WPP Group plc Annual Report 2016

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FY2016 Annual Report · WPP Group plc

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Annual Report & Accounts 2016

Contents

The fast read
1

A six-minute read

Who we are
14 Our companies & associates

Why we exist
16 Our mission

Our 4 strategic priorities
18

Horizontality; new markets; new media;
technology, data & content

WPP: a global company
20 Our growth markets

How we’re doing
23
26
53

Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity

Financial summary
Strategic report to share owners
Reports from our company leaders
57 Advertising
68
74
77
81
84 Healthcare Communications
88
90
92 WPP Digital
WPP’s Global Client Teams
WPP’s Regional, Sub-Regional
and Country Managers

94
96

Digital, eCommerce & Shopper Marketing
Specialist Communications

What we think
99 WPP’s collective intelligence

by Sir Martin Sorrell

111 Just Because You Can, Doesn’t Mean You Should
How ‘personalisation’ can get altogether too
personal for comfort
by Jeremy Bullmore

This year, our Annual Report draws inspiration
from street art in Western Europe, which has
developed from humble beginnings into a
sustained artistic movement. We are featuring
work by 13 of its leading figures, who are
transforming streets – and whole cities – in
Europe. See pages 240 to 243 for more
information about them.

Group photographs by Mark Seliger

Who runs WPP
115 Board of Directors

125
128

How we behave and how we’re rewarded
Letter from the chairman of the Company
121
Review of the Company’s governance and
123
the Nomination and Governance Committee
Review of the Audit Committee
Letter from the chairman of the
Compensation Committee
132 Directors’ Compensation Policy
145 Compensation Committee Report
158

Implementation of reward policy for
management outside the Board

161 Sustainability review

How we comply
169 Corporate governance
174 Other statutory information

Our 2016 financial statements
177 Accounting policies
184 Directors’ responsibility statement
186 Consolidated income statement
Consolidated statement of
187
comprehensive income

188 Consolidated cash flow statement
189 Consolidated balance sheet
190 Consolidated statement of changes in equity
192 Notes to the consolidated financial statements
222 Company profit and loss account
223 Company balance sheet
224 Company statement of changes in equity
225 Notes to the Company financial statements
227
233 Five-year summary
234 Financial glossary

Independent auditors’ report

About share ownership
237

Information for share owners

240 About the artists
244 Awards for recent WPP Annual Reports
245 WPP news and updates

Where to find us
246 Parent company centres
246 Group information
246 Parent company regional contacts
246 Business development
246 Contact points
246

WPP Regional, Sub-Regional and Country Managers

For a quick, pre-digested,
highly-compressed version
of this Annual Report: read
the next seven pages.

The full story starts on page 16.

Please read that, too.

Visit us online

Annual Report
wpp.com/annualreport2016

Sustainability Report*
wpp.com/sustainabilityreport2016-17

Pro bono work 2016*
wpp.com/probonoreport2016-17

*June 2017

The fast read

WPP is the world leader in communications services. It comprises leading
companies in all these disciplines:

Advertising

Media Investment Management

Data Investment Management

Public Relations & Public Affairs

Branding & Identity

Healthcare Communications

Digital, eCommerce &
Shopper Marketing

Specialist Communications

There are more than 160 companies within the Group – and each is a distinctive brand in
its own right. Each has its own identity, commands its own loyalty, and is committed to
its own specialist expertise. That is their individual strength. Clients seek their talent and
their experience on a brand-by-brand basis. Between them, our companies work with 360
of the Fortune Global 500, all 30 of the Dow Jones 30 and 78 of the NASDAQ 100. It is
also of greater value to clients that WPP companies and their people can work together, as
increasingly they do: providing a tailor-made range of integrated communications services.
Some 892 clients are now served in three distinct disciplines. 596 clients are
served in four disciplines, and these clients account for over 53% of Group revenues.
Group companies also work with 462 clients across six or more countries.

Collectively, over 205,000 people (including associates and investments) work for WPP

companies, out of over 3,000 offices in 112 countries.

Within WPP, our clients have access to companies
comprising the complete range of advertising and
marketing communications services skills: companies
with strong and distinctive cultures of their own.
WPP, the parent company, complements these
companies in several different ways.

WPP encourages, enables and incentivises

Our mission
To develop and manage talent;
to apply that talent,
throughout the world,
for the benefit of clients;
to do so in partnership;
to do so with profit.

operating companies of different disciplines to work
in close collaboration for the benefit of clients. We call this ‘horizontality’ – a way of
working that unites diverse talents round a single client brief to forge a seamless solution.

WPP can also function as the 21st-century equivalent of the full-service agency. For some

clients, predominantly those with a global presence requiring a wide range of marketing
services, WPP can itself provide a single contact point for both access and accountability.

And finally, WPP the parent company relieves the operating companies of much necessary but
time-consuming administrative work. Financial matters (such as planning, budgeting, reporting,
control, treasury, tax, mergers, acquisitions, investor relations, legal affairs and internal audit)
are all coordinated centrally. It also plays an across-the-Group role in the management of talent,
property, procurement, IT, knowledge-sharing, practice development and sustainability.

Read more about our role on page 16.

WPP ANNUAL REPORT 2016

The fast read

WPP’s collective intelligence
by Sir Martin Sorrell
Horizontality is best described as ‘connected know-how’: a way of working that unites
people with diverse skills to deliver seamless solutions for clients. We have made it our
strategic priority, because client demand for coordination between the different companies
and disciplines within parent groups is growing stronger all the time. We need to continue
to do it better than our competitors, several of whom have now woken up to its advantage.
WPP’s 205,000+ individual brains represent the planet’s greatest store of advertising and
marketing services insight, expertise, creativity and experience. The more we work together, the
more we can draw on that collective intelligence and the more effective we are on behalf of our
clients as a result.

Sir Martin Sorrell’s article begins on page 99.

Just Because You Can, Doesn’t Mean You Should
How ‘personalisation’ can get altogether too personal for comfort
by Jeremy Bullmore
For years, you’ve been unable to do something. Then new technology comes along – and
suddenly you can. So you do.

It’s an entirely human instinct – but not one to be thoughtlessly followed. It’s unwise to
assume that just because you’re now free to do something from which you were previously
debarred, it must be in your interest to grab it. It ain’t necessarily so.

Read Jeremy Bullmore’s essay on pages 111 and 112.

Our goal remains to be the world’s most admired, creative and respected communications
services advisor to global, multinational, regional and local companies. To that end, we have
four core strategic priorities:

Advance the practice of ‘horizontality’ (connected know-how) by ensuring our people
work together for the maximum benefit of clients: through cross-Group Communities
and Practices, Global Client Teams, and Regional, Sub-Regional and Country Managers.

Increase the combined geographic share of revenues from the faster-growing markets
of Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
to 40-45% of revenues.

Increase the share of revenues from new media to 40-45% of revenues.

Maintain the share of more measurable advertising and marketing services – such as
data investment management and direct, digital and interactive – at 50% of revenues,
with a focus on the application of technology, data and content.

Our Strategic report starts on page 26. Our 2016 financial statements are presented in full
on pages 177 to 235 and at wpp.com/investor.

WPP ANNUAL REPORT 2016

The fast read

Financial summary

2016 results

2016, our thirty-first year, was another
record year, our sixth record year in
a row, despite a generally low global
growth, or tepid, environment.

Billings*
£55,245m

Reported +16.0%
Constant +5.5%

Headline PBT*
£1,986m

Reported +22.4%
Constant +9.1%

Revenue
£14,389m

Reported +17.6%
Constant +7.2%

Net sales*
£12,398m

Reported +17.8%
Constant +7.4%

Headline EBITDA*
£2,420m

Reported +20.8%
Constant +8.0%

Headline PBIT*
£2,160m

Reported +21.8%
Constant +8.5%

Net sales margin*
17.4%

Reported +0.5%1
Constant +0.2%1

Reported profit
before tax
£1,891m

Reported +26.7%
Constant +12.5%

Headline diluted
EPS*
113.2p

Reported +20.9%
Constant +7.7%

Reported diluted
EPS*
108.0p

Reported +22.2%
Constant +8.5%

Dividends per
share
56.60p

Reported +26.7%
Constant +26.7%

(% change from 2015 in reported and constant currency)

* Refer to financial summary on page 23 for additional information.
1 Margin points.

WPP ANNUAL REPORT 2016

Reported billings were £55.2 billion, up well
over 5% in constant currencies, reflecting
good overall performance in net new
business. Revenue was up well over 17% to
£14.4 billion and up over 7% in constant
currencies. Net sales were up almost 18%
and over 7% in constant currencies. Including
100% of associates and investments, revenue
is estimated to total around £19 billion (over
$26 billion). Headline PBIT was up almost
22% to £2.160 billion (over £2 billion for the
first time) and up well over 8% in constant
currencies. Net sales margins increased by
0.5 margin points to an industry-leading
17.4% and, on a like-for-like basis, were up
0.3 margin points, in line with target,
adjusted for the merger with STW
Communications Group Limited in Australia.
Reported profit before interest and tax

rose almost 26% to £2.113 billion from
£1.679 billion, up 12% in constant
currencies. Headline EBITDA increased by
almost 21% to £2.420 billion, up 8% in
constant currencies. Headline profit before
tax was up well over 22% to £1.986 billion
and reported profit before tax was up almost
27% to £1.891 billion. Diluted headline
earnings per share rose by almost 21% to
113.2p (an all-time high) and diluted reported
earnings per share were up over 22% to
108.0p, both reflecting like-for-like revenue
and net sales growth, margin improvement
and the benefit of acquisitions, along with
the effect of currency tailwinds.

The value of the Group’s non-controlled

investments rose to £1.3 billion during the
year, from £1.2 billion in 2015, chiefly
reflecting the value of its content businesses,
primarily VICE and Refinery29, and the
Group’s investment in leading media
measurement company comScore, which
merged with Rentrak in the first half of 2016.
With an equity market capitalisation at

the time of writing of approximately

£22.2 billion, the total enterprise value
of your Company is approximately
£27.2 billion, a multiple of 11.3 times
2016 headline EBITDA.

Free cash flow and net debt

Free cash flow amounted to almost £1.6 billion
in 2016. This free cash flow was absorbed by
£0.7 billion of net cash acquisition payments
and investments, £0.4 billion of share buy-
backs and £0.6 billion of dividends, a total
outflow of £1.7 billion. This resulted in a
net cash outflow of £0.1 billion, before any
changes in working capital. Average net debt
was therefore £4.3 billion in 2016, compared
to £4.0 billion in 2015, at 2016 exchange
rates, and net debt at 31 December 2016
was £4.1 billion, against £3.2 billion at
31 December 2015, primarily reflecting the
weakness of sterling. This trend has continued
in the first two months of 2017, with average
net debt of £4.2 billion against £3.8 billion
for the same period in 2016, at 2017 exchange
rates. The average net debt to headline
EBITDA ratio in 2016 remains under
1.8 times, which is almost in the middle
of the Group’s target range of 1.5-2.0 times.

Revenue growth

Our reported revenue growth for the year
was 17.6%, and on a constant currency
basis, which excludes the impact of currency
movements, revenue was up 7.2%. This
difference of 10.4% reflects the weakness
of the pound sterling against most currencies,
particularly in the second half, following
the UK vote to exit the European Union.

On a like-for-like basis, which excludes

the impact of currency and acquisitions,
revenue was up 3.0%, with net sales up 3.1%.
In the fourth quarter, like-for-like revenue
was up 0.5%, the weakest quarter of the year,
following like-for-like growth well over 6%
in the final quarter of 2015, which was that

The fast read
How we’re doing

year’s strongest quarter. North America and
the UK slowed in the fourth quarter, again
partly the result of stronger comparatives, with
Western Continental Europe and Asia Pacific,
Latin America, Africa & the Middle East and
Central & Eastern Europe continuing to
perform well. Like-for-like net sales growth
was stronger than revenue growth, up over 2%
in the fourth quarter, also against a strong
comparative in 2015, with all regions, except
the UK, showing growth.

Geographic performance

Despite the slight slow-down in the rate of
revenue growth in the UK, constant currency
net sales were up almost 2% in the final
quarter, with like-for-like down 0.6%. On a
full-year basis, constant currency revenue was
up strongly at 5%, with like-for-like up almost
2%, with the second half weaker, perhaps
reflecting Brexit uncertainties. Full-year net
sales were up well over 5% in constant
currency, with like-for-like up over 2%.

For the year, Western Continental Europe

revenue grew almost 5% on a like-for-like
basis (over 4% in the second half), compared
with almost 5% in 2015, with net sales growth
of well over 3% like-for-like (almost 3%
in the second half), compared to well over
2% in 2015.

WPP ANNUAL REPORT 2016

The fast read
How we’re doing

2016 revenue by geography %

Sector performance

o North America
o UK
o Western Continental Europe
o Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

37
13
20

2016 headline PBIT1 by geography %

o North America
o UK
o Western Continental Europe
o Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

42
12
16

2016 revenue by sector %

o Advertising and Media

Investment Management

o Data Investment Management
o Public Relations & Public Affairs
o Branding & Identity, Healthcare
and Specialist Communications 28

2016 headline PBIT1 by sector %

o Advertising and Media

Investment Management

o Data Investment Management
o Public Relations & Public Affairs
o Branding & Identity, Healthcare
and Specialist Communications 28

46
18
8

48
16
8

On a like-for-like basis, Advertising and
Media Investment Management was the
strongest performing sector, with revenue
up almost 5% for the year and up almost
1% in quarter four.

Despite the slower growth in the final
quarter, like-for-like net sales in the Group’s
specialist Public Relations & Public Affairs
businesses were up almost 7% for the year.
At the Group’s Branding & Identity,
Healthcare and Specialist Communications
businesses (including direct, digital and
interactive), constant currency revenue grew
strongly at 8% in quarter four, the strongest
performing sector, with like-for-like revenue
up well over 1%.

Industry recognition

For the sixth successive year, WPP was
named Creative Holding Company of the
Year at the Cannes International Festival of
Creativity, in recognition of your Company’s
collective creative excellence; for the fifth
consecutive year, WPP was ranked Most
Effective Holding Company in the Effie
Global Effectiveness Index; and, for the
third year in a row, WPP was named the
World’s Top Holding Company by Warc.

1 The calculation of headline PBIT is set out in note 31 of the

financial statements.

WPP ANNUAL REPORT 2016

Non-executive chairman

Roberto Quarta
Chairman of the Nomination and
Governance Committee
Member of the Compensation Committee

Executive Directors

Sir Martin Sorrell
Chief executive

Paul Richardson
Finance director
Chairman of the Sustainability Committee

Non-executive directors

Jacques Aigrain
Chairman of the Audit Committee
Member of the Compensation Committee

Charlene Begley
Member of the Audit Committee and
Nomination and Governance Committee

Tarek Farahat
Member of the Audit Committee

Sir John Hood
Chairman of the Compensation Committee

Ruigang Li
Member of the Nomination and
Governance Committee

Daniela Riccardi
Member of the Nomination and
Governance Committee

Nicole Seligman
Senior independent director

Hugo Shong
Member of the Nomination and
Governance Committee

The fast read

Timothy Shriver
Member of the Compensation Committee

Sally Susman
Member of the Nomination and
Governance Committee

Sol Trujillo
Member of the Audit Committee

Members of the Advisory Board

Jeremy Bullmore

John Jackson

Bud Morten

John Quelch

Richard Rivers

Cuneyd Zapsu

Company Secretary

Marie Capes

Directors’ biographies appear on pages 116 to 119.

WPP ANNUAL REPORT 2016

The fast read

Governance

The Board of Directors is committed to
achieving compliance with the principles
of corporate governance set out in the
UK Corporate Governance Code and to
comply with relevant laws, regulations,
and guidelines such as the US Sarbanes-
Oxley Act 2002, the NASDAQ rules and,
where practicable, with the guidelines
issued by institutional investors and their
representative bodies.

WPP operates a system of internal
control, which is maintained and reviewed
in accordance with the UK Corporate
Governance Code, COSO and the
FRC guidance on risk management and
internal control.

Further details on corporate governance,
and how we comply, can be found on pages
169 to 173.

Compensation

Directors’ Compensation Policy is set by
WPP’s Compensation Committee and is
governed by three guiding principles:

Performance
Competitiveness
Alignment with share owner interest

The full report from WPP’s Compensation
Committee can be found on pages 128 to 158.

Sustainability

Leading companies – our clients –
are prioritising sustainability, looking
to integrate improved social and
environmental performance into their

products, communications and operations.
Our commitment to sustainability helps
us to align with the interests of our clients
and to respond to the growing number of
client procurement processes that include
sustainability criteria. It makes the Group
a more attractive employer, enables us
to improve efficiency, to be prepared for
changes in regulation and to maintain
positive relationships with our stakeholders.

Clients

Clients who engaged with us on

sustainability represented over £1.6 billion
in revenues to the Group in 2016, equivalent
to over 11% of the total.
People

We invested £45.1 million on training

in 2016 and offered over 6,400 paid
internships and apprenticeships.

At year-end 2016, women comprised

29% of the WPP Board, 33% of non-
executive directors, 34% of directors
and executive leaders in our operating
companies, and 54% of total employees.

Environment

We have cut our carbon footprint per
employee to 1.86 tonnes of CO2e, a 45%
reduction from 2006.

Social contribution

In 2016, our social investment was
worth £19.5 million, equivalent to over
1% of reported profit before tax.

In addition, WPP media agencies

negotiated free media space worth
£22.8 million on behalf of pro bono clients,
representing over another 1% of reported
profit before tax.

Read a summary of our performance and
activities in 2016 on pages 161 to 167.

WPP ANNUAL REPORT 2016

Advertising

Media
Investment
Management

Global Client Teams

Country & Regional Managers

Cross-Group
Communities
& Practices

WPP ANNUAL REPORT 2016

Who we are

Data
Investment
Management

Public Relations
& Public Affairs

Branding
& Identity

Health
& Wellness

Digital, eCommerce,
Shopper Marketing
& Specialist
Communications

WPP ANNUAL REPORT 2016

Who we are

Our companies & associates

Advertising

ADK1
adk.jp
Bates CHI&Partners†
bateschi.com
Berlin Cameron
berlincameron.com
CHI&Partners1
chiandpartners.com
Cole & Weber
coleweber.com
Grey
grey.com
GTB
gtb.com
HS Ad1
hsad.co.kr
J. Walter Thompson
Worldwide
jwt.com
Ogilvy
ogilvy.com
Santo
santo.net
WPP-Scangroup
wpp-scangroup.com
Scholz & Friends*
s-f.com
*S,C,P,F...
scpf.com
Sra. Rushmore
srarushmore.com
Soho Square
sohosquareasia.com
TAXI■
taxi.ca
The Jupiter Drawing Room1
thejupiterdrawingroom.com
WPP AUNZ
wppaunz.com
Y&R■
yr.com

Media Investment
Management and
Data Investment
Management

GROUPM:
groupm.com
Mindshare
mindshareworld.com
MEC
mecglobal.com
MediaCom
mediacom.com
Maxus
maxusglobal.com
Essence
essencedigital.com
Catalyst
catalystdigital.com
KR Media
krmedia-france.com
MetaVision Media
metavisionmedia.com
Xaxis
xaxis.com
tenthavenue:
tenthavenue.com

Bookmark
bookmarkcontent.com
Joule
jouleww.com
Kinetic Worldwide
kineticww.com
TMARC
tmarc.co.za

Other media agencies
Gain Theory
gaintheory.com
m/SIX2
msixagency.com
KANTAR:
kantar.com

Kantar Added Value
added-value.com
Kantar Futures
thefuturescompany.com
Kantar Health
kantarhealth.com
Kantar IMRB
mrbglobal.in
Kantar Media
kantarmedia.com

Kantar Millward Brown
millwardbrown.com
Kantar Public
kantar.com/public
Kantar Retail
kantarretail.com
Kantar TNS
tnsglobal.com
Kantar Vermeer
mbvermeer.com
Kantar Worldpanel
kantarworldpanel.com
Lightspeed
lightspeedresearch.com
comScore3,▲
comscore.com

Public Relations &
Public Affairs

Benenson Strategy Group❖
bsgco.com
Blanc & Otus♦
blancandotus.com
Buchanan Communications
buchanan.uk.com
Burson-Marsteller■
burson-marsteller.com
BWR❖
bwr-pr.com
Clarion Communications
clarioncomms.co.uk
Cohn & Wolfe■
cohnwolfe.com
Dewey Square Group
deweysquare.com
Finsbury
finsbury.com
Global Counsel1
global-counsel.co.uk
Glover Park Group
gpg.com
HERING SCHUPPENER
heringschuppener.com
Hill+Knowlton Strategies
hkstrategies.com
Ogilvy
ogilvy.com
Ogilvy Government Relations
ogilvygr.com
Penn Schoen Berland■
psbresearch.com

Prime Policy Group
prime-policy.com
QGA
qga.com
SJR◆
groupsjr.com
Wexler & Walker Public
Policy Associates♦
wexlerwalker.com

Branding & Identity

Addison Group★
addison-group.net
BDG architecture + design
bdg-a-d.com
Brand Union●
brandunion.com
CBA†
cba-design.com
Coley Porter Bell†
coleyporterbell.com
FITCH●
fitch.com
Lambie-Nairn★
lambie-nairn.com
Landor ■
landor.com
PeclersParis★
peclersparis.com
The Partners★
the-partners.com
SET ●
setcreative.com
VBAT★
vbat.com

Healthcare
Communications

WPP Health & Wellness:
wpphealthandwellness.com

CMI/Compas
cmimedia.com
ghg
ghgroup.com
Ogilvy CommonHealth
Worldwide
ogilvychww.com
Sudler & Hennessey■
sudler.com

WPP ANNUAL REPORT 2016

GCI Health
gcihealth.com
Wunderman World Health+
wunderman.com

Digital, eCommerce
& Shopper Marketing

Acceleration+
acceleration.biz
A. Eicoff & Co†
eicoff.com
AKQA
akqa.com
Barrows1
barrowsglobal.com
Blast Radius+
blastradius.com
Cerebra
cerebra.co.za
deepblue networks*
db-n.com
EWA
ewagroup.com
FullSIX3
fullsix.it/en
Geometry Global
geometry.com
ggk DialogGroup*
gkk.de
HighCo1
highco.fr
iconmobile■
iconmobile.com
Mando
mando.co.uk
Maxx Marketing†
maxx-marketing.com
MirumΩ
mirumagency.com
Ogilvy
ogilvy.com
Smollan1
smollan.com
VML■
vml.com
Wunderman■
wunderman.com

Specialist
Communications

Demographic marketing
Bravo■
bebravo.com
UniWorld1
uwg.is
Wing
insidewing.com
Employer branding/
recruitment
JWT INSIDEΩ
jwtinside.com
Event/face-to-face
marketing
MJM
mjmcreative.com
Metro
metrobroadcast.com
Richard Attias & Associates1
richardattiasassociates.com
Foodservice marketing
The Food Group
thefoodgroup.com
Sports marketing
Bruin Sports Capital3
bruinsportscapital.com
Chime Communications1
chimegroup.com
Courtside Ventures3
courtsidevc.com
ESP Properties
espglobal.com
PRISM Group
prismteam.com
TSE Consulting❖
tseconsulting.com
Two Circles
insidetwocircles.com
Real estate marketing
PACE
paceadv.com
Media & production services
The Farm Group
farmgroup.tv
Imagina1
mediapro.es
United Visions*
uv.tv

WPP Digital

Blue State Digital
bluestatedigital.com
Cognifide
cognifide.com
The Data Alliance
thedataalliance.com
F.biz
fbiz.com.br
Globant1
globant.com
Hogarth Worldwide
hogarthww.com
Johannes Leonardo1
johannesleonardo.com
Mutual Mobile1
mutualmobile.com
POSSIBLE
possible.com
Rockfish
rockfishdigital.com
Salmon
salmon.com
SYZYGY
syzygy.net

WPP Digital partner
companies

Ace Metrix3
acemetrix.com
All Def Digital3
alldefdigital.com
AppNexus3
appnexus.com
Domo3
domo.com
Fullscreen3
fullscreen.com
HDT Holdings Technology3
hdtmedia.com
Imagine Entertainment3
Indigenous Media3
indigenousmedia.com
Invidi3
invidi.com
Mitú3
mitunetwork.com

Who we are
Our companies & associates

mySupermarket3
mysupermarket.co.uk
Moment Systems3
miaozhen.com
MRC3
mrcstudios.com
OrderDynamics3
orderdynamics.com
Percolate3
percolate.com
Refinery293
refinery29.com
VICE Media3
vice.com
The Weinstein Company3
weinsteinco.com
WildTangent3
wildtangent.com

Cross-Group
Communities
& Practices

Government & Public Sector
Practice
wpp.com/govtpractice
The Store
wpp.com/store
WPP Health & Wellness
wpphealthandwellness.com
WPP Sports Practice

Key
1 Associate
2 Joint venture
3 Investment
♦ A Hill+Knowlton Strategies company
† An Ogilvy company
■ A Y&R Group company
● A member of Group XP
★ A member of The Partnership
+ A Wunderman company
* A Commarco company
Ω A J. Walter Thompson company
▲ Partnership with GroupM/Kantar
❖ A Burson-Marsteller company
As at April 2017.

WPP ANNUAL REPORT 2016

They need access to high-quality information, strategic
advice and specialist communications skills. And it’s in the
nature of specialist and creative talent that it is unlikely
to flourish within the confines of a client company. People
with specialist talents work best – and contribute more –
when recruited, trained and inspired by specialist companies.
Within WPP, our clients have access to companies

comprising the complete range of advertising and marketing
communications services skills: companies with strong and
distinctive cultures of their own.

WPP, the parent company, complements these

companies in several different ways.

WPP encourages, enables and incentivises operating

companies of different disciplines to work in close
collaboration for the benefit of clients. We call this
‘horizontality’ – a way of working that unites diverse
talents round a single client brief to forge a seamless
solution. No two clients are structured in precisely the
same way. Within WPP’s operating companies, teams
can be tailor-made to match any and all.

WPP can also function as the 21st-century equivalent
of the full-service agency. For some clients, predominantly
those with a global presence and a requirement for a
wide range of marketing services, WPP can itself provide
such clients with a single contact point for both access
and accountability.

And finally, WPP the parent company relieves the

operating companies of much necessary but time-consuming
administrative work. Financial matters (such as planning,
budgeting, reporting, control, treasury, tax, mergers,
acquisitions, investor relations, legal affairs and internal
audit) are all coordinated centrally. It also plays an across-
the-Group role in the management of talent, property,
procurement, IT, knowledge-sharing, practice development
and sustainability. For the operating companies, every
administrative hour saved is an extra hour to be devoted
to the pursuit of professional excellence.

Our mission
To develop and manage talent;
to apply that talent,
throughout the world,
for the benefit of clients;
to do so in partnership;
to do so with profit.

thousands of individual clients. They range from
Fortune 500 global giants through single-nation
start-ups to the smallest of specialist charities.

B etween them, WPP companies have tens of

Diverse as they are, they have one thing in common: in
pursuing their objectives, they face formidable competition.
Growing affluence in many parts of the world – combined
with overcapacity and over-supply in almost every significant
consumer market – has put more and more power into the
hands of consumers, accelerated by technology.

As always, if they are to succeed – or even to survive

with profit – every competitive company needs an
intrinsically appealing product or service. Increasingly,
part of that appeal must lie in a company’s evident sense
of a wider responsibility; one that extends beyond share
owners, employees and consumers and recognises a duty
to the environment and to society as a whole. Today’s
most successful companies are founded on strong values.

But even all that, though remaining the most
fundamental of requirements, is seldom enough. Just
as competitive costermongers arrange their apples in
appealing displays and polish them lovingly to catch
their customers’ eyes, so all companies need to display
their wares compellingly.

WPP ANNUAL REPORT 2016

Our 4 strategic priorities

Advance
horizontality by
ensuring our people
work together for the
beneﬁt of clients

Increase share of
revenues from
faster-developing
markets to 40-45%

Increase share of

revenues from new

media to 40-45%

Maintain share of more

measurable marketing

services at 50% of revenues

Cross-Group Client Teams

Are we on target?

28%

30%

42.5%

39%

42.5%

49%

51%

50%

2010

WPP ANNUAL REPORT 2016

2016

2010

2016

2020

2016

2020

2010

2016

2020

29%

2010

Advance

horizontality by

ensuring our people

work together for the

beneﬁt of clients

Increase share of

revenues from

faster-developing

markets to 40-45%

Increase share of
revenues from new
media to 40-45%

Maintain share of more
measurable marketing
services at 50% of revenues

Cross-Group Client Teams

Are we on target?

2010

28%

30%

42.5%

2016

2010

2016

2020

29%

2010

39%

42.5%

49%

51%

50%

2016

2020

2010

2016

2020

WPP ANNUAL REPORT 2016

WPP: a global company

WPP companies now operate in 112 countries. Here we show WPP’s
strength in growth markets of the world as well as in some of our
key mature markets*.

WPP ANNUAL REPORT 2016

$30m$10m$40mUSA26,000Brazil7,000UK16,000MexicoColombia1,900Germany8,000France4,500South AfricaRussia2,000Greater China14,000Japan4,000India15,0001,600Nigeria150Turkey1,500Egypt400Philippines1,200Vietnam1,500Bangladesh500PakistanEast Africa1,6001,400Indonesia1,7002,400PEOPLE+ Includes ﬁeldforce of 28,000.* Top 10, BRIC, Next 11 (the Group has no operations in Iran), CIVETS and MIST.Australia & New Zealand4,50032,000+SouthKorea$20m$6.9bn$3.4bn$1.3bn$700m$400m$70m$200m$160m$600m$50m$100m$300m$600m$1.6bn$150m$90m$100m$800m$500mREVENUESpain$600m8,000Argentina7,000$500m$30m$10m$40mUSA26,000Brazil7,000UK16,000MexicoColombia1,900Germany8,000France4,500South AfricaRussia2,000Greater China14,000Japan4,000India15,0001,600Nigeria150Turkey1,500Egypt400Philippines1,200Vietnam1,500Bangladesh500PakistanEast Africa1,6001,400Indonesia1,7002,400PEOPLE+ Includes ﬁeldforce of 28,000.* Top 10, BRIC, Next 11 (the Group has no operations in Iran), CIVETS and MIST.Australia & New Zealand4,50032,000+SouthKorea$20m$6.9bn$3.4bn$1.3bn$700m$400m$70m$200m$160m$600m$50m$100m$300m$600m$1.6bn$150m$90m$100m$800m$500mREVENUESpain$600m8,000Argentina7,000$500mRevenues denote the collective figure for all WPP
companies (including associates) in a given country
and are reported at 2016 constant currency rates.

People denotes the number of people employed
by WPP companies (including associates) in
a given country.

As at 31 December 2016.

WPP ANNUAL REPORT 2016

Billings1
Revenue
Net sales1
Headline EBITDA2
Headline operating profit2
Reported operating profit
Headline PBIT2
Net sales margin2
Headline PBT2
Reported PBT
Headline earnings2
Reported earnings

Headline diluted earnings per share2,3
Reported diluted earnings per share3
Ordinary dividend per share
Ordinary dividend per ADR4

Net debt at year-end
Average net debt5
Ordinary share price at year-end
ADR price at year-end
Market capitalisation at year-end

At 12 April 2017
Ordinary share price
ADR price
Market capitalisation

2016
£55,245m
£14,389m
£12,398m
£2,420m
£2,095m
£2,063m
£2,160m
17.4%
£1,986m
£1,891m
£1,468m
£1,400m

113.2p
108.0p
56.60p
$3.83

£4,131m
£4,340m
1,816.0p
$110.66
£23,260m

1,737.0p
$108.60
£22,214m

2015
£47,632m
£12,235m
£10,524m
£2,002m
£1,705m
£1,632m
£1,774m
16.9%
£1,622m
£1,493m
£1,229m
£1,160m

93.6p
88.4p
44.69p
$3.42

£3,211m
£3,562m
1,563.0p
$114.74
£20,237m

Change %
+16.0
+17.6
+17.8
+20.8
+22.9
+26.4
+21.8
+0.5*
+22.4
+26.7
+19.4
+20.7

+20.9
+22.2
+26.7
+12.0

+28.6
+21.8
+16.2
-3.6
+14.9

The financial statements have been prepared under International Financial Reporting Standards (IFRS).
1 Billings and net sales are defined on page 234.
2 The calculation of ‘headline’ measurements of performance (including headline EBITDA, headline operating profit,

headline PBIT, net sales margin, headline PBT and headline earnings) is set out in note 31 of the financial statements.

3 Earnings per share is calculated in note 9 of the financial statements.
4 One American Depositary Receipt (ADR) represents five ordinary shares. These figures have been translated for
convenience purposes only using the Consolidated income statement exchange rates shown on page 186. This
conversion should not be construed as a representation that the pound sterling amounts actually represent, or
could be converted into, US dollars at the rates indicated.

5 Average net debt is defined on page 234.
* Margin points.

WPP ANNUAL REPORT 2016

How we’re doing

Financial summary

Revenue £m

Net sales £m

14,389

11,019

11,529

12,235

10,373

10,076

10,065

10,524

9,515

12,398

14,389m

12,398m

Reported revenue was up 17.6% at £14,389 million.
On a constant currency basis, revenue was up 7.2%
and, on a like-for-like basis, revenue was up 3.0%.

Reported net sales were up 17.8% at £12,398 million.
On a constant currency basis, net sales were up 7.4%
and, on a like-for-like basis, net sales were up 3.1%.

Headline PBIT1 £m

o Net sales margin1 %

2,160m

1,662

1,681

1,774

1,531

Headline EBITDA1 £m

2,160

1,896

1,910

2,002

1,756

2,420

2,420m

Headline PBIT was up 21.8% to £2,160 million, over
£2 billion for the first time. Net sales margin was up
0.5 margin points (0.3 margin points on a like-for-like
basis) to an industry-leading 17.4%.

Headline EBITDA (headline earnings before
interest, taxation, depreciation and amortisation)
rose by 20.8% (8.0% in constant currencies).

Return on equity2 %

o Weighted average cost
of capital (WACC)

16.2%

14
12
10
8
6
4
2
0

14.4

15.0

13.6

16.3

16.2

Headline diluted earnings per share1 p

113.2

o Dividends per share p

113.2p

80.8

84.9

93.6

73.4

Return on equity decreased marginally to 16.2% in 2016,
versus a weighted average cost of capital of 6.4% in 2016,
also down from 2015.

Headline diluted earnings per share were up 20.9% to
113.2p. Dividends were up 26.7% to 56.60p per share,
giving a payout ratio of 50%, reaching the targeted payout
ratio of 50% one year ahead of schedule.

1 The calculation of ‘headline’ measurements of performance (including headline EBITDA, headline PBIT, net sales margin and headline earnings)

is shown in note 31 of the financial statements.

2 Return on equity is headline diluted earnings per share divided by equity share owners’ funds per share.

WPP ANNUAL REPORT 2016

How we’re doing
Financial summary

Average net debt £m

o Average net debt to
headline EBITDA2 ratio

4,340m

4,340

3,562

3,203

2,989

3,001

Debt maturity3 £m

2,201

719

400

215

200

658

405

641

608

25+

Average net debt was up at £4.3 billion in 2016, primarily
reflecting the weakness of sterling. The average net debt
to headline EBITDA ratio remains under 1.8 times, almost
in the middle of the Group’s target range of 1.5-2.0 times.

In September 2016, the Group issued £400 million of
30-year bonds with a coupon of 2.875%, refinancing
£400 million of bonds maturing in April 2017 with a
coupon of 6.0%.

2016 revenue by geography %

2016 headline PBIT1 by geography %

o North America
o UK
o Western Continental Europe
o Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

37
13
20

o North America
o UK
o Western Continental Europe
o Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

42
12
16

In 2016, 30% of the Group’s revenue came from Asia
Pacific, Latin America, Africa & Middle East and Central
& Eastern Europe up almost one percentage point from
2015. Our target is to increase this to 40-45% of revenues
over the next five years.

Profit growth was strongest in Western Continental
Europe in 2016, with margin improvement across all
regions in the year.

2016 revenue by sector %

2016 headline PBIT1 by sector %

o Advertising and Media

Investment Management

o Data Investment Management
o Public Relations & Public Affairs
o Branding & Identity, Healthcare
and Specialist Communications 28

46
18
8

o Advertising and Media

Investment Management

o Data Investment Management
o Public Relations & Public Affairs
o Branding & Identity, Healthcare
and Specialist Communications 28

48
16
8

Marketing services comprised 54% of our revenues in
2016, similar to 2015. Revenue growth was strongest in
Advertising and Media Investment Management at almost
5% on a like-for-like basis.

All sectors showed margin improvement in 2016, with
the strongest growth in Data Investment Management
and Public Relations & Public Affairs.

1 The calculation of headline PBIT is set out in note 31 of the financial statements.
2 The calculation of headline EBITDA is set out in note 31 of the financial statements.
3 Includes corporate bonds and bank loans payable at par value, excluding any redemption premium due, by due date.

WPP ANNUAL REPORT 2016

How we’re doing

Strategic report to share owners*

Dear share owner

2 016, our thirty-first year, was another

record year, our sixth record year in
a row, despite a generally low growth,
or tepid, global environment. Top-line
growth remained strong, with operating profits
and margins meeting and exceeding targets and
all regions and sectors showing growth on
almost all metrics. For the sixth successive year,
WPP was named Creative Holding Company
of the Year at the Cannes International Festival
of Creativity, in recognition of your Company’s
collective creative excellence; for the fifth
consecutive year, WPP was ranked Most
Effective Holding Company in the Effie Global
Effectiveness Index; and, for the third year in a
row, WPP was named the World’s Top Holding
Company by Warc.

Cannes International Festival of Creativity
Holding Company of the Year
2011, 2012, 2013, 2014, 2015, 2016

Effie Global Effectiveness Index
Most Effective Holding Company of the Year
2012, 2013, 2014, 2015, 2016

* This strategic report to share owners should be read in conjunction with
and as part of the Directors’ report on pages 121 to 167 and the section
headed How we comply on pages 169 to 175.

This strategic report includes figures and ratios that are not readily available
from the financial statements. Management believes that these non-GAAP
measures, including constant currency and like-for-like growth, and headline
profit measures, are both useful and necessary to better understand the Group’s
results. Where required, details of how these have been arrived at are shown
in the notes of the financial statements.

WPP ANNUAL REPORT 2016

At the same time, we have responded to the changing
competitive landscape by accelerating the implementation
of our strategic goals, particularly following Brexit. Sector
targets for fast-growth markets and new media have been
raised from 35-40% to 40-45% over the next four to
five years, with the quantitative revenue target of 50%
already achieved.

Your share price increased by over 16% in 2016, closing

at 1,816p at year end. Since then it has fallen slightly to
1,737.0p, down 4%, at the time of writing. This was
primarily due to the Company’s reduced revenue and net
sales guidance for 2017 from 3% to 2% due to an
increasingly challenging economic environment. Dividends
increased by almost 27% to 56.60p, a new high. This
represents a dividend payout ratio of 50% of headline
diluted earnings per share, reaching the recently targeted
payout ratio of 50% one year ahead of schedule and up
from 47.7% last year.

Reported billings were £55.2 billion, up well over 5%
in constant currencies, reflecting good overall performance
in net new business. Revenue was up well over 17% to
£14.4 billion and up over 7% in constant currencies.
Net sales were up almost 18% and over 7% in constant
currencies. Including 100% of associates and investments,
revenue is estimated to total around £19 billion (over
$26 billion). Headline PBIT was up almost 22% to
£2.160 billion (over £2 billion for the first time) and up well
over 8% in constant currencies. Net sales margins increased
by 0.5 margin points to an industry-leading 17.4% and, on
a like-for-like basis, were up 0.3 margin points, in line with
target, adjusted for the merger with STW Communications
Group Limited in Australia.

Reported profit before interest and tax rose almost 26%

to £2.113 billion from £1.679 billion, up 12% in constant
currencies. Headline EBITDA increased by almost 21%
to £2.420 billion, up 8% in constant currencies. Headline
profit before tax was up well over 22% to £1.986 billion
and reported profit before tax was up almost 27% to
£1.891 billion. Diluted headline earnings per share rose
by almost 21% to 113.2p (an all-time high) and diluted
reported earnings per share were up over 22% to 108.0p,
both reflecting like-for-like revenue and net sales growth,
margin improvement and the benefit of acquisitions, along
with the effect of currency tailwinds.

Return on equity decreased marginally to 16.2% in
2016 compared with 16.3% in 2015, versus a weighted
average cost of capital of 6.4% in 2016, also down from
6.7% in 2015. Additionally, the value of the Group’s
non-controlled investments rose to £1.3 billion during the
year, from £1.2 billion in 2015, chiefly reflecting the value

How we’re doing
Strategic report to share owners

of its content businesses, primarily VICE and Refinery29,
and the Group’s investment in leading media measurement
company comScore, which merged with Rentrak in the first
half of 2016.

Free cash flow amounted to almost £1.6 billion in
2016. This free cash flow was absorbed by £0.7 billion of
net cash acquisition payments and investments, £0.4 billion
of share buy-backs and £0.6 billion of dividends, a total
outflow of £1.7 billion. This resulted in a net cash outflow
of £0.1 billion, before any changes in working capital.
Average net debt was therefore £4.3 billion in 2016,
compared to £4.0 billion in 2015, at 2016 exchange rates,
and net debt at 31 December 2016 was £4.1 billion, against
£3.2 billion at 31 December 2015, primarily reflecting the
weakness of sterling. This trend has continued in the first
two months of 2017, with average net debt of £4.2 billion
against £3.8 billion for the same period in 2016, at 2017
exchange rates.

The average net debt to headline EBITDA ratio in 2016

remains under 1.8 times, which is almost in the middle of
the Group’s target range of 1.5-2.0 times. Headline interest
cover in 2016 was 12.4 times. Our long-term debt is
currently rated Baa2 and BBB and our short-term debt P2
and A2, by Moody’s and Standard & Poor’s respectively.
In September 2016, the Group issued £400 million of

30-year bonds with a coupon of 2.875%. These bonds
refinance £400 million of bonds maturing in April 2017 with
a coupon of 6.0%. This continues the plan to extend debt
maturities and take advantage of current low interest rates.

With the equity market capitalisation at the time of
writing of approximately £22.2 billion, the total enterprise
value of your Company is approximately £27.2 billion,
a multiple of 11.3 times 2016 headline EBITDA.

Revenue growth impacted by strong
currency tailwinds in the second half

Our reported revenue growth for the year was 17.6%, and
on a constant currency basis, which excludes the impact of
currency movements, revenue was up 7.2%. This difference
of 10.4% reflects the weakness of the pound sterling against
most currencies, particularly in the second half, following
the UK vote to exit the European Union.

On a like-for-like basis, which excludes the impact of
currency and acquisitions, revenue was up 3.0%, with net
sales up 3.1%. In the fourth quarter, like-for-like revenue
was up 0.5%, the weakest quarter of the year, following
like-for-like growth of well over 6% in the final quarter
of 2015, which was that year’s strongest quarter. North

America and the UK slowed in the fourth quarter, again
partly the result of stronger comparatives, with Western
Continental Europe and Asia Pacific, Latin America,
Africa & the Middle East and Central & Eastern Europe
continuing to perform well. Like-for-like net sales growth
was stronger than revenue growth, over 2% in the fourth
quarter, also against a strong comparative in 2015, with
all regions, except the UK, showing growth.

Strong growth in many regions

North America constant currency revenue was down
almost 1% in the final quarter and like-for-like down
almost 3%, largely as a result of the particularly strong
comparatives in the fourth quarter of 2015, when constant
currency revenue grew over 11% and like-for-like revenue
was up almost 10%, reflecting strong growth in Advertising
and Media Investment Management, parts of the Group’s
Public Relations & Public Affairs businesses and in the
Branding & Identity, Healthcare Communications and
direct, digital and interactive operations. On a full-year
basis, constant currency revenue was up almost 4%, with
like-for-like up 2%. However, constant currency net sales
grew almost 3% in the fourth quarter, with like-for-like
up 0.5% and strong growth in the Group’s Branding &
Identity and direct, digital and interactive businesses.

UK constant currency revenue was down almost 1% in

the final quarter and like-for-like down well over 2%, again
in part due to very strong comparatives for the final quarter
of 2015, which saw growth of well over 6% and almost
3% respectively. Media Investment Management and Data
Investment Management like-for-like revenue was up
strongly, offset by weaker performance in Advertising,
Public Relations & Public Affairs and direct, digital and
interactive. Despite the slight slow-down in the rate of
revenue growth, constant currency net sales were up almost
2% in the final quarter, with like-for-like down 0.6%. On
a full-year basis, constant currency revenue was up strongly
at 5%, with like-for-like up almost 2%, with the second
half weaker, perhaps reflecting Brexit uncertainties.
Full-year net sales were up well over 5% in constant
currency, with like-for-like up over 2%.

Western Continental Europe, continued to grow at

reasonable and stronger than average rates, although
reflecting difficult political and macroeconomic conditions,
with like-for-like revenue growth of over 3% and net sales
growth of almost 3% in the fourth quarter, compared to
well over 5% and over 3% in the third quarter. For the

WPP ANNUAL REPORT 2016

How we’re doing
Strategic report to share owners

Constant currency1 revenue growth %

North America

Western Continental Europe

Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

16
15

Constant currency1 net sales growth
by geography %
North America

16
15

Western Continental Europe

Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

16
15

Net sales margin2 by geography %

North America

Western Continental Europe

Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

16
15

Revenue by geography £m

3.9
7.9

5.0
8.4

8.0
4.7

11.9
8.5

4.8
4.7

5.5
7.8

7.2
4.3

11.8
7.3

19.4
18.8

16.5
16.2

14.5
13.7

17.2
16.8

year, Western Continental Europe revenue grew almost
5% on a like-for-like basis (over 4% in the second half),
compared with almost 5% in 2015, with net sales growth
of well over 3% like-for-like (almost 3% in the second
half), compared to well over 2% in 2015. Germany,
Norway, Spain, Sweden and Switzerland all showed good
growth in the final quarter, but Austria, France, Ireland,
Italy, the Netherlands and Portugal were tougher.

In Asia Pacific, Latin America, Africa & the Middle East
and Central & Eastern Europe, on a constant currency basis,
revenue growth in the fourth quarter remained strong at
almost 12%, the same as the first nine months growth, with
like-for-like up almost 4%, the strongest quarter of the year,
and well ahead of the first nine months growth of over 3%.
Growth in the fourth quarter was driven principally by Latin
America, Central & Eastern Europe, the Next 11¹, CIVETS²,
and the MIST³, with Africa & the Middle East weaker.
Constant currency net sales growth in the region was even
stronger at almost 13% in the final quarter, with like-for-like
net sales up almost 5%, the strongest quarter of the year, and
well ahead of the almost 4% achieved in quarter two. There
was strong net sales growth in all sub-regions except Africa
& the Middle East. In Asia, Cambodia, India, Malaysia,
Pakistan, the Philippines and Vietnam showed double-digit
like-for-like growth, with Hong Kong, Singapore and
Thailand, more challenging.

1 Bangladesh, Egypt, Indonesia, Mexico, Nigeria, Pakistan, the Philippines,
South Korea, Turkey and Vietnam (the Group has no operations in Iran).

2 Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.
3 Mexico, Indonesia, South Korea and Turkey.

2016 revenue by geography versus peers $bn

o Rest of World5
o Western Europe
(including UK)
o North America

o North America
o UK
o Western Continental Europe
o Asia Paciﬁc, Latin America,
Africa & Middle East and
Central & Eastern Europe

14000

12000
10000
8000
6000
4000
2000
0

WPP1

Omnicom1,3

Publicis1,2,3

IPG1,4

Dentsu6

Havas1,2

1 WPP – reportable US$s per WPP results. Omnicom, IPG, Publicis and Havas –
company presentations for 2016 with assumed non-Euro countries in Europe
are 3% of revenue.

2 FX. Havas and Publicis assumes $1 = €0.9039 based on the average

exchange rates for 2016.

1 See definition on page 234.
2 The calculation of net sales margin is set out in note 31 of the

3 OMC and PUB CEE based on analyst estimates.
4 IPG assumes Canada is 1.5% of revenue.
5 Rest of World: Asia Pacific, Latin America, Africa & Middle East and Central

& Eastern Europe.

6 Dentsu based on disclosed pro-forma group revenue splits against 2016 actual

financial statements.

reported revenue.

WPP ANNUAL REPORT 2016

How we’re doing
Strategic report to share owners

Latin America had its second strongest quarter of the
year, with like-for-like revenue up almost 9%, compared
with well over 9% in quarter two. Like-for-like net sales
grew over 8% in quarter four, also the second highest
quarterly growth in 2016, with full-year growth of well
over 6% (well over 6% in the second half and similar in
the first half). Africa slipped back in the fourth quarter, as
it did in the third quarter, with like-for-like revenue down
over 1% in quarter four and up 2% full-year. Net sales
growth was slightly weaker, down 1.9% like-for-like in
quarter four and up 0.4% full-year. In Central & Eastern
Europe, like-for-like revenue was up over 10% in quarter
four, the second highest quarter of the year, with the Czech
Republic, Romania, Russia and the Ukraine up double
digits. Croatia, Hungary, Poland and Serbia were tougher.
Full-year revenue for the BRICs1, which account for almost
$2.4 billion of revenue, was up almost 2% on a like-for-like
basis, with the Next 11 and CIVETS up over 14% and well
over 12% respectively. The MIST was up over 16%.

In 2016, 29.9% of the Group’s revenue came from
Asia Pacific, Latin America, Africa & the Middle East
and Central & Eastern Europe, up almost 1.0 percentage
point from 29.0% in 2015. On a net sales basis there was
a similar increase to 30.5% from 29.6% in 2015, which

compares with the Group’s strategic objective of 40-45%
in the next five years. Markets outside North America
now account for over 63% of our revenue.

Advertising and media perform well

Advertising and Media Investment Management was the
second-strongest performing sector, with constant currency
revenue growth of almost 8% for the year, and well over
4% in quarter four. On a like-for-like basis, Advertising
and Media Investment Management was the strongest
performing sector, with revenue up almost 5% for the year
and up almost 1% in quarter four, reflecting the impact of
a weaker net new business record. Advertising grew in Asia
Pacific in quarter four and the full year, but softened in all
other regions, as trading conditions became more difficult.
Media Investment Management showed strong like-for-like
revenue growth, up over 8% for the year, up just under 3%
in quarter four, with strong growth in the UK, Continental
Europe and Latin America.

1 Brazil, Russia, India and China.

Greater China

Germany

Australia/
New Zealand

Our 5 ‘Billion Dollar Markets’
WPP companies (including associates
and investments) generated revenues
of more than $1 billion in ﬁve markets

WPP ANNUAL REPORT 2016

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Constant currency1 revenue growth by sector
%
Advertising and Media
Investment Management

7.7
9.9

16
15

Data Investment
Management

Public Relations
& Public Affairs

Branding & Identity,
Healthcare and
Specialist Communications

16
15

0.4
3.5

5.0
4.7

11.8
7.3

Constant currency1 net sales growth by sector
%
Advertising and Media
Investment Management

6.5
5.3

16
15

Data Investment
Management

Public Relations
& Public Affairs

Branding & Identity,
Healthcare and
Specialist Communications

16
15

Net sales margin2 by sector %

Advertising and Media
Investment Management

Data Investment
Management

Public Relations
& Public Affairs

Branding & Identity,
Healthcare and
Specialist Communications

16
15*

16
15

16
15*

Revenue by sector £m

3.2
4.6

4.7
4.3

11.8
7.8

19.0
18.5

17.6
16.2

16.7
15.6

15.4
15.2

o Advertising and Media

Investment Management

o Data Investment
Management
o Public Relations &
Public Affairs
o Branding & Identity,
Healthcare and Specialist
Communications

14000
12000
10000
8000
6000
4000
2000
0

1 See definition on page 234.
2 The calculation of net sales margin is set out in note 31 of the

financial statements.

* Restated to reflect a reclassification of an associate business now split between

Advertising and Branding & Identity, Healthcare and Specialist Communications.

WPP ANNUAL REPORT 2016

Of the Group’s Advertising networks, Grey performed
particularly well in 2016, especially in the US. As mentioned
above, Asia Pacific was up, but elsewhere conditions were
more challenging and overall Advertising remained under
pressure. Growth in the Group’s Media Investment
Management businesses has been very consistent for most
of 2016, with constant currency and like-for-like revenue
up strongly for the year, but with a weaker second half,
largely the result of a more difficult final quarter, as weaker
net new business in the US impacted overall performance.
Elsewhere, like-for-like revenue growth in Western
Continental Europe, Media Investment Management’s
second largest region, was up 8%, with the UK and Latin
America up double digits. tenthavenue, the ‘engagement’
network focused on out-of-home media, also performed
strongly in the fourth quarter, with like-for-like net sales up
well over 5%, with strong growth of well over 6% in the
second half. The strong revenue and net sales growth across
most of the Group’s businesses, offset by slower growth in
the Group’s Advertising businesses in most regions, resulted
in the combined reported operating margin of this sector up
by 0.5 margin points to 19.0%, up 0.2 margin points in
constant currency.

In 2016, J. Walter Thompson Worldwide, Ogilvy, Y&R
and Grey generated net new business billings of £1.1 billion
($1.7 billion). In the same year, GroupM (the Group’s
Media Investment Management company, which includes
Mindshare, MEC, MediaCom, Maxus, GroupM Search,
Xaxis and now, Essence), together with tenthavenue,
generated net new business billings of £2.4 billion
($3.7 billion). The Group totalled £4.4 billion ($6.8 billion),
compared with £5.6 billion ($8.6 billion) in 2015.

Data Investment Management revenue was down
almost 2% on a like-for-like basis in the fourth quarter,
but more importantly, net sales were up well over 1% on
the same basis. On a full-year basis, constant currency
revenue was up 0.4%, but down almost 1% like-for-like,
with a weaker second half. Net sales, however, showed
stronger growth with constant currency net sales up over
3%, up almost 1% like-for-like. The mature markets were
more difficult, remaining under pressure, but the faster
growth markets grew net sales 3%. Syndicated research
continues to show resilience, with like-for-like net sales
growth up well over 1%, but custom research, which
accounts for almost half of Data Investment Management
net sales, was down a similar amount. Kantar Worldpanel,
Kantar Health, Kantar Public, Kantar Retail and Kantar
IMRB all showed strong like-for-like net sales growth,
with Kantar Insights more challenged. There seems to be

How we’re doing
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a growing recognition of the value of ‘real’ first-party data
businesses, rather than those that depend on third-party
data. Reported operating margins improved 1.4 margin
points to 17.6% and by 1.0 margin points in constant
currency. Good cost control and the continued benefits of
restructuring contributed to the improvement in operating
margin. Although there has been further improvement
during 2016, the slowest sub-sector continues to be
like-for-like net sales growth in the custom businesses
in mature markets, where discretionary spending remains
under review by clients.

The Group’s Public Relations & Public Affairs
businesses continued the growth shown earlier in the
year, with a stronger second half, but slower fourth
quarter, primarily the result of stronger comparatives in
the specialist Public Relations businesses in the final quarter
of 2015. Constant currency revenue grew well over 2% in
quarter four with like-for-like net sales down almost 1%,
with strong growth in Continental Europe and the Middle
East & Africa, but North America was down over 2%,
with the UK down significantly, as a result of lower M&A
activity in the Group’s specialist financial Public Relations
& Public Affairs businesses in the fourth quarter compared
with 2015. Despite the slower growth in the final quarter,
like-for-like net sales in the Group’s specialist Public

Relations & Public Affairs businesses were up almost
7% for the year, and Cohn & Wolfe performed particularly
well. Ogilvy and Hill+Knowlton Strategies also improved,
with Burson-Marsteller less buoyant. An improving
top-line and good control of costs resulted in the operating
margin improving by 1.1 margin points to 16.7% and
by 0.8 margin points in constant currency.

At the Group’s Branding & Identity, Healthcare and
Specialist Communications businesses (including direct,
digital and interactive), constant currency revenue grew
strongly at 8% in quarter four, the strongest performing
sector, with like-for-like revenue up well over 1%.
The Group’s direct, digital and interactive businesses,
especially WPP Digital, VML and Wunderman
performed strongly, with parts of the Group’s remaining
Branding & Identity, Healthcare and Specialist
Communications businesses also growing strongly.
Operating margins, for the sector as a whole, improved
0.2 margin points to 15.4% but fell 0.3 margin points
in constant currency, with operating margins negatively
affected as parts of the Group’s direct, digital and
interactive businesses in Western Continental Europe,
together with Branding & Identity and Healthcare
Communications, slowed.

Our 9 ‘Billion Dollar Brands’
Nine WPP brands have
generated revenues of
$1 billion or more

WPP ANNUAL REPORT 2016

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In 2016, 38.9% of the Group’s revenue came from
direct, digital and interactive, up 1.4 percentage points
from the previous year, with like-for-like revenue growth
of almost 6% in 2016.

2016 digital revenue vs peers $bn

$7.5bn

$5.8bn

$4.7bn

$2.7bn

$0.7bn

WPP

Publicis

Omnicom1

Dentsu

IPG1

Havas1

1 Digital revenue based on Exane BNP Paribas estimates.

Margins reach new high

Net sales margin was up 0.5 margin points to a new
historical high of 17.4%, up 0.2 margin points in constant
currency, and up 0.3 margin points like-for-like, in line
with the Group’s full-year margin target, adjusted for the
merger with STW Communications Group Limited in
Australia. The net sales margin of 17.4% is after charging
£34 million ($49 million) of severance costs, compared
with £24 million ($37 million) in 2015 and £367 million
($486 million) of incentive payments, versus £331 million
($505 million) in 2015.

WPP ANNUAL REPORT 2016

Group revenue is more weighted to the second half of
the year across all regions and sectors, and, particularly,
in the faster-growing markets of Asia Pacific and Latin
America. As a result, the Group’s profitability and margin
continue to be skewed to the second half of the year, with
the Group earning approximately one-third of its profits
in the first half and two-thirds in the second half.

As outlined in previous years, due to the increasing
scale of digital media purchases within the Group’s Media
Investment Management businesses and of direct costs
in Data Investment Management, net sales is the more
meaningful and accurate reflection of top-line growth,
although currently, only one of our competitors reports
net sales.

Net sales are a more appropriate measure because

Data Investment Management revenue includes pass-
through costs, principally for data collection, on which
no margin is charged. In addition, the Group’s Media
Investment Management sub-sector is increasingly buying
digital media for its own account on a transparent opt-in
basis and, as a result, the subsequent billings to clients
have to be accounted for as revenue, as well as billings.

Containment of operating costs continues

During 2016, the Group continued to manage operating
costs effectively, with improvements across most cost
categories, particularly staff and property costs.

Headline operating costs rose by 16.8%, rose by 7.0%

in constant currency and by 2.7% like-for-like. On all
bases, the growth in costs was lower than the growth in
revenue and net sales.

On a like-for-like basis, the average number of people

in the Group, excluding associates, in 2016 was 132,657
compared to 132,315 in 2015, an increase of 0.3%. On
the same basis, the total number of people in the Group,
excluding associates, at 31 December 2016 was 134,341
compared to 134,479 at 31 December 2015, a decrease of
138 or 0.1%. This reflected the transfer of a further 250
staff to IBM in the first half of 2016, as part of the strategic
partnership agreement and IT transformation program,
together with the continuing sound management of
headcount and staff costs in 2016 to balance revenue
and costs. On the same basis, revenue increased 3.0%
and net sales 3.1%.

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Reported staff costs, excluding incentives, increased by
17.3%, up 7.5% in constant currency. Incentive payments
amounted to £367 million ($486 million), which were
14.9% of headline operating profit before incentives and
income from associates, compared with £331 million
($505 million) or 16.2% in 2015. Achievement of target,
at an individual company level, generally generates 15%
of operating profit before bonus as an incentive pool,
20% at maximum and 25% at super maximum.

On a reported basis, operating margins, before all
incentives and income from associates, were 19.9%,
up 0.6 margin points, compared with 19.3% last year.
The Group’s staff costs-to-net sales ratio, including
severance and incentives, decreased by 0.4 margin points
to 62.8% compared to 63.2% in 2015, indicating
increased productivity.

As a result of all this, headline PBIT was up almost

22% to £2.160 billion, over £2 billion for the first
time, from £1.774 billion and up well over 8% in
constant currencies.

In 2016, the Group generated exceptional gains of
£277 million, largely representing re-measurement gains
in relation to the Group’s interest in Imagina and gains on
the sale of the Group’s interest in Grass Roots. These were
partly offset by investment write-downs of £86 million,
resulting in a net gain of £191 million, which in accordance
with prior practice, has been excluded from headline profit.
The Group took a £27 million restructuring provision,
primarily IT Transformation costs, resulting in a net
exceptional gain of £164 million. After all these gains
and restructuring costs, reported PBIT rose by almost
26% to £2.113 billion from £1.679 billion, up 12% in
constant currencies.

Net finance costs (excluding the revaluation of financial

instruments) were up 14.8% at £174.1 million, compared
with £151.7 million in 2015, an increase of £22.4 million.
This is due to the weakness in sterling resulting in higher
translation costs on non-sterling debt, the cost of higher
average net debt and lower income from investments, all
partially offset by the beneficial impact of lower bond
coupon costs resulting from refinancing maturing debt at
cheaper rates.

The Group’s headline tax rate was 21.0% (2015 19.0%)
and on reported profit before tax was 20.6% (2015 16.6%).
The tax charge includes the release of provisions following
the successful resolution of a number of tax matters during
the year. The headline tax rate for 2017 is expected to
be around 1% higher than 2016. Given the Group’s

geographic mix of profits and the changing international tax
environment, the tax rate is expected to increase slightly over
the next few years. Reported profit after tax rose by almost
21% (over 7% in constant currencies) to £1.502 billion.

Diluted headline earnings per share rose by almost 21%
to 113.2p from 93.6p. In constant currencies, earnings per
share on the same basis rose by almost 8%. Reported
diluted earnings per share rose by over 22% to 108.0p from
88.4p and increased well over 8% in constant currencies.

A record year, but not without challenges

The Group’s record performance in 2016, its sixth record
year in a row, was achieved despite a generally low global
growth, or tepid, environment. Top-line growth remained
strong, with operating profits and margins meeting and
exceeding targets and all regions and sectors showing
growth on almost all metrics.

India remains the one BRIC star
currently continuing to shine

Generally, the world seems trapped currently in a
nominal GDP growth range of 3.5-4.0%. Historically, the
BRICs or Next 11, located in Asia Pacific, Latin America,
Africa & the Middle East and Central & Eastern Europe
offered higher growth rates. After all, that is where the next
billion consumers will come from. However, in the last
few years Brazil, Russia and China have all faced various
challenges and slowed, although India remains the one
BRIC star currently continuing to shine. Whilst that
diminishing growth gap has been countered somewhat by
better prospects in the Next 11, CIVETS and MIST markets
like Mexico, Colombia, Vietnam, Indonesia, the Philippines
and Egypt, the growth rates of the mature markets of the
US, the UK and Western Continental Europe have also
improved, albeit from relatively low levels of growth.

That continues to be the case with the short to medium

prospects in the US, at least, strengthening under the
Trump administration, which is much more strongly
pro-business, much more business-connected than the
Obama administration, outlining planned pro-growth tax,
infrastructure investment, spending and regulatory reform.
The prospects in the UK are more mixed as the post-Brexit
vote scenarios will play out over the next two years and

WPP ANNUAL REPORT 2016

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uncertainties about the possible outcomes increase.
Three of the four leading Western Continental European
economies, Germany, France, Italy and Spain face elections
or electoral uncertainty. Greece and Portugal also face
continued economic uncertainty, and ECB Governor
Mario Draghi’s probable retirement in 2018/19 may
bring policy uncertainty, although Germany and Spain
are strengthening financially.

In these circumstances, clients face challenging top-line

growth opportunities and uncertainties. And although
inflation may pick up in the US because of stimulative
economic policy and in the UK because of the weakness
of sterling, generally inflation remains at low levels,
resulting in limited pricing power. As a result, there remains
considerable focus on the short-term and cost and the
finance and procurement functions are dominant, certainly
equal or more powerful than marketing, rightly or wrongly.
In addition, if you are running a legacy business, you
are faced with three simultaneous discombobulating forces
– technological disruption from disintermediators, those
like Uber or Airbnb in the transportation and hospitality
industries; the zero-based budgeting techniques of
companies like 3G Capital, Reckitt Benckiser and Coty
in consumer packaged goods and Valeant and Endo in
the pharmaceutical industries (although their models have
become somewhat discredited); and, finally, the attentions
of activist investors such as Nelson Peltz, Bill Ackman
or Dan Loeb.

Our 10-year experience of
measuring brand valuation
shows that the strongest
innovators and strongest
brands generate the strongest
top-line growth and total
shareholder returns

Not helping either in focusing on the long-term, is the
average term life of S&P 500 and FTSE 100 CEOs at 6-7
years, CFOs at 4-5 years and CMOs at 2-3 years. As a
result, it is not surprising that since Lehman at the end
of 2008, the combined level of dividend payments and
share buy-backs as a proportion of retained earnings at
the S&P 500 has steadily risen from around 60% of

WPP ANNUAL REPORT 2016

retained earnings to over 100%. In effect, managements
are abrogating responsibility for reinvesting retained
profits to their institutional investors. In fact, in seven
of the last eight quarters the ratio has exceeded or almost
reached 100%, tapering off in the last two quarters as stock
market indices and share prices reached new highs and the
relative attraction of buy-backs lessened.

This emphasis on the short-term and consequent

disinclination to invest for the long-term may be misplaced.
Our over 10-year experience of measuring brand valuation
clearly shows that the strongest innovators and strongest
brands generate the strongest top-line growth and total
shareholder returns. If you had invested equally over the
last decade in the top 10 brands identified by our annual
Financial Times/Millward Brown BrandZ Top 100
Most Valuable Global Brands survey, you would have
outperformed the S&P 500 Index by over 70% and
the MSCI by over four times. Investing in innovation
and strong brands yields enhanced returns. Perhaps,
surprisingly, corporate structures that seem to offend
customary good corporate governance may deliver
better long-term results. Controlled companies like the
Murdochs’ Newscorp and Fox or the Roberts’ Comcast
or Zuckerberg’s Facebook or Brin and Page’s Google
or, now, Spiegel’s Snap may provide the confidence and
stability needed to take the appropriate level of risk.
Given this macroeconomic background, it is not
surprising that clients are generally grinding it out in a
highly competitive ground game, rarely resorting to a
passing game or Hail Marys. Recently, reported calendar
2016 results generally reflect this, for example, in the auto,
retail, consumer packaged goods and pharmaceutical
industries. Although top-line growth may be hard to find
and guidance missed or just met, bottom lines are met or
exceeded. As top-line growth opportunities become more
and more pressurised, acquisitions and mergers become
even more attractive as a growth opportunity, particularly
if they present opportunities for significant cost synergies
and relatively unleveraged balance sheets can be
supplemented by still historically low-cost long-term debt.
Our industry is no different. Competition is fierce and

as image in trade magazines, in particular, is crucial to
many, account wins at any cost are paramount. There
have been several examples recently of major groups
being prepared to offer clients up-front discounts as an
inducement to renew contracts, heavily reduced creative
and media fees, extended payment terms, unlimited
indirect liability for intellectual property liability and
cash or pricing guarantees for media purchasing

How we’re doing
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commitments, although the latter are difficult for
procurement departments to measure and monitor.
As some say, you are only as strong as your weakest
competitor. These practices cannot last and will only
result eventually in poor financial performance and
further consolidation, the premium being on long-term
profitable growth.

Not surprising then that your Company’s top-line
revenue and net sales organic growth continues to hover
around the 3%+ level and on a cumulative basis for the
last two years over 6%, as it has done in previous sets
of consecutive years. In the first half of 2016, growth
was around 4%, due to weaker comparatives and in the
second half at around 2% due to stronger comparatives.

Outlook for 2017

2017 is unlikely to be much different. There seems little
reason for an upside breakout in growth in terms of
worldwide GDP growth, or indeed a downside breakout,
despite the possibility of an increase in interest rates in the
short-term. Interest rates are likely to continue to remain
at historically low relative levels, longer than some think.
Whilst Trumponomics may well result in an increase in the
US GDP growth rate and the US is the biggest ($18 trillion)
GDP engine out of a total of $74 trillion worldwide,
political uncertainties in Europe, West and East, the
Chinese focus on qualitative growth and the longer-term
recovery of Latin America, probably mean that stronger
growth will be harder to find outside the US. America First,
if the new Administration’s plans are implemented, will
almost definitely mean a stronger American economy,
at least in the short- to medium-term.

2017 is neither a maxi- or mini-quadrennial year,
although it will be somewhat influenced by the build-up
for the Pyeongchang Winter Olympics, FIFA World Cup in
Russia and the mid-term Congressional elections, all in 2018.
Nominal GDP growth should continue to grow in the
3.5-4% range, with advertising as a proportion remaining
constant overall, with mature markets continuing at lower
than pre-Lehman levels, counter-balanced by under-branded
faster growth markets growing at faster rates. In our own
case, budgets indicate top-line revenue and net sales growth
of around 2%, reflecting the impact of a lower net new
business record in the latter part of 2016, although new
business activity and conversion rates currently remain high.

Our prime focus will remain on growing revenue and

net sales faster than the industry average, driven by our

leading position in horizontality, faster-growing geographic
markets and digital, premier parent company creative and
effectiveness position, new business and strategically
targeted acquisitions.

At the same time, we will concentrate on meeting our
operating margin objectives by managing absolute levels
of costs and increasing our flexibility in order to adapt
our cost structure to significant market changes and by
ensuring that the benefits of the restructuring investments
taken in 2015 and 2016 continue to be realised.

The initiatives taken by the parent company in the areas

of human resources, property, procurement, information
technology and practice development continue to improve
the flexibility of the Group’s cost base. Flexible staff costs
(including incentives, freelance and consultants) remain
close to historical highs of above 8% of net sales and
continue to position the Group extremely well should
current market conditions deteriorate.

Our prime focus will remain
on growing revenue and net
sales faster than the industry
average

The budgets for 2017 have been prepared on a cautious

basis as usual (hopefully), but continue to reflect the
faster-growing geographical markets of Asia Pacific, Latin
America, Africa & the Middle East and Central & Eastern
Europe and the faster-growing functional sub-sector of
direct, digital and interactive, with a stronger second half
of the year, reflecting the 2016 comparative. Our 2017
budgets show like-for-like revenue and net sales growth
of around 2% and a target net sales margin improvement
of 0.3 margin points excluding the impact of currency.

At the time of writing, we have revenue and profit data

for the first two months of 2017. The Group has had a
relatively slow start to the year, with like-for-like revenue
growth up 0.3% in the first two months and net sales up
0.4% on the same basis, against stronger comparatives
last year. Operating margins are ahead of budget for the
first two months of the year.

All regions and sectors, except North America and
Data Investment Management, showed revenue and net
sales growth, with Public Relations & Public Affairs,
digital, direct and interactive and the Specialist
Communications businesses up the strongest. These

WPP ANNUAL REPORT 2016

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trends are in line with our budgets, which also indicate
a stronger rate of growth in the second half of the year.

Horizontality

Including associates and investments, the Group currently
employs over 205,000 full-time people in over 3,000 offices
covering 112 countries, now including Cuba and Iran,
although in the latter case only through affiliations, because
of effectively continuing sanctions. It services 360 of the
Fortune Global 500 companies, all 30 of the Dow Jones 30,
78 of the NASDAQ 100 and 892 national or multinational
clients in three or more disciplines. 596 clients are served
in four disciplines and these clients account for over 53%
of Group revenue.

The Group continues to improve
co-operation and coordination
among its operating companies...
an objective which has been
specifically built into short-term
incentive plans

These statistics reflect the increasing opportunities for

coordination and co-operation or horizontality between
activities, both nationally and internationally, and at a
client and country level. The Group also works with 462
clients in six or more countries. The Group estimates that
well over a third of new assignments in the year were
generated through the joint development of opportunities
by two or more Group companies. Horizontality across
clients, countries and regions and on which the Group
has been working on for many years, is clearly becoming
an increasingly important part of our client strategies,
particularly as clients continue to invest in brand in
slower-growth markets and both capacity and brand
in faster-growth markets.

The Group continues to improve co-operation and
coordination among its operating companies in order to
add value to our clients’ businesses and our people’s careers,
an objective which has been specifically built into short-
term incentive plans. We have decided that up to half of
operating company incentive pools are funded and
allocated on the basis of Group-wide performance in 2016
and beyond. Horizontality has been accelerated through
the appointment of 48 Global Client Leaders for our major
clients, accounting for over one third of total revenue of
almost $20 billion and Regional, Sub-Regional and
Country Managers in a growing number of test markets
and sub-regions, covering about half of the 112 countries
in which we operate.

