outlook. And as Mark has already highlighted, our financial targets remain in line with guidance. So life for like revenue, less pass through costs growth of mid single digits. Clearly, that's quite a broad range. And given the positive performance in Q1, we would expect all else being equal to be towards the upper end of that guidance, but nonetheless within that guidance. Headline operating profit margin of 13.5% to 14% CapEx of $450,000,000 to $500,000,000 and a net working capital outflow of $200,000,000 to $300,000,000 And again, you can see some of that outflow occurring in the first quarter as we start to unwind some of the very strong positions at the year end. And then reiteration of the guidance on the FX effects of 4% to 5% headwind expected through the year and a small impact on headline operating margin because of our overweighting in sterling costs. And with that, I'll hand back to Mark to take us through the business update. Thanks very much, John. So I think if you turn to Page 16, and it's not long since our preliminary results, but I think we have made progress since then and continue to execute the strategy. You'll see that I think our recovery has been underpinned by client mix on Page 16. It's really a continuation of the growth that we saw in the sectors of CPG, Tech and Healthcare, which ended last year have really come strongly into 2021. It's been boosted a little bit by the recovery in Automotive, but you can see that Retail down 4.7% Telecom, Media and Entertainment down 9.3% driven by the lack of releases and Leisure and Travel down 34.5% in the quarter, the parts of the business are still hampered by the restrictions on the economy. And I think that does suggest that as those restrictions are lifted, it does really underpin the recovery during 2021 in our spend and talks to the confidence the growing confidence that consumers have and that clients have invested in. On Page 17, we just highlight some of the areas of continued progress against the strategy that we outlined in December 2020 and indeed December 2018 to continue to invest in the faster growing and more technology driven areas of our business. We acquired DTI, very interesting technology company in Brazil, Eight Hundred people of whom, 600 are technologists. Really our first move into more of the application development part of TechnologyStack, where we've traditionally been more involved in systems integrators implementing systems like Adobe and Salesforce, DTI process application development capabilities that can build technologies from scratch for clients. And I think that was a very interesting capability to be able to deploy globally into our agencies and clients. And then for them, it's a relatively small but important mobile commerce business that we've been working with for some time here in The UK. And you will have seen that Kantar acquired Numerator strategically really interesting business in the purchase data space, actually company that Kantar had invested in when it was Infoscout. And I think it's been a powerful combination with the World Panel business at Canton. And we're very much supportive of the strategy there. And given our 40% investments in the business, keen to see that continue. Simplification of WPP continues. We launched Choreograph this week and we'll come on to that in on the next chart in the data area. We've relaunched brand asset valuator, so we used to have two brand valuation studies at WPP, BAV and Brand C. And after fifteen years of trying, we managed to bring them together into BAV that will now be the default brand evaluation tool across WPP. And we continue the simplification with the buyout of the minorities in Australia and delisting our Australian business. And that gives us the ability to integrate that more tightly into WPP while continuing to develop a very relevant strategy in the Australian and Seadom markets. And then lastly, but by no means least, we made an important commitment in the area of sustainability to be net zero within our own operations by 2025 and across our overall supply chain, primarily media production by 02/1930. And that was very well received by our clients and indeed our people. Just to highlight choreograph on Page 18. What is it? It's really a global data products and technology company brings together our key data assets inside Group M and Wunderman Thompson into a single business provides the foundation for us to be able to make further investments in data and technology. And I'd say that just like our customers want to have a single view of their consumers, I think WTP should have a single data view. It's an interesting time to launch the business given recent moves around third party cookies and privacy, and I think we're taking very much a privacy first approach to consumer data. We're not going to try to recreate the third party cookie or take some legacy approaches like that. We're really working with customers to understand how they can use their data in a responsible way and how indeed they can build a data asset using their products or services. It's going to be led by Kirk McDonald, who joined us from Zander, the AT and T media business and also heads up of GroupM North America. While it will operate operationally within GroupM, it's really very much going to be available to all of WPP in the cooperative way in which we work elsewhere. So what does it do? I think it's really four key products within the company. So audience insights and planning that allows us to gain insight into consumers, for media purposes, to target media, but also to inform creative development. This is a strong private identity solution based on 128,000,000 