All right. That's just some of the fantastic work that our agencies and people did throughout the year, and really the reason why you see such a fantastic set of financial results. Good morning and welcome everyone here to Sea Containers. It's great to be back in person for the first time I think in three years. John and I are here to take you through the results. For those of you in the room, there'll be an opportunity at the end to answer questions. I think for those of you watching online, you can ask questions through Teams, and then we'll put them through to the audience. To start with the customary statement, and be aware and read that.
Turning to the agenda, I'll just talk you through briefly the highlights, then John will cover the financial performance. I'll come back to look at our strategic progress and really answer, I guess, your question of what's changed in the outlook for our business, and why we're confident about our guidance for 2023, then we can take your questions. Turning to the highlights. Look, I think we had a continued strong and broad-based performance for the year. We had a strong 2022. We upgraded our guidance a number of times during the year, after perhaps a slightly slower Q3, in part because of comparatives, we had a good end to the year.
6.4%, you know, really in line with the overall year, despite some fears that we'd see much more of a slowdown. You know, secondly, our performance is much more broad-based across all our major agencies and across nearly all of our key markets. I think thirdly, the key point is we're in a much stronger competitive position. We'll come onto that as we talk about strategic progress the group has made. I think a lot of the structural questions that sort of bedeviled our conversations with analysts and investors to some extent, I think, have been answered by, you know, a set of numbers in 21 and 22 and give us confidence in our guidance for 2023.
That's down to the quality of the work, the work that you just saw, the size and scale of GroupM, our performance in new business. We're close to $6 billion won over the course of last year. Fourthly, we continue to invest and enhance our offer both through organic investments in technology, through acquisitions, and through continuing to simplify and transform our businesses through creation of new companies such as EssenceMediacom, Design Bridge and Partners, and other changes in the organization like the creation of GroupM Nexus. In terms of savings, the transformation plan remains on track with savings coming in ahead of target, and we're on track to deliver the aggregate savings by 2025.
The last point I think that will be the focus for a lot of the questions is our guidance for the year of 3%-5% top-line growth and continued margin expansion to deliver a headline operating margin of 15%. Net net, I'd say we had a productive year, we continue to transform and invest the business, and all of this gives us confidence in the year ahead. With that as an introduction, John will take you through the financial performance, and then we'll come back to the strategy and then to all of your questions. John.
Thank you, Mark, and great to be here in person, as Mark says. Let me take you through the financial results for 2022. Overall, revenue less pass-through costs up 13.5% on a reported basis, up 6.9% on a like-for-like basis, and that was the top end of the guidance range that we gave you in Q3. That of course, includes a Forex tailwind of 5.9% and a contribution from M&A of 0.7%, which is really as a consequence of the SVC merger, creating FGS Global. A number of bolt-on acquisitions that I will take you through later on. Also, of course, the impact of divesting our Russian operations.
Overall operating profit up GBP 1.7 billion, up 16.6% year-on-year, delivering a margin of 14.8%, up 40 basis points. Again, within the guidance range that we gave you. Taking account of income from associates and obviously net finance costs broadly similar to 2021. Tax at a rate of 25.5%, again in line with the guidance that we gave you. Delivered an EPS of GBP 0.985, up 25.5% year-on-year. Helped, of course, by our share buyback program. Coming on now to reconciliation between our headline operations and our reported profit. At the headline level, a profit of GBP 1.74 billion. Again, adjusting for goodwill impairment and amortization of intangibles.
Restructuring costs of GBP 219 million, in line with the guidance that we gave you at GBP 220 million this time last year. We've also revised our assumptions on some of our historical impairments in relation to our subletting assumptions, which has increased those impairments by a further GBP 18 million. A loss of GBP 36 million on disposals, which is a few gains from some disposals offset, of course, by the GBP 65 million on disposal of our Russian operations that we took you through at the half. Step down in our Imagina investment from associate to an investment, giving us GBP 66 back, leading to overall adjustments of GBP 384 million and a reported operating profit of GBP 1.358 billion.
Coming on now to the performance of our global integrated agencies, you know, strong growth in the year, 6.9% like-for-like, in line with the rest of our business. That's split between our creatives, creative agencies that grew at 5% and GroupM that grew at 9.1%, a good bounce back in Q4. Particular mention to Ogilvy, who had a very strong finish to the year in the second half, and also AKQA and Hogarth, both of which delivered double-digit growth in the year. Overall headline operating profit of GBP 1.4 billion, up 17.2% year-over-year, and a margin of 14.7%, up 60 basis points. Good reversal of performance in the second half versus the first strong margin accretion coming through.
Now looking at performance, that performance over a three-year basis, again, we can see here on the right-hand side very, very strong growth from GroupM. Up 17.2% over the last three years. Equally on the left-hand side, our creative agencies also up 3.5%. You can see, given that the red bars are larger than the purple bars, a lot of that growth in our creative agencies came through in 2022. We've got real momentum going into 2023 in relation to the performance of our creative business. Coming on now to public relations. This has been a very strong performer over the last three years, given the need for strategic communications and also a lot of the work we do, purpose-related work, ESG work. We've seen very strong growth in those areas in particular.
Overall, delivering 8.2% like-for-like growth. Worth calling out Hill+Knowlton, who delivered double-digit growth in 2022. Overall headline operating profit of GBP 191 million, up 33.6% year-on-year, and a margin of 16.5%, up 80 basis points. Very strong performance. Moving on now to our specialist agencies. We saw good growth across the business, actually delivering like-for-like growth of 5.6%. If we reflect the fact that we had a one-off COVID-related contract in 2021, which benefited that year, if we stripped out that one-off contract, then actually growth in 2022 would have been 9.1% on a normalized basis. The underlying performance of this sector is very strong.
Particularly call out CMI, Landor & Fitch, both of which were up double-digit year-on-year. Headline operating profit of GBP 119 million, down 7.8%, again affecting the one-off contract benefit coming through in 2021. The same on our margin, 13.2% year-on-year decline given the COVID contract. Worth mention of, again, example of simplifying our business. We combined Design Bridge and Superunion in the year to form Design Bridge and Partners. Coming on now to our geographic performance across our major markets. I saw good growth in the U.S., pretty much in line with the rest of the group. Worth calling out GroupM that saw double-digit growth in our U.S. market, and actually moved from the third place market position to the second place market position.
The U.K. actually was very strong, up slightly higher than our overall growth, 7.6%. A really strong fourth quarter. Surprising given the some of the negative economic headlines at the time. Our PR business in particular with FTS, Hill+Knowlton, BCW all delivering double-digit growth. Germany was up 4.8%. Again, if you stripped out that COVID contract, would have been up on a normalized level by 8.4%. China clearly had a challenging year last year as a consequence of lockdowns. We saw good growth in the first quarter, actually up 12%, but then the impact of lockdowns saw a decline, -6% in Q2, -9% in Q3, -8.4% in Q4 to deliver an overall negative -4% for the year.
We expect to see a challenging quarter in the first quarter of 2023, given the very tough comp, but we'd expect the performance to bounce back from Q2 onwards. India continues to deliver strong growth, so double-digit growth, albeit slowing slightly in the second half. GroupM actually within India grew almost 30%, so really strong growth from GroupM. In Australia, a solid performance with double-digit growth from our PR businesses. Brazil continues to be strong, particular call outs for F.biz and DTI Digital. Actually, on a year-on-year, we were up 18.2% in Brazil, and over the last three years, we've been up 32%. That's been a really solid performance on a three-year basis. France continues to be challenging as we absorb some of the client losses that we saw in 2021.
