Earnings Call: H1 2021

Aug 5, 2021

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the WPP 2021 Interim Results 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 very much, and good morning, everybody, and welcome to our 2021 Interim Results. I'm here in London with John Rogers, our CFO and Pero Ben Rivier, who heads our Investor Relations team. And we'll take you through the results and then answer any questions you have at the end. I think Turn to Page 2 to read the cautionary statement before we go through the results. So I'll just Briefly cover the highlights before handing over to John to talk you through our financial performance. And turning to Page 4. I think we saw a strong performance in the first half of the year. If you look at net sales growth, we led our peers as reported so far, and I think that reflects really a pretty strong performance Across the board, geographically, by business sector and by client sector with revenues as part of the first half up 11% against the backdrop of being down 9.5% in the first half of last year And an acceleration in performance from Q1 of 3.1% to 19.3%, so close to 20% net sales growth in the 2nd quarter. As I said, we had strong growth across the board in our integrated agencies, our public relations firms and our specialist agencies, a particularly strong Performance from Group M. I think the results also reflected a shift in business mix to the faster growing areas of our business within Communications into digital media, e commerce media, but also within the areas of e commerce or Experience Commerce and Technology, we saw that percentage increase from 25% to 26 We've had, I think, I'd say a respectable or solid start so far in terms of new business. We'll get into that a little bit later, but you've probably seen a slightly We won holding company of the year at the 2021 Cannes Lions, the first time that we've done that since 20 17. Overall, the results enabled us to increase our dividend by 25% and return further money to our shareholders £248,000,000 in share buyback with another £250,000,000 to come in the second half of the year. And net net, we're raising our guidance really 2nd time this year for revenue and expansion costs to 9% to 10% and our operating margin being at the upper end of the range that we set out at the beginning of the year. So I think we've seen really good momentum across the business. John will talk you through both the revenue and profit performance. But I think it takes us back to 2019 levels a year ahead of planned And a positive 2 year stack of 0.5% for the first half, but improving to 1.3% For the Q2, there's a good momentum going into the back half of this year and into next year. So John, do you want to take everyone through The financial performance. Thank you, Mark. Good morning, everyone. So straight into the headline income statement on Slide We've got revenue less pass through costs for the half of GBP 4,899,000,000 which is up 5% on a reported basis given the currency drag and up 11% on a like for like basis, all of which delivers an operating profit of $590,000,000 up 54.4 percent And taking account of the income from associates, net finance costs and of course, tax, Delivers a profit after tax of $387,000,000 up 82.8% year on year. Adjusting for non controlling interests delivers profitable profit attributable to shareholders of 353,000,000 up 84.9% year on year and the diluted EPS of $28,700,000 up 86 point 4 percent year on year and an operating margin for the first half of 12.1%, up 3.9 percentage points year on year. And for good measure, EBITDA was $699,000,000 up 45.7% year on year. So clearly a strong half. Moving now to the reconciliation of headline operating profit to reported operating profit. So we start off with a headline operating profit of €590,000,000 in the half. Adjusting for amortization, restructuring costs, Both COVID and transformation driven and also other costs, given adjustment of 106,000,000 and a reported operating profit of GBP484,000,000 obviously significantly ahead of last year given the goodwill impairments and the investment write downs that we made this time last year. Coming on now to performance within the different segments And on to Global Integrated Agencies, delivered an overall net revenue less pass through costs So just over CHF 4,000,000,000 up 10.9% on a like basis and also very pleasingly up 0.4% versus 2019. So really strong growth, delivering a profit of $483,000,000 up 71.1 percent and a margin of 11.9%, up 4.7 points. And you can see in the graph below the trajectory of that growth, And you can see they're building momentum. So Q1 on Q1 versus Q2 on Q2, you can see Up 17% in the half and 28.6% in the second quarter, really strong performance driven by recovery in global advertising spend and driven, of course, by our Zaxis and Vimecast businesses, Also encouraging 2 year growth from both Group M and BMLY and R and indeed double digit Like for like growth in Q2 for Hogarth, Wodom and Thompson and very good growth in Hogarth, Hovlevy, very encouraging performance from Hogarth, Strong performance in Q2. So overall, strong performance all around. Coming on now to public relations, which is an area that didn't suffer as much under COVID as some of our other segments. But overall, revenue less pass through costs, £429,000,000 up 7.4 percent on a like for like basis and also good growth versus 2019, up 2.6%. Profit index $63,000,000 down 11.7 percent and margin of 14.8%, down 2.1 percentage points. So we saw continued strong growth in Digitrym, of course, by demand for Strategic Advice, ECW And Hill and Norson, both growing double digit like for like in Q2. Since we've got a Herring merger is now completed. The margin was a little bit challenging down year on year, driven principally by an investment in our people and some of the merger related costs associated with FTH, actually dragging the margin down in the first half. Coming on now to our specialist agencies, where we've really seen a rapid recovery in areas like brand consulting. The revenue less pass through cost of $401,000,000 up 17.1% on a like for like basis And 3.3% versus 2019, so