households in The U. S. That allows clients such as WBA, WBA is one of the launch partners, to look at their own first party data and connect that out into the walled gardens and into their marketing activities in a privacy compliant way. The strong AI based media spend optimization tool. So much of the work that we've done within Essence looking at media optimization will now be brought into Choreograph. And then we've done some very interesting work around population simulations. That basically enables us to model the impacts of next best actions. If you did this, what would happen? So it enables us to design promotions and measure spend for clients. And that will be supported by services from strategy consultants that watch the clients do in the data area, custom software development, so how do we help them build that data operations and then we can help them run and operate those for class. I think an important move, and we're very pleased to see WPA publicly support the launch. So summary of the first quarter, I'd say what we'd say is strong start to the year, continued progress on executing our strategy and really the focus of the rest of 2021 has been managing the impact of COVID on our people and our clients. I'd point out that here in The UK and The U. S, we still only have two percent of our people back in the offices. Across WPP overall, about ten percent to 15% of our people are working in the office any one day. We're keen to get people to come back when it's safe, but I think we also understand that people aren't going to come back in the way they used to in the future. The situation in India is very difficult, and we can talk to our leadership there about everything we can do to help. But it's a reminder that although we may feel sitting here in The UK or in The U. S, somewhat as though COVID is behind us, it isn't in any case around the world. We need to be cognizant of that. It's going to be a busy year for new business, but one that also will give us new growth opportunities. And then we need to continue to work on the transformation plan to deliver the savings that will allow us to reinvest in the growth areas of our business. So it's obviously the year a good start, but more work to do. And we're now happy to John and I are happy to take your questions. Thank you, The first question comes from the line of Lisa Yang from Goldman Sachs. Please go ahead. Your line is now open. Hi, Lisa. Hi, Lisa. Good morning, Marjan and Peregrine. Congratulations on the results. I guess my first question is on the sort of trading environment. I mean, you previously expected Q1 to be negative and I use the plus three and actually outperform all the other agencies so far. So I'm just wondering what has really changed? Do you think it's just the market being much stronger than expected? Or you're benefiting maybe more from all the new business won last year? Or just thinking agencies in general recapturing a bigger part of the value? So I'm just wondering like how do you explain such a good sort of outperformance and how much of that could be sustained for the rest of the year? The second question is on the new business. I mean you mentioned it's going to be a busy year and there's been a lot of noise in the press as well about account reviews, account losses. I'm just wondering if you can maybe help us size the magnitude of how much of WPE's revenue is really at risk here. Are we talking about one, two or three percentage point of your revenue? And does that actually really differ from prior years, so we can be able to sort of compare? And the first question is on The U. S. It's great to see The U. S. Returning to positive growth. It still seems like it's lagging the other regions and some of your peers. So I'm just wondering like how do you explain that? What are you doing there? What are the actions you're taking there to potentially sort of narrow the gap versus other regions versus other peers? Thank you. Yes. So look, I think on Q1, it was a very broad based recovery, really, as you pointed across all parts of the business across 15 of our top 20 markets and across, say, slightly more than half of our clients. I think it reflects all of the points that you mentioned. A little bit is the market that's clearly come back perhaps more strongly than we would have expected. Part of it is note is our agencies, we've seen good performance in GroupM up 5.8, very solid performance in VML Y and R, a good performance in Wyndham Thompson returning to growth. So I think those parts of the business where we've taken action and integrated have been seen to grow. And then I think there's parts of our business in the sort of more technology driven areas. We saw 90% growth in our Connected TV business. We saw media spend for e commerce up 50% as we see good growth in Zaxis and FineCast. So I think those parts of the business sort of functionally that you would expect to grow have also grown. So I think it's both what WPP has done and the market. I think it's a little bit of each. And it's a little bit of, as you say, positive output from new business that we won in 2020 overall. I think turning to your new business question, I don't think we can quantify the pluses and the minuses at this point. I'd say that there's probably there is more opportunity than there is risk for us, But there are both and account reviews come around in cycles and we probably start this year with a little bit more than we did last year. I would say that the impact on our business will primarily be in 2022 for those account reviews that are the major account reviews that are coming up will primarily be 2022 issues or opportunities for us. And point out