Coming on now to our transformation program. As Mark mentioned earlier on, we've delivered GBP 375 million of savings to date. That's ahead of our GBP 300 million target, we expect to deliver or confident to deliver the GBP 600 million by 2025. If you look at where these savings generate from, starting at the bottom with the blue bar, the operating model, it's really as a result of greatly simplifying our business over the last two, three years. In the last year, continuing that journey with the creation of EssenceMediacom, GroupM Nexus, again, joining together Finecast and Xaxis, Design Bridge and Partners I've already mentioned. We've also significantly removed a large number of our legal entities as we continue to simplify the overall group structure.
Again, we've made changes to the ways of working, particularly as a consequence of reduced travel, all of which has contributed to those savings in that blue bar. We also see savings as a consequence in the green bar, what we call our efficiency savings, as a result of investments in our campus program. We now have 37 campuses across our business, five new ones in 2022, and we think we'll do another five to six in 2023. Of course, by 2026, we anticipate having about 70%-75% of our people all located in our global campuses. We've made significant changes to the way we operate in our procurement function. We've now driven the organization towards a much more category-driven model, and we started to see the benefits of that come through in savings.
In particular, in 2023, we expect to see more savings, particularly in the areas of flexible working and of course, our IT infrastructure. We continue to obviously roll out new systems, our ERP program, combination of Economy, which we've rolled out in APAC in 2022, and we anticipate in 2023, we'll roll that out in South America. Workday, of course, where we're rolling out in Wunderman Thompson North America, and we've also rolled out the people component of that package in the U.K. as well. At the same time, of course, as putting in place new systems, we're able to put in place shared services. We put shared services and operations in APAC as well as North America as a consequence of that systems investment.
What does all that mean in terms of margin as a consequence of these savings? You'll see when we set out our transformation plan back at the Capital Markets Day in December 2020, we talked about the ability to deliver efficiency and operational savings in our business, and that's clearly what's reflected on the left-hand side of this slide and the numbers I've just taken you through. We also talked about the need to invest in our business to grow our top line and to support our people. This is what this chart sets out. You see on this chart an investment very much in our people and our talent reflected in that 2.5% shown on the chart.
We've also invested in our incentive schemes, again, to normalize those to levels that we would be expect to paying out, and we see that, and we talked very much about that in 2020. Also in our IT infrastructure as well. There was an element, I say, of technical debt through years and years of underinvestment that we've had to play some catch up on. We're investing in our IT systems in order to make our, the, you know, the lives of our people easier and to free up their time so they can focus on actually supporting and working our clients.
If we were to look at the shape of this, how this might change over time as we progress over 2024 and 2025, I'd expect to see that overall net investment in our people start to reduce somewhat as we start to see the payback of investing in our talent. We start to see that operational leverage come through. We're also getting more efficiency gains through a better balance of our freelance and our permanent mix, increasing offshore activities, for example, and also back office efficiencies, all of which should start to pay dividends, and we'll see that net investment in our people start to reduce between 24 and 25. I would say from an incentives perspective, that will remain relatively static. We've now got our incentives on a broadly normalized level.
We'd expect to see that investment to be consistent over 2024 and 2025. On our IT, we'd expect to see that investment, net investment reduce over time as a consequence of getting some of the payback of the investments that we're making in 2022 and also in 2023. An overall improvement in margin. In fact, come 2025 and 2026, we ought to start to see our IT costs come down as we see that investment pay back. Just showing the margin bridge between 2021 and 2022, so 40 basis points of margin accretion.
We saw the net investment in people come through, particularly in the first half of the year where we were carrying quite a lot of freelance costs as a consequence of having to bring resource into the business to cope with higher-than-expected client demand. We saw an investment in our personal cost reflecting the fact that people were coming back to traveling in 2022 versus 2021, albeit important to note that our travel costs in 2022 were still roughly half of what they were pre-COVID, so in 2029. A significant saving overall reflected in the previous chart that I've just taken you through. Procurement savings and finance savings coming through, delivering 40 bips of upside in our D&A costs and our campus program, again, continuing to pay back as we invest 50 bips of upside coming through there.
Given that our incentives in 2021 were so high, we had a record year of incentives in 2021. We also saw a benefit as a consequence of moving to a more normalized level of incentive payout in 2022. Overall, though, the 40 basis points of margin accretion that we guided to. Just to give you a little bit of a view as to the shape of 2023, we expect to see some relative improvements in terms of our staff cost investment and probably offset a little bit by more investment into our IT infrastructure, particularly as we start to shift to the cloud and actually also drive improvements in our colleague experience. As I said, we expect to see that pay back in 2024 and 2025. Coming on now to our restructuring costs. Again, in line with our guidance.
Last year, we talked about Workday costs of GBP 350 million between 2022 and 2025. In 2022, we actually invested GBP 100 million in Workday in line with the guidance. That gives us GBP 250 million to spend over 2023-2025, so roughly GBP 80 million a year over the next three years. In 2022, we had other restructuring costs of around GBP 120 million, which are largely IT and property-related, to deliver overall restructuring costs of GBP 220 million, GBP 290 million in line with the guidance that we gave you. For 2023, as I've said, expect another GBP 80 million or so from Workday and another GBP 100 million in other restructuring to give a total of GBP 180 million, so down year-over-year.
GBP 180 million in 2023 versus the GBP 220 million in 2022. We will also conduct a broad review of our property portfolio through 2023, but with particular focus on the U.S. markets, given the existing usage and also a change in the hybrid ways of working. Once we've completed that property review, we do expect further restructuring charges to come through in 2023, albeit they will largely be of an accounting nature, not a cash impact. Coming on now to headline income from associates, GBP 74 million versus GBP 86 million in 2021. A slight decline year-on-year. The movements there are actually Kantar has improved, has gone up, and the rest has gone down slightly, a net reduction year-on-year.
Our guidance actually for 2023 is GBP 40 million of associate income. The reason why that's significantly lower than historically is because actually the carrying value of our Kantar investment has dropped to zero as a result of large restructuring costs and interest costs associated on the debt, which means from an accounting perspective, we cannot recognize that associate income from Kantar. The GBP 40 million is effectively net of that associate income from Kantar. If we were able to include that associate income, that number would be closer to GBP 90 million-GBP 100 million. It's important to recognize also that that is an accounting adjustment. There are absolutely zero changes to any cash flows. Coming on now to our overall cash position, strong operating cash flow of over GBP 2 billion.
We did have an outflow of net working capital at the year-end. I'm gonna talk you through that in a second. CapEx of GBP 223 million, which is a little bit lower than what we guided to. Cash dividends, obviously net acquisitions and disposals of GBP 237 million, and a share buyback of GBP 800 million, which we signaled at the beginning of the year. Actually, if we look at the last two years, we've returned GBP 1.5 billion of cash to our shareholders through share buybacks. All of which resulted in a year-end net debt of GBP 2.48 billion. Just coming to that net working capital position. You can see from this slide, this shows the net working capital position 2019 through to 2022.
You can see, at the very bottom there, difference between that blue and the red line at the bottom, we saw an outflow actually of about, you know, GBP 230 million or so, year-on-year between 2022 and 2021. That said, if you look at the average performance, our average net working capital month by month through the year, you can see from the chart, and I can assure you mathematically, that it is level, year-on-year. We really had some, I would say, timing differences at the year-end. I think also, our creative agencies grew better than we expected, and you saw that in the numbers, and our creative agencies tend to absorb working capital.
Our media business, albeit grew well, didn't grow quite as well as we were expecting, and therefore tends to be a generator of working capital. Net-net, that explains the year-end position. In terms of guidance for your models for 2023, we expect net working capital to be broadly flat. We do expect to see small operational improvements come through, offsetting the overarching continued growth of the business. Coming on now to our leverage metrics. Net debt just under GBP 2.5 billion. An improvement in our interest cover and our net debt to EBITDA ratio, exiting the year at 1.46 times. This is the average for the year, 1.46 times, just below the 1.5-1.75 target range. Slightly better than the guidance that we gave you.