very strong growth and recovery versus 2019. Headline operating profit of 44%, up 56% And margin of 11%, up 2.8 points. So really strong performance. There's been a real resurgence in demand for brand consulting for Landor, Superunion and DesignBridge, all performing very strongly and also significant growth at CMI, which is our Specialist Healthcare Media Business. Moving on now to the performance across our major markets. So good recovery in the U. S, 12.6% growth in Q2, and that also reflects growth on 2019 at 1.8%. So really encouraging performance in one of our major markets. The same for the UK, Growth of 31.8 percent in Q2 of a slightly weaker quarter this time last year at minus 23.3 But encouragingly, on a 2 year basis, up 1.1% versus 2019. So again, we're seeing good growth on that 2019 base. Germany, even better performance, 20.3% in the quarter. That's actually up 6.3% on a 2 year basis versus 2019. Greater China, a little bit more disappointing. We were actually down just up in the quarter, but down 1.7 percent on a 2 year basis, but we are seeing an improving trajectory, and we do expect to see growth that come through in the second half of the year. And Australia, we saw some recovery in Q2, but still negative on a 2 year basis. And now, of course, We've brought the business back into 100 percent ownership. We're very optimistic about driving stronger future performance. Coming on now to our other major markets. So India, up 30% in the quarter on the back of a weak performance in Q2 of last year, but nonetheless, up 1.3% on the half overall. France is a little bit more disappointing, actually down 7.8% on 2019, albeit some recovery In Q2 at 27.9 percent Canada up on a 2 year basis and up 33.5% in the quarter Italy, really strong recovery at 52.7%, a massive growth in the quarter and actually up 7% on a 2 year basis as well. So we're seeing great recovery in Italy. Spain, a little bit more challenging, up 15.8 In the quarter, but actually down on a 2 year basis, down 2.8% on a 2 year basis. So France and Spain, a little bit more to go before we see full recovery, A strong performance in the other markets I mentioned. Coming on now to our overall headline operating Margin. So staff costs pre incentives of GBP 3,200,000,000 actually down 1.3% year on year. Establishment costs, dollars 265, down 15.7%, reflecting the great work of our campus program. IT costs actually up 1.5 percent to $278,000,000 reflecting the investment that we're making in that area. Personnel costs Down 40.3%, reflecting the lower travel and accommodation costs, delivering Overall operating profit, pre incentives of GBP 834,000,000 which is up 94% year on year, so very strong performance. As you can see from the numbers, we're investing significantly in our incentive pool this year, reflecting the tremendous hard work of all our colleagues across the business. So in the first half, the cost was $244,000,000 delivering $590,000,000 of operating profit, up 54.4%. So when actually we look at the operating profit margins on a pre incentive basis, we stand at 17% at half year, which is up 7.8 Margin points year on year. And because of our investment in incentives, the post incentive margin is 12.1%, up 3.9 points year on year. So And another way of looking at that is displayed on the next slide where we show the margin bridge, half on half. You can see there the benefits of the operating leverage come through, through fewer people at 4.3% margin points And the benefits of our property strategy delivering 1.3 margin points, the lower travel cost delivering 0.8 margin points, IT at 0.2% and other G and A 1.1, followed by, if you like, a drag of 3.8, driven by this significant investment in our incentive pools that year on year. And to give you a little bit of shape for the second half, where we'd expect this is less operating leverage comes In the second half, so that 4.3 percent, we think, will largely disappear, driven by salary increases coming through and also additional recruitment to meet increasing growth. On the establishment costs, I would expect to see a similar benefit in the second half come through. On personal costs, I think that will be lower in the second half of the year, particularly as travel, of course, comes back in, in the second half. IT will be similar, and there will be less of a drag on incentives given year on year, we actually made quite a large accrual in the second half of last year, Reflecting the strong performance in the second half, accrued the bonus. And so the drag on incentives in the second half will be less. But overall, we would expect to outturn the year at the upper end of our margin guidance range, 13.5% to 14%, so towards the 14% range is where we'd expect to output. Coming on now to our progress on transformation and the longer term savings. You see on the left hand side there the savings that we talked about, the CHF 600,000,000 gross savings we expected to deliver by 2025. For those of you who may remember that we also showed a chart which showed the phasing of those growth savings and delivering what we Anticipated to be GBP 200,000,000 of gross savings in 2021. So I'm going to give you a little bit of a shape now as to what I think the full year will deliver. And We'll report in more detail on this at the year end itself, but I would forecast the full year Procurement savings in the order of $50,000,000 or so, real estate savings in the order of 100,000,000 Savings through shared services and further simplification of the business, about $15,000,000 and actually travel and accommodation savings for the full year About $150,000,000 But of course, some of those will come back in, in the future, so they're not all permanent. So I'd expect about $80,000,000 of that $150,000,000 to reverse, giving a net $70,000,000 So when I add the $50,000,000 to $150,000,000 and the $70,000,000 That's about $230,000,000 of savings we anticipate for the full year, slightly ahead of our target of €200,000,000 which we communicated back at the Capital Markets Day. So really good progress against our target. And that's what gives me comfort to confirm our guidance for 2023 at 15.5% to 