Emphasis has been laid on the areas of media investment

management, healthcare, sustainability, government, new
technologies, new markets, retailing, shopper marketing,
internal communications, financial services and media and
entertainment. The Group continues to lead the industry, in
coordinating communications services geographically and
functionally through parent company initiatives and winning
Group pitches.

Whilst talent and creativity (in the broadest sense)
remain key potential differentiators between us and our
competitors, increasingly differentiation can also be
achieved in three additional ways – through application
of technology, for example, Xaxis, AppNexus and Triad;
through integration of data investment management,
for example, Kantar and comScore (now merged with
Rentrak); and through investment in content, for example,
Imagina, VICE, Media Rights Capital, Fullscreen, Imagine
Entertainment, Indigenous Media, China Media Capital,
Bruin Sports Capital and Refinery29.

In addition, strong and considered points of view on
the adequacy of online and, indeed, offline measurement,
on viewability, on internet fraud and transparency, on
online media placement and brand safety and, finally, on
fake news are all examples where further differentiation
is important and can be secured through considered
initiatives. With its leadership position, as the world’s
largest media investment management operation, GroupM
has developed a strong united point of view with its leading
clients and associates, like AppNexus, in all these areas
and has aligned with Kantar’s data investment management
capabilities, for example, through comScore, to provide
better capabilities. These philosophical differences and
operational capabilities are extremely effective in
responding to the trade association and regulatory issues
that have been raised recently.

WPP ANNUAL REPORT 2016

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Four core strategic priorities

Our six specific objectives

Our reason for being, the justification for WPP’s existence,
continues to be to add value to our clients’ businesses and
our people’s careers. Our goal remains to be the world’s
most admired, creative and respected communications
services advisor to global, multinational, regional and
local companies.

To that end, we have four core strategic priorities,

as presented on pages 18 and 19.

1 Advance the practice of ‘horizontality’ (connected

know-how) by ensuring our people work together
for the maximum benefit of clients: through
cross-Group Communities and Practices, Global
Client Teams, and Regional, Sub-Regional and
Country Managers.

from the faster-growing markets of Asia Pacific,
Latin America, Africa & Middle East and Central
& Eastern Europe to 40-45% of revenues.

2 Increase the combined geographic share of revenues
3 Increase the share of revenues from new media
4 Maintain the share of more measurable advertising

and marketing services – such as data investment
management and direct, digital and interactive –
at 50% of revenues, with a focus on the application
of technology, data and content.

to 40-45% of revenues.

If we implement this strategy effectively then our
business will be geographically and functionally well-
positioned to compete successfully and to deliver on
our long-term financial targets:

Revenue and net sales growth greater than the

industry average.

Annual improvement in net sales margin of 0.3 margin

points or more, excluding the impact of currency,
depending on net sales growth and staff cost-to-net sales
ratio improvement of 0.2 margin points or more.

Annual diluted headline EPS growth of 10% to 15%
delivered through revenue and net sales growth, margin
expansion, acquisitions and share buy-backs.

Here are six objectives which represent our key
performance indicators (KPIs). For an assessment
of how we performed against them in 2016,
read on.

cost structure.

margins on net sales.

by the parent company.

growth more as margins improve.

owner value and improve return on
capital employed.

Improve still further the creative
capabilities and reputation of all
our businesses.

1 Continue to improve operating
2 Increase flexibility in the
3 Use free cash flow to enhance share
4 Continue to develop the value added
5 Emphasise revenue and net sales
6
1 First, to continue to improve operating margins.

In 2016, we achieved an industry-leading margin
of 17.4% on net sales.
We continue to believe a margin of well over 19%
on net sales, is a tough, but realistic, objective given that
our best-performing companies in each services sector
have already demonstrated they can perform at a combined
Group margin of 18% on net sales. The Group has
embarked on a number of programs to improve operational
effectiveness including process simplification, shared service
centres, offshoring certain tasks to lower-cost markets
and, where appropriate, outsourcing. We are consolidating
IT infrastructure and services, and centralising systems
development and applications to create efficiencies and
focus investment. These programs are projected to deliver a
1.0 margin point benefit (excluding the impact of currency)
over the course of the next two to four years.

WPP ANNUAL REPORT 2016

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2 Second, to increase flexibility in the cost structure.

In 2016, flexible staff costs (including incentives,
freelance and consultants) remained close to
historical highs of above 8% of net sales and
continue to position the Group extremely well should
current market conditions deteriorate.

Change in variable costs %

12.7

12.5

13.1

12.8

8.2

8.0

8.3

8.0

o 2016
o 2015
o 2014
o 2013

Variable staff costs
as a % of staff costs

Variable staff costs
as a % of net sales

maximise the return on investment on the
Company’s substantial free cash flow of almost
£1.6 billion (or almost $2.2 billion) per annum.

3 Third, to enhance share owner value and

As capital expenditure remains relatively stable, our focus is
on the alternative uses of funds between acquisitions, share
buy-backs and dividends. We have increasingly come to the
view that, currently, the markets favour consistent increases
in dividends and higher sustainable payout ratios, along
with anti-dilutive progressive buy-backs and, of course,
sensibly-priced, small- to medium-sized strategic acquisitions.

Mergers and acquisitions. There is still a very significant

pipeline of reasonably priced small- and medium-sized
potential acquisitions, with the exception perhaps of digital
in the US, where prices seem to have got ahead of themselves
because of pressure on competitors to catch up. This is
clearly reflected in some of the operational issues that are
starting to surface elsewhere in the industry, particularly
in fast-growing markets like China, Brazil and India.

Our acquisition focus in 2016 was again on the triple
play of faster-growing geographic markets, new media and
data investment management, including the application
of technology, data and content, totally consistent with
our strategic priorities in the areas of geography, new
communication services and measurability. In 2016,
the Group spent over £600 million on initial acquisition
payments, net of cash acquired and disposal proceeds.
Net acquisition spend is currently targeted at around
£300 to £400 million per annum, excluding slightly
more significant ‘one-offs’, like IBOPE in Latin America,
comScore and Triad. We will continue to seize
opportunities in line with our strategy.

Dividends. As outlined in the June 2015 AGM
statement, the achievement of the previously targeted
payout ratio of 45% one year ahead of schedule, raised
the question of whether the payout ratio target should
be increased further. Following that review, your Board
decided to up the dividend payout ratio to a target of
50%, to be achieved by 2017, and, as a result, declared
an increase of almost 23% in the 2016 interim dividend

Headline operating margins1 vs peers %

o WPP including
associates
o WPP
o Publicis
o Havas
o Omnicom
o IPG

2011

2012

2013

2014

2015

2016

1 Based on headline operating profit as a proportion of net sales as defined on page 234, excluding share of results of associates. As our competitors do not disclose

net sales, competitor operating margins have been calculated on a revenue basis, and sourced from relevant public filings.

WPP ANNUAL REPORT 2016

to 19.55p per share, representing a payout ratio of 50% for
the first half. This had the effect of evening out the payout
ratio between the two half-year periods and consequently
balancing out the dividend payments themselves, although
the pattern of profitability and hence dividend payments
seems likely to remain one-third in the first half and
two-thirds in the second half.

Our acquisition focus was
again on the triple play of
faster-growing geographic
markets, new media and data
investment management

Given your Company’s strong progress, your Board
proposes an increase of almost 29% in the final dividend to
37.05p per share, which, together with the interim dividend
of 19.55p per share, makes a total of 56.60p per share for
2016, an overall increase of almost 27%. This represents a
dividend payout ratio of 50%, compared to a payout ratio
of 47.7% in 2015, reaching the recently targeted payout
ratio of 50% one year ahead of schedule. Dividends paid
in respect of 2016 will total approximately £720 million
for the year.

Your Board will continue to review the question
of whether the dividend payout ratio should be further
increased, particularly given the continuing attractive
opportunities to reinvest retained earnings in the business.

Distributions to share owners1 £m

o Buy-backs
o Dividends paid

4.9%

6.0%

4.9%

5.9%

1200

1000

800

600

400

200

3.8%

4.3%

1 Sum of share buy-backs and dividends paid divided by average shares in
issue for the relevant period, as a percentage of the average share price for
the relevant period.

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Share buy-backs. They continue to be targeted to absorb
any share dilution from issues of options or restricted stock.
However, given the net sales margin target of 0.3 margin
points improvement, the targeted level of share buy-backs
will be 2-3% of the outstanding share capital. If achieved,
the impact on headline diluted EPS would be equivalent
to an incremental improvement of 0.2 margin points.

In addition, the Company also has considerable free cash

flow to take advantage of any anomalies in market values,
particularly as the average 2016 net debt-to-EBITDA ratio
was under 1.8 times, at the mid-point of our market
guidance of 1.5-2.0 times. Share buy-backs in 2016 cost
£427 million, representing 2.0% of issued share capital.
In 2016, funds returned to share owners were over
£1.0 billion. In the last five years, £4.2 billion has been
returned to share owners and, over the last 10 years,
£5.9 billion.

4 Fourth, we will continue to develop the value

added by the parent company and build unique
integrated marketing approaches for clients.
WPP is not just a holding company focused on
planning, budgeting, reporting and financial issues, but
a parent company that can add value to our clients and
our people in the areas of human resources, property,
procurement, IT and practice development, including
sustainability. We will continue to do this through a limited
group of 400 or so people at the centre in London, New
York, Hong Kong, Singapore, Shanghai and São Paulo.
This does not mean that we seek to diminish the strength of
our operating brands, but rather to learn from one another.
Our objective is to maximise the added value for our clients
in their businesses and our people in their careers.

Many of our initiatives are possible because of the scale
on which we now operate. In the optimum use of property,
in IT and in procurement generally, we are able to achieve
efficiencies that would be beyond the reach of any
individual operating company. But it is also clear that there
is an increasing requirement for the centre to complement
the operating companies in professional development and
client coordination. It is a relatively recent development for
certain multinational marketing companies, when looking
to satisfy their global communications needs, to make their
initial approach not to operating companies, but directly
to holding or parent companies.

Such assignments present major, and increasingly
frequent, opportunities for the few groups of our size.
It is absolutely essential that we have the professional
resources and the practice development capability to serve
such clients comprehensively, actively and creatively.

WPP ANNUAL REPORT 2016

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Initiatives involving some of the world’s largest marketers
continue to gain momentum. The world’s largest advertiser
is itself integrating its efforts around brands, in the areas
of advertising, media investment management, market
research, packaging design and public relations. For our
largest client, amongst others, we have implemented a
seamless model, effectively a one-client agency within our
Group. All our clients, whether global, multinational or
local, continue to focus on the quality of our thinking,
coordination of communications and price. In response,
we focus on talent, structure and incentives.

2016, particularly as we continue to face challenges,
including our senior leadership programs such as
‘The X Factor’, which prepares women for the next level
of leadership in the Group, as well as the work of our WPP
Stella women’s network in the UK (page 162) and initiatives
such as Walk the Talk, an intensive coaching program for
women that began at Maxus and is being adopted in other
parts of the Group. Women now account for 54% of our
employees and 34% of our executive leaders, the latter
which is clearly not good enough.

Managing talent is the priority

Talent and its management therefore remain at the heart
of our reason to be: that is what our clients pay us for.
Development of our people and the way we manage that
talent is a critical determinant of performance and one
on which we continue to make significant progress.

There is clear evidence that
businesses with greater diversity
in their leadership perform
better than the competition

In developing highly-competitive incentives combined

In 2011, your Company teamed up with the Shanghai

with extremely attractive working environments, we
increasingly differentiate ourselves from our competitors
and improve the attractiveness of WPP companies as
destinations for talent. Our quarterly reviews with the
operating companies are structured to give time and
attention to talent and to clients. Our recruiting efforts
throughout 2016 were fruitful as we successfully targeted
and recruited top talent within and beyond our industry,
often competing with investment banking, management
consulting, new media and private equity offers. The war
for talent is fierce and will intensify further and with lower
birth rates forecast we need to ensure we are an attractive
employer for a young workforce.

The blueprint for our executive development curriculum
has been completed. Our flagship client leadership training
program, Maestro, now in its 14th year, continues to help
us strengthen the effectiveness and confidence of senior
client practitioners and to achieve horizontality in our
ways of working. The parent company and each of our
operating companies have installed their own approach to
performance assessment and succession planning, aimed
at developing the careers of their people, improving the
quality of feedback, coaching and mentoring they receive
and providing for orderly succession.

A diverse workforce is more collaborative, creative and

effective and there is clear evidence that businesses with
greater diversity in their leadership perform better than the
competition. We continued to make diversity a focus during

Art & Design Academy to establish the WPP School of
Marketing and Communications. This jointly-run school
offers China’s first professional marketing and
communications three-year diploma program. In 2015,
WPP partnered with the Indian School of Design and
Innovation to offer a three-year undergraduate course on
marketing communications; and, in 2016, your Company
announced the launch of the WPP Africa Academy in
Johannesburg, South Africa, in collaboration with the
Red & Yellow School of Logic and Magic. This initiative
enables WPP companies across Africa to access high
quality, relevant and cost-effective training programs
for their agency people. Now WPP and Ogilvy UK are
partners in Pearson Business School’s new Rotational
Degree Apprenticeship program, an alternative to
traditional degree courses and a new approach for
education in the UK.

After more than 20 years, the WPP Fellowship

program remains (surprisingly) the only multidisciplinary
and multi-geographical recruitment and training initiative
in the industry, with a lower acceptance rate than Harvard
Business School’s MBA program. 194 Fellows have gone
through or are participating to date. This is just one of the
ways we seek to attract the next generation of diverse talent
into our industry – across the Group our companies offered
over 6,400 paid internships and apprenticeships in 2016.
To be successful in our industry requires us to offer
competitive compensation that allows us to attract the

WPP ANNUAL REPORT 2016

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best talent and then ensure we reward them for their
achievements and retain them for the long-term benefit
of the Group. We do this by ensuring that our
compensation levels are aligned to competitors (which is
becoming increasingly difficult, particularly against US
competitors) and the range of benefits we provide is
attractive and designed to meet the needs of all our people.

Communications

At the heart of our internal communications activity is
the sharing of company news, information, connections
and thinking within and across the Group to promote an
understanding of our constituent parts, to demonstrate our
collective thought leadership and, specifically, to support
WPP’s focus on horizontality. We do this through our
multi-awarded quarterly global newspaper and ebook, The
WIRE; regular internal emails, regional communicators’
meetings and company FactFiles; the promotion of Group
initiatives such as the Atticus Awards, BrandZ studies and
WPP Partnership Awards; and our intranet content. The
Group intranet now holds an extensive database of WPP
talent, as well as a comprehensive range of business and
personal development resources.

We aim to be a model of excellence in our external
communications, through our social media channels,
website content and in print. These include: frequent tweets
on noteworthy matters; our monthly public news ebulletin;
topical articles by the WPP CEO in global and national
media; our proprietary BrandZ studies; our annual Atticus
Journal of original thinking in communications services;
WPPED Cream creative winners; and our consistently-
awarded Sustainability Reports and Annual Reports.
In the first quarter of 2017, wpp.com was ranked in the
top five of 500 corporate websites assessed for accessibility
by SiteMorse.

compares with net sales growth on the same basis of over 7%
and average headcount growth of over 6%. As a result, the
establishment cost-to-net-sales ratio dropped by 0.2 margin
points (for the second consecutive year) to 6.7%, contributing
substantially to the Group’s overall margin improvement.

We have also ensured our new buildings are designed
to focus on sustainability and we look to achieve BREEAM
Very Good in the UK and LEED Gold in the US and similar
standards elsewhere. Our operating companies’ workplaces
continue to be cited for their creativity, innovation
and effectiveness.

2016 saw the completion of our Shanghai WPP Campus

colocation, housing more than 3,000 of our people, the
shared space at Sea Containers House in London housing
2,300 people, and the renovation of our shared space on
Lexington Avenue in New York. These new colocation
projects all meet our new planning standards and support
our horizontality goal. Longer-term colocation projects
are in the planning stage for New York, São Paulo,
Amsterdam, Milan, Lisbon and central Madrid, where
the former Telefónica building will house more than 30
Group companies and 2,500 people.

Our operating companies’
workplaces continue to be cited
for their creativity, innovation
and effectiveness

Our goal is to continue to deliver excellent workspace,

while reducing the portfolio further and so mitigate the
impact of property inflation. Our focus on continuing to
reduce the establishment cost-to-net-sales ratio will help
the Group achieve its margin targets for 2017, and beyond.

Procurement

Property management

In 2016, the Group’s property portfolio increased by
approximately 1% to 24.2 million square feet, reflecting
the impact of space acquired through acquisitions (including
0.4 million square feet following the merger with STW
Communications Group Limited in Australia), partly offset
by the benefit of more ‘agile working’, supported by more
technology in the office environment. Establishment costs
increased by 5.8% on a constant currency basis, which

In procurement, our goal is to make savings, add value
and minimise risk across all of WPP’s external spend,
with particular emphasis on opportunities to leverage
our scale to the benefits of our clients and our companies.
In 2016, we continued to implement and develop a
spend analytics system, which now provides supplier-level
and category visibility of over $5 billion of external
spend, across 15 of our largest markets around the world.
Capturing and making sense of ‘big data’ is increasingly

WPP ANNUAL REPORT 2016

In key geographic markets we are increasingly
coordinating our activities through WPP Regional,
Sub-Regional and Country Managers. We continue to
believe that increasing coordination is required between
our brands at global and country levels, as the arguments
for investment in regional management become weaker,
partly because of improved technology and client
reorgansation to achieve cost reduction. In addition, we
have increased the number of WPP Global Client Leaders
to coordinate our efforts on behalf of clients and to ensure
they receive maximum benefit from their relationships
with WPP regional operating brands.

We continue to believe that
increasing coordination is
required between our brands
at global and country levels

Furthermore, we continue to encourage internal
strategic alliances and promote co-operation. Practice
development initiatives have therefore been reinforced in
such areas as healthcare, retail, internal communications,
corporate sustainability and media and entertainment.

This has been especially important in developing our
portfolio of direct investments in new media under WPP
Digital and WPP Ventures and where our investments are
working with our agencies and people to bring new
technology capabilities and understanding to our clients.

All these initiatives are designed to ensure that we, the

parent company, really do (as well as being perceived to)
inspire, motivate, coach, encourage, support and incentivise
our operating companies to achieve their strategic and
operational goals.

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driving procurement opportunity assessment and new
project activities across the Group.

For 2017, we will continue our focus on the key drivers

of supplier cost, combined with an increased emphasis on
internal demand management (what we buy, why we buy
and how we buy). For indirect procurement, our goal
remains to have a minimum of 50% supplier spend in each
major country covered by WPP preferred suppliers and
contracts, and for these preferred suppliers to work with
us to deliver year-on-year value improvement.

Information technology

2016 was the second year of our multi-year program to
transform the Group’s IT capability. In June 2016, we
commissioned four new regional world-class cloud-enabled
data centres and have begun to transfer our legacy server
estate into these new facilities, along with the rollout of
tooling to enable the remote management of our servers,
PCs and network estate.

Continuing to support horizontality and the enablement

of WPP’s finance shared services strategy, we completed
the build of our new core ERP system, with the first
deployments scheduled to go-live from the second quarter
of 2017.

In 2016, we strengthened our strategic partnership with
Adobe, with a global agreement to deploy Adobe’s creative
cloud technology throughout our agencies to support
creativity, collaboration and horizontality.

Practice development

In practice development, we continue to develop horizontal
initiatives in a focused set of high-potential areas across
our vertical operating brands: in Media Investment
Management, healthcare, sustainability, government, new
technologies, new markets, retailing, shopper marketing,
internal communications, financial services and media and
entertainment. Specifically, we continue to invest in sharing
insights and developing initiatives through WPP Digital
(in digital marketing and media), The Store (in distribution
and retail), our Government & Public Sector Practice,
WPP Health & Wellness and The WPP Sports Practice.

WPP ANNUAL REPORT 2016

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5 Fifth, to emphasise revenue and net sales growth

more as margins improve. One legitimate criticism
of our performance against the best-performing
competition has been our comparative level of
organic revenue growth, although the methods used to
calculate rates of organic growth ‘vary’ to say the least
and we may have put too much emphasis on margin
improvement, where we outperform. Like-for-like revenue
growth of 3.0% and net sales growth on the same basis of
3.1% was (we believe) more than respectable. Our net sales
margin was up 0.5 margin points to an industry-leading
17.4%. We continue to believe that profitable growth is
preferable to sacrificing margins.

Estimated net new business billings of £4.4 billion
($6.8 billion) were won in the year, continuing the good
performance seen in the first nine months, although
comparatively weaker in the fourth quarter, following
the particularly successful media wins in the final quarter
of 2015. Generally, the Group continues to benefit from
consolidation trends in the industry, winning assignments
from existing and new clients, including several very large
industry-leading advertising, digital, media, pharmaceutical
and shopper marketing assignments, which partly
benefited the latter half of 2016, although offset, to some
extent, by a couple of significant media losses. There is,
probably, more sizeable net new business to come, reflecting
the Group’s differentiation in horizontality, technology,
data and content.

Our acquisition activities are also aimed at helping us
position our portfolio in the faster-growing geographic and
functional areas. The Group completed 56 transactions in
the year: 20 acquisitions and investments were in new
markets; 38 in quantitative and digital; and 10 were driven

Organic revenue growth vs peers %

by individual client or agency needs. Out of all these
transactions, 12 were in both new markets and quantitative
and digital.

Specifically, in 2016, acquisitions and increased equity

stakes have been completed in Advertising and Media
Investment Management in the US, Canada, the UK,
Turkey, Argentina, Brazil and Ecuador; in Data Investment
Management in the US, Denmark, Greece, India and New
Zealand; in Public Relations & Public Affairs in Canada,
Switzerland, Turkey, Kenya, India and Brazil; in Branding &
Identity in the Netherlands and Hong Kong; in direct, digital
and interactive in the US, the UK, France, Germany, the
Netherlands, Turkey, China, Singapore, South Korea, Brazil,
Colombia and Mexico; in Healthcare Communications in
the US; and in sports marketing in the US.

A further seven acquisitions and investments were

made in the first two months of 2017, with three in
Advertising and Media Investment Management; two
in Data Investment Management; and two in direct,
digital and interactive.

Revenue in faster-growing markets 2014-2016
$bn

o WPP
o Dentsu JPN1
o Dentsu
o Omnicom2
o Publicis2
o IPG2,3
o Havas2

2014

2015

2016

1 Dentsu revenue reported in Japan.
2 Peer data sourced from annual results translated at average exchange rate
for the year and assumed non-Euro countries in Europe are 3% of revenue.

3 Assumed Canada is 1.5% of revenue.

o WPP
WPP net sales
o Dentsu net sales1,2
o Omnicom1
o Publicis1
o IPG1
o Havas1

-2

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

1 Peer data sourced from company presentations.
2 Prior periods have been restated to reflect the transition from Japanese GAAP to IFRS.

WPP ANNUAL REPORT 2016

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These acquisitions continue to target our previously-

Creativity remains paramount

described strategic priorities; expanding the share of
revenues of our businesses in Asia Pacific, Latin America,
Africa & Middle East and Central & Eastern Europe to
40-45%; in new media to 40-45%; and in Data Investment
Management, direct, digital and interactive, to one-half.

Expansion plans

We intend to expand our strong networks – J. Walter
Thompson Worldwide, Ogilvy, Y&R, Grey, Scangroup,
Mindshare, MEC, MediaCom, Maxus, tenthavenue,
Kantar, Hill+Knowlton Strategies, Burson-Marsteller,
Cohn & Wolfe, Brand Union, Landor, FITCH, WPP
Health & Wellness, Wunderman, Geometry Global,
POSSIBLE and AKQA – in high-growth markets or
where their market share is insufficient.

We will also enhance our leadership position in Data
Investment Management by further development of our
key brands with particular emphasis on North America,
Asia Pacific, Latin America and Continental and Eastern
Europe. We will continue our growth of data panels and
have established a Kantar-wide operational capability.
We will reinforce our growing position in media research
through Kantar Media and Kantar IBOPE Media. This
includes our investments in television and internet audience
research and Marktest, Finpanel and CSM/CTR, which
on a combined basis is the market leader outside North
America. With our licensee partners in Europe and Asia
Pacific, we currently measure television and/or internet
audiences in 52 markets around the world.

In addition, we intend to reinforce our worldwide

strength in digital marketing and data through our
traditional channels such as Wunderman, Ogilvy,
Geometry Global, Blanc & Otus and Lightspeed. We
will also invest directly in new channels through start-ups,
particularly as US valuations in search, for example, are
still prohibitive. Other opportunities will be sought to
enhance our online capabilities.

Lastly, we will continue to develop our specialist

expertise in areas such as healthcare, retail and interactive
and to identify new high-growth areas.

WPP ANNUAL REPORT 2016

creative reputation WPP now enjoys globally.
The creative capability of the Group is led

6 Sixth, to build on, still further, the impressive

by John O’Keeffe, WPP’s worldwide creative
director. John reminds us constantly that while many
issues facing WPP are very important – margin growth,
acquisitions, geographical spread and the like – the creative
quality of the work will always be priority No.1. We live
or die by the ideas we deliver to our thousands of clients:
design ideas, media and digital ideas, consumer insights
and, of course, Kantar Millward Brown’s influential
BrandZ studies which is being combined with Y&R’s
equally influential BrandAsset® Valuator.

Training and development programs remain a key

focus, as of course does the judicious use of our M&A
skills to identify the best and most like-minded creative
businesses to join us.

In 2016, we celebrated our 10th annual internal
WPPED Cream awards, showcasing what we consider
our very best work. wppedcream.com is a key online
destination website for anyone searching for the very
best in marketing creative excellence.

For those of us concerned with marketing that actually
works, it’s common to say that, in order to be effective, you
need to be creative. Maybe we should start saying that in
order to be creative you need to be effective. Because we do
appear to have proven both tenets. For a record sixth time
in a row, our peers across the entire industry voted WPP
Creative Holding Company of the Year at the Cannes
International Festival of Creativity and Ogilvy for the
fifth consecutive year as the most creative agency network.
Four WPP agency networks, Ogilvy, Y&R, Grey and
J. Walter Thompson Worldwide finished in the top seven
networks at Cannes in 2016, in positions one, three, six
and seven respectively, an outstanding achievement. Grey
New York and INGO Stockholm were also voted the
second and third most creative agencies in the world.
For the fifth consecutive year, WPP was named
Most Effective Holding Company in the Effie Global
Effectiveness Index, with Ogilvy ranked the most effective
agency. For the third consecutive year, WPP was ranked
the World’s Top Holding Company by Warc.

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Strategic report to share owners

Assessing and managing our risks

The Company will use the results of the assessment to
prioritise companies for further engagement including
on-site assessments and training.

Risk management and internal control

The Group has an independently operated helpline, Right

We recognise that the success of the strategic objectives of
the Group discussed in this report depends to a significant
extent on the identification, understanding of and response
to the risks that the Group faces. The Board, with support
from the Audit Committee, has overall responsibility for
the system of internal control and risk management in the
Group. It has reviewed the design and effectiveness of the
system during the year and up to the date of this report and
carried out a robust assessment of the principal risks facing
the Group. The system of controls described below is
designed to manage or mitigate, but may not eliminate, the
risks of failure to achieve WPP’s strategic objectives and
is not an absolute assurance against material misstatement
or loss.

Control environment and culture

The quality and competence of our people, their integrity,
ethics and behaviour and the culture embedded within
the Group are all vital to the maintenance of the Group’s
system of internal control.

The Code of Business Conduct, which is regularly
reviewed by the Board and was updated in 2016, sets out
the principal obligations of all employees. Senior executives
throughout the Group are required to sign this Code each
year and all employees are required on joining the Group,
and at regular intervals, to complete the WPP How We
Behave, Anti-Bribery and Corruption, and Privacy & Data
Security Awareness training modules, which embed all of
the principles of the Code in addition to operating company
training programs. The WPP Policy Book, which is updated
with control bulletins, includes required practices in many
operational, tax, legal and human resource areas. Breaches
or alleged breaches of the Code are investigated by the
director of internal audit, head of compliance, the Group
chief counsel and external advisers where appropriate.
Group companies are also required to follow the Data
Code of Conduct and apply the Supplier Code of Conduct.
During 2017, we will launch a sustainability self-
assessment questionnaire to all WPP offices to help us
identify gaps in implementation focusing on governance,
employment practices, environment and supply chain.

to Speak, to enable our people to report issues that they
feel unable to raise locally, and anonymously, if necessary.
Through 70 calls to this helpline, a number of issues have
been raised during 2016, all of which have been followed
through and investigated where appropriate and reported
to the Audit Committee. The Compensation Committee
continues to review how the Group’s performance rewards
support the risk management and internal control systems.
Clawback provisions were adopted in 2016 and underline
the principles of the Code of Conduct.

Risk assessment

The Group uses a three lines of defence model in relation
to risk management.

First, each operating company undertakes monthly and
quarterly procedures and day-to-day management activities
to review their operations and business risks, supported
by Group policies, training and guidance on required
internal controls over financial reporting and monitoring
controls and reviews within their network.

Secondly, the operating network reviews are formally

communicated to the Group chief executive, the Group
finance director and senior parent company executives in
monthly reports and quarterly review meetings and, in
turn, to the Board. At each Board meeting, the Group chief
executive presents a Brand Check review of each of the
business’ operations, including an assessment of the risk in
each business, providing feedback on the business risks and
details of any change in the risk profile since the last Board
meeting. The Brand Check includes the possibility of
winning or losing major business, succession and the
addition or loss of a key executive; introduction of new
legislation in an important market; sustainability, including
risks relating to marketing ethics, privacy, diversity and
employment; political instability and changes in accounting
or corporate governance practice.

Thirdly, internal audit at the Company, with Audit
Committee oversight and external resource as required,
provides an independent review of risk management and
internal control via internal audits and management of
the testing program for SOX.

WPP ANNUAL REPORT 2016

How we’re doing
Strategic report to share owners

Control activities and monitoring

Policies and procedures for all operating companies are set
out and communicated in the WPP Policy Book, internal
control bulletins and accounting guidelines. The application
of these policies and procedures is monitored within the
individual businesses and by the director of internal audit,
compliance functions centrally and at the operating
companies and the WPP Group chief counsel and heads
of legal at the operating companies.

Operating companies are required to maintain and

update documentation of their internal controls and
processes. This documentation incorporates an analysis
of business risks, detailed control activities and monitoring,
together with IT and financial controls and controls over
security of data and the provision of timely and reliable
information to management.

The internal audit department was responsible for
reviews and testing of the documentation and the relevant
controls for a majority of the Group during 2016, the
results of which were reported to the Audit Committee.

Financial reporting

Each operating company annually updates a three-year
strategic plan, which incorporates financial objectives.
These are reviewed by the parent company’s management
and are agreed with the chief executive of the relevant
operating company.

The Group operates a rigorous procedure for the
development of operating company budgets, which build
up the Group’s budget. During the final quarter of each
financial year, operating companies prepare detailed
budgets for the following year for review by the parent

company. The Group’s budget is reviewed by the Board
before being adopted formally. Operating company results
are reported monthly and are reviewed locally, regionally
and globally by the business groups and by Group
management on a consolidated basis and ultimately by
the Board. The results are compared to budget and the
previous year, with full-year forecasts prepared and
updated quarterly throughout the year.

At each year-end, all operating companies supply their
full-year financial results with such additional information
as is appropriate. This information is consolidated to
allow the Group to present the necessary disclosures for
International Financial Reporting Standards (IFRS) as
adopted by the European Union and issued by the IASB.

The Disclosure Committee gives further assurance that
publicly-released information is free from material omission
or misstatement.

Principal risks and uncertainties

The Board has carried out a robust assessment of the
principal risks and uncertainties affecting the Group
as at 31 December 2016 and up to the date of this report
and which are described in the table on the following pages.
These risks relate to the Group and the industry in which
we operate and the strategic decisions taken by the Board.
A risk dashboard and map are discussed regularly by the
Audit committee and bi-annually by the Board.

Key:
Increased risk

No change from last year

Reduced risk

WPP ANNUAL REPORT 2016

Principal risks
Clients
The Group competes for clients in
a highly-competitive and evolving industry
and client loss to competitors or as a
consequence of consolidation in client
markets or a reduction in marketing
budgets due to economic conditions may
have a material adverse effect on the
Group’s market share and its business,
revenues, results of operations, financial
condition or prospects.

The Group receives a significant portion
of its revenues from a limited number
of large clients and the net loss of some
of these clients could have a material
adverse effect on the Group’s prospects,
business, financial condition and results
of operations.

How we’re doing
Strategic report to share owners

Potential impact

How it is managed and reflected
in our strategic priorities

The competitive landscape in the industry
in which we operate is constantly evolving.
Competitors include large multinational
advertising and marketing communication
companies and regional and national
marketing services companies, database
marketing and modelling companies,
telemarketers, information and
measurement, social media and professional
services and advisory firms and consulting
internet companies.

Agreements with clients are generally
terminable by the client on 90 days’ notice
or are on an assignment basis and many
clients put their business up for competitive
review from time to time. The ability to
attract new clients and to retain or increase
the amount of work from existing clients
may be impacted by loss of reputation and
be limited by clients’ policies on conflicts
of interest.

The global economy continues to be
volatile with uncertainties such as those
caused by Brexit in the UK and Europe
and technological disruption from
disintermediators in certain sectors.
In the past clients have responded to weak
economic and financial conditions by
reducing their marketing budgets which
are easier to reduce in the short term than
their other operating expenses. The risk
of client loss or reduction in marketing
budgets has increased.
A relatively small number of clients
contribute a significant percentage
of the Group’s consolidated revenues.
The Group’s 10 largest clients accounted
for 15.5% of revenues in the year ended
31 December 2016. Clients generally are
able to reduce advertising and marketing
spend or cancel projects on short notice.
The loss of one or more of the Group’s
largest clients, if not replaced by new
client accounts or an increase in business
from existing clients, would adversely
affect the Group’s financial condition.

To continue to improve the creative
capability and reputation of the Group’s
businesses and embed an ethical culture
that attracts and retains talent and clients.

The Group’s different agency networks
limit potential conflicts of interest and the
Group continues to improve co-operation
and coordination across the operating
companies, adding value to client businesses.

The appointment of 48 Global Client
Leaders for major clients and going forward
half of incentive pools to be funded and
allocated based on Group-wide performance.

Differentiation from competitors through
talent and creativity and by application of
technology, integration of data investment
management and investment in content.

Brand Check at every Board meeting
to identify the potential risk of client loss.

Global Client Leaders, horizontality and
the ‘Team’ model seeks to ensure the Group
maintains partnership relationship with
major clients. Operating companies seek to
establish reputations, talent and technical
capability in the industry and an ethical
and diverse culture that attract and retain
clients and key talent.

Increase flexibility in the cost structure
(including incentives, consultants and
freelancers).

Brand Check at every Board meeting
and regular dialogue between Executive
Directors of the Company and directors
of the Group’s largest clients.

WPP ANNUAL REPORT 2016

Potential impact

How it is managed and reflected
in our strategic priorities

The Group may be subject to investigative
or enforcement action or legal claims or
incur fines, damages, or costs and client
loss if the Group fails to adequately protect
data or observe privacy legislation in every
instance. A system breakdown or intrusion
could have a material adverse effect on
the Group’s business, revenues, results of
operations, financial condition or prospects.

The Group is generally paid in arrears for
its services. Invoices are typically payable
within 30 to 60 days.

The Group commits to media and
production purchases on behalf of some
of its clients as principal or agent depending
on the client and market circumstances.
If a client is unable to pay sums due, media
and production companies may look to
the Group to pay such amounts to which
it committed on behalf of those clients.

The Group assists the operating companies
in developing principles on privacy and
data protection and compliance with local
laws. The Group has commenced extensive
training ahead of GDPR implementation
in 2018 and the roll out of a GDPR toolkit
to assist the operating companies to prepare
for implementation.

Nominated senior executives provide
leadership on privacy and data protection.

Our people are required to take Privacy
& Data Security Awareness training
and understand the WPP Data Code of
Conduct and WPP policies on data privacy
and security.

The WPP Data Health Checker survey
is performed annually to understand the
scale and breadth of data collected by WPP
agencies, so the level of risk associated with
this can be assessed.

The IT Transformation project will enhance
the Group’s data security. In addition, the
Group has established a global internal IT
company responsible for providing core IT
shared services to all Group companies and
manage external technology providers.

Evaluating and monitoring clients’ ongoing
creditworthiness and in some cases
requiring credit insurance or payments
in advance.

The Group’s treasury position is a recurring
agenda item for the Audit Committee and
the Board.

How we’re doing
Strategic report to share owners

Principal risks
Cyber and data security
The Group is subject to strict data
protection and privacy legislation in the
jurisdictions in which it operates and relies
extensively on information technology
systems. The Group stores, transmits and
relies on critical and sensitive data such
as strategic plans, personally identifiable
information and trade secrets. Security of
this type of data is exposed to escalating
external threats that are increasing
in sophistication as well as internal
data breaches.

Existing and new data protection laws,
in particular the GDPR and E-privacy
regulation in the EU concerning user
privacy, use of personal information,
consent and online tracking may restrict
some of the Group’s activities and
increase costs.

The Group is carrying out an IT
Transformation project and is reliant
on third parties for the performance
of a significant portion of its worldwide
information technology and operations
functions. A failure to provide these
functions could have an adverse effect
on our business.

Financial
The Group is subject to credit risk through
the default of a client or other counterparty.

WPP ANNUAL REPORT 2016

How we’re doing
Strategic report to share owners

Principal risks
Operational
The Group’s performance could be
adversely impacted if it failed to ensure
adequate internal control procedures
are in place in relation to the Group’s
media trading.

Potential impact

How it is managed and reflected
in our strategic priorities

Failure to ensure that trading activities are
compliant with client obligations where
relevant could adversely impact client
relationships and business volumes.

The principles of adherence to the terms of
client contracts are embedded through the
networks and reinforced by audits at a WPP
and network level.

People and succession
The Group’s performance could be
adversely affected if it were unable
to attract and retain key diverse talent
or had inadequate talent management
and succession planning for key roles
at the parent and operating companies,
including but not limited to the founder
CEO and long-serving members of the
management team.

The Group is highly dependent on the
talent, creative abilities and technical
skills of our personnel as well as their
relationships with clients. The Group
is vulnerable to the loss of personnel
to competitors and clients leading
to disruption to the business.

The founder CEO has over 30 years’
service with the Company and is identified
with the success of the Group’s strategy
and a failure to plan for his succession
could impact investor confidence in
the Company.

Regulatory, sanctions, anti-trust and taxation
The Group may be subject to regulations
restricting its activities or effecting changes
in taxation.

Changes in local or international tax rules,
for example prompted by the OECD’s Base
Erosion and Profit Shifting project (a global
initiative to improve the fairness and
integrity of tax systems), or new challenges
by tax or competition authorities, may
expose the Group to significant additional
tax liabilities or impact the carrying value
of our deferred tax assets, which would
affect the future tax charge.

Regular monitoring of KPIs for trading are
undertaken to identify trends and issues.

An authorisation matrix on inventory
trading is agreed with the Company
and the Audit Committee.

The Group’s incentive plans are structured
to provide retention value, for example by
paying part of annual incentives in shares
that vest two years after grant date.

The Group seeks to establish reputations
in the industry that attract and retain
talented and diverse personnel, including
by improving the quality of their creative
output and by offering competitive
performance-based compensation and
by providing extremely attractive working
environments.

Succession planning for CEO, CFO
and key executives of the Company is
undertaken by the Board and Nomination
and Governance Committee on a regular
basis and a pool of potential internal and
external candidates identified in emergency
and planned scenarios.

Compensation Committee oversight for the
Group’s incentive plans and compensation.

The Group actively monitors any proposed
regulatory or statutory changes and
consults with government agencies and
regulatory bodies where possible on such
proposed changes.

Annual briefings to the Audit Committee
of significant changes in tax laws and their
application and regular briefings to the
Executive Directors. The Group engages
advisors and legal counsel to obtain
opinions on tax legislation and principles.

The Group will introduce new training and
control procedures in 2017 in response to
the introduction of the new offences in the
UK of failure to prevent the facilitation of
UK or foreign tax evasion.

WPP ANNUAL REPORT 2016

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Strategic report to share owners

Principal risks
The Group is subject to strict anti-
corruption, anti-bribery and anti-trust
legislation and enforcement in the countries
in which it operates.

Potential impact
The Group operates in a number of
markets where the corruption risk has
been identified as high by groups such
as Transparency International. Failure
to comply or to create a corporate
environment opposed to corruption or
failing to instil business practices that
prevent corruption could expose the
Group and senior officers to civil and
criminal sanctions.

The Group is subject to the laws of the US,
the EU and other jurisdictions that impose
sanctions and regulate the supply of
services to certain countries.

Failure to comply with these laws could
expose the Group to civil and criminal
penalties including fines and the imposition
of economic sanctions against the Group
and reputational damage which could
materially impact the Group’s results.

How it is managed and reflected
in our strategic priorities
Online and in-country ethics, anti-bribery,
corruption and anti-trust training on
a Group-wide basis to raise awareness
and seek compliance with the WPP Code
of Conduct.

Confidential, independently operated
helpline for WPP staff to raise any concerns,
which are investigated and reported to
the Audit Committee on a regular basis.

Due diligence on acquisitions and on
selecting and appointing suppliers and
restrictions on the use of third party
consultants in connection with any
awards of client contracts.

Gift and hospitality register and
approvals process.
Online training on a Group-wide basis
to raise awareness and seek compliance
and updates to Group companies on any
new sanctions.

Regular briefings to the Audit Committee
and constant monitoring by the WPP legal
team with assistance from external advisers
of the sanctions regimes.

Longer-term viability statement

The directors confirm that they have a reasonable
expectation that the Group will continue to operate and
meet its liabilities, as they fall due, for the next three years.
The directors’ assessment of the Group’s viability for the
next three years, has been made with reference to the
Group’s current position and prospects, the short-term
notice periods or assignment nature of many of the client
contracts, the volatility of global economic conditions, the
changing competitive landscape and the Company’s ability
to achieve the stated dividend policy and cover interest
payments on the Group’s debt. This period has been chosen
as it aligns with our three-year plan and budget. Sensitivity
analysis has been applied to reflect the potential impact of
one or a combination of the principal risks on the Group
and consequential contract breach, loss of reputation, client
loss and inability to win new business and the impact of
revenue loss. Based on the results of this analysis and the
assumption that the global economy and markets continue

to function, the directors have a reasonable expectation
that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three-year
period of their assessment.

Going concern

The directors are required to consider whether it
is appropriate to prepare the financial statements on
the basis that the Company and the Group are going
concerns. As part of its normal business practice,
the Group prepares annual and longer-term plans
and in reviewing this information and, in particular,
the three-year plan and budget, the directors believe
that the Company and the Group have adequate
resources for the foreseeable future. Therefore the
Company and the Group continue to adopt the going
concern basis in preparing the financial statements.

WPP ANNUAL REPORT 2016

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Sustainability matters

Sustainability performance summary

The Group’s commitment to, and investment in,
sustainability supports major business wins, increases
access to talent, improves efficiency and reduces risks to
our business. We estimate that clients who engaged with
WPP on our approach to sustainability were worth over
£1.6 billion in revenues to the Group in 2016, equivalent
to over 11% of total revenues.

We are in business for the long term and, like all leading

companies today, we recognise our wider responsibilities
and the opportunity to generate value for share owners,
clients, our people and the world at large through our
business. Sustainability at WPP cuts across all areas: from
the work we do for clients, to the time we donate to causes
through pro bono work, the way we run our Company
and look after our people, and our commitment to respect
human rights.

It is the ability to create,
recognise, refresh and maintain
those long-term brand values
that provide most big companies
with their most reliable profit
streams

Sustainability issues are ever more important to our

clients as they adjust to the impact of long-term
demographic, environmental and social trends, they need a
marketing services provider who understands the changing
landscape and shares their values. WPP companies are
already advisors to pioneering businesses looking to embed
sustainability and purpose into their brands, products and
marketing and our own track record on sustainability gives
us credibility.

A summary of the Group’s approach to sustainability

can be found on pages 161 to 167. Please also see our
annual Sustainability Report on the work our clients and
our people do in this important area.

Value of client business
supported by our sustainability
credentials1
Gender diversity (% female
employees)
Gender diversity (% female
executive leaders)
Investment in training
Carbon footprint (tonnes of CO2
per employee)
Social contribution2,3

2016

2015

2014

£1.64bn £1.29bn £1.35bn

54%

34%

31%
£45.1m £41.1m £38.2m

33%

1.86

2.28
£42.3m £40.2m £46.9m

2.07

1 Value of clients who requested information on our sustainability policies and

performance through their supplier management process.

2 Includes free media space donations.
3 The 2015 figure has been restated to reflect correct exchange rates in the

calculation of free media space.

And finally…

The business we are in demands that we be quick on our
feet; quick to take advantage of new opportunities; quick
to respond to new challenges; quick to understand new
popular attitudes. 2016, more than any we can remember,
was a year that made countless such demands.

But there is another skill, at least as important, that gets
less recognition. It is less newsworthy, rarely draws attention
to itself and is perhaps closer to wisdom. It is the ability
to create, recognise, refresh and maintain those long-term
brand values that provide most big companies with their
most reliable profit streams. At a time when all external
pressures seem to call for instant, short-term responses,
an understanding of the value of confidence, consistency
and continuity has never itself been more valuable.

It requires no less attentiveness and no less sensitivity

to change in a market’s dynamics. But it knows when a
gentle turn of the wheel is going to be far more favourable
for a brand’s future than a dramatic change of course.

The results reported here are the outcome of tens of
thousands of different client projects undertaken by tens
of thousands of talented individuals working for a great
diversity of companies within WPP. Some of these
companies have yet to celebrate their fifth birthday; others
are as old as their clients’ oldest brands. Increasingly, they
work together.

WPP ANNUAL REPORT 2016

How we’re doing
Strategic report to share owners

We thank them all for another record-breaking year.
And the uncertainties of 2017 mean that we shall be
more than ever grateful not only for their fleetness of foot,
but also for the benefit of their considered thoughtfulness
and accumulated experience.

Roberto Quarta
Chairman

Sir Martin Sorrell
Group chief executive

Paul Richardson
Group finance director

Forward-looking statements

In connection with the provisions of the Private Securities
Litigation Reform Act of 1995 (the ‘Reform Act’), the
Company may include forward-looking statements (as
defined in the ‘Reform Act’) in oral or written public
statements issued by or on behalf of the Company. These
forward-looking statements may include, among other
things, plans, objectives, projections and anticipated future
economic performance based on assumptions and the like
that are subject to risks and uncertainties. As such, actual
results or outcomes may differ materially from those
discussed in the forward-looking statements. Important
factors which may cause actual results to differ include but
are not limited to: the unanticipated loss of a material client
or key personnel, delays or reductions in client advertising
budgets, shifts in industry rates of compensation, regulatory
compliance costs or litigation, natural disasters or acts of
terrorism, the Company’s exposure to changes in the values
of other major currencies (because a substantial portion of
its revenues are derived and costs incurred outside of the UK)
and the overall level of economic activity in the Company’s
major markets (which varies depending on, among other
things, regional, national and international political and
economic conditions and government regulations in the
world’s advertising markets). In addition, you should
consider the risks described under the heading Principal risks
and uncertainties on pages 46 to 50, which could also cause
actual results to differ from forward-looking information.
In light of these and other uncertainties, the forward-looking
statements included in this document should not be regarded
as a representation by the Company that the Company’s
plans and objectives will be achieved. The Company
undertakes no obligation to update or revise any such
forward-looking statements, whether as a result of new
information, future events or otherwise.

WPP ANNUAL REPORT 2016

WPP Leadership Conference, London 2016

r
e
g

i
l

e
S
k
r
a
M

1. Michael Houston

Grey

10. Travyn Rhall
Insights, Kantar

19. Donna Imperato
Cohn & Wolfe

29. Donald A. Baer
Burson-Marsteller

38. Rupert Day
tenthavenue

2. Mark Inskip
Kantar Futures

11. Jon Cook
VML

20. Brian Gleason

Xaxis

30. Lynnette Cooke
Kantar Health

39. Richard Ingleton
Insights, Kantar

3. Nick Emery
Mindshare

4. Alexander
Jutkowitz
SJR

5. Stuart Smith

Ogilvy

12. Michelle Harrison
Kantar Public

21. Lois Jacobs
Landor

13. David Sable

22. Charles Courtier

Y&R

MEC

14. Stefano Zunino

J. Walter Thompson
Worldwide

6. Lindsay Pattison

15. Dan Khabie

Maxus

7. Mark Povey
WPP Digital

8. Laurence
Mellman
Specialist
Communications

Mirum

16. John Seifert
Ogilvy

Ogilvy
CommonHealth
Worldwide

9. Jed Beitler

Sudler & Hennessey

18. Eric Salama
Kantar

17. Matt Giegerich

26. Brian

23. Josep Montserrat
Kantar Worldpanel

24. Jack Martin
Hill+Knowlton
Strategies

25. Bart Michels

Kantar Added Value

Fetherstonhaugh
Ogilvy

27. Shane Atchison

POSSIBLE

28. Jim Prior

The Partnership

31. David Patton

Grey

32. Simon Bolton
Group XP

33. Tamara Ingram
J. Walter Thompson
Worldwide

34. Mark Read
Wunderman
WPP Digital

35. Phil Smiley
Kantar Retail

40. Stephen Allan
MediaCom

41. Toby Hoare

J. Walter Thompson
Worldwide

42. Sabina Teshler

SET

43. David Moore

Xaxis

44. Irwin Gotlieb
GroupM

45. Lynn O’Connor Vos

36. Mary-Ellen Howe

ghg

Specialist
Communications

37. Toby Southgate
Brand Union

46. Frank-Michael

Schmidt
Commarco

47. Steve Harding
Geometry Global

Our business is best understood
through an understanding of its
constituent parts. On the following
pages, the leaders of our major
companies give summary
accounts of their performance
and progress in 2016.

Group photograph of WPP company leaders,
above, taken at the global WPP Leadership
Conference, London, September 2016; and left,
those who were not present for the photoshoot.

1. Preeti Reddy
Kantar IMRB

5. Jim Heekin

9. Ralf Hering

14. Christopher Graves

Grey

HERING SCHUPPENER

Ogilvy

2. Ajaz Ahmed

6. Tim Castree

AKQA

MEC

10. Andy Brown
Kantar Media

15. Eric Hoyt
Bravo

3. Matt Eastwood

7. Peter Law-Gisiko

11. Christian Juhl

J. Walter Thompson
Worldwide

4. Beth Ann
Kaminkow
Kantar Vermeer

Y&R

Essence

8. Joel Johnson,

Michael Feldman,
Carter Eskew
(left to right)
The Glover
Park Group

12. Kelly Clark
GroupM

13. Roland Rudd
Finsbury

16. Wendy Lund
GCI Health

How we’re doing

J. Walter Thompson Worldwide

Report by Tamara Ingram
Chief executive officer, worldwide

A s a 152-year-old agency, J. Walter Thompson

has a rich legacy of pioneering that has shaped
the industry and our clients’ brands. In 2016,
we solidified the strategy that will empower us
to continue delivering innovative, inventive, and memorable
solutions for our client partners: We are hungry. We move
fast. We move the dial on people, culture and commerce.
One of our biggest steps forward this past year is our

investment in digital. We added Washington DC’s
iStrategyLabs (ISL) and Turkey’s Wanda Digital to our
roster. Alongside Mirum, which expanded its global
footprint in the India and MEA markets, Wanda and ISL
deepen our ability to create digital and physical experiences
for our clients.

We had significant new business wins across our

markets, including Air China, Newell, Nespresso, Danone,
TJX, and Tudor. We were particularly proud of
the evolution of our partnership with Lux. After working
with Lux for 91 years, we became its global digital agency
of record for the first time in our shared history.

2016 also marked a creative leap forward. Across
the year’s awards circuit, we showed significant jumps in
rankings. At the Cannes Lions International Festival of
Creativity we saw our best performance at the festival in
our entire history, with 80 Lions. JWT Amsterdam was
also named Cannes’ Innovation Agency of the Year, and
JWT Latin America earned the premier title of Latin
American Network of the Year.

We also had major recognition across other global shows,
including D&AD, Clios, Goafest, and Spikes. Several of our
creatives were recognized across Advertising Age’s Creativity
50, a list of the 50 most creative people of the year, and
Business Insider’s 30 most creative people in advertising
under 30. These creative milestones earned us the title of
The Gunn Report’s Biggest Mover of 2016.

While our award wins set us apart from the competition,
one of our biggest key differentiators is JWT Intelligence, our
engine for culture and consumer insights. Last year alone,

the team produced nine reports, surveyed over 150,000
consumers, and worked with 260 clients in 39 offices.

We also launched an extraordinary piece of innovation
called Pangaea, an internal Artificial Intelligence designed
and powered by Mirum and JWT, which allows us to ask
questions and get answers from any one of the 12,000 people
across our network. Pangaea leverages the diversity of our
massive network. And, as I’ve said, the way we will create
better thinking, better ideas, and more innovation is to
have different people with different skills and backgrounds.
This speaks to an important piece of our renewed energy.
Moving fast and forward is not just about being agile,

efficient, and productive; it also means that we pioneer and
push cultural and societal progress forward. In that vein,
we’ve begun piloting multiple global diversity initiatives,
including blind recruitment and unconscious bias training.

We partnered with consulting firm InQUEST to provide

an independent review of our policies and practices, and
we’ve also developed an internal network hotline. With the
hotline, employees can essentially act as our diversity and
initiative partners and can securely and anonymously share
their thoughts or concerns about how we make JWT an
even more inclusive workspace.

In line with these initiatives, we bolstered the
presence of women in leadership roles and across our
creative departments. Today, we have female CEOs leading
key offices/countries: New York, Chicago and Canada,
Buenos Aires, Beijing, Egypt, Portugal and Italy. And we
have many women in other leadership roles: head of new
business, London and New York; head of design, Mirum
North America; head of planning, South Asia, Singapore;
head of production, London; and our global chief creative
talent officer.

In helping to shape a more diverse industry in the next

generation of talent, we’ve also continued our Helen
Lansdowne Resor Scholarship and our Jump/Start programs.
Both are dedicated to mentoring and nurturing talent from
a range of academic, professional and cultural backgrounds.
Our Female Tribes study, launched in early 2016, also
continued to blossom with our offices in India, the Middle
East & Africa, the Philippines and Vietnam, building
market-specific studies dedicated to helping their clients’
brands unlock the capital of female consumers.

We are consistently and actively looking for new
opportunities to invest in creating change, understanding
and progress for our employees, our clients, and the industry.
I am incredibly proud of the hard work we’ve done in

the past year. I am thrilled to see where this new
momentum carries us.

WPP ANNUAL REPORT 2016

How we’re doing
Advertising

Ogilvy

Report by John Seifert
Worldwide chairman and
chief executive officer

I n 2016, I became the ninth chairman and CEO of

Ogilvy since David Ogilvy founded the agency in 1948.
The responsibility is one that I take on with both
enormous pride and great humility. I have been with
Ogilvy for 38 years, starting in the Los Angeles office as
a summer intern. I stand on the shoulders of so many
talented Ogilvy leaders who have come before me to serve
this amazing company. I never want to let them down.

As I traveled the Ogilvy worldwide network this past
year – meeting extraordinary staff, clients, and partners
of the brand – I was constantly reminded of our assets.
We have wonderfully talented people who represent a wide
range of professional skills, diverse cultures and multiple
generations with great values. We have an enduring creative
culture that David Ogilvy personally built with a close-knit
team of partners over decades. We have a portfolio of the
world’s most admired clients. And we have a truly global
presence that enables us to project the Ogilvy brand, and
serve our clients, everywhere that matters in today’s world.
With this solid foundation, I started drafting a strategy,
‘Ogilvy – The Next Chapter,’ as soon as I transitioned into
the role of CEO in January 2016. Before I go into detail
about our ‘Next Chapter’ agenda, I want to share some
highlights of our performance this past year and recognize
a few of the leaders who were responsible for our success
across the network.

2016 was an outstanding year for the company in
terms of creative recognition, client portfolio development,
expansion of services, and advances in workplace diversity.
Our relentless commitment to producing work for our
clients that is both creative and effective (what we call ‘Twin
Peaks’) propelled us to our fifth straight win as Network of
the Year at the Cannes International Festival of Creativity,
and helped us to regain our title as the Effies’ World’s Most
Effective Agency Network. In recognition of this outstanding
creative performance, we closed 2016 by being named, for
the first time ever, Adweek magazine’s Global Agency of the
Year. Adweek singled out the diversity and quality of our

WPP ANNUAL REPORT 2016

global creative product, and the seamless continuity of our
network leadership team as the key reasons for selecting us.
I’m so fortunate to have Tham Khai Meng, worldwide
chief creative officer, as my partner. We are deeply grateful
for his stewardship of our ‘Twin Peaks’ creative mission,
and his passionate leadership of our sparkling worldwide
creative community. Ogilvy has scaled the top of the
creative mountain over the past decade and we intend
to climb ever higher in the years to come.

Our new business record in 2016 was equally impressive

and diverse, encompassing some of the world’s top brands.
Our high-profile wins included: Aldi in China and
Germany; Perform Group’s live sports streaming service,
Dazn, in Japan; Southwest Airlines in New York; Tesco
in the UK, Czech Republic and Poland; Tyson Foods in
Chicago; Unilever in the Philippines; Whaley Technology
and Yili Group in China; and Lenovo, already a client in
China, named us global agency of record, which includes
the Motorola brand. After a 25-year break, we also won
back Nationwide, a former client whose relationship with
Ogilvy dates back 50 years.

... a comprehensive
reorganization of our enterprise
will shift Ogilvy... to a unified and
single Ogilvy brand offering

For the third year in a row, we received a perfect score
on the Corporate Equality Index, a benchmarking survey
and report on corporate policies and practices related to
lesbian, gay, bisexual and transgender workplace equality,
administered by the Human Rights Campaign Foundation.
While there is a lot of talk in our industry right now
about diversity and inclusion in the workplace, we have
championed diversity in all its forms since our founding.
This past year we put in place concrete performance
measures globally to raise standards in our industry and
accelerate the accomplishment of our own diversity and
inclusion goals, none more important than realizing gender
equality across our worldwide leadership ranks within the
next five years.

Our specialist marketing services of Influence and
Public Relations, Customer Engagement Marketing and
Strategy Consulting performed particularly well in 2016,
and will accelerate the delivery of even more ‘modern
marketing’ solutions across our business.

How we’re doing
Advertising

Under the worldwide leadership of Stuart Smith,
our influence marketing and public relations professionals
performed brilliantly in 2016, growing the value of the
top five clients served by these professionals alone by an
unprecedented 41%, and the value of the top 20 clients
served by 17% versus last year. We’ve expanded these
client engagements to encompass other Ogilvy offerings
including brand strategy and advertising, content
management, digital and customer engagement marketing.

Our public relations professionals also enhanced
Ogilvy’s reputation for creativity overall by contributing
strongly to our performance in Cannes, and with Agency
of the Year recognition in China, Singapore, Hong Kong
and the Middle East. In addition, our thought leadership
and delivery of ‘earned influence’ as a critical marketing
practice won critical acclaim, topping the prestigious
Holmes Report’s list of 2016 ‘best innovations in public
relations.’ Our growing influence and public relations
capabilities will increasingly drive a more comprehensive
modern marketing offering for the company overall.

Under the worldwide leadership of Brian

Fetherstonhaugh, our customer engagement professionals
delivered strong business results in 2016. The strength of
our creative product, led by precision targeting through
data-driven customer insights and purchase behavior,
enabled us to win new client assignments in key business
sectors such as retail, consumer goods, financial services
and airlines. A particular proud moment was being
named a leader in global digital agency rankings by
Gartner Research. Our new Social Customer Relationship
Management (SCRM) and Marketing Automation offerings
will remain key points of competitive differentiation and
accelerate enterprise growth over the coming years.

Under the worldwide leadership of Carla Hendra, we
founded a consulting practice six years ago with the idea
that clients experiencing disruption needed advice and
counsel from a trusted partner steeped in strategic brand
and marketing knowledge. We delivered record growth
through this practice in 2016, and will accelerate the
momentum for our global enterprise in 2017 and beyond by
expanding the practice throughout key markets in Europe,
Asia Pacific and Latin America.

In this fast changing and dynamic industry of ours,
we have learned never to rest on our laurels. David Ogilvy
instilled in all of us a core value of ‘divine discontent’ – a
constant reminder that we can always do better, and must
be vigilant in anticipating what is coming around the corner
to deliver more value to clients. In this current climate of

seismic change – socially, politically, economically and
technologically – clients are demanding deeper connectivity
across the full range of modern marketing capabilities that
their brands and businesses require. In light of these
heightened expectations, we must deliver better thinking,
better work, and better delivery from the Ogilvy brand.

This [transformation strategy] will
enable our global enterprise to be
more client-centric and our people
to deliver the most creative and
modern solutions

It is with this context in mind that I have set out,
with the enthusiastic support of Sir Martin Sorrell, WPP
leadership and all of my Ogilvy partners, to transform our
company under the ‘Next Chapter’ strategy mentioned
earlier. Underpinning this strategy is a comprehensive
reorganization of our enterprise structure, which will shift
Ogilvy from a collection of individually-managed (vertical)
business units and P&Ls (e.g. Ogilvy & Mather
Advertising, OgilvyOne, Ogilvy Public Relations, and
more) to a unified and single Ogilvy brand offering, which
will be led and managed through an integrated financial
framework and business operating system as one Ogilvy.
This new entity, with the shared purpose of making
brands matter, will be comprised of deep capabilities of
modern marketing experts and expertise – encompassing
data, strategy, creative content and specialist marketing and
media services – that work seamlessly together to provide the
most creative, most effective, and most cost-efficient solutions
for our clients. We will roll out the first phase of business
transformation across our US operations in early 2017,
with the rest of our markets following throughout the year.
This transformation strategy centers on our people,
our work and our clients. Refocusing our leaders to these
essentials, and away from financial and administrative
management of an organization grown too fragmented and
complex, has to be a good thing! We will break down the
barriers of a legacy organization structure designed for
a different era of client service and marketing. This will
enable our global enterprise to be more client-centric and
our people to deliver the most creative and modern
solutions demanded of our industry.

WPP ANNUAL REPORT 2016

How we’re doing
Advertising

Our clients expect their strategic partners and suppliers

to create better work – with more accountability for
business value – faster and less expensively than ever
before. Understanding that there are no brilliant ideas or
differentiated client experiences without flawless execution,
we are also launching a new function, called Ogilvy
Delivery, as part of our enterprise transformation. Ogilvy
Delivery revitalizes our commitment to the art of making,
focusing on the critical craft skills required to bring big
ideas to life in all channels and touchpoints in the most
agile, cost-efficient and effective way possible.

The Ogilvy brand has always been at the leading edge
of change. David Ogilvy demanded it. For the next chapter
of Ogilvy, we intend to ‘re-found’ the entire company in the
spirit of David Ogilvy’s original business point of view and
core beliefs, but with an expanded portfolio of specialist
capabilities, new ways of working together and partnering
across WPP, and with a revitalized determination to
transform the Ogilvy brand experience for our people and our
clients. This agenda will define Ogilvy for decades to come.
I could not be more confident in our collective ability
to deliver our Next Chapter ambition. Our shared purpose
and mutual commitment to work together as one
organization will ensure our future is even brighter than
our past. Most of all, I have tremendous faith in the
incredible people of Ogilvy. It is their spirit, talent,
resilience, and drive to win that will push Ogilvy into
its next great age.

Our mission is clear: we are a founder-branded,
pervasively creative, modern marketing organization
that makes brands matter. We are Ogilvy.

Ogilvy CommonHealth
Worldwide

See report on page 84.

WPP ANNUAL REPORT 2016

Y&R Group

Report by Peter Law-Gisiko
Chief executive officer

pioneered what is now considered a best practice
of top agencies, seamlessly integrating a full range
of marketing disciplines to best service our clients

I t is close to 45 years since the Y&R Group first

and engage and motivate their customers.

The advances in marketing technology, the abundance

of data, the proliferation and fragmentation of media,
as well as the need to connect to the much empowered
consumer, has helped amplify each of our company’s
core competencies through the filter of our changed
environment. Today, each Y&R Group company has
more perspectives and tools than ever before to help
their clients create enduring brands that will thrive in
the evolving marketplace.

At the same time, clients, now more than ever, require
us to be nimble and focused on driving efficiencies without
sacrificing effectiveness. Our team approach, among
ourselves and with WPP, is key to making sure we
deliver on both sides of the equation, for our clients
and for our business.

The different uses of marketing technology, data and

storytelling are the ingredients that make Y&R Group
so effective on behalf of its clients and a natural partner
in so much of the horizontality that underpins WPP.
In just one example, Y&R, Wunderman, VML
and Burson-Marsteller work side-by-side in Memphis,
Tennessee to help the U.S. Navy recruit the next
generation to their ranks.

The use of data is being driven in different and unique

ways across the Group. Landor’s Brand Community
model overturns traditional hierarchical thinking about
brand management, using data-driven tools like Brand
Differential. Burson-Marsteller is leveraging its renowned
polling resources to help drive content and creative work.

How we’re doing
Advertising

The Science & Learning program at Sudler & Hennessey
is designed to help clients leverage critical data. Y&R just
launched its second year of Best Countries rankings, in
partnership with US News & World Report and The
Wharton School, and part of a larger platform based
on BAV methodology that analyzes data to understand
nations as brands.

Y&R

Report by David Sable
Global chief executive officer

Each Y&R Group company has
more perspectives and tools than
ever before to help their clients
create enduring brands

The ways that our companies continue to reinvent
themselves only serve to deepen the synergies between
them, creating greater incentives to collaborate, and
numerous ways to leverage the different ways the Y&R
Group companies engage with new technologies and data
models in order to tell stories that have marketplace impact.
Y&R Group initiatives benefitted all of the companies.

The Group’s IT, for example, worked to improve the
technology structure, creating a new platform, UHUB,
that optimizes the development operations of the digital
teams. Through better code management and enhanced
collaboration, UHUB improves productivity, increases
capacity, reduces risk and improves margin. Over 80 offices
are using it and driving it around the network is a goal
for 2017.

In 2016, Y&R Group embraced WPP’s focus on the
United Nations Sustainable Goal of gender equality, with
an ultimate goal of increasing the ranks of women in
all areas and in particular senior leadership roles. At the
Group level, we are beginning to pilot an unconscious
bias training program focused on gender equality, with
a second program dedicated to helping those returning
to the workplace that will be launched later this year.

Reports on 2016 from each of the companies follow.

Rubicam’s founder, Raymond Rubicam, who was,
himself, an unusual leader for his time. As the
first creative to found an agency, Rubicam was

R esist the Usual. The saying comes from Young &

convinced that it was our job to resist the typical, the
expected, on behalf of our clients. As he was fond of saying,
“Resist the Usual.”

Jeff Bezos of Amazon has said: “If you’re only going to
do the things you know are going to work, you’re going to
leave a lot of opportunity on the table.” That might sound
like a reckless statement, were it not for another corollary
of his – to obsess over customers, not competitors. In fact,
we can’t think of a more customer-centric strategy than to
Resist the Usual.

Resisting the Usual in 2016 produced great results.
With Resist the Usual as our call to action, in 2016 we were
named the No.3 Creative Global Network at Cannes, with
99 Lions spanning 26 offices. We were the No.1 agency of
the EMEA Effies, No.2 in China’s Effie Awards and No.2
for the Asia Pacific region.

Resisting the Usual is always about people first. That
has never been more true than now, when data is prolific
and algorithms too often left to do the job that only
people can do – apply instincts and insights and historical
knowledge to make full and credible analyses.

Resisting the Usual is also finding new ways to apply

data. Our Best Countries platform, partnered with
US News & World Report and The Wharton School is in
its second year. The 2017 data has not only generated new
Best Countries rankings – with some surprising results in
a volatile year – but also provides a gold mine of insights
about nations as brands, useful to governments, businesses
and the general public.

WPP ANNUAL REPORT 2016

How we’re doing
Advertising

And last year saw the key appointment of David Patton,

Resisting the Usual generated a new wave of our

who joined Y&R as the global president, moving from
Grey. Based out of our Y&R London office, David is
helping to operationally manage our extensive global
network. A creative champion, a masterful strategic
thinker, we are already feeling his impact and inspiration.
Resist the Usual added up to close to $100 million
of new business revenue around the world, including the
massive U.S. Census win, major Pfizer brands, as well as
JPMorgan Chase, Cirque du Soleil in the US, Chanel,
Premier League and, in early 2017, JD Williams in Europe
and Xtep in China.

Resist the Usual meant leveraging the full force of our
Global Boutique in new ways, for example, creating new
work for Dannon Activia that brought the right people to
the table from Y&R New York, Buenos Aires and London.
It also meant building on our deep partnerships with VML,
iconmobile and TAXI.

It meant creating new practices. Howard Courtemanche

joined us as the president of a new Health and Wellness
practice, which in its first six months scored four wins
for over $21 million revenue. Its mission is to Resist The
Usual in creating communications for consumers, always
pushing for breakthrough solutions. Charter clients include
Merck, Galderma, Boehringer Ingleheim, Teva, MD
Anderson and Optum. In 2016, our first year, a flurry of
additional new clients were won, including BMS, Pfizer
OTC, PhRMA, Orexigen and Bayer. And Joe Rivas, who
is the global lead on our Dell business, is heading up a
Technology & Business practice. It will help clients,
current and new, benefit from a shared understanding
of the challenges in the sector, as well as from learnings,
experience and proprietary tools we have developed. In the
first quarter of 2017, we launched a third practice, Y&R
Inspire Change, which will focus on helping non-profits,
NGO and CSR initiatives, leveraging our deep experience
helping companies, hospitals and other organizations,
particularly as they face the key challenge of developing
a new generation of ‘givers.’

Resist the Usual saw BAV’s fielding approach transition

to a digital, online format. Even more important, we
explored brand equity and BAV and how it aligns to social
equity in the online space, with the objective of building a
practice around that understanding.

Innovation incubator, led by our global director of
innovation, Mansi Jayakumar, who was also named this
year as one of Forbes magazine’s 30 Under 30 and a Shots
Rising Star NYC. The new SparkPlug program has five
new start-ups that will take up residence at our global
HQ in New York, helping our clients find new ways to
engage their customers all the while we help them shape
their offering to best do that.

We also Resisted the Usual, by leveraging our
HR/Talent experts to help bring new thinking to
our clients’ businesses. In the fall, based on our deep
relationships with colleges (from which we recruit talent
and for our apprenticeship program) we worked with
the Navy Partnership to arrange an IdeaHack. Y&R
executives, representatives of the Navy and our Navy
team, trekked up to Boston for a 48-hour exercise of
creating ideas for millennials with Northeastern students
in Journalism, Computer Science and Design. It was a
win for everyone – new ideas that gave us insights into
recruitment targets, and clearly this taste of our business
adds to our ability to recruit the best and brightest.
In 2016, we expanded into two new markets –

Memphis and Washington, DC – to provide the U.S. Navy
and the U.S. Census with the best staffing model that is
all about the professionalism, proximity and productivity
they need.

Finally, Resist the Usual was about telling great stories.

In Asia, we partnered with VICE to create a webcast that
showed the renaissance in the Myanmar market, done as
an extended eXploring exercise. In London, despite having
lost the Marks & Spencer business, we signed off with
what was declared the UK’s most beloved holiday campaign
this year – ‘Mrs Claus’. In New York, we created a new
platform for the newly split Xerox company, ‘Set the Page
Free,’ and launched it by reimagining a classic spot,
‘Brother Dominic’ from 40 years ago to show the dramatic
changes in Xerox technology. Also in New York, we created
a campaign for PhRMA about biomedical research set to
Dylan Thomas’ famous poem, ‘Do Not Go Gentle Into
That Good Night.’

WPP ANNUAL REPORT 2016

How we’re doing
Advertising

VML

Wunderman

Report by Jon Cook
Global chief executive officer

Report by Mark Read
Global chief executive officer

has never been stronger. From the second
consecutive year of Advertising Age A-List
honors – naming VML as one of the top five

O n every conceivable level, the pulse of VML

most influential and impactful agencies in the entire
industry – to the most creatively awarded year in our
history, it’s undeniably the most productive and prosperous
period in our 25-year history.

W underman enjoyed a very successful 2016,

delivering its best results in five years. We
ended the year positioned to grow stronger
on recent client wins and to benefit from the
increasing opportunities from clients looking to transform
their marketing and customer experience to take advantage
of the digital revolution.