Again, just a reminder of our capital allocation strategy. Organic investment, the first priority, GBP 223 million of CapEx, particularly into our campus and our IT program, but also P&L investment in areas like Choreograph and GroupM Nexus, for example. Cash dividends of GBP 365 million. We had investments in M&A of GBP 287 million, offset by disposals of GBP 50 million in the likes of Village Marketing and Fēnom Digital and Bower House Digital and Corebiz. All of these in high-growth areas of commerce, experience, and technology, helping that long-term growth of our business. Of course, our strategy is to return any excess capital within the boundaries of our 1.5-1.7 times range, hence the GBP 800 million-plus share buyback that we saw in 2022.
Given that the average is now 1.46 times, and we expect that to be 1.5, 1.6 as we travel through 2023, we're not intending to buy back any shares this year other than those to cover the dilutive impact of our vesting share program, so about GBP 50 million or so in total. This will enable us to capitalize, of course, on any M&A opportunities that come our way. Lastly, just to take you through the guidance for next year for 2023. Like-for-like revenue, less pass-through cost growth of 3%-5% and further margin improvement, you know, reflecting continued operational leverage to deliver a headline margin of around 15%.
We've hopefully helpfully set out the rest of the detailed guidance for you on this slide. We reiterate, of course, our medium-term guidance to get to 3%-4% growth and 15.5%-16% also in the medium- term. That's it from me. Thank you, and I'll hand back to Mark to cover the strategic progress.
Very good. All right. Thank you, John. Look, at the end of John's presentation, he shared the guidance of 3%-5% for next year. I think what I'd like to just talk about our strategic progress in the context of the guidance or the guidance in the context of our strategic progress. What's changed to give us the confidence that we can deliver that growth next year? I think some reasons that are external to the environment, to what clients are doing, and what's happening in the market, and there are a number of reasons that are linked to WPP and the changes we've made at the company over the last four to five years.
If we look at the external environment, it's clear it's an environment of increasing complexity, but an environment where there's also new opportunities for our clients. We operate in a more competitive media environment, new platforms like TikTok growing, YouTube launching Shorts, Meta launching Instagram Reels, WeChat taking search advertising for the first time. It's a more competitive media landscape, more choices for clients. There's channels that are technology and data-driven, so they need more analytics, they need more media savvy. They also need new creative work and new creative opportunities. All of these complexity is driving new opportunities for clients. I think there's new opportunities to advertise on platforms like Netflix or to invest behind TikTok. All of these channels need new content and new ideas, and quite often, different types of content from other channels.
That's leading our clients to look much more fundamentally at their investments. Whereas perhaps four or five years ago, they look at television advertising and think about how much they should spend there. Today, they're faced with a plethora of choice and a need to maximize their choice. You know, some of the questions we've had around the growth of the platforms. Do the platforms disintermediate WPP? You know, my view is they empower us, they empower our people to do different and better types of work, and they empower us to grow if we do our job correctly, and that ultimately is the critical point. I think the external environment is more complicated. Faced with that, I think clients are also investing more in marketing.
These are some of the statements we've seen from clients' reports over the last couple of months. I think a number of you have, analysts, picked up on that. You know, ask yourself the reasons for that. Is it because they saw the renewed importance of communicating with their customers during COVID? It's certainly driven by their desire to invest in brands at a time of high inflation when clients are facing volume reduction and price increases. They understand they need to reinvest some of that margin back in brands to communicate with customers to secure their place in retailers. You can see that in the results.
You can see for yourself what Coke are saying, "We'll continue to invest to support momentum," or Colgate, "We'll continue to invest margin improvement in the P&L to allow us to fund more advertising," or Unilever, "Further investments in brand and marketing... further increases in brand and marketing investment." Consistently, and while most of the commentary is from consumer packaged goods companies, I think you're seeing this consistently across our client base. Amazon today is the world's largest advertiser from nowhere 10 years ago. I think clients understand the importance of marketing, they understand the importance of what we do, and they're continuing to invest despite the challenges of the global economy. It's not just the external environment that's changed. WPP has changed as well.
Today, we have a broader, a much more modern offer, and we set out four years ago this new understanding of our offer from communications, experience, commerce, and technology. Today, while about 75% of our business is in the communications business, 25% of our business is in experience, commerce, and technology. I think maybe one thing that's changed is an understanding of the value of communications. When we set this out, you know, we had a growth rate for communications of 0%-3% and 5%, 10%, 15% in the other areas. Last year, while the experience, commerce, and technology part of the business grew at 9%, the communications part of the business grew at 6%, 'cause there are big growth opportunities in communications, whether that's influencer marketing and social media.
The example here of work we did for Ford in Europe or retail media or programmatic media within communications. You know, GroupM today get 48% of their business from digital media. That's up significantly over the last four years. There's also strong growth areas in experiences work we did for Haleon, the new AI-driven application that lets you look at packaging and see what's on the packaging, whether we build the Xbox e-commerce platform from Wunderman Thompson or the work that Ogilvy and GroupM did together for Mondelez in India using AI to create millions of versions of a commercial that Indians all across India put out across social media. Our offer is different. It's broader, it's more relevant to clients, and it's more integrated.
At the same time, as a company, we have a simpler business with stronger brands, whether that's great brands like Ogilvy or AKQA, or in public relations, FGS Global or BCW, and the simplification we've done in our design and brand new identity. Our structure has changed. We've gone from hundreds of brands to really 12 or 13 key brands, and each of these brands is stronger, more relevant, and more differentiated in the market, in my view. Our business is simpler and somewhat easier to manage. Those brands, I'd say, are delivering world-class work, and that work is recognized in our industry. At Cannes last year, WPP was Creative Company of the Year for the second year running. The last time we achieved that was 2017. Ogilvy was Network of the Year. The last time they did that was 2016.
I think our work is getting better, it's getting more recognized. Interestingly, FGS Global, if those of you who saw the Mergermarket table, FGS Global was the lead M&A advisor, not just globally, but in the US, in Europe, and in Asia. They're creating a powerhouse in strategic communications. The recognition of AKQA by Fast Company for the world-changing ideas that they create for their clients. Our work is better, it's better recognized. While our geographic position and client portfolio may not have shifted, I think it does give us confidence as we look at 2023, particularly the breadth of our geographic spread and the breadth of our client portfolio. In particular, I call out here our performance in the rest of the world.
You know, China's 5% of our business, not a major part of our business, but in the opening of China will help the results, particularly from the second quarter on. We have a broad-based business geographically and a broad-based business from a client perspective. You can see our strength in CPG that perhaps four or five years ago would be seen as a weakness, is perhaps now being perceived as a strength. We're also continuing to, and have continued to, invest in the business. We've focused here a lot on our work around e-commerce partnerships with the likes of Stripe and Instacart, and acquisitions of Corebiz, Newcraft, and Diff in the e-commerce space. We launched GroupM Nexus to bring a lot of our digital media operations together.
That makes it easier to automate, it makes it easier to offshore, it makes it easier to invest. Xaxis and Finecast in programmatic media and connected television continue to grow. Delivering $2 billion of billings last year and growing very strongly, particularly in connected television. We continue to train and invest in people that can help our clients understand the platforms produced by the likes of Adobe and Salesforce and Microsoft and Meta. That's another big area. There's been a lot of attention over the last few weeks on generative AI, and personally, I've sort of played around a lot with ChatGPT and whether or not it's gonna fundamentally revolutionize search. It's certainly captured the world's attention. I thought we'd talk a little bit about our work through the context of AI.
It's an area we've been investing in for a number of years at WPP. We acquired Satalia, an AI company, two years ago here in the U.K., which is home, actually, to a lot of the innovation that's going on in the AI sphere. I thought we'd try to bring to life what we do for clients using AI through a few examples. The first example is work that EssenceMediacom did for Cancer Research in the U.K.. What's important about this work is the ability to use AI not just to reach and target new audiences, but also to tailor the creative to those new audiences. In this particular case, to use that not just across digital and out of home, but also on connected television.