16%. We've got real line of sight of how we're going to deliver that margin improvement as we progress through 2022 and 2023. Coming on now to some of the different areas and the work that we're doing. As many of you will know, we recruited Rachel Haim in to lead our IT function from BT. She's made a fantastic start. We've identified significant opportunities for savings and doing things more efficiently. We've got a very clear road map now as to how we're going to progress over the next few years and how we're going to reduce the gap between our current cost base and the industry benchmark. We've also brought in Dawn Winchester to very specifically lead our Workday project and also the work that we're doing on our target operating model to become more efficient across finance and HR. And also, we're making great progress on shared services. We're already starting to migrate countries like the U. K, UAE, China and Singapore Into our 5 regional shared service hubs, in Shanghai, Mumbai, Malaysia, Dallas and Mexico, We've also brought in very strong talent here as well in the form of Suzanne Lea Polley Nichols to head up our Global Business Services program. She comes in from UPS And it's really leading the charge on driving forward our shared services strategy. On procurement, as I mentioned earlier, we made a strong start In delivering savings there in the €2,000,000,000 or so of indirect spend, that function is being led by Tig Matthews. We've got here some examples on our calf beef, on Pharmacy Benefits as others in FM, telephony and so forth where we are driving cost out through our buying scale across the organization. Property making tremendous progress, the further 10 campuses to go by the end of this year, and we're on track We're doing great work on our business unit rationalization. We've got we're targeted actually to take out about 500 legal entities this year And we'll work to go in the years ahead. And already, we're delivering travel savings, as I communicated earlier. So we feel that we've got Really strong initiatives across the Transformation program. And of course, we'll give you a much more detailed update when we come to our year end. In terms of our free cash flow and free cash flow conversion, again, you'll see we start off at the top of the page with operating profit of $484,000,000 making adjustments depreciation, lease payments, working capital, net interest, tax and capital expenditure and earn out delivering an outflow of 345 for the half year. That obviously compares to an outflow of 825 for 2020, The improvement, obviously, being driven by stronger operational performance, stronger working capital management and lower tax and earnouts. Coming on now to the uses of those cash flow in the on Slide 17. We talk here about Obviously, we've got expenditure on acquisitions. Australia, we brought that business into owning it 100%. Mark mentioned earlier on DTI As an investment in Brazil, various UK investments and also numerator, which is a Kantar investment, You see the cost of those €252,000,000 on the page in terms of outflows and again in terms of share repurchases for the year, €298,000,000 at the bottom half, delivering an overall net cash flow, €1,000,000 at the bottom half, delivering an overall net cash flow of €852,000,000 negative versus €915,000,000 for the same time last year. And just coming on now to bridging the debt year on year. So this time last year, dollars 2,700,000,000 of debt, Strong operating cash flow, obviously offset by lease payments, CapEx, tax, acquisitions very strong performance in our trade net working capital, Most of which was delivered in the second half of last year, of course, share buybacks, dividends, but overall, a reduction in our net debt by GBP 1,200,000,000 to GBP 1,500,000,000 and that's GBP 1,100,000,000 on a constant currency basis. So very strong deleveraging across our business, Which, of course, is reflected in our leverage metrics on the next page, where we show available liquidity We stepped up a little bit year on year to $5,100,000,000 Interest cover has improved to 8.3x, and our rolling average net debt to headline EBITDA has reduced to 1.1x, which is actually below our 1.5x to 1.75x guidance. And actually, we expect to close the year below that 1.5% to 1.75% stated range also. Coming on now to the impact of FX on revenue less pass through costs. Again, we signaled this at the start of the year. We've had year to date a headwind of 5.8%. We expect a similar, slightly lower headwind for the remainder of the year, But overall, for the full year, an adjustment of negative 5% as a result of exchange rate shifts. So coming on now to my last slide, an update on dividends, buybacks and guidance. We're declaring an interim dividend of 12.5p, up 25% We've completed the first phase of share buybacks in the half of GBP 248,000,000 We expect to complete an additional GBP 350,000,000 planned for half 2. As Mark has already alluded to, we are updating our guidance 2021, so like for like revenue, less pass through costs grow at 9% to 10%. It was previously mid single digits. Equally, headline operating margin towards the upper end of our range, in the half of twenty fourteen, so close to 14%, And CapEx and net working capital guidance remains the same with CapEx of €450,000,000 to €500,000,000 and a small network capital outflow of €200,000,000 to €300,000,000 think it's important to remind everyone, of course, that there remain short term uncertainties, what would the various variance of COVID and travel restrictions and the economic outlook, Etcetera. But nonetheless, we've had very positive momentum in the first half of the year. And as we look here, we would expect that momentum to continue into the second half And equally into 2022. And therefore, our medium term guidance remains unchanged. In particular, our margin guidance of 15.5% to 16% for 2023, where we now have really good visibility That's how we're going to segue towards that number between now 20222023. And with that, I'll hand over to Mark to give you a business update. Thank you. Thanks very much, John. And I've got a few comments we need to make on the