that we had a really strong run last year and a really good performance in our media businesses, and many of the reviews are in media. But there's no doubt that we've got work to do to deliver them. I think on The U. S, I point a little bit sort of to the two year stack. We could have I think The U. S. Returned to growth in January, February last year. And I point to the sequential improvement from Q4 to Q1. And I think we'll see a continued improvement in The U. S. Business in the rest of the year and perhaps a little bit of we've probably been a little bit more driven in growth internationally than we have in The U. S. But that's not a decision. John, do you have anything to add to that? Yes. Lisa, just building on The U. S. Performance. I think actually if you look across the different agency performances in that market, you see quite stark patterns reflecting where those particular agencies are in their relative turnaround. So for example, VML Y and R in the first quarter in The U. S. Was very, very strong, just above double digit growth. So fantastic performance from VML Y and R in The U. S. And again, reflecting, we think, the success of bringing those two agencies together and that's now really starting to pay dividends. Then you've got sort of Wunderman Thompson, for example, in that market, which was broadly flat and again reflecting it's been two years now since we bought those agencies together. We're now starting to see a turnaround in that business, some really positive performance in The U. S. And broadly flat quarter on quarter. And then you've got other agencies like Ogilvy, which were clearly negative in the first quarter but very much part of a turnaround strategy being led, of course, by Andy Main, who's brought some fantastic creative talent into that business to drive that turnaround. So I think that what gives us reasons to believe in The U. S. Market is that we've got some agencies that are perhaps more mature in their evolution really performing very strongly, and we've got every confidence that we can turn over the as an organization around given the investment that we've made in talent in that leadership team over the last six months. That's very clear. Thank you. Thank you. And your next question comes from the line of Julien Roche at Barclays. Please go ahead. Your line is now open. Yes. Good morning, everybody. Thank you for taking my questions. The usual three. If I start with disclosure, thank you for delivering on better disclosure. I think group M organic is very welcome. I'm greedy. So could I have an idea of the percentage of net sales represented by GroupM either in full year 2020 or Q1 twenty twenty one? Second question, I saw on Bloomberg that Mark said results closer to upper end of guidance. What does this mean? Organic margin seems to be organic based on what John said earlier. So what is lower and upper end of mid single digit? Is it 4% to 6% or 3% to 7%? And then last one is on Choreograph, 128,000,000 households. Can we have some idea of the geographical breakdown? And how many do you need in an ideal world? And any stark difference between Choreograph and Epsilon, Omni, Merkle and Acxiom? Thank you. John, why don't you take me first? Maybe if I pick up the first two and then Mark will pick up on choreograph. So, Livon Group M, I admire your tenacity, Julian, in asking for this disclosure. I mean, I think what we would say is it's roughly Group M is roughly 35% or so of net revenue pass through costs. That's a number that we've given in the past. And we'll stick with that, gives you a broad indication of the overall size of the business with respect to the other parts. Your question on what are the mid single digit translate into in practice? I think I would probably say 3% to 7% would be a generous range. And we might expect, of course, given the strong performance in Q1 to be towards the upper end of that range. But just to be clear, we still face significant uncertainty in many markets. Mark's already talked about the challenges we're facing in India. The same is true of Brazil. Canada is going into has been into another phase of lockdown. So there remains a lot of uncertainty. So we need to be careful we don't get too carried away with ourselves. But I would say if we define the range of say 3% to 7% in its broadest sense, we would hope to be towards the sort of the upper end of that range 6% to 7% of that order, if all other things remain equal. Mark on choreograph. Yes. I think on choreograph, the data that sits inside Choreograph came from Wonderman data, I think it's only part of the proposition. The bulk of those 128,000,000 households are in The U. S. But I think that we want to take a more agnostic approach to data than really building our own singular data asset. I don't want to sort of highlight differences with the other companies. What I'd say is that Choreograph is built on certain principles. The first, privacy at the heart, so ensuring that we respect consumer privacy. Secondly, we want to take an approach where we help clients build their own first party data assets and manage that through the products and services that they offer. So how do we for example, with Walgreens, how do we enhance the might Walgreens offer so that consumers are more willing to share their data. We're not interested in sort of rebuilding the cookie in other ways because we don't think that that's a tenable strategy long term nor the right thing to do with our clients. And then the third is I think you see operationally will work in a very tight way between our media business and the rest of WPP to use data to integrate those activities more tightly. And I think that's