If you're watching TV through your connected TV box in your living room that's connected by Wi-Fi, you'll see a different ad depending on what country you are in the world. We actually had to get those ads through the U.K. clearance authority, which I can assure you is not easy 'cause they like to see every word that's written. This notion of, you know, automating delivering ads on the fly is difficult. Let's see the work that EssenceMediacom did for Cancer Research.
Cancer Research UK wanted to make their Race for Life events locally relevant for everyone across the U.K.. MediaCom drove the process and brought together multiple GroupM solutions. Unmissable is a GroupM Nexus capability that delivered and optimized omni-channel programmatic media to the geographic areas and relevant audiences that mattered the most. Choreograph Create enabled relevant creative content to be delivered across media channels using valuable data on every impression for all 131 races across the U.K.. Working as one fully integrated team, we were able to deliver gender-relevant creatives only targeting audiences within a 10-mile radius of the race. Dynamic ads signposted info for the nearest Race for Life events across all addressable channels available in each location, including connected TV. Finecast utilized Choreograph technology to overcome the complex creative clearance process and provided a single addressable activation point to the CTV ecosystem.
Combining talented creative storytelling with AI-driven optimization, we achieved 1,000+ personalized ads, more engagement, uplift in sales, and added media value. These best-in-class capabilities enabled Cancer Research UK to deliver highly personalized messages and dynamic creative at scale.
You can see there how we're using AI to improve our media performance, to tailor creative to particular audiences, all leading to better results and better performance to clients. The next example is in e-commerce, it's an example of why we think creativity can be applied in all areas of our business. This is an example for paint. If you thought that watching paint dry was a boring experience, this shows how you can make the paint purchasing process more exciting and more interesting for consumers using the power of AI. Let's show this film. That shows how consumers speaking, though you couldn't hear them, would talk to different colors and produce those colors in the paint.
The last example shows how we can use AI to bring something to life that wouldn't be brought to life. This year was the last year of Serena Williams' career. AKQA worked with Nike to bring Serena's matches back to life and have Serena play Serena over the last 27 years, analyzing 130,000 games that she played. Let's see the work that AKQA did for Nike.
To innovate its products, helping everyone to perform faster, higher, stronger, more accurate, and free. What does it take to master all skills? To stay on top not for years, but for decades. Under Nike's 50th anniversary, we studied the greatest athlete of all time, the one that stood on top for more than 20 years, and transformed this data into a live entertainment event. This is Never Done Evolving, featuring Serena from 1999, the year she won her first Grand Slam, against Serena from 2017, the year she won her 23rd Grand Slam. Based on archival footage, machine learning was able to model each era's playing style, decision-making, shot selection, reactivity, recovery, and agility. The virtual match was created by building on the Vid2Player technique developed by Stanford University. The result was seeing both Williams play herself in 130,000 games.
We're all extremely passionate about sport. When we look at the data we capture, there's beauty in that. The lines and curves, it's like a symphony.
The game was launched as a live event, narrated by Josh Appel, tennis main narrator during Serena's era.
In tennis, there are no bigger dream matches than this one. One Grand Slam title against 23 Grand Slam titles.
The results surpassed nearly all Nike's YT benchmarks, spreading through all media courts.
This level of excellence it kept over so many decades is just absolutely astounding.
You remember the feeling she gave you, and the inspiration she gives to so many players and so many fans is what her legacy will be, and it's what's created.
Yeah.
I feel it's more of like an evolution of Serena.
I think that shows, you know, what AI can do in our business, whether it's targeting media, creating new customer experiences, or bringing ideas to life. I don't think there's an area of our business or indeed any business that isn't gonna be touched by it. For us, it's very relevant, as I said, in our media business. It's very relevant as an assistant in the creative process. I don't believe, this is the good news, it's ever gonna replace creativity, but is of aid in the creative process. It's certainly of aid in automating processes that are largely done by people. A lot of our production work will be more automated, and that will help us reduce cost to clients, bring work to them more efficiently, and deal with the plethora of new channels that need to operate in.
Will help us in decision-making as well. We're really keen on applying that across our business. The last point I want to touch on before wrapping up is our purpose. We set out a new purpose for WPP five years ago to build a better future for our people, planet, clients, and communities. We've done a lot of work in this area. In people, highlight the work that we've done in training people, investing in mental health allies, in diversity and inclusion. I'm very proud of the progress we've made as a company in promoting more women and more people from other ethnic backgrounds to leadership positions and other roles inside the company. Made tremendous progress there.
In terms of the planet, we've committed to be net zero in our own operations by 2025, and through the areas of production and media by 2030. We're doing a lot of work internally and with other media partners to drive to those changes. Lastly, sadly, many of the communities in which our people live and work have been impacted over the last few years. I'm struck that tomorrow is the anniversary of the Russian invasion in Ukraine. We're actually three years really from the start of the recognition of the challenge of COVID. We stand on the cusp of, you know, the reality of a disaster in Turkey and Syria, and our teams in Turkey are really helping to deliver creative work and creative campaigns to raise money for that region.
We have 1,200 people in Turkey. We have 200 people in Pakistan. While they haven't been directly affected, many of their families and friends have been impacted by the events there. I think it's important for us as a company, and it's certainly important for our people, to feel that there's something that they can do in that scenario. We want to invest. I think it makes WPP a better destination for people, and I think it makes us a better partner to our clients. I think we should be proud of the work that we've done in that area.
A lot has changed, and I think as you look at our guidance, and I'm sure we'll come onto it in some detailed questioning shortly, you know, I think that we are looking at good growth next year. I think it's well supported by the discussions and conversations we have from our clients who recognize the environment in which they operate and the importance of what we do. We are in a position to deliver a strong set of numbers. I think in conclusion, that's why I'd lend really. You know, we're well-positioned to deliver sustainable long-term growth. We have a good guidance in 23 on the back of a good year in 22 and a good year in 21. There's positive outlook for our industry.
If you come back to our overall three-year growth at, I think, 2019 is really the right point in comparison, we delivered 3.2% growth over that period. I remember being actually in this room in December 2018 and being asked by, I don't know, Tom or one of his colleagues, what would we deliver? I think we sort of slightly ducked it by saying peer-level growth. If you'd sort of pinned me to the ground, I probably would've said 3%, and effectively that's what we've delivered since 2019. There were questions, I think rightly at the time, about our growth in North America, which has delivered three-year growth of 3.3%. If you remember, we hadn't grown in the U.S. since the first quarter of 2016.
We delivered 3.3% compound growth over the last three years. There are questions about our creative agencies, which while they've grown 1.2% CAGR, they actually grew around 5% last year, and they hadn't grown for many years before 2016. Our PR businesses have done extremely well, and that's often been a part of the business that have been most impacted by this. I think we can deliver consistent long-term organic growth. We made a lot of progress in transforming and simplifying our business, and we leave the last year and look forward this year for confident or quietly confident in continued growth and margin expansion in 2023. Thank you. We're done, and we're here to take your questions.
I think we'll probably take two or three questions from the room, and then Anthony will sort of field questions from the people who are watching us online. Why don't we start, why don't we start with Lina, yeah?
Hi.
Hi. We'll get you a microphone. You say who you are and where you're from, I think, whatever, yeah.
Better. Hi. Lina from BNP Paribas .
Yeah.
Congratulations on the results, and thank you for having us in London. I have three questions. The first one is on the top-line guidance. Can you elaborate a bit more around what you have baked in in terms of macro headwinds, new contract, cross-selling, brands' appetite, and what will make the difference between the 3% and the 5%? Second question, very similar on the margin. Can you explain a bit more the moving parts around the 5%, the 15%, sorry, guidance on wage inflation, attrition levels, operating leverage, and benefits from the transformation plan? Lastly, John, I guess, you mentioned offshoring. Can you elaborate where you stand as % of headcounts currently in offshore centers, and how should we think about your offshoring strategy in the medium-term?