business, but we'll get quickly to the Q and A. So on Page 23, I think it's clear that We see attractive growth opportunities for WPP and the changes we've made in terms of integrating our business, simplifying the structure, Investing in creativity, digital media and data and technology do allow us to capture them. And I think if you look on Page 4, there were 4 Page 23, there are 4 sort of we call them post COVID, though we're not, I think, really through COVID yet, post COVID Structural growth drivers to call out. The first is if you look at ad spend, we're expecting a CAGR of 6.9% Over the next 3 years, this chart is a little complicated, but it shows, I think, how GroupM have consistently raised both the estimate of The size and the estimate of the growth of the advertising market over the last three years. So we are seeing good strong growth in the advertising market overall over the next 3 years. And particularly within that, digital media growing closer to 10% over the next 3 years. I think there's strong Structural growth in our core market, and that's reflected in the strength of GroupM's Performance in the first half of this year. I think the first to call out is the long term potential for growth in e commerce. It's an area where we've been investing for a number of years within WPP and as part of our restructuring over the last 2 years, we really put e commerce at the heart of many of our businesses and invested significantly in that. Evan, I think the 4th point to make in the bottom right is really the importance of what we do for clients And that the results that we see in the first half of this year are more fundamental than just a rebound in activity. And if you look at The three areas of consumer packaged goods, technology and health care that make up together about 54% of our sales, We're seeing strong growth on a 2 year basis. So those sectors that grew well in 2020 or had Very resilient performance in 2020. We're seeing continued growth in 2021 in the first half of the year. We expect that to continue into the second half and into 2022. And I think it talks to a long term growth possibility and perhaps Really the realization or the recommitment of our clients to invest in marketing as the economy recovers. So on Page 24, we talked about the changes that we've made. I'd like to highlight a few of those in terms of how we look at the business Within our global integrated agencies in media, I mentioned Group M, we've seen 3.7% growth on a 2 year basis in Group M. I think that talks to the strong structural growth opportunities that we see inside our media business. It's now 43% digital in Digital area is growing very quickly. You can see within ecommerce driven media, it's up 61% in the first half. Finecast, our television business, Up 113%, and Zacks itself is up 56% in the first half of the year as clients Earlier in the year, we announced that we appointed Brendan Moorcroft as the CEO, and that's probably a key part of our response in a number of major On the creative front, we now have 4 distinctive global creative networks, And we're particularly pleased, I mentioned at the beginning, to be awarded holding company of the year, the 2021 CAT 9, the first time we've done that since 2017. And I remind you within those businesses, we do have strong positions in e commerce, in marketing technology. They're not in any way just advertising agencies. They're integrated agencies capable of helping clients connect with their consumers, sell products across Very well in the first half of the year. We're increasingly seeing that public relations and public affairs that is integrated into our overall flow reflected in The walk in the boots assignment and continued investment in reputation, in employee communications and purpose. Historically, In a downturn, PR is one of the areas most affected. We haven't seen that this time, and I think that bodes well for the future. Then lastly, with the Specialist Communications, I've called out CMI that John mentioned, but also The growth we've seen in our branding identity companies as clients reinvest in innovation, in new product launches and in corporate activity, and that's reflected in their On Page 20, I'd just touch briefly on new business. Coming into the year, We had a very, very strong performance in 2020 where we led all the new business tables by some metric, particularly in media, and Mediacom had an excellent performance Last year, as did all the GroupM agencies. This year, I think the performance probably has been a little bit more balanced towards creative than media. I think that's actually a good thing. It shows that our creative agencies are coming back more strongly in effect the investment we made creatively. I'd say that Wavemaker particularly had a strong start to the year in new business. There have been a couple of Glad that we would strong wins in the second half of the year. On Page 26, I mentioned our performance at Cannes. I think just to call out on this page the contribution from each of our Creative agencies and indeed our media and design agencies in Cannes, Each of our major networks won a Grand Prix, which I think is fantastic result. Superunion won a Grand Prix in design, the first time in some years that a design really reflected contribution from across the company. On Page 27, as we talked about before, we mentioned in our ESG Day, Purpose is increasingly a strong driver of our business and 9 of our top 10 clients are working with us on purpose related activities That goes from helping them to develop their ESG strategy to specific product initiatives that support it through to helping them to communicate What they're doing in the purpose arena. I think those are really the highlights of the year from a business perspective so far. On Page 28 in summary, I think we recovered 2019 levels a year ahead of what we expect and what we set out in December 2020. Well, good momentum going into the second half and into next year, and that reflects, let's say, strong client demand across a range of our services In all major geographies, but also that some markets are still sadly impacted by COVID. We do have strong