what clients really are looking to do. And I think we want to take a very broad approach to data overall. There's no doubt that first party data is important, but there's many other forms of data. We're having good growth in our connected television business using geographic or zip code based targeting. So there's many other forms of data that are available to our clients and that's important. And then the last point I'd make is what's critical to us is how we integrate that into our partners. And given our relationship with Google and Facebook, we're working really very tightly with them to help our client be able to onboard data into those walled gardens seamlessly as well. And just in terms of numbers, Julian, the Choreograph business has got offices across 10 different countries. Clearly, there's a initial focus towards The U. S. And The U. K. As markets highlighted in there, clearly our biggest markets. But we do see an opportunity to expand the business and invest in the business over time. It's a critical area of service to our clients and we see a tremendous opportunity to grow that side of the business. And by bringing those data assets and capabilities together under the Choreograph name, we really believe that sets us a strong foundation for that future growth. And also the possibility, of course, of adding to that business through M and A. Okay. Super clear. Thank you very much. Thank you. And your next question comes from the line of Tom Singlehurst at Citi. Please go ahead. Your line is now open. Hi, Tom. Hi. Thank you very much for taking the question. Yes, three questions, I'm afraid. The first one is on, I suppose, the next step, which is the second quarter, China plus 18% organic. Is this what post COVID recovery looks like? And is therefore sort of generally applicable to what we should expect in the second quarter? That was the first question. Second question was on Choreograph. I'm sort of anxious not to misrepresent you, but I think we've always interpreted your comments about not needing to own singular data assets as you being sort of tacitly critical of some of the other agency groups having platforms like Epsilon and Acxiom. Is the fact that you're creating Choreograph an equally tacit admission that actually it makes sense to have a sort of centralized data asset that you can point to in pitch processes? And then the third question on pitch processes, just actually leaving aside the risk of losing accounts, is increasing pitch activity having a quantifiable drag on margin? Is there anything from that sort of activity that is going to weigh on the margin profile alongside currency and maybe a sort of mix shift away from The U. S? So maybe I'll take the first one and perhaps the last one as well and then perhaps Mark will comment on choreograph. I think on the is China a sort of a signal of things to come in terms of recovery through COVID? I guess the answer to that question is possibly. I mean, I would point to the two key markets that were most impacted by COVID in the first quarter of last year, which was China, obviously, and Italy in Europe. And we saw a strong bounce back in the first quarter in both of those markets. So would we expect that similar trend to translate into a bounce back for those markets most impacted by COVID in the second quarter of last year, then I think the answer would be yes. And I think you probably look at the impacts across the various geographies, and you could make an assertion that we might expect to see most of the shortfall that we incurred in the second quarter last year. Some of that's going to bounce back, and I think we'd expect to see a similar pattern. But of course, it's very, very difficult to predict these things. And again, I'd just reiterate the point I made earlier on the call that there's still a lot of uncertainty out there. So I think we're right to take a cautious tone. But I'd sort of expect most geographies to demonstrate similar patterns to that that we've seen in Italy and in China in terms of the level of the bounce back that we've observed in Q1. In terms of pitch processes and impacts on margin, I mean, the market's always competitive and there's always pressure on pricing, and that's probably true of every single market, not just marketing services. And it's right that we need to maintain that competitiveness in the market. I would say that we have certainly more a lot more margin upside opportunity in the form of how we transform the business and how we deliver efficiency savings than we necessarily have margin pressure in terms of pricing. But there will always be margin pressure in terms of pricing. And clearly, we will need to make investments where we need to make them. But those will more than be funded by the efficiency opportunities that we've outlined to you historically in terms of transforming the business going forward. Perfect. I was also thinking about just the simple volume of the pitching activity. I mean, obviously, you're not flying around anywhere in the short term, but does just the distraction of time associated with pitching activity have been Yes. I think there are swings around it. You're right. I mean, there's a lot of pitch activity and there's as much opportunity as there is challenge through that, but there is a step up in pitch activity. But then you equally point to the other side of the equation, which is but we haven't got people flying around the world to deliver those pitches for obvious reasons. And actually, we've managed to maintain a very healthy control over our costs through the first quarter. So there's always going to be swings and roundabouts, but I don't see a particular margin