Okay. Why don't I sort of start on the guidance and let John sort of finish that off, talk about the margin, and we'll come back to headcount and offshore. Look, I think our budgets and Well, our guidance is based on our budgets, and our budgets are based on a detailed, you know, a detailed bottom-up view of what each of our agencies and each of our people have in terms of conversations with clients. I think they're also supported by the conversations we have at a senior level with clients and what you understand clients want to do. I think we tried to say during the presentation, I think at the end of last year, I think clients were more confident in private than they were in public.
When I talk to CEOs, they're a lot more positive than they would've been if when they appeared on Bloomberg or CNBC about the outlook for the year 'cause I think everyone was rightly cautious. I think the general view is the world economy is in a better place today than people feared it would be back in October and November. By the way, you hear that consistently across our peers, so our guidance is maybe not as much news to you as it would've been if it had come out, you know, a year or a month ago. I think that, the second reason is the reasons I thought. You know, clients understand the value of investing.
If you're the CEO of a company, you're looking at, let's say, an FMCG company looking at price is down 2%. Sorry, volume is down 2%, price is up, say, 7%, total revenue up 5%, you're probably not gonna cut your spend. You're probably gonna continue to invest in marketing to support the price increases, to support your revenue. I think that investors are looking for, albeit this is the year of efficiency, still value revenue growth, and there's no doubt that we're a little bit helped, certainly the top line, by inflation. I don't mean inflation in terms of us putting our prices up for our clients, I mean inflation in terms of what's happening in terms of client budgets and client spend. I think broadly speaking, it's a, you know, positive environment for companies to continue to invest.
I do think that, you know, consumers are continuing to spend, and that, to some extent is behind this. If there's a catastrophe this year, then things change. I said back in when we did our Q3 results, I don't think this year's gonna be a catastrophe, and I still, you know, I still have that view. You know, there'll be a slightly softer landing. It may take somewhat longer. You know, you see interest rates. You know, interest rates and inflation tend to fight against each other. If inflation goes up, so does interest rates, demand comes off a bit, prices come off a bit. You know, I think we're in for maybe a slightly longer but a slightly more sort of resilient, top-line environment than perhaps we would, certainly would have feared back in, you know, October and November.
I don't think that internally our view has substantially shifted since then. You know, you saw Q4 came in, you know, better than people had feared. Actually stronger than our Q3, although our Q3 was a little bit skewed by comparatives. I think we're, you know, pretty confident in the guidance for the year.
For our permanent headcount, it will be broadly the same, but actually we expect to see lower inflation 2023 on freelance. I think average cost inflation on our staff costs will be about 4%-5% in 2023 versus 6%-7% in 2022. You've got other investments. We talked about an investment in IT, so we're gonna have to invest in our IT, continue to invest in our IT infrastructure. You saw the investment that we've made over the last three years. We'll continue on that journey in 2023, and we'll start to see the payback in 2024 and 2025. You'll also see the transformational savings come through, so the GBP 450 that we showed on that chart, the progression towards the GBP 600.
There's other components like, for example, we ought to see a bit of a bounce back, for example, in China. China was actually a drag of 20 basis points of margin in 2022. We may start to see, depending on how China fares through the year, some of that bounce back in 2023. We continue, of course, to make investments in Choreograph and other parts of our business. When you net all of those different moving parts, we're expecting to see a drop through on our net sales increase this year of the low 20%. Normally, in a normal year, we'd expect that to be 25%-30%. It's a little bit lower in 2023 because of the somewhat higher inflationary environment and our desire to protect our clients from price increases as much as we possibly can.
That's why you see a slightly lower drop through in 23. That gives you a little bit of a shape on the margin for this year. In terms of your question on outsourcing,
Offshore.
Offshoring. We offshore roughly about We've got about 10,000 people you describe as being offshored, which certainly helps to mitigate some of our cost and mitigate some of that sort of 5%, inflation that we're seeing on our permanent headcount. We'd expect to see that increase over time. We're not gonna give any specific guidance on that. There's plans in place to see that increase over time. What we're also seeing increasingly is our agencies move to a much more what we call a distributed model, whereby we use resource in all geographies to serve clients in different parts of the world. Where we've got low cost or lower cost resource, we're using that resource to help serve clients, for example, in the U.S. or in the U.K.. We're using a much more distributed model.
It is not sort of offshoring in and of itself, but it's using the right resource to support our client work in a much more economically efficient way.
Okay. Adrian.
Morning, everyone. This is Adrian from Bank of America. Good to see you, gentlemen. I've got a few questions, if you don't mind. To follow up on Lina's question about 23, can you discuss a bit the phasing of that growth? Would you expect it to be second half weighted, or do you expect performance to be equally based around the different quarters? Secondly, I wasn't quite sure, John, why you mentioned that leverage would increase. You said 1.5, 1.6, but not quite sure why. To come back on the 23 guidance, Mark, you highlighted 3.2%, three CAGR. You're guiding on 3%-5%.
I'm not quite sure I understood what's driving the acceleration from 3.2% to, like, 3%-5%. Thank you.
Yeah. Yeah. I mean, on the last point, I mean, we are in a more inflationary world in 23 than we were the last three years, and that may contribute to part of it, I think would be the simple answer. Do you wanna talk about the phasing, John?
Yes. In terms of phasing, it is broadly neutral across the year. I would say probably slightly lower in Q1 because, of course, we've got the comp on China. We saw China grow 12% in the first quarter of last year. We've got to annualize that comparator. I'd say Q1 possibly slightly lower and then relatively consistent across Q2, Q3, and Q4. In question to your point on leverage, I think, again, it's a reflection of the... We will see a good bounce back in our free cash flow in 2023. We were impacted, of course, in 22 as a consequence of the net working capital outflow as well as the bonus accrual for 21 and the cash payments coming through in 22.
We'll expect to see that all reverse in 2023, so we'll see a strong bounce back to free cash flow generation. Of course, there's CapEx of GBP 300 million, other investments in M&A and so forth. When you add all that together, I'd expect our net debt position to be somewhere between sort of GBP 2.6 billion, so a little bit of an increase year-on-year. Certainly at the lower end of our GBP 1.5 billion-GBP 1.75 billion guided range.
Okay. Through to Lisa and then Tom.
Thank you. Good morning. It's Lisa from Goldman Sachs. Three questions, please. Firstly, on your mid-term guide, I mean, clearly you're already at that 3%-4% level in terms of growth or even outperforming that. I'm just wondering when should we expect to get to that 15.5%-16% margin. Is that 2024, 2025? I mean, I think you did say some of you're gonna get some of the payback in the next one to two years. That's the first question. Second question is on the interest cost.
Obviously a couple of moving parts. Given the movement in rates, you should be a net beneficiary 'cause you're getting more interest on the, on your cash. At the same time, you have also a lot of maturities due. I'm just wondering what are you assuming in terms of are you expecting to refinance that or you're happy to repay down the debt? Any sort of color on the, how to think about interest cost in 2023, 2024 would be great. Third question is on Kantar. Clearly, it has performed really well. It looks like your guidance for 2023 implies an improvement from GBP 38 million to GBP 40 million to GBP 50 million.
Can you maybe explain how, what's underpinning that, like the organic growth expectations, margins, and any sort of plans for an imminent exit? Thank you.
Okay. I think, I mean, John, why don't you take that, and we can talk about Kantar in the sort of round as well, I think.
Sure.
Yeah.
In terms of your first question, which is when do we think we'll get to the 15.5%-16%? I think we would say in the next one or two years. 2024, 2025 would be what we see as being the medium-term, which is about a year later than we guided to when we gave our Capital Markets Day in December 2020. Obviously, as a consequence of events that have happened since then and the invasion of Ukraine by Russia. About a year later than we originally planned. In relation to your question on interest, so we had about GBP 215 of interest cost in 2022. We'd expect that to be about GBP 250 million in 2023.