Over the past two years, we have worked on positioning

VML’s global network credentials have never been
stronger, equally balancing creative capabilities, technology
proficiency and strategic thinking. We enjoyed our best-ever
showing at Cannes, with a record number of Lions and
shortlists – spanning a dozen diverse categories, Lead
Agency recognition in the Forrester Lead Agencies Wave
report, Leader ranking in the Gartner Magic Quadrant
for Digital Agencies study and much more.

Wunderman for the future, building more innovative
capabilities, hiring new people, making a number of critical
acquisitions and integrating much more closely our creative
and data skills. Today, we can offer the progressive client,
one who recognizes the power of data and technology
but knows that brilliant creative ideas are needed to
inspire consumers, a trusted partner to help them map
out their future.

We’ve strengthened Most Important Partner

relationships by leading clients through brand, technology
and consumer engagement transformations. Whether it be
through expanded experiences for long-standing partners
such as Bayer, Ford, Sprint, Tyson and Wendy’s – or
through new agency of record client partnerships with
Electrolux and New Balance.

VML continues to extend capabilities and collaboration

around the world, supporting clients such as Bridgestone,
Colgate-Palmolive, Dell, Kellogg’s, Kimberly-Clark, Ford,
Microsoft and PepsiCo across multiple VML markets and
regions. VML global offices secured new business
relationships with brands such as GoDaddy, HSBC, Netflix
and Verisign. Additionally, multiple VML global offices
garnered Agency of the Year honors.

In short, VML has never been more relevant for a
growing number of respected and renowned global brands.
We’re thrilled that our 25th anniversary year coincides with
the strongest momentum in our history.

Wunderman is very well placed,
with our heritage in data, to
leverage the benefits of AI for
its clients

Wunderman is a ‘Creatively Driven. Data Inspired.’
organisation. We believe in strong creative ideas but also
in delivering measurable results founded in our expertise
in data. We have integrated our three major disciplines –
Data and Analytics, Creative Communications and
Experiences, and Technology-Enabled Marketing – across
our 175 offices. This combination not only enhances our
expertise; it also enables us to offer end-to-end solutions
for our clients. At its heart is COLLISION, our unique way
of working, which builds on the notion that the best results
come out of the collision of creativity and data, and delivers
results through rigorous frameworks, easy access to data
and a collaborative way of working. Our people now work

WPP ANNUAL REPORT 2016

How we’re doing
Advertising

side by side across disciplines, taking full advantage of each
other’s knowledge and strengths.

In 2016, we made a number of acquisitions. We

welcomed Acceleration into our network from WPP Digital,
adding 150 seasoned technology and consulting experts
to our team. Founders Jacques van Niekerk and Stephan
Pretorius joined us in broader roles as CEO of Wunderman
Data and Global CTO, respectively. We extended our data
business in Europe with Conexance joining us in France.
And late in the year, Brazil’s leading marketing automation
company, Pmweb, joined our network. This new infusion of
talent improved our ability to deliver data and technology
consulting and extended our offer into end-to-end digital
transformation services.

Our efforts, I am pleased to say, are paying off.

Globally, we won more than $75 million in new business in
2016, including from leading brands such as GSK, Danone,
T-Mobile, Shell, HSBC, Nestlé, U.S. Navy, Ford and
Dyson. We gained major new assignments in every region
and practice. What’s more, many of those assignments are
in new areas for us, including data and technology strategy,
product innovation, content strategy and virtual reality.
Creatively, we continue to improve and are gaining
recognition for our efforts. Our offices in Belgium and
Buenos Aires won Cannes Lions last year alongside awards
for our Shanghai office at the IAB Mixx Awards, our Buenos
Aires and Lima offices at the El Ojo festival, our Paris office
at the Cristal Festival, and our Seattle and London offices
at the Data & Marketing Association’s events.

Our specialist groups, Wunderman Health and

Wunderman MSC, also continued to perform particularly
strongly with double-digit growth in the past year.
Wunderman Health has positioned itself as a change agent,
as the healthcare industry increasingly commits to digital
and customer-centric marketing. During 2016, the agency
was buoyed by wins like GSK Consumer Health’s selection
to its global digital roster. In 2017, it will launch an evolved
personalized marketing practice, unveil proprietary
research and further expand into emerging fields of
wellness and health services.

Our ecommerce expert, FusePump, has built exciting
proprietary mobile applications aimed at the digital shopper.

WPP ANNUAL REPORT 2016

Finally, we are thinking ambitiously about our future
and how advances in computing power are driving artificial
intelligence (AI). Wunderman is very well placed, with our
heritage in data, to leverage the benefits of AI for its clients.
We have successfully delivered a number of projects for clients
that benefit from the application of AI to marketing and are
investing with some key strategic partners in new areas.

Above all, the more than 7,000 people who make up

Wunderman around the world are energized by their
achievements in 2016 and ambitions for the future. I would
like to thank them for what they have done and what they
will do together in 2017 to realise our ambition of inspiring
people to take action.

Burson-Marsteller

Report by Donald A. Baer
Worldwide chair and
chief executive officer

I n 2016, we continued strengthening and combining

the two pillars of our growth strategy – world-class
strategic counseling and cutting-edge integrated
communications – to build a fully modernized firm.
On both fronts, we won significant business from current
and new clients.

Leading corporations and business associations chose

us to spearhead major campaigns aimed at their most
important reputational challenges. We reignited our US
government work, winning major federal contracts.
New clients tapped our crisis capabilities to cope with
particularly controversial situations. And we continued to
deepen our capabilities in evidence-based, content-driven,
creative work, building out our StudioB across our global
network while collaborating with our polling arms
Benenson Strategy Group and Penn Schoen Berland, and
our media partnership arm Palisades Media Ventures.

New offerings introduced in 2016 included Burson-
Marsteller Advantage Women, which helps organizations
further their goals to close the gender gap and create
opportunities for women to rise as leaders. We also added a
higher education specialty that helps college and university
administrations handle the new wave of social issues
sparking debate and unrest on campuses across the US.
Adding more world-class strategic communications
professionals, building state-of-the-art integrated social
media and creative services and deepening strengths to help
clients address 21st century needs helped lead to a 44%
year-over-year increase in awards for our work, including
being named Large Agency of the Year in the US by PR
News. We are proud of the progress we have achieved,
building on a culture rooted in performance, urgency
and progress.

Landor

Report by Lois Jacobs
Chief executive officer

model for managing brands, and the most
awarded branding agency at Cannes for the
second year running. 2016 was an outstanding

E xceptional financial growth, a radical new

We expanded our brand engagement and verbal identity

year for Landor.

practices; we added Landor Lab (an intensive incubator
experience), and we created Brand Differential (a predictive
research and prioritization tool). We welcomed new clients
such as Airbus, Fidelity Investments, Huawei, Jabal Omar,
Metro Group, One&Only Resorts and Siemens.

Our revolutionary approach to brand management
– The Brand Community Model – is already achieving
great traction with both new and existing clients. It
recognizes that traditional tools are failing in today’s
hyperconnected, complex market. Top-down command
and rigid control are no longer effective. Landor’s new
model helps clients build, nurture and sustain enduring
and effective brand communities.

How we’re doing
Advertising

Client highlights include the rebrand of the Australian

Open – which broke all attendance records – and the
launch of Axway, Alawwal Bank, Holler & Dash
restaurants, Airbus company Navblue and S&P Global.

Bravo

Report by Eric Hoyt
President and
chief executive officer

smarter and more effective than ever. Our core
offering has become highly integrated, delivering
omni-channel solutions for clients that build their

2 016 was a challenging year but Bravo has emerged

In an increasingly multicultural America, Wendy’s,

brands and grow their business.

Mazda, Pfizer, Coca-Cola, Chevron and SC Johnson
continue to entrust their needs with Bravo.

Central to Bravo’s performance are people and

partnerships. Talent optimization and enhancing the skills
of our best people ensure our clients and our agency are
driven by superior marketing professionals. Continued
collaborations with Y&R, VML, Wunderman, Ogilvy,
Red Fuse, Garage, GroupM and Geometry attest to Bravo’s
strategic and creative excellence in the increasingly
integrated world our clients require.

Sudler & Hennessey

See report on page 85.

WPP ANNUAL REPORT 2016

How we’re doing
Advertising

Grey Group

Grey

Report by Jim Heekin
Chairman and
chief executive officer

2 016 marked our ninth year in a row of record

financial and creative performance. We began
the year with Global Agency of the Year honors
from Adweek and continued our momentum.
High-profile new business wins included Marriott
International, Weber, Procter & Gamble’s Herbal Essences,
Marks & Spencer, C&A and Bose. Many of our current
clients awarded us significant new assignments including
Eli Lilly, Kellogg’s, Ally Financial, Pfizer and Nestlé.
Importantly, we emerged from the GlaxoSmithKline
global review with five global brands, one more than
we previously served. And early 2017 marked the
announcement of Walgreens Boots Alliance’s global
account consolidation with Team WBA, of which Grey
is a key member. Grey will be the client’s lead advertising
agency in the US.

Our creative reputation continued to soar at the Cannes
International Festival of Creativity. We won 93 Lions from
14 countries in four regions, including a Grand Prix and
Titanium Lion. Grey won in 20 categories from film, radio
and outdoor to the newest disciplines of mobile, creative
data and entertainment. The agency ranked sixth globally
and Grey New York ranked as the No.1 most creative
agency in the US and North America and No.2 in the world.
Adweek wrote, “Grey is winning big for work that
worked and busted through the boundaries of advertising.
It’s entertaining, inspiring, useful stuff; meaningful work
that people want to be around.”

We enhanced our leadership ranks for the future with

the promotion of several talented executives who have
driven our success for years. Michael Houston took up his
duties as global president of Grey, an expanded worldwide
management role. Alain Groenendaal was appointed
president and chief executive officer of Grey Europe, after
leading Grey Latin America. Eduardo Maruri became
president of Grey Latin America, having built our market-
leading agency in Ecuador. Nirvik Singh, who has been
key to our growth in Asia for nearly three decades, took
on added duties as chairman and chief executive officer
of Grey Asia, Middle East and Africa. Per Pedersen, our
chairman of the Grey Global Creative Council, was named
global creative chairman. Importantly, Debby Reiner
became chief executive officer of Grey New York, a new
position. During her many years of leading our Procter &
Gamble business, Grey has become one of the foremost
beauty agencies in the world.

Adweek wrote, “Grey is winning
big for work... that busted
through the boundaries of
advertising... entertaining,
inspiring, useful stuff”

Grey continued its strategic acquisitions to enhance the
network’s capabilities and critical mass. We acquired Tank,
a leading healthcare and consumer agency in Canada. We
strengthened our presence in the Benelux region acquiring
FamousGrey, one of the largest independent agencies. In
Ecuador, we took a majority stake in Maruri Grey, our
long-time partner. Finally, we continued our expansion in
China, acquiring Easycom, a premier social media agency
in Shanghai.

Our Gillette Olympic commercial, ‘Perfect Isn’t Pretty,’

Not many advertising agencies survive yet alone thrive

chosen by Procter & Gamble to run in the opening
ceremony, to our ‘Song of the Open Road’ for Volvo to
‘Super Bowl Babies Choir’ for the NFL, all exploded in
popular culture true to our ‘Famously Effective’ philosophy.

to mark their centennial. As we celebrate our 100th
anniversary throughout 2017, I’m convinced Grey’s best
days lie ahead.

WPP ANNUAL REPORT 2016

Commarco

Report by Frank-Michael Schmidt
Chief executive officer

marketing communications group. With our
broad portfolio of agency brands and specialised
disciplines, we are deeply rooted in the biggest

C ommarco is the second-largest Germany-based

European market and see ourselves as experts for Germany.
Our companies work for clients such as BMW, Opel (GM/
PSA), Siemens, Samsung, Unilever, Vodafone and many
organisations in the public sector. We look back on 2016
as a year of numerous successful projects, new competence
centres and new business wins.

Our flagship brand Scholz & Friends celebrated its 35th
anniversary with its best business results since joining WPP.
Its new management system, established in 2015, bore fruit
by generating collaboration beyond silos and new
entrepreneurial initiatives: the ‘content desk’ for real-time
content marketing; the specialised employer branding unit;
and the new agency brand Scholz & Friends Trademarks
for retail marketing. Many new business wins rounded out
a successful year, for example: RWE, Germany’s largest
energy provider, with the innogy launch and IPO campaign;
AirBerlin, Germany’s second-largest airline; Car2Go, the
world’s largest car-sharing provider; and many others.

We are deeply rooted in the
biggest European market
and see ourselves as experts
for Germany

gkk DialogGroup, our CRM specialist, welcomed
Siemens Financial Services, innogy and Porsche as new
clients and enlarged its social media business with Samsung
and KIA, making it one of the top 10 social media agencies
in Germany.

How we’re doing
Advertising

Our full-service web design agency deepblue networks

expanded its strategic focus and launched a specialised unit
for gaming and e-sports, helping to position brands as first
mover in the ascendant e-sports business.

Blumberry augmented its digital portfolio and launched

the world’s biggest branded content travel portal for TUI
Group with its ‘Content Live Hub’ technology.

KKLD* conducted the global brand design relaunch for

MINI and launched an innovative brand experience space
for MINI: the A/D/O design space in Greenpoint, Brooklyn
– with co-working and prototyping facilities as well as event
spaces for designers, influencers and brand aficionados.
With these and many other companies and clients,

Commarco will continue its innovation and growth
strategy within the highly-fragmented German
communications market.

WPP ANNUAL REPORT 2016

How we’re doing

GroupM

Report by Irwin Gotlieb
Global chairman
and
Kelly Clark
Global chief executive officer

in a challenging environment.

Slow growth and complexity in the supply

G roupM delivered another year of strong results

transparency. In 2016, the level of new business reviews
was significant. GroupM lost two major clients but still
won a market-leading $5.6 billion of new business,
according to RECMA.

chain force advertisers to seek value and

Our global ‘brand safety’
unit has been active for three
years, and no such unit exists
elsewhere in the industry

Trust must underpin the relationships between

advertisers, buyers, sellers and the technologies that connect
them. GroupM is leading the market in ensuring the digital
supply chain’s integrity through improved viewability, more
robust measurement, and the protection of clients from
content pirates and fraudsters. Our global ‘brand safety’
unit has been active for three years, and no such unit exists
elsewhere in the industry.

WPP ANNUAL REPORT 2016

The future is clear. Media allocation, optimization and
attribution have to be informed by data and executed at the
speed of the platforms on which advertisers need to win.
At the same time, we must maintain our unique perspective
that comes from deep visibility and executional skills across
and between ‘walled gardens’ and other channels, advertiser
categories and geographies.

GroupM is leading the market
in ensuring the digital supply
chain’s integrity

We announced the creation of [m]PLATFORM to
meet these needs. [m]PLATFORM will enable GroupM,
its agencies and our partners across WPP, to create
personalized communications for clients at scale with
improved performance and efficiency.

In addition to creating an outstanding leadership team
for [m]PLATFORM, GroupM appointed a new global CEO,
as did our agency MEC. We salute Dominic Proctor, our
outgoing president and WPP’s first media agency leader,
who has moved onto new challenges after 30 years of service
to the Group.

We aspire to be more intelligent and responsive than
ever, and relentless in the pursuit of talent and applying that
talent to the advantage of our clients through better and
faster insights and actions. We remain, as always, focused
on our clients’ success.

Mindshare

Report by Nick Emery
Global chief executive officer

we head into 2017 stronger than ever.

2 016 was another great year for Mindshare and

markets by Unilever. We continued that momentum across
2016 with many stand-out performances.

We ended 2015 winning Facebook, booking.com
and General Mills and being re-appointed across 60

The year was peppered with some great new business

wins – Kangshifu, Yili, 21st Century Fox, Malaysian
Airlines, Haribo, Achmea, Uniqlo, JD.com, OLX, The
Weather Channel, Avon, Aujan and Deutsche Bahn.

In Australia, the last quarter saw wins from IKEA,
BUPA, QSR and REA. In the US, Chicago finished 2016
on a great new business run, securing Tyson Foods. China
continue to set new benchmarks by giving us our largest
haul of new business from any country, including our
appointment as the first gaming agency of record for Yili.
Our team in India beat last year’s haul of awards and
broke all records with 250 awards: Agency of the Year at
FOMA APAC; SMARTIES™ Agency of the Year APAC;
the first Agency of the Year at the Content Marketing
Awards. Its Cannes Glass Lion Grand Prix was a cause
for global celebration. Campaign Asia Pacific named
us SE Asian Media Agency of the Year and also SE Asia
Digital Agency of the Year.

We won the Campaign Media Network of the Year
for Asia Pacific and were named Mobile Agency of the
Year in EMEA and Asia Pacific by the Mobile Marketing
Association. We also won Agency Network of the Year
at the Festival of Media Asia.

How we’re doing
Media Investment Management

We garnered Agency of the Year and Digital Agency of
the Year in Austria and Italy, the Most Effective Agency in
the UK, Media Plan of the Year in the US and were named
Agency of the Year in Portugal, Turkey, India, Sri Lanka,
Japan, Vietnam, Malaysia, Indonesia, China, Thailand,
Bangladesh, Hong Kong and Singapore. We also won gold
for Digital Agency of the Year in Vietnam, Indonesia,
Bangladesh and Pakistan.

In 2017, our focus continues to be on the marriage of
the worlds of branding and outcomes and how we create
new models for our clients around data, digital and content.
We are brilliantly placed to deliver.

Mindshare is 20 years old on 1 November 2017 –

we will be making 2017 a year of celebration.

MEC

Report by Tim Castree
Global chief executive officer

I joined MEC in January 2017 and am honored to head

a company that accomplished so much under Charles
Courtier’s 14-year leadership. We wish Charles
continued success and happiness.
2016 was again dominated by new business pitches.
Our biggest wins included Nationwide and BMW in the
UK, Vodafone in Australia, Hertz in US/Latin America
and Friesland Campina globally. We retained Beiersdorf
in Europe, Mitsubishi in Australia, SABMiller in EMEA,
Calzedonia in Italy, Erste Bank in CEE and Johnson &
Johnson came back to MEC Russia less than a year after
moving its business. We are taking the lessons of the loss
of AT&T in the US and Mexico very seriously.

WPP ANNUAL REPORT 2016

How we’re doing
Media Investment Management

MEC UK was named Campaign’s Media Agency of

the Year and scored over 30 other industry awards for
client work. In Asia Pacific, we saw strong performance
with sustained top-line growth. China is making huge
improvements, notably winning back Mercedes less than
six months after losing it, and launching an analytics team
which is the new model for that discipline across GroupM
China. Globally, our content offering, MEC Wavemaker,
continues to grow at an exceptional pace, now present in
over 20 markets.

Our content offering, MEC
Wavemaker, continues to grow
at an exceptional pace

And we continue to lead the talent transformation
agenda with numerous types of industry recognition for
our initiatives.

As we look forward, we recognize that MEC is at a critical

moment. Clients are being disrupted by the same forces of
change that are impacting our core business and they need
MEC and GroupM to be their partners in transformation.
We are excited about the ongoing reinvention of our
company and are hard at work to make a difference to
our clients’ business and to make MEC the distinctive
and admired media, technology and content agency for
the future.

WPP ANNUAL REPORT 2016

MediaCom

Report by Stephen Allan
Worldwide chairman and
chief executive officer

how we responded to our challenges and
grew stronger.

L ooking back at 2016, we are delighted with

Our loss of Volkswagen Group after
19 successful years was well documented, but it’s
our fightback that deserves more attention. Since the
decision, we have regrouped, refocused, and refreshed
our Content + Connections offering to deliver excellent
new business results.

In total, we have recorded wins worth more than
$2 billion in less than a year, with major successes in every
market (and the pitch pipeline is still full). Most recently,
we won Walgreens and Duane Reade in the US, and Boots
in the UK as part of a wider WPP solution for Walgreens
Boots Alliance through Team WBA – and there are further
international opportunities ahead.

We have regrouped, refocused,
and refreshed our Content
+ Connections offering
to deliver excellent new
business results

In North America, we also welcomed FanDuel,
Electrolux, PhRMA and WholeFoods to the agency,
while EMEA-specific highlights include winning IKEA
in Germany and British Gas in the UK. In Latin America,
we won Pfizer in Mexico and extended our relationship
with P&G across its LADMAR region.

How we’re doing
Media Investment Management

We grew our P&G relationship in China too, and
also added Uber in that market. Elsewhere in Asia Pacific,
we retained Vinamilk in Vietnam, and won Unilab in the
Philippines and Agoda in Indonesia. Buoyed by these
successes, we have since opened new offices in Sri Lanka
and Bangladesh to extend our influence in the region.

Powered by our ‘Systems Thinking’ philosophy, we
continued to deliver best-in-class work, winning more
than 240 awards. These included 12 Cannes Lions for
P&G, Deutsche Telekom, Fonterra and Mars, 11 trophies
at the Festival of Media Global Awards and 12 at the
M&M Global Awards, including Agency of the Year.

This strong performance means we remain second in
RECMA’s Network Diagnostics Report, which measures
overall agency quality. This is a wonderful achievement, made
possible thanks to the continued dedication of our people.
Building on this momentum, we have relaunched our
operating system, 20|20 Connections, to take full advantage
of GroupM’s [m]PLATFORM, which uses a database of
more than 1.5 billion individual IDs. This will help our
teams serve increasingly personalised messages to consumers
and deliver even greater efficiencies for our clients.

Maxus

Report by Lindsay Pattison
Worldwide chief executive officer

(technology, effectiveness & data) sits at the heart of what
we do, creating outputs that differentiate our ability to plan,
activate and optimise media.

But tech doesn’t matter without the best talent. We’ve made

it a mission to improve gender equality at Maxus. In 2016
we launched Walk the Talk (https://twitter.com/maxus_wtt),
an intensive coaching experience for senior Maxus women,
arming them with the confidence for their ‘bigger game’,
ensuring that our leadership is reflective of the wider world
around us. Over 800 women have completed the course and
22 secured promotions within eight months.

The average age of a Maxus colleague is (just) 28. Gen Y
have a very different set of values and motivations for work;
for example diversity, transparency and a desire for global
mobility. So we launched the Maxus Global Exchange
(https://maxusglobalexchange.tumblr.com/). This saw 75
Maxus people from 45 countries travel to experience another
culture, ways of working and forge strong relationships.

We launched Walk the Talk, an
intensive coaching experience
for senior Maxus women

Our talent initiatives were driven by Rudi Symons,
promoted to chief talent officer. Also welcomed to our
global board were Dan Benedict, chief client officer, and
Pam Sullivan, our LA leader. And we promoted Jen Smith
as our first global creative director to collaborate and
create with other WPP agencies around the world.

will propel Maxus in the future.

2 016 was about putting the engine in place that

Innovative, ambitious new clients came into
our agency: BT/EE, US digital retailer jet.com and
Huawei appointed us in 35 markets. These visionaries are
just a few examples of those who are absolutely reliant on
new technology and new forms of communications.

Technology inside and out has been our focus. New
services included our Tech Consulting group and a unique
PAYG DMP for clients who want nimble access to data.
Internally, we restructured our agency to ensure that TED

WPP ANNUAL REPORT 2016

How we’re doing
Media Investment Management

Essence

Xaxis

Report by Christian Juhl
Global chief executive officer

Report by Brian Gleason
Global chief executive officer

growth for Xaxis.

We welcomed plista, a leading native advertising

2 016 was a year of diversification and international

company from Berlin, into the fold and launched
its offering into 12 new markets, including China and the
US. We also expanded the footprint of Light Reaction, our
performance offering, across 33 countries. Finally, in
November 2016, we completed the acquisition of Triad
Retail Media, which now provides our clients with a unique
opportunity to reach and engage consumers as they shop
online with leading retailers like Walmart.

As the integrity and contribution of various players

within the programmatic advertising value chain came under
increased scrutiny throughout the year, we remained true
to our guiding principle of delivering measurable results for
brands and a positive experience for consumers, fulfilling
our mission of making advertising welcome.

We heard the advertisers’ call for a simpler and more
accountable approach to programmatic media, hence our
2017 focus is on consolidating Xaxis’ position as the leading
provider of outcome-based media, ensuring our clients’
digital marketing investments deliver optimal returns.

To do so, we will further invest in areas that help us
deliver long-term competitive advantage and value in a
rapidly-changing multiscreen environment:

Access to Xaxis’ unique algorithms and machine

learning capabilities.

An experienced and talented workforce.
Strategic media partnerships with the leading global

and local media brands.

As the path to purchase becomes ever more diverse and
consumers’ attention increasingly fragmented, our clients can
count on Xaxis to make the complex simple and to deliver
consistent and measurable results for their brands.

GroupM network, 2016 proved to be one of
expansive growth with new-found scale. We
opened offices in Chicago, Delhi, Shanghai

A s our first full year operating within the WPP/

and Sydney, bringing our headcount to over 650 full-time
people and continuing our mission to ‘make advertising
more valuable to the world’. Growth-wise, all of our regions
are up year-on-year. As with 2015, Asia Pacific was the
rocket ship, almost doubling for the second year in a row.
North America and EMEA were impressive in their own
right, contributing towards our 10th year in a row
of double-digit growth. And, our investment in ad tech
maintained momentum, as our proprietary media
management platform, Olive, almost doubled its
contribution year-on-year towards our overall revenue.

Asia Pacific was the rocket ship,
almost doubling for the second
year in a row

On the new business front, in North America we won

the Target account in conjunction with GroupM’s Team
Arrow, and picked up two global pieces of business –
FrieslandCampina and DAZN. Together with our organic
growth, these new accounts contributed to our billings
climbing 30% year-on-year; crossing over the $1 billion
mark. Key hires such as a chief talent officer, a global head
of strategy, an EMEA CEO and a new global head of
analytics reaffirmed our commitment to hiring the best
talent in the business, as well as our unwavering loyalty to
further developing our data and analytics offerings globally.

WPP ANNUAL REPORT 2016

tenthavenue

Report by Rupert Day
Chief executive officer

As the global leader in reaching people
‘on the move’, we see continued interest in the
support of out-of-home (OOH) inventory against

2 016 was a significant year for tenthavenue.

other channels driven by the following key factors:

Increased demand for inventory based on targeted

audiences versus simple location data.

Cross-channel integration such as geo-located OOH

combined with mobile display.

Further automation resulting in increased efficiency

of creative distribution.

Ability to optimise the creative on a real-time basis.
Advertisers’ concerns over fraud, viewability, brand

safety and waste of digital programmatic.

tenthavenue is best placed, among its peers, to take

advantage of this momentum and deliver optimised
branding as well as drive-to-store solutions by integrating:

Creative production/origination and content
acquisition/specialist platform versioning through the
partnership of Candyspace and Spafax.

Technical delivery infrastructure, with its proprietary
technical competence around developments such as Reach,
or its digital reformatting capabilities, Spafax Hub, and
OOH media specialists, Kinetic and Aviator.

Our sales-side business strategy is driven by a focus
on reaching travellers: consumers who travel for business;
leisure/entertainment and retail; and the understanding
of interactions around these different activities.

How we’re doing
Media Investment Management

To best deliver this we have organised our businesses

into three units:

1. Creation of audiences
In the last quarter of 2016, we launched Bookmark by
merging Forward Worldwide and Spafax Content. The
new entity will work with travel and retail clients to
build audiences aligned with their brand – either funded
directly by the client or through third-party advertising.

2. Exclusive rights or products to sell into
existing audiences
Spafax Networks and TMARC (with the acquisition
of Platform5) will build exclusive opportunities to
reach traveller and retail audiences.

3. Audience networks
tenthavenue media offers travel audience solutions by
selling directly to advertisers and supported by tech,
creative and data fees on a fully-transparent basis.

As a specialist, we constantly need to re-affirm
our point of difference so, in 2017, we will build new
opportunities across these three areas, again focusing
on travellers, through a mixture of acquisitions,
partnerships and in-house product development.

It is with many thanks to the 1,500 people who work

within tenthavenue, our clients and partners that I feel
confident that 2017 will be our seventh consecutive year
of above-market growth.

WPP ANNUAL REPORT 2016

How we’re doing

Kantar

Report by Eric Salama
Chairman and
chief executive officer

for Brexit and the election of President Trump.
The combination of these events and the
competitive pressure which our clients are facing

T he world at large will obviously remember 2016

has changed the environment in which we work, too.
Clients at the highest level are questioning how best to
understand the attitudes and behaviours of ordinary people
and are more open to shifting budgets, experimenting and
trialling new technology than ever before. Inertia is not a
concept that holds much sway at the moment!

Against this backdrop, our focus has been on

accelerating our efforts in getting the best of Kantar to all
of our clients, delivering work that helps our clients have
impact within their organisation, innovating in ways that
reduce cost and that make our output more predictive and
real-time, and being the kind of thought leader which our
clients feel compelled to partner with.

In doing so, a characteristic of much of our best work

are insights and a way of activating those insights that
combine multiple data points, points of view and people
from across all our brands. Recent work for clients in areas
as diverse as driverless cars and Parkinson’s Disease were
great examples of analysing a mix of data – survey,
ethnographic, big data, social media, device-originated
telemetry, wearable – and delivering insights and actionable
recommendations that we would have been unable to
produce only a few years ago.

WPP ANNUAL REPORT 2016

Innovation that drives impact
Much of our focus has been on using technology and big
data to help clients get a more complete understanding of
their market, to help them optimise budgets and to do this
at lower cost and faster.

Clients at the highest level
are questioning how best
to understand the attitudes
and behaviours of ordinary
people

Kantar Worldpanel has used smartphones and receipt

scanning technology to launch panels that measure
out-of-home-consumption in China, Thailand, Indonesia
and much of Latin America as well as the world’s first
ecommerce panel in France. Kantar Media has become a
world leader in analysis of return-path data in a way that
enables us to measure media consumption of niche channels
in markets as diverse as South Africa and Malaysia and
in measuring all content consumption on all devices in
markets such as the Netherlands and Denmark. Kantar
Added Value, Kantar Futures and Kantar TNS combined
to use social media data to deliver habits and attitudes
work for Unilever at half the previous cost in half the time.
Numerous parts of Kantar have tapped into WPP’s wider
deal with Spotify to help clients understand how music
can be used as a proxy for mood and as a source of
segmentation. Kantar TNS, Kantar Millward Brown and
our operations teams have partnered with, for example,
ZappiStore and Qualtrics to enable clients to test new
concepts and advertising in less than eight hours, rather
than the five weeks it used to take, and have taken data
collection to mobile and to the cloud. Kantar Retail has
expanded its virtual reality offering so that clients
can now test new in-store layouts and packaging through
proprietary software and portable VR headsets.

How we’re doing
Data Investment Management

Kantar Health continued to strengthen its reputation as
a leader in healthcare consulting and market research. The
primary contributors behind another year of growth were
the global expansion of real-world evidence consulting and
data analytics; the launch of CancerLandscape™ – a novel
solution that enables unprecedented insight into the
innovations being developed in cancer; and continued
commitment to the empowerment and education of
consumers and patients worldwide.

But clients want more than just a better understanding.

They want to understand how to optimise their spending
and how to make sense of multiple insight streams.

In combining the segmentation work that Kantar TNS

has done for L’Oréal with Kantar Worldpanel data, we
enabled the client to understand where the biggest
opportunities were and how to access them; in combining
Kantar Millward Brown brand tracking with Kantar
Worldpanel data in an approach called PowerPurchase
we have enabled clients in many markets to understand
the extent to which their trade activity was building on
their brand building activity and how best to leverage it.
Through our partnership with Facebook and VICE we
offer clients the ability to measure the ROI of Facebook
campaigns and of long-form content; and in rolling
out Kantar TNS Connect and Kantar Retail XTEL we
have enabled clients to optimise their media allocation
by touchpoint and maximise the impact of their
promotional spend.

Kantar Public was one of only
two organisations to predict
correctly the outcome of the
Brexit vote

In carrying out this work, we have significantly
expanded our client portfolio. Local clients, such as JBS
out of Brazil, Pladis out of Turkey and Indofoods out of
Indonesia and BBVA out of Spain, have become big clients
for us in their home market and as they globalise. Clients
such as Facebook, Google, Hulu, Twitter, Alibaba, eBay,
Didi and Ola have shown how new technology-driven

sectors such as ecommerce, search and transport have
come to recognise the importance of understanding their
brand and their customers and maximising their chances
of success.

Compelling thought leadership
In this environment, thought leadership isn’t just a nice to
have. Clients want partners that they feel can guide them
through uncertain times.

Some of our thought leadership has involved a
continuation of programs started several years back.
BrandZ™, which tracks the value of global brands and is
now the world’s largest brand database, is into its 20th year
and saw events held globally and in markets as diverse as
China, Indonesia, India, Brazil, Mexico and Peru. Now
in its fourth year, Kantar Worldpanel’s Brand Footprint
measures the extent to which brands are purchased around
the world and has both analysed and predicted the growth
of local brands and the way in which penetration is the key
driver of future market share in categories as diverse as
skincare and mobile phones. Kantar Retail’s PoweRanking
studies and its China Digital Power have become, over time,
the industry benchmarks for understanding the relative
strength of individual retailers and manufacturers in
their relationship. And Kantar Vermeer followed up its
involvement in the Marketing 2020 program with Insights
2020, the largest global marketing and insights leadership
initiative, and it saw its work leveraging the findings
for Unilever appear as the cover story of the Harvard
Business Review.

But some of our thought leadership has been new
and even more visible. Kantar Public was one of only
two organisations to predict correctly the outcome of the
Brexit vote having consistently done so for a month before
the actual vote. Kantar Public in Australia carried out a
seminal study regarding domestic violence against women
which was debated in Parliament and led to new legislation.
Kantar Futures’ Defying Gravity work has mapped out
ways in which clients can grow in a slow-growth low-
inflation environment. Kantar Health’s Edge of Insight
series helped clients understand the importance of
secondary influencers in healthcare decisions and of the
way in which technology is shaping the mobile health
consumer. Across the US, we have rolled out our

WPP ANNUAL REPORT 2016

Recognition for our brands and people
Finally, a point about recognition. Other than internal
and client awards, a number of our brands and people have
been recognised publicly. Kantar TNS and Lightspeed
swept the board at the UK’s MRS awards, Kantar IMRB
swept the board at the Indian Research Industry awards
and Kantar TNS won the Australian B&T Research
Agency of the Year award. Numerous units, including
Kantar Worldpanel in the UK, France, Thailand, Taiwan,
and Latin America as well as the Kantar Delivery Centre
in India and Kantar Health in the UK, won awards as a
top place to work.

Individuals such as Mike Kelly, David Hanlon,
Jon Puleston and BL Chen were recognised for their
individual contribution to their industry.

But every month each of our 30,000 Kantar people
around the world know of examples of how they have
impacted their clients and made a difference to our
company. They work for corporate clients, for the public
sector and on charitable causes such as Unicef and the
Special Olympics. They don’t get recognised for it publicly
and we, as management teams, should say thank you
more than we do. To all of our people for all of those
occasions, a public thank you here for all you do to make
our company special and an indispensable partner to so
many of our clients.

How we’re doing
Data Investment Management

FragmentNation approach to help understand the way
that the nation has fragmented and to understand some
of the current dialogue and polarization.

Getting the best of Kantar to clients and
to the market
In previous years we have talked about the need to scale
some of the great work we do to more clients and markets
and to make sure that we get the best of Kantar to all
our clients.

We have had success in doing so but we recognised the
need to go faster. So, at the beginning of 2016, we changed
our approach. We eliminated our internal P&Ls, rebranded
everything with a Kantar prefix, made our proprietary data
available to everyone internally, appointed Kantar Country
Leaders, reorganised the way we approach HR, finance,
operations, marketing, launched Kantar Public and Kantar
Consulting, and appointed a unitary management team
for our insights brands.

We eliminated our internal
P&Ls, rebranded everything
with a Kantar prefix

The aim of all this was to eliminate any siloed way
of thinking and to ensure that our clients get the best of
Kantar and that our people get the full benefits of working
for Kantar. It has been a big change – not as big as Brexit,
perhaps – but which has been warmly welcomed by clients
and our people alike.

Most importantly, it is a change that clients and staff
are actually experiencing – we are determined to make sure
that it reaches every interaction and is deeply embedded in
the way we behave.

WPP ANNUAL REPORT 2016

Burson-Marsteller

See report on page 64.

Hill+Knowlton Strategies

Report by Jack Martin
Chief executive officer
and chairman

to our biggest problems can seem deceptively
small at first glance, as can the origins of
our direst threats. In this environment, a

W e are living in uncertain times. The solutions

handful of tiny start-ups can still topple multi-billion-dollar
industries, or create them out of nothing. A handful of
hackers can find equal footing with any superpower. And
a single social media account, wielded skillfully, can be
the tipping point in a US Presidential election.

By tapping into the limitless
power of storytelling content,
SJR is continuing to open up
new ways for H+K to transform
reputations, conversations,
and entire industries

The future belongs to those thinkers who can perceive

the unique advantages and opportunities inherent in this
environment. To navigate uncertainty, it isn’t enough to
solve the problems our clients put before us. We have to
think of solutions that are bigger than the problems
themselves, and blaze new paths when all existing paths
lead nowhere.

How we’re doing

I’ve been greatly encouraged by the spread of this kind
of thinking throughout Hill+Knowlton Strategies over the
past year, sparked especially by SJR in New York and our
Global Center of Creative Strategy in London. Because of
this new approach, 2016 was a year of growth, one of the
best we’ve seen for a number of years.

Under the leadership of Alexander Jutkowitz, SJR has
been the catalyst for explosive growth, both creative and
financial. Its unique approach to problem solving, in which
they convene top talent and don’t confine it with job titles
or assumptions, has allowed SJR to pivot quickly around
our clients’ needs. And by tapping into the limitless power
of storytelling content, SJR is continuing to open up new
ways for H+K to transform reputations, conversations,
and entire industries.

Under the leadership of Richard Millar, our Global
Center of Creative Strategy has brought a new sense of
purpose both to H+K and to our clients’ communications
strategies. Through its dedication to creativity and
curiosity, it is at the forefront of learning how to drive
and not just adapt to the way that influence works.
Across H+K, we are test-driving the model of
innovation, transformation and hungry, restless
energy that our clients so urgently need from us
in this uncertain world.

WPP ANNUAL REPORT 2016

How we’re doing
Public Relations & Public Affairs

Cohn & Wolfe

2016 was also an especially rewarding year for industry

recognition. We added 17 Cannes Lions, three Clios and
19 Eurobest Awards, not to mention the WPPED Cream PR
Crème de la Crème Award. Recognition continues to build
across all regions. North America was named The Holmes
Report Large Agency of the Year. In Europe, we were
recognized as Regional Network of the Year by The
International Communications Consultancy Organization,
as well as Best European Network to Work For by The
Holmes Report and Best Place to Work by PRWeek UK.
In Asia, we were honored with two Agency of the Year
Awards from Marketing magazine (Silver for Malaysia and
Bronze for Singapore). Our Asia network is still relatively
young, so it was quite an achievement to be a Holmes
Report finalist for both Asia-Pacific Technology PR and
Southeast Asia PR Consultancy of the Year.

Never content to rest on our laurels, we are now
hyper-focused on further growth in 2017. By combining
our creative excellence with foresight about consumer
demand for fully immersive brand experiences, we are
poised to build an industry-leading creative technology
capability. It is what today’s C-suite needs to succeed in
our rapidly changing, technology-driven communications
industry. And Cohn & Wolfe is ready to deliver!

Report by Donna Imperato
Chief executive officer

Y ou are likely reading this report among other PR

agency reports – but Cohn & Wolfe is no longer
a traditional public relations agency. Fueled by
our vision to own the future of communications,
Cohn & Wolfe has thoroughly evolved into an idea-driven,
integrated communications agency that is channel-neutral
and media agnostic. Our transformation is paying off.

2016 saw the strongest year of growth in the agency’s

history and our third sequential year of double-digit
growth. Cohn & Wolfe is now 50% larger globally than
we were just three years ago.

Cohn & Wolfe has evolved into
an idea-driven, integrated
communications agency that is
channel-neutral and media
agnostic

The power of our integrated communications offering

is attracting marquee clients across all regions, including
China telecom leader ZTE, Newell Brands (25 brands
across 13 markets), DineEquity and Applebee’s and
Twentieth Century Fox Home Entertainment. Backed
by our expanding geography, more wins than ever were
global or shared across regions. We also deepened our
relationships with long-term clients across every sector
with the addition of digital and content assignments.

WPP ANNUAL REPORT 2016

How we’re doing
Public Relations & Public Affairs

Finsbury

HERING SCHUPPENER

Report by Roland Rudd
Chairman

Report by Ralf Hering
Principal partner and
chief executive officer

globally-integrated strategic communications
consultancy. It specialises in managing complex
assignments in corporate reputation, financial

F insbury continues to expand its influence as a

and transaction communications, public affairs and crisis
management. Finsbury has offices in the UK, the US,
mainland Europe, the Middle East and this year boosted
its presence in Asia by opening an office in Japan.

2016 marked the beginning of a strategic partnership
between Finsbury and HERING SCHUPPENER, the leading
strategic communications consultancy in Continental Europe.
The now seamless global offer has resulted in more than 20
joint projects, notably on large M&A transactions including
Bayer/Monsanto and Linde/Praxair, and major global
reputation management mandates for ABB and KION, as well
as the global crisis management assignment from Volkswagen.

2016 marked the beginning
of a strategic partnership
between Finsbury and
HERING SCHUPPENER

In 2016, revenues increased as Finsbury added

significant new assignments for Viacom, Nando’s, iHeart,
Prada, Barings and KSA Ministry of Finance among others,
to complement its existing work for major clients including
Toyota, Sky, UnitedHealth Group, CPPIB, Aviva and
Ahold. Finsbury also managed a number of high-profile
deals including Softbank’s acquisition of ARM, Sainsbury’s
acquisition of Home Retail Group and the initial public
offering for Convatec.

Our capital markets business almost

profits, 2016 was another record year
for our firm.

W ith double-digit growth in revenue and

doubled, advising clients in the largest transactions
and initial public offerings in Germany and Europe.
Thanks to our newly-created global strategic partnership
with Finsbury, our world-class capability to advise on
cross-border mandates has become another strong
competitive advantage.

Together we have formed a globally-leading strategic

communications advisory supporting our clients in
mission-critical situations covering all important markets
in Europe, the UK, the US and Asia.

We strengthened our dominant market leader position in
Germany and remained No.1 in the Mergermarket rankings
in value and volume, now for 13 consecutive years. We also
boosted our business in CEO transitions, corporate crises
and public affairs with a strong digital transformation
offering as a cross-function for all our mandates.

Our world-class capability
to advise on cross-border
mandates has become
another strong competitive
advantage

In May, The Holmes Report named us again EMEA

Consultancy of the Year 2016.

WPP ANNUAL REPORT 2016

How we’re doing
Public Relations & Public Affairs

Buchanan

Report by Richard Oldworth
Executive chairman

communications boutique produced increased
revenues and profits in 2016. The first half
saw some interesting corporate restructuring

B uchanan’s positioning as a strategic

assignments as well as higher underlying retained fee
income. While the Brexit vote adversely affected our
UK-centric IPO pipeline in the second half, a resurgent
natural resources sector helped push our year-end retainer
run rate almost 20% higher than a year earlier.

We expect good growth in 2017 and are targeting

the addition of a select number of senior recruits to
further enhance our offer.

WPP ANNUAL REPORT 2016

How we’re doing

Landor

See report on page 64.

Group XP

Brand Union

Report by Simon Bolton
Group chief executive officer

Report by Toby Southgate
Worldwide chief executive officer

G roup XP is a unique consulting model formed

through the partnership between Brand Union,
FITCH, SET and SET Live. We believe that
great customer experience is the key driver
of business growth. By connecting diverse perspectives
and skills in our network, we bring a holistic view of
experience to create transformative interactions between
brands and people.

Horizontality remains a key
element to the success of the
Group XP offer

We partnered with Kantar Millward Brown and
BrandZ to launch the Group XP Experience Index, a
first-of-its-kind report that enables us to quantify the role
brand experience plays in building financial growth. The
results, a global ranking of the Top 30 experience brands,
were launched simultaneously in London and New York
in October.

Horizontality remains a key element to the success of
the Group XP offer and we are now serving Adidas, JTI,
Samsung, Simply Health and VW Group across at least
two operating companies, a trend that we expect to grow
in 2017.

2 016 was challenging in a number of key

markets. We saw twin drivers of change:
the commoditisation of our packaging design
offer and the impact of the value investors.
In contrast, we find continued value in our core

purpose. We have been part of WPP for 30 years, and have
done our best work breaking ice: engaging senior clients
with practical, agnostic advice on how best to communicate
and organise their brands. In 2016, this focus secured
significant new engagements with Aetna, Tyson Foods,
Le Group, National Grid, Liberty Mutual and IAG.

We evolved structurally, too. In Asia Pacific we created
a unified regional model under chairman Monica Lee and
CEO Graham Hitchmough. In the UK, we established a
new leadership team with CEO Alex Clegg, who joined us
after a successful decade leading Ogilvy Group Vietnam.
There were areas of outstanding performance. Madrid,

under Pilar Domingo, is a model of sustained organic
growth. New York, led by Christina Falzano and Don
Forringer, delivered another strong year; through the
dedication of Coleen Cahill, we grew our business with Bank
of America. In Germany, CEO Tobias Phleps has built a
successful start-up story in Berlin. In a ruthless economy,
Epigram Brand Union in São Paulo delivered growth.

We ended the year with guarded confidence, and having
delivered the strongest quarterly new business performance
in several years. For 2017 we predict modest growth fuelled
by both a refreshed clarity of purpose and our relationships
across Group XP and WPP at large.

WPP ANNUAL REPORT 2016

How we’re doing
Branding & Identity

FITCH
Report by Simon Bolton
Worldwide chief executive officer

SET

Report by Sabina Teshler
Founder and
chief executive officer

S ET continues to work towards its mission of

‘making experiences through physical interactions
the most powerful and most craved media channel
for people and brands today.’ As brands continue
to allocate a greater share of the overall marketing budget
to non-traditional channels, SET is uniquely positioned to
capture a greater portion of this spend.

Our financial performance in 2016 reflects this trend.
With net revenue growth exceeding 50%, 2016 was truly
a banner year for our agency. With the support of WPP
and Group XP, SET has enjoyed some major client wins
connected to the NY studio including Verizon, The North
Face, The Gap and Sennheiser, leading to threefold growth
of the studio.

As our client relationships increasingly move upstream,

we continue to elevate our strategic and creative talent
and thus broadening our service offering to support the
experience needs of marketing executives. Last year
we added two ECDs to our team, Simon Hatter and
Jodi Terwilliger. We’ve also created a digital production
team that supports the new experience needs of our
client partners.

W e enjoyed a successful year as we grew the

network on all key dimensions. Growth
was fuelled by acquiring major new client
assignments from T Mobile, Ann Inc.,

In the retail sector, we continue to evolve our offer
ahead of the market curve and have been particularly
potent in marrying the online and offline worlds, despite
the tension often inherent between those environments.

Samsung, PetSmart, JTI and Carpoly.

Given this context, we added further bench strength to

our Asia Pacific network through the acquisition of an
independent agency in Hong Kong that comprises a blended
2D, 3D and interactive studio. Led by Jonathan Cummings
and Cally Williams, the team brings full branding solutions
to clients such as SWIRE Properties, Genting Resorts and
Nord Anglia.

The leadership structure, led by three regional CEOs,
Hermann Behrens (NA), David Blair (EMEIA) and Andrew
Crombie (SENA), ensures a tight, collaborative network
that sees resource, talent and skills deployed internationally
to best meet client needs.

In the retail sector, we continue
to evolve our offer ahead of the
market curve

Tim Greenhalgh, chairman and CCO continued to
position FITCH as the go-to retail and design agency for
ambitious clients. Tim sat on a number of major awards
juries and delivered a keynote on ‘Generous Brands’ at
the NRF and talked to the Store of the Future at WPP’s
World Retail Forum.

At the time of going to press, I am delighted to
announce the well-deserved promotion of David Blair
to global CEO. David and I will work closely together
to steer FITCH through 2017.

WPP ANNUAL REPORT 2016

The Partnership

Report by Jim Prior
Chief executive officer

collaborative companies yielded encouraging
results in its second full year since formation.
A number of significant new client opportunities

O ur hybrid structure of five distinct but closely

were created through The Partnership companies working
in combination, while the specialist, client-focused
approaches of each individual company were well-suited
to the general operating environment, resulting in good
growth overall. This group continues to set an industry-
leading creative standard and enjoyed award wins in
multiple competitions around the world.

Addison Group
The company continued to diversify its mix of business
in 2016 achieving a well-balanced portfolio of digital,
corporate branding and corporate content work. CEO
Tom Robinson led Addison Group to establish several new
relationships with high-profile clients, including Diageo,
National Grid and QinetiQ.

Lambie-Nairn
Clients are increasingly recognising Lambie-Nairn’s
Dynamic Brands approach as the most contemporary and
fit-for-purpose method with which to manage their brands
across multiple markets and multiple media. In 2016, the
company retained its global role with Telefonica after a
competitive review and won several important new clients,
including JLL.

How we’re doing
Branding & Identity

PeclersParis
Under the leadership of CEO Eric Duchamp, PeclersParis
had a strong year. Fashion and beauty trend consulting
services expanded significantly, globally and particularly
in China. The company’s trend books sold well and remain
a crucial source of inspiration to clients worldwide, and its
digital business continues to grow.

The Partners
The combination of senior-level brand consulting skills
with multi-award winning design capabilities helped
The Partners to another year of excellent growth, with its
London and New York offices performing particularly
well. New clients in 2016 included Nespresso and Revlon.
Another successful year at the Cannes International Festival
of Creativity, most notably with work for Argos, was a
creative highlight.

VBAT
It was a momentous year for VBAT as its acquisition of
dBOD was completed and the two firms merged to create
a market leader in branding and design in the Netherlands.
The newly-merged company, now under the leadership
of CEO Remco van der Sluis, further strengthens the
company’s relationship with Heineken and offers market-
leading capabilities to clients in its home market and
internationally.

WPP ANNUAL REPORT 2016

How we’re doing

WPP Health & Wellness

Ogilvy CommonHealth
Worldwide

Report by Mike Hudnall
Chief executive officer

Report by Matt Giegerich
Retiring chairman and
chief executive officer

the spectrum of health.

W PP Health & Wellness is a new entity

that unites the Group’s broad capability
under one banner to significantly
advance our offer for our clients across

The growing ubiquity of health today is ushering
in an era of unprecedented cross-industry partnerships
and innovation that present tremendous opportunities
for our clients and our business. Building on WPP’s
areas of competitive advantage, we are well positioned
to seize these opportunities, accelerate growth and new
value for our clients. Our strategy centers around
advancing horizontality, which we began with the
formation of this healthcare specialist practice. Beyond
that, we are establishing health-focused partnerships
with Group companies designed to strengthen our
collective healthcare capabilities, and create modern
specialized services that will accelerate growth in 2017
and beyond.

2016 was a strong year for our healthcare business,
punctuated with coveted new business assignments and
meaningful contributions to client partnerships that
drove substantial growth across our healthcare
portfolio. We also won more Cannes Lions Health
awards than any other holding company last year,
underscoring WPP’s creative reputation.

WPP ANNUAL REPORT 2016

I n 2016, Ogilvy CommonHealth Worldwide expanded

its leadership position in the healthcare
communications industry, adding 21 clients never
worked with before, in more diversified categories than
ever before, with significant growth in Specialty Marketing,
Medical Affairs and Market Access.

Throughout the year, we
drove horizontality through
collaboration within Ogilvy
and across WPP

Global macro healthcare trends, and our deep

understanding of them, continue to guide the agency. With
consolidation and contraction ongoing, our clients have laser
focus on efficiency and ROI, a renewed emphasis on Real
World Evidence, accelerated R&D in specialty medicines
and continue to experience access/reimbursement pressures.
Our response to these trends includes the formation
and launch of NANO – a specialized, highly nimble unit
designed to work with emerging healthcare and selfcare
companies. We developed and launched a comprehensive
Patient Access Service offering, and saw exponential
growth of our proprietary properties such as the Element
Access Tool that delivers real-time, office-level
reimbursement data and unique EHR initiatives delivering
key messages within the workflow.

Of course, we continue investing in talent, growing
staff in such critical areas as medical strategy, planning,
and digital engagement strategy, while elevating our
creative product across all disciplines.

Throughout the year, we drove horizontality through
collaboration within Ogilvy and across WPP, working with
OgilvyRED, Effective UI, Bottle Rocket, social@ogilvy,
Y&R and more, while remaining key contributors to the
healthcare Team accounts.

In 2017, although full of potential change, we will likely

face similar market pressures. But we approach the year
with enthusiasm as part of the new WPP Health & Wellness
group, building on the strengths and resources of the
healthcare specialist agencies, and supporting the new Ogilvy
Health & Wellness practice in its efforts to capitalize on this
growing and dynamic market. We are excited to enable new
cross-agency collaboration – horizontality – for the benefit
of our clients and development of our people.

After 25 years with the agency, I retired from Ogilvy
CommonHealth Worldwide in April 2017. I handed over
executive and managerial duties to my very able successors:
managing partners Darlene Dobry, Michael Parisi, Shaun
Urban and Marc Weiner, who now co-lead the agency.

How we’re doing
Healthcare Communications

Sudler & Hennessey

Report by Jed Beitler
Chairman and chief
executive officer worldwide

anniversary by producing a big idea that will
ensure great talent for decades to come: S&H
implemented a global apprenticeship for 75

S udler & Hennessey celebrated its 75th

college graduates and provided two months of training
and real-world work experience – and a stipend.

Additionally, two initiatives were launched: Science &
Learning, an education and training model led by Louisa
Holland, to help clients strategically leverage critical data
to secure stronger positions for their brands; while Rob
Rogers was appointed to lead promotional efforts for Sudler
New York and Sentrix Communications Healthcare, to
execute plans with a fresh attitude and new talent, and
a new business effort.

S&H implemented a global
apprenticeship for 75 college
graduates

In the realm of recognition, Chris Duffey was appointed

a juror at Cannes Lions Health, two Sudler New York
teams were named among the top 10 Young Lions Health
finalists, and BeLive, the first wearable and app to track
pain in real-time, won 18 awards, including Sudler’s
first-ever Cannes Lion; IntraMed was honored with the
MAHF’s Digital Pioneer Award.

Rounding out the year’s activities, S&H acquired the

San Francisco-based digital specialist shop, Viscira,
expanding the range of interactive solutions and technology
horsepower, and new senior leadership was appointed in
Australia and Japan.

WPP ANNUAL REPORT 2016

How we’re doing
Healthcare Communications

ghg

Report by Lynn O’Connor Vos
Chief executive officer

g hg|greyhealth group had another consecutive year

of growth, fueled by breakthrough, multi-channel
agency launch campaigns, innovative medical
education, healthcare-access programs and
cutting-edge health IT. As a recognized leader in partnering
with medical affairs for ‘pre-commercialization,’ ghg
achieved high growth in our scientific and value-based
communications.

ghg works with some of the world’s most influential

companies, creating everything from TV and digital
content, to CRM, mobile apps and virtual-reality
experiences. We have forged partnerships with some of
the industry’s biggest game-changers, such as IBM Watson
and VICE (Tonic). We have also invested in tomorrow’s
technology leaders, including OptimizeRx, ScrollMotion
and Text4Baby (recently featured in an exhibit at the
Cooper Hewitt, Smithsonian Design Museum).

We have forged partnerships
with some of the industry’s
biggest game-changers, such
as IBM Watson and VICE

But what truly differentiates us, beyond award-winning

campaigns and high-science initiatives, is the reputation
we have acquired as inventors of healthcare solutions –
we have built, designed, and/or developed the following:
the Quitter’s Circle app for smoking cessation, which was
the first healthcare app on the Apple iWatch; the Metastatic
Breast Cancer Advisor with IBM Watson – an AI program
that allows patients, physicians, payers and policy-makers
to access 10 years of global research on metastatic breast
cancer; the Gum Health Physical tool, for Colgate, to aid

WPP ANNUAL REPORT 2016

in patient education, awareness and compliance; and our
vaccines team supplied the first branded Facebook page in
a key client’s history, helping that company usher in a new
era of social sharing.

ghg continues its thought leadership and original
research with new studies about millennials and health
activators, in partnership with Kantar Health. Our white
paper, The New World of Healthcare: What Millennials
Want, explores this quickly-growing, soon-to-be-primary
healthcare consumer cohort, which is changing the
industry with its unique outlook, preferences, and habits.
At ghg, we believe ‘Communication is the Cure.’

It’s the way we live, and what we do for our clients
every single day.

CMI/Compas

Report by Stan Woodland
Chief executive officer

planning and buying firm, and we’re on a mission
to become an indispensable partner to each and
every client. As we worked to redefine the

C MI/Compas is a leading healthcare media

agency-client relationship, taking on accountability for our
clients’ business goals, and even putting our own money
behind some client initiatives, we gained the notice of WPP,
which acquired CMI in March 2016. The company’s
upward trajectory of growth continued with the winning
of several competitive RFPs and an industry-leading client
retention rate, allowing CMI/Compas to sustain an average
annual revenue growth of more than 30% per year over
the last four years. Among the growth drivers were a full
launch of our Drive® offering, comprising best-in-class
healthcare SEM/SEO and social media capabilities. CMI/
Compas also expanded our customers’ insights offerings
with robust quantitative and qualitative research about
the physician audience.

GCI Health

Report by Wendy Lund
Chief executive officer

growth, fueled primarily through an expansion
of key offerings and diversifying our account
base with over 30 new business wins. We take

G CI Health continued its record of double-digit

great pride in not only the unsurpassed results of the
cutting-edge programming we execute, but also becoming
an extension of our clients – partners in most cases – to
add to their business performance.

The healthcare industry is increasingly focused
on digital content creation and marketing. Whether
collaborating with clients to use augmented reality to
show their commitment to corporate responsibility, helping
to execute a major social promotional push to refresh a
10-year campaign or launch a suite of social channels
featuring a branded Facebook community with open
commenting (a rarity in the healthcare space) – we have
helped our clients to not only keep pace, but truly innovate
in the digital healthcare space.

We have helped our clients
to not only keep pace, but
truly innovate in the digital
healthcare space

We are also committed to providing forward-thinking
thought leadership in today’s ever-changing, often volatile
healthcare landscape. This, combined with our focus on
putting Patients at the Center and challenging our staff
to ‘Do Something Different,’ has continued to garner
industry recognition including 2016 SABRE Award for
Rx Campaign of the Year, Global SABRE for PR Campaign
of the Year and PRWeek’s Global Breakthrough Campaign
of the Year.

How we’re doing
Healthcare Communications

Getting beyond the stellar work of our employees, we
pride ourselves on a company that embraces partnership
and performance while fostering a fun environment and
staff development, all of which has resulted in us being
recognized as 2016 Best Places to Work by PRNews and
The Holmes Report.

In 2017, GCI Health will continue to help our clients

succeed in a changing healthcare landscape and launch
breakthrough programming across the entire health sector
with a multi-channel, integrated approach. Where we
are today is just a starting point for where we’re going
in the future.

WPP ANNUAL REPORT 2016

How we’re doing

AKQA

Report by Ajaz Ahmed
Chief executive officer

is a thoughtful, considered and intelligent experience
at every connection. Our primary motivations are as
relatable and easily understood as the work they help

I n a world where digital is everywhere, AKQA’s passion

to inspire. The three metrics that matter most to us are:
1. The creation of genre-redefining work that makes a
cultural impact;
2. Encouraging positive feedback from audiences; and
3. Contributing to the career development of our colleagues.
That’s why our focus is predominantly on progressing a

culture that gives our team the canvas and environment to
create work that elevates the spirit and why we care about
delivering meaningful results for our clients.

... the goal of each assignment
[is] to be the best of its kind in
the world

It’s heartening therefore to have achieved a 93% client
retention rate, being voted by our people as one of the UK’s
top three employers, while achieving incredible feedback
from audiences worldwide from the work we create. At
the same time, we won more than 100 honours in 2016,
including seven Cannes Lions, and were also named Agency
of The Year and Gaming Agency of the Year by IAB and
PromaxBDA respectively.

WPP ANNUAL REPORT 2016

Many of our ideas are born from the frustration of
looking at what already exists and asking the question:
“why does it have to be this way?,” making the goal of each
assignment to be the best of its kind in the world. Through
artificial intelligence, the conversational interface and
technological advances, we create beautiful, memorable
work that’s helping to simplify and enhance the way people
live and communicate.

With ideas that move the world, we architect and
deliver remarkable brand and customer experience. A
common thread has now emerged amongst the clients we
collaborate with: the need for a strategic partner to provide
a cohesive blueprint and future vision for their business,
rooted in reaching the audiences of today and tomorrow.
This clarity of purpose will help our clients to increase
their relevance and expand their connection in an
environment that’s now defined by accelerating change.

How we’re doing
Digital, eCommerce & Shopper Marketing

As we build our reputation on our ability to change
people’s behavior in ways that drive conversion for our
clients’ brands, we continue to be validated by the response
we receive from new prospects. In 2016, we welcomed
many new clients to our roster, including Chase,
Kimberly-Clark Professional and Electrolux.

All told, we have a strong proposition, business
momentum, solid partnerships with clients and WPP
agencies, and a passion for creating campaigns that
convert brand equity into action.

Geometry Global

Report by Steve Harding
Global chief executive officer

to strengthen our core capabilities, expand key clients
and grow our reputation. We made significant progress
in making our way of working consistent across the

I n just our third full year of operation, we continued

network, attracting top talent, and winning new
assignments from both current clients and new ones.

We added two key leaders to our global management
team in 2016. Fadi Shuman joined as global chief digital
officer to consolidate our digital and ecommerce assets and
help us achieve our vision of becoming a device-agnostic,
omni-channel expert in ecommerce. Diana Cawley was
appointed regional CEO for Asia Pacific, bringing a deep
understanding of brand activation and shopper marketing
to the region. She will oversee a transformation from
executional activation to more strategic, creative, and
digital activation in Asia, and especially in China where
she is based.

For key clients… we focused
on building resilient team
structures to further support the
globalization of the accounts

For the key clients we service in multiple markets, we

focused on building resilient team structures to further
support the globalization of the accounts. The hiring and
placing of new Global Client Leaders and local teams
strengthened our client relationships, resulting in
considerable growth on Unilever, Coca-Cola and Emirates,
among others.

WPP ANNUAL REPORT 2016

How we’re doing

Report by Mary-Ellen Howe
Chief operating officer, Specialist Communications,
North America
and
Laurence Mellman
Chief operating officer, International Specialist
Communications

W PP’s Specialist Communications division

comprises individual business units with
separate and distinct marketing expertise
by industry, audience segment or medium.

Our clients benefit from the depth of knowledge and
strategic focus of these specialists; the Group benefits
through the flexibility these companies offer as partners
for sister WPP companies when serving clients’ integrated
marketing needs. Our role in managing this portfolio is
to help these companies grow on their own terms and to
support co-operation opportunities across the Group.

In aggregate, the portfolio of companies achieved a

strong 2016 result and expectations are that they will
continue to enjoy good growth in 2017.

WPP Scangroup is listed on the Nairobi Securities

Exchange, operating a multi-agency model as WPP’s
partner across multiple disciplines in sub-Saharan Africa,
with offices in 25 African countries. 2016 saw the first
full-year benefit of new offices in Nigeria (H+K Strategies)
and the launch of a new office in Gabon. The company’s
agencies continued to win numerous awards across the
region. Alongside collaboration with sister agencies,
acquisition opportunities continue to be assessed to
broaden both service and geographical offerings.

WPP ANNUAL REPORT 2016

In 2016 Berlin Cameron continued to build on its core

business with its biggest client, Capital One. The agency
relocated alongside BAV Consulting and together they won
assignments for Lexus, the National Kidney Foundation
and Sequential Brands Group. The agency also furthered
its start-up and branding practice with wins from
MyHeritageDNA and Underclub.

At Seattle-based Cole & Weber, growth continued

strongly after winning new business from Regence Blue
Cross Blue Shield and driving organic growth with clients
including Hydro Flask. The agency is well positioned as
nimble and medium-sized, combining the creativity of
a boutique with the strategic partnership of business
consultancy and the digital prowess of a digital shop.

Our role in managing this
portfolio is to help these
companies grow on their
own terms and to support
co-operation opportunities

Sra. Rushmore was, for the 12th year in a row, voted
the No.1 advertising agency in both original and effective
creativity in Spain, as well as the most attractive integrated
agency overall. This past year has been the agency’s most
international year with campaigns being aired in more than
125 countries worldwide.

The Farm Group had another active year which saw

the opening of its 33,000 square feet, state-of-the-art
headquarters in London, as well as the supply of a technical
and editing team in Rio for the BBC’s feed of the Summer
Olympics. The Farm HQ is equipped with new UHD and
HDR technologies, ready to supply programs to suppliers
like Amazon and Netflix as well as traditional broadcasters.
One of the first major projects in the new facility was
The Grand Tour for Amazon.

How we’re doing
Specialist Communications

US-based corporate events company, MJM, created

141 Hawaii aligns branding and experiential marketing

for Sony as well as global and national companies while
mobilizing a partnership between Friends of Hawaii
Charities and the Harry & Jeannette Weinberg Foundation
to generate significant funds for Hawaiian charities. It
kicked off the full-field PGA TOUR season for the 20th
year with the Sony Open in Hawaii. In addition to this
flagship PGA TOUR property, it services several other
professional golf management and marketing events on
the LPGA Tour and Champions Tour.

Specialist UK CRM agency EWA continued to build on
new services around political polling, surveys and telephone
contact with voters for the EU Referendum and local
elections. Core services focused on improving relationships
between clients and their customers through the delivery
of promotions, campaign response and customer experience
solutions, generating new business from HS2, JET and
Linden Homes.

BDG architecture + design is a team of architects,
designers and creative thinkers. The belief that architecture
is most successful when it is able to connect people and
spaces has seen the team continue to grow and expand
their European coverage in 2016. Following the successful
completion of the agile working environment for Ogilvy
and MEC in London at the beginning of 2016, large-scale
colocations of WPP companies are now currently under
design in Madrid, Amsterdam, Milan and Lisbon.
Significant UK client wins included Sky, Money
Supermarket and Teach First.

inspiration and impact for top-tier clients including
Deloitte, NAPA, Discover, McKinsey and Unilever. MJM
took talent development and corporate assembly to the next
level with creative strategy and production for their clients’
most significant internal-facing events.

Technical production company Metro Broadcast

strengthened its position in the live events industry by
investing further in technology and combining its talents in
broadcasting with traditional event production. Introducing
broadcast elements to live events and utilising the latest in
audio visual tech, Metro added the Bank of England and
ITV to its client portfolio while extending its reach in the
global pharmaceutical market. Expanding the agency’s
managed service business by winning a bid to manage
YouTube’s new studio spaces in London and Berlin boosted
Metro’s credentials in this growing market, where
professional video production facilities are made accessible
to artists, celebrities and vloggers.

Mando has continued to expand throughout Europe

and South Africa. The promotional risk management
company also picked up the illustrious Company of the
Year award from The Institute of Marketing in the UK for
outstanding work over the year, with a range of blue-chip
clients including Ferrero, McDonald’s and GSK.

Pace continues to expand its real estate offerings with
new assignments for Pier Village, a residential development
in New Jersey and The Bristol, a 25-storey condominium
development in West Palm Beach. Its Florida division,
Green Advertising, continues to service outside of real
estate with work in the education and healthcare sector
as well as security services.

The Food Group has continued to expand its food
and beverage marketing and content development business
with growth coming from its core clients such as Mars,
Mondelēz, Kraft Heinz and Perdue Foods. In addition, it
has added some other great clients to the roster such as
Aramark, World Kitchen, Saputo, Tampa Maid Foods
and the Dairy Farmers of America. Its culinary division,
Creative Food Solutions, continues to grow as it has added
clients Rich Products and Jennie’O Foods, among others.

WPP ANNUAL REPORT 2016

How we’re doing

Report by Mark Read
Chief executive officer
and
Mark Povey
Chief operating officer

marketing transformation and innovation for
leading global brands. Combining technical
expertise with a consumer-focused, insight-

W PP Digital is a group of companies that drives

driven approach, WPP Digital companies deliver award-
winning solutions that allow our clients to reach consumers
in context across all digital touchpoints. 2016 was another
successful year, with the expansion of existing client
relationships, significant new client wins and multiple
industry accolades.

POSSIBLE, an integrated agency, continued its focus
on data, technology, creativity and emotion. Its Empathy
Model, a proprietary tool for analysing the emotions of
social posts, made Coca-Cola the leader in social media
marketing at the 2016 Summer Olympics. POSSIBLE
expanded its Commerce practice by building specific
services and expertise that optimise marketing and sales
performance for brands on Amazon and Alibaba’s Tmall,
and continued to strengthen relationships with Microsoft,
Nestlé, AT&T, Procter & Gamble and Turner, and added
Aston Martin, Adidas, LEGO and Specsavers to its roster.
The agency launched POSSIBLE POV, a curated collection
of articles on all things digital. The agency also expanded
into Germany, Brazil and Argentina and strengthened its
Adobe expertise through the acquisition of Conrad Caine.
SYZYGY enhanced its CGI, virtual reality, innovation,
customer experience, data and media management offerings.
The company acquired USEEDS, a Berlin-based customer
experience specialist, opened new offices in Munich and
London and expanded in the US. Creative director Piotr
Jaworowski was awarded The Internationalist Agency
Innovator award and the agency won Cannes Lions and
MM&M awards for its work on Soolantra. SYZYGY
continued to work successfully with Global Avis globally

WPP ANNUAL REPORT 2016

and Mazda; new clients included Lufthansa, L’Oréal,
Muller, American Express and Facebook.

Creative agency Johannes Leonardo experienced
continued success with its guiding mantra ‘The Consumer
is the Medium.’ JL helped make Adidas Instagram’s
most-liked brand within its category and won new work
with Sonnet Insurance, New York City Football Club,
NBC, Alexander Wang and Bleacher Report. The agency
also added Mass Mutual to its roster and continued to
strengthen relationships with Google and Coca-Cola.

As the network of
communication channels
available to consumers grows
increasingly complex, we
will remain at the forefront
of marketing innovation

Hogarth had a very successful year. Growth in
digital was particularly strong, fuelled by the opening
of a specialist offshore digital production facility in Brazil
and the deployment of dynamic advertising content for
use on the web. The company continued to expand its
offer in TV primary and post production, working with a
number of global brands to consolidate its TV production
activity around the world. Major client wins included
Nespresso, GSK and General Mills. In addition, it
substantially grew the scope and scale of its relationships
with P&G, Santander, TK Maxx and Dow Jones, amongst
several others. The global nature of Hogarth’s leading client
relationships has driven activity across the whole company.
Revenue grew across all regions in 2016, with particularly
strong performances in the US and Latin America.

F.biz maintained momentum, despite a challenging
economic environment in Brazil, and was recognized as
the No.1 digital agency in Brazil by Scopen. In addition
to a Cannes Lion for Unilever work, COO Guilherme
Jahara received the Caboré Award, the most prestigious
national professional award for creative professionals
in Brazil. New clients included Honda Motorcycles
and Ovaltine.

How we’re doing
WPP Digital

Blue State Digital, the leading purpose-driven creative

and technology agency, expanded its portfolio of clients
to include Airbnb, Fair Trade USA, March of Dimes and
Yale University and continued to work with Google, Lloyds
Banking Group and Colgate-Palmolive to deepen their
engagement with customers. BSD’s technology powered
Bernie Sanders’ grassroots movement along with hundreds
of political candidates and advocacy organizations during
the 2016 US election. BSD received a number of awards
including a Lovie for its Tate Modern creative work, a
Shorty Award for the ‘Love Must Win’ campaign with
Freedom To Marry and Webbys for work with NYU’s
Tisch School of the Arts, the Sierra Club and several
trade associations.

Rockfish experienced another year of solid performance

driven by best-in-class ecommerce strategy and execution
of pure-play and omni-channel experiences. It expanded
its offering and activations in innovation-based services for
existing, long-term clients Southwest Airlines, Ford Motor
Company and Sam’s Club, while leaning into emerging
technologies with commerce-focused Internet of Things
and mobile connectivity innovations for CPG and retail
clients. Additional highlights include being named
Innovation Agency of the Year at the iMedia Awards,
key horizontality partnerships within WPP, and new
business wins with Intel, Colgate-Palmolive, Patient
Point and Luxottica/EyeMed.

Digital technology consultancy Cognifide added
Barclays Africa Group Limited to its roster. The company
expanded geographically with new offices in New York
and Johannesburg. Cognifide was named as the UK’s Top
Tech Agency in the EConsultancy Top 100 and recently
spearheaded the WPP Common Ground initiative in
support of #techmums, a project that empowers women
through technology.