drag as a consequence of that activity per se. Yes. No, I'd agree with that, Tom. I think on Choreograph, we saw the opportunity to bring together what we're doing today. And I think, to some extent, branding it, Choreograph highlights our capability, and we had strong capabilities in GroupM and Wunderb and Thompson. I think it's good timing given the regulatory and privacy changes to make this move, but I don't think that's really in response to anything. We've been busy from a structural perspective, and I think we felt as we went through last year, we've been working on this really for the last six or seven months to bring the businesses together. We felt it was the right time to tackle that. Now I do think that the data ownership that you highlight is related to iBehaviour and KBM businesses that have been part of WPP for many years. And I think there's a value in that, primarily in providing identity solutions to clients more than the data itself. And I don't think we changed our view on that, but that was clearly an important part of the WBA presentation and one of the reasons why we retained and expanded our relationship with that client. So I think it gives us an opportunity and I think it gives us a good opportunity to combine those data assets and data capabilities with media, which clearly is rising up the client's agenda. That's very clear. Thank you very much. Thank you. And your next question comes from the line of Matthew Walker at Credit Suisse. Please go ahead. Your line is open. Thanks. Just a couple of questions on choreograph. So could you just tell us, you've got the 20,000 data attributes. Is that basically 20,000 attributes per household? And then the products and services that you've got in that business, were those things that you were already doing as part of GroupM separately and in Wunderman Thompson separately and you're kind of just bringing it together so that you were already doing those activities or are they new? And then the last question is on how are you getting the permission of people from those households to what kind of tracking are you doing with those people? How many people are given permission to be tracked? And does it include, for example, their credit card and debit card spending online and offline? If you could give us a bit of a feel for what kind of tracking that you're doing that is permissioned by the consumer? Yes. I think the 20,000 attributes are both demographic and purchase history and the database is primarily in The U. S. And so they're sort of consistently across those households in The U. S. We work with a number of other retailers and contributors to that co op to do that with the permission of consumers from the data that they collect and we work carefully to make sure that those retailers and other contributors have consumer permission and that's given on the right basis. And it's really more based on that than it is on tracking consumers. It's not a sort of tracking system. In terms of the products and services, yes, it includes both those that were being developed inside Wunderman Thompson, but combines them with many of the technologies that were or are being developed inside Group M relating to the media business. And particularly those technologies that Essence were developing, allowing them to activate data inside of the walled gardens and to build bridges, if you like, between first party data around Google and Facebook and other platforms. So it's both technology that we're already developing and technologies that we will continue to develop in the future. Also very much a cloud based solution, which gives us a lot of flexibility in terms of sort of hardware deployment and deployment into client situations as well. All right. That's great. Thank you. Thanks. Thank you. And your next question comes from the line of Richard Kramer, Aretta Research. Please go ahead. Your line is now open. Thanks very much. I'd like to ask one question about KOREOGRAF and FINDECAST, but more about the business model. Is it your intention to build products where you would receive recurring license income as opposed to the traditional campaign based spending that WPP mostly addresses? And then my other question is, I'm mindful that the top 3,000 clients represent about three quarters of sales. But when we step back and look at the fastest growing portion of digital ad spend, it's coming from smaller D2C brands and influencers and so forth. Can you talk a little bit about the role you would envision for WPP developing to provide maybe some sort of light services to those smaller pools of spend, which right now are largely captured by the self serve platforms of walled gardens, but maybe there's some value you have to add to that space? Thanks. Yes. So I'd say within Choreograph, the revenues are a mixture of consulting fees when we provide consulting services. There are some license fees where we license data to clients. And I think we would expect to build new business models with clients. And then there are also some fees where we provide data operations to clients. So this is a large healthcare company where we're managing all of the customer records for two fifty million of their customers that's provided on a mix of license fee and consulting services. When we look at a business like Finecast, we act as a principle in that business. And so we would take a margin on the media based on the results that we deliver to our clients. So it does I think take WPP into new areas from a fee perspective. On your last question on smaller clients, it is something that's on our mind. The typical WPP clients of the world's 10,000 largest corporations and we are cognizant