It's important that we unpack that because actually that GBP 35 million increase, about half of it is actually interest on net debt, and the other half is actually a reduction in income from investment. It just happens to be that we've got a whole plethora of investments. We think they will return less, we expect to see a reduction in the, in that income. About GBP 18 million or so of the 35 is actually an increase in our interest cost. When you look at that 18, you break that down, about two-thirds of it is as a consequence of having slightly higher net debt, and about a third of it is as a consequence of increasing rates. Our average interest cost at the moment is 3%. We have to refinance a GBP 750 million bond this year.
We'll likely do that earlier than later. That will increase our average interest cost to about 3.2%, hence why we're seeing that slight rate increase. It's important to note that only half of that uptick in interest cost is actually interest on debt. The other half is reduction in investment income. In terms of, I mean, I wouldn't want to talk too specifically in relation to the performance of Kantar overall, albeit other than to say that it's performed, you know, incredibly well. You know, it's a headline EBITDA of about $750 million at the moment. It's performed incredibly well over the last couple of years and continues to grow. In terms of, obviously, exits, I'm not going to give you any sort of indications as to when those may.
I would look at Kantar, and we often think of Kantar as being a hidden gem, if you like, in our business. Again, if you sort of think about the value of Kantar, I mean, I'll leave you to do your own modeling, of course, but if you think about the headline income of GBP 750 million or so in EBITDA, and if you applied, again, I talk a range of multiples, 8-12x. You choose your own range, but call that 10x. That's sort of GBP 7.5 billion. You take off the GBP 3.4 billion or so of debt. That's about GBP 4 billion of equity value. Our share of that is about $1.7 billion-$1.8 billion. Call that GBP 1.4 billion-GBP 1.5 billion.
I mean, that, you know, that might give you some sort of ideas as to the way we think about the value of Kantar. There's lots of assumptions in there, and you'll have to make your own assumptions as to that value. I think it's quite, in a way, the fact that we're now stripping out, if you like, the income from Kantar, from our associates line, makes it a little bit cleaner because you can take that straightforward income, EPS, if you like, for the WPP business overall and apply whatever multiple you want to that. You can then take the value of Kantar and apply whatever you want to our 40% stake on Kantar and add the two together.
Yeah. I mean, I'd add to that. You know, I think as John said, in some ways, it is easy to look at the value of it. It's a financial investment. We're very pleased with the decision we made to retain 40%, and we're very aligned with Bain Capital on the investment. You know, it may happen this year, it may not happen this year. I think that, you know, that's how we're looking at realizing the value of that investment. Tom.
Yeah. Thank you. Yeah. Tom here from Citi. Thanks for taking the questions. I've got a couple on capital allocation, if it's okay.
Yeah.
Maybe we could start with the buyback or lack of. I mean, obviously, the leverage is slightly raised this year for a number of reasons that you outlined. I'm just interested in your sort of philosophical view on buybacks beyond for the ESOP. Is it, you know, should we anticipate you returning capital via that going forward in general, or should we assume that cash will be held back for M&A and other uses? On that point, can you talk about plans for M&A, and can you talk in particular about retail media investment? Some of the other bigger agency groups have bought dedicated retail media investment related platforms.
I know you have those capabilities within your networks, but do you feel the need to have something dedicated and separate, and could M&A?
Yeah
be part of the story?
I mean, I'll talk about how I feel philosophically about buybacks more than the policy, if you like. Look, I think you can't shrink to grow at the end of the day, and I think there are attractive investment opportunities in our business. That's what, as a management team, we should be focused on looking at. If after, you know, the results and after, you know, the acquisitions we've been able to make, the dividends we've been able to pay to shareholders, there's money left over, then it makes sense to return that through a buyback. You know, the substantial buyback that we've done has really been to offset the impact of the Kantar transaction on earnings. I think that's really sort of philosophically how we use it.
That's not to say there won't be buybacks in 2023, but I think our priority has to be to invest in the business, to build the capabilities that our clients need, and to, you know, allow our companies and our brands to make acquisitions to grow. That's the priority. I think on M&A, I mean, I think the focus is clear and has been. It's technology related, technology driven businesses that are sometimes creatively strong, sometimes strong in data. We're very focused on solidifying our partnerships with companies like Adobe and Salesforce and Microsoft and Google because that helps strengthen our position with them. I think we're very focused on the more major markets, so the U.S., Brazil, India, other parts of the world where we have a strong position where actually valuation's a little bit more realistic.
I think the U.S. is a big focus for us from an investment perspective. Here, some parts of the U.K. or the U.K. and some parts of Western Europe, we have a great business like Germany, I think are interesting. That will be the sort of functional and geographic mix. I think, you know, I go into this year expecting sort of similar in 23 to what we did in 22. You know, six to 10, eight to 10 sort of acquisitions. There may be, you know, we never rule out more interesting opportunities. In terms of retail media, you know, we do have some capabilities in that area. I think there's two sides, like every coin, there's two sides to retail media.
There's what we do to help our clients, invest in retail media, and, you know, we have very strong capability there. I believe we're Amazon's single largest retail media partner. We acquired companies like Marketplace Ignition in Seattle, I think seven or eight years ago. We acquired an Amazon expert in Luxembourg five years ago. We have been investing for some time in retail media and helping clients navigate that. You know, the interesting thing about retail media, it's both a media problem as well as a creative problem, and then you have to understand distribution and supply chain and everything there. I think the other side of the coin is helping retailers sell their media to clients, and there I think we're a little bit cognizant of the channel conflict issues.
You know, are we sitting on both sides of the fence, if you like, in terms of retail media? We look at it with interest, and we advise a number of clients what they should do. You know, we acquired a company called Triad, six or seven years ago, was not a great success. I think we're sort of wary of being on both sides of the fence from a retail media perspective on whether, you know, we need our clients to have confidence that, the money that they're investing is not going through channels where we're on the other side of the transaction. It is interesting. It's a massive growth area. It's a conversation we have with every client.
We're very, very well equipped to help clients, whether they want to spend money on Amazon or on Walmart or on WBA or Target or any other major retail media platforms around the world. Okay. Do we have any more questions in the room? If you're in the room, you get priority. Okay. I think no. We're gonna take questions from the webcast. How are we gonna do this? Can we dial people in or?
I think we can play them over the speaker, I think.
Any questions?
Thank you. If you would like to ask a question on the telephone line, then please press star followed by one on your telephone keypad and remember to unmute locally. Our first question comes from Richard Eary from UBS. Richard, please go ahead.
Morning, everyone. I have a couple of questions actually, if I can. First one for John. Just going back to your comment about you expect net debt to increase slightly. Can you just walk us through again so I'm clear the moving parts from what your EBITDA number is through to the increase in net debt so I'm just clear we've got all the moving parts on there in terms of particularly around M&A, et cetera, and uses of cash flow. That's the first thing. The second thing, Mark, just on guidance, is that can you maybe talk through a little bit...
I know you've given some discussion already, but can you talk through in terms of by drivers, by clients, by geography and by business lines and whether that growth you're expecting through to 2025 is similar to what you articulated over the last three years by different business lines? That would be helpful. Then just the last question, just going back to, I think, a comment on Kantar. Can you just repeat what you said around the value of Kantar that you had on the books? I presume within the balance sheet it's been written down to zero, but what would be your current carrying value if it wasn't written down?
All right. Why don't I start on the guidance, then John can tackle net debt and how we account for Kantar. In terms of the drivers, look, I think, It's, it's relatively broad-based, and I'd say we're not seeing a big shift in the patterns that we saw before. I'd say by client, you know, perhaps we're seeing, you know, consistent growth across our top 30 clients and across the client base with one or two clients looking at reductions, but no major pullbacks, certainly no consistent pullback. I'd say by business line, again, pretty consistently, you know, strong growth in businesses that are driven more by technology and data and commerce and technology services. You know, our media business, as it has historically, tends to have a higher underlying rate of growth than, let's say, the so-called creative agencies.