WPP’s largest ecommerce agency Salmon expanded
into Northern Europe and India with the acquisition of
ecommerce consultancy Eperium. Salmon launched new
commerce initiatives for Audi UK, Ted Baker, Habitat and
Punch Taverns, in addition to driving digital growth with
existing clients DFS, Game, Sainsbury’s and Selfridges.
The company grew to 700+ employees and has driven
billions worth of digital transactions through its clients’
sites to date.

The Data Alliance, a horizontal team that helps
WPP companies access and leverage data, entered into
partnerships that will benefit WPP companies and their
clients. The group established partnerships with Spotify,
Mobilewalla, Snapchat and VICE. The group will continue
to pursue opportunities that provide access to valuable
insights for all members of the WPP network.

The Data Alliance established
partnerships with Spotify,
Mobilewalla, Snapchat
and VICE

WPP Digital expanded its investment portfolio in
2016 with the addition of Mitú, the largest community
of Latino content creators and social media influencers,
Woven, a digital media company that produces and
distributes pop culture content, and Russel Simmons’
All Def Digital, a leading producer of music and content
tailored to the urban-centric youth population.

In 2017, WPP Digital will continue to explore
acquisition and investment opportunities that enhance
and augment our expertise. As the network of
communication channels available to consumers grows
increasingly complex, we will remain at the forefront
of marketing innovation.

WPP ANNUAL REPORT 2016

How we’re doing

W PP was the first marketing services group

to offer the ‘Team’ model of client service:
pulling together talent and resources from
across the Group’s different agencies,
specialisms and markets to provide fully integrated
solutions that are tailor-made for each client.

The Global Client Team is the most advanced form

of horizontality – WPP’s strategy of ensuring our
businesses and people work together effectively for the
benefit of clients.

There are now 48 Teams, involving almost 40,000
of our people and accounting for more than a third of our
revenues. Each has a dedicated Global Client Leader, who
provides a single point of leadership and acts as a gateway
to WPP’s collective capabilities.

Christian Schroeder
Phil Lancaster

1 Anthony Wong
John Lynn
2
3 Millicent Badillo
4 Alina Kessel
5
6
7 George Rogers*
Erin Byrne
8
Steve Forcione
9
10 Joseph Petyan
Jamie Copas
11
12 David Chapman
13 Kim Brink
14 Chris Hunton
15 Jennifer Graham Clary
16 Daniel Goldberg

Ida Rezvani
17
18 Chris Butler
19 Mike Hudnall
20 Gowthaman
Ragothaman

21 Heather MacPherson
22 Anders Kinberg
23 Deborah Kerr
24 Julia Hammond
25 Lou Aversano
26 Jon Cook
27 Michelle Harrison
28 Sean Howard
29 Michael Buttlar
30 Peter Dart
31 Jaime Prieto

32 Rose Wangen-Jones
33 David Pullan
34 Cecile Berger
35 Philip Heimann
36 Gloria Gibbons
37 Carl Hartman
38 Maggie Helmig
39 Rafael Esteve
40 Joe Rivas
41 Malia Supe
42 Stephanos Klimathianos*
43 Serene Wong
44 Shane Atchinson
45 Eva Ruzicka

* more than one client.

WPP ANNUAL REPORT 2016

How we’re doing

Sub-Regional & Country Managers, who
now cover about half of the 112 countries in
which we operate, is to foster horizontality

T he primary role of WPP’s Regional,

in their markets by helping our businesses to coordinate
their activities and deliver the best resources to clients.
They also ensure we hire the best local talent, and
seek out acquisition opportunities that boost our clients’
and our own business.

r
e
g

i
l

e
S
k
r
a
M

1. Pierre Conte

France

2. Demet Ikiler

Turkey

3. Polo Garza
Mexico

4. Mike Connaghan

WPP AUNZ

5. Ranjana Singh
Indonesia &
Vietnam

6. Roy Haddad

Middle East &
North Africa

7. Andrew Scott
UK & Continental
Europe

8. Scott Spirit

Strategy & Digital,
Global

9. Ranjan Kapur

India

10. Bessie Lee
Greater China

Group photograph of WPP Regional, Sub-Regional &
Country Managers above left, taken at the global WPP
Leadership Conference, London, September 2016; and
above right, those who were not present for the photoshoot.

WPP ANNUAL REPORT 2016

1. TB Song

Greater China

2. Manuel Maltez

Portugal

3. JP Donnelly

Ireland

4. Ruslan Tagiev

Russia

5. Massimo Costa

Italy

6. Miguel Barroso

Cuba

7. Shenan Chuang
Greater China

8. Geoff Wild AM
Australia &
New Zealand

9. Sung Lee
South Korea

10. Roberto Coimbra
Andina region

11. David Lhota
Czech Republic

WPP Leadership Conference, London 2016

WPP’s collective
intelligence

WPP CEO Sir Martin Sorrell
reports

wrote his proposal for an
information management
system at CERN, the

W hen Tim Berners-Lee

European particle physics laboratory, it
was out of frustration that the different
parts of the organisation – both human
and technological – struggled to
communicate with each other.

Data was hard to find, there were

multiple, incompatible computer
systems, and knowledge was not
shared efficiently.

Nearly three decades later, the World

Wide Web that Berners-Lee imagined
has transformed how we communicate
and the way we live our lives – and
yet improving coordination within
companies remains one of the business
world’s most stubborn challenges.

WPP ANNUAL REPORT 2016

What we think
WPP’s collective intelligence

W hy? Because it is a problem that technology

alone cannot fix. When organisations are
successful in getting their people to work
together effectively, it is not because they

have a common IT infrastructure, intranet or cloud-based
file-sharing system, but because they have solved a complex
equation of which technology is just a part – alongside
leadership, motivation, incentives, structure, process,
culture, communication and more.

This is difficult to do, and in large firms that do not

operate under a single brand, it is even more difficult.
Take WPP. As a company that has grown – to a

significant degree – through acquisition, the Group is made
up of many individual agency brands that, traditionally,
have operated largely independently from one another.
Each has its own identity, its own way of doing things,
its own relationships with clients.

This has been a source of great strength for those

companies and for the Group as a whole, and will continue
to be so. But it can also be a barrier to communication
and collaboration between WPP’s constituent parts.

Once upon a time this would not have mattered very
much. It wasn’t important to clients, so it wasn’t important
to us. But clients’ needs have changed – and marketing
services businesses need to change to meet them.

Advertisers or clients increasingly tell us that they
want to take advantage of the full scale and capabilities
of WPP, to receive a tailor-made range of integrated
communications services, and to tap into our talent and
resources wherever they sit within the Group.

WPP’s 205,000+ individual
brains represent the planet’s
greatest store of marketing
services insight, expertise,
creativity and experience

Connected know-how

Horizontality is best described as ‘connected know-how’:
a way of working that unites people with diverse skills
to deliver seamless solutions for clients. We have
made it our first strategic priority, because client demand
for coordination between the different companies and
disciplines within parent groups is growing stronger
all the time. We need to continue to do it better than
our competitors, several of whom have now woken up
to its advantages.

Including those of our associates and investments,
WPP’s 205,000+ individual brains represent the planet’s
greatest store of advertising and marketing services insight,
expertise, creativity and experience. The more we work
together, the more we can draw on that collective
intelligence, and the more effective we are on behalf
of our clients as a result.

So how do we connect all that know-how, and deploy

all that talent?

Horizontality takes various forms, ranging from
relatively small-scale collaborations between different
agencies and specialisms around the world to its most
advanced manifestation: the Global Client Team.

Global Client Teams pull together people and resources

from across WPP’s companies, disciplines and markets
to provide the most creative and effective solutions for
a single client’s business. The model is infinitely flexible,
with each Team built around the client’s unique needs.
All Teams have a dedicated leader, who provides a
single point of leadership and access to WPP’s collective
talent and capabilities. This allows clients to pull from
the best of the best, from anywhere within the Group.
WPP pioneered the Team model of client service,
beginning with Ford and HSBC over a decade ago. Ford,
through GTB (Global Team Blue) and Colgate, through
Red Fuse, are the most complete examples today. There are
now 48 Global Client Teams, accounting for more than a
third of WPP’s total revenues and involving almost 40,000
of our people.

Another important integrator is the Country Manager,

Some especially forward-thinking clients began asking
for this over 10 years ago. It was clear that, as well as serving
them through single agencies (each organised as a separate,
‘vertical’ silo), we needed a ‘horizontal’ offering that spanned
the entire Group. We needed to stimulate co-operation across
company, functional and national boundaries, and we
needed to share information much more effectively.
And so something we call ‘horizontality’ was born.

whose job is to encourage horizontality in specific
geographic markets in order to deliver the best resources
to clients, to identify acquisition opportunities and to help
recruit local talent. We currently have WPP Country and
Regional Managers, covering about half of the 112
countries in which we operate.

We have also established a number of sector-specific

WPP practices and other cross-Group units, through

100

WPP ANNUAL REPORT 2016

What we think
WPP’s collective intelligence

which our companies share knowledge, pool resources
and coordinate services for clients. They include The Store
(retail), WPP Digital, The Government & Public Sector
Practice, The Data Alliance, WPP Health & Wellness and,
most recently, The WPP Sports Practice.

WPP Health & Wellness is particularly significant as
it represents the first time in our history that an operating
company has carried the WPP brand. Comprising all of
our healthcare agencies, pharmaceutical and consumer
healthcare client teams, and new horizontal health
partnerships across all the Group’s major companies, it
breaks new ground by going to market explicitly under
the WPP banner.

WPP united

We will continue to travel in this direction, behaving less
and less as a loose federation of independent companies,
and more and more as one, united firm.

This will be particularly pronounced in our media
investment and data investment businesses, GroupM and
Kantar, which between them represent approximately half
of the Group’s revenues.

WPP Health & Wellness
breaks new ground by going
to market explicitly under
the WPP banner

When we have been successful in winning big pitches

over the last year or so, it was because we presented a
tightly integrated offer, with media and data in lockstep
alongside creative and strategy. And when we failed to
present an integrated offer, we failed to win the business.

We are unique among our industry peers in having our
own data business. Our ability to leverage that proprietary
first-party data and apply our insights to the media
investment we make on clients’ behalf, and to our wider
business, is a source of value to those clients and
competitive advantage to us.

For some, the idea of ‘one WPP’ is controversial.
We certainly can’t push agencies down this road too fast.
It needs to be a gradual process, handled with great care.
Controversial or not, though, such integration is inevitable
if we are to retain our place as essential partners to brands.

As Marc Pritchard, Procter & Gamble’s chief brand officer,
put it when addressing agencies at an industry conference
last year: “Your complexity should not be our problem.”

With ever greater frequency, global clients are
conducting reviews and calling pitches at the level of
parent company rather than individual networks or
agencies. Those with the most joined-up, comprehensive
offer, and who present it most compellingly, will be the
winners in this new landscape.

The collaborative instinct

The large majority of people within our agencies don’t,
in fact, need much pushing.

Tim Berners-Lee’s proposal wasn’t just a response to a
problem – it was a hopeful vision of what might be possible.
He identified not only the need for a better approach, but
the potential of an idea based on essential truths about
human nature.

“CERN is a wonderful organisation,” he wrote.
“It involves several thousand people, many of them very
creative, all working toward common goals. Although they
are nominally organised into a hierarchical management
structure, this does not constrain the way people will
communicate, and share information, equipment and
software across groups.”

He also said his best source of information was often

asking people what they were working on while they were
having a coffee break – which if nothing else shows that
particle physics is as reliant on caffeine and gossip as our
own business.

His point was that you don’t have to force people to
collaborate – they do it naturally. The challenge, then, is
to facilitate that collaboration, and to remove those things
that stop it happening.

For our people, horizontality provides exposure to,

and the opportunity to work with, a wider range of
colleagues and clients across a broader spectrum of
marketing disciplines. This is particularly the case in our
new colocations, such as the WPP Campus in Shanghai,
which bring the Group’s agencies together under one roof
in a single, beautifully designed, ultra-modern building.
Madrid and Amsterdam are next, with more to follow.
Informal interaction and networks are critical to

organisations of all kinds, and our new shared office spaces
are specifically designed to enable the open, face-to-face
exchange of ideas and information (including conversations
over coffee) that help people do their best work.

WPP ANNUAL REPORT 2016

101

In September 2016, Kantar, our data investment
business, launched a new corporate identity covering its
12 operating brands, reflecting its own ongoing change
program. As well as creating a single family of brands, the
program fosters and rewards much greater collaboration
between them, with the aim of presenting clients with more
easily-navigable and connected solutions that draw on
the best of Kantar’s expertise.

And in November 2016, GroupM, the parent company

to our media agencies, announced the creation of
[m]PLATFORM, the industry’s most advanced technology
suite of media planning applications, data analytics and
digital services.

Horizontality is happening not
only between our companies
but within them

The platform brings together – under one team –

capabilities from GroupM and other WPP businesses,
including search, social, mobile, digital ad operations and
programmatic. It connects wide-ranging WPP data sources
across Kantar and Wunderman; third-party data providers;
GroupM’s data from unique agreements with global media
partners; and clients’ own data when they choose.
[m]PLATFORM is supported by a team of data
scientists, technologists and digital practitioners from
GroupM specialist companies and Xaxis, our programmatic
digital media platform, and it allows media planners at all
GroupM agencies to use the most detailed consumer data
to achieve results for their clients.

What we think
WPP’s collective intelligence

Common platforms

In a group of our size and international spread, virtual
spaces are, of course, vital for collaboration too.

In 2014, we began a major program of transformation

and investment in our global information technology
systems. Many of our operating companies now share a
common IT infrastructure and set of applications. If this
sounds a little underwhelming, consider that for the first
30 years of our existence, most of WPP’s companies had
their own, often proprietary systems that (like some agency
CEOs) resolutely refused to talk to each other.

Happily, in both cases, that no longer applies. For the
first time, there is a single email and calendar platform, a
directory with the details of everyone within the Group and
a common file-sharing application. Simple things that have
a huge impact on how we all work together.

Team Unilever, which handles one of our biggest global

client relationships, has taken advantage of these shared
platforms with the launch of Central, a new community
and publishing platform for the 15,000 people and 80
different agencies working on Unilever business worldwide.
It is a tool not only for sharing news and information

but also for building a greater sense of cohesion,
understanding what colleagues are working on and,
critically, sourcing talent and expertise. Expect to see
more initiatives like this among our other client teams.

Horizontality within

Horizontality is happening not only between our
companies but within them.

In January 2017, Ogilvy & Mather, the global

marketing communications network, unveiled a
transformation program that will see the company unified
as a single-branded, fully integrated enterprise, Ogilvy. The
reorganisation will simplify both how the company markets
itself around the world and its own internal structure.

Like all WPP businesses, Ogilvy’s essential offering is
the quality of its talent, and the company’s ‘One Ogilvy’
strategy is designed to ensure that its people are able to
work together as seamlessly as possible.

102

WPP ANNUAL REPORT 2016

What we think
WPP’s collective intelligence

Worldwide communications services expenditure 2016 $m

North America
Latin America
Europe
Asia Pacific
Africa & Middle East
Total

Advertising
188,675
36,412
105,569
176,515
17,414
524,585

Data investment
management
19,640
1,800
16,800
6,000
760
45,000

Public
relations
4,300
480
2,700
4,950
158
12,588

Direct & specialist
communications
109,681
38,084
114,759
61,442
2,204
326,170

Sponsorship
22,400
4,500
15,900
14,800
2,600
60,200

Total
344,696
81,276
255,728
263,707
23,136
968,543

Source: GroupM
Note: Healthcare communications ($5.0 billion) is distributed pro-rata in Direct & specialist communications.

Media and marketing investment vs GDP 2012-2017f
% change

o Media and
marketing

annual % change
o Global nominal
GDP % change

5.5

5.0

4.5

4.0

3.5

2012

2013

2014

2015

2016f

2017f

Source: GroupM
f: Forecast.

A model for our times

One of the reasons that clients are increasingly attracted to
WPP’s horizontal, Team model of service is the efficiencies
of scale we are able to offer. In today’s low-growth,
cost-constrained corporate world, this is becoming ever
more important.

Since the financial crisis, heralded by the collapse of
Lehman Brothers nearly a decade ago, top-line growth has
been hard to come by, boards and investors have been ultra-
conservative, and companies have been reluctant to invest.
As a result we have seen a much greater focus on
cost reduction, consolidation on a massive scale, the
widespread stockpiling of cash, and a boom in share
buy-backs and dividends.

By one measure, at least, corporate America is shrinking.

In 2009, 60% of earnings across the S&P 500 were spent
on share buy-backs and dividends. That ratio passed 100%
at the beginning of 2015, and rose to 131% in the first
quarter of 2016. In the FTSE 100, the dividend-payout ratio
has climbed from below 40% in 2011 to over 70% in 2016.

Worldwide, corporate investment as a proportion of GDP

has continued to decline. In the US, fixed capital investment
by business is at its lowest ebb for more than 60 years.
Companies are, consequently, sitting on huge amounts
of uninvested cash. McKinsey & Company estimate that
corporate cash holdings are the equivalent of 10% of GDP
in the US, 22% in Western Europe and 47% in Japan.

What all this tells us is that companies lack the will or,
perhaps, the confidence to invest in their own growth and
development, and prefer instead the seemingly risk-free
approach of returning funds to shareholders or retaining
ever-larger cash balances.

By choosing short-term risk-avoidance, though, they
are piling up far greater dangers for the future. Long-term
success relies on investment in those things that drive a
business forward – brands, research and development,
innovation and marketing.

The pressure faced by leaders to manage their businesses

for short-term results is intense. The number of listed
firms in the US has halved in the last 20 years, driven by
consolidation and the pursuit of savings. In 1990, there were

WPP ANNUAL REPORT 2016

103

What we think
WPP’s collective intelligence

Shape of global recovery
% change

o Advertising
o Global nominal
GDP

-5

-10

Source: GroupM
f: Forecast.

02 03

06 07 08 09 10 11 12 13 14 15 16f 17f

Nominal GDP projections 2016-2018f
% change

o 2016f
o 2017f
o 2018f

World
output

China

Japan

Germany

France

India

Italy

Brazil

Canada

Source: GroupM
f: Forecast.

104

WPP ANNUAL REPORT 2016

11,500 M&A deals worldwide; since 2008, the number has
more than doubled to 30,000 a year, with a value equivalent
to approximately 3% of global GDP.

So-called legacy companies are squeezed from all sides –

by activist investors, by zero-based budgeters, and by new,
disruptive competitors. Analysts and the financial press,
meanwhile, obsess over the minutiae of quarterly results
as if they were the key to a company’s entire future, rather
than a snapshot of its fortunes over a mere three months.

Short-termism on the rise

In a 2013 McKinsey survey of more than 1,000 top
executives, nearly two-thirds said that pressure to deliver
short-term financial performance had increased in the
prior five years, and nearly 90% agreed that “a longer
time horizon to make business decisions” would boost
corporate performance.

The potential value unlocked by
companies taking a longer-term
approach was worth more than
$1 trillion in forgone US GDP over
the last decade

When the exercise was repeated in 2016, the situation
had deteriorated further. Whereas, in 2013, 79% felt under
particular pressure to demonstrate results within two years
or less, by 2016 that figure had risen to 87%.

The 2016 study identifies the vicious circle of short-

termism that makes it such a difficult disease to cure:
“While executives may feel that investor pressure forces
their hand, the short-term objectives and metrics they set
also push investors to shorten their horizons to match the
data available to them.”

CEOs have complained of this for some time, but until

now there has been little evidence to support their case.
In February this year, McKinsey published a new piece of
research led by Dominic Barton, the firm’s global managing
partner. It identified US companies that take the long view
and found that, between 2001 and 2014, their revenue
grew on average 47% more than that of other firms; their
earnings grew 36% more; and their profit grew 81% more.

What we think
WPP’s collective intelligence

Long-term companies invested almost 50% more in

In September 2016, with BlackRock, The Dow Chemical

research and development; their market capitalisation
grew $7 billion more than that of other businesses; their
total shareholder return was greater; and they added
nearly 12,000 more jobs on average.

The report lays bare the cost of short-termism: “Had
all firms created as many jobs as the long-term firms, the
US economy would have added more than five million
additional jobs over this period… this suggests, on a
preliminary basis, that the potential value unlocked by
companies taking a longer-term approach was worth more
than $1 trillion in forgone US GDP over the last decade.”

McKinsey is one of the founders, alongside the Canada
Pension Plan Investment Board, of Focusing Capital on the
Long Term – an initiative aimed at promoting long-term
thinking in business and investment, that we also support.

Company and Tata Sons, the founding partners relaunched
the scheme as FCLT Global, an independent not-for-profit
with its own CEO. FCLT Global is part of a growing
movement to raise awareness of the damaging effects of
short-termism and develop strategies for defeating it.

Late last year, US educational and policy studies
organisation The Aspen Institute assembled leaders from
global businesses including Unilever, Pfizer, Royal Dutch
Shell, Levi Strauss and WPP to launch The American
Prosperity Project – “a non-partisan framework for
long-term investment.”

The launch was a call to action not only for business
leaders but also policymakers, recognising that progress
is impossible without partnership between the public
and private spheres. As The Aspen Institute puts it,
“Neither business nor government can shoulder this
responsibility alone.”

Average job creation: long-term vs others
Annual cumulative jobs added

o Long-term
o All others

+20,000

+10,000

Starting employment

+11,600

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Average company economic proﬁt: long-term vs others
$ million per year

o Long-term
o All others

Financial crisis

1,000

800

600

400

200

0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

+81%

Source: McKinsey Corporate Performance Analytics: S&P Capital IQ: McKinsey Global Institute Analysis

WPP ANNUAL REPORT 2016

105

What we think
WPP’s collective intelligence

Inherent unpredictability

Principal contributors to 2017 media growthf

Central to the Aspen project is spending on infrastructure,
chiming with President Trump’s plans to invest $1 trillion
in “transportation, clean water, a modern and reliable
electricity grid, telecommunications, security infrastructure,
and other pressing domestic infrastructure needs” (to quote
from the campaign literature).

Not for the first time, residents
of the Davos bubble (of which
I am one) had misjudged the
public mood, failing at the
previous meeting to predict
the result of either the US
election or the Brexit vote

If these plans become reality, they are likely to boost
growth and inflation, perhaps delivering a two- to three-
year Keynesian/Trumpian boom. But what we gain on
the US domestic swings we may lose on the international
roundabouts, given the inherent unpredictability of
President Trump’s impact overseas. The ‘Muslim travel
ban’ and suspension of the US refugee program provided
an early and particularly vivid example of that. Large
question marks also hang over the US approach to Russia,
China, Mexico and NATO, to name just a few examples,
adding further clouds to an already uncertain outlook for
business globally.

The wave of populism that swept President Trump to
power, dumped (or is in the process of dumping) the UK
out of the European Union and rocked the Establishment
the world over, was the single most fretted-over
phenomenon for delegates at the World Economic Forum
in January 2017.

Not for the first time, residents of the Davos bubble
(of which I am one) had misjudged the public mood, failing
at the previous meeting to predict the result of either the
US election or the Brexit vote.

Although I thought Hillary Clinton would emerge as
the winner, as the Primaries got under way I wrote that
“Davos is a long way from the heartlands of America,

106

WPP ANNUAL REPORT 2016

ASIA PACIFIC (all)
NORTH ASIA
China
NORTH AMERICA
US
WESTERN EUROPE
LATIN AMERICA
UK
Argentina
Japan
ASEAN
CENTRAL & EASTERN EUROPE
India
MIDDLE EAST & AFRICA
Russia
Egypt
Australia
Philippines
Brazil
Spain
Thailand
Vietnam
South Korea
Turkey
Canada
Indonesia
Mexico

Source: GroupM
f: Forecast.

Contribution
$m
11,064
6,634
6,242
4,979
4,684
2,785
2,360
1,553
1,426
1,355
1,349
1,144
1,063
631
533
496
482
428
372
349
330
328
312
303
295
266
213

Contribution
%
48.2
28.9
27.2
21.7
20.4
12.1
10.3
6.8
6.2
5.9
5.9
5.0
4.6
2.7
2.3
2.2
2.1
1.9
1.6
1.5
1.4
1.4
1.4
1.3
1.3
1.2
0.9

where dissatisfaction with the political Establishment runs
deep. The economic crisis, recession, unemployment, wage
stagnation and so-called ‘hollowing-out’ of the middle
classes that followed the collapse of Lehman Brothers in
2008 have opened the door to populists… Trump showed
he can translate celebrity into votes… he has tapped into
something very important that cannot be ignored.”

As President, Donald Trump continues to tap that well

of public discontent. Alongside controlling immigration,
job creation and job repatriation are at the top of the
President’s list of promises to the American people.
Globalisation has been the bogeyman but there are other,
perhaps more fundamental, threats to employment.

What we think
WPP’s collective intelligence

Contributors to 2017 media growth by region/countryf $m

UK
1,553

Central &
Eastern
Europe
1,144

Western Europe
2,785

Middle
East & Africa

631

US
4,684

Latin
America
2,360

China

6,242

Japan
1,355

India
1,063

Australia
482

Source: GroupM
f: Forecast.

Robots and robber barons

At the beginning of 2017, I attended the Consumer
Electronics Show in Las Vegas – a highly-polished showcase
for everything from the latest smartphone, TV and in-car
technology to virtual and augmented reality, artificial
intelligence robotics and home automation. But beneath
the buzz surrounding the toys and gadgets, there was
serious discussion of the potentially darker implications
of technology’s ubiquity.

Voices as diverse as Stephen Hawking, Citibank and the
University of Oxford have warned of the risks of automation
to human employment. Subject to the constraints of
economic viability, most things that can be automated will
be automated. One study has suggested that 35% of UK
jobs face being replaced by robots, a figure that rises to
almost 50% in the US and 77% in China.

At the same time, a new breed of corporation has
grown to dominate the business landscape. There have
always been very large companies, of course, but today’s
big beasts are different.

A recent report in The Economist highlights the issue:
“In Silicon Valley a handful of giants are enjoying market
shares and profit margins not seen since the robber barons
in the late 19th century... In the old days companies with
large revenues and global footprints almost always had lots
of assets and employees. Some superstar companies, such
as Walmart and Exxon, still do. But digital companies with
huge market valuations and market shares typically have
few assets.”

The report points out a startling contrast: a quarter of
a century ago, the three biggest automotive manufacturers
in Detroit had nominal revenues of $250 billion, a market
capitalisation of $36 billion and 1.2 million employees; in
2014 the three biggest players in Silicon Valley had revenues
of $247 billion, were capitalised at over $1 trillion and had
just 137,000 people on their books.

The tech giants have ushered in an era of massive scale
accompanied by minimal employment. Expect the debate
to get louder as this trend accelerates.

World’s largest listed companies by market capitalisation 2006 vs 2016* $bn

200

400

600

2006

Energy

Exxon Mobil

Financials

General Electric

Healthcare

Microsoft

Industrials

Citigroup

Gazprom

PetroChina

ICBC

Toyota

Bank of America

Royal Dutch Shell

200

400

600

2016

Apple

Alphabet

Microsoft

Berkshire Hathaway

Exxon Mobil

Amazon

Facebook

Johnson & Johnson

JP Morgan Chase

General Electric

* Data as at 31 December 2006 and 2016.
Source: Bloomberg

WPP ANNUAL REPORT 2016

107

What we think
WPP’s collective intelligence

Tech companies faking it?

The digital duopoly enjoyed by Google and Facebook
is the most striking aspect of the contemporary media
business landscape. Their dominance and influence has
brought scrutiny – and criticism.

Facebook was forced to admit to a series of
embarrassing errors after it repeatedly overstated the
metrics used to gauge the effectiveness of advertising,
prompting wider questions about the value of digital ad
spend in a market already dogged by concerns over
viewability, third-party verification and fraud.

More damagingly, along with Twitter and Google
it was thrust into the limelight during the fractious US
Presidential campaign, accused of giving a platform to
hatred and fake news, and even of swaying the result itself.
The long-standing collective defence to such claims is that
they are not media companies but tech companies – a
defence that’s wearing pretty thin.

Google and Facebook are, after all, the largest and third

largest recipients of our media spend on behalf of clients,
at around $5 billion and $1.7 billion respectively in 2016
(the second largest is 20th Century Fox/News Corp/Sky
at $2.25 billion). That’s a lot of media bought from
organisations who claim not to be media owners.

Although they masquerade as tech, they are in the
business of monetising inventory, just like any traditional
media group. Unlike them, however, they seek to
disassociate themselves from the content on which they
rely, claiming to be mere digital plumbers with little or
no responsibility for what flows through their pipes.
They are finding this line increasingly difficult to hold.

As Robert Thomson, chief executive of News Corp,
put it: “These companies are in digital denial. Of course
they are publishers and being a publisher comes with
the responsibility to protect and project the provenance
of news. The great papers have grappled with that sacred
burden over decades and centuries, and you can’t absolve
yourself from that burden or the costs of compliance
by saying, ‘We are a technology company’.”

Digital advertising in the spotlight

Media agencies have also faced questions over their role in
a less-than-perfect digital inventory supply chain, and their
supposed complicity in a system that supports questionable
content rather than quality publishing.

Increasing automation has brought advertisers significant

benefits in terms of greater efficiencies and better targeting
but, in the digital and programmatic world, there is a risk
of advertising appearing in inappropriate contexts, of bots
notching up fraudulent views and of ads being paid for but
hardly seen.

Given these risks, GroupM has taken a very public,

proactive leadership role in championing viewability,
anti-fraud and brand safety measures. No one has fought
harder to ensure quality in digital advertising.

GroupM is the only media investment business with
a dedicated global team focused on digital supply chain
integrity. It uses every available brand safety tool and
supports or leads every industry effort that drives up
standards in the digital media marketplace. It helped found
and fund the Trustworthy Accountability Group (TAG) and
other initiatives that benefit the industry as a whole. And it
has developed trusted marketplaces, outside open networks,
where advertising is placed only with well-known, safe media
partners who do not carry fake news or hate speech.

GroupM has shown that with the right mitigation
strategy and by working with the best technology partners,
it is possible to ensure that the overwhelming majority of
advertising is published alongside contextually relevant and
appropriate media content.

Brand safety measures are, however, only as good as the
oversight and coding of content by the digital media owners
themselves, who have ultimate responsibility for what
appears on their platforms. To take YouTube as an example,
if Google fails to correctly identify video content, it becomes
impossible for advertisers to completely exclude risk when
buying online inventory.

As the neutral intermediary between brands and media
owners, GroupM will continue to work with all parties to
drive continual improvement in this still very young and
fast-developing market.

Enduring strength

There are those who point to the rise of adtech and martech,
the walled gardens of Facebook and Google, and the
growing interest in our sector of acquisitive management
consultancy firms, and would have you believe that we are
in a period of unprecedented change or even existential
threat to the advertising and marketing services business.
This argument is somewhat lacking in supporting data.

The direction of the wind always changes, and WPP
has always had a very good weather vane. Ours is a history

108

WPP ANNUAL REPORT 2016

What we think
WPP’s collective intelligence

Growth of media in major markets 2012-2017f %

Internet

North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

Television
North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

2013
2014
2015
9.8 12.1 11.5

2016f 2017f
2012
9.2
10.3
8.4
27.1 38.2 n/a3 60.4 n/a3 17.1
11.5
9.7 11.4 11.9 12.3 10.6
29.3 21.7 11.8 13.6 16.3 14.4
24.5 26.9 27.0 27.4 23.4 18.2
39.2 39.4 34.6 33.9 27.8 20.7
60.1 57.0 55.3 49.0 32.0 23.9
57.0
6.4
15.5 15.4 16.6 17.9 14.6 13.3

5.9 34.9

8.8

7.3

2014
3.5
9.7
3.3
3.1
1.5
-1.8

2013
2012
3.9
0.9
8.3 19.7
-6.1 -0.5
3.1
2.3
4.4
5.7
5.8
3.0
13.8 16.5 10.9 15.4
7.5 -8.2 21.0
12.5
1.8
2.9
3.8
3.7

2016f 2017f
2015
1.9
3.9
-0.1
5.2
5.8
4.5
1.5
3.0
2.8
8.4
-2.9
7.9
0.9 -0.4
0.6
-2.8 -4.6 -4.4
6.3 11.2
6.6
7.0
2.2
2.8

Outdoor
North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

2012
3.7
12.2
-2.7
3.1
12.0
18.5
17.8
26.5
7.3

2015
2.0

2016f 2017f
2014
2013
0.1
3.0
3.1
3.2
5.0 24.4 50.7 26.4
2.2
2.5
-1.9
4.7
-0.1
6.5
2.8 -0.4 -10.7
3.0
0.0
6.3
4.9
3.8
8.7 -0.8
5.9
6.0
-1.0
-3.1
6.0
0.4
6.2
1.3
0.6
4.2
1.7
3.6
2.9

2.9
5.6
3.3
3.5
9.7
2.5
5.1

Magazines

North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

2014

-9.0 -8.2

2012
1.9
0.0 -3.2

2016f 2017f
2013
2015
0.0 -4.3 -3.2 -2.5 -3.3
2.3 -4.6
-8.7 -5.5 -6.2 -5.4 -4.6
-9.3 -6.5
-9.8
-1.8 -12.3 -16.6 -29.0 -23.9
-9.5
-12.7
6.3 -11.8 -12.5 -13.0 -8.3
-1.6 -2.5 -5.4 -5.0 -4.4 -4.4

-10.3
-4.1 -11.5 -10.7 -19.8
0.0 -2.6
4.7
-1.8 -5.6 -10.0 -8.2 -15.8

-8.1 -12.6

-7.6

Radio
North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

2013
2014
2012
0.1 -3.5
4.4
6.7
7.6
2.5
2.7
-2.3
-2.9
2.2
2.6
8.5
3.4
-2.4
4.9
2.1
7.1
1.5
6.4 10.3
9.5 -25.5
-1.7
-9.1
5.1
1.2
0.1
4.2 -0.1

2016f 2017f
2015
2.6
3.2
-1.6
2.2
0.6
4.7
1.0
1.9
1.9
-5.1
4.5
4.8
4.9 -0.3 -0.2
6.2 -6.3 -6.6
6.3
4.3
3.5
-1.9
1.6
1.6

35.3

Cinema
North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

2016f 2017f
2013
2015
2014
2012
4.3
4.5
0.0
4.3 -16.7 15.0
-1.3
-1.4 15.5 21.3 25.5 -10.2
3.6
2.6
3.2 -10.8
-2.8 13.9
-2.9
9.8 10.5
4.5
6.7
1.1
-2.9 18.5 13.3 11.4
12.0 -8.3
0.0 -4.8 -5.0
4.0
4.2
6.5
6.9
5.7
2.0 -32.6 19.0 11.0
4.9
3.2
-1.7 16.1

0.0
11.8 -27.7 -13.9 19.3
-0.1
4.7 -5.2

Newspapers

North America
Latin America
Western Europe
Central & Eastern Europe
Asia Pacific (all)
North Asia1
ASEAN2
Middle East & Africa
World

2014
-5.9
-1.7

2015
-7.3
1.5 -3.5

2016f 2017f
2013
2012
-9.3 -8.6
-4.8 -4.0
3.5
3.4
6.9
-9.9 -10.1 -5.4 -6.8 -5.7 -6.0
-9.0
-9.2
-7.7 -4.7 -3.6
-1.4
-7.4
-7.8 -12.0 -12.2
-2.9
-2.4
-5.1 -15.0 -26.7 -31.9 -24.1
-5.1
-7.2 -6.0 -10.1 -4.3
8.0
1.5
-4.9
-7.6
-0.1 -12.2 -16.2 -10.8
-5.1 -4.7 -6.6 -8.6 -8.9 -6.6

Source: GroupM
f: Forecast.
1 China, Hong Kong, South Korea, Taiwan.
2 Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam.
3 2014 and 2016 Latin America growth figure affected by method change and

therefore not shown.
(Figures rounded up.)

WPP ANNUAL REPORT 2016

109

What we think
WPP’s collective intelligence

of rapidly and successfully adapting our existing businesses
by developing or acquiring new skills to meet the changing
needs of the market and our clients.

Walled gardens are not a new phenomenon. The
US TV giants were once as powerful oligopolists as the
current generation of digital media firms are today. In
media planning and buying, our role has always been to
extract maximum value from media platforms on behalf
of advertisers to help them achieve their objectives – that
hasn’t changed.

Advertisers rely on us for objective assessment of the
value of those different platforms. Google and Facebook
both think they have all the answers, but they can’t both
be right. Clients know this, and although some work direct
with media owners some of the time, very few work direct
all of the time.

At WPP we have a range of capabilities that any single
advertiser would find it very difficult to replicate in-house.
We are expert in managing data and systems that can be
applied to advertising; we work with every media platform
everywhere in the world; we have visibility across all
channels and all product and service categories globally;
we have deep institutional knowledge in every business
sector in a world of high talent mobility on the client side;
and we are uniquely well placed to stay abreast of the
myriad product and technology changes in the market.

In contrast, consulting businesses are flawed by their

lack of geographic reach, their lack of exposure across
channels and their lack of exposure in a meaningful way
to media markets. If you don’t trade in the product it’s
hard to understand it.

Adtech and martech products are complex to choose,

use and change. We play a vital role in selection,
implementation, operation and – most crucially – in
managing switching between components. This expertise
stems from the fact that WPP has always been an early
adopter of technology and its application to marketing
services. Our rapid deployment and integration of
technology has created new opportunities in many of our
businesses (from GroupM and Xaxis to Wunderman and
AKQA) and enduring relevance and strength for WPP itself.
And what of creativity, the heart of our business? In
today’s disrupted, technology-driven market, demand for
creative services remains as strong as ever. Or, more simply,
there’s still no substitute for a brilliant idea for a campaign.
And there is no organisation on earth with more people
who excel at producing such ideas than WPP.

Our record at the Cannes Lions International Festival
of Creativity, where we have been named the most creative

110

WPP ANNUAL REPORT 2016

group for the last six years, is testament to that, while
our five consecutive Effies, recognising the effectiveness
of marketing campaigns, proves the business value of
such creative excellence to clients.

If anything, the need for creative talent has grown
rather than diminished. New channels require new assets
and formats, boosting demand for agencies, individuals
and teams that can produce platform-specific work.

Fuel in the tank

WPP is the leader in our industry but scale has value
only when it is harnessed. We have done that very effectively
for many years in some parts of the Group, not least in our
media division GroupM, but we have yet to do so fully in
other areas of our business. In other words, there is a great
untapped opportunity within WPP to improve how we
operate and the results we are able to produce for our clients.
Horizontality is the means of unlocking that value.
In some respects it is frustrating that we are only at the
beginning of the journey towards a more integrated WPP
(I have never been a patient person). Fundamentally,
though, it is good news. It means we still have a lot of
fuel in the tank.

Our collective effort, collective strength and, above all,
collective intelligence will be a growing source of advantage
over new and existing rivals. On their own, WPP’s
companies are formidable. Together, they become a
competitor few can ever challenge.

In the meantime, remember…

1. The next one billion middle-class consumers will come
from Asia Pacific, Latin America, Africa and the Middle
East and Central and Eastern Europe.
2. Given falling birth and death rates, talent will become
the scarcest resource.
3. There is a need for ‘Third Forces’ to challenge the digital
dominance of Google and Facebook.
4. Amazon and Alibaba are becoming the online Walmart
of the future.
5. Internal communications are one of the keys to strategic
alignment.
6. Internal organisations are being built globally and locally.
7. Finance and procurement are looking at marketing as a
‘cost’ not an investment.
8. Government is becoming a more important potential client.
9. Sustainability is the core of long-term strategic success.
10. Short-term pressures will increase consolidations and
convergence.

What we think

Just Because You Can
Doesn’t Mean You Should
How ‘personalisation’ can get
altogether too personal for comfort

By Jeremy Bullmore

Then new technology comes along – and suddenly
you can. So you do.

F or years, you’ve been unable to do something.

to be thoughtlessly followed. It’s unwise to assume that just
because you’re now free to do something from which you
were previously debarred, it must be in your interest to grab
it. It ain’t necessarily so.

It’s an entirely human instinct – but not one

Ever since the advent of mass media, marketing people

have bemoaned their lack of precision. “I know that half
the money I spend on advertising is wasted. The only
trouble is that I don’t know which half” is a hoary old
saying that has no undisputed source, no historical
validation and is almost certainly apocryphal. The fact
that it survives at all is evidence of the marketing world’s
continuing uneasiness about what is seen as ‘waste’.

You sell, say, disposable diapers. You buy, say, 30
seconds’ worth of UK television time. You reach, say,
10 million households. Yet there are only 2.5 million
UK households that include babies of nappy-wearing
age. It follows that a considerable proportion of your
media money is ‘wasted’. It seems unarguably obvious.

So when the new digital media come along and seem to
offer you precision targeting, even ‘personalisation’, you are
naturally very interested indeed. Now you can talk only to
families who need to buy diapers and surgically exclude all
those who don’t. You should certainly be interested; but not
all the time and not for everything.

It’s a common flaw in discussions about advertising

to imply – and implicitly accept – that all advertising,
all commercial advertising campaigns, are intended and
expected to perform the same role; and that is to sell.
And while in one way that’s correct – all advertising should

be expected at the very least to pay its way; to be an
investment rather than a cost – in another way, to believe
that the specific task of all advertising is to make a sale
can be dangerously misleading.

As Stephen King reminded us over 40 years ago, the
precise role of any advertisement can usefully be plotted
on what he called a Scale of Immediacy*. At the most
immediate end of that scale, advertising is designed to
trigger the nearest thing possible to an instant transaction.
Before the internet, you could fill out a coupon or pick up
a phone, and today just a couple of clicks can set a sale in
train. That’s about as direct an effect as advertisements
ever have.

In devising such advertising – advertising intended to
get any given consumer actually doing something there and
then – knowledge about that consumer can be invaluable;
and on the whole, the more knowledge you have, the more
valuable it is. The drive for personalisation makes total
sense. To know when an individual may be in the market
for a mortgage, a new car or a holiday villa, is precious
knowledge. It allows you to dangle the offer enticingly
in front of that person at the moment of greatest potential
interest; and, very importantly, that person will probably
be grateful to you for having done so.

But, of course, most advertising isn’t like that. Most

advertising is on behalf of staple brands, repeat purchase
goods and services, and it’s not expected to trigger an
immediate action on the part of its audience. To return
to King’s Scale of Immediacy, advertising for most staple
brands belongs at the lower end of that scale; its mechanism
is indirect. It sets out to remind its audience of the brand’s
existence and purpose; to maintain, nourish and enhance
its general desirability; to increase its brand equity; to add

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111

What we think
Just Because You Can Doesn’t Mean You Should

intangible qualities to its functional core. In other words,
such advertising doesn’t even attempt to make an
immediate sale; its sole purpose to make a brand more
saleable – and to keep it so.

customers. But perfect, detailed knowledge of each one of
several million people is impossible to acquire; openly using
partial knowledge is as likely to alienate as it is to appeal;
and furthermore, it’s quite unnecessary.

This function is usually described as brand-building

The best relationship of a person with a brand is not

and indeed it does build brands. At least as critical,
however, is its role in brand nourishment, brand
sustenance, brand maintenance. It preserves a brand’s
worth, and therefore its profitability.

We won’t respond well to
pushy brands; brands that
claim to understand us when
they clearly don’t. So brands
shouldn’t be seen to be making
all the running

This kind of advertising may well have some immediate

sales effect but that’s not its primary purpose.

I was once given a lift by a 50-year-old friend who’d
recently sold his share in an advertising agency and had
celebrated by buying himself an extremely expensive car.
“I bought this car because I saw an advertisement,” he told
me. “Nothing very special about that, I grant you – except
that I saw that ad when I was 14.”

Not all advertisements are still paying their way after

36 years. But the value of consistent brand advertising,
advertising that remains true to the brand’s character,
and continues to enhance it, can be almost timeless.
And it’s when planning this kind of advertising that
agencies and their clients need to be most wary of the
claims of ‘personalisation.’

As a race, we’re deeply suspicious of being spied upon.

A cartoon of many years ago identified this anxiety
perfectly. A man stands looking at one of those maps of
a town centre to be found in car parks. A large arrow is
labelled: YOU ARE HERE. And the man, clearly unnerved,
is saying, “How do they know?”

Of course it makes perfect marketing sense for

marketing people to know as much as they can about those
whom they hope will become, or remain, their regular

unlike the relationship between two friends. As with
friends, we feel most comfortable with brands when we feel
that in some sense we have discovered them for ourselves.
The disciples of personalisation forget that the human brain
is on constant, unconscious alert for things, ideas, people
with whom it might like to connect.

We don’t, on the whole, like pushy people; people
who get too close at parties and who tell us that they
really, really want to be best friends. And in much the
same way, we won’t respond well to pushy brands; brands
that claim to understand us when they clearly don’t.
So brands shouldn’t be seen to be making all the running.
The skilful brand custodian imbues a brand with
characteristics and character that are most likely to attract
the attention of its clearly defined target audience – and
then invites that audience to make that final, all-important
connection themselves.

Mass media provide exactly
the right balance of reach
and distance

This is by far the best way to first initiate and then
cement a brand relationship – and for two overlapping
reasons. First, because the individual has been an active
participant rather than a submissive recipient, the
relationship will be strong. And secondly, because that
relationship has been in part forged by the individual,
it can only be personal; it can’t be anything else.

So a brand shouldn’t be seen to be trying to get too
close. Any attempt at personalisation will almost certainly
fail. Mass media provide exactly the right balance of reach
and distance. For decades, marketers may have felt they
used them reluctantly because they had no choice. In truth,
only mass media confer the status, the fame and the allure
that make brands individually desirable to millions of
wonderfully disparate individuals.

* Practical Progress from a Theory of Advertisements, 1975.
To be found in A Master Class in Brand Planning, The Timeless
Works of Stephen King, Wiley, 2007.

112

WPP ANNUAL REPORT 2016

Members of the Advisory Board

Jeremy Bullmore
John Jackson
Bud Morten
John Quelch
Richard Rivers
Cuneyd Zapsu

Company Secretary

Marie Capes

Board of Directors
Non-executive chairman

Roberto Quarta
Chairman of the Nomination and Governance Committee
Member of the Compensation Committee

Executive Directors

Sir Martin Sorrell
Chief executive
Paul Richardson
Finance director
Chairman of the Sustainability Committee

Non-executive directors

Jacques Aigrain
Chairman of the Audit Committee
Member of the Compensation Committee
Charlene Begley
Member of the Audit Committee and
Nomination and Governance Committee
Tarek Farahat
Member of the Audit Committee
Sir John Hood
Chairman of the Compensation Committee
Ruigang Li
Member of the Nomination and Governance Committee
Daniela Riccardi
Member of the Nomination and Governance Committee
Nicole Seligman
Senior independent director
Hugo Shong
Member of the Nomination and Governance Committee
Timothy Shriver
Member of the Compensation Committee
Sally Susman
Member of the Nomination and Governance Committee
Sol Trujillo
Member of the Audit Committee

WPP ANNUAL REPORT 2016

115

Who runs WPP
Board of Directors

Board of Directors

Jacques Aigrain Non-executive director Age 62

Roberto Quarta Non-executive chairman Age 67

Roberto Quarta was appointed as a director with effect
from 1 January 2015 and became chairman of WPP
in June 2015. He is Chairman of Smith & Nephew plc,
a FTSE 100 listed global medical devices company and
Partner of Clayton, Dubilier & Rice and Chairman of
Clayton, Dubilier & Rice Europe, a private equity firm.
Previously, he was Chief Executive and then Chairman
of BBA Group plc, Chairman of Rexel SA and IMI plc
and a Non-Executive Director at BAE Systems plc,
Equant NV, Foster Wheeler AG and PowerGen plc.

Sir Martin Sorrell Chief executive Age 72

Sir Martin Sorrell joined WPP in 1986 as a director,
becoming Group chief executive in the same year. He was a
non-executive director of Arconic Inc. until 10 March 2017
and Delta Topco until 31 January 2017.

sirmartinsorrell@wpp.com

Paul Richardson Finance director Age 59

Paul Richardson became Group finance director of WPP
in 1996 after four years with the Company as director
of treasury. He is responsible for the Group’s worldwide
functions in finance, information technology, procurement,
property, treasury, taxation, internal audit and
sustainability. He is a chartered accountant and fellow
of the Association of Corporate Treasurers.

paul.richardson@wpp.com

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WPP ANNUAL REPORT 2016

Jacques Aigrain was appointed a director of WPP on
13 May 2013. He is currently a Senior Advisor at Warburg
Pincus LLP. He was on the Executive Committee of Swiss
Re AG from 2001 to 2009 including CEO from 2006, and
prior to that, he spent 20 years with JPMorgan Chase in
New York, London and Paris. In addition, he is a non-
executive director of London Stock Exchange Group Plc
and a Supervisory Board Member of LyondellBassell NV
and Swiss International Airlines AG. He was Chairman
of LCH Clearnet Group Ltd from 2010 to March 2015,
and also was a Director of the Qatar Financial Center
Authorities until March 2015 and Supervisory Board
Member of Lufthansa AG until April 2015. He is a dual
French and Swiss citizen. He holds a PhD in Economics
from Sorbonne University, and a MA degree in Economics
from Paris Dauphine University.

Charlene Begley Non-executive director Age 50

Charlene T Begley was appointed a director of WPP on
1 December 2013. Most recently, Ms Begley served as a
Senior Vice President of General Electric Company and
the Chief Executive Officer and President of GE Home
& Business Solutions at General Electric Company. In
this role, she had responsibility for $9 billion of revenue
with the GE Appliances, Lighting and Intelligent Platforms
businesses, as well as served as the company’s Chief
Information Officer and led the Sourcing Council and
Corporate Leadership Staff. As CIO, she managed a budget
of $3.7 billion and led 10,000 IT professionals with a
strong focus on business process excellence, simplification,
collaboration and security and compliance. Over her
career at GE, she served as President and Chief Executive
Officer of GE Enterprise Solutions, GE Plastics, and
GE Transportation. In addition, she led GE’s Corporate
Audit Staff and served as the Chief Financial Officer for
GE Transportation and GE Plastics Europe and India.
Ms Begley currently serves as a non-executive director
and member of the Audit Committee of NASDAQ OMX
and non-executive director and member of the Audit and
Nominating Committees of Red Hat. Ms Begley was a
director of Morpho Detection, Inc. and GE Fanuc JV. She
was recognized as a Young Global leader on the World
Economic Forum and Fortune’s “Most Powerful Women
in Business”. Ms Begley graduated Magna Cum Laude
from the University of Vermont in 1988 with a BS Degree
in Business Administration.

Who runs WPP
Board of Directors

Tarek Farahat Non-executive director Age 52

Ruigang Li Non-executive director Age 47

Tarek Farahat was appointed a director with effect
from 11 October 2016. He is JBS’ Global President for
Marketing and Innovation and a member of the Board of
Directors. JBS is the largest protein production company
in the world by sales. He initially joined JBS S.A. in 2013
as an independent non-executive director before taking
on his current executive role in 2015. Mr Farahat serves
on the Board of Alpargatas S.A. Prior to JBS S.A.,
Mr Farahat spent 26 years at Procter & Gamble, in a
range of marketing and general executive management
roles, working across Europe, the Middle East, Africa and
Latin America, including the General Management/Vice
President roles of the Latin America region from 2001. As
the head of Procter & Gamble operations in Brazil (2006 –
2012) he led the company to a period of accelerated growth
as well as successfully integrating the Gillette business. In
2012, he was elected by the board of directors of Procter &
Gamble as President for Procter & Gamble Latin America
and was also appointed to Procter & Gamble’s Global
Leadership Council. Mr Farahat has a BA Business degree
from the American University in Cairo and a degree in
Finance from Cairo University. He is a joint Egyptian and
Brazilian citizen.

Sir John Hood Non-executive director Age 65

Sir John Hood was appointed a director on 1 January 2014.
An international education and business leader, he was
formerly Vice-Chancellor of the University of Oxford and
of the University of Auckland. In his native New Zealand,
he served as Chairman of Tonkin & Taylor Ltd and as
non-executive director of Fonterra Co-operative Group,
ASB Bank Ltd, and other companies. Sir John currently
serves as President & CEO of the Robertson Foundation,
and as Chairman of Study Group Limited and BMT Group.
He also serves as Chair of the Rhodes Trust. Sir John also
serves on the board of Aurora Energy Research. Sir John
earned his PhD in Civil Engineering from the University of
Auckland and then won a Rhodes Scholarship to Oxford,
where he was awarded an MPhil in Management Studies.
Sir John has been appointed a Knight Companion to the
New Zealand Order of Merit.

Ruigang Li was appointed a director of WPP on
12 October 2010. He is the Founding Chairman of
CMC Capital Partners and CMC Holdings (CMC),
China’s most prestigious platforms for media and
entertainment investment and operation with an extensive
coverage across the entire spectrum of traditional and
internet space. Ruigang Li has led CMC to create a number
of champions and emerging leaders in key sub-sectors
including television, film, animation, sports, music,
location-based entertainment, financial media, financial
and media data services, advertising, e-commerce,
ticketing, mobile video social network, game and
education. Ruigang Li was the Chairman and President
of SMG (Shanghai Media Group) for more than 10 years
and successfully transformed SMG from a Shanghai-
based provincial broadcaster into China’s leading media
conglomerate with the most diversified business scope.

Daniela Riccardi Non-executive director Age 57

Daniela Riccardi was appointed a director on 12 September
2013. A prominent FMCG, retail-and-fashion products
executive, she is Chief Executive Officer of Baccarat, the
international luxury goods company, and was Chief
Executive Officer of Diesel Group, the innovative fashion
business. She was an executive at Procter & Gamble for
25 years, including service as President of Procter &
Gamble Greater China, with 7,000 employees, and Vice
President-General Manager for Eastern Europe & Russia.
Ms Riccardi also sits on the Board of Kering and on the
Board of Comite Colbert. Ms Ricardi is a guest lecturer
at Grenoble Ecole de Management in Paris. Ms Riccardi
is a Magna Cum Laude graduate in Political Science and
International Studies at Sapienza University of Rome and
completed a Fellowship in Marketing at Yale University.

WPP ANNUAL REPORT 2016

117

Who runs WPP
Board of Directors

Nicole Seligman Non-executive director Age 60

Timothy P. Shriver Non-executive director Age 57

Nicole Seligman was appointed a director on 1 January
2014. Most recently, Ms Seligman served as President of
Sony Entertainment, Inc. and Sony Corporation of America
and Sony Group Senior Legal Counsel. Until 2014, she
was Executive Vice President and General Counsel of Sony
Corporation. Previously, as a partner in the Washington
law firm of Williams & Connolly, she counselled a wide
range of clients, including major media companies, on
complex litigation and commercial matters. She was a law
clerk for US Supreme Court Justice Thurgood Marshall and
was associate editorial page editor for the Asian Wall Street
Journal. Ms Seligman serves on the Board of Viacom Inc.
She was a Magna Cum Laude graduate of both Harvard
College and Harvard Law School.

Hugo Shong Non-executive director Age 61

Hugo Shong was appointed a director on 13 May 2013.
He is the Global Chairman of IDG Capital and president
of IDG Asia/China. He joined IDG in 1991 as an associate
to IDG’s founder and chairman, Patrick J. McGovern, for
Asian business development after working for three years as
a reporter and editor at Electronic Business and Electronic
Business Asia magazine, where he launched over 40
magazines and newspapers in Asian countries, such as PC
World Vietnam, the Chinese editions of NetworkWorld,
Electronic Products, Cosmopolitan, Harper’s Bazaar,
National Geographic, FHM and Men’s Health. In 1993, he
helped IDG to set up China’s first technology venture fund,
IDG Capital, which now has $5 billion under management
and an investment portfolio including Baidu, Tencent (QQ),
Sohu, Ctrip, Soufun and Xiaomi. In January 2017, IDG
Capital led the acquisition of IDG Ventures, the investment
business under IDG. He currently serves on the board of
Mei Ah Entertainment Group, an entertainment company
with interests in television, film and theatre listed on the
Hong Kong Stock Exchange. Hugo has been a member of
the board of trustees of Boston University since 2005. After
completing his undergraduate studies at Hunan University,
he attended the Chinese Academy of Social Sciences and
earned a Master of Science from Boston University in 1987.
He conducted graduate studies at the Fletcher School of
Law and Diplomacy and has also completed the Advanced
Management Program at Harvard Business School.

Tim Shriver was appointed a director of WPP on 8 August
2007. He is Chairman of Special Olympics and in that
capacity, he happily serves together with over 5.34 million
Special Olympics athletes in 170 countries, all working
to promote health, education, and a more unified world
through the joy of sports. Before joining Special Olympics
in 1996, Mr Shriver was and remains a leading educator
focusing on the social and emotional factors in learning.
He co-founded and currently chairs the Collaborative for
Academic, Social, and Emotional Learning (CASEL), the
leading school reform organization in the field of social
and emotional learning. He is a member of the Council
on Foreign Relations. Mr Shriver earned his undergraduate
degree from Yale University, a Master’s degree from
The Catholic University of America, and a Doctorate in
Education from the University of Connecticut. He has
produced four films, written for dozens of newspapers
and magazines, founded an ice cream company, and been
rewarded with degrees and honors which he didn’t deserve
but happily accepted on behalf of others.

Sally Susman Non-executive director Age 55

Sally Susman was appointed a director on 13 May 2013. She
is currently executive vice president, Corporate Affairs for
Pfizer, the world’s largest biopharmaceutical company. Sally
also heads the firm’s corporate responsibility group and plays
a key role in shaping policy initiatives. Before joining Pfizer
in 2007, she was EVP of Global Communications at Estée
Lauder, where she directed global corporate affairs strategy
and served as a member of the Executive Committee. She
also held several senior corporate affairs posts at American
Express, working in both London and the US. She started
her career in government service focused on international
trade issues and her positions included Deputy Assistant
Secretary for Legislative and Intergovernmental Affairs in
the US Department of Commerce. She serves on the board
of the International Rescue Committee. Sally holds a BA in
Government from Connecticut College in the US and has
studied at the London School of Economics.

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WPP ANNUAL REPORT 2016

Who runs WPP

Sol Trujillo Non-executive director Age 65

Solomon D. (Sol) Trujillo was appointed a director of WPP
on 12 October 2010. He is an international business
executive with three decades’ experience as CEO of
high-cap global companies in the US, EMEA and Asia
Pacific. A digital pioneer and long-time practitioner of
market-based management, Sol was an early champion of
high-speed broadband and the mobile internet to stimulate
productivity and innovation across all sectors of the
economy. Sol currently sits on corporate boards in the US,
EU, and China and has managed operations in more than
25 countries around the world – including developed as
well as emerging markets from the EU and North America
to China, Australasia, Africa and the Middle East.

WPP ANNUAL REPORT 2016

119

Report by Roberto Quarta
Chairman of the Company
and chairman of the Nomination
and Governance Committee

Dear share owner

of record-breaking performance is testament
to the fundamental strength of your Company,
the robustness of its strategy and the calibre

T hat 2016 was WPP’s sixth consecutive year

The achievement is particularly noteworthy in light
of the challenging trading environment in which WPP’s
various businesses and their clients operate – with global
economic growth continuing to underwhelm.

of its people.

This environment is the backdrop to the more cautious

outlook for 2017 that the Group presented in its
Preliminary Results for 2016. WPP’s stellar performance
over many years means expectations are, rightly, set at
the highest level. The true test of a business, however,
is its ability to deliver through economic cycles, adapt
to changes in the market and navigate bumps in the road
– an ability your Company and its management team have
demonstrated in spades for more than three decades.
Even the most smooth-running of engines needs
fine-tuning, which is why we conducted an externally
facilitated Board review during 2015-16 to evaluate Board
processes and effectiveness. A respected external expert –
a leader in this field – attended Board and committee
meetings and interviewed each director and the Company
Secretary individually.

Over the last year we have been implementing the
recommendations of that review, with the aim of ensuring
the more efficient and effective operation of the Board
and its functions, focusing on succession planning, Board
composition and the use of Board time.

WPP is a large, multidisciplinary and geographically

dispersed organisation, doing business in complex and
fast-changing markets. To complement the excellent
reporting and presentations the Board already receives
from the management team, we have made changes to
the Board agenda to ensure there is always sufficient time
for discussion and debate of the most pressing topics.

We have sharpened the Board’s focus on key risks,

not least data security and regulation, as the danger
of breaches, cyber attacks, cyber fraud and potential
infringements of data protection laws become ever
more present for all businesses.

The task of evaluating Board effectiveness is a
continuous one and this year our senior independent
director, Nicole Seligman, has led the Board evaluation,
building on the recommendations of the external review
to ensure the positive momentum is maintained.

WPP ANNUAL REPORT 2016

121

How we behave and how we’re rewarded

In 2016, we welcomed Tarek Farahat to the Board as
a non-executive director, following the tragic loss of our
colleague Roger Agnelli. In Tarek, we found someone
who shared Roger’s passion for, and experience in, the
Latin American markets, which are of course strategically
important to WPP and its clients.

Tarek’s track record of running consumer-facing
businesses in Latin America, the Middle East and Europe,
and his board-level experience with global public
companies, have already been of immense value to your
Board and the Company as a whole.

At the AGM this year we say goodbye to two members

of the Board: Timothy Shriver and Charlene Begley.

Tim is retiring from the Board having completed his
term as a non-executive director, during which time he
served as a valued member of the Compensation Committee
and Nomination and Governance Committee. We have
all benefited from his breadth of vision, deep insight and
thoughtful engagement with the Board, and he leaves with
our enduring gratitude for the contribution he has made
to the fortunes of WPP over the last nine years.

Charlene has also had a hugely positive impact

during her three years with WPP and the support she has
provided as a valued member of the Audit Committee and
Nomination and Governance Committee and on the IT
Transformation project. She has the Board’s very best
wishes as she leaves due to timing conflicts on her other
US board commitments.

Charlene’s departure means the proportion of women
on the Board will fall temporarily after the AGM from the
current 29%. We intend to restore – and if possible improve
upon – that statistic with coming appointments.

While we still have work to do to achieve greater gender
balance on the Board, in terms of the spread of nationalities
WPP already has a diverse line-up of directors – with eight
different nationalities represented. For a global company
like WPP, with interests in mature and fast-growing
markets around the world, the international perspective
this affords is vital.

During 2016, the Compensation Committee, led by
Sir John Hood, has carefully considered the renewal of the
Directors’ Compensation Policy for submission to share
owners for approval at the AGM. This has been a complex
task that has taken into account the corporate governance
policies and guidance provided by our share owners and the
need to appropriately reward executives. The policy that we
are submitting for your approval does respond to concerns
expressed about executive compensation levels in the UK,
in that it presents a significant diminution of the previous

122

WPP ANNUAL REPORT 2016

policy, while attempting to provide an attractive
proposition for current and future executives.

The quality of our management team is underlined
by WPP’s financial performance and also by the external
recognition it receives.

At the head of our operating companies, many of
them multinational corporations in their own right, the
Group has an enviable collection of highly accomplished
and capable business leaders a number of whom have
seamlessly succeeded to their global CEO roles during
2016. As ever they give their own reports on the progress
of their businesses within these pages. I encourage you to
read them all.

As I said in last year’s report, succession planning
(for all major companies, not just WPP) must consider two
scenarios: a planned process of transition to new leadership
over time; and an unforeseen, more sudden change due to
circumstances beyond our control.

Whether it happens in the near or distant future, when

Sir Martin leaves his role as chief executive we will have
an exceptional team of potential candidates on the bench.
This team comprises not only those who report directly to
Sir Martin but also many who currently occupy the senior
tier below.

Our succession planning process, which has always
been rigorous, has become even more focused and detailed
over the last year. As part of our continuous assessment
of those individuals who might one day become chief
executive of the Group, we have invited a number of
leaders within WPP companies to present to the Board
and attend Board meetings. This exercise gives me greater
confidence than ever in the strength of our people and
their potential to succeed at the very top.

This internal pool is, of course, maintained alongside

a constantly refined list of external candidates.

The outstanding nature of the executives the Board
meets regularly leads me to believe that they are, in turn,
developing leaders of similar character and ability within
their own companies. This pipeline of talent is essential for
the ongoing prosperity of your Company – an organisation
built on human ingenuity and expertise.

WPP’s record-breaking run is the product of hard
work by 205,000 dedicated people worldwide (including
associates and investments). On behalf of the Board and
the Group’s share owners I offer them our heartfelt thanks.

Roberto Quarta
19 April 2017

Review of the Company’s
governance and the Nomination
and Governance Committee

Report by Roberto Quarta
Chairman of the Nomination and
Governance Committee

Nomination and Governance Committee members
and attendance during 2016

Roberto Quarta (Chairman)
Charlene Begley
Ruigang Li
Daniela Riccardi
Hugo Shong
Sally Susman

Meetings eligible
to attend
4
4
4
4
4
4

Meetings
attended
4
3
3
4
4
4

Dear share owner

Committee responsibilities and how they were
discharged in 2016

Nomination and Governance committee in
2016 were:

T he principal focus of the four meetings of the

management and review of tenure and independence of the
non-executive directors;

succession planning for the CEO and senior

the appointment of a non-executive director with Latin
American experience following the death of Roger Agnelli
and a non-executive director with financial experience to
join the Audit Committee;
Board evaluation; and
the selection of an external search firm to work

with the committee and Board on the selection of
non-executive directors.

How we behave and how we’re rewarded

Succession planning

I have had extensive discussions with share owners on
the renewal of the compensation policy and the issue
of succession and sought to respond to their request for
greater transparency of reporting and to integrate the
Board evaluation process with succession planning.
The committee and the full Board fully appreciates that
strategic, thoughtful and practical succession planning
is critical to the long-term success of the Company.
The Board has for some time had a strategy in
place for an agreed or foreseen departure of the senior
management team including the CEO and CFO and also
in the event of sudden emergencies, where an individual
cannot continue working.

Following the recommendations of the external Board

evaluation, the Board has made progress in assessing the
internal and external candidates for CEO and CFO
succession and considering internal candidate development
and skill gaps. During 2016, the Board has held three
detailed senior management and CEO succession planning
reviews and has met with the senior management teams
of all of the major operating companies within the Group
both formally and informally and in many cases the tier
of managers below to develop their understanding of the
diversity of the pipeline of internal candidates and
continually reassess the succession plans.

The committee has also engaged an external search
firm to work with the committee and Board to identify
suitable and diverse directors in the context of the strategic
development of the Group, which include business-specific
and digital or data analytics expertise, back office
integration, relevant financial experience and UK
governance experience. The external search firm has
no other connection with the Group.

New non-executive director

The Board announced the appointment of Tarek Farahat
as a non-executive director on 11 October 2016, following
the recommendation of the committee which had been
assisted in the search process by the external search firm.
Mr Farahat is the Global President for Marketing and
Innovation and a Director of JBS S.A. and prior to that
spent 26 years at Procter & Gamble in a range of marketing
and management roles working across Europe, the Middle
East, Africa and Latin America including as head of their
operations in Brazil for six years. Mr Farahat’s considerable
knowledge of Latin America and his proven track record

WPP ANNUAL REPORT 2016

123

How we behave and how we’re rewarded

of running consumer-focused businesses in that market
as well as the Middle East and Europe together with
his relevant financial and global public company board
experience will enhance our Board effectiveness.
Mr Farahat was appointed to the Audit Committee on
24 February 2017 after an initial period of familiarisation
with the Group.

Committee composition

Pursuant to our non-executive director tenure policy, Tim
Shriver will retire at this year’s AGM having served on the
Board and the Compensation Committee since August
2007. Charlene Begley will also retire at this year’s AGM
due to the pressure of her other US commitments. Subject
to their appointment and reappointment at the AGM and
following the retirement of Tim Shriver and Charlene
Begley, the composition of our three main committees will
be as follows:

Committee
composition 2017
Roberto Quarta
Jacques Aigrain
Tarek Farahat
Sir John Hood
Ruigang Li
Daniela Riccardi
Hugo Shong
Sally Susman
Sol Trujillo

Audit
Committee

Compensation
Committee

Chair l

Nomination and
Governance
Committee

Chair l

The senior independent director, Nicole Seligman,

customarily attends all Board committee meetings.

Board and committee evaluation

The annual evaluation of the Board’s and all committees’
effectiveness has been conducted internally by the senior
independent director following the externally facilitated
evaluation by Dr Tracy Long of Boardroom Review Limited
which commenced in 2015 and was concluded in 2016.

Each director completed a confidential questionnaire

and then held separate conversations with the senior
independent director considering the effectiveness of
the Board and its committees and an assessment of my
performance. The discussions also considered the progress
made by the Board in implementing the recommendations

of the external evaluation. The results of the evaluation
will be considered in the 2016 Sustainability Report to
be published in June 2017.

Board diversity

The Board confirms its commitment to diversity, including
gender at all levels of the Group as well as the Board.
The Board’s policy on diversity commits WPP to increasing
diversity across its subsidiaries and supports the development
and promotion of all talented individuals. As at 31
December 2016, women comprised 29% of the WPP Board
and 33% of non-executive directors, including the senior
independent director, and represented eight different
nationalities with a broad spectrum of skills, backgrounds
and experience. The Board intends to restore and, if possible,
improve upon the diverse nature of the Board following
Charlene Begley’s retirement at this years AGM.

Corporate Governance

During the year, the Board was briefed on regulatory
and corporate governance developments. This principally
included the UK Corporate Governance Code guidance
on audit committees and the changes to the auditor
independence rules, the implementation of the Market
Abuse Regulation and an external report on the role of
Nomination Committees.

Sustainability

Paul Richardson, chairman of the Company’s Sustainability
Committee, presented a comprehensive assessment of the
Group’s sustainability performance and risks to the
committee for 2016. A more detailed review of our
sustainability performance and activities can be read on
pages 161 to 167 and in our 2016/2017 Sustainability
Report and Pro bono book to be published in June 2017.

Terms of reference

The committee’s terms of reference, which are reviewed
with the Board annually and most recently in April 2016,
are on the Company’s website at wpp.com/investor.

Roberto Quarta
19 April 2017

124

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How we behave and how we’re rewarded

Review of the Audit Committee

Report by Jacques Aigrain
Chairman of the Audit Committee

Audit Committee members and attendance
during 2016

Jacques Aigrain (Chairman)
Sol Trujillo
Roger Agnelli1
Charlene Begley

Meetings eligible
to attend
7
7
2
7

Meetings
attended
7
7
2
7

1 Roger Agnelli tragically died on 19 March 2016.

Dear share owner

W e held seven meetings during the year,

which were attended by Deloitte LLP, the
Company’s external auditor, the Company’s
chairman, the senior independent director,
the Group finance director, the director of internal audit,
the Group chief counsel, the Group chief accountant and
the Company Secretary. The committee also held separate
private meetings with the external auditor, the director of
internal audit and the Group chief accountant.

Committee responsibilities and how they were
discharged in 2016

The main matters we dealt with during 2016 were as follows:
monitoring the integrity of the Company’s financial
statements and reviewing significant financial reporting
judgements;

reviewing internal controls and internal audit activities;
assisting the Board in meeting its responsibilities in
respect of carrying out a robust assessment of the principal
risks affecting the Group and reviewing and reporting on
the systems and key elements of risk management as they
affect the Group and reviewing the risk map and
framework for presentation to the Board;

reviewing the Group Treasury policy with particular

focus on debtors, funding foreign exchange and
cash management and the continued ability of the
Group to adopt the going concern basis in preparing
financial statements;

reviewing reports on any material litigation
or regulatory reviews involving Group companies;

reviewing the Group’s mergers and acquisitions strategy,

any significant acquisitions, the earnout payments profile
review and integration processes and the debt financing by
the Group;

reviewing GroupM’s trading model and its risk

assessment processes;

reviewing the Group’s tax strategy;
monitoring the accounting and legal reporting

requirements, including all relevant regulations of the UK
Listing Authority, the SEC and NASDAQ and the Jersey
Financial Services Commission and changes to the UK
Corporate Governance Code;

overseeing continued compliance with Section 404
of SOX, through regular status reports submitted by the
internal and external auditors;

reviewing the Group’s IT Transformation project and

shared services initiatives; and

reviewing issues raised on our Right to Speak helpline

and the actions taken in response to those calls.

Fair, balanced and understandable

A sub-committee of the Board including members of this
committee examined whether the Annual Report and
Accounts for 2016 was fair, balanced and understandable
and provided the information necessary for share owners
to assess the Group’s position, performance, business
model and strategy. The sub-committee received an early
final draft of the report for review and comment, as well
as a report from the Disclosure Committee as to the
governance relating to compilation of the report. The
Board subsequently considered the report as a whole and
discussed the report’s tone, balance and language for
compliance with these standards. The Board’s statement
on the report is on page 175.