that much of the growth is in the longer period of clients. And I think over the coming months, we are looking at how we can grow in that area. We do have pretty successful Google marketing platform business where we help more medium sized clients to implement Google marketing platforms that sits within acceleration and we are looking at how we can develop that inside GroupM. And I think there's some interesting opportunities in addressable television where we may able to connect in the small and mid sized businesses onto those platforms as well. So I wouldn't build it in your spreadsheet yet, if you'd like, but I think it's something that's on our mind. And it's certainly a tier between the very smallest businesses and the very largest business. Well, I think there probably is an opportunity for WPP longer term to capture growth. And just Richard, just in response to your first question from a broader perspective as well. I think we are very interested in exploring different commercial models in terms of how we serve and support our clients. And our clients are often asking us the extent to which we're willing to have performance based on or have fees based on success and performance driven fees. And so we are more broadly looking at how we can adapt our commercial models away from perhaps the traditional approach to looking at how we offer value up to our clients, whether that that is through licensing products, whether that's through more value based fees or alternative models. And that is something that we are in the process of exploring. Okay. I look forward to hearing more. Thanks. Thank you. And your next question comes from the line of Matti Leisenin at Bernstein. Please go ahead. Your line is now open. Good morning. Very strong performance from a lot of your agencies which do a fair bit of project based work such as AKQA, VMLY and R and the brand agencies. I was just wondering since last year there was still a lot of project based work that was still on hold due to the pandemic situation. Was a lot of this impressive Q1 performance perhaps pent up demand from that period finally coming in? And then the second question, you already feel a lot on choreograph, so thanks for that. I just had a question specifically on the IDs on those 128,000,000 households and specifically online IDs for the individuals in them. You said you don't want to rebuild the cookie ID system. But to me, it seems like if you want to be able to activate data against those individuals in those households going forward with all the changes, the cookies and the mobile IDs, you'd have to at least partner with someone who is trying to, say, rebuild an email based system or a second party cooperative in order to be able to do that or otherwise do lots of probabilistic modeling. So could you give us a bit more detail on how you plan to maintain that sort of activation reach and accuracy for those households going forward, specifically outside the walled gardens and connected TV? Thank you. Okay. Maybe if I just comment on your first question on project work. I wouldn't necessarily ascribe that dynamic to the bounce back that we've seen in the likes of the ML Y and R or AKQA for that matter necessarily. I think that's the performance that we've seen in those respective agencies is very much sort of sustainable ongoing work for clients. That said, I would agree with your point in relation to the bank consultancy business so Landau and Superunion, where we've seen tremendous growth in the first quarter. But as you say, the nature of the work that they do is very much more project based for clients. And we saw quite a heavy decline this time last year as the impact of COVID immediately caused a squeeze on client spend. We've seen that bounce back very strongly and encouragingly in the first quarter of this year. So I'd certainly ascribe that dynamic to Landau and Superunion, not necessarily to them or Y and R and AKQA as you asserted. On Choreograph, so we do have postal addresses and email addresses for the vast majority of those households. So we do see good match rates from those identifiers into The Walled Gardens. I would say that that enables us to to target media inside The Walled Gardens, which I have to remind you is probably 80% of digital media spend and into other areas where there are logged in users from The New York Times to The Wall Street Journal to other publisher sites, but also into clients' own media and that we're able to link into client identifiers. So you could take client X and use their identifiers to activate into Google. So I think we do see strong and very competitive match rates and we are able to activate that in the sort of future likely privacy environment. I think the other build I'd make, Matt, as well is just in terms of a couple of areas that we are doing a lot of work on are on things like agent based modeling, where we actually use computational models that attempt to simulate the interaction of individuals or groups based on a set of defined conditions in an environment. So moving away from the cookie world, but really looking at how we can predict individuals' behavior based on some of this agent based modeling. And also looking at things like what we call synthetic data. So it's not data that's been recorded by direct measurement, but instead we've been able to run simulations or manufacture for the first of the testing that allows us to understand how different types of consumers will react and behave in certain types of environments. And the work that we're doing here, we see as being sort of really building on this move away from this cookie based world into a different way of targeting our