structural growth opportunities resulting from a shift in consumer behavior to digital media and e commerce channels, Growth in some key client sectors like consumer packaged goods, healthcare and technology. And I remind people of the strength of WPP's Geographic footprint, particularly in markets like India, Brazil, China, Indonesia, have long term from structural growth opportunities. We have made good progress in our broad agenda around creativity, around purpose, New services and John highlighted the importance of our transformation program, not just to improve our margin, but also to free up money to invest in our business. So in conclusion, I think we are collectively very pleased with the results. I'd like to thank our clients for their support, our people for their hard work. I think net net, the results do demonstrate the long term viability, the great adaptability And the power of our business model, I think, bode well for the future. So thank you all for listening, and we'll take questions. Thank you, sir. We will now take our first question from Tom Singlehurst from Citi. Please go ahead. Your line is open. Yes. Thanks for taking the question. It's Tom here and Matt. Hi, Tom. Yes. So, one of 2 questions, 1 on revenue broadly and 1 on cost. On the revenue side, obviously, Yes, there's a genuine concern. We're entering a period of higher sort of cost inflation. I'm just wondering whether you could give us some sort of high level comments on The vulnerability of marketing investment to sort of input cost inflation, I mean, there's historically been a perception that Marketing might be used as a buffer to offset sort of input cost inflation elsewhere. Is that still a risk you think across the second half or do you think we've seen a shift in perception such that marketing itself is seen as an input cost In its own right. So that was the first question. On the set incentive, as far as I can tell, looking at The commitment to incentives for the full year as measured as a percentage of EBIT pre incentives, it's Pretty much as high as it's ever been, going all the way back to the beginning of the millennium. So the question is this, are you actually Spending more in absolute terms on incentives than the original plan. And what does that mean for 2022 onwards? I mean, do you continue to sort of spend at that level in relative terms or does the sort of sharing of the proceeds of supernormal growth become a bit more balanced? Thank you. Okay. So I'll tackle the first question and John tackle the second. Look, I think that What we're seeing is an investment or reinvestment by clients in marketing as the economy Recovers. If you look within Consumer Packages, as I point out, on a 2 year basis, we've seen growth of 7.2%. So really good growth across both years. We do hear from a number of CPG companies that there are pressure on input costs, and some of that's Being passed on to retailers and consumers through inflation. I think historically, inflation probably being viewed as Sort of broadly positive to market marketing spend. I think what you're talking about is sort of inflation in input prices Without the ability to pass those on to the end consumer, and clearly, I think we're seeing that from some clients. We're not seeing that in all of our CPG clients. And I think net net, we don't expect that to change things substantially in the second half. John, do you want to talk about incentives? Yes, sure. Let me just give you A reasonably long answer on this question to sort of help you sort of shape your thinking for the first and second half. So Just to give you a little bit of a shape. So obviously, in the first half, we're reporting overall incentive costs at 244. Now based on our current performance and trajectory, I would expect that to broadly land for the full year At about just north of 450 there or thereabouts. Now there's lots of contingents and ifs and buts attached to that, but that just gives you a little bit of a flavor for the full year. And just for reference, that compares to 185,000,000 for last year and 294,000,000 for 2019. So clearly, a step up year on year, both versus 2019 2020. And as Mark said, reflecting significant half, and we believe it's important to reward our colleagues With a strong bonus. Having had quite a tough year last year, it would be great to be able to award our colleagues with a strong bonus for this year, Reflecting the strong performance. And so I would imagine it being about north of €450,000,000 but it's a little bit higher than what I would describe as being the normalized position. So I would expect the normalized position going forward to be somewhere between €300,000,000 and €350,000,000 with this year being a step above where we would expect to be On a normalized basis, so all else being equal going into 2022, we'd expect our bonus charge In the ordinary course of the business, to be somewhere between €300,000,000 to €350,000,000 So we will, therefore, benefit from a little bit of a tailwind Going into 2022, in margin point terms, it's about 1 to 1.5 margin points because of that normalization of the bonus. Obviously, we'd hope to be Paying out much bigger bonus than that in 2022, but we'd only be doing so off the back of very strong performance and therefore it would fund itself. So hopefully that's a Pretty full answer to the question. It gives you a little bit of guidance as to how we see the bonus charge shaping over time and where it sits relative to a normal period. Perfect. Very comprehensive. Thank you very much. Thank you. Your next question comes from Matti Leitonen from Bernstein. Dean, please go ahead. Your line is open. Hello, good morning. First question on Creative. You gave the recovery rate over 2 years for VMLY and R. But I was just wondering if you could give us a rough indication of what that would look like Across the Creative Agency business. And then a second question on the very strong performance in Commerce. It seems like you're going sort of further into commerce marketing now with the e commerce expansion. And perhaps historically, you did In the physical trade promotion world, could you give us a bit of