Financial reporting and significant financial
judgements

The management team make key decisions and judgements
in the process of applying the Group’s accounting policies.
These key judgements were detailed in reports to the
committee in respect of 2016 which were then examined
by the committee and discussed with management.
Deloitte also reported to and discussed with the
committee whether suitable accounting policies had been
adopted in the financial statements for the year ended 2016

WPP ANNUAL REPORT 2016

125

How we behave and how we’re rewarded

and whether management had made appropriate estimates
and judgements. The areas of significant judgement
considered by the committee and how these were addressed
are set out below and reflect a number of the principal risk
areas identified by the Board on pages 46 to 50:

accounting for the judgemental elements of
remuneration, including pensions, bonus accruals,
severances and share-based payments. The committee
agreed that the assumptions applied by management
are reasonable;

the assessments made for goodwill impairment. The
committee confirmed, based on management’s expectations
of future performance of certain businesses, the level of
goodwill impairment charges required in 2016;

the judgements made in respect of tax, in particular the
level of central tax provisioning. The committee supported
management’s assumptions in both these areas and believe
the current level of provisions is reasonable; and

the judgements made in determining the gain on
investment made in 2016 on Imagina. The committee
agreed that the approach adopted by management is
appropriate;

the going concern assessment and viability statement
and key forecast assumptions. The committee concur with
management’s going concern assumptions as set out on
page 50.

the judgements made in respect of the recoverability of
other media income and revenue recognition, particularly
as these relate to media volume income and media trading
income. The committee received briefings from Deloitte and
management on the appropriateness of the policies adopted
and the controls in place and challenged management to
demonstrate the effectiveness of such controls;

the judgements made in respect of the release of
provisions related to other media income. The committee
considered the testing undertaken by Deloitte and
information from management to support the change
in approach and agreed the change where supported
is appropriate;

the valuations of non-controlled investments and listed
associates, which are based on local management forecasts,
recent third-party investment and other supporting
information such as industry valuation multiples. The
committee examined the valuations with management and
considered the sample testing of the investments performed
by Deloitte and agreed that the valuations were appropriate;

the accuracy of forecasting the potential future
payments due under earnout agreements in respect of
acquired businesses. The committee considered the
forecasting with management and the testing undertaken
by Deloitte and agreed that earnouts have been accounted
for on a consistent basis to previous periods;

the approach taken by management to accounting for
exceptional expenses incurred in relation to the ongoing
IT Transformation project, which the committee considered
was appropriate;

the valuation of year-end provisions in respect of
working capital. The committee received briefings on the
approach taken by management in assessing the level of
exposure across the Group and agreed it was consistent
and appropriate;

126

WPP ANNUAL REPORT 2016

External audit

Deloitte have been WPP’s auditors since 2002. The lead
partner rotates every five years and the latest rotation took
effect during 2015. In 2016, the effectiveness of the audit
process was evaluated through a committee review of the
audit planning process and discussions with key members
of the Group’s finance function. The 2016 evaluations
concluded that there continued to be a good quality audit
process and constructive challenge where necessary to
ensure balanced reporting. The committee held private
meetings with the external auditors and the committee
chair met privately with the external auditors before
meetings. The committee continues to be satisfied with
the performance of Deloitte and confirmed that Deloitte
continues to be objective and independent and noted the
principal findings of the FRC 2016 Audit Quality Review
on the audit file of WPP for the year ended 31 December
2015 as part of their 2016 review cycle. The committee
recommends the reappointment of Deloitte at the AGM
on 7 June 2017.

The committee considered the Group’s position on
its audit services contract in the context of the regulations
concerning the audit market. Although there is no
immediate intention to tender the audit contract, the
Company will re-tender at the latest by the 2022 year
end in compliance with the transitional arrangements
for competitive tender that require mandatory rotation
after the 2023 fiscal year-end.

The Company confirms that it has complied with
the Competition and Markets Authority final order on
mandatory tendering and audit committee responsibilities.

How we behave and how we’re rewarded

Internal audit

Terms of reference

The committee’s terms of reference, are reviewed annually
and most recently were reviewed and updated in October
2016 and can be viewed on the Company’s website at
wpp.com/investor.

Committee membership

Tarek Farahat was appointed to the committee on
24 February 2017 and brings not only relevant financial
and global public company experience but also sector
and operational experience across many of the markets
in which the Group operates with particular experience
in Latin America. I look forward to his contribution to
the committee and would like to thank Charlene Begley
for her hard work as a member of the committee, as she
will be retiring at the AGM. I would also like to thank
all of my colleagues on the committee, the parent company
executives and external advisors for their endeavours
in 2016.

Jacques Aigrain
19 April 2017

The annual internal audit plan is approved by the committee
at the beginning of the financial year. Progress against the
plan is monitored through the year and any changes require
committee approval. Significant issues identified within audit
reports are considered in detail along with the mitigation
plans to resolve those issues. The committee also considers
the level of internal audit resource to ensure it is appropriate
to provide the right level of assurance over the principal risks
and controls throughout the Group.

Non-audit fees

The committee has established a policy regarding non-audit
services that may be provided by Deloitte, which prohibits
certain categories of work in line with relevant guidance
on independence, such as ethical standards issued by the
Auditing Practices Board and SEC. The policy was reviewed
by the committee in 2014 and advice on remuneration was
included in the prohibited category with effect from the
beginning of 2015 allowing for a transition period. Further
review in 2016 has resulted in a prohibition on tax services
being provided by Deloitte in the EU and a general default
to an alternative provider elsewhere subject to adherence to
regulations. Other categories of work may be provided by the
auditors if appropriate and if pre-approved by the committee,
either as individual assignments or as aggregate amounts
for specified categories of services. All fees are summarised
periodically for the committee to assess the aggregate value
of non-audit fees against audit fees. The level of fees for 2016
is shown in note 3 of the financial statements on page 195.

Committee evaluation

The committee and its members were formally assessed
by the Nomination and Governance Committee as part
of the review of committee composition in 2016 and as
part of the evaluation process described on page 124 for
their technical suitability to be members and also for its
overall effectiveness. The Board has designated me as the
committee’s financial expert for Sarbanes-Oxley Act (SOX)
purposes and together with Charlene Begley as having recent
and relevant financial experience for the purposes of the UK
Corporate Governance Code. The members of the committee
have financial and/or financial services experience as set out
in their biographies on pages 116 to 119.

WPP ANNUAL REPORT 2016

127

How we behave and how we’re rewarded

Letter from the chairman of
the Compensation Committee

Letter from the Chairman of the
Compensation Committee
Directors’ Compensation Policy
Compensation Committee Report

Dear share owner

Page

128
132
145

present the Directors’ Compensation Report for
the year ended 31 December 2016. The report
includes an ‘at a glance’ snapshot of WPP’s

O n behalf of the WPP Board I am pleased to

performance and corresponding compensation for the year.
We then set out for share owners’ consideration our
Directors’ Compensation Policy incorporating proposed
changes to the policy approved by 82% of share owners in
2014. This revised policy will be presented for approval at
the 2017 AGM. This is then followed by our Compensation
Committee Report, which details the compensation
decisions made by the committee and the resulting
outcomes for the directors.

Highlights of our proposed 2017-2019
Compensation Policy

During the year, the Compensation Committee dedicated
considerable time to the re-evaluation of its policy. This
necessarily involved extensive dialogue with share owners
and other interest groups. We are most grateful for their
interest and input.

WPP has a long-standing history of embracing a
philosophy of pay for performance. This philosophy is
incorporated into the Company’s compensation programs
in a range of different ways, for example: the five-year time
horizon used since 1995 to measure performance in long-
term incentive plans, and the use of challenging performance
conditions to govern awards under all incentive plans.

Pay for performance and alignment with share
owner interests remain central to the Group’s culture.
The committee believes these cornerstone features have
been most effective in driving exceptional performance,
which has resulted (inter alia) in WPP becoming the most
valuable, international, integrated communication services
company. As a result, the committee concluded that this
ethos should continue to be reflected in the Company’s
compensation arrangements.

128

WPP ANNUAL REPORT 2016

Notwithstanding the Company’s superior performance,

we understand share owners’ increasing discomfort with
the levels of our programs’ reward opportunities for
outstanding performance. Similar feedback led to the
changes introduced by the (then) committee earlier this
decade that were subsequently incorporated in the 2014-
2016 compensation policy. Based on the more recent share
owner concerns, we are proposing further significant
reductions in the compensation levels for the Company’s
Executive Directors. The changes to your CEO’s
compensation levels are set out below.

In summary:
The total incentive opportunity (the combination of

short-term incentive maximum and the face value of an award
under the Executive Performance Share Plan, or EPSP) will
reduce from 14.1 times to 10 times salary.

The maximum short-term incentive opportunity will
reduce by 35 percentage points, from 435% to 400% of salary.
40% of the achieved bonus will be delivered in shares in the
form of an Executive Share Award (ESA) and these shares must
be held for a further two years.

The EPSP award will accordingly reduce by 374 percentage

points, from 974% to 600% of salary.

The pension allowance will reduce by 10 percentage points

from 40% to 30% of salary.

The range of benefits provided will be replaced by a fixed
benefit allowance of £200,000, a 12% reduction on the 2016
benefits’ cost.

In aggregate, these changes will have the effect of reducing
the Group CEO’s overall maximum pay opportunity, before
any account is taken of share price appreciation or dividends,
by 27% or £4.8 million. This brings the total reduction since
2011 to 58% or £18.1 million.

In addition to these changes our proposed policy

also reflects the following:

In respect of the Group CFO, the total incentive
opportunity will reduce by 150 percentage points from
700% to 550% of salary. The level of benefits provided
will also be capped at $85,000.

The maximum incentive, short- and long-term, that

could be offered to a new appointee to the Board, is
being reduced by 20% from 10 times to 8 times salary.
The maximum pension contribution that could be
offered to a new appointee to the Board is being reduced
by 15 percentage points from 40% to 25% of salary.
The level of vesting associated with the threshold
performance requirement under the EPSP will reduce
from 20% of the award to 15% of the award.

The committee did not reach these decisions lightly.
The process has proven to be challenging, reflecting the

How we behave and how we’re rewarded
Letter from the chairman of the Compensation Committee

divergent views of share owners, the differences in
competitive market practices in the UK (which may cause
competitiveness issues in the US) and internationally where
WPP competes, the imperative of retaining and motivating a
high-performing leadership team, all while also maintaining
the Company’s attractiveness to future leadership recruits.

We hope that you will find that our revised compensation

policy appropriately balances these important factors.

(EPSP). The design of the EPSP was strongly influenced by
share owners’ views. This plan has granted awards at lower
levels, with further reductions proposed in 2017, and
measures performance equally across three critical areas:
EPS growth, return on equity and relative TSR. We
anticipate that the value of awards vesting in subsequent
years will be substantially lower than the values realised
under LEAP.

Pay for performance in 2016

2016 was once again a record year for WPP. The Company
achieved strong top-line growth with operating profits and
margins meeting and exceeding targets across all regions
and sectors.

This sustained strong performance was reflected in the

outcomes of the Company’s incentive plans for the year.
Awards under the short-term incentive plan ranged from
95% – 120% of target. Shares awarded in 2012 under the
last cycle of the Leadership Equity Acquisition Plan (LEAP)
vested in full on 7 March 2017.

The 2012 LEAP award was the final instalment of
the existing LEAP incentive program. WPP significantly
out-paced all except one of its peers with five-year TSR
growth of 210%. In reviewing the outcome under the plan
the committee noted:

WPP’s TSR ranked in the upper decile of the FTSE 100
during the same period and out-performed US indices and
broader industry peer groups;

market capitalisation increased by £14.71 billion

($15.44 billion) or 172.0% from £8.55 billion ($13.27 billion)
to £23.26 billion ($28.71 billion);

the share price increased from 675 pence at the start
of 2012, to 1,816 pence by the end of 2016, a compound
annual growth rate of 22%;

the Company’s dividend increased from 24.6p to 56.6p,

a compound annual growth rate of 18%;

TSR was ahead of the Company’s most comparable
competitors: Omnicom (180%), Dentsu (114%) and Publicis
(106%); and

the Company’s strong underlying financial performance,

including net sales growth of 34%, a 51% increase in
headline PBIT and a 67% increase in headline diluted EPS.
The committee acknowledges that the value created
for share owners throughout the five-year term of the 2012
awards, and throughout the eight years of the LEAP III
program, has been significant.

In 2013, in response to share owners’ concerns about

the design of LEAP, the committee adopted a new long-
term incentive plan, the Executive Performance Share Plan

Performance targets for 2017 incentive
awards

The committee has approved performance targets for the 2017
short-term incentive awards. As previously, performance will
be assessed against a mix of financial measures, for 70% of
the award, with the balance being determined by achievements
against individual strategic objectives.

The three financial measures are unchanged for 2017

and are headline PBT growth, headline net sales margin
improvement and growth in net sales. The performance
ranges and outcomes will be disclosed in next year’s report.
The committee has also reviewed the 2017-2021 EPSP

measures and targets, concluding that they remain
appropriate, stretching and aligned to the guidance issued
to share owners. The targets that will apply are as follows:

Measure
EPS
ROE
Relative TSR

Performance range
7% – 14% compound annual growth
15% – 18% annual average
Median to upper decile

Looking forward

We hope that you will recognise the significant steps the
committee has taken in responding to any concerns in
presenting its proposed policy. With the majority of
compensation still contingent on the sustainable performance
of WPP, we are confident that these proposals will continue
to provide meaningful alignment between performance and
reward. As in previous years, we extend our thanks to those
share owners and advisors who helpfully engaged with us
in formulating our proposed policy. We hope they will meet
with your support at the 2017 AGM.

Sir John Hood
Chairman of the Compensation Committee
19 April 2017

WPP ANNUAL REPORT 2016

129

How we behave and how we’re rewarded

At a glance

How we performed in 2016

Group financial performance measures:

Headline PBT growth

Headline net sales
margin improvement

Growth in net sales

6.0%

o Target

o Actual

5.0%

6.5

6.0

5.5

5.0

4.5

4.0

0.4

0.3

0.2

0.1

0.0

0.3%

0.3%
0.26%

o Target

o Actual –
constant
currency

Like-for-like

3.2

3.1

3.0

2.9

2.8

3.1%

o Target

o Actual

3.0%

Long-term total shareholder return performance1

WPP Total Shareholder Return (‘TSR’)

1200

1000

800

600

400

200

1,006%

249%

210%

Twenty
years

Ten
years

Five
years

FTSE 100
S&P 500
CAC 40
MSCI World

241%
470%
322%
329%

65%

51%
199% 146%
66%
140% 105%

58%

19%

One
year

17%
34%
23%
29%

Change in value of a £100 investment
in WPP over time relative to indices

1200

1000

800

600

400

200

£1,106

£570
£429
£422
£341

Jan
97

Jan
99

Jan
01

Jan
03

Jan
05

Jan
07

Jan
09

Jan
11

Jan
13

Jan
15

Jan
17

o WPP
o S&P 500

o FTSE100
o CAC40

o MSCI
World Index

Source: DataStream. TSR calculated up until 31 December 2016.

Change in value of a £100 investment in WPP over time relative to a composite index of peers

1,200

1,000

800

600

400

200

£1,106

£742

Jan 97

Jan 99

Jan 01

Jan 03

Jan 05

Jan 07

Jan 09

Jan 11

Jan 13

Jan 15

Jan 17

o WPP o Peer composite

Source: DataStream. TSR calculated up until 31 December 2016. ‘Peer Composite’ comprises Havas, IPG, Omnicom and Publicis, and from its
date of listing in 2001; Dentsu. All data has been converted on a daily basis into GBP. It is assumed that an investment is made on a market-cap
weighted basis across all companies, redistributed at the end of each day.

1 TSR calculated using an averaging period of one month (one-year TSR) or six months (longer-term TSR) in common currency.

130

WPP ANNUAL REPORT 2016

How we behave and how we’re rewarded
At a glance

How much the Executive Directors earned in 2016 (£000)

Sir Martin Sorrell

Paul Richardson

o Fixed compensation

o Short-term incentives

o Long-term incentives

3,596

2,992

41,560

48,148

86%

o Fixed compensation

o Short-term incentives

o Long-term incentives

1,100

1,517

6,698

12%

16%

9,315

72%

How we will implement our proposed compensation policy in 2017

Policy

Implementation1

Base salary
Pension

Benefits

24-month review period
Pension is provided by way
of contribution to a defined
contribution arrangement,
or a cash allowance,
determined as a percentage
of base salary
A fixed benefits allowance
will be provided as an
alternative to the provision of
itemised benefits, to be used
at the executive’s discretion

2017
No change
Reduction/
No change

Sir Martin Sorrell
£1,150,000
30%

Paul Richardson2
$1,080,470
30%

Reduction

£200,000

$85,000

Short-term incentives • 70% financial and 30%

Reduction

individual strategic
objectives

• One-year performance
• 60% cash, 40% deferred
WPP shares (two years)

Opportunity: 0% – 400%
Target: 200%

Opportunity: 0% – 250%
Target: 165%

Long-term incentives • TSR, EPS and ROE

Reduction

Opportunity: 0% – 600%

Opportunity: 0% – 300%

• Five-year performance
• 100% WPP shares

1 Opportunity and target expressed as a percentage of base salary.
2 Paul Richardson’s base salary figure is denominated in US dollars other than his fee for directorship of WPP plc which amounts to £100,000.

Any sterling amounts have been converted into US dollar at an exchange rate of $1.3547 to £1.

WPP ANNUAL REPORT 2016

131

How we behave and how we’re rewarded

Directors’ Compensation Policy

The Compensation Committee presents the proposed Directors’ Compensation Policy for 2017-2019. It is the intention
of the committee that this policy will be maintained for three years from approval, assuming no changes are required.
The committee believes that this policy continues to align with the Company’s mission statement and business objectives
as well as being competitive for current and successor Executive Directors.

Proposed policy changes

The 2017 policy that is being presented to share owners for approval has been drafted to take into account the views
of our share owners that have been received over the last policy period. The key changes from the 2014 policy, which
are described in the chairman’s letter, can be summarised as follows:

The maximum annual bonus opportunity of the Group chief executive is reduced to 400% and for the Group chief

financial officer to 250%. A minimum of 40% of the achieved bonus will be delivered in deferred shares (ESA).

The maximum annual Executive Performance Share Plan (EPSP) opportunity of the Group chief executive is being

reduced to 600% of base salary and for the Group chief financial officer to 300% of base salary. The EPSP plan will
continue to operate over a five-year performance period and the performance measures of TSR, EPS and ROE remain
unchanged.

The threshold vesting level of the EPSP award is being reduced to 15%.
The maximum level of annual pension contribution for the Group chief executive is being reduced to 30% of base salary.
The Executive Directors will be provided with a non-itemised fixed benefits allowance to enable them to procure

benefits to enable them to undertake their role and ensure their security and wellbeing. The benefits allowance for the
Group chief executive will be £200,000 and for the Group chief financial officer $85,000 per annum.

The maximum incentive award, the combination of short- and long-term incentives, for a new appointee to the Board,

is being reduced to 8 times base salary.

The maximum pension contribution for a new appointee to the Board is being reduced to 25% of base salary. This

amount may be delivered by either a contribution towards a defined contribution retirement plan or by way of a cash
retirement allowance.

The above proposed changes to policy will be effective 1 January 2017, except for the pension contribution which

will be effective 1 July 2017. The impact of these changes is demonstrated in the pay scenario charts on page 139.

132

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How we behave and how we’re rewarded
Directors’ Compensation Policy

WPP’s compensation philosophy

Our mission statement and our six business objectives shape our compensation philosophy. Broadly, our Directors’
Compensation Policy is determined by three long-standing guiding principles:

performance-driven reward;
competitiveness; and
alignment with share owner interests.
Specifically, our six business objectives (as set out on page 37) are reflected in the design of our compensation plans

as set out below:

WPP’s six business objectives

Alignment with compensation structure

and Group chief financial officer

and improve return on capital employed

Short-term incentive measure for the Group chief
financial officer

1 Continue to improve operating margins on net sales Short-term incentive measure for the Group chief executive
2 Increase flexibility in the cost structure
3 Use free cash flow to enhance share owner value
4 Continue to develop the value added by the parent
5 Emphasise revenue and net sales growth more
6 Improve still further the creative capabilities

Short-term incentive measures (parent company-led
efficiency projects) for the Group chief executive and
Group chief financial officer

TSR, EPS growth and average ROE are long-term incentive
measures for the Executive Directors

Short-term incentive measures for the Group chief executive
and Group chief financial officer

Short-term incentive measure for the Group chief executive

and reputation of all our businesses

as margins improve

company

Our Directors’ Compensation Policy is designed to attract and retain best-in-class talent. The policy looks to incentivise
directors to develop the skills of the Group’s employees in order to consistently exceed our clients’ expectations, driving
and rewarding sustainable and exceptional performance, thereby producing long-term value for share owners. In applying
this policy, the committee takes into account the pay and conditions elsewhere in the Group, which in turn are informed
by general market conditions and internal factors such as the performance of the Group or relevant business unit.

Considerations taken into account when setting our Directors’ Compensation Policy

Employment conditions at WPP

When reviewing changes to the compensation levels for the directors, the committee considers any changes in light of
increases awarded across the Group over a relevant period of time, in conjunction with the other factors set out in the
policy table. Due to the global nature of the business and the distribution of our 132,657 employees over 112 countries,
it was not practical to consult them when drawing up our new policy.

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Share owner views

During 2016, the main focus from WPP share owners, as well as the media more generally, was on executive
compensation. WPP has worked diligently to listen to all views and create a policy that is both acceptable for share
owners as well as attractive and retentive for Executive Directors.

WPP continues to engage openly with share owners and institutional investors to discuss matters relating to
compensation. The feedback received during these conversations is valuable and is among the factors that inform the
decisions made by the committee.

Glossary

The following are acronyms used throughout the policy:

Acronym
DEPs
DSUs
EPSP
ESA
Good Leaver

RSP
STIP

Definition
Dividend Equivalent Payments
Deferred Stock Units
Executive Performance Share Plan – long-term incentive plan introduced in 2013
Executive Share Award – the part of the STIP that is deferred into shares
Broadly, when an individual is dismissed other than for cause (the particular meaning applicable
to each share plan can be found in the relevant rules)
Restricted Stock Plan
Short-term Incentive Plan – the annual incentive plan comprising a cash bonus and an ESA

Directors’ Compensation Policy table – Executive Directors

The following table sets out details of the proposed compensation elements for WPP’s Executive Directors.

Component and purpose

Operation

Fixed elements of compensation

Performance

Maximum annual
opportunity

Base salary
To maintain package
competitiveness
and reflect skills
and experience.

Base salary levels are reviewed every two
years or following a significant change in
the scope of a role. The base salary number
includes a director fee of £100,000.

Company and personal
performance will be taken
into account during the
review process.

Levels are determined by taking a number
of relevant factors into account including
individual and business performance,
level of experience, scope of responsibility,
compensation practices across the
Group and the competitiveness of
total compensation against both our
competitors and companies of a similar
size and complexity.

Under normal
circumstances base salary
will increase by no more
than the local rate of
inflation over the period
since last review.

In the event of a promotion
or a significant change
in the scope of the role,
or changes in sector
competitive pay or
the need to counter a
competitive external
offer, the committee
may exceed this limit.

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Component and purpose

Operation

Performance

Maximum annual
opportunity

Short-term incentives (details of how performance measures and targets are set are included in the notes to this table
on pages 137 and 138)

Cash bonus, Executive
Share Awards (ESA)
To drive the achievement
of business priorities for
the financial year and
to motivate, retain and
reward executives over
the short and medium
term, while maximising
alignment with share
owner interests.

Overview
The committee may invite executives to
participate in the STIP under which a bonus
can be made subject to performance
measured over the financial year. Bonus
opportunity is determined as a percentage
of salary.

Performance measures and targets
are reviewed and set annually to
ensure continuing strategic alignment.
Achievement levels are determined
following year-end by the committee,
based on performance against targets.

Executive Directors’ bonuses are delivered
in the form of a cash award and a deferred
share award (ESA), the latter constituting
at least 40% of the total bonus achieved.
The ESA will vest after a minimum of two
years subject to continued employment,
together with additional shares in respect
of accrued dividends.

Judgement
The committee will use its judgement
to set the performance measures and
targets annually.

Group chief executive:
400% of base salary.

Other Executive Directors:
250% of base salary.

The value of any accrued
dividends will vary
depending on the size
of the ESA awarded,
dividends declared
and share price over
the deferral period.

70% subject to financial
performance, either at a Group
and/or divisional level depending
on the role.

30% subject to individual
objectives linked to the strategy of
WPP or the relevant business area.

The committee will use its
judgement in assessing
performance relative to targets
and expectations communicated
at the start of the year and will
consider unforeseen factors that
may have impacted performance
during the period.

Vesting schedule
The following table sets out the
level of bonus payable for
threshold and target performance
as a percentage of maximum.
Vesting operates on a straight-line
basis between these points.

Malus provisions (ESA)
The committee has the ability to reduce any
unvested ESA in certain situations, including
when fraud or a material misstatement
has affected the level of any performance-
related compensation.

Sir Martin
Sorrell
Other
Executive
Directors

Clawback provisions
The committee has the ability to clawback
cash bonus, earned in respect of the
performance year 2016 or after, in the
three years post payment in certain
situations, including when fraud,
breach of fiduciary duty or a material
misstatement has affected the level of
any performance-related compensation.

Target (as
percentage
of maximum)

Threshold

50%

66%

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Component and purpose

Operation

Performance

Maximum annual
opportunity

Long-term incentives (details of how performance measures and targets are set are included in the notes to this table
on pages 137 and 138)

Executive Performance
Share Plan (EPSP)
To incentivise long-term
performance and to focus
on long-term retention and
strategic priorities, while
maximising alignment
with share owner interests.

One-third relative TSR.
One-third headline EPS growth.
One-third average ROE.

Conditional awards:
Plan maximum:
9.75 times base salary.

All measures are assessed
independently of each other.

Group chief executive:
6 times base salary.

Other Executive Directors:
3 times base salary.

The value of accrued
dividends will vary
depending on the level
of vesting, dividends
declared and share
price over the
performance period.

TSR is measured on a market-
capitalisation weighted basis
against a peer group of business
competitors that are selected
according to size and relevance.
This peer group is reviewed
annually at the start of each
cycle to ensure it remains robust,
appropriate and relevant in light
of WPP’s business mix. Half of the
TSR element is measured on a
local currency basis, half on a
common currency basis.

EPS is defined as WPP’s headline
diluted earnings per share. The
EPS performance is calculated
by taking the aggregate EPS
over the performance period and
calculating the compound annual
growth from the financial year
preceding the start of the period.

ROE is calculated as headline
diluted EPS divided by the
average balance sheet per
share value of share owners’
equity during the year.

Vesting schedule
Awards will vest from 15% for
threshold performance and 100%
for maximum performance.

Overview
Executives may receive an annual conditional
award expressed as a percentage of base
salary. Executives may also receive an award
in respect of the number of reinvested
dividends proportionate to the amount of the
award vesting, the dividends declared during
the performance period and the share price at
the time the dividend is declared. Awards will
vest subject to performance, measured over
a period of five consecutive financial years.

In respect of merger and acquisition activity
within the peer group, the committee has an
established and operated policy that TSR
outcomes should not be impacted by the
speculation or actuality of takeovers of peer
group companies (including WPP). This policy
includes a minimum listing requirement, an
approach for the reinvestment of proceeds from
shares of companies that delist during the
performance period and parameters for
companies subject to bid speculation. Details of
how this policy is implemented will be disclosed
each year in the relevant Annual Report.

In accordance with the EPSP rules that were
approved by share owners at the 2013 AGM,
if the committee considers that there has been
an exceptional event or that there have
been exceptional circumstances during a
performance period that have made it
materially easier or harder for the Company
to achieve a performance measure, the
committee may adjust the extent to which
an award vests to mitigate the effect of the
exceptional event or circumstances.

Judgement
The committee will use its judgement to set the
performance measures and targets annually.

Malus provisions
The committee has the ability to reduce any
unvested EPSP award in certain situations,
including when fraud or a material
misstatement has affected the level of any
performance-related compensation.

Clawback provisions
The committee has the ability to clawback the
amount net of tax received by an executive
from the proceeds of the vesting of an award
granted in 2016 or later years, in the three years
post payment, in certain situations, including
when fraud, breach of fiduciary duty or a
material misstatement has affected the level
of any performance-related compensation.

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Component and purpose

Operation

Performance

Other items of compensation

Dividend Equivalent
Payments (DEPs)
on the DSUs
To ensure that Sir Martin
Sorrell receives an amount
equal to the dividends
that would be payable
if he had taken receipt of
and retained the shares
underlying the DSUs.

Benefits
Provide a fixed and
non-itemised allowance,
to enable the executive to
procure benefits to enable
them to undertake their
role and ensure their
wellbeing and security.

Pension
To enable provision for
retirement benefits.

The Company has previously received share
owner approval to allow Sir Martin Sorrell
to defer receipt of the DSUs. The Company
makes a cash payment to Sir Martin Sorrell
of an amount equal to the dividends that
would have been due on the shares
comprising the DSUs.

This benefit will cease in November 2017.

The fixed allowance will be reviewed
periodically by the committee and any
changes will be effective for the next fiscal
year. The allowance is set with regard to
the individual concerned and the role
they undertake.

Should the executive be required to
relocate to a different country, a relocation
benefit may be provided in addition
to the allowance depending on the
prevailing circumstances.

Pension is provided by way of contribution
to a defined contribution retirement
arrangement, or a cash allowance,
determined as a percentage of base salary.

No longer subject to a
performance requirement
as this was assessed at the
point of vesting in 1999.

Not applicable.

Maximum annual
opportunity

The value of any accrued
dividends will vary
depending on the
dividends declared during
the deferral period.

Fixed benefit allowances
are as follows:
Group chief executive:
£200,000
Group chief financial
officer: $85,000.

Group chief executive:
30% of base salary.

Group chief financial
officer: 30% of base salary.

New Executive Director
appointee to the Board:
25% of base salary.

Notes to the policy table

Selection of performance measures

Plan rules

Copies of the various plan rules are available for inspection
at the Company’s registered office and head office.
The Directors’ Compensation Policy table for Executive
Directors provides a summary of the key provisions relating
to their ongoing operation.

The committee has the authority to ensure that any

awards being granted, vested or lapsed are treated in
accordance with the plan rules which are more extensive
than the summary set out in the table.

STIP
Performance measures are selected by the committee on the
basis of their alignment to Group strategy and are the key
measures to oversee the operation of the business. Measures
are reviewed annually by the committee taking into account
business performance and priorities.

EPSP
EPS growth is a measure that is important for both
management and our share owners, capturing growth in
revenue and earnings. ROE is similarly important, and
provides a positive counterbalance and risk management
mechanism through the focus on both growth and capital
efficiencies. With the inclusion of relative TSR, the plan
also takes account of share owner views of how WPP has
performed relative to the companies in the peer group.

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Calibration of performance targets

STIP
The performance targets for the STIP are set to incentivise
year-on-year growth and to reward strong, sustainable
performance. Strategic targets are based upon the annual
business priorities. The committee is of the view that the
targets for the STIP are commercially sensitive and it
would be detrimental to the Company to disclose them
in advance of or during the relevant performance
period. The committee will disclose those targets at
the end of the relevant performance period in that
year’s Annual Report, if those targets are no longer
commercially sensitive.

EPSP
Operational targets under the EPSP are set taking into
account a combination of factors, but primarily internal
forecasts, analysts’ expectations (albeit, the period over
which analysts’ forecast is generally shorter than the
five-year performance period) and historical performance
relative to budgets.

Relative TSR targets are set to ensure they are more
stretching than UK norms and require out-performance
of our peers at median before any reward is triggered.

Cascade to WPP Group pay policy

As well as setting the policy for the Executive Directors,
the committee is also responsible for reviewing the policy
for the most senior people at WPP outside the Board.
Compensation packages for these individuals are
normally reviewed every 18-24 months. As is the case
for Executive Directors, the WPP Group pay policy ensures
a clear and direct link between the performance of the
Group or relevant operating company and compensation.
Substantial use of performance-driven compensation not
only ensures the continued alignment of the interests of
share owners and senior individuals within the Group, but
also enables the Group to attract, retain and motivate the
talented people upon whom our success depends.

WPP is committed to encouraging strong performance
through a reward system that aligns management’s interests
with those of share owners.

From a compensation perspective, this is encouraged

in a number of ways:

Senior executives participate in the same long-term
incentive plan as the Executive Directors, which is designed
to incentivise growth, capital efficiency and share price
appreciation; and

Share ownership is encouraged for the WPP Leaders
(approximately the top 300 executives), all of whom have
stretching ownership goals.

Across the workforce more broadly, many employees
participate in bonus and commission plans based on the
performance of their employing company. Where locally
competitive, employees are provided with company-
sponsored pension plans and life assurance
plans and a range of other benefits. In addition to these
compensation elements, the Company also uses share-based
compensation across the workforce to incentivise, retain
and recruit talent which encourages a strong ownership
culture among employees. The main share plans are
described below.

Restricted Stock Plan
The RSP is used to satisfy awards under the short-term
incentive plans (including ESAs) as well as to grant awards
to management under the WPP Leaders, Partners and
High Potential program. In this program, awards are made
to participants that vest three years after grant, provided
the participant is still employed within the Group.

Executive Directors, and other senior management
employees, receive part of their annual bonus entitlement
as a deferred share award (ESA) under the RSP. Executive
Directors are ineligible to participate in any other aspect
of the management share award program.

Share Option Plan 2015
The WPP plc Share Option Plan 2015 is an all-employee
plan that makes annual grants of stock options to
employees with two years of service who work in
wholly-owned subsidiaries. This plan replaced the legacy
Worldwide Ownership Plan.

The WPP plc Share Option Plan 2015 has the capability
to make grants of executive share options in order to attract
or retain key talent. Such awards are made infrequently.
There were no grants of executive share options in 2016,
or 2015. The Executive Directors do not participate in
this plan.

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How do these pay policies affect potential compensation packages?

These graphs seek to demonstrate how pay varies with performance. The graphs are reflective of the pay policy that is
being presented for approval at the 2017 AGM.

Sir Martin Sorrell (including DEPs1 which will cease in November 2017)
Value of package (£000s)

Fixed and variable pay mix

Minimum

3,453

On-plan

Maximum

6,788

Minimum

On-plan

100%

51%

34%

15%

14,953

Maximum

23%

31%

46%

5,000

10,000

15,000

20%

40%

60%

80%

100%

Sir Martin Sorrell (excluding DEPs1 which will cease in November 2017)
Value of package (£000s)

Fixed and variable pay mix

Minimum

1,695

On-plan

5,030

Minimum

On-plan

100%

33%

46%

21%

Maximum

13,195

Maximum

13%

35%

52%

5,000

10,000

15,000

20%

40%

60%

80%

100%

Paul Richardson
Value of package (£000s)

Minimum

1,100

On-plan

Maximum

2,774

Fixed and variable pay mix

Minimum

On-plan

100%

40%

47%

13%

5,486

Maximum

20%

36%

44%

1,000

2,000

3,000

4,000

5,000

6,000

20%

40%

60%

80%

100%

o Fixed o Short-term incentives o Long-term incentives

1 DEPs are dividend equivalent payments applicable to Sir Martin Sorrell only. Details of the payments are set out on page 140.

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The graphs are informed by three performance scenarios and these, along with the assumptions used, are summarised below.

Fixed elements

Short-term
incentives

Long-term
incentives

Base salary
1,150
798

Consists of base salary, benefits (including DEPs where indicated) and pension
Base salary reflects current levels (FY2017)
The DEPs are consistent with the single figure table for FY2016. Benefits reflect the fixed benefits
allowances under the proposed policy
Pension reflects contributions under the proposed policy
£0002
Sir Martin Sorrell
Paul Richardson
On-plan scenario assumes target bonus is paid
Maximum scenario assumes the full bonus is paid
Below threshold
% of salary
0%
Sir Martin Sorrell
Paul Richardson
0%
On-plan scenario assumes threshold vesting of an award at the proposed policy level
Maximum scenario assumes full vesting of an award at the proposed policy level
% of salary
Sir Martin Sorrell
Paul Richardson

Benefits (inc. DEPs)
1,9581
63

Below threshold
0%
0%

On-plan
90%
45%

On-plan
200%
165%

Pension
30%
30%

Total fixed
3,453
1,100

Maximum
400%
250%

Maximum
600%
300%

1 The DEP component of the benefits number, £1,757,739, will cease in November 2017.
2 Any US dollar amounts have been converted into sterling at an exchange rate of $1.3547 to £1.

Other Executive Director policies

Legacy share awards and obligations

Under the Directors’ Compensation Policy, Sir Martin
Sorrell’s deferred awards will be paid in accordance
with the terms agreed at the time and set out in previous
Compensation Committee reports. The key terms of
Sir Martin’s deferred awards are summarised below.

Deferred awards (Sir Martin Sorrell only)

The Company has previously received share owner approval
to allow Sir Martin Sorrell to defer receipt of his UK and
US 2004, 2005 and 2007 LEAP awards and the UK part
of his 2006 and 2009 LEAP awards. The UK awards are
options that can be exercised at any time until November
2017. The US awards will vest on the earlier of the end of
Sir Martin’s employment with the Company, a change in
control of the Company and 30 November 2017. Additional
shares will continue to accrue in respect of dividends paid
up to the point of exercise (UK) or vesting (US).

The Company has also previously received share owner
approval to allow Sir Martin Sorrell to defer receipt of the
UK and the US Deferred Stock Units (DSUs). These are the
awards that originally vested in 1999, having been granted

in 1995 under the Capital Investment Plan. The UK DSU
is an option that can be exercised at any time until
November 2017. The US DSU will vest on the earlier of
the end of Sir Martin’s employment with the Company, a
change in control of the Company and 30 November 2017.
In accordance with share owner approval, Sir Martin
Sorrell receives cash dividend equivalent payments
(DEPs) in respect of these deferred awards as noted
in the policy table.

Share ownership guidelines

Executive Directors and other members of the senior
management team are subject to share ownership guidelines
which seek to reinforce the WPP principle of alignment
of management’s interests with those of share owners.

The following levels of ownership are required to be
achieved by the Executive Directors (unchanged for 2017):

Group chief executive
Group chief financial officer
Minimum for any other
new executive appointed
to the Board

% of base salary
600%
300%

200%

Executive Directors will be permitted a period of seven
years from the date of their appointment to achieve the
guideline level.

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In the event that an Executive Director fails to achieve
the required levels of share ownership, the committee will
decide what remedial action or penalty is appropriate. This
may involve a reduction in future share awards or requiring
the director to purchase shares in the market to meet the
ownership guidelines.

Appointments to the Board

This section sets out details with respect to the appointment
of a new Executive Director to the Board of WPP, whether
it is an external or internal appointment.

Fixed compensation
Base salary will be set taking into account a range of
factors, including the profile and prior experience of the
candidate, internal relativities, cost and external market
data. If base salary is set at a lower initial level, contingent
on individual performance, the committee retains the
discretion to realign the base salary over a phased period
of one to three years following appointment, which may
result in an exceptional rate of annualised increase in excess
of that set out in the policy table.

Other elements of fixed pay will be set in accordance

with the policy table. A new appointment may require the
committee to rely on the authorised discretion (as set out
on page 137) to make payments related to relocation, for
example, in order to facilitate the appointment.

Ongoing variable compensation
The committee will seek to pay only that level of reward
necessary to recruit the exceptional talent needed to lead
such a complex global group. The actual level of incentive
offered will be dependent on the role and existing package
of the candidate. The aggregate maximum face value for
annual short- and long-term variable compensation will
be 8 times base salary, which is materially lower than the
current Group chief executive maximum level.

The committee retains the discretion to make awards

on recruitment, within the policy limits, to provide an
immediate alignment of interest with the interests of
share owners.

manner at the discretion of the committee. The intention of
the committee is that any award will take the form of WPP
shares and will be subject to performance as far as possible.

An announcement of the director’s appointment,
detailing the incumbent’s compensation will be made on a
timely basis through a regulatory information service and
posted on the Company’s website.

Service contracts
The following terms will apply for any new executive role
appointed to the Board in the future.

Executives will normally be appointed on a notice
period of up to 12 months, although the committee retains
the discretion to appoint an external candidate on a notice
period of up to 24 months reducing on a rolling basis to
12 months (such that after 12 months’ service the notice
period would have reverted to the standard 12 months).

At the committee’s discretion, any payment in lieu of
notice will be restricted to base salary, benefits and pension.
On termination, entitlements will lapse when classified

as a bad leaver (defined within the incentive plans).
Otherwise base salary, benefits and pension allowance
are payable as per the notice period and the committee will
have the power to make phased payments that would be
reduced or stopped if alternative employment is taken up.

Terms specific to internal appointments
The committee can honour any pre-existing commitments
if an internal candidate is appointed to the Board.

Service contracts

The Company’s policy on Executive Directors’ service
contracts is that they should be on a rolling basis without
a specific end date.

The effective dates and notice periods under the current

Executive Directors’ service contracts are summarised below:

Sir Martin
Sorrell
Paul
Richardson

Effective from

Notice period

19 November 2008

‘At will’

19 November 2008

12 months

Buy-out awards
The committee may consider buying-out compensation
entitlements that the individual has had to forfeit by
accepting the appointment. The structure and value of the
awards will be informed by the structure and value of those
entitlements being forfeited, and the performance targets,
time horizon and vehicle will be set in an appropriate

Sir Martin Sorrell’s service contract may be terminated
by either the Company or Sir Martin without any notice,
and without any payment in lieu of notice.

The Executive Directors’ service contracts are
available for inspection at the Company’s registered
office and head office.

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Loss of office provisions

Fixed compensation elements
As noted above, the service contract of Paul Richardson
provides for notice to be given on termination.

The fixed compensation elements of the contract will
continue to be paid in respect of any notice period. There
are no provisions relating to payment in lieu of notice. If an
Executive Director is placed on garden leave, the committee
retains the discretion to settle benefits in the form of cash.
The Executive Directors are entitled to compensation for
any accrued and unused holiday although, to the extent
it is possible and in share owner interests, the committee
will encourage Executive Directors to use their leave
entitlements, prior to the end of their notice period.

Except in respect of any remaining notice period, no
aspect of any Executive Director’s fixed compensation is
payable on termination of employment. Sir Martin Sorrell’s

service contract contains an indemnity, subject to certain
conditions relating to previously deferred awards, from
WPP in respect of any US tax which is charged under
section 280G as a result of a termination linked to a change
in control of WPP. Further details are set out below.

Short- and long-term compensation elements
If the Executive Director is dismissed for cause, there is not
an entitlement to a STIP award, and any unvested share-
based awards will lapse. Otherwise, the table below
summarises the relevant provisions from the directors’
service contracts (cash bonus) and the plan rules (RSP and
EPSP), which apply in other leaver scenarios. As noted on
page 137, the committee has the authority to ensure that
any awards that vest or lapse are treated in accordance with
the plan rules, which are more extensive than the summary
set out in the table below.

Cash bonus

The Executive Directors are entitled to receive their bonus for any particular year provided they are employed on
the last date of the performance period.

ESA

EPSP

Provided the Executive Director is a Good Leaver, unvested awards will be reduced on a time pro-rata basis and
paid on the vesting date.

• The award will lapse if the executive leaves during the first year of a performance period.
• Provided the Executive Director is a Good Leaver, awards will vest subject to performance at the end of the

performance period and time pro-rating. Awards will be paid on the normal date.

• In exceptional circumstances, the compensation committee may determine that an award will vest on a

different basis.

• Generally, in the event of death, the performance conditions are to be assessed as at the date of death.

However, the committee retains the discretion to deal with an award due to a deceased executive on any other
basis that it considers appropriate.

• Awards will vest immediately on a change-of-control subject to performance and time pro-rating unless it is

agreed by the committee and the relevant Executive Director that the outstanding awards are exchanged for
equivalent new awards.

Other pre-existing terms that apply to Sir Martin Sorrell

Sir Martin Sorrell’s deferred LEAP awards and his DSUs (as set out on page 140) will be paid out unconditionally on
termination of employment. The performance requirements in respect of these awards have already been met, the awards
have vested and are therefore no longer subject to any leaver provisions.

In the event any payments due to Sir Martin would be treated as ‘deferred compensation’ in accordance with US
legislation and subject to section 409A requirements, those payments will be delayed. If those payments are delayed,
an amount in respect of interest as a result of the delay will be due from the Company to Sir Martin.

In the event of a change of control of WPP, the Company has agreed to indemnify Sir Martin, with the prior approval
of share owners, with respect to any related personal US tax liability under the provisions of section 280G. This indemnity
is subject to certain limitations that exempt the Company from liability for any tax related to the share-owner approved
deferrals of certain awards. Based on the most recent review by the committee of the potential impact of this clause, it
is unlikely that any 280G payment would be due from the Company based on an analysis, using standard assumptions.
This was reviewed by independent counsel.

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Other committee discretions not set out on page 142

Leaver status: the committee has the discretion to determine an executive’s leaver classification in light of the guidance
set out within the relevant plan rules, except with respect to Sir Martin Sorrell. Unless Sir Martin Sorrell is terminated for
cause, he will be treated as having retired on leaving the Company and therefore be treated in accordance with the plan
rules as a Good Leaver.

Settlement agreements: the committee is authorised to reach settlement agreements with departing executives,

informed by the default position set out above.

External appointments

Executive Directors are permitted to serve as non-executives on the boards of other organisations. If the Company is a
share owner in that organisation, non-executive fees for those roles are waived. However, if the Company is not a share
owner in that organisation, any non-executive fees can be retained by the office holder.

Directors’ Compensation Policy table – chairman and non-executive directors

The following table sets out details of the ongoing compensation elements for WPP’s chairman and non-executive
directors. No element of pay is performance-linked.

Component and purpose Operation

Base fees
To reflect the skills and
experience and time
required to undertake
the role.

Additional fees
To reflect the additional
time required in any
additional duties for
the Company.

Fees are reviewed at least every two years and take into account the skills,
experience and time required to undertake the role, as well as fee levels in
similarly-sized UK companies.

The chairman and non-executive directors receive a ‘base fee’ in connection
with their appointment to the Board.

Non-executive directors are eligible to receive additional fees in respect
of serving as:

• Senior independent director
• Chairman of a Board Committee
• Member of a Board Committee
• Consultancy fees in respect of other work that falls outside the remit

of their role for the Company.

Benefits and
allowances
To enable the chairman
and non-executive
directors to undertake
their roles.

The Company will reimburse the chairman and non-executive directors for all
reasonable and properly documented expenses incurred in performing their
duties of office.

The Company may provide additional allowances to facilitate the operation of
the Board such as a travel allowances for attendance at international meetings.

In the event that the reimbursement of these expenses gives rise to a personal tax
liability for the chairman or non-executive director, the Company retains the
discretion to meet this cost (including, where appropriate, costs in relation to tax
advice and filing).

While not currently offered, the Company retains the discretion to pay additional
benefits to the chairman including, but not limited to, use of car, office space and
secretarial support.

Maximum annual opportunity

An overall cap on all
non-executive fees,
excluding consultancy fees,
will apply consistent with
the prevailing and share
owner-approved limit in
the Articles of Association.

Consultancy fees will be set
on a discretionary basis,
taking account of the nature
of the role and time required.

Benefits and allowances for
the chairman will be set at
a level that the committee
feels is required for the
performance of the role.

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Directors’ Compensation Policy

Other chairman and non-executive director policies

Letters of appointment for the chairman and non-executive directors

Letters of appointment have a two-month notice period and there are no payments due on loss of office.

Appointments to the Board

Letters of appointment will be consistent with the current terms as set out in this Annual Report. The chairman and
non-executive directors are not eligible to receive any variable pay. Fees for any new non-executive directors will be
consistent with the operating policy at their time of appointment. In respect of the appointment of a new chairman, the
committee has the discretion to set fees taking into account a range of factors including the profile and prior experience
of the candidate, cost and external market data.

Payments in exceptional circumstances

In truly unforeseen and exceptional circumstances, the committee retains the discretion to make emergency payments
which might not otherwise be covered by this policy. The committee will not use this power to exceed the recruitment
policy limit, nor will awards be made in excess of the limits set out in the Directors’ Compensation Policy table. An
example of such an exceptional circumstance could be the untimely death of a director, requiring another director to
take on an interim role until a permanent replacement is found.

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Compensation Committee Report

This section of the Compensation Committee Report sets
out details of how the Company’s Compensation Policy
was implemented in 2016. We start by setting out the
details of the Compensation Committee – those setting and
implementing the policy. We then present a summary of
the 2016 executive compensation together with a summary
of pay across the Group.

Governance in relation to compensation

Compensation Committee members

Sir John Hood (Chairman)
Jacques Aigrain
Roberto Quarta
Tim Shriver

Attendance at 5
meetings in 2016
5
5
5
5

During 2016, the Compensation Committee met five times
on a formal basis, with additional informal meetings held
as needed.

The committee members do not have any personal
financial interest (other than as a share owner as disclosed
on page 156) in the matters to be decided by the
committee, potential conflicts of interest arising from
cross-directorships or day-to-day involvement in running
the Group’s businesses. The terms of reference for the
Compensation Committee are available on the Company’s
website, and will be on display at the AGM, as set out
in the Notice of AGM.

Advisors to the Compensation Committee

The Compensation Committee regularly consults with
Group executives. In particular, the committee invites
certain individuals to attend meetings, including the Group
chief executive (who is not present when matters relating
to his own compensation or contracts are discussed and
decided), the Company Secretary, the chief talent officer
and the worldwide compensation & benefits director.
The latter two individuals provide a perspective
on information reviewed by the committee and are a
conduit for requests for information and analysis from
the Company’s external advisors.

External advisors

The committee retains Willis Towers Watson to act as
independent advisors. Willis Towers Watson is engaged
to provide advice to the Compensation Committee and
to work with management on matters related to our
compensation policy and practices. Willis Towers Watson
is a member of the Remuneration Consultants Group and
has signed the code of conduct relating to the provision of
advice in the UK. In light of this, and the level and nature
of the service received, the committee remains satisfied that
the advice is objective and independent.

Willis Towers Watson provides limited other services
at a Group level, however some of the operating companies
may engage advisors, including Willis Towers Watson, at
a local level.

In 2016, Willis Towers Watson received fees of
£220,968 in relation to the provision of advice to the
committee. The committee receives external legal advice,
where required, to assist it in carrying out its duties.

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Compensation Committee Report

Statement of share owner voting

In 2016, a significant number of share owners voted against the Implementation Report of the Compensation Committee.
The committee understands that the majority of share owners voting against the Implementation Report did so because of
the level of the 2015 single figure of the Executive Directors, which was driven largely by the maturity of a legacy five-year
long-term incentive plan award under LEAP. The 2011 LEAP award vested in full, reflecting very strong relative TSR
performance and an almost doubling of the Company share price over the five-year investment and performance period.
The committee is content that LEAP has performed as intended and in the manner approved by share owners when the
plan was implemented and when the last compensation policy was approved.

The committee would also like to remind share owners that the LEAP program was replaced in 2013 with a new

long-term incentive plan, but that the first five-year awards under this plan will not vest until 2018.

Resolution
To approve the Implementation
report of the Compensation
Committee

Votes for

Number

Votes against

Votes cast Votes withheld

Number

649,465,421

66.55

326,385,527

33.45

975,850,948

11,128,256

Executive Directors’ total compensation received (audited)

Single total figure of compensation

Sir Martin Sorrell1

Paul Richardson1,2

Base

salary Benefits3
£000
228
193
62
67

£000
1,150
1,150
798
718

DEPs4 Pension
£000
£000
460
1,758
460
1,545
240
–
216
–

Short-term
incentives5
£000
2,992
4,278
1,517
1,648

Long-term
incentives6
£000
41,560
62,783
6,698
8,859

Total annual
compensation
£000
48,148
70,409
9,315
11,508

2016
2015
2016
2015

1 Any US dollar amounts received in 2016 have been converted into sterling at an exchange rate of $1.3547 to £1.
2 Paul Richardson’s base salary figure is denominated in US dollars other than his fee for directorship of WPP plc which amounts to £100,000 which, per above, has
been converted at an exchange rate of $1.3547 to £1. There has been no change in base salary over 2015 and the difference between the 2015 value is due to a
change in exchange rates.

3 The benefits, and therefore total annual compensation, set out in the table above exclude the disclosable value of expenses related directly to attendance at
Board meetings that would be chargeable to UK income tax. The expenses were for Sir Martin £2,578 (£6,938 in 2015) and Paul Richardson £13,826 (£14,502
in 2015). Details of benefits are set out on page 147.

4 Sir Martin Sorrell receives payments in accordance with the approval granted by share owners of amounts equal to the dividends that would be payable during
2016 totalling £1,757,739 (£1,545,340 during 2015) in respect of the shares reflected in the UK and US Deferred Stock Units Awards Agreements, these agreements
that now comprise the awards granted under the Capital Investment Plan in 1995.

5 This is the aggregate amount awarded for the 2016, and 2015, financial years’ performance. The awards are delivered equally in a deferred share bonus in the

form of an ESA, which vests two years from the date of grant subject to continued employment, and cash.

6 This is the value of the 2012, and 2011, LEAP awards which vested in 2017, and 2016, following the end of the five-year performance period on 31 December 2016,

and 31 December 2015, respectively.

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Compensation Committee Report

Fixed elements of compensation (audited)

Base salary

Sir Martin Sorrell
Paul Richardson

Effective date
1 January 2013
1 July 2013

Contractual salary
000
£1,150
$945 and £100

Base salary received
in 2016
000
£1,150
$1,0801

1 The WPP directorship fee for Paul Richardson has been converted into US dollars at a rate of $1.3547 to £1.

Each Executive Director receives a fee of £100,000 for their directorship of WPP plc, included in the base salary figure
above. The base salary for the Executive Directors is reviewed, but not necessarily changed, every 24 months. There have
been no changes in base salary for the Executive Directors since 2013.

Benefits, dividend equivalent payments and pension

Sir Martin Sorrell1
Paul Richardson1

2016 Benefits
£000
228
62

2016 DEPs
£000
1,758
–

The benefits shown are those provided to the Executive Directors that are deemed taxable in the UK, or those that would
be taxable if Paul Richardson were resident in the UK. The value of benefits received that are detailed in the numbers
above include car and/or car allowance, healthcare, life assurance, long-term disability allowance and a per diem housing
allowance paid when the executive uses their own accommodation when travelling outside of their home country. The
benefits set out exclude the disclosable value of expenses related directly to attendance at Board meetings that would be
chargeable to UK income tax.

The table above also includes share owner-approved dividend equivalent payments of £1,757,739 (£1,545,340 during
2015) which are due on certain of Sir Martin Sorrell’s deferred share awards. The following table provides a breakdown
of the key taxable benefits for 2016:

Sir Martin Sorrell1
Paul Richardson1

Car benefits
£000
37
27

Healthcare
£000
68
15

Accommodation
allowance
£000
86
19

Other expenses
£000
37
1

1 The benefits set out above exclude the disclosable value of expenses related directly to attendance at Board meetings that would be chargeable to UK income
tax. The expenses were for Sir Martin £2,578 and Paul Richardson £13,826.

Sir Martin Sorrell
Paul Richardson

Contractual pension
(% of base salary)
40%
30%

2016 Pension
£000
460
240

All pension benefits for the Executive Directors are provided on either a defined contribution or a cash allowance basis.
Only base salary is pensionable. No changes have been made to pension contribution rates in the last year, but Sir Martin
Sorrell’s contractual pension as a percentage of base salary will reduce to 30% in July 2017 subject to policy approval at
the upcoming AGM.

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Compensation Committee Report

Variable elements of pay (audited)

Short-term incentive

This section summarises the Compensation Committee’s assessment of the Executive Directors’ performance during 2016
under the short-term incentive plan.

2016 short-term incentive plan outcome (percentages expressed relative to base salary)

Sir Martin Sorrell
Paul Richardson

Actual short-term
incentive received
260%
190%

Attributed to
financial objectives
160%
140%

Attributed to
personal objectives
100%
50%

Total 2016
short-term incentives
£000
2,992
1,517

In respect of the 2016 short-term incentive awards, half will be delivered in the form of shares as an Executive Share
Award (ESA) with a two-year deferral requirement. ESAs are subject to malus provisions. The cash bonuses are subject
to clawback provisions.

Performance against financial objectives (70% of the award)

Performance against all financial objectives is calculated on a pro forma (‘like-for-like’) basis other than net sales margin
that is calculated on a constant currency basis. The key financial short-term incentive plan objectives for all the Executive
Directors are consistent with 2015 and provide a robust basis for assessing financial achievement.

2016 was another record year with the Company producing strong net sales and profit growth whilst margins
performance was robust. The achievements against our stretching targets are illustrated below and demonstrates out-
performance against the profit and net sales targets and a slight under-performance against the very ambitious margin
improvement target.

Group performance (CEO and CFO)

2016 ﬁnancial objectives (70% of the award)

Threshold

Target

Maximum

Vesting
(% of maximum)

o Like-for-like headline PBT growth (1/3)

o Constant currency headline net sales

margin improvement (1/3)

o Like-for-like growth in net sales (1/3)

2.5%

2.0%

1 Like-for-like headline net sales margin improvement.

6.0%

0.26%

0.3%1

3.1%

10.0%

0.5%

4.0%

60%

52%

77%

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Compensation Committee Report

Performance against individual strategic objectives (30% of the award)

Executive Director

Sir Martin Sorrell

Personal measure 2016 Clarification of measures
Leadership
planning

Strategic planning
& execution

Paul Richardson Working capital

management
WPP IT
transformation

Financial control

Actively managing the process of strengthening the Group’s
senior leadership teams through internal development,
promotions, transfers and external hires.
Key focus areas include maintaining creative excellence;
driving strategy in the digital, data, analytics and new
markets; improving the effectiveness of the WPP horizontality
approach to enhance client service delivery.
Improving year-on-year rolling average net working capital
as a percentage of the annual revenue trend.
Implementing a transformational program of outsourcing
IT services to produce enhanced service and cost savings
in future years.
Demonstrating measures taken to improve operating
company balance sheet control and management.

Maximum
potential
(% of base
salary)

Award
received
(% of
maximum)

131%

77%

90%

55%

2016 short-term incentive plan awards

Based on the performance set out above, the short-term incentive award for each executive was:

Sir Martin Sorrell
Paul Richardson

Base salary
000
£1,150
$1,0801

Target bonus %
of base salary
217.5%
200%

Maximum bonus %
of base salary
435%
300%

2016 award %
against target/
maximum
120%/60%
95%/63%

Total 2016 short-term
incentive award
000
£2,992
$2,056

1 The fee for Paul Richardson has been converted into US dollars at a rate of $1.3547 to £1.

As noted above, 50% of the 2016 bonus is delivered in the form of WPP shares as an Executive Share Award (ESA). These
shares are granted post determination of the annual bonus achievement and will vest, subject to continued employment,
two years later.

Short-term incentive weightings and measures for 2017

The committee has reviewed the performance objectives and weightings for 2017 to ensure continued alignment
with Company strategy. The weighting of financial objectives (70%) and individual strategic objectives (30%) will
remain unchanged as will the Group financial measures of headline PBT growth, net sales margin improvement and
net sales growth.

The committee is of the view that the targets for the STIP are commercially sensitive and it would be detrimental to
the Company to disclose them in advance of or during the relevant performance period. To the extent targets are no longer
commercially sensitive they will be disclosed at the end of the relevant performance period in that year’s Annual Report.

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Long-term incentives (audited)

2012 – 2016 LEAP III awards vesting

The 2012 awards were the final awards granted under LEAP III, the long-term incentive plan which in 2013 was replaced
by the EPSP. Vesting of LEAP awards was solely dependent on WPP’s relative TSR performance measured in common
currency, against a custom group of WPP’s comparators (Aegis, Arbitron, Dentsu, GfK, Havas, Interpublic, Ipsos,
Omnicom, Nielsen and Publicis), weighted by their respective market capitalisation.

Over the five-year investment and performance period, WPP out-performed 95% of the weighted peer group including
both Omnicom and Publicis, WPP’s largest and most comparable multi-line competitors. Over the period, WPP delivered
TSR of 210% which means that a shareholding of £100 at the start of the period would be worth £310 at the end,
including reinvested dividends. The underlying financial and operational performance was also strong over the five-year
period, consistent with the TSR outcome.

Aegis and Arbitron, two of the comparator companies, were taken over during the investment and performance period

by Dentsu and Nielsen, respectively. In line with the guidelines previously established by the committee, the two
companies were removed from the comparator group as neither company was listed for more than 40% of the investment
and performance period.

WPP’s TSR performance relative to the comparator group resulted in a match of 500%, equating to the maximum award.

Sir Martin Sorrell
Paul Richardson1

Number of shares
vesting
2,406,380
86,690

Share price
on vesting
£17.2708
$104.6617

1 Paul Richardson’s 2012 LEAP award were granted in respect of ADRs.

Value of match
at grant price of
£8.5975/$69.2492
000
£18,529
$5,373

Value added due
to dividends
000
£4,339
$953

Value added due
to share price
appreciation
000
£18,692
$2,747

2016 Long term
incentives
000
£41,560
$9,073

Sir Martin Sorrell
£'000

Paul Richardson
$'000

50,000

40,000

30,000

20,000

10,000

8,000

6,000

4,000

2,000

Value of
match
at grant
price

Value
added
due to
dividends

Value
added due
to share
price
appreciation

2016
Long term
incentives

Value of
match
at grant
price

Value
added
due to
dividends

Value
added due
to share
price
appreciation

2016
Long term
incentives

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Compensation Committee Report

2016 EPSP awards granted

In 2016, the Executive Directors, along with a select number of senior executives within the Group, were granted awards
under the Executive Performance Share Plan (EPSP). The 2016 awards are subject to three equally-weighted independent
performance conditions, being relative TSR, EPS and ROE. Performance is measured over the five financial years starting
in 2016 as follows:

Measure

Weight

Nature

Performance zone
(threshold to maximum)

Payout

Total Shareholder Return (TSR)

Earnings Per Share (EPS)

Return On Equity (ROE)

One-third

Relative to peers

One-third

WPP growth

One-third

WPP absolute

Median to upper decile

7% – 14% compound annual growth

15% – 18% annual average1

Below threshold: 0% of element vests
Threshold: 20%2 of element vests
Maximum of above: 100% of element vests
Straight-line vesting between threshold and maximum

Performance period

Five-years ending on 31 December 2020

1 The ROE measure for EPSP awards issued in 2013 and 2014 was a 10% to 14% average return.
2 The Threshold level is proposed to move to 15% from 2017.

As in previous years, WPP’s TSR performance is compared to companies representing our most relevant, listed global
competitors, weighted by market capitalisation. In 2016, the comparator group comprised Dentsu, GfK, Havas,
Interpublic, Ipsos, Nielsen, Omnicom and Publicis. TSR performance is calculated on a market capitalisation-weighted
basis in both common and local currency (weighted equally). Using a dual basis ensures that the interests
of both local and international investors are reflected in the performance measures.

The following interests were awarded on 28 November 2016 at the preceding five-day average share price of £17.052

(ordinary shares) or $105.93092 (ADRs).

Sir Martin Sorrell
Paul Richardson

Basis and level of award
(% of salary)
974%1
400%1

Award over
Ordinary Shares
ADRs

Number of interests
awarded
656,873
41,536

Face value at date of grant
000
£11,201
$4,400

1 The basis level of award is proposed to be reduced as set out in the new Directors’ Compensation Policy.

EPSP measures and targets for 2017 – 2021

The committee have reviewed both the measures and the targets as part of the review of the Directors’ Compensation
Policy that is being submitted to share owners for approval. The committee judge that the balance of measures remains
appropriate and aligned to the Company’s business objectives and that the targets remain challenging and in line with
financial forecasts.

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Aligning pay and performance

As set out in the Directors’ Compensation Policy, the committee’s objective is to align variable compensation with the
key strategic priorities of WPP, maximising the dynamic between pay and performance.

This dynamic is contingent upon the committee setting challenging targets each year. The following graph and table

demonstrate the relationship between pay and performance over the last eight years for the Group chief executive.

Historical TSR performance1 Value of hypothetical £100 holding

o WPP

o FTSE 100

600

500

400

300

200

100

Value of a
hypothetical
£100 investment

£590

£219

2008

2009

2010

2011

2012

2013

2014

2015

2016

Financial year 31st December
CEO total compensation (£000)2
Year-on-year change in CEO total
compensation
Short-term incentive award
against maximum
Long-term incentive award
against maximum
Change in annual TSR3
Change in five-year TSR4

2009
7,199

2010
11,597

2011
11,941

2012
17,543

2013
29,846

2014
42,704

2015
70,4095

2016
48,148

63%

32%

50%
66%
10%

61%

95%

83%
32%
37%

77%

46%
-13%
13%

47%

62%

86%
38%
45%

70%

82%

87%
56%
241%

43%

72%

100%
3%
172%

65%

86%

100%
18%
135%

-32%

60%

100%
19%
210%

1 Growth in the value of a hypothetical £100 holding of WPP ordinary shares over eight years against an equivalent holding in the FTSE 100 (the broad market

equity index of which WPP is a constituent) based on one-month average of trading day values. Source: DataStream.

2 Calculated using the single figure methodology.
3 TSR calculated using a one-month trading day average, consistent with the data shown in the graph.
4 TSR calculated using a six-month averaging period, consistent with the calculation methodology under LEAP/EPSP.
5 The CEO total compensation figure has been restated to exclude the disclosable value of expenses related directly to attendance at Board meetings as per the

single figure table on page 146.

Relative importance of spend on pay

The following table sets out the percentage change in total staff costs, headcount, dividends and share buy-backs.

Total staff costs
Headcount – average over the year
Dividends and share buy-backs

2016
£7,784.9m
132,657
£1,043.9m

2015
£6,652.6m
124,930
£1,133.4m

% change
17.02%
6.19%
-7.90%

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Relative change in pay for the Group chief executive

The following table summarises the change in the Group chief executive’s base salary, taxable benefits and annual bonus,
compared to that of full-time employees within the Group. The higher level of taxable benefits of the chief executive
officer is due to the increased cost of insured benefits. The cost of UK taxable benefits have reduced due to more effective
and efficient management of benefit provision. The benefits received by employees has remained constant.

Group chief executive
All employees

Base salary1
No change
1.5%

Taxable benefits1,2
18.1%
-6.6%

Annual bonus1
-30.1%
-11.7%

1 The all employees numbers for the change in base salary, taxable benefits and annual bonus have been calculated based on the annual average amount

received. The annual bonus data for the Group chief executive uses the short-term incentive figures set out on page 146.

2 Taking into account the worldwide structure and size of the Group, and given the need to calculate benefits on the basis that an individual is resident in the
UK for tax purposes, collating data on all employees was not practicable. As a result, the population for the taxable benefits consists of UK employees only.

Non-executive directors’ fees

The fees due to non-executive directors, last reviewed on 1 July 2013, are set out below (£000).

Chairman
Non-executive director
Senior independent director
Chairmanship of Audit or Compensation Committee
Chairmanship of Nomination and Governance Committee
Member of Audit or Compensation Committee
Member of Nomination and Governance Committee

475
70
20
40
15
20
10

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Non-executive directors’ total compensation received (audited)

The single total figure of compensation table below details fee payments received by the non-executive directors while
they held a position on the Board. During both 2015 and 2016, the Company met the cost (including national insurance
and income tax, where relevant) of expenses incurred by the non-executive directors in performing their duties of office,
in accordance with the policy set out on page 143.

In 2016, the disclosable value of the expenses that would be chargeable to UK income tax totalled £98,407

(including £32,314 of national insurance and income tax, where relevant).

Roberto Quarta1
Roger Agnelli2
Jacques Aigrain
Charlene Begley
Tarek Farahat3
Sir John Hood
Ruigang Li
Daniela Riccardi
Nicole Seligman
Hugo Shong
Timothy Shriver
Sally Susman
Sol Trujillo

2016
475
23
130
100
13
110
80
80
85
80
90
80
90

Fees
£000
2015
305
114
121
100
–
110
96
88
86
112
106
80
106

1 The 2015 fee reflects fees for the part-year Roberto Quarta served as chairman of the WPP Board.
2 Roger Agnelli tragically died on 19 March 2016.
3 Tarek Farahat was appointed to the WPP Board on 11 October 2016.

Past directors

During 2016, payments were made to past directors who continued to provide advisory services to the Company.
A payment of £59,054 was made to John Quelch in respect of educational presentations he gave to companies within
the WPP Group. A payment of £30,000 was made to John Jackson in respect of his advisory role to WPP, which
enables the Company to benefit from his considerable knowledge and experience in the communications and marketing
services sector.

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Executive Directors’ interests (audited)

Executive Directors’ interests in the Company’s ordinary share capital are shown in the following table. Other than as
disclosed in this table, and in the Compensation Committee report, no Executive Director had any interest in any contract
of significance with the Group during the year. Each Executive Director has a technical interest as an employee and
potential beneficiary in shares in the Company held under the ESOPs. More specifically, the Executive Directors have
potential interests in shares related to the outstanding awards under the LEAP program and the EPSP in addition to
outstanding ESAs. As at 31 December 2016, the Company’s ESOPs (which are entirely independent of the Company
and have waived their rights to receive dividends) held in total 13,857,706 shares in the Company (17,154,359 in 2015).

Outstanding scheme interests

Total share
interests
(including
charitable
foundation)

24,547,301
25,859,089
1,000,265
1,068,240

Total beneficial
interests and
deferred
awards1
21,021,365
21,283,153
1,000,265
1,068,240

Deferred awards
(without
performance
conditions
– vested but
unexercised,
included in
Total beneficial)2

8,773,456
8,773,456
–
–

Shares without
performance
conditions
(unvested)3,4
247,164
133,817
103,270
54,185

Shares with
performance
conditions
(unvested)5,6
5,450,606
3,295,436
1,250,220
862,295

Total unvested
shares
5,697,770
3,429,253
1,353,490
916,480

Director
Sir Martin Sorrell7 At 31 Dec 2016
At 19 Apr 2017
Paul Richardson At 31 Dec 2016
At 19 Apr 2017

1 Shares held outright together with shares due pursuant to awards that have vested but receipt of which have been deferred with share owner approval

(see footnote 2).

2 Shares (1) pursuant to the vesting of awards under Renewed LEAP (namely the 2004 and 2005 awards, part of the 2006 award, the 2007 award the UK portion
of the 2009 Award) and (2) which originally formed part of the Capital Investment Plan (an award made in 1995, which vested in 1999, in respect of 4,691,392
shares in total, some of which have been received by Sir Martin Sorrell) and which now comprise the share owner-approved UK and US Deferred Stock Units
Awards Agreements. The receipt of all of these awards has been deferred until November 2017 in accordance with share owner approval. Dividend shares
will be due on the exercise of these options.

3 Shares due pursuant to the 2014 and 2015 Executive Stock Awards, full details of which can be found on page 156. Additional dividend shares will be due

on vesting.

4 Shares due pursuant to the 2015 Executive Stock Awards, full details of which can be found on page 156. Additional dividend shares will be due on vesting.
5 Maximum number of shares due on vesting pursuant to the outstanding LEAP III and EPSP awards, full details of which can be found on page 157. Additional

dividend shares will be due on vesting.

6 As noted in footnote 5 above, less the maximum due under the 2012 LEAP III Award, which vested on 7 March 2017 (full details can be found on page 150).
7 On 24 March 2017, Sir Martin Sorrell gifted 1,050,000 ordinary shares to The JMCMRJ Sorrell Charitable Foundation. At 19 April 2017, The JMCMRJ Sorrell

Charitable Foundation is interested in 4,575,936 ordinary shares. Sir Martin Sorrell has no beneficial interest in these shares.

Share ownership guidelines

As detailed in the Directors’ Compensation Policy, the Executive Directors are required to achieve a minimum level of
share ownership of WPP shares. The Group chief executive and Group chief financial officer are required to hold shares
to the value of 600% and 300% of base salary respectively.

At the end of 2016, and at the date of this Compensation Committee report, both Executive Directors exceeded their

respective share ownership guidelines by a substantial margin.

WPP ANNUAL REPORT 2016

155

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Compensation Committee Report

Non-executive directors’ interests (audited)

Non-executive directors’ interests in the Company’s ordinary share capital are shown in the following table. Except as
disclosed in this table, and in the Compensation Committee report, no non-executive director had any interest in any
contract of significance with the Group during the year.