customers. And there's a lot of work we're doing for our clients in this direction. Very clear. Thank you, both. Thank you. And your next question comes from the line of Patrick Wellington at Morgan Stanley. Please go ahead. Your line is now open. Yes. Good morning, Emily. Good morning. First question is on costs. We're at the April now. Still nobody is flying anywhere as Thomas pointed out. You've talked about 200,000,000 of your $810,000,000 of COVID related cost savings being retained. But do you think it's time to start revising up that element of potential cost saving retention in 2021? Secondly, again in response to Tom's question, if we go for a sort of flat ish two year base, then we'd be looking at Q2 organic revenue organic net sales growth of about 15%. Should that be the benchmark? And then thirdly, John, I mean, we've had some experience of you now over a few quarters. Would you say you're a bit of a serial underguider when you look at WPP's performance? Well, maybe I should take all of those and I'll comment on what they do. Yes, I was going to say, Mark may want to comment on that. Look, this is clearly a trading statement. So we're not going to get overly drawn in relation to costs or profitability, but we are reiterating the guidance that we gave at the prelims that we expect the operating margin to be in the range 13.5% to 14%. And so we're reiterating that guidance. I think that is very sensible. I think there are lots of movements. There's maybe some upside coming through in sales. There's some drag coming through in terms of foreign currency. I think at this stage of the year, it will be overly premature to be moving those numbers up. And there is many potential drags on those costs, particularly as we expect markets to unlock through the next couple of quarters. People will start to return to traveling and many of our clients will, of course, expect that too. So we will see some of those costs coming back in. Obviously, we will monitor those very closely and we will keep a tight control of them. But I think at this stage, it would be far too premature to be pushing up our margin numbers. And indeed, there are as many drags on the margin as there are potential upside. So hence, why we are reiterating guidance. In some ways, I'm a bit more bearish on the margin than I am on the net sales. The net sales definitively towards the upper end of the range, but the margin guidance still very much in line with what we said. In terms of flattish on a two year basis, yes, I wouldn't say that I think again, I'd point you to the response I gave to the previous question in relation to China and to Italy. In both of those markets, which saw the biggest, if you like, Q1 downturns last year and have seen the biggest bounce backs in Q1 of this year. In both cases, they were a shortfall on 2020. So in a way, we are still, in both of those markets lagging 1% or 2% from where we were at 2019 levels of sales. And so I wouldn't whilst flattish, I wouldn't use those terms. I would expect us to perhaps fall slightly short of the 15% that you discussed. But let's see. I mean, it's so difficult. We are genuinely dealing with uncharted territory here. We just really don't know. And I think we'll just have to wait to see how the market performs going forward. We've had a good start to the year. We've seen some examples of bounce backs in China and Italy. I would expect us to see similar trends, but I wouldn't expect us to fully recover the shortfall that we delivered in Q2 of last year. And in terms of am I a serial soft guide? I don't know. I mean, I think it's look, it's difficult. I'd like to think not, but naturally in an uncertain environment, which this is. And none of us have really navigated through this territory. This is it is genuinely unprecedented. It's often overused, but it's genuinely unprecedented. It's very difficult to predict what's going to happen going forward. So I remember this time last year, we were forecasting all sorts of negative downturn scenarios. Now fortunately, those didn't come to pass and actually performance was a lot better than we were expecting. But there was a very broad range of outcomes. And whilst we have got some history over the last twelve months of how things have performed, there is still a lot of uncertainty out there. We are seeing it's very important that we remember this. We're seeing a very challenging situation in India at the moment with our colleagues and our people, similar circumstances in Brazil. So we are not through this yet. And therefore, I would tend to always try and try and under promise and over deliver. But it's really reflect it's not reflective of my style. It's more reflective of the genuine uncertainty that's out there in the market. I would add to that. I think it's a steady mix. Everyone gets when things get look at our share price over the course of the year and the recovery. I think that the speed of the decline surprised people and the pace of the recovery surprised people. I think there's more to do that. We try to guide as accurately as we can. I mean, I think it's fair to say that this isn't meant to dig. I mean, I think compared to some of our peers, we have probably provided the clearest guidance in relation to the performance of the business going forward. So I think in that respect, we've tried to provide as much transparency as we possibly can in clearly what's a very uncertain world at the moment. That's great. As Julian said earlier, the transparency has improved. So very good. Just quick one, Mark. Do you feel with Choreograph the need to buy any extra data assets to go with what you have there? Or is that a complete set as far as