commentary on sort of Does that mean that you see e commerce, trade promotion and media as a fundamentally better business opportunity than Trade promotion was in the physical world or what sort of explains that? And then finally, a bit related to that bonus question earlier that you just answered, You seem to have retained much more staff than particularly the U. S. Peers in 2020. Do you think it gives you an advantage now in the current market for Talend as you go further into the sort of post recovery Growth. Thank you very much. Okay. So I'll tackle the Commerce question and then John can talk to The first and then Commerce was. I mean the reality is that given the technology changes that are taking place, The worlds of marketing and sales and content are inevitably converging And sort of historic divide between the sales department and the marketing department in many of our clients is coming closer together. And we're starting to build new relationships with the heads of sales like we might have done With the Head of Marketing, so I think we're seeing some strategic convergence of those worlds. Whereas historically, through Fitch, We may have designed stores. Our involvement in building e commerce websites is much more fundamental. I remind you that we just replatformed Net A Porter. We work with Sainsbury's to build sainsbury's dotco.uk, so an enterprise level grocery website, and we built And we'll continue to work very closely with Selfridges on their e commerce efforts, and that's just here in the UK. So I think This convergence gives us good opportunity from a sort of a build perspective And from a media perspective, to get into new markets. And I think that, that's a 3 to 5 year and ongoing opportunity. Do you want to give us some color on the Creative? Yes. So just on the 2 year wrap on the Creative. Across our global integrated agencies, we are up 0.4% versus 2019. Now of course, that is across Hogelby, Warner and Thompson, VMMYR, AKQA, Group M and Hogarth. And within that, Group M is actually up 3.7 percent on 2019. So if you stripped out Group M from that, we would be slightly down on 2019 levels across I will be one of them, and talk to the other Y and R and AKQA Group in Hogarth, but not by much. And so We're actually pretty pleased with the performance. As we said 6 months ago, we expected it to take 2 years to recover back to 2019 levels, and We basically got back 2019 levels in the Creative Admissions in 1 year. We're slightly shy of that, but we'd expect to see continued momentum come through in the second half. So we're pretty pleased with performance. And in particular, actually, I'd call out Ogogia as well, which Quarter on quarter, delivered a really strong growth in the 2nd quarter, very pleasing to see the impact of Andy Main and his New management team really driving performance in the Ogilvy business. On the point around bonus and Staff churn and are we seeing a benefit? I mean, difficult to comment relative to our competition, of course, but I mean, I think we're seeing churn levels across our business, which are clearly a big step up on last year, unsurprisingly, Because last year, of course, most people were in lockdown. But actually, if you look at our churn levels versus 2019, we're not dissimilar across the business. There's pockets in certain markets and certain areas, but actually, we're not dissimilar. And I think what you hear some of our peers reporting is a big step up in churn. So I would say that we do see an advantage because of that. Churn levels are still relatively high, But maybe we do see a relatively strong performance versus our peers. And clearly, staff churn does cost the business A lot of money. So the extent to which we can manage that and drive that down, we see it being a very positive thing. And of course, a lot of the work that we're doing In integrating and bringing together our people management systems across the business, we hope in the long run we'll deliver further benefits to how we can Give our people the clear path that they're looking for across all of our different agencies and reduce that churn even further. So I expect to see some benefit, but very difficult To quantify, frankly. Very helpful. Thank you, Mark and John. Thank you. Your next question comes from Sarah Simon from Berenberg. Most of my questions have been answered. But I just had one on Mark, you've obviously highlighted e commerce as an opportunity. I was just interested to know whether you looked at the Citrusad deal Am I right in thinking that actually your focus on e commerce is less about the media side of it and more about the kind of implementation and strategy. Just a quick comment there would be helpful. Yes. Look, I'm not going to point on a particular transaction, but I think We want our volume to be very broad in e commerce. So I think it relates to really every aspect of our business from Advising clients on their e commerce strategy. So thinking through, do they When do they go direct to consumer? How do they sell best through traditional retailers? How do they take advantage of Instacart? Karen Everson, you may have noticed, who are very close with the Facebook, which has gone to Instacart. And then how we help them spend their money through their media business, how they get data from e commerce companies to help target They're not just their marketing spend, but drive innovation. So I think that it's a real e commerce is a real Fundamental change in how clients sell. If you look at John Donahue's statement from Nike last year, He attributed their investments in e commerce, not just to being able to sell to consumers during the pandemic, but Improvements in their product innovations, the insights they generated, through reductions in stock levels, through looking at consumer demand. So I think it's pretty fundamental and I think a big area of conversation that we have with every client. Okay. That's helpful. Thanks. Thank you. Your next Question comes from Julien Roch from Barclays. Please go ahead. Your line is open. Yes. Good morning, Marc. Good morning, John. Good morning, Julien. Good morning. Julien. My first question My first question