Non-executive director
Roberto Quarta
Jacques Aigrain
Charlene Begley
Tarek Farahat1
Sir John Hood
Ruigang Li
Daniela Riccardi
Nicole Seligman
Hugo Shong
Timothy Shriver
Sally Susman
Sol Trujillo

1 Tarek Farahat was appointed to the WPP Board on 11 October 2016.

Outstanding share-based awards

Total interests at 31 December 2016
27,500
9,000
2,140
–
3,000
4,000
–
6,250
–
10,070
5,000
10,000

Total interests at 19 April 2017
27,500
9,000
2,140
–
3,000
4,000
4,100
6,250
22,915
10,070
5,000
10,000

Executive Share Awards (ESAs) held by Executive Directors

All Executive Share Awards granted under the Restricted Stock Plan are made on the basis of satisfaction of previous
performance conditions and are subject to continuous employment until the vesting date. The table does not include the
2016 ESAs as these will not be granted until after publication of this Annual Report. Unless otherwise noted, awards are
made in the form of WPP ordinary shares.

Sir Martin Sorrell 2013 ESA
2014 ESA
2015 ESA
Paul Richardson1 2013 ESA
2014 ESA
2015 ESA

Grant
date

Share/ADR
price on
grant date
27.05.14 £12.8850
27.05.15 £15.8350
07.06.16 £15.9850
27.05.14 $108.1000
27.05.15 $121.7200
07.06.16 $116.2700

No. of
Shares/
ADRs
granted2
159,691
113,347
133,817
12,970
9,817
10,837

Face
value
on grant

date3
000
£2,058
£1,795
£2,139
$1,402
$1,195
$1,260

Additional
shares
granted in
lieu of
dividends
9,311
–
–
747
–
–

Total
shares
vesting
169,002
–
–
13,717
–
–

Shares /
ADR price
Vesting
on vesting
date
£15.4962
06.03.16
–
06.03.17
06.03.18
–
06.03.16 $110.2500
–
06.03.17
–
06.03.18

Value on
vesting
000
£2,619
–
–
$1,512
–
–

1 Paul Richardson’s ESAs were granted in respect of ADRs.
2 Dividend shares will be due on these awards.
3 Face value has been calculated using the average closing share price for the five trading days preceding the date of grant (as set out in the table).

156

WPP ANNUAL REPORT 2016

How we behave and how we’re rewarded
Compensation Committee Report

Long-term incentive plans – Leadership Equity Acquisition Plans

The following table summarises the awards outstanding under LEAP III. The last award under this plan vested on
7 March 2017, details can be found on page 150.

Investment
and performance
period

Number of
investment
shares/ADRs

Share/
ADR price
on grant
date

Maximum
number of
matching
units at
1 Jan 20162

Granted/
(Lapsed)
units

Additional
dividend
shares

During 2016
Vested or
deferred
shares

Maximum
number of
matching
units at
31 Dec 2016

Share/
ADR price
on vesting

Value on
vest/
deferral
date
000

Award
date

Name
Sir Martin Sorrell

07.12.11 01.01.11 – 31.12.15
10.12.12 01.01.12 – 31.12.16

711,159 £6.6475 3,555,795
431,034 £8.5975 2,155,170

Paul Richardson

(0) 426,810 3,982,605
–
–

– 2,155,170

– £15.7644 £62,783
–
–

07.12.11 01.01.11 – 31.12.15
10.12.121 01.01.12 – 31.12.16

100,344 £6.6475
15,517 $69.2500

501,720
77,585

(0)
–

60,220 561,940
–

–

– £15.7644
–

77,585

£8,859
–

1 Paul Richardson’s 2012 LEAP award was granted in respect of ADRs.
2 Dividend shares will be due on these awards.

Long-term incentive plans – Executive Performance Share Plan

The following table summarises all of the awards outstanding under the Executive Performance Share Plan.

Sir Martin Sorrell

Paul Richardson1

Grant
date
28.06.13
04.06.14
09.06.15
28.11.16
28.06.13
04.06.14
09.06.15
28.11.16

Performance period
01.01.13-31.12.17
01.01.14-31.12.18
01.01.15-31.12.19
01.01.16-31.12.20
01.01.13-31.12.17
01.01.14-31.12.18
01.01.15-31.12.19
01.01.16-31.12.20

Maximum
number of nil
cost options over
shares/ADRs
awarded2

Share/ADR
price on
grant date
1,032,540 £10.8480
867,756 £12.9080
738,267 £15.1720
656,873 £17.0520
52,026 $83.4186
40,927 $107.9960
37,970 $115.8800
41,536 $105.9309

Nil cost
options
vested/
(lapsed)
–
–
–
–
–
–
–
–

Additional
dividend
shares
–
–
–
–
–
–
–
–

Nil cost
options
exercised
or
deferred
–
–
–
–
–
–
–
–

During 2016

Maximum number of
nil cost options over
shares/ADRs at
31 Dec 2016
1,032,540
867,756
738,267
656,873
52,026
40,927
37,970
41,536

1 Paul Richardson’s EPSP awards were granted in respect of ADRs.
2 Dividend shares will be due on these awards.

Full details of the 2016 EPSP award, including performance measures and targets, can be found on page 151.

WPP ANNUAL REPORT 2016

157

How we behave and how we’re rewarded

Implementation of reward policy
for management outside the Board

Share incentive dilution for 2006 to 2016

The share incentive dilution level, measured on a 10-year
rolling basis, was at 3.0% at 31 December 2016 (2015:
2.9%). It is intended that awards under all plans, other
than share options, will all be satisfied with purchased
shares held either in the ESOPs or in treasury.

Sir John Hood
Chairman of the Compensation Committee
on behalf of the Board of Directors of WPP plc
19 April 2017

As noted on pages 137 and 138, the Company uses
share-based compensation programs across the Company
to incentivise and retain employees, recruit new talent and
to encourage a strong ownership culture among employees.
The use of the core share plans in 2016 is described below.

The Restricted Stock Plan (RSP)

The WPP Leaders, Partners and High Potential program
made awards to about 1,700 of our key executives in 2016.
Awards will vest three years after grant, provided the
participant is still employed within the Group. In addition,
senior executives have part of their annual bonus paid in
the form of executive or performance share awards that
vest two years after grant. The Executive Directors do not
participate in any other aspect of the RSP except for the
deferred share bonus award. All awards granted under the
RSP are subject to malus and clawback conditions.

WPP Share Option Plan 2015

During 2016, the WPP Share Option Plan 2015 was
used to make awards to over 48,000 employees. By
31 December 2016, options under this plan, and its
predecessor the Worldwide Ownership Plan, had been
granted to approximately 157,000 employees over
78 million shares since March 1997.

During 2016, approximately 15,000 WPP employees
who had received awards under the Worldwide Ownership
Plan, took advantage of the strong share price and
exercised their options.

While the Share Option Plan provides the authority

to make executive option awards, in addition to
all-employee awards, no awards were granted in 2016.
The Executive Directors do not participate in this plan.

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WPP ANNUAL REPORT 2016

How we behave and how we’re rewarded

Sustainability review

We strive to be a responsible and sustainable business.
We work to maximise the positive value our business
creates for clients, share owners, our people, supplier
partners, pro bono partners and the communities in
which we operate, and to reduce negative social and
environmental impacts associated with our activities.

Our approach and performance in 2016 is summarised

below and explored in more detail in our Sustainability
Report which will be published in June 2017 (wpp.com/
sustainability).

Sustainability and our business

Our commitment to sustainability makes us a more
attractive employer, helps us align with the interests of our
clients and enables us to improve efficiency, be prepared for
changes in regulation and maintain positive relationships
with our stakeholders. Our work on sustainability supports
our business strategy in three main ways:

Access to skills: Strong employment policies, investment

in skills and inclusive working practices help us recruit,
motivate and develop the talented people we need to serve
our clients in all disciplines across our locations, including
new markets where our industry is less well established.
Access to new business: A growing number of our

clients are prioritising sustainability and looking for
partners who share their values and aspirations. Our
commitment to responsible and sustainable business
practices helps us to access this business and to meet the
sustainability requirements in client procurement processes.
Privacy and data security continue to be a high priority for
our clients and for WPP.

Efficiency, risk and reputation: Managing the social
and environmental impacts of our business and selecting
supplier partners who adopt standards consistent with our
own can reduce costs and risks to the business as well as
improving efficiency and safeguarding our reputation.

The longer term

Demographic, technological, social and environmental
change are set to reshape our world over the next decades
generating new challenges, uncertainties and opportunities
for our clients. There will be new markets from a growing
and ageing population, but also unprecedented demands on
public services and resources. Climate change and resource
scarcity will create major challenges for sectors from
agriculture and food, to manufacturing and retail, but also

opportunities for businesses able to tap into low carbon
innovation. Continued rapid technological change
is disrupting old business models and impacting the
relationship between business and consumers. We are
seeing rising expectations from citizens, consumers,
employees and stakeholders who expect business to
lead in tackling societal challenges.

Brands need to prepare now for these challenges.
The most successful will be those who are able to integrate
sustainability into their strategies and products, and to
align their purpose with changing societal needs. Our clients
require the best insight, research and communications
services to help them do this effectively and will continue
to seek out a marketing services provider who understands
the changing landscape and shares their values.

Our companies are already working with many pioneers

of sustainable business. As our clients increasingly feel the
impact of these longer-term trends, their significance will
grow for WPP too. Our work on sustainability today will
help ensure our business is prepared for the future.

Sustainability management

Paul Richardson, WPP’s Group finance director, is the
Board director responsible for sustainability. He chairs our
Sustainability Committee made up of senior representatives
from Group functions, which reviews progress on key
sustainability issues. Our central sustainability function
develops strategy and coordinates data collection. It
communicates on sustainability matters on behalf of the
Group and works with Group functions (such as our talent
team, legal, real estate, IT and procurement). The head of
sustainability reports directly to the Group finance director.

Strategic direction and policy frameworks for
sustainability are established at Group level with
implementation devolved to our companies. During 2016,
we appointed two sustainability advisors centrally to
support our operating companies on sustainability and to
audit compliance with the WPP Code of Business Conduct,
Sustainability Policy and Human Rights Policy Statement.
During 2017, we will launch a sustainability self-assessment
questionnaire to all WPP offices to help us identify gaps
in implementation, focusing on governance, employment
practices, environment and supply chain. The sustainability
advisors will use the results of the assessment to prioritise
companies for further engagement including on-site
assessments and training.

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Sustainability review

Risk and opportunity

Performance in 2016 – Access to skills

Social, environmental, human rights and ethical risks are
integrated into the Group’s assessment of principal risks
which are set out in detail in the Strategic report.

Stakeholder engagement and materiality

We interact with a wide range of stakeholders in the course
of doing business and benefit from their views and insights.
Our most important stakeholder groups are clients,
investors and our people.

Stakeholder feedback helps us to identify the priority
sustainability issues for our business and to manage these
effectively. We carried out a materiality assessment in 2014
and we updated this during 2016 through research with
external stakeholders and senior employees. The findings
will be published in our Sustainability Report.

We engaged with investors, rating agencies and

benchmarking organisations on sustainability during 2016
including CDP, Dow Jones Sustainability Index, Ethibel
Sustainability Index, ET Index Research, La Financiere de
L’Echiquier, FTSE4Good, Generali Investments, Human
Rights Campaign Corporate Equality Index, Institute
of Business Ethics, MSCI, STOXX Global ESG Leaders,
Sustainalyitics, Trillium Asset Management and Vigeo.
To raise investor awareness of our activities, we submit
this section of our Annual Report for share owner voting
at our AGM.

We are included in the FTSE4Good Index. We
participate in the CDP climate change program and
received a score of A- in 2016. We also scored A- in the
CDP supply chain program.

Data and reporting

WPP companies report their sustainability data to the
parent company quarterly through our Group financial
reporting system. Data in this section covers the period
from 1 January 2016 to 31 December 2016. We will publish
our 15th Sustainability Report in June 2017. In line with
best practice, selected environmental and employment
data will be externally assured by Bureau Veritas, a
leading independent assurance provider.

Leading employment practices are essential to ensure we
have the skills our business and clients need. We invest in
recruiting, retaining and developing a diverse range of
talented people to serve our clients across our many
markets and disciplines.

Inclusion and diversity

A diverse workforce is more creative and effective. Diversity
of outlook and background is particularly important for
our sector because our work needs to connect with a very
diverse and global consumer base.

We promote inclusive working practices and support
our companies to increase the diversity of our workforce
including through recruitment, policy development, training,
mentoring and flexible working practices. All employees
undertake awareness training on diversity as part of our
online ethics training ‘How we behave’, see page 164. We
are also developing e-learning to help our people understand,
identify and address unconscious bias. This is being launched
in 2017 and will be mandatory for all employees.
‘The X Factor’ is our senior mentoring and

development program for women led by Charlotte Beers,
the former global CEO of Ogilvy & Mather and chairman
of J. Walter Thompson, which prepares senior and high
potential WPP female leaders for the next level of
leadership. By the end of 2016, 109 women had completed
the program.

Our WPP Stella women’s network aims to address

barriers that could prevent women progressing their
careers to senior levels within the Group and to facilitate
the sharing of good practices between our companies.
The network began in the UK and will be extended to
our businesses in the US and Asia. During 2016, we
launched our Family Friendly Guidelines and Parent
Portal for UK operating companies. This is helping our
companies to implement best practice maternity, paternity
and flexible working policies and to support working
parents. WPP Stella is also running networking events,
a coaching program for senior women and media
training to facilitate more of our female leaders to
take up speaking opportunities.

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WPP ANNUAL REPORT 2016

Gender diversity 2012-2016

WPP Board
Executive
leaders
Senior
managers
Total employees
(full-time
equivalent)

2016
29%

34%

48%

2015
29%

2014
24%

% women
2012
19%

2013
29%

33%

31%

32%

47%

46%

47%

54%

As at 31 December 2016, women comprised 29% of the
WPP Board, 33% of non-executive directors, 34% of
directors and executive leaders in our operating companies
(certainly not good enough), 48% of senior managers and
54% of total employees.

We measure ethnic diversity in our businesses in the
UK and the US using national definitions of ethnic/racial
minorities (the Equality and Human Rights Commission
in the UK and the Equal Opportunity Commission in the
US). In 2016, 28% of full-time employees in these countries
were from ethnic minorities (2015: 26%). We were ranked
10th in the FTSE 100 by Sir John Parker’s Report into the
Ethnic Diversity of UK Boards published in November
2016, with 3 out of 14 directors considered diverse.

Training, development and education

We invested £45.1 million in training for our people
during 2016 (2015: £41.1m). Training supports employee
engagement and development, and enables us to meet
the changing needs of our clients. Our Group training
programs are designed to help us deliver on our four
strategic priorities: horizontality; new markets; new media;
and technology, data and content. For example, the WPP
‘Mini MBA’ is a series of workshops that help our rising
talent broaden their understanding of business and
marketing issues, develop leadership skills, and deliver
client value. 2,732 participants worldwide have benefited
to date.

We partner with education providers and offer
internships and apprenticeships to help build the future
skills base for our industry and to identify talented young
people to join our teams.

How we behave and how we’re rewarded
Sustainability review

Our university partnerships include our support for
the WPP School of Communications and Marketing in
Shanghai, our partnership with the Indian School of Design
and Innovation in Mumbai, which offers a three-year
undergraduate course on marketing communications, and
our Africa Academy, providing high-quality training and
talent development. WPP and Ogilvy UK are participating
in the new Rotational Degree Apprenticeship program, a
three-year program developed by Pearson Business School
that enables participants to gain a Business Management
degree and professional experience through apprenticeships
at leading businesses. Partners in the program include
Unilever, IBM, Tesco and Pearson.

We offered 6,413 paid internships and apprenticeships
at our companies during 2016 (5,356 internships and 1,057
apprenticeships). It is our policy that all internships and
apprenticeships globally should be paid to enable a diverse
range of candidates to take up these positions.

Reward and compensation

Attractive compensation packages help us to recruit and
retain talented people. Our people also have access to a
range of benefits, including pensions and private health
insurance. Compensation is regularly benchmarked against
other companies in our markets and sector. Compensation
for our most senior leaders is set in accordance with our
Directors’ Compensation Policy, see pages 132 to 144.

Many of our people participate in performance-related
incentive plans on top of base pay. These reward excellent
performance and are assessed either through the employee’s
operational business area or on the share price performance
of the Company. Senior employees may participate in
share-based compensation plans.

Our Worldwide Ownership Plan and WPP Share
Option Plan have been active since 1997 and have granted
share option awards to more than 157,000 of our people.

Employee external appointments

We recognise that our companies’ executives may be invited
to become non-executive directors of other companies,
and that such experience may be beneficial to the Group.
Consequently, executives are allowed to accept non-
executive appointments with non-competing companies,
subject to obtaining the approval of the Group finance
director in the case of senior executives.

WPP ANNUAL REPORT 2016

163

How we behave and how we’re rewarded
Sustainability review

Access to new business

Sustainability services

In 2016, at least 11.4% of our revenues, £1.64 billion
(2015: £1.29 billion), came from clients that asked about
our approach to sustainability or engaged with us on
sustainability issues.

Privacy and data security

Consumer data is used extensively in developing,
implementing and monitoring marketing campaigns
particularly by our digital marketing and insight businesses.
We have rigorous privacy and data security standards
and procedures governing how we collect, use and store
this data to protect consumer privacy and reduce risks
to our business.

The WPP Data Code of Conduct and our global IT
security, privacy and social media policies, apply to all WPP
companies and provide a clear framework for implementing
privacy best practice. Our Client Contract Toolkit helps
WPP companies understand how privacy and data
protection criteria should be integrated into client contracts.

We engage our people on our Code and policies
through mandatory Group-wide global online Privacy
and Data Security Awareness training. Since it was
launched in December 2015, training has been completed
by 154,570 employees.

We are building privacy and security awareness through

our Safer Data campaign and online platform. The Safer
Data platform is a key source of know-how on privacy risk
and data security with a range of information and guidance
for employees. It includes a ‘SaveMyData’ reporting tool,
to allow our people to raise concerns and questions about
data issues direct with our in-house legal teams. During
2017 we will continue to help our companies prepare
for implementation of the General Data Protection
Regulation (GDPR) and ePrivacy Regulation.

We used our Data Health Checker in 2016 for the fourth

year running to review privacy risks and data security
practices in our businesses. The results showed that the
majority of our companies have mitigation measures that
match or exceed their level of privacy risk, with the average
score being 2.9 out of 5, where 5 is the maximum score
possible. Of those companies surveyed, 76% have a
dedicated privacy lead and 79% have trained all of their
people on data security and privacy in addition to Group
training, which is an increase of over 20% from 2015.

Our companies work with clients to integrate sustainability
into consumer research, brand strategies and marketing.
We also develop social marketing campaigns for clients,
including governments and NGOs, to raise public
awareness of social and environmental issues and help bring
about positive behaviour change. Many of our companies
have specialist sustainability offerings and social marketing
units to lead this work. Examples of recent campaigns are
included in our Sustainability Report.

Efficiency, risk and reputation

Our commitment to responsible and sustainable business
practices helps us to operate efficiently, to reduce legal,
financial, reputational and other risks to our business and
to maintain good relationships with our people, suppliers,
clients and other stakeholders. WPP is committed to
maintaining high ethical standards, protecting human rights
and acting with honesty and integrity in everything we do.

Our ethical standards

The WPP Code of Business Conduct provides the ethical
framework for WPP and our companies. It sets out the
values, principles and key points of policy that apply to
everyone at WPP and that our companies must reflect in
their own policies and procedures. It is supported by more
detailed policies in key areas including anti-bribery and
corruption. Senior managers in all our companies and our
business partners and suppliers are asked to sign a copy of
the WPP Code of Business Conduct each year to confirm
they will comply with its principles.

Our ethics training, ‘How we behave’, is compulsory
for all employees. It covers topics such as diversity, human
rights and avoiding misleading work. Our online training
on anti-bribery and corruption covers the Foreign Corrupt
Practices Act and UK Bribery Act on issues such as
hospitality and gifts, facilitation payments and the use of
third-party advisors. Training is updated every 2-3 years
and employees are required to repeat the training following
each update. Over 126,700 employees have completed
our anti-bribery and corruption training and 124,960
have completed our ethics training since the last update
in summer 2016.

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WPP ANNUAL REPORT 2016

How we behave and how we’re rewarded
Sustainability review

We expect associate companies (those in which we hold a
minority stake) and affiliate companies (preferred partners to
whom we may refer business) to adopt ethical standards that
are consistent with our own.

We have a Group-level committee that meets regularly
to discuss ethical and compliance issues and new risk areas.
Committee members include the Group chief counsel, deputy
general counsel, litigation and compliance, Group finance
director, the head of talent and the head of sustainability.
Employees can report concerns or suspected cases

of misconduct in confidence through our third party-
managed Right to Speak facility, overseen by our internal
audit department.

Human rights

Respect for human rights is a fundamental principle for
WPP. In our business activities we aim to prevent, identify
and address negative impacts on human rights and we look
for opportunities to positively promote and support human
rights, including children’s rights. Our Human Rights
Policy Statement, published in 2015, summarises our
approach to human rights as an employer, in our supply
chain and through our work for clients. It reflects
international standards and principles, including the
International Bill of Human Rights, the UN’s Guiding
Principles on Business and Human Rights, the International
Labour Organization’s Declaration on Fundamental
Principles and Rights at Work and the Children’s Rights
and Business Principles.

Our companies help to promote progress on human

rights issues through pro bono work for human rights
organisations. We train our people on a number of human
rights issues through scenarios in our ethics training.

We are members of the United Nations Global Compact
and committed to making progress against its 10 principles.
We report on our performance in our Sustainability Report.

Modern Slavery Act

We do not tolerate any form of modern slavery, forced
labour or human trafficking in any part of our business
or supply chain. As part of our due diligence processes
we have assessed the risk of modern slavery for WPP.
This found the risk of modern slavery to be very low in
our direct workforce and among our strategic tier-one
suppliers, those with whom we have a direct contractual
relationship. In early 2017, we conducted compulsory

on-site training for our central Commercial and Procurement
Services Team on the risks and issues of modern slavery.
We are providing guidance and support to our

operating companies to help them comply with the UK’s
Modern Slavery Act.

During 2017, we will publish our first annual slavery
and human trafficking statement in response to the Modern
Slavery Act that will contain more information on our
approach. This will be publicly available on our website.

Living wage

We support the principle that all workers should be paid
enough to provide a decent standard of living. This
principle is known as the ‘living wage’. In the UK, the
Living Wage Foundation, a not-for-profit organisation,
calculates the voluntary living wage which exceeds the UK’s
statutory national living wage.

The vast majority of our people already earn

significantly above the voluntary living wage rate. However,
wage rates in our supply chain may be lower. It is our policy
for WPP, the parent company, and all our UK companies,
to pay the voluntary living wage set by the Living Wage
Foundation to all employees and all on-site contractors such
as cleaning, security and catering staff in the UK. Our
policy is to only offer paid internships and apprenticeships.

Ethical decisions in our work

Our work for clients can sometimes raise ethical issues,
for example, work for government clients, work relating
to sensitive products or marketing to children. We have a
review and referral process for work that may present an
ethical risk. Before accepting potentially sensitive work,
employees are required to elevate the decision to the most
senior person in the relevant office and then to the most
senior executive of the WPP company in the country
concerned, who will decide if further referral to a WPP
executive is required. Employees are trained on this referral
process during our ethics training.

Supply chain

We aim to work with supplier partners who meet high
standards in areas such as ethical conduct, labour
standards and environmental management. This reduces
risks for WPP and our clients. By improving oversight
of our supply base we can identify opportunities to
consolidate procurement and reduce costs.

WPP ANNUAL REPORT 2016

165

How we behave and how we’re rewarded
Sustainability review

We evaluate potential new suppliers on factors such
as assurance of supply, quality, service, cost, innovation
and sustainability. Supplier partners are expected to adopt
standards that are consistent with our own. These are set
out in the supplier version of the WPP Code of Business
Conduct, which explains how our own Code should be
applied by companies in our supply chain. All new supplier
partners are asked to sign a copy of the Code to confirm they
will comply with our social and environmental standards.
We have identified two areas of our supply chain where

breaches of our Code could have a potentially significant
impact on WPP’s reputation or that of our clients –
advertising production and data management. We are
working more closely with supplier partners in these areas
to identify and manage risks. Over the last four years
(2013-2016) we have assessed 236 suppliers covering nearly
£236 million in annual spend or approximately 15% of our
total spend on advertising production and data management.
More details are available in our Sustainability Report.

Our progress in 2016:

Our footprint per employee was 1.86 tonnes of CO2e,

down 10% on 2015 and 45% lower than 2006.

Our footprint per £million of revenue was 17.36 tonnes

of CO2e, down 20% on 2015 and 62% lower than 2006.
Our absolute carbon footprint was 249,782 tonnes

CO2e (2015: 264,774 tonnes CO2e).

We made significant progress in 2016 and are close to
meeting our 2020 target of 1.8 tonnes of CO2e. This is due
to a number of factors, including: changes in carbon
emissions factors for scope 2 emissions in some countries,
reflecting an increase in the percentage of lower-carbon and
renewable energy used to power national grids; an increase
in the amount of Renewable Energy Certificates (RECs) that
we purchase in the US, with enough RECs purchased to
offset 41% of the electricity utilised by WPP companies in
the US during 2016; and improvements in our office energy
efficiency and a drop in business air travel.

Carbon intensity 2006-2016
Tonnes CO2e

45.56

e
e
y
o
p
m
e
r
e
p
s
e
n
n
o
T

3.39

1.86

1.80

17.36

0
06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

e
u
n
e
v
e
r

m
£
r
e
p
s
e
n
n
o
T

o Headcount intensity – tonnes per employee
Target headcount intensity
o Revenue intensity – tonnes per £m revenue

Carbon footprint in 2016
%

Stationary fuel combustion
Purchased electricity

Business air travel
Other estimated impacts

3%
47%

37%
13%

Environment

We aim for WPP to be a low-carbon and resource-efficient
Group. This reduces costs, enhances our credibility as
advisors to clients, enables us to meet the environmental
requirements included in many client tender processes and
supports employee engagement.

Our target is to reduce carbon emissions to 1.8 tonnes
of CO2e per employee by 2020, a 47% reduction from 2006.
Each of our operating companies has its own individual
reduction target. Our strategy focuses on:

Office energy use: Improving the energy efficiency of
our buildings and IT systems. 18% of our total floor space
(approx. 4.4 million square feet) is now certified to
advanced green building standards, such as LEED and
BREEAM. We aim to have 25% of our floor space certified
to these standards by 2020.

Air travel: Reducing non-essential flights. We offset
the equivalent of 100% of emissions from our business
air travel, by supporting renewable energy generation
projects in fast-growing economies. Our video conferencing
network now incorporates more than 720 units in over
173 cities.

Renewable energy: Around 22% of the total electricity
we purchase is generated from renewable sources, including
green-tariff electricity and renewable energy certificates.

166

WPP ANNUAL REPORT 2016

How we behave and how we’re rewarded
Sustainability review

WPP’s carbon emissions breakdown (tonnes of CO2e)

Scope 1 – Fuel used to heat WPP offices
Scope 2 – Total purchased electricity
Scope 3 – Air travel and other estimated impacts
Total gross (excluding carbon reduction of renewable
electricity)
Carbon reduction of purchased renewable electricity
Total net (including carbon reduction of renewable
electricity)
Percentage change from 2006 (net)

WPP’s carbon intensity (tonnes of CO2e)

Tonnes per employee (net)
Percentage change from 2006
Tonnes per £m of revenue (net)
Percentage change from 2006

2016
7,851
146,846
125,026

2015
8,135
153,798
133,420

2014
9,748
159,540
133,293

2013
11,305
157,471
132,382

2012
9,840
164,212
133,034

279,723
29,941

295,354
30,580

302,581
21,192

301,158
21,299

307,086
23,765

249,782
-7%

264,774
-2%

281,389
5%

279,859
4%

283,321
5%

Base
year 2006
2,628
149,728
116,825

269,181
–

2016
1.86
-45%
17.36
-62%

2015
2.07
-39%
21.64
-53%

2014
2.28
-33%
24.41
-46%

2013
2.35
-31%
25.40
-44%

2012
2.45
-28%
27.31
-40%

Base year
2006
3.39
–
45.56
–

Our carbon data covers the year ended 31 December 2016 in line with the Group’s financial reporting period. Data has been prepared in accordance with the
World Resource Institute (WRI) and World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting
Standard, Revised Edition (the GHG Protocol). All greenhouse gases emissions figures are in metric tonnes of carbon dioxide equivalents (CO²e). They include
three of the six greenhouse gases covered by the Kyoto Protocol – carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). Perflurocarbons (PFCs),
hydroflurocarbons (HFCs) and sulphur hexafluoride (SF6) emissions have been omitted from our reporting as they are not a material source of greenhouse gases
for WPP. Emissions data is included for all operations for which WPP and its subsidiaries have operational control. Associate companies are excluded. When
calculating our carbon footprint, we rate purchased renewable electricity (including green-tariff contracts and renewable energy certificates) as zero emissions.
For full transparency, we also disclose total electricity purchased at grid average carbon intensity. Total purchased electricity includes emissions from purchased
heat and steam. Our carbon data is reviewed and assured by Bureau Veritas, an independent assurance provider. Read the full carbon emissions statement 2016
in our Sustainability Report.

We can also have an influence on indirect emissions
associated with our business activities – our value chain
emissions. These include emissions associated with
advertisements we place for clients and the goods and services
we buy. GroupM, our Media Investment Management
business, is exploring how we can work with clients to reduce
the carbon footprint of media campaigns. We are integrating
our analysis of value chain emissions into procurement tools
to help us identify lower carbon procurement options.

This free media space was worth £22.8 million in 2016
(2015: £20.7 million), representing over another 1% of
reported profit before tax, bringing our total social
contribution to £42.3 million (2015: £40.2 million). We
identified an error in our exchange rate calculation for free
media space in 2015 and as a result have restated our data.
The WPP India CSR Foundation is investing US$5
million in projects supporting education, life skills and
vocational training for children aged 11-18.

Social investment

Our companies make a significant contribution to
organisations working in areas such as poverty alleviation,
health, human rights and the environment, through our social
investment. This includes pro bono work, providing marketing
services and insight for little or no fee, helping charities to
achieve their objectives, raise funds and recruit members.
We gave £19.5 million in pro bono services and charitable
donations during 2016 (2015: £19.4 million), equivalent
to 1.03% of reported profit before tax (2015: 1.30%).

Our companies also negotiate free media space for
charity campaigns enabling them to reach a wide audience.

We launched Common Ground in 2016, a new

collaboration between the world’s six biggest advertising
and marketing services groups. Common Ground aims to
use the power of communication to help achieve the United
Nations Sustainability Goals. WPP is focusing on the goal
of gender equality, which is important both in its own right
as well as having attendant benefits for tackling poverty
and improving education and economic growth. Our
companies are involved in a number of pro bono projects
aimed at tackling gender bias and stereotyping in the media
and promoting opportunity for women and girls. More
details will be available in our Sustainability Report.

WPP ANNUAL REPORT 2016

167

Corporate governance:
How the Company is
governed, including
risk management and
activities of the Board

Statements of compliance

UK Corporate Governance Code compliance

The Board considers that WPP complied in all material
respects throughout 2016 with the provisions of the
UK Corporate Governance Code.

Internal control

WPP operates a system of internal control, which is
maintained and reviewed in accordance with the UK
Corporate Governance Code and the FRC guidance
on risk management and internal control.

How we comply

We have structured this section around the main principles
of the UK Corporate Governance Code to enable share
owners to evaluate how the principles have been applied.

WPP ANNUAL REPORT 2016

169

How we comply
Corporate governance

Leadership

The role of the Board
The Board is collectively responsible for promoting the success of the Company by directing and supervising the
Company’s policy and strategy and is responsible to share owners for the Group’s financial and operational performance
and risk management. Responsibility for the development and implementation of Group policy and strategy and for
day-to-day management issues is delegated by the Board to the Group chief executive and Group finance director.
The list of matters reserved to the Board can be downloaded from the website wpp.com/wpp/investor.

During 2016, the Board met eight times formally (six scheduled meetings and two meetings held at short notice)

and held 16 committee meetings throughout the year.

Attendance of directors at meetings
Roberto Quarta (Chairman)
Sir Martin Sorrell
Paul Richardson
Roger Agnelli1
Jacques Aigrain
Charlene Begley
Tarek Farahat2
Ruigang Li
Nicole Seligman
Daniela Riccardi
Hugo Shong
Sir John Hood
Tim Shriver
Sally Susman
Sol Trujillo

Board
8
8
8
1
7
8
2
6
8
6
7
7
8
8
8

Audit Committee
4
–
7
2
7
7

Compensation
Committee
5
–
–
–
5
–

Nomination and
Governance Committee
4
–
–
–
–
3

–
7
–
–
–
–
–
7

–
5
–
–
5
5
–
–

3
4
4
4
–
–
4
–

1 Roger Agnelli tragically died on 19 March 2016.
2 Tarek Farahat was appointed on 11 October 2016.
3 All of the directors attended the scheduled meetings of the Board in the year during their tenure with the exception of Jacques Aigrain and Ruigang Li

who each missed one meeting.

4 Two unscheduled meetings of the Board took place which were attended by all the directors eligible to attend, except Hugo Shong, Sir John Hood and Ruigang Li

who sent apologies for one unscheduled meeting and Daniela Riccardi who sent apologies for both unscheduled meetings owing to prior commitments.

170

WPP ANNUAL REPORT 2016

The role of the chairman
The Board is chaired by Roberto Quarta, who chairs the
Nomination and Governance Committee and is a member
of the Compensation Committee and attended all meetings
of the Audit Committee at the invitation of its chairman.
The chairman provides the leadership of the Board and is
the main point of contact between the Board and the CEO.
The chairman represents the Board in discussions with share
owners and investor bodies, ensures that systems are in place
to provide directors with timely and accurate information,
represents the Company in external gatherings, and is also
responsible for the Board governance principles. He has
led the ongoing emphasis on management development and
CEO and senior management succession planning.

The role of the senior independent director
The senior independent director is Nicole Seligman who
is available to share owners and acts as a sounding board
for the chairman and as an intermediary for the other
directors with the chairman, when necessary. The senior
independent director’s role includes responsibility for the
chairman’s appraisal and succession and this year the
Board evaluation process. Nicole Seligman was appointed
to the Board in January 2014 and has served on the
Compensation Committee. As the senior independent
director, Ms Seligman customarily attends all Board
committee meetings at the invitation of the chairmen
of those committees.

Non-executive directors
The non-executive directors have a diverse range of skills,
experience and backgrounds. As detailed in their biographies
on pages 116 to 119, the non-executive directors work across
the globe in media and advertising, investment banking and
investment management, pharmaceuticals, logistics and
bioenergy, FMCG, international management consulting,
private equity and angel investing, business education,
manufacturing, consumer products and retail management,
internet start-ups, government and non-profit organisations.
They provide constructive challenge and assistance to the
Group chief executive in developing the Group’s strategy.
All directors have access to the services of the Company
Secretary and may take independent professional advice
at the Company’s expense in conducting their duties.
The Company provides insurance cover for its directors
and officers.

How we comply
Corporate governance

Effectiveness

The composition of the Board
The Board is composed of 14 directors. Two current
members are Executive Directors and 12, including the
chairman, are non-executive directors. Two non-executive
directors will be retiring at the AGM in 2017, following
which the Board will be composed of 12 directors. The
independence of each non-executive director is assessed
annually by the Board. The Board has confirmed that
all of the non-executives standing for election and
re-election at the 2017 AGM continue to demonstrate
the characteristics of independence.

Succession: Board and committee membership
The following changes to the Board’s roles and
composition took place during 2016 and early 2017:
Tarek Farahat was appointed to the Board on
11 October 2016 and joined the Audit Committee on
24 February 2017.

Charlene Begley and Tim Shriver announced that they

will both be retiring from the Board at the AGM in 2017.

Time commitment
Letters of appointment for non-executive directors do not
set out a fixed time commitment for Board attendance and
duties but give an indication of the likely time required. It is
anticipated that the time required by directors will fluctuate
depending on the demands of the business and other events.

Development
On joining WPP, non-executive directors are given an
induction which includes one-to-one meetings with
management and the external auditors, briefings on the
duties of directors of a Jersey company, the Share Dealing
Code, WPP Code of Conduct and the UK Corporate
Governance Code. The induction also covers the Board
committees that a director will join. All directors are fully
briefed on important developments in the various business
activities which the Group carries out worldwide and
regularly receive extensive information concerning the
Group’s operations, finances, risk factors and its people,
enabling them to fulfil their duties and obligations as
directors. The directors are also frequently advised on
regulatory and best practice requirements which affect the
Group’s businesses on a global basis. One Board meeting a
year is held in a location other than London or New York.
In 2016, the Board met in Berlin, where it received briefings
from all the heads of the Group’s European operations.

WPP ANNUAL REPORT 2016

171

How we comply
Corporate governance

In 2017, in India, the Board will review the Group’s
Asia Pacific operations.

Evaluation
WPP undertakes an annual review of the Board,
its committees and individual directors. The annual
evaluation of the Board’s and all committees’ effectiveness
was externally facilitated in 2015 and the results of
the evaluation considered in the 2015 Sustainability
Report. The annual evaluation for 2016 has been
conducted internally by Nicole Seligman, the senior
independent director.

Re-election
The directors submit themselves for annual re-election
at each AGM, if they wish to continue serving and are
considered by the Board to be eligible. Directors may be
appointed by share owners by ordinary resolution or by
the Board on the recommendation of the Nomination
and Governance Committee and must then stand for
re-election at the next AGM, where they may be re-elected
by ordinary resolution of the share owners.

With only specific exceptions to ensure Board
continuity, non-executive directors shall not stand for
re-election after they have served for the period of their
independence, as determined by applicable UK and US
standards, which is nine years.

Diversity
WPP recognises the importance of diversity, including
gender, at all levels of the Group as well as the Board.

WPP is committed to increasing diversity across its
subsidiaries and supports the development and promotion
of all talented individuals. As at 31 December 2016, women
comprised 29% of the WPP Board and 33% of non-
executive directors, 34% of directors and executive leaders
in our operating companies, 48% of senior managers and
54% of total employees.

Directors’ conflicts of interest
The Company’s Articles of Association permit the Board
to consider and, if it sees fit, to authorise situations where
a director has an interest that conflicts, or may possibly
conflict, with the interests of the Company (Situational
Conflicts). The Board has a formal system in place for
directors to declare Situational Conflicts to be considered
for authorisation by those directors who have no interest
in the matter being considered. In deciding whether
to authorise a Situational Conflict, the non-conflicted
directors must act honestly and in good faith with a
view to the best interests of the Company and they may
impose limits or conditions when giving the authorisation,
or subsequently, if they think this is appropriate.
Any Situational Conflicts considered, and any

authorisations given, are recorded in the relevant minutes.
The prescribed procedures have been followed in deciding
whether, and on what terms, to authorise Situational
Conflicts and the Board believes that the systems it has in
place for reporting and considering Situational Conflicts
continue to operate effectively.

Remuneration

Non-executive directors do not participate in the
Company’s pension, share option or other incentive plans.
The Board considers that the non-executive directors’
remuneration conforms with the requirements of the UK
Corporate Governance Code.

The fees payable to non-executive directors represent

compensation in connection with Board and Board
committee meetings and where appropriate for devoting
additional time and expertise for the benefit of the Group
in a wider capacity.

Details of directors’ compensation and service contracts

form part of the report of the Compensation Committee
which commences on page 128.

172

WPP ANNUAL REPORT 2016

How we comply
Corporate governance

The Annual General Meeting
The 2017 AGM will be held on Wednesday 7 June 2017
at 12 noon at the Pullman Hotel London St Pancras,
100-110 Euston Road, London NW1 2AJ. A separate
notice convening the meeting is distributed to share owners
and will be published on WPP’s website, wpp.com.
All resolutions for which notice has been given will be
decided on a poll.

Relations with share owners

Dialogue with share owners
The relationship with share owners, potential share
owners and investment analysts is given high priority
by the Company.

The Company has a well-developed and continuous
program to address the needs of share owners, investment
institutions and analysts for a regular flow of information
about the Company, its strategy, performance and
competitive position. Given the wide geographic distribution
of the Company’s current and potential share owners, this
program includes regular visits to investors, particularly
by the Group chief executive, the Group finance director
and the head of investor relations, in the UK, Continental
Europe and the major financial centres in North America
and also in Asia Pacific and Latin America. The Company’s
chairman meets with investors and regularly consults with
investors’ governance representatives and advisory bodies.
The Company provides a preliminary announcement, an
interim management statement at the end of the first and
third quarters that includes a trading update, an interim
report at half year and a trading update and presentation
at the AGM.

The Company ensures that it has a proper dialogue
with share owners and their representative bodies through
executive and non-executive directors in relation to
remuneration and corporate governance matters. In 2016,
the chairman held extensive rounds of discussions with
share owners and advisory groups regarding senior
executive compensation and the new compensation policy,
and CEO and Board succession planning. The chairman
and senior independent director provide thorough feedback
to the Board on issues raised with them by share owners.
WPP’s website, wpp.com, provides current and
historical financial information, including trading
statements, news releases and presentations and the
Company’s statement of its corporate governance practices.

WPP ANNUAL REPORT 2016

173

Other statutory information

Substantial share ownership

Articles of Association

As at 19 April 2017, the Company is aware of the following
interests of 3% or more in the issued ordinary share capital:

There are no restrictions on amending the Articles of
Association of the Company other than the need to pass
a special resolution of the share owners.

MFS
BlackRock Inc

6.64%
5.62%

Share capital

The Company’s authorised share capital consists solely of
1,750,000,000 ordinary 10 pence shares. The Company
operates an American Depositary Receipt program. The
rights and obligations relating to the ordinary share capital
are outlined in the Articles of Association; there are no
restrictions on transfer, no restrictions on voting rights
and no securities carry special voting rights with regard
to control of the Company.

At the AGM on 8 June 2016, share owners passed
resolutions authorising the Company, in accordance with
its Articles of Association, to allot shares up to a maximum
nominal amount of £86,157,177 of which £12,936,513
could be allotted for cash free of statutory pre-emption
rights. In the year under review no shares were issued for
cash free from pre-emption rights. Details of share capital
movements are given in note 26 of the financial statements
on pages 217 to 219.

Authority for purchase of own shares

At the AGM on 8 June 2016, share owners passed a special
resolution authorising the Company, in accordance with
its Articles of Association, to purchase up to 129,365,131
of its own shares in the market. In the year under review,
25,890,000 ordinary shares of 10 pence each were
purchased at an average price of £16.51 per share.

Auditors

The directors will propose a resolution at the AGM to
re-appoint Deloitte LLP as auditors.

The disclosed interests refer to the respective combined

holdings of the entity and to interests associated with it.
The Company has not been notified of any other

holdings of ordinary share capital of 3% or more.

Profits and dividends

The profit before tax for the year was £1,890.5 million
(2015: £1,492.6 million). The directors declared a final
dividend of 37.05p (2015: 28.78p) per share to be paid on
3 July 2017 to share owners on the register at 9 June 2017
which, together with the interim ordinary dividend of
19.55p (2015: 15.91p) per share paid on 7 November 2016,
makes a total of 56.60p for the year (2015: 44.69p).

Change of control

All of our bonds contain provisions which are triggered
on a change of control of the Company. The holders of such
bonds have the right to repayment at par except for holders
of our US$ bonds. The holders here have the right to
redeem the bonds at 101% of par, if the Company is
non-investment grade at the time of the change of control
or becomes non-investment grade within 120 days of the
announcement of the change of control.

In addition, the Group has a Revolving Credit Facility
in the amount of $2,500 million due July 2021, the terms
of which require the consent of the majority of the lenders
if a proposed merger or consolidation of the Company
would alter its legal personality or identity.

In general terms, awards granted under WPP’s
incentive plans will usually vest on a change of control,
albeit on a pro-rated basis. Where awards are subject to
performance conditions, those conditions will still need
to be met, also on a pro-rated basis. Certain incentive plans
allow the Compensation Committee to require outstanding
awards to be exchanged for equivalent awards in the
acquiring company.

174

WPP ANNUAL REPORT 2016

How we comply
Other statutory information

Statement of directors’ responsibilities
in respect of the preparation of
financial statements

The directors are responsible for preparing the financial
statements in accordance with applicable law and
regulations. The directors have elected to prepare financial
statements for the Group in accordance with International
Financial Reporting Standards as adopted by the European
Union (IFRS) and have also elected to prepare financial
statements for the Company in accordance with UK
accounting standards. Company law requires the directors
to prepare such financial statements in accordance with
the Companies (Jersey) Law 1991.

International Accounting Standard 1 requires that
financial statements present fairly for each financial year
the Company’s financial position, financial performance
and cash flows. This requires the faithful representation
of the effects of transactions, other events and conditions
in accordance with the definitions and recognition criteria
for assets, liabilities, income and expenses set out in the
International Accounting Standards Board’s ‘Framework for
the Preparation and Presentation of Financial Statements’.

In virtually all circumstances, a fair presentation will be
achieved by compliance with all applicable IFRSs. Directors
are also required to:

properly select and apply accounting policies;
present information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information;

provide additional disclosures, when compliance with
the specific requirements in IFRSs is insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity’s financial
position and financial performance; and

make an assessment of the Company’s ability to

continue as a going concern.

The directors are responsible for keeping proper
accounting records, which disclose with reasonable
accuracy at any time the financial position of the Company,
for safeguarding the assets, for taking reasonable steps
for the prevention and detection of fraud and other
irregularities and for the preparation of a Directors’
report and directors’ compensation report.

The directors are responsible for the maintenance
and integrity of the Company website. Jersey legislation
and UK regulation governing the preparation and
dissemination of financial statements differs from
legislation in other jurisdictions.

The directors confirm that so far as they are aware,

there is no relevant audit information of which the
Company’s auditors are unaware. Each director has
taken all the steps that he or she ought to have taken,
as a director, in order to make himself or herself aware
of any relevant audit information and to establish that
the Company’s auditors are aware of that information.

In accordance with the principles of the UK Corporate
Governance Code, the Board has established arrangements
to evaluate whether the information presented in the
Annual Report is fair, balanced and understandable;
these are described on page 177.

The Board considers the Annual Report and financial

statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for share owners to assess the Company’s position,
performance, business model and strategy.

The letters from the chairmen of the Nomination
and Governance, Audit and Compensation Committees,
the statements regarding directors’ responsibilities and
statement of going concern set out above and the directors’
remuneration and interests in the share capital of the
Company set out on pages 121 to 158, are included in
the Directors’ report, which also includes the sections
‘Strategic report to share owners’, ‘What we think’ and
‘Who runs WPP’.

By Order of the Board:

Marie Capes
Company Secretary
19 April 2017

WPP ANNUAL REPORT 2016

175

Accounting policies

and its subsidiaries (the Group) for the year
ended 31 December 2016 have been prepared in
accordance with International Financial Reporting

T he consolidated financial statements of WPP plc

Standards (IFRS) as adopted by the European Union as
they apply to the financial statements of the Group for the
year ended 31 December 2016.

The Group’s financial statements have also been
prepared in accordance with International Financial
Reporting Standards as issued by the International
Accounting Standards Board.

Basis of preparation

The consolidated financial statements have been prepared
under the historical cost convention, except for the
revaluation of certain financial instruments. The principal
accounting policies are set out below.

Basis of consolidation

The consolidated financial statements include the results
of the Company and all its subsidiary undertakings made
up to the same accounting date. All intra-Group balances,
transactions, income and expenses are eliminated in full
on consolidation. The results of subsidiary undertakings
acquired or disposed of during the period are included
or excluded from the consolidated income statement
from the effective date of acquisition or disposal.

WPP ANNUAL REPORT 2016

177

Our 2016 financial statements
Accounting policies

Goodwill and other intangible assets

Contingent consideration

Intangible assets comprise goodwill, certain acquired
separable corporate brand names, acquired customer
relationships, acquired proprietary tools and capitalised
computer software not integral to a related item
of hardware.

Goodwill represents the excess of fair value attributed

to investments in businesses or subsidiary undertakings
over the fair value of the underlying net assets, including
intangible assets, at the date of their acquisition.

Goodwill impairment reviews are undertaken annually

or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of
goodwill is compared to the net present value of future cash
flows derived from the underlying assets using a projection
period of up to five years for each cash-generating unit. After
the projection period a steady growth rate representing an
appropriate long-term growth rate for the industry is applied.
Any impairment is recognised immediately as an expense
and is not subsequently reversed.

Corporate brand names, customer relationships and

proprietary tools acquired as part of acquisitions of
businesses are capitalised separately from goodwill as
intangible assets if their value can be measured reliably
on initial recognition and it is probable that the expected
future economic benefits that are attributable to the asset
will flow to the Group.

Certain corporate brands of the Group are considered

to have an indefinite economic life because of the
institutional nature of the corporate brand names, their
proven ability to maintain market leadership and profitable
operations over long periods of time and the Group’s
commitment to develop and enhance their value. The
carrying value of these intangible assets is reviewed at least
annually for impairment and adjusted to the recoverable
amount if required.

Amortisation is provided at rates calculated to write
off the cost less estimated residual value of each asset on a
straight-line basis over its estimated useful life as follows:

Brand names (with finite lives) – 10-20 years.
Customer-related intangibles – 3-10 years.
Other proprietary tools – 3-10 years.
Other (including capitalised computer software)

– 3-5 years.

Contingent consideration is accounted for in accordance
with IFRS 3 Business Combinations. Contingent
consideration only applies to situations where contingent
payments are not dependent on future employment of
vendors and any such payments are expensed when they
relate to future employment.

Future anticipated payments to vendors in respect of
contingent consideration (earnout agreements) are initially
recorded at fair value which is the present value of the
expected cash outflows of the obligations. The obligations
are dependent on the future financial performance of the
interests acquired (typically over a four- to five-year period
following the year of acquisition) and assume the operating
companies improve profits in line with directors’ estimates.
The directors derive their estimates from internal business
plans together with financial due diligence performed in
connection with the acquisition.

Subsequent adjustments to the fair value are recorded
in the consolidated income statement within revaluation
of financial instruments.

Property, plant and equipment

Property, plant and equipment are shown at cost less
accumulated depreciation and any provision for impairment
with the exception of freehold land which is not depreciated.
The Group assesses the carrying value of its property, plant
and equipment to determine if any impairment has occurred.
Where this indicates that an asset may be impaired, the
Group applies the requirements of IAS 36 Impairment of
Assets in assessing the carrying amount of the asset. This
process includes comparing its recoverable amount with its
carrying value. Depreciation is provided at rates calculated
to write off the cost less estimated residual value of each
asset on a straight-line basis over its estimated useful life,
as follows:

Freehold buildings – 50 years.
Leasehold land and buildings – over the term

of the lease or life of the asset, if shorter.

Fixtures, fittings and equipment – 3-10 years.
Computer equipment – 3-5 years.

178

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Accounting policies

Interests in associates and joint ventures

Trade receivables

An associate is an entity over which the Group has
significant influence. In certain circumstances, significant
influence may be represented by factors other than
ownership and voting rights, such as representation
on the Board of Directors.

The Group’s share of the profits less losses of associate

undertakings net of tax, interest and non-controlling
interests is included in the consolidated income statement
and the Group’s share of net assets is shown within interests
in associates in the consolidated balance sheet. The Group’s
share of the profits less losses and net assets is based on
current information produced by the undertakings, adjusted
to conform with the accounting policies of the Group.

The Group assesses the carrying value of its associate
undertakings to determine if any impairment has occurred.
Where this indicates that an investment may be impaired,
the Group applies the requirements of IAS 36 in assessing
the carrying amount of the investment. This process includes
comparing its recoverable amount with its carrying value.

The Group accounts for joint venture investments under

the equity method which is consistent with the Group’s
treatment of associates.

Other investments

Other investments are designated as ‘available for sale’
and are shown at fair value with any movements in fair
value taken to equity.

On disposal the cumulative gain or loss previously

recognised in equity is included in the profit or loss for the year.

Inventory and work in progress

Work in progress is valued at cost, which includes outlays
incurred on behalf of clients and an appropriate proportion
of directly attributable costs and overheads on incomplete
assignments. Provision is made for irrecoverable costs
where appropriate. Inventory is stated at the lower of cost
and net realisable value.

Trade receivables are stated net of provisions for bad and
doubtful debts.

Foreign currency and interest rate hedging

The Group’s policy on interest rate and foreign exchange
rate management sets out the instruments and methods
available to hedge interest and currency risk exposures
and the control procedures in place to ensure effectiveness.
The Group uses derivative financial instruments to
reduce exposure to foreign exchange risk and interest rate
movements. The Group does not hold or issue derivative
financial instruments for speculative purposes.

Derivatives are initially recognised at fair value at

the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each balance
sheet date. The resulting gain or loss is recognised in profit
or loss immediately unless the derivative is designated and
effective as a hedging instrument, in which event the timing
of the recognition in profit or loss depends on the nature
of the hedge relationship.

At the inception of the hedge relationship the entity
documents the relationship between the hedging instrument
and hedged item, along with its risk management objectives
and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an
ongoing basis, the Group documents whether the hedging
instrument that is used in a hedging relationship is highly
effective in offsetting changes in fair values or cash flows
of the hedged item.

Note 25 contains details of the fair values of the

derivative instruments used for hedging purposes.

Changes in the fair value of derivatives that are designated

and qualify as fair value hedges are recorded in profit or loss
immediately, together with any changes in the fair value
of the hedged item that is attributable to the hedged risk.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
or net investment hedges is deferred in equity. The gain
or loss relating to the ineffective portion is recognised
immediately in profit or loss. Amounts deferred in equity
are recycled in profit or loss in the periods when the
hedged item is recognised in profit or loss. However,
when the forecast transaction that is hedged results in
the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously deferred in equity

WPP ANNUAL REPORT 2016

179

Our 2016 financial statements
Accounting policies

are transferred from equity and included in the initial
measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, or exercised,
or no longer qualifies for hedge accounting. At that time,
any cumulative gain or loss on the hedging instrument
recognised in equity is retained in equity until the forecast
transaction occurs. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss
recognised in equity is transferred to net profit or loss
for the period.

Derivatives embedded in other financial instruments
or other host contracts are treated as separate derivatives
when their risks and characteristics are not closely related
to those of host contracts and the host contracts are not
carried at fair value with unrealised gains or losses reported
in the consolidated income statement.

Convertible debt

Convertible debt is assessed according to the substance of
the contractual arrangements and is classified into liability
and equity elements on the basis of the initial fair value of
the liability element. The difference between this figure and
the cash received is classified as equity.

The consolidated income statement charge for the

finance cost is spread evenly over the term of the convertible
debt so that at redemption the liability equals the
redemption value.

Other debt

Other interest-bearing debt is recorded at the proceeds
received, net of direct issue costs.

Liabilities in respect of option agreements

Borrowing costs

Option agreements that allow the Group’s equity partners
to require the Group to purchase a non-controlling interest
are treated as derivatives over equity instruments and are
recorded in the consolidated balance sheet initially at the
present value of the redemption amount in accordance
with IAS 32 Financial Instruments: Presentation and
subsequently measured at fair value in accordance with IAS
39 Financial Instruments: Recognition and Measurement.
The movement in the fair value is recognised as income or
expense within revaluation of financial instruments in the
consolidated income statement.

Finance costs of borrowing are recognised in the consolidated
income statement over the term of those borrowings.

Revenue recognition

Revenue comprises commission and fees earned in respect
of amounts billed. Direct costs include fees paid to external
suppliers where they are retained to perform part or all of
a specific project for a client and the resulting expenditure
is directly attributable to the revenue earned. Revenue is
stated exclusive of VAT, sales taxes and trade discounts.

Derecognition of financial liabilities

In accordance with IAS 39 Financial Instruments:
Recognition and Measurement, a financial liability of the
Group is only released to the consolidated income statement
when the underlying legal obligation is extinguished.

180

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Accounting policies

Advertising and Media Investment Management

Data Investment Management

Revenue is typically derived from commissions on media
placements and fees for advertising services. Revenue may
consist of various arrangements involving commissions,
fees, incentive-based revenue or a combination of the three,
as agreed upon with each client.

Revenue is recognised when the service is performed, in
accordance with the terms of the contractual arrangement.
The amount of revenue recognised depends on whether we
act as an agent or as a principal in an arrangement with a
client. Where we act as an agent, the revenue recorded is the
net amount retained when the fee or commission is earned.
Although the Group may bear credit risk in respect of these
activities, the arrangements with our clients are such that
we consider that we are acting as an agent on their behalf.
In such cases, costs incurred with external suppliers (such
as media suppliers) are excluded from our revenue. Where
the Group acts as a principal and contracts directly with
suppliers for media payments and production costs, the
revenue recorded is the gross amount billed.

Incentive-based revenue typically comprises both

quantitative and qualitative elements; on the element related
to quantitative targets, revenue is recognised when the
quantitative targets have been achieved; on the element
related to qualitative targets, revenue is recognised when
the incentive is received or receivable.

The Group receives volume rebates from certain
suppliers for transactions entered into on behalf of clients
that, based on the terms of the relevant contracts and local
law, are either remitted to clients or retained by the Group.
If amounts are passed on to clients they are recorded as
liabilities until settled or, if retained by the Group, are
recorded as revenue when earned.

Revenue recognised in proportion to the level of service
performed for market research contracts is based on
proportional performance. In assessing contract
performance, both input and output criteria are reviewed.
Costs incurred are used as an objective input measure of
performance. The primary input of all work performed
under these arrangements is labour. As a result of the
relationship between labour and cost, there is normally
a direct relationship between costs incurred and the
proportion of the contract performed to date. Costs
incurred as a proportion of expected total costs is used
as an initial proportional performance measure. This
indicative proportional performance measure is
subsequently validated against other more subjective
criteria (i.e. relevant output measures) such as the
percentage of interviews completed, percentage of reports
delivered to a client and the achievement of any project
milestones stipulated in the contract. In the event of
divergence between the objective and more subjective
measures, the more subjective measures take precedence
since these are output measures.

While most of the studies provided in connection
with the Group’s market research contracts are undertaken
in response to an individual client’s or group of clients’
specifications, in certain instances a study may be
developed as an off-the-shelf product offering sold to
a broad client base. For these transactions, revenue is
recognised when the product is delivered. Where the
terms of transaction provide for licensing the product
on a subscription basis, revenue is recognised over the
subscription period on a straight-line basis or, if applicable,
based on usage.

Substantially all services are provided on a fixed price
basis. Pricing may also include a provision for a surcharge
where the actual labour hours incurred in completing a
project are significantly above the labour hours quoted in
the project proposal. In instances where this occurs, the
surcharge will be included in the total revenue base on
which to measure proportional performance when the
actual threshold is reached provided that collectability
is reasonably assured.

WPP ANNUAL REPORT 2016

181

Our 2016 financial statements
Accounting policies

Public Relations & Public Affairs and Branding
& Identity, Healthcare and Specialist
Communications

Revenue is typically derived from retainer fees and services
to be performed subject to specific agreement. Revenue is
recognised when the service is performed, in accordance
with the terms of the contractual arrangement. Revenue is
recognised on long-term contracts, if the final outcome can
be assessed with reasonable certainty, by including in the
consolidated income statement revenue and related costs
as contract activity progresses.

Taxation

Corporate taxes are payable on taxable profits at current
rates. The tax expense represents the sum of the tax
currently payable and deferred tax.

The Group is subject to corporate taxes in a number

of different jurisdictions and judgement is required in
determining the appropriate provision for transactions
where the ultimate tax determination is uncertain. In such
circumstances, the Group recognises liabilities for anticipated
taxes based on the best information available and where
the anticipated liability is both probable and estimable,
liabilities are classified as current. Any interest and penalties
accrued are included in corporate income taxes both in the
consolidated income statement and balance sheet. Where
the final outcome of such matters differs from the amount
recorded, any differences may impact the income tax and
deferred tax provisions in the period in which the final
determination is made.

The tax laws that apply to the Group’s subsidiaries may

be amended by the relevant tax authorities. Such potential
amendments are regularly monitored and adjustments are
made to the Group’s tax liabilities and deferred tax assets
and liabilities where necessary.

The tax currently payable is based on taxable profit for

the year. Taxable profit differs from net profit as reported
in the consolidated income statement because it excludes
items of income or expense that are taxable or deductible
in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax
is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.

182

WPP ANNUAL REPORT 2016

Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are recognised for all
taxable temporary differences unless specifically excepted
by IAS 12 Income Taxes. Deferred tax is charged or
credited in the consolidated income statement, except
when it relates to items charged or credited to other
comprehensive income or directly to equity, in which case
the deferred tax is also dealt with in other comprehensive
income or equity. Deferred tax assets are recognised to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences
can be utilised, which can require the use of accounting
estimation and the exercise of judgement. Such assets and
liabilities are not recognised if the temporary difference
arises from the initial recognition of goodwill or other
assets and liabilities (other than in a business combination)
in a transaction that affects neither the taxable profit nor
the accounting profit.

The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax liabilities are recognised for taxable

temporary differences arising on investments in subsidiaries
and associates, and interests in joint ventures, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference
will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there

is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities
on a net basis.

Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled
or the asset is realised based on enacted or substantively
enacted legislation.

Our 2016 financial statements
Accounting policies

Retirement benefit costs

Operating leases

The Group accounts for retirement benefit costs in
accordance with IAS 19 Employee Benefits.

For defined contribution plans, contributions are
charged to the consolidated income statement as payable
in respect of the accounting period.

For defined benefit plans the amounts charged to
operating profit are the current service costs, past service
costs, administrative expenses and gains and losses on
settlements and curtailments. They are included as part
of staff costs. Past service costs are recognised immediately
in the consolidated income statement when the related
plan amendment occurs. Net interest expense is calculated
by applying the discount rate to the recognised overall
surplus or deficit in the plan.

Actuarial gains and losses are recognised immediately

in the consolidated statement of comprehensive income.
Where defined benefit plans are funded, the assets
of the plan are held separately from those of the Group,
in separate independently managed funds. Pension plan
assets are measured at fair value and liabilities are
measured on an actuarial basis using the projected unit
method and discounted at a rate equivalent to the current
rate of return on a high-quality corporate bond of
equivalent currency and term to the plan liabilities.
The actuarial valuations are obtained at least triennially
and are updated at each balance sheet date.

Recognition of a surplus in a defined benefit plan
is limited based on the economic gain the Company is
expected to benefit from in the future by means of a
refund or reduction in future contributions to the plan,
in accordance with IAS 19.

Finance leases

Assets held under finance leases are recognised as assets of
the Group at the inception of the lease at the lower of their
fair value and the present value of the minimum lease
payments. Depreciation on leased assets is charged to the
consolidated income statement on the same basis as owned
assets. Leasing payments are treated as consisting of capital
and interest elements and the interest is charged to the
consolidated income statement as it is incurred.

Operating lease rentals are charged to the consolidated
income statement on a straight-line basis over the lease
term. Any premium or discount on the acquisition of a lease
is spread over the life of the lease on a straight-line basis.

Translation of foreign currencies

Foreign currency transactions arising from normal trading
activities are recorded at the rates in effect at the date of the
transaction. Monetary assets and liabilities denominated
in foreign currencies at the year end are translated at the
year-end exchange rate. Foreign currency gains and losses
are credited or charged to the consolidated income
statement as they arise.

The income statements of overseas subsidiary
undertakings are translated into pounds sterling at
average exchange rates and the year-end net assets of these
companies are translated at year-end exchange rates.

Exchange differences arising from retranslation of the

opening net assets and on foreign currency borrowings
(to the extent that they hedge the Group’s investment in
such operations) are reported in the consolidated statement
of comprehensive income.

Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the
closing rate.

Share-based payments

The Group issues equity-settled share-based payments
(including share options) to certain employees and accounts
for these awards in accordance with IFRS 2 Share-Based
Payment. Equity-settled share-based payments are
measured at fair value (excluding the effect of non-market-
based vesting conditions) at the date of grant. Details
regarding the fair value of equity settled share-based
transactions are set out in notes 22 and 26.

The fair value determined at the grant date is recognised

in the consolidated income statement as an expense on a
straight-line basis over the relevant vesting period, based
on the Group’s estimate of the number of shares that will
ultimately vest and adjusted for the effect of non-market-
based vesting conditions.

WPP ANNUAL REPORT 2016

183

Critical judgements and estimation
uncertainty in applying accounting policies

Management is required to make key decisions and
judgements whilst acknowledging there is estimation
uncertainty in the process of applying the Group’s
accounting policies. The most significant areas where such
judgements and estimation uncertainty apply are revenue
recognition, goodwill and other intangibles, payments
due to vendors (earnout agreements), liabilities in respect
of put option agreement with vendors, acquisition reserves,
taxation and accounting for pension liabilities. Where
judgement has been applied or estimation uncertainty
exists, the key factors taken into consideration are disclosed
in the accounting policies and the appropriate note in these
financial statements.

Directors’ responsibility statement

We confirm that to the best of our knowledge:

the financial statements, prepared in accordance with

the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
the Strategic report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties
they face.

Sir Martin Sorrell
Group chief executive Group finance director
19 April 2017

Paul Richardson

Our 2016 financial statements
Accounting policies

New IFRS accounting pronouncements

At the date of authorisation of these financial statements,
the following Standards, which have not been applied in
these financial statements, were in issue but not yet effective:

IFRS 9: Financial Instruments;
IFRS 15: Revenue from Contracts with Customers; and
IFRS 16: Leases
With the exception of IFRS 15 and IFRS 16, the Group
does not consider that these Standards will have a significant
impact on the financial statements of the Group except for
additional disclosures when the relevant standards come
into effect.

IFRS 15 is effective from 1 January 2018. It provides for

one of two methods of transition: retrospective application
to each prior period presented or recognition of the
cumulative effect of retrospective application of the new
standard as of the beginning of the period of initial
application. We have not yet decided which transition
method we will use. While we continue to assess the impacts
of the standard, based on our initial assessment, we do not
expect the adoption of IFRS 15 to have a significant impact
on the timing of the Group’s revenue recognition. We do
expect an acceleration of revenue recognition for certain
incentive-based revenues; however, incentive-based revenues
are not material to the Group’s revenue. In April 2016, the
IASB issued clarification guidance on principal versus agent
considerations. We are currently evaluating the impact
of the principal versus agent guidance on certain of our
revenues and direct costs; however, we do not expect any
change to have a material effect on our results of operations.
IFRS 16 is effective from 1 January 2019. The standard
eliminates the classification of leases as either operating or
finance leases and introduces a single accounting model.
Lessees will be required to recognise a right-of-use asset
and related lease liability for the majority of their operating
leases and show depreciation of leased assets and interest
on lease liabilities separately in the income statement. IFRS
16 will require the Group to recognise substantially all of
its current operating lease commitments on the balance
sheet and the financial impact of this, together with other
implications of the standard, are currently being assessed.
In the current year, the following Standards and

Interpretations became effective:

IFRS 14: Regulatory Deferral Accounts;
The adoption of these Standards and Interpretations has

not led to any changes in the Group’s accounting policies.

184

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Accounting policies

The numbers in full …

WPP ANNUAL REPORT 2016

185

Our 2016 financial statements

Consolidated income statement

For the year ended 31 December 2016

Billings1

Revenue
Direct costs
Net sales
Operating costs
Operating profit
Share of results of associates
Profit before interest and taxation
Finance income
Finance costs
Revaluation of financial instruments
Profit before taxation
Taxation
Profit for the year

Attributable to:
Equity holders of the parent
Non-controlling interests

Headline PBIT
Net sales margin
Headline PBT

Earnings per share
Basic earnings per ordinary share
Diluted earnings per ordinary share

Notes

2016
£m
55,245.2

2015
£m
47,631.9

2014
£m
46,186.3

2016
$m2
74,439.6

2015
$m2
72,766.7

2014
$m2
75,943.6

14,388.9
(1,991.1)
2
12,397.8
3 (10,334.7)
2,063.1
49.8
2,112.9
80.4
(254.5)
(48.3)
1,890.5
(388.9)
1,501.6

6
6
6

12,235.2
(1,710.9)
10,524.3
(8,892.3)
1,632.0
47.0
1,679.0
72.4
(224.1)
(34.7)
1,492.6
(247.5)
1,245.1

11,528.9
(1,464.1)
10,064.8
(8,557.5)
1,507.3
61.9
1,569.2
94.7
(262.7)
50.7
1,451.9
(300.4)
1,151.5

19,379.3
(2,688.6)
16,690.7
(13,989.6)
2,701.1
65.3
2,766.4
109.6
(344.1)
(71.4)
2,460.5
(516.7)
1,943.8

18,693.2
(2,614.3)
16,078.9
(13,585.1)
2,493.8
71.2
2,565.0
110.9
(342.6)
(53.2)
2,280.1
(378.4)
1,901.7

18,956.0
(2,407.0)
16,549.0
(14,097.4)
2,451.6
101.8
2,553.4
154.0
(430.9)
82.1
2,358.6
(487.2)
1,871.4

1,400.1
101.5
1,501.6

2,160.3
17.4%
1,986.2

1,160.2
84.9
1,245.1

1,774.0
16.9%
1,622.3

1,077.2
74.3
1,151.5

1,680.6
16.7%
1,512.6

1,808.7
135.1
1,943.8

2,864.6
17.2%
2,630.1

1,771.6
130.1
1,901.7

2,704.3
16.8%
2,472.6

1,749.4
122.0
1,871.4

2,739.8
16.6%
2,462.9

109.6p
108.0p

90.0p
88.4p

82.4p
80.5p

141.5¢
139.6¢

137.5¢
134.9¢

133.8¢
130.8¢

31
31
31

9
9

Notes
The accompanying notes form an integral part of this consolidated income statement.
1 Billings is defined on page 234.
2 The consolidated income statement above is also expressed in US dollars for information purposes only and is unaudited. It has been prepared assuming the US dollar is the

reporting currency of the Group, whereby local currency results are translated into US dollars at actual monthly average exchange rates in the period presented. Among other
currencies, this includes an average exchange rate of US$1.3547 to the pound sterling for the year 2016 (2015: US$1.5288, 2014: US$1.6475).

186

WPP ANNUAL REPORT 2016

Consolidated statement of comprehensive income

Our 2016 financial statements

For the year ended 31 December 2016

Profit for the year
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments
(Loss)/gain on revaluation of available for sale investments

Items that will not be reclassified subsequently to profit or loss:
Actuarial (loss)/gain on defined benefit pension plans
Deferred tax on defined benefit pension plans

Other comprehensive income/(loss) for the year
Total comprehensive income for the year

Attributable to:
Equity holders of the parent
Non-controlling interests

Note
The accompanying notes form an integral part of this consolidated statement of comprehensive income.

2016
£m
1,501.6

2015
£m
1,245.1

2014
£m
1,151.5

1,378.0
(93.1)
1,284.9

(15.9)
(0.4)
(16.3)
1,268.6
2,770.2

(275.9)
206.0
(69.9)

33.5
(5.2)
28.3
(41.6)
1,203.5

(221.2)
64.6
(156.6)

(86.6)
62.1
(24.5)
(181.1)
970.4

2,600.6
169.6
2,770.2

1,121.6
81.9
1,203.5

893.0
77.4
970.4

WPP ANNUAL REPORT 2016

187

Our 2016 financial statements

Consolidated cash flow statement

For the year ended 31 December 2016

Net cash inflow from operating activities
Investing activities
Acquisitions and disposals
Purchases of property, plant and equipment
Purchases of other intangible assets (including capitalised computer software)
Proceeds on disposal of property, plant and equipment
Net cash outflow from investing activities
Financing activities
Share option proceeds
Cash consideration for non-controlling interests
Share repurchases and buy-backs
Net (decrease)/increase in borrowings
Financing and share issue costs
Equity dividends paid
Dividends paid to non-controlling interests in subsidiary undertakings
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Translation differences
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Reconciliation of net cash flow to movement in net debt:
Net (decrease)/increase in cash and cash equivalents
Cash outflow/(inflow) from decrease/(increase) in debt financing
Debt acquired
Other movements
Translation differences
Movement of net debt in the year
Net debt at beginning of year
Net debt at end of year

Note
The accompanying notes form an integral part of this consolidated cash flow statement.