you're concerned? I think it's a complete set in terms of data assets or capabilities. But I do think it's an interesting platform from which we can invest more in data. As I said, I don't think our transformation is never complete. So there will always be areas where we can invest organically or perhaps we can make acquisitions. We bought this business as John mentioned Sandtable in The UK with this agent based modeling as additional capability. So I think just as our clients want a single view of the customer, we needed a single view of the data. So but it's an interesting foundation, I think. Great. Thanks very much. Thank you. And your next question comes from the line of Sarah Simon at Berenberg. Please go ahead. Your line is now open. Yes. Hi. Couple of questions just on back on the data question. Firstly, are you supporting any of the various ID initiatives that are out there like obviously, previously talked about UID two point zero, but there's other ones out there? And second question was just on cookies. Obviously, the EU is looking at that and there's some question as to whether that may be deemed an antitrust issue. If for some reason they Google were to delay or stop entirely the deprecation of third party cookies, What would be your strategic response to that? Thanks. So I think so we are taking place in various industry initiatives around IDs. And I think that whilst those IDs are privacy compliant that our clients want to adopt, we're very happy to work with them. I think it's unlikely that there'll be a single replacement to the cookie simply because the degree of tracking that we've allowed on the Internet is not something that we'd allow offline. I mean, as you saw the piece in the Feet where Washington Post reporter said that he found 5,400 individual tracking applications on his phone in the course of a week. I don't think any of us would really want that in our lives. And whilst we can argue, I would argue that most of that tracking is for perfectly legitimate purposes and enables us to target advertising and measure results, I think the degree of it has gone beyond what the cookie was designed to do. I mean, the cookie was not designed to provide ad tracking in the way that it developed. It's really a convenience that the original ad service, DoubleClick, OpenAdStream. Remember, actually, WPP acquired twenty fourseven Real Media back in 02/2007, and we bought OpenAdStream and ad server into WPP for a number of years till we sold it to AppNexus. I think in the long run, we are going to have to provide more privacy compliance ways of managing data. And I think the question is just being transparent. If consumers want to opt into third party ad tracking, then it's fine for them to do and they have the ability to do it. And there are indeed a number of scenarios where consumers may well want to do that. If they want to see more relevant advertising, they want to be frequency capped, they may well find that in their advantage. When it turns to cookies, I think we'll have to see the outcome. I mean, I think that the irony was that a lot of these privacy regulations were to some extent by regulators seen as a way of seen as a way of, let's say, perhaps hindering the growth of the major technology companies. And actually they've had the reverse effect because the technology companies have the opted in relationships with consumers. But look, I think net net it's neutral to positive the WPP and the clients need our advice and that's what we need to give them. That's great. And can I just ask a follow-up? Given as you said cookies weren't designed for advertising and match rates are actually quite poor. Do you think there is an argument to be made that some of these or clearly there will be a low opt in rate than is currently achieved in terms of overall tracking, but presumably a better match rate. Do you have a view as to what the breakeven point would be in terms of kind of better matching versus lower opt in rate? I think sometimes in business, there's an obsession with the measurable. And what's measurable is not always what's most important. And we spend all our time obsessing about programmatic media, which is maybe 10% or 15% of media spend. But we spend much less time thinking about creative optimization or the idea. I think we need to have a balance whether a match rate is 80% or 85% or 80% probably neither here nor there. We don't know the we never statistically know the effectiveness of our work. So I think we have to see all of these things in perspective. We have to spend as much time focusing on the idea and the creative work and where we're reaching consumers as we do on the data and technology that underpins it. And I think that sort of we got very lazy in retargeting because of the ROI. But I think the consumers don't like it. And so we need to replace it with something that's a little bit more privacy friendly if we want to maintain the trust and confidence of consumers in advertising in the long run. That's great. Thanks. Thank you. And there are no further questions. And I'd like to hand the call back over to Mr. Mark Reag for further closing remarks. So thanks everyone. Thank you for your question. Thanks for listening. I think we said at the beginning, we had a strong start to the year, perhaps a little bit better than or certainly a little bit better than we and you had expected, which is reassuring. We're not in any way out of the woods yet, but I think we do expect a strong 2021. And we'll see you again in August on this call, but no doubt before then to discuss the results. So thank you all for listening. That does conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.