The creative agencies, because they have strong capability in commerce and like AKQA in digital transformation, are seeing good growth. Geographically, I'd say again, a similar pattern. More resilience than we'd expected in Western Europe. A couple of markets a bit softer 'cause of specific client issues. Solid growth in Brazil and India. China coming back, from, let's say, the second quarter on that helped the profile overall. I think that, there's no single thing I would call out that our growth is dependent upon other than the fact that the economy continues to be in a slightly better place than people expected perhaps three to four months ago.
I think as everyone else has realized, our industry is in a structurally better place than perhaps people had feared three to four months ago as well. John, do you want to talk about debt and cash flow?
Sure. Richard, hi.
Can I just ask a follow-up just on that?
Yeah. Yep.
Just with regard to just the account win momentum in the business, obviously last year was softer than probably what it was in the previous year, given obviously the Coca-Cola win, but then the L'Oréal loss, in the fourth quarter. Are we still expecting within that 3%-5% growth tailwinds from account win momentum this year?
Yeah, I think that our good new business performance last year, notwithstanding, you know, sadly, we're not 100% perfect, notwithstanding some losses, I think definitely helps going into 2023, but it's not the sole driver. I mean, we have, you know, a large number of clients that are planning double-digit growth and some that are lower, obviously you do in any at this point in any year. I don't think that there's. Look, I think our new business performance and our competitive helps us, but I don't think it's dependent on any one of those things. All right, John.
Okay, Richard. Look, at risk of doing all your modeling work for you, I'll try and take you through some of the numbers just to sort of help you out in terms of cash flow. If you look at the, you know, the headline EBITDA level, you know, just over GBP 2 billion in 2022. We'd expect that to sort of obviously rise in 2023. Two point one, GBP 2.1 billion-GBP 2.2 billion, that type of direction. We've then got interest costs, again, on debt of around GBP 150-GBP 160. Taxes of GBP 450 or so reflecting the step-up in our tax rate that we've guided to the 27% versus the 25.5%. CapEx of around GBP 300. Then, of course, we've got restructuring costs of GBP 180, again, that we guided to.
We've got earn outs of around GBP 80 or so, similar to this year. We've got flat working capital movements. In terms of non-trade working capital, expect an outflow of around GBP 150 or so. We talk about M&A of GBP 400 million or so. We don't assume any disposals within that, although there may be some disposals. GBP 50 on share buybacks to support the different share schemes, and the dividend, of course, policy at 40% payout ratio. If you add all of that together, and of course, there's lots of moving parts there, and it can move. You know, that's roughly an outflow of GBP 150-200 or so. That gets us to a net debt position of about GBP 2.6-2.65 billion for the year end.
That's a fairly detailed overview. Of course, there are variabilities, plus or minus around that, all of which would result in a net debt to EBITDA average for the year of about just over 1.5 times. Again, in our 1.5-1.75 range. Hopefully that sets out very clearly the expected cash flows for the year. Of course, they may well change. In terms of your question on Kantar, again, just to repeat, I mean, obviously the complexities around, I'm sure you're aware around private equity, sort of debt structuring are clear. The carrying value of our investment in Kantar has dropped to zero for two reasons principally.
One of which is because of restructuring costs taken outside of headline to transform that business, and that is delivering great success in the performance of Kantar. We've seen a really step up in EBITDA performance over the last couple of years as a consequence of that restructuring, that transformation. Second, of course, is the interest costs on the leverage. All of which is technically taking the carrying value of Kantar in our books down to zero. That means that we cannot recognize the associated income. That's an accounting technicality. That, of course, doesn't mean there's no value associated or attached to Kantar. How do you think about what is the value of Kantar in our portfolio?
One way of looking at it's not the only way of looking at it, but one way of looking at it is the way that I outlined earlier on. Just to sort of again, for your benefit, just to take you through that math, and it is subjective, and you have to do your own work and valuations, but the headline EBITDA is around GBP 750 million. That's the bit that's been steadily improving, and that may well continue to improve. You can then look at whatever multiple you fancy to that, and it could be eight, if you, if you look at an Ipsos type multiple, or it could be higher if you looked at a higher comparable, it could be eight to 12. Again, you have to take your view, and I can't comment on what the market would assume there.
Let's just take, you know, as an illustrative example, 10 times. That gets you to your GBP 7.5 billion. You then take off the GBP 3.4 billion of debt that Kantar has. That gets you to a net GBP 4 billion, and our stake in that is $1.7 billion or so. GBP 1.3 billion, GBP 1.4 billion. I'm not saying that. That's one way of looking at the value of Kantar. You have to look at your own approach. You'll take your own assumptions around that, but that might be an illustrative way of looking at how do you think about the value of Kantar in our business. That's not value, of course, that's reflected in our books because the carrying value, as I said, is zero.
Okay.
Yeah, that's super helpful. Thank you.
Thank you. Our next question comes from Matthew Walker from Credit Suisse. Matthew, please go ahead.
Hi, Matthew.
Thanks a lot. Good morning. Can you hear me?
Yep.
Hey, good morning. Hi. Yeah, thanks for taking the question, first of all. The first thing is, like you mentioned, a 9% growth for your business transformation assets in 2022. Are you assuming a similar level of growth for business transformation in 2023? Second question would really be on in-housing. What are you seeing on the in-housing trend at the moment, and are you offsetting any of that with, you know, selling extra services like, you know, like ECT and business transformation? Just wondering what your perspective on that was.
Then finally, just on the inflation point, which I guess is well taken about the client budgets. I think last year you did put up your own prices to, and got maybe a couple of % of growth from putting up your own prices of your own workforce. Are we to assume that you're not doing any of that in 2023?
Okay. Where can I start? Look, I think on, you know, the experience commerce and technology area, we wouldn't necessarily define that as business transformation 'cause transformation impacts everything we do with our clients. We don't really forecast or budget in that way. I can't give you a number of, you know, 9%. What I'd say is, broadly speaking, we would expect that part of the business to grow more strongly than communications in 2023, as it has done in previous years. I would point out that, you know, what we've seen is a relatively robust performance in communications because that business is not dead and actually, is doing well, particularly as clients invest in marketing.
On in-housing, look, I think that clients have always brought sort of more commodity elements of what we've done in-house, and or offshored it, and increasingly we're offshoring it as well to reduce the cost of doing it. I don't think anything substantially changed in that. A number of the sort of best known in-housing initiatives from clients are actually staffed and provided by agencies, and we have many examples of people across WPP and many of our clients, a growing number of clients, who do work inside client operations.
I think it's a very fluid structure, and I think, you know, if I were a talented, you know, person looking for a job in programmatic media or e-commerce or data analytics, would I rather work in one of our agencies or work inside a client organization that makes, you know, sausages or a bank? I probably want to work in one of our companies. I think, you know, clients are best off partnering with us in many of those areas, but there will always be the sort of more commoditized areas of the work that they bring in-house, and our job is to make sure that, you know, we're always at the forefront of what we're doing and not in those more commoditized areas.
On your question on inflation, I mean, John will answer, but I think the simple answer is, you know, that we continue to manage our prices. We have to pay our people more money. That means we have to put our prices up to our clients to be able to attract and reward our people.
I guess exactly. I mean, I guess to put a bit of color on that in terms of numbers. You know, as you rightly highlighted, in 2022, we probably managed to put our prices up overall about 3%-3.5% or so. Obviously our cost inflation in 2022 on our staff was 6%-7%, we had to, you know, it's our job as a business to absorb that cost inflation and try and avoid passing it on to our clients. We want to give them value for money, we're able to do so by initiatives such as transformation, by initiatives such as offshoring, managing our cost base effectively, and so forth.