Notes
11

11
11
11

2016
£m
1,773.8

2015
£m
1,359.9

2014
£m
1,703.7

(638.8)
(252.1)
(33.0)
7.7
(916.2)

27.2
(58.3)
(427.4)
(22.5)
(6.4)
(616.5)
(89.6)
(1,193.5)
(335.9)
291.9
1,946.6
1,902.6

(335.9)
28.9
(144.4)
(2.3)
(466.0)
(919.7)
(3,210.8)
(4,130.5)

(669.5)
(210.3)
(36.1)
13.4
(902.5)

27.6
(23.6)
(587.6)
492.0
(11.4)
(545.8)
(55.2)
(704.0)
(246.6)
(54.4)
2,247.6
1,946.6

(489.1)
(177.9)
(36.5)
5.9
(697.6)

25.0
(5.6)
(510.8)
465.2
(27.5)
(460.0)
(57.7)
(571.4)
434.7
(70.3)
1,883.2
2,247.6

(246.6)
(480.5)
–
(124.0)
(84.3)
(935.4)
(2,275.4)
(3,210.8)

434.7
(437.7)
–
23.8
(55.8)
(35.0)
(2,240.4)
(2,275.4)

188

WPP ANNUAL REPORT 2016

Consolidated balance sheet

Our 2016 financial statements

At 31 December 2016

Non-current assets
Intangible assets:

Goodwill
Other

Property, plant and equipment
Interests in associates and joint ventures
Other investments
Deferred tax assets
Trade and other receivables

Current assets
Inventory and work in progress
Corporate income tax recoverable
Trade and other receivables
Cash and short-term deposits

Current liabilities
Trade and other payables
Corporate income tax payable
Bank overdrafts and loans

Net current liabilities
Total assets less current liabilities
Non-current liabilities
Bonds and bank loans
Trade and other payables
Deferred tax liabilities
Provision for post-employment benefits
Provisions for liabilities and charges

Net assets
Equity
Called-up share capital
Share premium account
Other reserves
Own shares
Retained earnings
Equity share owners’ funds
Non-controlling interests
Total equity

Notes

2016
£m

2015
£m

12
12
13
14
14
15
17

20
19
15
23
21

13,214.3
2,217.3
968.7
1,069.4
1,310.3
140.4
204.9
19,125.3

400.4
231.2
12,374.5
2,436.9
15,443.0

10,670.6
1,715.4
797.7
758.6
1,158.7
94.1
178.7
15,373.8

329.0
168.6
10,495.4
2,382.4
13,375.4

(15,010.4)
(752.3)
(1,002.5)
(16,765.2)
(1,322.2)
17,803.1

(12,685.0)
(598.5)
(932.0)
(14,215.5)
(840.1)
14,533.7

(5,564.9)
(1,273.8)
(692.4)
(276.5)
(227.9)
(8,035.5)
9,767.6

133.2
562.2
1,185.2
(962.0)
8,405.9
9,324.5
443.1
9,767.6

(4,661.2)
(891.5)
(552.3)
(229.3)
(183.6)
(6,517.9)
8,015.8

132.9
535.3
(9.7)
(719.6)
7,698.5
7,637.4
378.4
8,015.8

Note
The accompanying notes form an integral part of this consolidated balance sheet.

The financial statements were approved by the Board of Directors and authorised for issue on 19 April 2017.

Signed on behalf of the Board:

Sir Martin Sorrell
Group chief executive

Paul Richardson
Group finance director

WPP ANNUAL REPORT 2016

189

Our 2016 financial statements

Consolidated statement of changes in equity

For the year ended 31 December 2016

Balance at 1 January 2016
Ordinary shares issued
Treasury share additions
Treasury share allocations
Net profit for the year
Exchange adjustments on foreign currency net
investments
Loss on revaluation of available
for sale investments
Actuarial loss on defined benefit
pension plans
Deferred tax on defined benefit
pension plans
Comprehensive income
Dividends paid
Non-cash share-based incentive plans (including
share options)
Tax adjustment on share-based payments
Net movement in own shares held
by ESOP Trusts
Recognition/remeasurement
of financial instruments
Share purchases – close period commitments
Acquisition of subsidiaries2
Balance at 31 December 2016

Called-up
share
capital
£m
132.9
0.3
–
–
–

Share
premium
account
£m
535.3
26.9
–
–
–

Other
reserves1
£m
(9.7)
–
–
–
–

Own
shares
£m

Retained
earnings
£m

Total
equity
share
owners’
funds
£m
(719.6) 7,698.5 7,637.4
–
27.2
–
(274.5)
–
(3.9)
– 1,400.1 1,400.1

–
(274.5)
3.9

Non-
controlling
interests
£m

Total
£m
378.4 8,015.8
27.2
(274.5)
–
101.5 1,501.6

–
–
–

–

–
–
–

–
–

–

– 1,309.9

–

(93.1)

–

–
–
– 1,216.8
–
–

–
–

–

–
–

–

– 1,309.9

68.1 1,378.0

–

(93.1)

(15.9)

–

(93.1)

(15.9)

(0.4)
(0.4)
–
– 1,383.8 2,600.6
–
(616.5)

(616.5)

–

(0.4)
169.6 2,770.2
(706.1)
(89.6)

–
–

106.5
3.9

28.2

(181.1)

(152.9)

–
–

–

106.5
3.9

(152.9)

–
–
–
133.2

–
–
–

(21.9)
–
–
562.2 1,185.2

–
–
–

4.9
26.8
8.6
8.6
(20.7)
(20.7)
(962.0) 8,405.9 9,324.5

4.9
–
8.6
–
(15.3)
(36.0)
443.1 9,767.6

Notes
The accompanying notes form an integral part of this consolidated statement of changes in equity.
1 Other reserves are analysed in note 27.
2 Acquisition of subsidiaries represents movements in retained earnings and non-controlling interests arising from changes in ownership of existing subsidiaries and recognition

of non-controlling interests on new acquisitions.

190

WPP ANNUAL REPORT 2016

For the year ended 31 December 2015

Balance at 1 January 2015
Ordinary shares issued
Treasury share additions
Treasury share allocations
Net profit for the year
Exchange adjustments on foreign
currency net investments
Gain on revaluation of available
for sale investments
Actuarial gain on defined benefit
pension plans
Deferred tax on defined benefit
pension plans
Comprehensive (loss)/income
Dividends paid
Non-cash share-based incentive plans
(including share options)
Tax adjustment on share-based
payments
Net movement in own shares held
by ESOP Trusts
Recognition/remeasurement
of financial instruments
Share purchases – close period
commitments
Acquisition of subsidiaries2
Balance at 31 December 2015

Called-up
share
capital
£m
132.6
0.3
–
–
–

Share
premium
account
£m
508.0
27.3
–
–
–

Shares to
be issued
£m
0.3
(0.3)
–
–
–

–

–
–
–

–

–
–
–

–

–
–
132.9

–
–
535.3

–

–
–
–

–

–
–
–

Other
reserves1
£m
36.2
–
–
–
–

(272.9)

206.0

–

–
(66.9)
–

–

Our 2016 financial statements
Consolidated statement of changes in equity

Own
shares
£m

Retained
earnings
£m

Total
equity
share
owners’
funds
£m
(283.7) 7,106.7 7,500.1
0.2
27.5
–
(406.0)
–
(3.6)
– 1,160.2 1,160.2

–
(406.0)
3.6

Non-
controlling
interests
£m

Total
£m
326.7 7,826.8
27.5
(406.0)
–
84.9 1,245.1

–
–
–

(272.9)

(3.0)

(275.9)

–

206.0

33.5

(5.2)
–
– 1,188.5
(545.8)
–

(5.2)
1,121.6
(545.8)

–

(5.2)
81.9 1,203.5
(601.0)
(55.2)

–

99.0

18.0

(33.5)

(148.1)

(181.6)

–

206.0

33.5

–

99.0

18.0

(181.6)

(59.7)

(59.0)

–

(0.7)

(59.7)

80.0
–
(9.7)

–
–

82.9
2.9
(18.6)
(18.6)
(719.6) 7,698.5 7,637.4

–
25.0

82.9
6.4
378.4 8,015.8

of non-controlling interests on new acquisitions.

WPP ANNUAL REPORT 2016

191

Our 2016 financial statements

Notes to the consolidated financial statements

For the year ended 31 December 2016

1. General information
WPP plc is a company incorporated in Jersey. The address of the registered office is Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES and
the address of the principal executive office is 27 Farm Street, London, United Kingdom, W1J 5RJ. The nature of the Group’s operations and its principal
activities are set out in note 2. These consolidated financial statements are presented in pounds sterling.

2. Segment information
The Group is a leading worldwide communications services organisation offering national and multinational clients a comprehensive range of
communications services.

The Group is organised into four reportable segments – Advertising and Media Investment Management; Data Investment Management; Public
Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications. This last reportable segment includes WPP Digital
and direct, digital, promotional & relationship marketing.

IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and
allocation of resources by the Group chief executive. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 permits the aggregation
of these components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable
segments, the directors have had regard to the similar economic characteristics of certain operating segments, their shared client base, the similar
nature of their products or services and their long-term margins, amongst other factors.

Operating sectors
Reported contributions were as follows:

Income statement
2016
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist Communications

2015
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist Communications

2014
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist Communications

Revenue1

£m

Net sales
£m

Headline

PBIT2,4
£m

Net sales

margin3,4

6,547.3
2,661.1
1,101.3
4,079.2
14,388.9

5,552.8
2,425.9
945.8
3,310.7
12,235.2

5,134.3
2,429.3
891.9
3,073.4
11,528.9

5,413.5
1,994.0
1,078.8
3,911.5
12,397.8

4,652.0
1,768.1
929.7
3,174.5
10,524.3

4,502.0
1,748.9
880.4
2,933.5
10,064.8

1,027.2
351.5
179.8
601.8
2,160.3

859.7
286.1
145.2
483.0
1,774.0

837.6
272.7
135.6
434.7
1,680.6

19.0
17.6
16.7
15.4
17.4

18.5
16.2
15.6
15.2
16.9

18.6
15.6
15.4
14.8
16.7

Notes
1 Intersegment sales have not been separately disclosed as they are not material.
2 A reconciliation from reported profit before interest and taxation to headline PBIT is provided in note 31. Reported profit before interest and taxation is reconciled to reported profit

before taxation in the consolidated income statement.

3 Net sales margin is defined in note 31.
4 Prior year headline PBIT and net sales margins have been restated to reflect a reclassification between sectors of one of the Group’s associates.

192

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Notes to the consolidated financial statements

Other information
2016
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist
Communications

2015
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist
Communications

2014
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist
Communications

Share-based
payments
£m

Capital
additions1

£m

Depreciation
and
amortisation2

£m

Goodwill
impairment
£m

Share of
results of
associates
£m

Interests in
associates and
joint ventures
£m

60.7
13.0
7.5

25.3
106.5

55.4
13.7
6.7

23.2
99.0

48.6
18.8
7.9

26.9
102.2

126.2
61.5
10.3

87.1
285.1

119.7
58.1
9.1

59.5
246.4

91.0
48.1
7.4

67.9
214.4

105.4
60.9
11.6

81.5
259.4

96.9
51.8
9.8

69.9
228.4

102.6
50.9
12.6

62.8
228.9

20.9
–
–

6.1
27.0

15.1
–
–

–
15.1

16.9
–
–

–
16.9

8.3
13.2
3.2

25.1
49.8

26.8
0.8
2.3

17.1
47.0

25.1
18.4
3.9

14.5
61.9

285.6
109.4
108.1

566.3
1,069.4

377.0
86.4
92.0

203.2
758.6

395.5
119.3
60.1

185.0
759.9

Notes
1 Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software).
2 Depreciation of property, plant and equipment and amortisation of other intangible assets.

Balance sheet
2016
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist
Communications

2015
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist
Communications

2014
Advertising and Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and Specialist
Communications

Segment
assets
£m

Unallocated
corporate

assets1,2
£m

Assets
Consolidated
total
assets
£m

Segment
liabilities
£m

Unallocated
corporate
liabilities1,2

£m

Liabilities
Consolidated
total
liabilities
£m

15,984.9
3,167.2
3,222.5

9,385.2
31,759.8

12,911.4
3,713.3
1,839.2

7,640.2
26,104.1

12,250.5
3,427.1
1,744.7

6,433.5
23,855.8

(12,409.6)
(1,272.0)
(542.1)

(2,564.9)
(16,788.6)

(10,506.9)
(1,067.0)
(425.1)

(1,990.4)
(13,989.4)

(9,803.5)
(1,045.7)
(400.0)

(1,622.3)
(12,871.5)

2,808.5

34,568.3

2,645.1

28,749.2

2,767.1

26,622.9

(8,012.1)

(24,800.7)

(6,744.0)

(20,733.4)

(5,924.6)

(18,796.1)

Notes
1 Included in unallocated corporate assets and liabilities are corporate income tax, deferred tax and net interest-bearing debt.
2 Comparative figures for 2014 have been restated to reduce both deferred tax assets and deferred tax liabilities, by a corresponding amount.

WPP ANNUAL REPORT 2016

193

Our 2016 financial statements
Notes to the consolidated financial statements

Contributions by geographical area were as follows:

Revenue1
North America2
UK
Western
Continental Europe
Asia Pacific, Latin
America, Africa &
Middle East and
Central & Eastern
Europe

Net sales
North America2
UK
Western
Continental Europe
Asia Pacific, Latin
America, Africa &
Middle East and
Central & Eastern
Europe

Headline PBIT3
North America2
UK
Western
Continental Europe
Asia Pacific, Latin
America, Africa &
Middle East and
Central & Eastern
Europe

Net sales margin4
North America2
UK
Western
Continental Europe
Asia Pacific, Latin
America, Africa &
Middle East and
Central & Eastern
Europe

Notes
1 Non-current assets excluding financial instruments and deferred tax.
2 North America includes the US with non-current assets of £6,849.0 million

(2015: £5,202.6 million).

3. Operating costs

2016
£m

5,280.8
1,866.3

2,943.2

2015
£m

4,491.2
1,777.4

2014
£m

3,899.9
1,640.3

2,425.6

2,568.8

Non-current assets1
North America2
UK
Western Continental Europe
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe

4,298.6
14,388.9

3,541.0
12,235.2

3,419.9
11,528.9

4,603.7
1,587.6

2,425.5

3,882.3
1,504.5

3,471.7
1,396.0

2,016.2

2,142.6

3,781.0
12,397.8

3,121.3
10,524.3

3,054.5
10,064.8

895.4
261.4

351.7

728.2
243.1

277.2

621.8
221.2

277.2

651.8
2,160.3

525.5
1,774.0

560.4
1,680.6

Margin

19.4%
16.5%

14.5%

17.2%
17.4%

18.8%
16.2%

13.7%

16.8%
16.9%

17.9%
15.8%

18.3%
16.7%

Staff costs (note 5)
Establishment costs
Other operating costs (net)
Total operating costs
Operating costs include:
Goodwill impairment (note 12)
Investment write-downs
Restructuring costs
IT asset write-downs
Amortisation and impairment of acquired
intangible assets (note 12)
Amortisation of other intangible assets
(note 12)
Depreciation of property, plant and
equipment
Losses/(gains) on sale of property, plant
and equipment
Gains on disposal of investments
and subsidiaries
Gains on remeasurement of equity
interests arising from a change in
scope of ownership
Net foreign exchange gains
Operating lease rentals:
Land and buildings
Sublease income

12.9%

Plant and machinery

2016
£m

2015
£m

8,189.3 6,225.3
2,106.4
2,138.5
4,321.6 3,558.6

3,349.7
4,327.2
18,976.6 15,240.0

2015
£m

2016
£m

2014
£m
7,784.9 6,652.6 6,440.5
726.3
711.3
1,713.3 1,513.4 1,405.7
10,334.7 8,892.3 8,557.5

836.5

27.0
86.1
27.4
–

15.1
78.7
106.2
29.1

16.9
7.3
127.6
–

168.4

140.1

147.5

38.6

33.7

31.6

215.2

190.0

191.7

0.8

1.1

(0.8)

(44.3)

(131.0)

(186.3)

(232.4)
(17.0)

(165.0)
(10.7)

(9.2)
(2.5)

556.1
(11.6)
544.5
10.6
555.1

476.6
(11.3)
465.3
18.3
483.6

466.1
(11.2)
454.9
19.9
474.8

In 2016, operating profit includes credits totalling £26.3 million (2015:
£31.6 million, 2014: £24.9 million) relating to the release of excess
provisions and other balances established in respect of acquisitions
completed prior to 2015. Further details of the Group’s approach to
acquisition reserves, as required by IFRS 3 Business Combinations,
are given in note 28.

Investment write-downs of £86.1 million (2015: £78.7 million, 2014:
£7.3 million) includes £79.6 million in relation to comScore Inc, which has
not released any financial statements in relation to its 2015 or 2016 results
due to an internal investigation by their Audit Committee. Following
the announcement of this internal investigation, the market value of
comScore Inc fell below the Group’s carrying value. Other investment
write-downs relate to certain non-core minority investments in the US
where forecast financial performance and/or liquidity issues indicate
a permanent decline in the recoverability of the Group’s investment.

Notes
1 Intersegment sales have not been separately disclosed as they are not material.
2 North America includes the US with revenue of £5,005.8 million

(2015: £4,257.4 million, 2014: £3,664.9 million), net sales of £4,365.1 million
(2015: £3,674.3 million, 2014: £3,254.2 million) and headline PBIT of £849.4 million
(2015: £697.3 million, 2014: £588.2 million).

3 Headline PBIT is defined in note 31.
4 Net sales margin is defined in note 31.

194

WPP ANNUAL REPORT 2016

In 2016, restructuring costs of £27.4 million (2015: £106.2 million, 2014:
£127.6 million) comprise £27.4 million (2015: £36.7 million, 2014: 38.9
million) of costs resulting from the project to transform and rationalise the
Group’s IT services and infrastructure. Included within the restructuring
costs in 2015 and 2014 were £69.5 million and £88.7 million respectively
arising from a structural reassessment of certain of the Group’s operations,
primarily in the mature markets of Western Europe.

Gains on disposal of investments and subsidiaries of £44.3 million
(2015: £131.0 million, 2014: £186.3 million) include £26.5 million of gains
arising on the sale of the Group’s equity interest in Grass Roots Group.

Gains on remeasurement of equity interests arising from a change in
scope of ownership of £232.4 million in 2016 primarily comprise gains
of £260.0 million in relation to the reclassification of the Group’s interest
in the Imagina Group in Spain from other investments to interests in
associates, resulting from WPP attaining significant influence in the
period; and losses of £23.2 million in relation to the merger of most of the
Group’s Australian and New Zealand assets with STW Communications
Group Limited in Australia. The re-named WPP AUNZ became a listed
subsidiary of the Group on 8 April 2016.

All of the operating costs of the Group are related to administrative expenses.

Auditors’ remuneration:

Fees payable to the Company’s auditors for
the audit of the Company’s annual accounts
The audit of the Company’s subsidiaries
pursuant to legislation

Other services pursuant to legislation
Fees payable to the auditors pursuant
to legislation
Tax advisory services
Tax compliance services

Corporate finance services
Other services1
Total non-audit fees
Total fees

2016
£m

2015
£m

2014
£m

1.4

1.5

1.4

19.4
20.8
3.7

24.5
1.6
1.3
2.9
0.1
5.7
8.7
33.2

16.2
17.7
3.3

21.0
1.8
1.0
2.8
0.2
6.5
9.5
30.5

14.5
15.9
3.1

19.0
2.1
1.0
3.1
0.3
5.4
8.8
27.8

Note
1 Other services include audits for earnout purposes.

Minimum committed annual rentals
Amounts payable in 2017 under leases will be as follows:

In respect of operating
leases which expire:
– within one year
– within two to five

years

– after five years

Plant and machinery
2015
2016
£m
£m

2017
£m

Land and buildings
2015
2016
2017
£m
£m
£m

4.0

4.3

5.3

85.1

57.6

66.7

10.5
–
14.5

9.7
0.3
14.3

10.8
0.1
16.2

287.9 240.3 223.9
187.0 163.1 139.4
560.0 461.0 430.0

Our 2016 financial statements
Notes to the consolidated financial statements

Future minimum annual amounts payable under all lease commitments
in existence at 31 December 2016 are as follows:

Year ending 31 December
2017
2018
2019
2020
2021
Later years

4. Share of results of associates
Share of results of associates include:

Share of profit before interest and taxation
Share of exceptional losses
Share of interest and non-controlling
interests
Share of taxation

Minimum
rental
payments
£m

Less
sub-let
rentals
£m

Net
payment
£m

574.5
491.1
432.6
406.3
377.3
1,728.1
4,009.9

(9.3) 565.2
(7.1) 484.0
427.7
(4.9)
403.4
(2.9)
(2.6)
374.7
(5.6) 1,722.5
(32.4) 3,977.5

2016
£m
97.1
(15.2)

(4.7)
(27.4)
49.8

2015
£m
95.2
(21.8)

(1.7)
(24.7)
47.0

2014
£m
101.8
(7.6)

(3.1)
(29.2)
61.9

5. Our people
Our staff numbers averaged 132,657 for the year ended 31 December 2016
against 124,930 in 2015 and 121,397 in 2014. Their geographical
distribution was as follows:

North America
UK
Western Continental Europe
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe

2015

2016

2014
27,246 26,224 26,809
14,070 13,401 12,838
24,996 23,506 23,376

66,345 61,799 58,374
132,657 124,930 121,397

Their operating sector distribution was as follows:

Advertising and Media Investment
Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity, Healthcare and
Specialist Communications

2016

2015

2014

55,120 53,227 52,329
29,279 28,395 28,240
8,392
8,492

9,054

39,204 34,816 32,436
132,657 124,930 121,397

At the end of 2016, staff numbers were 134,341 (2015: 128,123, 2014:
123,621). Including all employees of associated undertakings, this
figure was approximately 198,000 at 31 December 2016 (2015: 190,000,
2014: 179,000).

WPP ANNUAL REPORT 2016

195

Our 2016 financial statements
Notes to the consolidated financial statements

Staff costs include:

Wages and salaries
Cash-based incentive plans
Share-based incentive plans (note 22)
Social security costs
Pension costs (note 23)
Severance
Other staff costs1

Staff cost to net sales ratio

2015
£m

2016
£m

2014
£m
5,395.6 4,578.4 4,467.8
210.7
231.8
260.2
102.2
99.0
106.5
567.8
578.4
658.1
148.9
160.0
178.1
24.0
37.4
34.5
905.7
981.0
1,151.9
7,784.9 6,652.6 6,440.5
62.8% 63.2% 64.0%

Note
1 Freelance and temporary staff costs are included in other staff costs.

Included above are charges of £15.5 million (2015: £16.7 million,
2014: £16.9 million) for share-based incentive plans in respect of key
management personnel (who comprise the directors of the Group).
Further details of compensation for key management personnel are
disclosed on pages 128 to 158.

6. Finance income, finance costs and revaluation of financial
instruments
Finance income includes:

Income from available for sale investments
Interest income

Finance costs include:

Net interest expense on pension plans
(note 23)
Interest on other long-term employee
benefits
Interest payable and similar charges1

Revaluation of financial instruments2 include:

Movements in fair value of treasury
instruments
Movements in fair value of other
derivatives
Revaluation of put options over
non-controlling interests
Revaluation of payments due to vendors
(earnout agreements)

2016
£m
12.5
67.9
80.4

2015
£m
18.9
53.5
72.4

2014
£m
26.0
68.7
94.7

2016
£m

2015
£m

2014
£m

6.7

7.3

8.0

2.7
245.1
254.5

2.5
214.3
224.1

1.9
252.8
262.7

2016
£m

2015
£m

2014
£m

(19.5)

(3.7)

31.3

–

15.9

15.0

(17.2)

(11.3)

(8.8)

(11.6)
(48.3)

(35.6)
(34.7)

13.2
50.7

Notes
1 Interest payable and similar charges are payable on bank overdrafts, bonds and

bank loans held at amortised cost.

2 Financial instruments are held at fair value through profit and loss.

The majority of the Group’s long-term debt is represented by
$2,862 million of US dollar bonds at an average interest rate of 4.48%,
€2,952 million of Eurobonds at an average interest rate of 1.85%
and £1,000 million of Sterling bonds at an average interest rate of 4.83%.

196

WPP ANNUAL REPORT 2016

Average borrowings under the US Dollar Revolving Credit Facilities
(note 10) amounted to the equivalent of $109 million at an average
interest rate of 0.82%.

Average borrowings under the Australian dollar Revolving Credit
Facilities, acquired as part of the merger of most of the Group’s Australian
and New Zealand assets with STW Communications Group Limited in
Australia, amounted to A$336 million at an average rate of 3.69%.

Average borrowings under the US Commercial Paper Program for 2016
amounted to $293 million at an average interest rate of 0.75% inclusive
of margin.

7. Taxation
The headline tax rate was 21.0% (2015: 19.0%, 2014: 20.0%). The tax rate
on reported PBT was 20.6% (2015: 16.6%, 2014: 20.7%). The cash tax rate
on headline PBT was 20.9% (2015: 18.6%, 2014: 19.2%).

The tax charge comprises:

Corporation tax
Current year
Prior years

Deferred tax
Current year
Prior years

Tax charge

2016
£m

2015
£m

2014
£m

569.4
(80.3)
489.1

403.0
(108.4)
294.6

394.9
4.4
399.3

(88.0)
(12.2)
(100.2)
388.9

(35.8)
(11.3)
(47.1)
247.5

(93.2)
(5.7)
(98.9)
300.4

The corporation tax credit for prior years in 2016, and also 2015, mainly
comprises the release of a number of provisions following the resolution
of tax matters in various countries. In 2014 the deferred tax credit
primarily related to the recognition of temporary differences that were
previously unrecognised.
The tax charge for the year can be reconciled to profit before taxation in
the consolidated income statement as follows:

Profit before taxation
Tax at the corporation tax rate of 20%1
Tax effect of share of results of associates
Irrecoverable withholding taxes
Items that are not deductible in
determining taxable profit
Effect of different tax rates of subsidiaries
operating in other jurisdictions
Origination and reversal of unrecognised
temporary differences
Tax losses not recognised or utilised
in the year
Utilisation of tax losses not previously
recognised
Recognition of temporary differences
not previously recognised
Net release of prior year provisions
in relation to acquired businesses
Other prior year adjustments
Tax charge
Effective tax rate on profit before tax

2015
£m

2016
£m

2014
£m
1,890.5 1,492.6 1,451.9
312.2
302.3
(13.3)
(9.5)
24.2
25.7

378.1
(10.0)
36.3

9.4

25.4

14.2

60.4

49.9

12.9

(4.3)

52.2

0.4

4.0

10.6

52.1

(11.3)

(10.4)

(42.2)

(29.4)

(20.6)

(69.0)

(17.4)
(22.9)
(23.3)
16.1
(96.8)
(69.2)
300.4
247.5
388.9
20.6% 16.6% 20.7%

Note
1 The parent company of the Group is tax resident in the UK. As such, the tax rate

in the tax reconciliation for 2016 is the UK corporation tax rate of 20% (2015: 20.25%,
2014: 21.5%).

The calculation of the headline tax rate is as follows:

Headline PBT1
Tax charge
Tax charge relating to gains on disposal
of investments and subsidiaries
Tax (charge)/credit relating to
restructuring costs
Deferred tax relating to gains on disposal
of investments and subsidiaries
Deferred tax impact of the amortisation
of acquired intangible assets and other
goodwill items
Headline tax charge
Headline tax rate

Note
1 Headline PBT is defined in note 31.

2015
£m

2016
£m

2014
£m
1,986.2 1,622.3 1,512.6
300.4
247.5

388.9

(1.1)

(21.4)

(3.0)

26.5

14.1

3.2

–

(13.8)

23.2
35.4
29.2
302.5
308.3
417.2
21.0% 19.0% 20.0%

Factors affecting the tax charge in future years
Factors that may affect the Group’s future tax charge include the
levels and mix of profits in the many countries in which we operate,
the prevailing tax rates in each of those countries and also the foreign
exchange rates that apply to those profits. The tax charge may also
be affected by the impact of acquisitions, disposals and other corporate
restructurings, the resolution of open tax issues, future planning, and the
ability to use brought forward tax losses. Furthermore, changes in local
or international tax rules, for example prompted by the OECD’s Base
Erosion and Profit Shifting project (a global initiative to improve the
fairness and integrity of tax systems), or new challenges by tax or
competition authorities, may expose us to significant additional tax
liabilities or impact the carrying value of our deferred tax assets,
which would affect the future tax charge.

The Group has a number of open tax returns and is subject to various
ongoing tax audits in respect of which it has recognised potential liabilities,
none of which are individually material. The Group does not currently
expect any material additional charges, or credits, to arise in respect of
these matters, beyond the amounts already provided. Liabilities relating to
these open and judgemental matters are based upon estimates of whether
additional taxes will be due after taking into account external advice
where appropriate. Where the final tax outcome of these matters is different
from the amounts which were initially recorded then such differences will
impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.

Tax risk management
We maintain constructive engagement with the tax authorities and
relevant government representatives, as well as active engagement with
a wide range of international companies and business organisations with
similar issues. We engage advisors and legal counsel to obtain opinions
on tax legislation and principles. We have a Tax Risk Management
Strategy in place which sets out the controls established and our
assessment procedures for decision-making and how we monitor tax
risk. We monitor proposed changes in taxation legislation and ensure
these are taken into account when we consider our future business plans.
Our directors are informed by management of any tax law changes,
the nature and status of any significant ongoing tax audits, and other
developments that could materially affect the Group’s tax position.

Our 2016 financial statements
Notes to the consolidated financial statements

8. Ordinary dividends
Amounts recognised as distributions to equity holders in the year:

Per share
2015 Final
dividend
2016 Interim
dividend

Per ADR1
2015 Final
dividend
2016 Interim
dividend

2016

2015

2014

Pence per share

2016
£m

2015
£m

2014
£m

28.78p 26.58p 23.65p

368.5

343.2

309.5

19.55p 15.91p 11.62p
48.33p 42.49p 35.27p

248.0
616.5

202.6
545.8

150.5
460.0

2016

2015

2014

Cents per share

2016
$m

2015
$m

2014
$m

219.99¢ 218.95¢ 185.01¢

563.4

565.5

484.1

132.42¢ 121.62¢ 95.72¢
352.41¢ 340.57¢ 280.73¢

335.9
899.3

309.7
875.2

248.0
732.1

Proposed final dividend for the year ended 31 December 2016:

Per share
Final dividend

Per ADR1
Final dividend

2016

2015

2014

Pence per share
37.05p 28.78p 26.58p

2016

2015

2014

Cents per ADR
250.96¢ 219.99¢ 218.95¢

Note
1 These figures have been translated for convenience purposes only, using the

approximate average rate for the year shown on page 186. This conversion should
not be construed as a representation that the pound sterling amounts actually
represent, or could be converted into, US dollars at the rates indicated.

The payment of dividends will not have any tax consequences for
the Group.

9. Earnings per share

Basic EPS
The calculation of basic reported and headline EPS is as follows:
2015

Reported earnings1 (£m)
Headline earnings (£m) (note 31)
Average shares used in basic EPS
calculation (m)
Reported EPS
Headline EPS

2016

2014
1,400.1 1,160.2 1,077.2
1,467.5 1,229.1 1,135.8

1,277.8 1,288.5 1,307.4
82.4p
90.0p
109.6p
86.9p
95.4p
114.8p

Note
1 Reported earnings is equivalent to profit for the year attributable to equity holders

of the parent.

Diluted EPS
The calculation of diluted reported and headline EPS is as follows:

Diluted reported earnings (£m)
Diluted headline earnings (£m)
Average shares used in diluted EPS
calculation (m)
Diluted reported EPS
Diluted headline EPS

2015

2016

2014
1,400.1 1,160.2 1,077.2
1,467.5 1,229.1 1,135.8

1,296.0 1,313.0 1,337.5
80.5p
88.4p
108.0p
84.9p
93.6p
113.2p

WPP ANNUAL REPORT 2016

197

Our 2016 financial statements
Notes to the consolidated financial statements

Diluted EPS has been calculated based on the diluted reported and diluted
headline earnings amounts above. At 31 December 2016, options to
purchase 8.4 million ordinary shares (2015: 7.0 million, 2014: 10.7 million)
were outstanding, but were excluded from the computation of diluted
earnings per share because the exercise prices of these options were
greater than the average market price of the Group’s shares and, therefore,
their inclusion would have been accretive.

A reconciliation between the shares used in calculating basic and
diluted EPS is as follows:

2016
m

2015
m

2014
m

Average shares used in basic EPS
calculation
Dilutive share options outstanding
Other potentially issuable shares
Shares used in diluted EPS calculation

1,277.8 1,288.5 1,307.4
4.8
25.3
1,296.0 1,313.0 1,337.5

2.4
15.8

3.5
21.0

At 31 December 2016 there were 1,331,880,730 (2015: 1,329,366,024,
2014: 1,325,747,724) ordinary shares in issue.

10. Sources of finance
The following table summarises the equity and debt financing of the
Group, and changes during the year:

Analysis of changes in financing
Beginning of year
Ordinary shares issued
Net (decrease)/increase in
drawings on bank loans and
corporate bonds
Amortisation of financing costs
included in net debt
Debt acquired
Other movements
Exchange adjustments
End of year

Shares
2015
£m

2016
£m

Debt
2015
£m

668.2
27.2

640.6
27.6

5,157.4 4,523.0
–

–

(22.5)

492.0

–
–
–
–
695.4

–
–
–
–
668.2

9.0
144.4
(13.1)
757.9

7.5
–
105.0
29.9
6,033.1 5,157.4

Note
The table above excludes bank overdrafts which fall within cash and cash equivalents
for the purposes of the consolidated cash flow statement.

Shares
At 31 December 2016, the Company’s share base was entirely composed
of ordinary equity share capital and share premium of £695.4 million
(2015: £668.2 million), further details of which are disclosed in note 26.

Debt
US$ bonds The Group has in issue $812 million of 4.75% bonds due
November 2021, $500 million of 3.625% bonds due September 2022,
$750 million of 3.75% bonds due September 2024, $300 million of
5.125% bonds due September 2042 and $500 million of 5.625% bonds
due November 2043.

198

WPP ANNUAL REPORT 2016

Eurobonds The Group has in issue €252 million of 0.43% bonds due
March 2018, €600 million of 0.75% bonds due November 2019,
€750 million of 3% bonds due November 2023, €750 million of 2.25%
bonds due September 2026 and €600 million of 1.625% bonds due
March 2030.

Sterling bonds In September 2016, the Group issued £400 million of
2.875% bonds due September 2046. The Group has in issue £400 million
of 6% bonds due April 2017 and £200 million of 6.375% bonds due
November 2020.

Revolving Credit Facility The Group has a five-year Revolving Credit
Facility of $2.5 billion due July 2021. The Group’s borrowing under
these facilities, which are drawn down predominantly in US dollars
and pounds sterling, averaged the equivalent of $109 million in 2016.
In April 2016, the Group entered into a A$520 million Revolving Credit
Facility due April 2019. The Group’s borrowings under the Australian
dollar facilities were drawn down in Australian dollars and New Zealand
dollars, averaged the equivalent of A$336 million in 2016. The Group had
available undrawn committed credit facilities of £2,122.3 million at
December 2016 (2015: £1,696.8 million).

Borrowings under the $2.5 billion Revolving Credit Facility are governed
by certain financial covenants based on the results and financial position
of the Group. Borrowings under the A$520 million Revolving Credit
Facility are governed by certain financial covenants based on the results
and financial position of WPP AUNZ.

US Commercial Paper Program
The Group operates a commercial paper program using its Revolving
Credit Facility as a backstop. The average commercial paper outstanding
in 2016 was $293 million. There was no US Commercial Paper outstanding
at 31 December 2016.

The following table is an analysis of future anticipated cash flows in
relation to the Group’s debt, on an undiscounted basis which, therefore,
differs from the fair value and carrying value:

Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years
Debt financing (including interest) under the
Revolving Credit Facility and in relation to
unsecured loan notes
Short-term overdrafts – within one year
Future anticipated cash flows
Effect of discounting/financing rates
Debt financing
Cash and short-term deposits
Net debt

2016
£m
(582.9)
(389.5)
(893.0)
(369.1)
(812.9)
(5,144.7)

2015
£m
(541.7)
(548.2)
(325.4)
(581.6)
(335.0)
(4,459.5)

(8,192.1)
(534.3)
(8,726.4)
2,159.0
(6,567.4)
2,436.9
(4,130.5)

(6,791.4)
(435.8)
(7,227.2)
1,634.0
(5,593.2)
2,382.4
(3,210.8)

Our 2016 financial statements
Notes to the consolidated financial statements

Analysis of fixed and floating rate debt by currency including the effect of
interest rate and cross-currency swaps:

11. Analysis of cash flows
The following tables analyse the items included within the main cash
flow headings on page 188.

2016
Currency
$

€
Other

– fixed
– floating
– fixed
– floating
– fixed

2015
Currency
$

€
Other

– fixed
– floating
– fixed
– floating
– fixed

Fixed
rate1
4.62%
n/a
4.53%
n/a
1.85%
n/a

Fixed
rate1
4.62%
n/a
6.19%
n/a
2.54%
n/a

Floating
basis
n/a
LIBOR
n/a
LIBOR
n/a
n/a

Period
(months)1
212
n/a
193
n/a
93
n/a

Floating
basis
n/a
LIBOR
n/a
LIBOR
n/a
n/a

Period
(months)1
224
n/a
37
n/a
90
n/a

£m
1,255.6
1,063.1
800.0
200.0
2,521.9
192.5
6,033.1

£m
1,052.0
890.7
400.0
200.0
2,544.4
70.3
5,157.4

Note
1 Weighted average. These rates do not include the effect of gains on interest rate swap

terminations that are written to income over the life of the original instrument.

The following table is an analysis of future anticipated cash flows in
relation to the Group’s financial derivatives, which include interest rate
swaps, cash flow hedges and other foreign exchange swaps:

2016
Within one year
Between one and two
years
Between two and three
years
Between three and four
years
Between four and five
years
Over five years

2015
Within one year
Between one and two
years
Between two and three
years
Between three and four
years
Between four and five
years
Over five years

Financial liabilities
Receivable
£m
183.0

Payable
£m
183.2

Financial assets
Receivable
£m
302.2

Payable
£m
282.5

19.2

18.8

20.0

20.7
521.3
783.2

20.6

18.1

51.7

57.5

61.2

55.4

58.5

60.5

18.1
518.1
776.0

1,687.3
–
2,140.2

1,686.1
–
2,162.7

Financial liabilities
Receivable
£m
50.6

Payable
£m
55.2

Financial assets
Receivable
£m
102.7

Payable
£m
72.4

40.7

17.4

18.4

20.3
834.1
986.1

39.4

277.1

298.1

17.6

19.1

52.8

55.6

20.8
834.2
981.7

58.1
1,393.6
1,909.6

56.7

56.7
1,387.2
1,958.1

Net cash from operating activities:

Profit for the year
Taxation
Revaluation of financial instruments
Finance costs
Finance income
Share of results of associates
Operating profit
Adjustments for:
Non-cash share-based incentive plans
(including share options)
Depreciation of property, plant and
equipment
Impairment of goodwill
Amortisation and impairment of acquired
intangible assets
Amortisation of other intangible assets
Investment write-downs
Gains on disposal of investments
and subsidiaries
Gains on remeasurement of equity
interests arising from a change in scope
of ownership
Losses/(gains) on sale of property, plant
and equipment
Operating cash flow before movements
in working capital and provisions
(Increase)/decrease in inventories
and work in progress
Increase in trade receivables and
accrued income
Increase in trade payables and
deferred income
Decrease/(increase) in other receivables
(Decrease)/increase in other payables –
short term
Increase in other payables – long-term
Decrease in provisions
Cash generated by operations
Corporation and overseas tax paid
Interest and similar charges paid
Interest received
Investment income
Dividends from associates
Net cash inflow from operating activities

2015
£m

2016
£m

2014
£m
1,501.6 1,245.1 1,151.5
300.4
247.5
(50.7)
34.7
262.7
224.1
(94.7)
(72.4)
(61.9)
(47.0)
2,063.1 1,632.0 1,507.3

388.9
48.3
254.5
(80.4)
(49.8)

106.5

99.0

102.2

220.8
27.0

168.4
38.6
86.1

194.7
15.1

140.1
33.7
78.7

197.3
16.9

147.5
31.6
7.3

(44.3)

(131.0)

(186.3)

(232.4)

(165.0)

(9.2)

0.8

1.1

(0.8)

2,434.6 1,898.4 1,813.8

(16.7)

7.8

(9.7)

(53.7)

(882.7)

(132.5)

188.7
77.4

713.4
(39.0)

449.8
48.5

74.5
24.2
(62.3)

(303.7)
4.5
(47.8)

(58.9)
36.5
(38.7)
2,283.3 1,734.3 2,108.8
(289.9)
(301.2)
(249.1)
(212.0)
69.8
61.3
4.9
11.9
52.2
72.6
1,773.8 1,359.9 1,703.7

(414.2)
(242.1)
73.9
12.5
60.4

WPP ANNUAL REPORT 2016

199

Our 2016 financial statements
Notes to the consolidated financial statements

Acquisitions and disposals:

12. Intangible assets

Initial cash consideration
Cash and cash equivalents acquired (net)
Earnout payments
Purchase of other investments (including
associates)
Proceeds on disposal of investments
and subsidiaries
Acquisitions and disposals
Cash consideration for non-controlling
interests
Net cash outflow

Share repurchases and buy-backs:

Purchase of own shares by ESOP Trusts
Shares purchased into treasury
Net cash outflow

Net (decrease)/increase in borrowings:

Proceeds from issue of £400 million bonds
Repayment of €498 million bonds
Proceeds from issues of €600 million bonds
Repayment of €500 million bonds
Premium on exchange of €252 million bonds
Repayment of $369 million bonds
Repayment of $600 million bonds
Repayment of $25 million TNS
private placements
Proceeds from issue of €750 million bonds
Proceeds from issue of $750 million bonds
(Decrease)/increase in drawings on
bank loans
Net cash (outflow)/inflow

Cash and cash equivalents:

Cash at bank and in hand
Short-term bank deposits
Overdrafts1

2016
£m
(424.1)
57.3
(92.3)

2015
£m
(463.5)
57.7
(43.9)

2014
£m
(382.7)
74.4
(34.3)

(260.2)

(283.2)

(188.8)

80.5
(638.8)

63.4
(669.5)

42.3
(489.1)

(58.3)
(697.1)

(23.6)
(693.1)

(5.6)
(494.7)

2016
£m
(152.9)
(274.5)
(427.4)

2015
£m
(181.6)
(406.0)
(587.6)

2014
£m
(98.3)
(412.5)
(510.8)

2016
£m
400.0
(392.1)
–
–
–
–
–

2015
£m
–
–
858.7
(481.9)
(13.7)
–
–

–
–
–

2014
£m
–
–
–
–
–
(235.3)
(333.7)

(14.6)
588.7
460.1

(30.4)
(22.5)

128.9
492.0

–
465.2

2015
£m

2016
£m

2014
£m
2,256.2 2,227.8 1,967.0
545.7
154.6
180.7
(265.1)
(435.8)
(534.3)
1,902.6 1,946.6 2,247.6

Goodwill
The movements in 2016 and 2015 were as follows:

Cost:
1 January 2015
Additions1
Revision of earnout estimates
Exchange adjustments
31 December 2015
Additions1
Revision of earnout estimates
Exchange adjustments
31 December 2016

Accumulated impairment losses and write-downs:
1 January 2015
Impairment losses for the year
Exchange adjustments
31 December 2015
Impairment losses for the year
Exchange adjustments
31 December 2016

Net book value:
31 December 2016
31 December 2015
1 January 2015

£m

10,583.0
763.6
19.9
(72.3)
11,294.2
796.6
28.4
1,820.2
13,939.4

603.6
15.1
4.9
623.6
20.0
81.5
725.1

13,214.3
10,670.6
9,979.4

Note
1 Additions represent goodwill arising on the acquisition of subsidiary undertakings

including the effect of any revisions to fair value adjustments that had been
determined provisionally at the immediately preceding balance sheet date, as
permitted by IFRS 3 Business Combinations. The effect of such revisions was not
material in either year presented. Goodwill arising on the acquisition of associate
undertakings is shown within interests in associates and joint ventures in note 14.

Cash-generating units with significant goodwill as at 31 December are:

GroupM
Kantar
Wunderman
Y&R Advertising
Burson-Marsteller
Other
Total goodwill

2016
£m

2015
£m
2,966.2 2,390.7
2,573.0 2,223.4
1,297.1 1,083.3
946.9
1,140.3
482.6
590.3
4,647.4 3,543.7
13,214.3 10,670.6

Note
1 Bank overdrafts are included in cash and cash equivalents because they form an

integral part of the Group’s cash management.

The Group considers that the carrying amount of cash and cash
equivalents approximates their fair value.

Other goodwill represents goodwill on a large number of cash-generating
units, none of which is individually significant in comparison to the total
carrying value of goodwill.

200

WPP ANNUAL REPORT 2016

Other intangible assets
The movements in 2016 and 2015 were as follows:

Brands
with an
indefinite
useful life
£m

Acquired
intan-
gibles
£m

Cost:
1 January 2015
Additions
Disposals
New acquisitions
Other movements1
Exchange adjustments
31 December 2015
Additions
Disposals
New acquisitions
Other movements1
Exchange adjustments
31 December 2016

–
–
–
–
(1.2)

969.3 1,784.2
–
–
230.7
6.7
(14.5)
968.1 2,007.1
–
(0.8)
319.1
11.6
198.5
1,141.3 2,535.5

–
–
–
–
173.2

Other
£m

Total
£m

313.0 3,066.5
36.1
36.1
(19.2)
(19.2)
233.1
2.4
2.6
(4.1)
(12.9)
2.8
331.0 3,306.2
33.0
33.0
(43.0)
(42.2)
329.6
10.5
16.3
4.7
438.8
67.1
404.1 4,080.9

Amortisation and impairment:
1 January 2015
Charge for the year
Disposals
IT asset write-downs
Other movements
Exchange adjustments
31 December 2015
Charge for the year
Disposals
Other movements
Exchange adjustments
31 December 2016

Net book value:
31 December 2016
31 December 2015
1 January 2015

– 1,187.3
135.7
–
–
–
–
–
–
–
–
16.5
– 1,339.5
163.3
–
(0.4)
–
–
–
60.6
–
– 1,563.0

210.3 1,397.6
169.4
33.7
(18.3)
(18.3)
29.1
29.1
(7.3)
(7.3)
20.3
3.8
251.3 1,590.8
201.9
38.6
(39.9)
(39.5)
2.0
2.0
108.8
48.2
300.6 1,863.6

1,141.3
968.1
969.3

972.5
667.6
596.9

103.5 2,217.3
79.7 1,715.4
102.7 1,668.9

Note
1 Other movements in acquired intangibles include revisions to fair value adjustments

arising on the acquisition of subsidiary undertakings that had been determined
provisionally at the immediately preceding balance sheet date, as permitted by
IFRS 3 Business Combinations.

Brands with an indefinite life are carried at historical cost in accordance
with the Group’s accounting policy for intangible assets. The carrying
values of the separately identifiable brands are not individually
significant in comparison with the total carrying value of brands with
an indefinite useful life.

Acquired intangible assets at net book value at 31 December 2016
include brand names of £486.2 million (2015: £401.0 million), customer-
related intangibles of £448.9 million (2015: £239.9 million), and other
assets (including proprietary tools) of £37.4 million (2015: £26.7 million).

The total amortisation and impairment of acquired intangible
assets of £168.4 million (2015: £140.1 million) includes £5.1 million
(2015: £4.4 million) in relation to associates.

Our 2016 financial statements
Notes to the consolidated financial statements

In accordance with the Group’s accounting policy, the carrying values
of goodwill and intangible assets with indefinite useful lives are reviewed
for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired.

The carrying values of brands with an indefinite useful life are assessed
for impairment purposes by using the royalty and loyalty methods of
valuation, both of which utilise the net present value of future cash flows
associated with the brands.

The goodwill impairment review is undertaken annually on 30 September.
The review assessed whether the carrying value of goodwill was
supported by the net present value of future cash flows, using a pre-tax
discount rate of 8.5% (2015: 8.5%) and management forecasts for a
projection period of up to five years, followed by an assumed annual
long-term growth rate of 3.0% (2015: 3.0%) and no assumed improvement
in operating margin. Management have made the judgement that this
long-term growth rate does not exceed the long-term average growth rate
for the industry.

The goodwill impairment charge of £27.0 million (2015: £15.1 million)
relates to a number of under-performing businesses in the Group, of
which £7.0 million (2015: £nil) is in relation to associates. In certain
markets, the impact of local economic conditions and trading
circumstances on these businesses was sufficiently severe to indicate
impairment to the carrying value of goodwill.

Under IFRS, an impairment charge is required for both goodwill and
other indefinite-lived assets when the carrying amount exceeds the
‘recoverable amount’, defined as the higher of fair value less costs to
sell and value in use.

Our approach in determining the recoverable amount utilises a
discounted cash flow methodology, which necessarily involves making
numerous estimates and assumptions regarding revenue growth,
operating margins, appropriate discount rates and working capital
requirements. The key assumptions used for estimating cash flow
projections in the Group’s impairment testing are those relating to revenue
growth and operating margin. The key assumptions take account of the
businesses’ expectations for the projection period. These expectations
consider the macroeconomic environment, industry and market
conditions, the unit’s historical performance and any other circumstances
particular to the unit, such as business strategy and client mix.

These estimates will likely differ from future actual results of operations
and cash flows, and it is possible that these differences could be material.
In addition, judgements are applied in determining the level of
cash-generating unit identified for impairment testing and the criteria
used to determine which assets should be aggregated. A difference in
testing levels could affect whether an impairment is recorded and the
extent of impairment loss. Changes in our business activities or structure
may also result in changes to the level of testing in future periods.
Further, future events could cause the Group to conclude that impairment
indicators exist and that the asset values associated with a given
operation have become impaired. Any resulting impairment loss could
have a material impact on the Group’s financial condition and results
of operations.

Historically our impairment losses have resulted from a specific event,
condition or circumstance in one of our companies, such as the loss of
a significant client. As a result, changes in the assumptions used in our
impairment model have not had a significant effect on the impairment
charges recognised and a reasonably possible change in assumptions
would not lead to a significant impairment. The carrying value of
goodwill and other intangible assets will continue to be reviewed at
least annually for impairment and adjusted to the recoverable amount
if required.

WPP ANNUAL REPORT 2016

201

Our 2016 financial statements
Notes to the consolidated financial statements

13. Property, plant and equipment
The movements in 2016 and 2015 were as follows:

14. Interests in associates, joint ventures and other investments
The movements in 2016 and 2015 were as follows:

Free-
hold
build-
ings
£m

Lease-
hold
buildings
£m

Fixtures,
fittings
and
equip-
ment
£m

Com-
puter
equip-
ment
£m

Total
£m

110.3
0.4
1.2
(12.6)

2.9
102.2
1.3
–
(0.3)

784.7
107.2
2.2
(68.2)

11.5
837.4
107.9
7.9
(83.2)

334.7
39.4
13.3
(37.7)

(11.4)
338.3
55.9
6.5
(46.1)

598.4 1,865.2
210.3
21.1
(174.4)

63.3
4.4
(55.9)

(7.3)

(4.3)
602.9 1,917.9
252.1
20.6
(236.0)

87.0
6.2
(106.4)

23.2

142.5
126.4 1,012.5

48.0
402.6

153.7
367.4
743.4 2,322.0

22.5
5.2
(7.7)

(0.8)
19.2
4.3
(0.6)

412.4
70.5
(64.8)

5.1
423.2
81.1
(77.8)

203.4
40.9
(29.5)

(5.9)
208.9
45.7
(49.2)

454.4 1,092.7
194.7
(156.5)

78.1
(54.5)

(9.1)

(10.7)
468.9 1,120.2
220.8
(229.0)

89.7
(101.4)

2.3
25.2

83.3
509.8

34.6
240.0

121.1
241.3
578.3 1,353.3

Land
£m

37.1
–
–
–

–
37.1
–
–
–

–
37.1

–
–
–

–
–
–
–

–
–

37.1
37.1
37.1

101.2
83.0
87.8

502.7
414.2
372.3

162.6
129.4
131.3

165.1
134.0
144.0

968.7
797.7
772.5

Cost:
1 January 2015
Additions
New acquisitions
Disposals
Exchange
adjustments
31 December 2015
Additions
New acquisitions
Disposals
Exchange
adjustments
31 December 2016

Depreciation:
1 January 2015
Charge for the year
Disposals
Exchange
adjustments
31 December 2015
Charge for the year
Disposals
Exchange
adjustments
31 December 2016

Net book value:
31 December 2016
31 December 2015
1 January 2015

At the end of the year, capital commitments contracted, but not
provided for in respect of property, plant and equipment were
£22.1 million (2015: £61.3 million).

202

WPP ANNUAL REPORT 2016

Goodwill
and other
intang-
ibles of
associates
and joint
ventures
£m
340.7
–

Net
assets of
associates
and joint
ventures
£m
419.2
(18.7)

Total
associates
and joint
ventures
£m
759.9
(18.7)

Other
invest-
ments
£m
669.2
357.1

–

124.8

–

47.0
(75.1)
5.1
(7.9)
(46.7)

–
–
5.7
(5.8)
(1.6)

47.0
(75.1)
10.8
(13.7)
(48.3)

–
–
–
18.9
(13.8)

11.2

(34.9)

(23.7)

–

206.0

–
–
334.1
(1.3)

(4.4)
–
424.5
–

(4.4)
–
758.6
(1.3)

–
(78.7)
1,158.7
233.5

–

292.2

49.8
(60.4)
(45.3)

43.6
61.6
(12.7)

–
–
52.4

30.7
50.1
–

49.8
(60.4)
7.1

74.3
111.7
(12.7)

–

–
–
–

(74.3)
170.4
(3.4)

(44.2)

(88.8)

(133.0)

(0.2)

–

(93.1)

–
–
(4.8)
320.4

(5.1)
(7.0)
–
749.0

(5.1)
(7.0)
(4.8)
1,069.4

–
–
(81.3)
1,310.3

1 January 2015
Additions
Goodwill arising on
acquisition of new
associates
Share of results of associate
undertakings (note 4)
Dividends
Other movements
Exchange adjustments
Disposals
Reclassification from/(to)
subsidiaries
Revaluation of other
investments
Amortisation of other
intangible assets
Write-downs
31 December 2015
Additions
Goodwill arising on
acquisition of new
associates
Share of results of associate
undertakings (note 4)
Dividends
Other movements
Reclassification from other
investments to associates
Exchange adjustments
Disposals
Reclassification
to subsidiaries
Revaluation of other
investments
Amortisation of other
intangible assets
Goodwill impairment
Write-downs
31 December 2016

The investments included above as ‘other investments’ represent
investments in equity securities that present the Group with opportunity
for return through dividend income and trading gains. They have no
fixed maturity or coupon rate. The fair values of the listed securities are
based on quoted market prices. For unlisted securities, where market
value is not available, the Group has estimated relevant fair values on
the basis of publicly available information from outside sources or on
the basis of discounted cash flow models where appropriate.

The carrying values of the Group’s associates and joint ventures
are reviewed for impairment in accordance with the Group’s
accounting policies.

The Group’s principal associates and joint ventures at 31 December 2016
included:

Asatsu-DK Inc.
Barrows Design and Manufacturing (Pty)
Limited
Chime Communications Ltd
CTR Market Research Company Limited
CVSC Sofres Media Co Limited
GIIR Inc
Globant S.A.1
Haworth Marketing & Media Company
High Co SA
Imagina
Marktest Investimentos SGPS S.A.
Smollan Holdings (Pty) Ltd

%
owned
24.6

Country of
incorporation
Japan

35.0
24.9
46.0
40.0
30.0
19.5
49.0
34.1
23.5
43.1
24.8

South Africa
UK
China
China
Korea
Argentina
USA
France
Spain
Portugal
South Africa

Note
1 Although the Group holds less than 20% of Globant S.A, it is considered to be an

associate as the Group exercises significant influence over the entity.

The market value of the Group’s shares in its principal listed associate
undertakings at 31 December 2016 was as follows: Asatsu-DK Inc:
£202.9 million, GIIR Inc: £26.9 million, Globant SA: £180.7 million and
High Co SA: £21.0 million (2015: Asatsu-DK Inc: £171.6 million, GIIR Inc:
£25.2 million, Globant SA: £170.3 million and High Co SA: £27.2 million).

The carrying value (including goodwill and other intangibles) of
these equity interests in the Group’s consolidated balance sheet at
31 December 2016 was as follows: Asatsu-DK Inc: £134.5 million, GIIR
Inc: £37.9 million, Globant SA: £78.5 million and High Co SA: £31.4 million
(2015: Asatsu-DK Inc: £120.1 million, GIIR Inc: £30.4 million, Globant SA:
£61.9 million and High Co SA: £28.6 million).

Where the market value of the Group’s listed associates is less than
the carrying value, an impairment review is performed utilising the
discounted cash flow methodology discussed in note 12.

The Group’s investments in its principal associate undertakings are
represented by ordinary shares.

Our 2016 financial statements
Notes to the consolidated financial statements

Summarised financial information
The following tables present a summary of the aggregate financial
performance and net asset position of the Group’s associate undertakings
and joint ventures. These have been estimated and converted, where
appropriate, to an IFRS presentation based on information provided by
the relevant companies at 31 December 2016.

Income statement
Revenue
Operating profit
Profit before taxation
Profit for the year

Balance sheet
Assets
Liabilities
Net assets

2016
£m

2015
£m

2014
£m

2,254.5 2,049.5 2,246.5
280.6
283.7
267.0
236.5
183.0
162.0

308.3
237.2
156.7

2016
£m

2015
£m

2014
£m

3,912.4 4,380.3
4,223.1
(1,900.0) (1,906.2) (1,823.9)
2,323.1 2,006.2 2,556.4

The application of equity accounting is ordinarily discontinued when
the investment is reduced to zero and additional losses are not provided
for unless the Group has guaranteed obligations of the investee or is
otherwise committed to provide further financial support for the investee.

At the end of the year, capital commitments contracted, but not
provided for in respect of interests in associates and other investments
were £89.2 million (2015: £93.1 million).

15. Deferred tax
The Group’s deferred tax assets and liabilities are measured at the end
of each period in accordance with IAS 12 Income taxes. The recognition
of deferred tax assets is determined by reference to the Group’s estimate
of recoverability, using models where appropriate to forecast future
taxable profits.

Deferred tax assets have only been recognised for territories where the
Group considers that it is probable there would be sufficient taxable profits
for the future deductions to be utilised.

Based on available evidence, both positive and negative, we determine
whether it is probable that all or a portion of the deferred tax assets will
be realised. The main factors that we consider include:

– the future earnings potential determined through the use of internal

forecasts;

– the cumulative losses in recent years;
– the various jurisdictions in which the potential deferred tax assets arise;
– the history of losses carried forward and other tax assets expiring;
– the timing of future reversal of taxable temporary differences;
– the expiry period associated with the deferred tax assets; and
– the nature of the income that can be used to realise the deferred

tax asset.

If it is probable that some portion of these assets will not be realised, then
no asset is recognised in relation to that portion.

If market conditions improve and future results of operations exceed our
current expectations, our existing recognised deferred tax assets may be
adjusted, resulting in future tax benefits. Alternatively, if market conditions
deteriorate further or future results of operations are less than expected,
future assessments may result in a determination that some or all of the
deferred tax assets are not realisable. As a result, all or a portion of the
deferred tax assets may need to be reversed.

WPP ANNUAL REPORT 2016 203

Our 2016 financial statements
Notes to the consolidated financial statements

Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax
balances for financial reporting purposes:

Deferred tax assets
Deferred tax liabilities

Gross
2016
£m
598.0
(1,150.0)
(552.0)

Offset
2016
£m
(457.6)
457.6
–

As
reported
2016
£m
140.4
(692.4)
(552.0)

Gross
2015
£m
410.7
(868.9)
(458.2)

Offset
2015
£m
(316.6)
316.6
–

As
reported
2015
£m
94.1
(552.3)
(458.2)

Gross
20141
£m
406.8
(834.7)
(427.9)

Offset
20141
£m
(298.0)
298.0
–

As
reported
20141
£m
108.8
(536.7)
(427.9)

Note
1 Comparative figures for 2014 have been restated to reduce both the deferred tax assets and the deferred tax liabilities, by a corresponding amount.

The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2016 and 2015:

Deferred
compensation
£m
45.5

Accounting
provisions
& accruals
£m
51.5

Retirement
benefit
obligations
£m
106.4

Property,
plant &
equipment
£m
41.4

Tax losses
& credits
£m
48.1

Share-based
payments
£m
71.5

Restructuring
provisions
£m
20.4

Other
temporary
differences
£m
22.0

Total
£m
406.8

(5.8)

(2.9)

(12.0)

–
–
2.2

–
41.9
–

39.5

–
–
14.2
95.6

–
–
0.9

–
49.5
7.1

8.5

–
–
15.5
80.6

(5.2)
–
1.8

–
91.0
–

28.3

1.8
–
20.3
141.4

2.1

–
–
1.2

–
44.7
–

19.2

–
–
6.9
70.8

20.4

–
–
2.8

–
71.3
–

6.2

–
–
12.2
89.7

(3.3)

–
6.4
4.2

–
78.8
0.2

(1.8)

–
(15.0)
13.6
75.8

11.2

–
–
(0.5)

(14.2)
16.9
–

(11.7)

–
–
0.7
5.9

(5.1)

4.6

–
–
(0.3)

–
16.6
15.0

(5.2)
6.4
12.3

(14.2)
410.7
22.3

7.7

95.9

–
–
(1.1)
38.2

1.8
(15.0)
82.3
598.0

1 January 2015
(Charge)/credit to
income
Charge to other
comprehensive income
Credit to equity
Exchange differences
Transfer to current tax
creditor
31 December 2015
Acquisition of subsidiaries
Credit/(charge)
to income
Credit to other
comprehensive income
Charge to equity
Exchange differences
31 December 2016

Other temporary differences comprise a number of items including tax deductible goodwill, none of which is individually significant to the Group’s
consolidated balance sheet.

In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2016 and 2015:

1 January 2015
Acquisition of subsidiaries
(Credit)/charge to income
Exchange adjustments
31 December 2015
Acquisition of subsidiaries
(Credit)/charge to income
Charge to other comprehensive income
Exchange differences
31 December 2016

Brands
and other
intangibles
£m
558.2
73.4
(44.2)
(10.3)
577.1
114.8
(51.3)
–
115.3
755.9

Associate
earnings
£m
19.6
–
2.7
0.2
22.5
–
3.1
–
2.7
28.3

Property,
plant &
equipment
£m
30.8
–
(1.6)
1.7
30.9
–
(0.4)
–
5.7
36.2

Financial
instruments
£m
49.7
–
(1.8)
2.8
50.7
–
3.5
–
9.8
64.0

Other
temporary
differences
£m
12.7
0.4
(2.4)
0.3
11.0
–
17.3
2.2
2.6

Total
£m
834.7
73.8
(42.6)
3.0
868.9
114.8
(4.3)
2.2
168.4
33.1 1,150.0

Goodwill
£m
163.7
–
4.7
8.3
176.7
–
23.5
–
32.3
232.5

204

WPP ANNUAL REPORT 2016

At the balance sheet date, the Group has gross tax losses and other
temporary differences of £5,153.2 million (2015: £4,581.9 million) available
for offset against future profits. Deferred tax assets have been recognised
in respect of the tax benefit of £1,104.4 million (2015: £1,186.3 million) of
such tax losses and other temporary differences. No deferred tax asset
has been recognised in respect of the remaining £4,048.8 million (2015:
£3,395.6 million) of losses and other temporary differences as the Group
considers that there will not be enough taxable profits in the entities
concerned such that any additional asset could be considered
recoverable. Included in the total unrecognised temporary differences
are losses of £42.4 million that will expire within 1–10 years, and
£3,489.3 million of losses that may be carried forward indefinitely.

At the balance sheet date, the aggregate amount of the temporary
differences in relation to the investment in subsidiaries for which deferred
tax liabilities have not been recognised was £3,270.8 million. No liability
has been recognised in respect of these differences because the Group
is in a position to control the timing of the reversal of the temporary
differences and the Group considers that it is probable that such
differences will not reverse in the foreseeable future.

16. Inventory and work in progress
The following are included in the net book value of inventory and work
in progress:

Work in progress
Inventory

17. Trade and other receivables
The following are included in trade and other receivables:

Amounts falling due within one year:

2016
£m
383.1
17.3
400.4

2015
£m
315.1
13.9
329.0

Trade receivables (net of bad debt provision)
VAT and sales taxes recoverable
Prepayments
Accrued income
Fair value of derivatives
Other debtors

2016
£m

157.2
310.0

2015
£m
8,054.2 6,799.4
154.9
235.0
3,353.8 2,853.8
4.6
447.7
12,374.5 10,495.4

14.7
484.6

Our 2016 financial statements
Notes to the consolidated financial statements

The ageing of trade receivables and other financial assets is as follows:

Carrying
amount
at 31
December
2016
£m

Neither
past
due nor
impaired
£m

0-30
days
£m

31-90
days
£m

91-180
days
£m

181
days-
1 year
£m

Greater
than 1
year
£m

8,054.2 5,545.6 1,611.0 683.6 156.6

37.2

20.2

504.5

6.7
8,558.7 5,880.6 1,702.3 699.9 163.3

335.0

16.3

91.3

11.9
49.1

43.3
63.5

Carrying
amount
at 31
December
2015
£m

Neither
past
due nor
impaired
£m

0-30
days
£m

31-90
days
£m

91-180
days
£m

181
days-
1 year
£m

Greater
than 1
year
£m

6,799.4 4,290.7 1,704.0 631.9 133.0

35.4

4.4

453.5

5.1
7,252.9 4,556.4 1,811.6 655.7 138.1

265.7

107.6

23.8

19.1
54.5

32.2
36.6

2016
Trade
receivables
Other
financial
assets

2015
Trade
receivables
Other
financial
assets

Other financial assets are included in other debtors.

Past due amounts are not impaired where collection is considered likely.

Amounts falling due after more than one year:

Prepayments
Accrued income
Fair value of derivatives
Other debtors

Bad debt provisions:

Balance at beginning of year
New acquisitions
Charged to operating costs
Exchange adjustments
Utilisations and other movements
Balance at end of year

2016
£m
3.7
9.5
8.3
183.4
204.9

2016
£m
85.4
1.8
15.5
13.7
(22.6)
93.8

2015
£m
1.5
5.8
39.7
131.7
178.7

2015
£m
85.3
1.0
21.6
0.2
(22.7)
85.4

The allowance for bad and doubtful debts is equivalent to 1.2%
(2015: 1.2%) of gross trade accounts receivables.

The Group considers that the carrying amount of trade and other
receivables approximates their fair value.

WPP ANNUAL REPORT 2016 205

As of 31 December 2016, the potential undiscounted amount of future
payments that could be required under the earnout agreements for
acquisitions completed in the current year and for all earnout agreements
range from £nil to £453 million (2015: £nil to £378 million) and £nil to
£2,108 million (2015: £nil to £1,645 million), respectively. The increase
in the maximum potential undiscounted amount of future payments
for all earnout agreements is due to earnout arrangements related
to new acquisitions and exchange adjustments, partially offset by
earnout arrangements that have completed and payments made
on active arrangements during the year.

20. Bank overdrafts, bonds and bank loans
Amounts falling due within one year:

Bank overdrafts
Corporate bonds and bank loans

2016
£m
534.3
468.2
1,002.5

2015
£m
435.8
496.2
932.0

The Group considers that the carrying amount of bank overdrafts
approximates their fair value.

Amounts falling due after more than one year:

Corporate bonds and bank loans

2016
£m

2015
£m
5,564.9 4,661.2

The Group estimates that the fair value of corporate bonds is
£6,101.4 million at 31 December 2016 (2015: £5,207.4 million). The
Group considers that the carrying amount of bank loans approximates
their fair value. The fair values of the corporate bonds are based on
quoted market prices.

The corporate bonds, bank loans and overdrafts included within liabilities
fall due for repayment as follows:

Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years

2016
£m
1,002.5
208.0
717.2
195.7
660.9

2015
£m
932.0
413.6
174.7
440.6
194.2
3,783.1 3,438.1
6,567.4 5,593.2

Our 2016 financial statements
Notes to the consolidated financial statements

18. Trade and other payables: amounts falling due within one year
The following are included in trade and other payables falling due within
one year:

Trade payables
Deferred income
Payments due to vendors (earnout agreements)
Liabilities in respect of put option agreements
with vendors
Fair value of derivatives
Other creditors and accruals

2016
£m

2015
£m
10,308.3 8,538.3
1,081.0
126.0

1,312.7
277.5

51.1
51.0
0.7
4.1
2,887.9
3,056.8
15,010.4 12,685.0

The Group considers that the carrying amount of trade and other
payables approximates their fair value.

19. Trade and other payables: amounts falling due after more than
one year
The following are included in trade and other payables falling due after
more than one year:

Payments due to vendors (earnout agreements)
Liabilities in respect of put option agreements
with vendors
Fair value of derivatives
Other creditors and accruals

2016
£m
699.0

246.0
1.8
327.0
1,273.8

2015
£m
455.3

183.3
2.3
250.6
891.5

The Group considers that the carrying amount of trade and other
payables approximates their fair value.

The following tables set out payments due to vendors, comprising
deferred consideration and the directors’ best estimates of future
earnout-related obligations:

Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years

At beginning of year
Earnouts paid (note 11)
New acquisitions
Revision of estimates taken to goodwill (note 12)
Revaluation of payments due to vendors (note 6)
Exchange adjustments
At end of year

2016
£m
277.5
220.1
170.2
176.6
122.4
9.7
976.5

2016
£m
581.3
(92.3)
359.5
28.4
11.6
88.0
976.5

2015
£m
126.0
104.9
105.1
110.9
122.5
11.9
581.3

2015
£m
311.4
(43.9)
262.2
19.9
35.6
(3.9)
581.3

206

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Notes to the consolidated financial statements

21. Provisions for liabilities and charges
The movements in 2016 and 2015 were as follows:

1 January 2015
Charged to the income statement
Acquisitions1
Utilised
Released to the income statement
Transfers
Exchange adjustments
31 December 2015
Charged to the income statement
Acquisitions1
Utilised
Released to the income statement
Transfers
Exchange adjustments
31 December 2016

Property
£m
44.5
9.2
13.3
(7.2)
(2.8)
(3.0)
(1.3)
52.7
5.8
11.1
(14.7)
(2.9)
(1.6)
8.1
58.5

Other
£m
121.9
15.6
11.2
(11.4)
(10.9)
2.5
2.0
130.9
14.5
3.9
(18.1)
(3.7)
14.6
27.3
169.4

Total
£m
166.4
24.8
24.5
(18.6)
(13.7)
(0.5)
0.7
183.6
20.3
15.0
(32.8)
(6.6)
13.0
35.4
227.9

Note
1 Acquisitions include £3.4 million (2015: £13.5 million) of provisions arising from

revisions to fair value adjustments related to the acquisition of subsidiary
undertakings that had been determined provisionally at the immediately preceding
balance sheet date, as permitted by IFRS 3 Business Combinations.

Provisions comprise liabilities where there is uncertainty about the timing
of settlement, but where a reliable estimate can be made of the amount.
These include provisions for vacant space, sub-let losses and other
property-related liabilities. Also included are other provisions, such as
certain long-term employee benefits and legal claims, where the
likelihood of settlement is considered probable.

The Company and various of its subsidiaries are, from time to time,
parties to legal proceedings and claims which arise in the ordinary
course of business. The directors do not anticipate that the outcome
of these proceedings and claims will have a material adverse effect
on the Group’s financial position or on the results of its operations.

22. Share-based payments
Charges for share-based incentive plans were as follows:
2016
£m
106.5

Share-based payments (note 5)

2015
£m
99.0

2014
£m
102.2

Share-based payments comprise charges for stock options and restricted
stock awards to employees of the Group.

As of 31 December 2016, there was £175.9 million (2015: £162.0 million)
of total unrecognised compensation cost related to the Group’s restricted
stock plans. That cost is expected to be recognised over an average
period of one to two years.

Further information on stock options is provided in note 26.

Restricted stock plans
The Group operates a number of equity-settled share incentive schemes,
in most cases satisfied by the delivery of stock from one of the Group’s
ESOP Trusts. The most significant current schemes are as follows:

Leadership Equity Acquisition Plan III (LEAP III)
Under LEAP III, the most senior executives of the Group, including certain
Executive Directors, commit WPP shares (‘investment shares’) in order to
have the opportunity to earn additional WPP shares (‘matching shares’).
The number of matching shares which a participant can receive at the
end of the fixed performance period of five years is dependent on the

performance (based on the Total Shareholder Return (TSR)) of the
Company over that period against a comparator group of other listed
communications services companies. The 2012 LEAP III plan vested in
March 2017 at a match of 5.0 shares for each investment share, the
maximum match possible. The last LEAP III award was granted in 2012
and no further awards will be made following the introduction of the EPSP.

Executive Performance Share Plan (EPSP)
The first grant of restricted stock under the EPSP was made in 2013. This
scheme is intended to reward and incentivise the most senior executives
of the Group and has effectively replaced LEAP III. The performance
period is five complete financial years, commencing with the financial
year in which the award is granted. The vest date will usually be in the
March following the end of the five-year performance period. Vesting is
conditional on continued employment throughout the vesting period.