is on buyback. It was part of the Investor Day target, but it was supposed to start in full year 'twenty three. And you're starting in the second half of twenty twenty one. So will we have a buyback in full year twenty twenty two as well and basically buyback regular buyback starting from Noelle, that's my first question. My second one is on new services. They went from 25% in 2019 to 26%. When you gave us the $0.25 split for 2019, you gave us a tech, commerce and experience breakdown. Do you want to provide the same breakdown? Or should we forget those 3 categories and just think about a new service bucket given to us twice a year? And what was the organic growth of that new service bucket in the first half? That's my second question. And then the last one is on net new business, dollars 2,900,000,000 which is okay. It's in line with 2019, but below 2018 2017. You were, however, the only agency losing media billings in the first half according to Convergence, as highlighted by another agency slide. So Net net, based on accounts that have changed hand this year so far, will net new business have a negative, neutral or positive impact on organic next year? Thank you. Yes. Okay. Why don't I take the net new business number, and then John can talk to you about buybacks and sort of specific Look, I think we've had as you say, we had an excellent year in new business this year last year, I think, We had an excellent 2020, particularly in media. I'd say we've had a solid performance this year. It's not spectacular, But it's not bad. It's been much stronger, I'd say, on the creative side of the business than it has been on the media side. I think we did lose I think we were not successful in the Stellantis review. It was a very quick review, and that skewed the results. I have studied the chart to which you referred to in some detail. And Perhaps we should have an off the record conversation about its composition. But I think It includes new business wins and retentions. So I think it merits Further investigation. Okay. Loud and clear. And Julian, just coming on to your questions on Share buybacks, obviously, we did the €250,000,000 in the first half. We're announcing up to €350,000,000 in the second half. And then we've already clearly indicated that, that would put us below our stated balance sheet Range on net debt to EBITDA of 1.5x to 1.75x. So again, if you refer back to our capital allocation policy at Capital Markets Day in December, obviously, anything outside that range, we would, all else being equal, intend to Payback to shareholders through further share buybacks. So I don't want to forecast too much, but obviously, All else being equal, given that we'll out turn the year below that metric of 1.5x to 1.75x, there is clearly the possibility Our future potential share buybacks, albeit we don't know necessarily what's going to happen between now and then. Acquisition opportunities may come along, Etcetera, or further growth investment opportunities may come along. But all else being equal, hopefully, you can draw your conclusions from what I've just said. In relation to the split between Communications and Commerce Experience and Technology, we're not going to break that out In detail every time we report it, we may come to it at the year end and break out in a little bit more detail. Obviously, it moves relatively slowly over time. And hence, I think breaking it out every single time It isn't really going to necessarily always tell you the right story, but we're pleased with the progression that we've made. We said that we're going obviously from 25% to 40% between now 2025. And this 1% shift reflects Steady linear progression against that target, so we're pleased with the progress. I think it's really also important to highlight, of course, that Within the communications bucket, the 70% at the 74%, yes, there are some massively fast growing businesses that contains most of our Media Business, we've already talked about the great progress we've seen on Group M in the first half. And the fact that it's even shifted by On Indication of how much that new service bucket grew in the first half on an organic basis? I suppose we are up double digit. Well, I'll let you do the math on it, but obviously, it's growing from 25% to 26%, so You can work it out, but we'll come back to it at the year end and give you a bit more detail. But hopefully, you can work out a mass from the numbers. Okay. Very good. Thank you very much. Thank you. Thank you. Your next question comes from Matthew Walker from Credit Suisse. Please go ahead. Your line is open. Thanks. Good morning. Hi, guys. Hi, Dan. Two questions, please. Hi. The first question was really on the margin side. I think John mentioned that the bonuses Net for next year being lower, so let's say it goes from sort of $450,000,000 to $300,000,000 $350,000,000 with the benefit of 1 to 1.5 margin points. I guess you're not necessarily saying that the margin is going to grow that much. Are there any rags that you would point out, or should we basically flow that 1 to 1.5 through for the full year in 2022. That was the first one. The second one was, obviously, there's been some comments around You discussed inflation. Have you seen any evidence of, I guess you haven't, but any slowing growth In the economy or ad markets, they will impact on the second half of the year. That's the second question. And then specifically around Facebook, that was one of the key clients, I guess you're not participating in the review according to the press. Can you just explain a bit why not? Because it seems like Not necessarily the most important one, but certainly an important client. Okay. I mean, look, I'll let John handle the margin and bonus question and add to what he wants to say on the second half. But we're not seeing Any slowdown or anything that you mentioned around inflation or input costs Overall, with our clients. I think on Facebook, it's really the specific reasons are between Between us and Facebook, I'd all like to say is we decided not to proceed with the review, but we continue to work with Facebook in And Matthew, just coming to your point On margin, so