I would say for the year ahead, we would probably expect to see, you know, similar types of price increases and, as I said earlier on, maybe slightly lower inflation on our staff costs. Still, you know, 4%-5% or so. Still above what we might put through in price increases. Nonetheless, we get a little bit of relatively margin relief in 2023 because the inflationary pressures have eased, and we continue to push our prices up sensibly with our clients by about the same as we did in 2021.
You mind if I have a quick follow-up, which was the U.S. was a little bit slower in Q4. Do you see U.S. being a little bit slower than some of the other geographies in 2023 or, any comments around that?
No, I think you're right. It was a little bit slower in Q4. That said, we had some really good momentum in our Ogilvy business with some significant client wins, which will benefit us as we go into 2023. I wouldn't want to give specific geographic guidance going into this year, but, you know, we feel confident about our ability to continue to perform in the U.S. market, and we've, you know, had some good success examples from Ogilvy in the last quarter.
Okay. Thank you both. Thanks a lot.
Thank you. Our next question comes from Omar Sheikh from Morgan Stanley. Omar, please go ahead.
Yeah. Morning, everyone. Just three quick ones for me, maybe. On margins, maybe John, first of all, you talked about the medium-term margin target being achieved in the next couple of years. Could you maybe talk about what you think might be the potential to raise margins beyond that? Are there any further efficiency savings that you think are possible within WPP? Are there some benefits from the investments that you made in technology that could maybe take margins up beyond that, or meaningfully beyond that medium-term guidance? Maybe also on margin, John, you said 4%-5% on staff costs, 4%-5% overall growth in 2023, isn't the average headcount gonna be going up?
So just wondering what the kind of price and total headcount for 2023, the mix looks like. If you just maybe give some color there, that'd be helpful. Then secondly, maybe for Mark, your comments just... I mean, I think just following up on Matthew's question just now on the impact of inflation on client spending, could you just maybe give a sense of what clients are telling you about, you know, how much they're expecting inflation to, you know, play on their total spending for 2023? What happens if inflation comes down rapidly? Does that negatively impact how much they might spend, or does that not really change things? That would be helpful. Then just finally, really quickly on Kantar, it sounds like...
Let's not infer, but I guess the question is, if you were to decide to sell Kantar, what would you do with the proceeds? Thanks.
Look, I think, I mean, take your question in reverse order. On Kantar, I think we'd have to see, and we don't know when it would be or what the proceeds would be or what opportunity would be ahead of us at that time. We'll see. In some ways, the situation we've got to now is somewhat cleaner in terms of the earnings that in some ways makes it easier. On inflation, I mean, we don't have direct conversations with clients. My sense is that, you know, these things balance. If inflation comes down, interest rates will come down, and that will be positive. If inflation goes up, interest rates will go up, and that's sort of a bit more negative.
I think it's hard to say what's positive or negative. I just think that in an inflationary environment, clients don't slash spend. That doesn't mean if inflation start to come down gradually, They are, you know. You're sort of looking for the negative in these things. I think that, you know, the conversations we have are relatively robust as the economy's in a slightly better place than people feared, and that's sort of where we are now as we look ahead at the next 12 months. I can't really give you sort of more detailed, more detailed insight into that, than that, I'm afraid. You had a question for you on margin.
I think there were two questions on margin, if I understood correctly. Just in terms of your last question on margin, just again, give you a little bit of the shape of some of the dynamics. Just for comparison. For 2022, we saw, broadly speaking, staff inflation costs of about 6%-7%, as I said, and we also saw headcount increases on average of about 9% in 2022. The reality was we mitigated a lot of the impact of that inflation through transformation savings, through offshoring, through mix of resource and freelance and permanent and so forth. That gives you a little bit of the headline to 2022. If you look for 2023, we would say, as I said earlier on, we'd expect staff inflation at around 4%-5%.
We'd actually expect our headcount increases to be around, you know, 2% or so, something of that order. It gives you. In both years, 2021 and 2022, sort of price increase of around 3%-4%. That helps you think about how you're doing your modeling. Important to highlight that a lot of the inflationary pressure coming through on staff costs we managed to offset. You don't see that all flow through. There's a lot of work we do to offset that through mix, through offshoring, through, you know, using the right resource in the right places to support our clients. Your first question, which was on margin beyond the medium-term guidance of 15.5%-16%.
Look, obviously, I'm not gonna give any new guidance today beyond that medium-term, which we hope to achieve in the next year or so, other than to say that, you know, WPP is a complex organization. It's a lot simpler today than it was four years ago. In two, three, four years' time, it will likely be simpler still, you know. It's not a journey that's going to be finished in two, three, four years. This is a, you know, long journey of change. I don't. I suspect my successor and, you know, Mark's successor over the years will be talking about transformation in WPP for years to come. There is a significant opportunity in the business to simplify and improve the business. We've made good progress, I think, in the last four years in that direction.
You can read into that what you will about longer- term margins, but certainly we're very happy with the medium-term guidance that we set out.
All right, next question. Any more?
It's very clear. Thanks both.
Thanks. Thanks, Matthew. Any more? One more.
Yep. We have one final question on the telephone line from Silvia Cuneo from Deutsche Bank. Silvia, please go ahead.
Good morning, everyone. Thanks for taking my questions. I just have two left. One is on account reviews. What is your expectations for level of account reviews this year? How much could be up for renewal to defend, and how much potentially up for grab? Do you have any big example that you might like to share on this? Secondly, on digital advertising, many of the platforms still sound a bit mixed regarding performance and outlook for digital advertising. Can you please share your views as to why WPP does not seem to be that impacted? Is that more because of the channel shifts, perhaps away from display to more retail media or your sectors of exposure? Thank you.
Okay. I mean, look, I think on account reviews, we have a pretty healthy new business pipeline. It's probably a little bit smaller than it was this time last year, though it increased significantly in the last 24 hours. I think that there'll be reviews that take place. I think a lot of clients are looking at our work and our partnership with The Coca-Cola Company, trying to understand how relevant that is for them. What are the benefits of really working with a partner who can help them transform their business and transform their marketing, help them deliver better work, and at the time, save money.
I think that's quite attractive proposition to a large number of major clients who are struggling with thousands, in some cases, thousands and thousands of agency partners. I expect that to continue this year. On the digital advertising point, I mean, it was interesting, we were looking at the growth. The growth of the FANGs in Q4 was 1.2%, and WPP delivered 6.4%. Now, I will admit that on a three-year basis, they've certainly seen very strong growth, and probably I'd rather have it on a three-year basis than for a quarter. I do think that, it does demonstrate the strength and resilience of our business. I think it's a little bit a sample error. It's a little bit a sample error problem, and it's a little bit a business mix problems.
The business mix problem is we tend to work with larger companies that have more consistent budgets. They're less driven by customer acquisition and the vagaries of the private equity market. Many of the platforms have a different business mix, a lot of small and medium-sized businesses, a lot of companies. I don't think FTX is a major partner to a lot of the platforms in a way it was perhaps a year ago. A lot of the, you know, venture-backed start-up are spending less. That's the sort of the business mix. Then I think it's a little bit of a sample size error, which is a lot of the platforms where you're seeing growth, like TikTok or Amazon, are not measured in those, in those models where you just add up simplistically, you know, Google, Meta, Twitter and Snap.
You're seeing growth out of those four platforms and that makes a more diverse media mix, more competition, more ways to reach consumers. I think that's better for our clients, it's better for WPP as well. I think that's the transformation we're seeing there. And I expect that to continue this year and into the future. Okay. I hope that's the last of the questions.
Yeah.
Thank you for that. Thanks everybody, for listening in the room. Thanks in particular to our clients, whose trust in us, we repay through our work. To our people, for the hard work they've done. They've created these results, not John or I, and also to our shareholders for their support through the years. Thank you all and we'll see you in Q1.