you're correct in saying that, see, the expectation for this year is circa 400 €450,000,000 Normally, we would expect that to be €300,000,000 to €350,000,000 in a normal year. But of course, we can't We predict that what it will be for next year, depending on the performance of the business. But if we perform against plansconsensus, we'd expect to pay out bonus at that level. And your question was, does all of that flow through? Well, all else being equal, of course, all of that flows through. But of course, all else won't be equal. So as we look into 2022, we would expect to see additional operating leverage As we grow the business, we'd expect to see a slight drag in relation to personnel costs As travel and accommodation costs come back in, we'd expect to see some additional upside based on establishment costs, And we'd expect to see some upside based on incentives, but we'd expect to see some downside looking at the full year, For example, annualization of salary costs, etcetera. So there's lots and lots of moving parts in that, and we're not going to provide you with guidance for 2022 Margin on this call, but clearly, one of the big components is that incentive piece and that, all else being equal, gives us a 1% to 1.5% Tailwinds going into 2022, but there are the moving parts, both positive and negative, that you'll need to take account of. What we are comfortable with is reiterating the guidance for 2023, which reflects the margin of 15.5% to 16%. And we can see we've got based on all of our different moving parts and, of course, the benefits that We're delivering through our transformation program. We are very comfortable in reiterating that margin guidance for 2023. So I'll leave you to, in the first instance, bridge the gap between the 14% that we expect to outturn in 2021 and the 15 point 16% in 2023 and the various moving parts that exist for 2022. We'll clearly come back to providing you with more detailed guidance for 2022 at prelims for this year end. Okay. Very clear. Thanks a lot. Thanks. Thank you. Our next question comes from Adrien de Saint Hilaire from Bank of America. So first of all on Group M, you've mentioned that it grew 4% on a 2 year comp. How does that compare to the overall ad markets? And also, Marc, you mentioned GroupM is forecasting 7% CAGR for the ad market between now and 2024. Would you expect GroupM to outperform that figure, perform in line or underperform? 2nd question that It's still around the topic of growth. So at the Capital Markets Day, you kind of guided for like 2.5%, 3% like for like growth in 2023. Since you're recovering a year ahead of expectation, is that now a fair assumption for 2022 as well? And then I think the Group M is gaining market share compared to its competitors Compared to its peers, its relationship to aggregate ad spend is complicated because much of that Growth in digital ad spend is focused on small and medium sized businesses that are not the Traditional clients of group ends, it's really not necessarily the right comparison to compare it to the aggregate share, but I think It's a strong business. It's gaining share certainly compared to its traditional peers and it's gaining share In digital media, where it matters. Look, I think on M and A, actually, if you look at Our spend in the first half of the year compared to our target, we're on track to hit the target we set out in December For the year as a whole, some of that did go through numerator through our associate, But that is in a high growth area of the data Investment Management business, and it's a quality, High growth companies. I think we're on track to make our targets. We have a number of interesting opportunities in our pipeline. Do you want to talk about expectations? Yes. And in relation to growth expectations for 2022 and 2023, you're right, of course, that In 2023, we guided to 2.5% to 3% like for like growth at Capital Markets Day, and we maintain that guidance 2023. We're not at this stage going to issue guidance for 2022. Obviously, we still got 6 months this year still to run. We carried very strong momentum through the first half, as evidenced by the numbers today. We would expect that momentum to continue through into the second half of this financial year. But we'll obviously wait and see how the second half transpires before we give guidance 2022 itself, but we are comfortable with the longer term guidance of 2.5% to 3% like for like Coming through in 2023. We've got good momentum in the business at the moment, and we just want to see how we trade over the next 6 months before we give that guidance for 2022. That's all very clear. Can I just ask a very, very quick follow-up? So, Depends on where it is. Thanks, Mike. It will be quick, I hope. So do you mind telling us like how much cost savings will be delivered in 2022 out of the 600,000,000 that you plan to deliver for 2025? Well, if you look at the Again, I'll just refer you back to the charts at the Capital Markets Day, where we outlined the $600,000,000 of gross savings, and we gave you a chart Following that, which showed how the cost savings progressed over time. So it was $200,000,000 of gross savings For this year, dollars 300,000,000 for next year, obviously, on a cumulative basis. So we're comfortable with that guidance still. I mean, it's only ever an approximation as to how we Proceed over the next 5 years, but 200,000,000 for this year, 300,000,000 for next year on a cumulative basis. We remain comfortable with that program. All very clear. Thank you. Thank you. There are no further questions at this time. I would now hand the call over to Mr. Mark Reid for further closing remarks. Excellent. Thank you very much. And thank you, everybody, For listening, I think I just conclude with the point I made at the end of the presentation. I think it's a great set of results. So thank you to our clients and our people. And I do believe it demonstrates the long term viability, the adaptability, our ability to Really transform a company of 100,000 people over the last 3 years and changes that we've made And the power of our business model in terms of the Gentlemen, you may now disconnect.