There are three performance criteria, each constituting one-third of
the vesting value, and each measured over this five-year period:
(i) TSR against a comparator group of companies. Threshold performance
(equating to ranking in the 50th percentile of the comparator group)
will result in 20% vesting of the part of the award dependent on TSR.
The maximum vest of 100% will arise if performance ranks in the 90th
percentile, with a sliding scale of vesting for performance between
threshold and maximum.
(ii) Headline diluted earnings per share. Threshold performance (7%
compound annual growth) will again result in a 20% vest. Maximum
performance of 14% compound annual growth will give rise to a 100%
vest, with a sliding vesting scale for performance between threshold
and maximum.
(iii) Return on equity (ROE). Average annual ROE defined as headline
diluted EPS divided by the balance sheet value per share of share owners’
equity. Threshold performance of 10% average annual ROE and
maximum performance of 14%, with a sliding scale in between.
Threshold again gives rise to a 20% vest, with 100% for maximum.

Performance Share Awards (PSA)
Grants of restricted stock under PSA are dependent upon annual
performance targets, typically based on one or more of: operating profit,
profit before taxation and operating margin. Grants are made in the year
following the year of performance measurement, and vest two years after
grant date provided the individual concerned is continually employed by
the Group throughout this time.

Leaders, Partners and High Potential Group
This scheme provides annual grants of restricted stock to well over
1,000 key executives of the Group. Vesting is conditional on continued
employment over the three-year vesting period.

Valuation methodology
For all of these schemes, the valuation methodology is based upon fair
value on grant date, which is determined by the market price on that
date or the application of a Black-Scholes model, depending upon the
characteristics of the scheme concerned. The assumptions underlying the
Black-Scholes model are detailed in note 26, including details of assumed
dividend yields. Market price on any given day is obtained from external,
publicly available sources.

Market/non-market conditions
Most share-based plans are subject to non-market performance conditions,
such as margin or growth targets, as well as continued employment.
LEAP III and EPSP schemes are subject to a number of performance
conditions, including TSR, a market-based condition.

For schemes without market-based performance conditions, the valuation
methodology above is applied and, at each year end, the relevant accrual
for each grant is revised, if appropriate, to take account of any changes in
estimate of the likely number of shares expected to vest.

WPP ANNUAL REPORT 2016 207

Our 2016 financial statements
Notes to the consolidated financial statements

For schemes with market-based performance conditions, the probability
of satisfying these conditions is assessed at grant date through a statistical
model (such as the Monte Carlo Model) and applied to the fair value.
This initial valuation remains fixed throughout the life of the relevant plan,
irrespective of the actual outcome in terms of performance. Where a lapse
occurs due to cessation of employment, the cumulative charge taken to
date is reversed.

Movement on ordinary shares granted for significant restricted stock plans:

Non-
vested
1 January
2016
number
m
2.1

Granted
number
m
5.4

Lapsed
number
m
(0.1)

Vested
number
m
(6.6)

Non-
vested 31
December
2016
number
m
0.8

6.7

1.7

5.7

1.8

(0.5)

–

1.1

(0.1)

(1.5)

2.9

(0.4)

(1.8)

8.0

1.2

6.4

LEAP III1
Executive
Performance
Share Plan (EPSP)
Performance
Share Awards
(PSA)
Leaders, Partners
and High
Potential Group

749p

Weighted average fair value
(pence per share):
LEAP III1
Executive
Performance
Share Plan (EPSP)
Performance
Share Awards
(PSA)
Leaders, Partners
and High
Potential Group

1,343p

1,401p

1,271p

665p

860p

665p

860p

1,705p

1,179p

–

1,373p

1,490p

1,596p

1,225p

1,596p

1,603p

1,410p

1,242p

1,534p

Note
1 The number of shares granted represents the matched shares awarded on vest date
for the 2011 LEAP III plan which vested in March 2016. The actual number of shares
that vest for each LEAP III plan is dependent on the extent to which the relevant
performance criteria are satisfied.

The total fair value of shares vested for all the Group’s restricted stock
plans during the year ended 31 December 2016 was £116.8 million
(2015: £111.7 million, 2014: £107.2 million).

23. Provision for post-employment benefits
Companies within the Group operate a large number of pension plans,
the forms and benefits of which vary with conditions and practices in the
countries concerned. The Group’s pension costs are analysed as follows:

Defined contribution plans
Defined benefit plans charge to
operating profit
Pension costs (note 5)
Net interest expense on pension plans
(note 6)

2016
£m
153.5

2015
£m
135.0

2014
£m
129.8

24.6
178.1

6.7
184.8

25.0
160.0

7.3
167.3

19.1
148.9

8.0
156.9

208

WPP ANNUAL REPORT 2016

Defined benefit plans
The pension costs are assessed in accordance with the advice of local
independent qualified actuaries. The latest full actuarial valuations for
the various pension plans were carried out at various dates in the last
three years. These valuations have been updated by the local actuaries
to 31 December 2016.

The Group’s policy is to close existing defined benefit plans to new
members. This has been implemented across a significant number
of the pension plans.

Contributions to funded plans are determined in line with local conditions
and practices. Contributions in respect of unfunded plans are paid as they
fall due. The total contributions (for funded plans) and benefit payments
(for unfunded plans) paid for 2016 amounted to £43.7 million (2015:
£70.9 million, 2014: £68.2 million). Employer contributions and benefit
payments in 2017 are expected to be approximately £70 million.

(a) Assumptions
There are a number of areas in pension accounting that involve
judgments made by management based on advice of qualified advisors.
These include establishing the discount rates, rates of increase in salaries
and pensions in payment, inflation, and mortality assumptions. The
main weighted average assumptions used for the actuarial valuations
at 31 December are shown in the following table:

2016
% pa

2015
% pa

2014
% pa

2013
% pa

UK
Discount rate1
Rate of increase in salaries
Rate of increase in pensions in payment
Inflation
North America
Discount rate1
Rate of increase in salaries
Inflation
Western Continental Europe
Discount rate1
Rate of increase in salaries
Rate of increase in pensions in payment
Inflation
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe
Discount rate1
Rate of increase in salaries
Inflation

2.5
3.5
4.1
2.8

3.8
3.1
4.0

1.7
2.0
1.3
1.7

4.2
5.9
4.0

3.7
3.1
3.9
2.4

4.0
3.0
2.5

2.5
2.3
1.6
2.0

4.2
5.8
4.0

3.4
3.1
3.9
2.4

3.7
3.0
2.5

2.1
2.2
2.0
2.0

4.2
6.1
3.9

4.5
3.6
4.2
2.9

4.5
3.0
2.5

3.7
2.4
2.0
2.0

4.4
5.9
4.5

Note
1 Discount rates are based on high-quality corporate bond yields. In countries where
there is no deep market in corporate bonds, the discount rate assumption has been
set with regard to the yield on long-term government bonds.

For the Group’s pension plans, the plans’ assets are invested with the
objective of being able to meet current and future benefit payment
needs, while controlling balance sheet volatility and future contributions.
Pension plan assets are invested with a number of investment managers,
and assets are diversified among equities, bonds, insured annuities,
property and cash or other liquid investments. The primary use of bonds
as an investment class is to match the anticipated cash flows from the
plans to pay pensions. The Group is invested in high-quality corporate
and government bonds which share similar risk characteristics and are
of equivalent currency and term to the plan liabilities. Various insurance
policies have also been bought historically to provide a more exact
match for the cash flows, including a match for the actual mortality
of specific plan members. These insurance policies effectively provide
protection against both investment fluctuations and longevity risks.
The strategic target allocation varies among the individual plans.

Our 2016 financial statements
Notes to the consolidated financial statements

Management considers the types of investment classes in which the
pension plan assets are invested. The types of investment classes are
determined by economic and market conditions and in consideration
of specific asset class risk.

The following table provides information on the weighted average
duration of the defined benefit pension obligations and the distribution
of the timing of benefit payments for the next 10 years. The duration
corresponds to the weighted average length of the underlying cash flows.

Management periodically commissions detailed asset and liability
studies performed by third-party professional investment advisors and
actuaries that generate probability-adjusted expected future returns
on those assets. These studies also project the estimated future pension
payments and evaluate the efficiency of the allocation of the pension
plan assets into various investment categories.

At 31 December 2016, the life expectancies underlying the value of the
accrued liabilities for the main defined benefit pension plans operated
by the Group were as follows:

All
plans

North
America

Western
Conti-
nental
Europe

Other1

22.8

23.6

21.0

19.6

24.5

24.4

24.8

24.2

24.8

24.7

24.4

25.6

23.4

19.6

Years life expectancy
after age 65
– current pensioners
(at age 65) – male
– current pensioners
(at age 65) – female

– future pensioners
(current age 45)
– male

– future pensioners
(current age 45)
– female

Weighted average
duration of the defined
benefit obligation (years)
Expected benefit
payments over the next
10 years (£m)
Benefits expected to be
paid within 12 months
Benefits expected to be
paid in 2018
Benefits expected to be
paid in 2019
Benefits expected to be
paid in 2020
Benefits expected to be
paid in 2021
Benefits expected to be
paid in the next five years

All
plans

North
America

Western
Conti-
nental
Europe

Other1

12.5

9.3

13.8

17.1

9.1

71.4

43.4

17.1

65.7

38.3

17.3

66.5

37.9

17.4

65.4

36.7

17.7

65.7

35.1

18.2

8.1

7.8

8.4

8.5

8.9

2.8

2.3

2.8

2.5

3.5

315.5

150.5

95.2

49.5

20.3

26.5

26.0

27.0

26.6

24.8

Note
1 Includes Asia Pacific, Latin America, Africa & Middle East and Central &

Eastern Europe.

The life expectancies after age 65 at 31 December 2015 were 22.9 years
and 24.7 years for male and female current pensioners (at age 65)
respectively, and 24.8 years and 26.7 years for male and female future
pensioners (current age 45), respectively.

In the determination of mortality assumptions, management uses the
most up-to-date mortality tables available in each country.

Eastern Europe.

The following table presents a sensitivity analysis for each significant
actuarial assumption showing how the defined benefit obligation would
have been affected by changes in the relevant actuarial assumption
that were reasonably possible at the balance sheet date. This sensitivity
analysis applies to the defined benefit obligation only and not to the net
defined benefit pension liability in its entirety, the measurement of which
is driven by a number of factors including, in addition to the assumptions
below, the fair value of plan assets.

WPP ANNUAL REPORT 2016 209

(b) Assets and liabilities
At 31 December, the fair value of the assets in the pension plans, and the
assessed present value of the liabilities in the pension plans are shown in
the following table:

Equities
Bonds
Insured annuities
Property
Cash
Other
Total fair value
of assets
Present value
of liabilities
Deficit in the plans
Irrecoverable surplus
Net liability1
Plans in surplus
Plans in deficit

2016
£m
161.9
566.0
63.5
1.6
44.9
96.3

%
17.3
60.6
6.8
0.2
4.8
10.3

2015
£m
132.5
479.5
60.5
1.5
65.1
75.1

%
16.3
58.9
7.4
0.2
8.0
9.2

2014
£m
151.1
496.2
68.0
1.4
52.2
80.6

%
17.8
58.4
8.0
0.2
6.1
9.5

934.2 100.0

814.2 100.0

849.5

100.0

(1,209.8)
(275.6)
(0.9)
(276.5)
28.0
(304.5)

(1,039.9)
(225.7)
(3.6)
(229.3)
31.4
(260.7)

(1,144.8)
(295.3)
(0.9)
(296.2)
17.2
(313.4)

Note
1 The related deferred tax asset is discussed in note 15.

All plan assets have quoted prices in active markets with the exception
of insured annuities and other assets.

Surplus/(deficit) in plans by region
UK
North America
Western Continental Europe
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe
Deficit in the plans

2016
£m
20.0
(133.8)
(116.9)

2015
£m
30.9
(123.4)
(97.4)

2014
£m
11.4
(150.1)
(126.2)

(44.9)
(275.6)

(35.8)
(225.7)

(30.4)
(295.3)

Some of the Group’s defined benefit plans are unfunded (or largely
unfunded) by common custom and practice in certain jurisdictions.
In the case of these unfunded plans, the benefit payments are made
as and when they fall due. Pre-funding of these plans would not be
typical business practice.

Our 2016 financial statements
Notes to the consolidated financial statements

The sensitivity analyses are based on a change in one assumption
while holding all other assumptions constant so that interdependencies
between the assumptions are excluded. The methodology applied is
consistent with that used to determine the recognised defined benefit
obligation. The sensitivity analysis for inflation is not shown as it is an
underlying assumption to build the pension and salary increase
assumptions. Changing the inflation assumption on its own without
changing the salary or pension assumptions will not result in a significant
change in pension liabilities.

Sensitivity analysis of significant
actuarial assumptions
Discount rate
Increase by 25 basis points

UK
North America
Western Continental Europe
Other1

Decrease by 25 basis points

UK
North America
Western Continental Europe
Other1

Rate of increase in salaries
Increase by 25 basis points

UK
North America
Western Continental Europe
Other1

Decrease by 25 basis points

UK
North America
Western Continental Europe
Other1

Rate of increase in pensions in payment
Increase by 25 basis points

UK
Western Continental Europe

Decrease by 25 basis points

UK
Western Continental Europe

Life expectancy
Increase in longevity by one additional year

UK
North America
Western Continental Europe
Other1

Increase/(decrease)
in benefit obligation
2015
£m

2016
£m

(13.3)
(10.9)
(10.1)
(0.6)

14.1
11.2
10.6
0.6

0.2
–
1.4
0.6

(0.2)
–
(1.4)
(0.6)

2.3
6.8

(2.3)
(6.4)

17.7
6.2
7.4
–

(10.9)
(9.4)
(7.8)
(0.5)

11.5
9.7
8.2
0.5

0.2
0.1
1.3
0.5

(0.1)
–
(1.3)
(0.5)

2.1
5.3

(2.0)
(5.0)

13.3
5.1
5.6
–

Note
1 Includes Asia Pacific, Latin America, Africa & Middle East and Central &

Eastern Europe.

210

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Notes to the consolidated financial statements

(c) Pension expense
The following table shows the breakdown of the pension expense
between amounts charged to operating profit, amounts charged to
finance costs and amounts recognised in the consolidated statement
of comprehensive income (OCI):

Service cost1
Administrative expenses
Charge to operating profit
Net interest expense on pension plans
Charge to profit before taxation for defined
benefit plans

Return on plan assets (excluding interest
income)
Changes in demographic assumptions
underlying the present value of the
plan liabilities
Changes in financial assumptions
underlying the present value of the
plan liabilities
Experience gain/(loss) arising on the
plan liabilities
Change in irrecoverable surplus
Actuarial (loss)/gain recognised in OCI

2016
£m
22.4
2.2
24.6
6.7

2015
£m
23.0
2.0
25.0
7.3

2014
£m
17.3
1.8
19.1
8.0

31.3

32.3

27.1

66.3

(31.7)

68.9

6.7

13.8

(12.3)

(92.6)

55.4

(141.4)

1.0
2.7
(15.9)

(1.3)
(2.7)
33.5

(1.8)
–
(86.6)

The following table shows the split of the deficit at 31 December between
funded and unfunded pension plans.

2016
Surplus/
(deficit)
£m

2016
Present
value of
liabilities
£m

2015
Surplus/
(deficit)
£m

2015
Present
value of
liabilities
£m

2014
Surplus/
(deficit)
£m

2014
Present
value of
liabilities
£m

20.0
(56.0)

(406.4)
(420.4)

30.9
(45.5)

(352.6)
(364.5)

11.4
(70.6)

(385.8)
(402.5)

(48.9)

(180.9)

(42.3)

(143.9)

(67.8)

(178.4)

(5.8)

(17.2)

(4.9)

(15.0)

(5.4)

(15.2)

(90.7) (1,024.9)

(61.8)

(876.0)

(132.4)

(981.9)

–
(77.8)

–
(77.9)

–
(79.5)

Funded plans
by region
UK
North America
Western
Continental
Europe
Asia Pacific, Latin
America, Africa &
Middle East and
Central & Eastern
Europe
Deficit/liabilities
in the funded
plans

Unfunded plans
by region
UK
North America
Western
Continental
Europe
Asia Pacific, Latin
America, Africa &
Middle East and
Central & Eastern
Europe
Deficit/liabilities
in the unfunded
plans

Deficit/liabilities
in the plans

(68.0)

(55.1)

(58.4)

Note
1 Includes current service cost, past service costs related to plan amendments and

(gain)/loss on settlements and curtailments.

(39.1)

(30.9)

(25.0)

(184.9)

(163.9)

(162.9)

(275.6) (1,209.8)

(225.7) (1,039.9)

(295.3) (1,144.8)

In accordance with IAS 19, plans that are wholly or partially funded are
considered funded plans.

WPP ANNUAL REPORT 2016

211

Our 2016 financial statements
Notes to the consolidated financial statements

(d) Movement in plan liabilities
The following table shows an analysis of the movement in the pension
plan liabilities for each accounting period:

Plan liabilities at beginning of year
Service cost1
Interest cost
Actuarial (gain)/loss

Effect of changes in demographic
assumptions
Effect of changes in financial
assumptions
Effect of experience adjustments

Benefits paid
Loss due to exchange rate movements
Settlement payments
Other2
Plan liabilities at end of year

2016
£m

2015
£m
1,039.9 1,144.8
23.0
34.6

22.4
37.2

2014
£m
972.8
17.3
40.7

(6.7)

(13.8)

12.3

92.6
(1.0)
(92.4)
124.2
(4.8)
(1.6)

141.4
1.8
(57.7)
14.8
–
1.4
1,209.8 1,039.9 1,144.8

(55.4)
1.3
(112.6)
13.4
–
4.6

Notes
1 Includes current service cost, past service costs related to plan amendments and

(gain)/loss on settlements and curtailments.

2 Other includes acquisitions, disposals, plan participants’ contributions and

reclassifications. The reclassifications represent certain of the Group’s defined benefit
plans which are included in this note for the first time in the periods presented.

(e) Movement in plan assets
The following table shows an analysis of the movement in the pension
plan assets for each accounting period:

Fair value of plan assets at beginning
of year
Interest income on plan assets
Return on plan assets
(excluding interest income)
Employer contributions
Benefits paid
Gain due to exchange rate movements
Settlement payments
Administrative expenses
Other1
Fair value of plan assets at end of year
Actual return on plan assets

2016
£m

2015
£m

2014
£m

814.2
30.5

849.5
27.3

726.2
32.7

66.3
43.7
(92.4)
78.8
(4.8)
(2.2)
0.1
934.2
96.8

(31.7)
70.9
(112.6)
12.4
–
(2.0)
0.4
814.2
(4.4)

68.9
68.2
(57.7)
12.6
–
(1.8)
0.4
849.5
101.6

Note
1 Other includes acquisitions, disposals, plan participants’ contributions and

reclassifications. The reclassifications represent certain of the Group’s defined benefit
plans which are included in this note for the first time in the periods presented.

212

WPP ANNUAL REPORT 2016

24. Risk management policies

Foreign currency risk
The Group’s results in pounds sterling are subject to fluctuation as a result
of exchange rate movements. The Group does not hedge this translation
exposure to its earnings but does hedge the currency element of its net
assets using foreign currency borrowings, cross-currency swaps and
forward foreign exchange contracts.

The Group effects these currency net asset hedges by borrowing in the
same currencies as the operating (or ‘functional’) currencies of its main
operating units. The majority of the Group’s debt is therefore denominated
in US dollars, pounds sterling and euros. The Group’s borrowings at
31 December 2016 were primarily made up of $2,862 million, £1,000
million and €2,952 million. The Group’s average gross debt during the
course of 2016 was $3,182 million, £781 million and €3,132 million.

The Group’s operations conduct the majority of their activities in their
own local currency and consequently the Group has no significant
transactional foreign exchange exposures arising from its operations.
Any significant cross-border trading exposures are hedged by the use
of forward foreign-exchange contracts. No speculative foreign exchange
trading is undertaken.

Interest rate risk
The Group is exposed to interest rate risk on both interest-bearing
assets and interest-bearing liabilities. The Group has a policy of actively
managing its interest rate risk exposure while recognising that fixing rates
on all its debt eliminates the possibility of benefiting from rate reductions
and similarly, having all its debt at floating rates unduly exposes the
Group to increases in rates.

Including the effect of interest rate and cross-currency swaps, 54.2% of the
year-end US dollar debt is at fixed rates averaging 4.62% for an average
period of 212 months; 80.0% of the sterling debt is at a fixed rate of 4.53%
for an average period of 193 months; and 100% of the euro debt is at
fixed rates averaging 1.85% for an average period of 93 months.

Other than fixed rate debt, the Group’s other fixed rates are achieved
principally through interest rate swaps with the Group’s bankers. The
Group also uses forward rate agreements and interest rate caps to
manage exposure to interest rate changes. At 31 December 2016 no
forward rate agreements or interest rate caps were in place. These
interest rate derivatives are used only to hedge exposures to interest
rate movements arising from the Group’s borrowings and surplus cash
balances arising from its commercial activities and are not traded
independently. Payments made under these instruments are accounted
for on an accruals basis.

Going concern and liquidity risk
In considering going concern and liquidity risk, the directors have
reviewed the Group’s future cash requirements and earnings projections.
The directors believe these forecasts have been prepared on a prudent
basis and have also considered the impact of a range of potential
changes to trading performance. The directors have concluded that the
Group should be able to operate within its current facilities and comply
with its banking covenants for the foreseeable future and therefore
believe it is appropriate to prepare the financial statements of the Group
on a going concern basis.

Our 2016 financial statements
Notes to the consolidated financial statements

At 31 December 2016, the Group has access to £8.2 billion of committed facilities with maturity dates spread over the years 2017 to 2046 as
illustrated below:

£ bonds £400m (2.875% ’46)
US bond $500m (5.625% ’43)
US bond $300m (5.125% ’42)
Eurobonds €600m (1.625% ’30)
Eurobonds €750m (2.25% ’26)
US bond $750m (3.75% ’24)
Eurobonds €750m (3.0% ’23)
US bond $500m (3.625% ’22)
US bond $812m (4.75% ’21)
Bank revolver ($2,500m)
£ bonds £200m (6.375% ’20)
Eurobonds €600m (0.75% ’19)
Bank revolver (A$520m)
Eurobonds €252m (0.43% ’18)
£ bonds £400m (6.0% ’17)

Total committed facilities available
Drawn down facilities at 31 December 2016
Undrawn committed credit facilities

Drawn down facilities at 31 December 2016
Net cash at 31 December 2016
Other adjustments
Net debt at 31 December 2016

2017
£m

2018
£m

2019
£m

2020
£m

2021+
£m
400.0
405.0
243.0
512.6
640.8
607.5
640.8
405.0
658.0
2,025.1

200.0

512.6
304.0

215.3

400.0

400.0
400.0

215.3
215.3

816.6
719.4

200.0
200.0

6,537.8
4,512.7

£m
400.0
405.0
243.0
512.6
640.8
607.5
640.8
405.0
658.0
2,025.1
200.0
512.6
304.0
215.3
400.0

8,169.7
6,047.4
2,122.3

6,047.4
(1,902.6)
(14.3)
4,130.5

Given the strong cash generation of the business, its debt maturity profile
and available facilities, the directors believe the Group has sufficient
liquidity to match its requirements for the foreseeable future.

Treasury activities
Treasury activity is managed centrally from London, New York and
Hong Kong, and is principally concerned with the monitoring of working
capital, managing external and internal funding requirements and the
monitoring and management of financial market risks, in particular
interest rate and foreign exchange exposures.

The treasury operation is not a profit centre and its activities are carried
out in accordance with policies approved by the Board of Directors and
subject to regular review and audit.

The Group manages liquidity risk by ensuring continuity and flexibility
of funding even in difficult market conditions. Undrawn committed
borrowing facilities are maintained in excess of peak net-borrowing levels
and debt maturities are closely monitored. Targets for average net debt
are set on an annual basis and, to assist in meeting this, working capital
targets are set for all the Group’s major operations.

Capital risk management
The Group manages its capital to ensure that entities in the Group will
be able to continue as a going concern while maximising the return to
stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in note 10, cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in the consolidated statement
of changes in equity and in notes 26 and 27.

Credit risk
The Group’s principal financial assets are cash and short-term deposits,
trade and other receivables and investments, the carrying values of
which represent the Group’s maximum exposure to credit risk in relation
to financial assets, as shown in note 25.

The Group’s credit risk is primarily attributable to its trade receivables.
The majority of the Group’s trade receivables are due from large national
or multinational companies where the risk of default is considered low.
The amounts presented in the consolidated balance sheet are net
of allowances for doubtful receivables, estimated by the Group’s
management based on prior experience and their assessment of the
current economic environment. A relatively small number of clients
make up a significant percentage of the Group’s debtors, but no
single client represents more than 5% of total trade receivables as
at 31 December 2016.

The credit risk on liquid funds and derivative financial instruments is
limited because the counterparties are banks with high credit ratings
assigned by international credit-rating agencies or banks that have
been financed by their government.

A relatively small number of clients contribute a significant percentage of
the Group’s consolidated revenues. The Group’s clients generally are able
to reduce advertising and marketing spending or cancel projects at any
time for any reason. There can be no assurance that any of the Group’s
clients will continue to utilise the Group’s services to the same extent, or
at all, in the future. A significant reduction in advertising and marketing
spending by, or the loss of one or more of, the Group’s largest clients, if not
replaced by new client accounts or an increase in business from existing
clients, would adversely affect the Group’s prospects, business, financial
condition and results of operations.

WPP ANNUAL REPORT 2016

213

Interest rate swaps
The Group uses interest rate swaps as hedging instruments in fair
value hedges to manage its exposure to interest rate movements on its
borrowings. Contracts with a nominal value of $500 million have fixed
interest receipts of 3.63% until September 2022 and have floating interest
payments averaging LIBOR plus 1.52%. Contracts with a nominal value
of $812 million have fixed interest receipts of 4.75% until November 2021
and have floating rate payments averaging LIBOR plus 2.17% (set in
arrears). Contracts with a nominal value of £200 million have fixed
interest receipts of 6.00% up until April 2017 and have floating rate
payments averaging LIBOR plus 0.64%. Contracts with a nominal value
of A$30 million have fixed interest receipts of 2.59% until December 2017
and have floating rate payments based on the Australian bank bill
swap bid rate (BBSY). Contracts with a nominal value of A$30 million
have fixed interest rate receipts of 2.85% until August 2017 and have
floating rate payments based on the Australian bank bill swap reference
rate (BBSW).

The fair value of interest rate swaps entered into at 31 December 2016
is estimated to be a net asset of approximately £17.0 million (2015:
£37.4 million). These amounts are based on market values of equivalent
instruments at the balance sheet date, comprising £20.0 million
(2015: £39.7 million) assets included in trade and other receivables
and £3.0 million (2015: £2.3 million) liabilities included in trade and
other payables.

Changes in the fair value relating to the ineffective portion of interest
rate swaps amounted to a loss of £5.2 million (2015: loss of £6.8 million,
2014: gain of £5.3 million) which is included in the revaluation of financial
instruments for the year. This loss resulted from a £19.3 million loss on
hedging instruments and a £14.1 million gain on hedged items.

Our 2016 financial statements
Notes to the consolidated financial statements

Sensitivity analysis
The following sensitivity analysis addresses the effect of currency and
interest rate risks on the Group’s financial instruments. The analysis
assumes that all hedges are highly effective.

Currency risk
At 31 December 2016, the Group’s major foreign currency denominated
borrowings are held in individual entities with the same financial
reporting currencies as borrowings. Therefore a weakening or
strengthening of sterling against the Group’s major currencies would not
result in any gains or losses. In 2015, a 10% weakening of sterling would
have resulted in a £40.8m loss being posted directly to equity. These
losses would arise on the retranslation of foreign currency denominated
borrowings and derivatives designated as effective net investment
hedges of overseas net assets. These losses would have been partially
offset in equity by a corresponding gain arising on the retranslation
of the related hedged foreign currency net assets. A 10% strengthening
of sterling would have an equal and opposite effect.

Interest rate risk
A one percentage point increase in market interest rates for all currencies
in which the Group had cash and borrowings at 31 December 2016
would increase profit before tax by approximately £4.5 million (2015:
£7.9 million). A one percentage decrease in market interest rates would
have an equal and opposite effect. This has been calculated by applying
the interest rate change to the Group’s variable rate cash and borrowings.

25. Financial instruments

Currency derivatives
The Group utilises currency derivatives to hedge significant future
transactions and cash flows and the exchange risk arising on translation
of the Group’s investments in foreign operations. The Group is a party
to a variety of foreign currency derivatives in the management of its
exchange rate exposures. The instruments purchased are primarily
denominated in the currencies of the Group’s principal markets.

During 2016, the Group held no currency derivatives. In 2015, the
amounts taken to and deferred in equity during the year for currency
derivatives that are designated and effective hedges was a charge of
£73.5 million for cash flow hedges. In 2015 and 2014, changes in the
fair value relating to the ineffective portion of the currency derivatives
amounted to a gain of £3.2 million and £23.0 million respectively which
is included in the revaluation of financial instruments for the year.

The Group designates its foreign currency-denominated debt and
cross-currency swaps as hedging instruments against the currency
risk associated with the translation of its foreign operations.

At the balance sheet date, the total nominal amount of outstanding
forward foreign exchange contracts not designated as hedges
was £122.0 million (2015: £86.5 million). The Group estimates
the fair value of these contracts to be a net asset of £0.1 million
(2015: £3.9 million).

These arrangements are designed to address significant exchange
exposure and are renewed on a revolving basis as required.

214

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Notes to the consolidated financial statements

An analysis of the Group’s financial assets and liabilities by accounting classification is set out below:

2016
Other investments
Cash and short-term deposits
Bank overdrafts and loans
Bonds and bank loans
Trade and other receivables: amounts falling due within one year
Trade and other receivables: amounts falling due after more than one year
Trade and other payables: amounts falling due within one year
Trade and other payables: amounts falling due after more than one year
Derivative assets
Derivative liabilities
Payments due to vendors (earnout agreements) (note 19)
Liabilities in respect of put options

2015
Other investments
Cash and short-term deposits
Bank overdrafts and loans
Bonds and bank loans
Trade and other receivables: amounts falling due within one year
Trade and other receivables: amounts falling due after more than one year
Trade and other payables: amounts falling due within one year
Trade and other payables: amounts falling due after more than one year
Derivative assets
Derivative liabilities
Payments due to vendors (earnout agreements) (note 19)
Liabilities in respect of put options

Derivatives in
designated
hedge
relationships
£m

Held for
trading
£m

Loans &
receiv-
ables
£m

Available
for sale
£m

Amortised
cost
£m

Carrying
value
£m

–
–
–
–
–
–
–
–
20.0
(3.0)
–
–
17.0

–
–
–
–
–
–
–
–
3.0
(2.9)
(976.5)
(297.0)

–
2,436.9
–
–
8,468.8
89.9
–
–
–
–
–
–
(1,273.4) 10,995.6

1,310.3
–
1,310.3
2,436.9
–
–
(1,002.5)
(1,002.5)
–
(5,564.9)
(5,564.9)
–
8,468.8
–
–
–
89.9
–
– (10,398.9) (10,398.9)
–
(8.4)
23.0
–
–
(5.9)
(976.5)
–
(297.0)
–
(5,925.2)

(8.4)
–
–
–
–
1,310.3 (16,974.7)

Derivatives in
designated
hedge
relationships
£m

Held for
trading
£m

Loans &
receiv-
ables
£m

Available
for sale
£m

Amortised
cost
£m

Carrying
value
£m

–
–
–
–
–
–
–
–
39.7
(2.3)
–
–
37.4

–
–
–
–
–
–
–
–
4.6
(0.7)
(581.3)
(234.4)
(811.8)

–
2,382.4
–
–
7,184.4
68.5
–
–
–
–
–
–
9,635.3

1,158.7
–
–
–
–
–
–
–
–
–
–
–

–
–
(932.0)
(4,661.2)
–
–
(8,595.5)
(5.3)
–
–
–
–
1,158.7 (14,194.0)

1,158.7
2,382.4
(932.0)
(4,661.2)
7,184.4
68.5
(8,595.5)
(5.3)
44.3
(3.0)
(581.3)
(234.4)
(4,174.4)

WPP ANNUAL REPORT 2016

215

Our 2016 financial statements
Notes to the consolidated financial statements

The following table provides an analysis of financial instruments that are
measured subsequent to initial recognition at fair value, grouped into
levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than
quoted prices included within level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).

Level 1
£m

Level 2
£m

Level 3
£m

2016
Derivatives in designated hedge
relationships
Derivative assets
Derivative liabilities
Held for trading
Derivative assets
Derivative liabilities
Payments due to vendors (earnout
agreements) (note 19)
Liabilities in respect of put options
Available for sale
Other investments

2015
Derivatives in designated hedge
relationships
Derivative assets
Derivative liabilities
Held for trading
Derivative assets
Derivative liabilities
Payments due to vendors (earnout
agreements) (note 19)
Liabilities in respect of put options
Available for sale
Other investments

216

WPP ANNUAL REPORT 2016

Reconciliation of level 3 fair value measurements1:

1 January 2015
Losses recognised in the income statement
Gain recognised in other comprehensive
income
Exchange adjustments
Additions
Disposals
Cancellations
Settlements
31 December 2015
Losses recognised in the income statement
Gain recognised in other comprehensive
income
Exchange adjustments
Additions
Disposals
Reclassifications from other investments
to interests in associates
Settlements
31 December 2016

Liabilities in
respect of
put options
£m
(184.9)
(11.3)

Other
investments
£m
534.4
(2.2)

–
21.4
(86.8)
–
25.3
1.9
(234.4)
(17.2)

–
(47.4)
(42.9)
–

–
44.9
(297.0)

196.4
13.3
113.5
(8.1)
–
–
847.3
(1.6)

(105.6)
112.9
105.7
(3.4)

(74.3)
–
881.0

–
–

(976.5)
(297.0)

–
–

429.3

20.0
(3.0)

3.0
(2.9)

–
–

–

881.0

Note
1 The reconciliation of payments due to vendors (earnout agreements) is presented

in note 19.

Level 1
£m

Level 2
£m

Level 3
£m

–
–

311.4

39.7
(2.3)

4.6
(0.7)

–
–

–

(581.3)
(234.4)

847.3

The fair values of financial assets and liabilities are based on quoted
market prices where available. Where the market value is not available,
the Group has estimated relevant fair values on the basis of publicly
available information from outside sources or on the basis of discounted
cash flow models where appropriate.

Payments due to vendors and liabilities in respect of put options
Future anticipated payments due to vendors in respect of contingent
consideration (earnout agreements) are recorded at fair value, which
is the present value of the expected cash outflows of the obligations.
Liabilities in respect of put option agreements are initially recorded at the
present value of the redemption amount in accordance with IAS 32 and
subsequently measured at fair value in accordance with IAS 39. Both
types of obligations are dependent on the future financial performance
of the entity and it is assumed that future profits are in line with directors’
estimates. The directors derive their estimates from internal business plans
together with financial due diligence performed in connection with the
acquisition. At 31 December 2016, the weighted average growth rate in
estimating future financial performance was 25.0% (2015: 20.3%), which
reflects the prevalence of recent acquisitions in the faster-growing markets
and new media sectors. The risk adjusted discount rate applied to these
obligations at 31 December 2016 was 1.5% (2015: 1.7%).

A one percentage point increase or decrease in the growth rate in
estimated future financial performance would increase or decrease
the combined liabilities due to earnout agreements and put options
by approximately £13.4 million (2015: £11.9 million) and £17.9 million
(2015: £19.0 million), respectively. A 0.5 percentage point increase
or decrease in the risk adjusted discount rate would decrease or
increase the combined liabilities by approximately £16.0 million
(2015: £11.6 million) and £16.4 million (2015: £11.9 million), respectively.
An increase in the liability would result in a loss in the revaluation
of financial instruments, while a decrease would result in a gain.

Other investments
The fair value of other investments included in level 1 are based on
quoted market prices. Other investments included in level 3 are unlisted
securities, where market value is not readily available. The Group
has estimated relevant fair values on the basis of publicly available
information from outside sources or on the basis of discounted cash flow
models where appropriate. The sensitivity to changes in unobservable
inputs is specific to each individual investment.

26. Authorised and issued share capital

Authorised
1 January 2015
31 December 2015
31 December 2016

Issued and fully paid
1 January 2015
Exercise of share options
31 December 2015
Exercise of share options
31 December 2016

Equity
ordinary
shares

Nominal
value
£m

1,750,000,000
1,750,000,000
1,750,000,000

1,325,747,724
3,618,300
1,329,366,024
2,514,706
1,331,880,730

175.0
175.0
175.0

132.6
0.3
132.9
0.3
133.2

Company’s own shares
The Company’s holdings of own shares are stated at cost and represent
shares held in treasury and purchases by the Employee Share Ownership
Plan (‘ESOP’) trusts of shares in WPP plc for the purpose of funding certain
of the Group’s share-based incentive plans, details of which are disclosed
in the Compensation Committee report on pages 145 to 158.

The trustees of the ESOP purchase the Company’s ordinary shares in the
open market using funds provided by the Company. The Company also
has an obligation to make regular contributions to the ESOP to enable it
to meet its administrative costs. The number and market value of the
ordinary shares of the Company held by the ESOP at 31 December 2016
was 13,857,706 (2015: 17,154,359), and £251.7 million (2015: £268.1 million)
respectively. The number and market value of ordinary shares held in
treasury at 31 December 2016 was 51,026,358 (2015: 34,619,468) and
£926.6 million (2015: £541.1 million) respectively.

Our 2016 financial statements
Notes to the consolidated financial statements

Share options

WPP Executive Share Option Scheme
As at 31 December 2016, unexercised options over ordinary shares of
6,741 and unexercised options over ADRs of 422 have been granted
under the WPP Executive Share Option Scheme as follows:
Number of ordinary
shares under option
3,696
3,045

Exercise price
per share (£)
8.333
10.595

Exercise
dates
2015-2022
2016-2023

Number of ADRs
under option
422

Exercise price
per ADR ($)
59.170

Exercise
dates
2011-2018

WPP ANNUAL REPORT 2016

217

WPP Share Option Plan 2015
As at 31 December 2016, unexercised options over ordinary shares of
6,599,650 and unexercised options over ADRs of 734,760 have been
granted under the WPP Share Option Plan 2015 as follows:
Number of ordinary
shares under option
102,625
2,878,700
6,875
3,591,825
19,625

Exercise price
per share (£)
15.150
15.150
15.150
17.055
17.055

Exercise
dates
2018-2022
2018-2025
2019-2025
2019-2026
2019-2023

Number of ADRs
under option
417,770
316,990

Exercise price
per ADR ($)
105.490
115.940

Exercise
dates
2020-2026
2018-2025

The aggregate status of the WPP Share Option Plans during 2016 was
as follows:

Movements on options granted (represented in ordinary shares)

1 January

Lapsed
2016 Granted Exercised
–
(780)
(12,842)
– (2,488,979) (1,582,821)

Exercisable
31
December
2016
8,851
7,809,917 3,890,386
–
–
17,592,085 5,776,275 (2,514,706) (2,761,436) 18,092,218 3,899,237

(5,700) (1,175,600) 10,273,450
–
(2,235)
(7,185)

Outstanding
31
December
2016
8,851

5,678,475 5,776,275
–

WPP
22,473
WWOP 11,881,717
WSOP
24/7

9,420

Our 2016 financial statements
Notes to the consolidated financial statements

WPP Worldwide Share Ownership Program
As at 31 December 2016, unexercised options over ordinary shares of
4,447,052 and unexercised options over ADRs of 672,573 have been
granted under the WPP Worldwide Share Ownership Program as follows:

Number of ordinary
shares under option
2,750
50,250
26,500
1,750
1,200
875
24,425
8,875
158,050
64,125
125
1,300
750
102,050
41,500
500
4,500
9,050
390,820
75,000
2,472,576
5,625
970,706
33,750

Number of ADRs
under option
19,610
46,650
30,495
12,270
71,134
4,915
266,516
220,983

Exercise price
per share (£)
4.819
5.483
5.483
5.608
5.913
5.917
6.028
6.268
6.268
6.268
6.668
7.005
7.113
7.113
7.113
7.478
7.543
7.718
8.458
13.145
13.145
13.145
13.505
13.505

Exercise price
per ADR ($)
44.560
49.230
56.560
59.500
67.490
75.760
102.670
110.760

Exercise
dates
2011-2018
2012-2019
2013-2019
2012-2019
2011-2018
2011-2018
2011-2018
2014-2018
2014-2021
2015-2021
2009-2017
2010-2017
2013-2017
2013-2020
2014-2020
2011-2017
2014-2020
2010-2017
2015-2022
2017-2021
2017-2024
2018-2024
2016-2023
2017-2023

Exercise
dates
2012-2019
2014-2021
2013-2020
2011-2018
2015-2022
2010-2017
2017-2024
2016-2023

218

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Notes to the consolidated financial statements

Weighted-average exercise price for options over

1 January

2016 Granted Exercised

Lapsed

Outstanding
31
December
2016

Exercisable
31
December
2016

The average share price of the Group for the year ended
31 December 2016 was £16.45 (2015: £14.74, 2014: £12.65) and the
average ADR price for the same period was $111.20 (2015: $112.88,
2014: $104.21).

7.950
11.859
15.150

Ordinary shares (£)
WPP
WWOP
WSOP
ADRs ($)
WPP
WWOP
WSOP
24/7

–
66.270
90.449
–
115.940 105.490
–
57.635

–
–
17.055

6.679
11.137
–

–
12.475
15.243

69.387
61.647

63.900
96.402
– 115.006
60.679

56.688

9.355
12.059
16.192

59.170
93.131
109.998
–

9.355
10.542
–

59.170
86.871
–
–

Options over ordinary shares
Outstanding

Range of
exercise prices
£
4.819 – 17.055

Weighted average
exercise price
£
14.525

Weighted average
contractual life
Months
87

Options over ADRs
Outstanding

Range of
exercise prices
$
44.56 – 115.94

Weighted average
exercise price
$
101.925

Weighted average
contractual life
Months
95

As at 31 December 2016 there was £9.9 million (2015: £10.4 million) of total
unrecognised compensation cost related to share options. That cost is
expected to be recognised over a weighted average period of 20 months
(2015: 20 months).

Share options are satisfied out of newly issued shares.

The weighted average fair value of options granted in the year
calculated using the Black-Scholes model was as follows:

Fair value of UK options (shares)
Fair value of US options (ADRs)
Weighted average assumptions:

UK Risk-free interest rate
US Risk-free interest rate
Expected life (months)
Expected volatility
Dividend yield

2015

2016

2014
135.0p 144.0p 155.0p
$9.94 $11.34 $12.23

0.44% 1.04% 1.12%
1.60% 1.45% 1.28%
48
20%
2.8%

48
17%
2.8%

48
16%
2.8%

Options are issued at an exercise price equal to market value on the date
of grant.

Expected volatility is sourced from external market data and represents
the historic volatility in the Group’s share price over a period equivalent
to the expected option life.

Expected life is based on a review of historic exercise behaviour in the
context of the contractual terms of the options, as described in more
detail below.

Terms of share option plans
In 2015, the Group introduced the Share Option Plan 2015 to replace both
the ‘all-employee’ Worldwide Share Ownership Plan and the discretionary
Executive Stock Option Plan. Two kinds of options over ordinary shares
can be granted, both with a market value exercise price. Firstly, options
can be granted to employees who have worked at a company owned
by WPP plc for at least two years which are not subject to performance
conditions. Secondly, options may be granted on a discretionary basis
subject to the satisfaction of performance conditions.

The Worldwide Share Ownership Program was open for participation to
employees with at least two years’ employment in the Group. It was not
available to those participating in other share-based incentive programs
or to Executive Directors. The vesting period for each grant is three years
and there are no performance conditions other than continued
employment with the Group.

The Executive Stock Option Plan has historically been open for
participation to WPP Group Leaders, Partners and High Potential Group.
It is not currently offered to parent company Executive Directors. The
vesting period is three years and performance conditions include
achievement of various TSR (Total Shareholder Return) and EPS (Earnings
Per Share) objectives, as well as continued employment.

The Group grants stock options with a life of 10 years, including the vesting
period. The terms of stock options with performance conditions are such
that if, after nine years and eight months, the performance conditions
have not been met, then the stock option will vest automatically.

WPP ANNUAL REPORT 2016

219

Our 2016 financial statements
Notes to the consolidated financial statements

27. Other reserves
Other reserves comprise the following:

1 January 2015
Exchange adjustments on foreign currency net investments
Gain on revaluation of available for sale investments
Recognition and remeasurement of financial instruments
Share purchases – close period commitments
31 December 2015
Exchange adjustments on foreign currency net investments
Loss on revaluation of available for sale investments
Recognition and remeasurement of financial instruments
31 December 2016

Capital
redemption
reserve
£m
2.7
–
–
–
–
2.7
–
–
–
2.7

Equity
reserve
£m
(246.2)
–
–
(59.0)
80.0
(225.2)
–
–
(21.9)
(247.1)

Revaluation
reserve
£m
158.4
–
206.0
–
–
364.4
–
(93.1)
–
271.3

Translation
reserve
£m
121.3
(272.9)
–
–
–
(151.6)
1,309.9
–
–
1,158.3

Total
other
reserves
£m
36.2
(272.9)
206.0
(59.0)
80.0
(9.7)
1,309.9
(93.1)
(21.9)
1,185.2

28. Acquisitions
The Group accounts for acquisitions in accordance with IFRS 3 Business Combinations. IFRS 3 requires the acquiree’s identifiable assets, liabilities and
contingent liabilities (other than non-current assets or disposal groups held for sale) to be recognised at fair value at acquisition date. In assessing fair
value at acquisition date, management make their best estimate of the likely outcome where the fair value of an asset or liability may be contingent
on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition
date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over
those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect
of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the consolidated income statement or
as an adjustment to goodwill as appropriate under IFRS 3.

The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired
and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date.

Intangible assets
Property, plant and equipment
Cash
Trade receivables due within one year
Other current assets
Total assets
Current liabilities
Trade and other payables due after one year
Deferred tax liabilities
Provisions
Bank loans
Total liabilities
Net assets
Non-controlling interests
Fair value of equity stake in associate undertakings before acquisition of controlling interest
Goodwill
Consideration
Consideration satisfied by:
Cash
Payments due to vendors

Book
value at
acquisition
£m
10.5
20.6
57.1
249.5
78.0
415.7
(299.4)
(40.4)
–
(0.1)
(144.4)
(484.3)
(68.6)

Fair
value
adjustments
£m
319.1
–
–
–
–
319.1
(2.8)
(59.5)
(96.1)
(11.5)
–
(169.9)
149.2

Fair
value to
Group
£m
329.6
20.6
57.1
249.5
78.0
734.8
(302.2)
(99.9)
(96.1)
(11.6)
(144.4)
(654.2)
80.6
(15.0)
(98.5)
799.3
766.4

423.3
343.1

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our
clients. Goodwill that is expected to be deductible for tax purposes is £54.8 million.

Non-controlling interests in acquired companies are measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets.

The contribution to revenue and operating profit of acquisitions completed in the year was not material. There were no material acquisitions completed
between 31 December 2016 and the date the financial statements have been authorised for issue.

220

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Notes to the consolidated financial statements

29. Principal subsidiary undertakings
The principal subsidiary undertakings of the Group are:

Reconciliation of profit before taxation to headline PBT and
headline earnings:

Grey Global Group LLC
J. Walter Thompson Company LLC
GroupM Worldwide LLC
The Ogilvy Group LLC
Young & Rubicam, Inc
TNS Group Holdings Ltd

Country of incorporation
US
US
US
US
US
UK

All of these subsidiaries are operating companies and are 100% owned
by the Group.

A more detailed listing of the operating subsidiary undertakings is
given on pages 14 and 15. The Company directly or indirectly holds
controlling interests in the issued share capital of these undertakings
with the exception of those specifically identified.

30. Related party transactions
From time to time the Group enters into transactions with its associate
undertakings. These transactions were not material for any of the
years presented.

31. Reconciliation to non-GAAP measures of performance
Management includes non-GAAP measures as they consider these
measures to be both useful and necessary. They are used by
management for internal performance analyses; the presentation of
these measures facilitates comparability with other companies, although
management’s measures may not be calculated in the same way as
similarly titled measures reported by other companies; and these
measures are useful in connection with discussions with the investment
community.

Reconciliation of profit before interest and taxation to headline PBIT:
2014
£m
2,112.9 1,679.0 1,569.2

2016
£m

2015
£m

Profit before interest and taxation
Amortisation and impairment of
acquired intangible assets
Goodwill impairment
Gains on disposal of investments
and subsidiaries
Gains on remeasurement of equity
interests arising from a change in
scope of ownership
Investment write-downs
Restructuring costs
IT asset write-downs
Share of exceptional losses of associates
Headline PBIT
Finance income
Finance costs

Interest cover on headline PBIT

Calculation of headline EBITDA:

Headline PBIT (as above)
Depreciation of property, plant and
equipment
Amortisation of other intangible assets
Headline EBITDA

168.4
27.0

140.1
15.1

147.5
16.9

(44.3)

(131.0)

(186.3)

(165.0)
78.7
106.2
29.1
21.8

(232.4)
86.1
27.4
–
15.2

(9.2)
7.3
127.6
–
7.6
2,160.3 1,774.0 1,680.6
94.7
(262.7)
(168.0)
10.0
times

80.4
(254.5)
(174.1)
12.4
times

72.4
(224.1)
(151.7)
11.7
times

2016
£m

2014
£m
2,160.3 1,774.0 1,680.6

2015
£m

220.8
38.6

197.3
31.6
2,419.7 2,002.4 1,909.5

194.7
33.7

Net sales
Headline PBIT
Share of results
of associates
(excluding
exceptional
gains/losses)
Headline
operating profit

Profit before taxation
Amortisation and impairment of
acquired intangible assets
Goodwill impairment
Gains on disposal of investments
and subsidiaries
Gains on remeasurement of equity
interests arising from a change in
scope of ownership
Investment write-downs
Restructuring costs
IT asset write-downs
Share of exceptional losses of associates
Revaluation of financial instruments
Headline PBT
Headline tax charge
Non-controlling interests
Headline earnings
Ordinary dividends paid

Dividend cover on headline earnings

2016
£m

2014
£m
1,890.5 1,492.6 1,451.9

2015
£m

168.4
27.0

140.1
15.1

147.5
16.9

(44.3)

(131.0)

(186.3)

(165.0)
78.7
106.2
29.1
21.8
34.7

(232.4)
86.1
27.4
–
15.2
48.3

(9.2)
7.3
127.6
–
7.6
(50.7)
1,986.2 1,622.3 1,512.6
(302.5)
(308.3)
(417.2)
(74.3)
(84.9)
(101.5)
1,467.5 1,229.1 1,135.8
460.0
545.8
2.5
2.3
times
times

616.5
2.4
times

Net sales margin before and after share of results of associates:
2016
£m
12,397.8
17.4% 2,160.3

2015
£m
10,524.3
16.9% 1,774.0

2014
£m
10,064.8
16.7% 1,680.6

Margin
%

(65.0)

(68.8)

(69.5)

16.9% 2,095.3

16.2% 1,705.2

16.0% 1,611.1

Reconciliation of free cash flow:

Cash generated by operations
Plus:
Interest received
Investment income
Dividends from associates
Share option proceeds
Proceeds on disposal of property,
plant and equipment
Movement in other receivables, payables
and provisions
Less:
Movements in trade working capital
Interest and similar charges paid
Purchases of property, plant and equipment
Purchases of other intangible assets
(including capitalised computer software)
Corporation and overseas tax paid
Dividends paid to non-controlling interests
in subsidiary undertakings
Free cash flow

2016
£m

2014
£m
2,283.3 1,734.3 2,108.8

2015
£m

73.9
12.5
60.4
27.2

61.3
4.9
72.6
27.6

69.8
11.9
52.2
25.0

7.7

13.4

5.9

269.6

2.5

12.6

(118.3)
(242.1)
(252.1)

161.6
(212.0)
(210.3)

(307.6)
(249.1)
(177.9)

(33.0)
(414.2)

(36.1)
(301.2)

(36.5)
(289.9)

(89.6)

(57.7)
1,585.3 1,263.4 1,167.5

(55.2)

WPP ANNUAL REPORT 2016

221

Our 2016 financial statements

Company profit and loss account

For the year ended 31 December 2016

Turnover
Operating income
Operating profit
Interest receivable and similar income
Interest payable and similar charges
Revaluation of financial instruments
Loss on ordinary activities before taxation
Taxation on loss on ordinary activities
Loss for the year

Note
The accompanying notes form an integral part of this profit and loss account.

All results are derived from continuing activities.

Notes

33
34

2016
£m
–
13.8
13.8
–
(102.5)
(8.6)
(97.3)
–
(97.3)

2015
£m
–
10.6
10.6
1.2
(146.1)
(4.0)
(138.3)
–
(138.3)

There are no recognised gains or losses in either year, other than those shown above, and accordingly no statement
of comprehensive income has been prepared.

222

WPP ANNUAL REPORT 2016

Company balance sheet

As at 31 December 2016

Fixed assets
Investments

Current assets
Debtors

– due within one year
– due after one year

Cash at bank and in hand

Current liabilities
Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets

Capital and reserves
Called-up share capital
Share premium account
Other reserves
Capital redemption reserve
Own shares
Profit and loss account
Equity share owners’ funds

Note
The accompanying notes form an integral part of this balance sheet.

Our 2016 financial statements

Notes

2016
£m

2015
£m

12,970.3
12,970.3

12,863.8
12,863.8

37
38

1,640.2
–
13.7
1,653.9

1,686.1
19.1
83.8
1,789.0

(4,322.0)
(2,668.1)
10,302.2
(1,363.4)
8,938.8

(3,855.7)
(2,066.7)
10,797.1
(1,012.3)
9,784.8

133.2
562.2
(10.0)
2.7
(766.7)
9,017.4
8,938.8

132.9
535.3
(10.0)
2.7
(496.1)
9,620.0
9,784.8

The financial statements were approved by the Board of Directors and authorised for issue on 19 April 2017.

Sir Martin Sorrell
Group chief executive

Paul Richardson
Group finance director

Registered Company Number: 111714

WPP ANNUAL REPORT 2016 223

Our 2016 financial statements

Company statement of changes in equity

Capital
redemption
reserve
£m
2.7
–
–
–
–
–

Own
shares
£m

Total equity
share
owners’
Profit and
funds
loss account
£m
£m
(93.7) 10,205.6 10,665.5
27.5
0.2
–
(406.0)
(3.6)
(138.3)
(545.8)

(406.0)
3.6
–
–

(138.3)
(545.8)

–

–
2.7
–
–
–
–
–

–

–
2.7

–

(496.1)

–
(274.5)
3.9
–
–

99.0

2.9
9,620.0
–
–
(3.9)
(97.3)
(616.5)

82.9
9,784.8
27.2
(274.5)
–
(97.3)
(616.5)

–

106.5

–
(766.7)

8.6
9,017.4

8.6
8,938.8

For the year ended 31 December 2016

Balance at 1 January 2015
Ordinary shares issued
Treasury share additions
Treasury share allocations
Net loss for the year
Dividends paid
Non-cash share-based incentive
plans (including share options)
Share purchases – close period
adjustments
Balance at 31 December 2015
Ordinary shares issued
Treasury share additions
Treasury share allocations
Net loss for the year
Dividends paid
Non-cash share-based incentive
plans (including share options)
Share purchases – close period
adjustments
Balance at 31 December 2016

Ordinary
share
capital
£m
132.6
0.3
–
–
–
–

Share
premium
£m
508.0
27.3
–
–
–
–

Shares to
be issued
£m
0.3
(0.3)
–
–
–
–

–

–
132.9
0.3
–
–
–
–

–
535.3
26.9
–
–
–
–

–

–
133.2

–
562.2

–

–
–
–
–
–
–
–

–

–
–

Other
reserves1
£m
(90.0)

–
–
–
–
–

–

80.0
(10.0)

–
–
–
–
–

–

–
(10.0)

Notes
The accompanying notes form an integral part of this statement of changes in equity.
1 Other reserves are analysed in note 41.

224

WPP ANNUAL REPORT 2016

Notes to the Company financial statements

Our 2016 financial statements

32. Accounting policies
The principal accounting policies of WPP plc (the Company) are
summarised below. These accounting policies have all been applied
consistently throughout the year and preceding year.

a) Basis of accounting
The separate financial statements of the Company are prepared under
the historical cost convention in accordance with the Companies (Jersey)
Law 1991. The company meets the definition of a qualifying entity under
FRS 100 (Financial Reporting Standard 100) issued by the Financial
Reporting Council.

These financial statements were prepared in accordance with Financial
Reporting Standard 101 Reduced Disclosure Framework. As permitted by
FRS 101, the Company has taken advantage of the disclosure exemptions
available under that standard in relation to share-based payment,
financial instruments, capital management, presentation of a cash-flow
statement and certain related party transactions.

Where required, equivalent disclosures are given in the consolidated
financial statements. The financial statements are prepared on a going
concern basis, further details of which are in the Directors’ report on
page 50.

b) Translation of foreign currency
Foreign currency transactions arising from operating activities are
translated from local currency into pounds sterling at the exchange rates
prevailing at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the period end are translated at the
period-end exchange rate. Foreign currency gains or losses are credited
or charged to the profit and loss account as they arise.

c) Investments
Fixed asset investments are stated at cost less provision for impairment.

d) Taxation
Current tax is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are recognised for all
taxable temporary differences unless specifically excepted by IAS 12
Income Taxes. Deferred tax is charged or credited in the consolidated
income statement, except when it relates to items charged or credited
to other comprehensive income or directly to equity, in which case the
deferred tax is also dealt with in other comprehensive income or equity.
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from the initial recognition of goodwill
or other assets and liabilities (other than in a business combination) in
a transaction that affects neither the tax profit nor the accounting profit.

e) Group and treasury share transactions
Where a parent entity grants rights to its equity instruments to employees
of a subsidiary, and such share-based compensation is accounted for as
equity-settled in the consolidated financial statements of the parent, IFRS
2 (share-based payment) requires the subsidiary to record an expense
for such compensation with a corresponding increase recognised in
equity as a contribution from the parent. Consequently, in the financial
statements of the parent (WPP plc), the Company has recognised an
addition to fixed asset investments of the aggregate amount of these
contributions of £106.5 million in 2016 (2015: £99.0 million), with a
credit to equity for the same amount.

f) Foreign currency and interest rate hedging
The Company’s policy on interest rate and foreign exchange rate
management sets out the instruments and methods available to hedge
interest and currency risk exposures and the control procedures in place
to ensure effectiveness.

The Company uses derivative financial instruments to reduce exposure
to foreign exchange risk and interest rate movements. The Company does
not hold or issue derivative financial instruments for speculative purposes.
Derivatives are initially recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured to their fair
value at each balance sheet date. The resulting gain or loss is recognised
in profit or loss immediately unless the derivative is designated and
effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship.

At the inception of the hedge relationship the entity documents the
relationship between the hedging instrument and hedged item, along
with its risk management objectives and its strategy for undertaking
various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Company documents whether the hedging
instrument that is used in a hedging relationship is highly effective in
offsetting changes in fair values or cash flows of the hedged item.

Changes in the fair value of derivatives that are designated and qualify
as fair value hedges are recorded in profit or loss immediately, together
with any changes in the fair value of the hedged item that is attributable
to the hedged risk.

The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow or net investment hedges is deferred
in equity. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss. Amounts deferred in equity are recycled in
profit or loss in the periods when the hedged item is recognised in profit
or loss. However, when the forecast transaction that is hedged results in
the recognition of a non-financial asset or a non-financial liability, the
gains and losses previously deferred in equity are transferred from equity
and included in the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the hedging instrument expires
or is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. At that time, any cumulative gain or loss on the hedging
instrument recognised in equity is retained in equity until the forecast
transaction occurs. If a hedged transaction is no longer expected to
occur, the net cumulative gain or loss recognised in equity is transferred
to net profit or loss for the period.

Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and
the host contracts are not carried at fair value with unrealised gains
or losses reported in the consolidated income statement.

33. Interest receivable and similar income

Interest receivable from subsidiary undertakings
Interest receivable on financial instruments

2016
£m
–
–
–

2015
£m
0.6
0.6
1.2

WPP ANNUAL REPORT 2016 225

39. Creditors: amounts falling due within one year
The following are included in creditors falling due within one year:

Bank overdrafts
Corporate bonds
Amounts due to subsidiary undertakings
Interest payable on corporate bonds
Other creditors and accruals

403.1

2016
£m

2015
£m
1,238.7 1,010.3
367.2
2,659.2 2,436.5
33.4
8.3
4,322.0 3,855.7

18.0
3.0

Corporate bonds include £400 million of 6% bonds due April 2017. Further
details are given in note 10.

40. Creditors: amounts falling due after more than one year
The following are included in creditors falling due after more than
one year:

Corporate bonds
Amounts due to subsidiary undertakings

Total borrowings are repayable as follows:

Within one year
Between one and five years
Over five years

2015
2016
£m
£m
411.8
–
600.5
1,363.4
1,363.4 1,012.3

2016
£m

2015
£m
4,322.0 3,855.7
411.8
600.5
5,685.4 4,868.0

656.1
707.3

41. Equity share owners’ funds
Other reserves at 31 December 2016 comprises a translation reserve
of £10.0 million (2015: £10.0 million).

At 31 December 2016 the Company’s distributable reserves amounted to
£8,595.7 million (2015: £9,310.3 million). Further details of the Company’s
share capital are shown in note 26.

Our 2016 financial statements
Notes to the Company financial statements

34. Interest payable and similar charges

Interest payable on corporate bonds
Bank and other interest payable
Interest payable to subsidiary undertakings

2016
£m
33.7
5.4
63.4
102.5

2015
£m
65.1
8.9
72.1
146.1

35. Taxation on loss on ordinary activities
The tax assessed for the year differs from that resulting from applying
the rate of corporation tax in the UK of 20% (2015: 20.25%). The differences
are explained below:

Loss on ordinary activities before tax
Tax at the rate of 20% thereon
Factors affecting tax charge for the year:
Revaluation of financial instruments
Unrecognised losses carried forward
Tax charge for the year

2016
£m
(97.3)
19.5

2015
£m
(138.3)
28.0

(1.7)
(17.8)
–

(0.8)
(27.2)
–

36. Fixed asset investments
The following are included in the net book value of fixed asset investments:
Subsidiary
undertakings
£m
12,863.8
106.5
12,970.3

1 January 2016
Additions
31 December 2016

Fixed asset investments primarily represent 100% of the issued share
capital of WPP Jubilee Limited, a company incorporated in Great Britain.
Fixed asset investments were purchased in a share-for-share exchange.
At 31 December 2016 cost and net book value were the same. Details of
indirect subsidiaries are given in note 29.

37. Debtors: amounts falling due within one year
The following are included in debtors falling due within one year:
2016
£m

Amounts owed by subsidiary undertakings
Fair value of derivatives
Other debtors

2015
£m
1,628.7 1,685.4
–
0.7
1,640.2 1,686.1

10.3
1.2

38. Debtors: amounts falling due after one year
The following are included in debtors falling due after more than one year:
2015
£m
19.1

Fair value of derivatives

2016
£m
–

226

WPP ANNUAL REPORT 2016

Our 2016 financial statements

Independent auditors’ report

Opinion on financial statements of WPP plc

Summary of our audit approach

In our opinion:

the financial statements give a true and fair view of the

state of the Group’s and of the Parent Company’s affairs
as at 31 December 2016 and of the Group’s profit and the
Parent Company’s loss for the year then ended;

the Group financial statements have been properly

prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;

the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, including FRS 101
“Reduced Disclosure Framework”; and

the financial statements have been properly prepared in

accordance with the requirements of the Companies
(Jersey) Law 1991.

The financial statements that we have audited comprise:
the accounting policies;
the consolidated income statement (excluding the US

dollar information);

the consolidated statement of comprehensive income;
the consolidated cash flow statement;
the consolidated balance sheet;
the consolidated statement of changes in equity;
the Parent Company profit and loss account, balance

sheet and statement of changes in equity; and

the related notes 1 to 41.
The financial reporting framework that has been
applied in their preparation is applicable law and IFRSs as
adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice), including FRS
101 “Reduced Disclosure Framework”.

Key risks

The key risks that we identified in the current
year were:

• Revenue recognition – accounting for media

volume income

• Goodwill

• Taxation reserves

The key risks are the same as the prior year.

The materiality that we used in the current year
was £94.5 million which was determined on the
basis of 5% of profit before tax.

Those entities subject to audit provide for coverage
of 81% of the Group’s consolidated revenue (2015:
83%); achieved through a combination of direct
testing and specified audit procedures (including
substantive analytical review procedures)
performed by the Group auditor and/or
component auditors across the world.

There have been no significant changes in our
approach compared with the prior year.

Materiality

Scoping

Significant
changes in our
approach

Separate opinion in relation to IFRSs
as issued by the IASB

As explained in the accounting policies to the Group
financial statements, in addition to applying IFRSs as
adopted by the European Union, the group has also applied
IFRSs as issued by the International Accounting Standards
Board (IASB).

In our opinion the group financial statements comply

with IFRSs as issued by the IASB.

Going concern and the directors’ assessment
of the principal risks that would threaten the
solvency or liquidity of the Group

We have reviewed the directors’ statement regarding the
appropriateness of the going concern basis of accounting on page 50
to the financial statements and the directors’ statement on the
longer-term viability of the Group contained within the strategic report.

We are required to state whether we have anything material to add
or draw attention to in relation to:

• the directors’ confirmation on page 46 that they have carried out a
robust assessment of the principal risks facing the Group, including
those that would threaten its business model, future performance,
solvency or liquidity;

WPP ANNUAL REPORT 2016 227

Our 2016 financial statements
Independent auditors’ report

• the disclosures on pages 47 to 50 that describe those risks and

explain how they are being managed or mitigated;

• the directors’ statement on page 175 to the financial statements

about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s ability
to continue to do so over a period of at least twelve months from
the date of approval of the financial statements;

• the directors’ explanation on page 50 as to how they have

assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.

We confirm that we have nothing material to add or draw attention
to in respect of these matters. We agreed with the directors’ adoption
of the going concern basis of accounting and we did not identify
any such material uncertainties. However, because not all future
events or conditions can be predicted, this statement is not a
guarantee as to the Group’s ability to continue as a going concern.

Independence

We are required to comply with the Financial Reporting Council’s
Ethical Standards for Auditors and confirm that we are independent
of the Group and we have fulfilled our other ethical responsibilities in
accordance with those standards.

We confirm that we are independent of the Group and we have
fulfilled our other ethical responsibilities in accordance with those
standards. We also confirm we have not provided any of the
prohibited non-audit services referred to in those standards.

Our assessment of risks of material
misstatement

The assessed risks of material misstatement described
below are those that had the greatest effect on our audit
strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. As part of our
risk assessment procedures we obtained an understanding
of and tested the design, implementation and operating
effectiveness of internal controls (at Group level and at each
of the full scope audit components) that respond to the
identified risks, in addition to performing the substantive
audit procedures detailed below.

Risk

Revenue recognition – accounting for media
volume income

Assessing the timing of recognition and valuation
of media volume income earned from media
owners is an area of complexity and judgement
due to the need for management to determine at
what point persuasive evidence of agreement
with the media owner exists and to interpret
the variety of language used in the underlying
contractual terms with media owners.

Assessing the valuation of media volume income
is also an area of complexity with regards to
whether the media volume income is required to
be passed back to the client and on what basis to
calculate such passback. Given the complexity
and judgement involved the timing of recognition
and the valuation of media income are
considered to be key audit risks.

Refer to page 125 (Review of the Audit
Committee) and page 177 (accounting policies).

How the scope of our substantive audit procedures responded
to the risk

We have:

• Checked that management could demonstrate that

persuasive evidence exists in respect of the arrangement
with the media owner at the time media volume income
is recorded, and viewed this evidence on a sample basis.

• Challenged the timing of recognition and valuation of
media volume income earned from media owners by
understanding the rationale for income recognised in the
current year in respect of media investment activity in prior
periods and verifying the accounting for arrangements that
are non-coterminous with the Group’s year end.

• Assessed management’s interpretation of contractual terms

with media owners and clients in determining the valuation
of media volume income and determined whether
consistent judgement has been applied year on year.

• Assessed the ageing of balance sheet provisions for

the pass back of media volume income to clients and
challenged management where brought forward
provisions had been released.

• Analysed and understood the trend of media volume

income recognised against prior year activity.

Key observations

The results of our
testing were satisfactory.
We consider the
timing and valuation
of media volume
income recognised
in the year to
be reasonable.

228

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Independent auditors’ report

Risk

Goodwill

How the scope of our substantive audit procedures responded
to the risk

We have:

Given the magnitude of the goodwill balance
and the continued economic uncertainty in
certain regions, it is important to ensure that the
goodwill impairment review is approached in a
robust manner to identify potential impairments,
where necessary.

• Challenged the key assumptions used in the impairment

model for goodwill, including specifically the operating cash
flow projections, discount rates, and long term growth rates.
The key assumptions used for estimating cash flow
projections in the Group’s impairment testing are those
relating to revenue growth and operating margin.

Determining whether the carrying value of
goodwill is recoverable requires management to
make significant estimates concerning the
estimated future cash flows and associated
discount rates and growth rates based on
management’s view of future business prospects.
The Group is highly acquisitive. As such, given
the magnitude of the goodwill balance (2016:
£13,214 million, 2015: £10,671 million), and the
relative sensitivity to certain inputs to the
impairment testing process, in particular the
discount rate, the valuation of goodwill is
considered a key audit risk.

Refer to page 125 (Review of the Audit
Committee), page 177 (accounting policies)
and page 200 (financial disclosures).

• Compared these assumptions to externally derived data

(where applicable) as well as forming our own assessment.

• Engaged our internal fair value specialists who assisted in

computing an independent assessment of the discount rates
used and assessing the methodology used in preparing the
impairment testing model.

• Tested the integrity and mathematical accuracy of the

impairment model.

• Considered the sensitivity of the impairment testing model

to changes in key assumptions.

We also considered the adequacy of the Group’s disclosures
in respect of its goodwill impairment testing and whether
disclosures about the sensitivity of the outcome of the
impairment assessment to reasonably possible changes
in key assumptions properly reflected the risks inherent in
such assumptions.

Taxation reserves

We have:

There is uncertainty in respect of resolving
matters with tax authorities around the world.
The highly disaggregated nature of the Group
coupled with its acquisitive nature means that
there are a number of different tax jurisdictions
in which the Group could be liable to pay tax,
making potential tax exposures a key audit risk.
Therefore assessing the Group’s exposure to
significant tax risks and the level of provisions
recognised is an area of judgement.

Refer to page 125 (Review of the Audit
Committee), page 177 (accounting policies)
and page 196 (financial disclosures).

• Discussed and considered all significant taxation exposures

with Group management including their tax specialists.

• Together with our internal taxation specialists we

challenged the estimates and judgements made by
management when calculating the income tax payable in
each territory and the associated provisions held.

We reviewed correspondence with taxation authorities in
significant locations where available, as well as reviewing the
support or opinions received from external counsel and other
advisors where management has utilised such opinions to
make assumptions on the level of taxation payable.

Key observations

The results of our testing
were satisfactory and
we concur that the
assumptions used in
the impairment model,
including the discount
rate, and level of
goodwill impairment
booked in the year are
appropriate.

The results of our testing
were satisfactory.
There were no material
exceptions noted
when corroborating
management’s
judgement to the
correspondence and
support reviewed
for those significant
tax reserves.

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee
discussed on page 125.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our

opinion thereon, and we do not provide a separate opinion on these matters.

WPP ANNUAL REPORT 2016 229

Our 2016 financial statements
Independent auditors’ report

Our application of materiality

An overview of the scope of our audit

As a result of the highly disaggregated nature of the Group,
with operations in 112 countries and more than 3,000 offices
among more than 150 companies within the Group, a
significant portion of audit planning time is spent so that the
scope of our work is appropriate to address the Group’s
identified risks of material misstatement. In selecting the
components that are in scope each year, we refresh and
update our understanding of the Group and its environment,
including obtaining an understanding of the Group’s system
of internal controls, and assessing the risks of material
misstatement at the Group level, in order to check that the
units selected provide an appropriate basis on which to
undertake audit work to address the identified risks of
material misstatement. Such audit work represents a
combination of procedures, all of which are designed to
target the Group’s identified risks of material misstatement
in the most effective manner possible. Those entities subject
to audit provide for coverage of 81% of the Group’s
consolidated revenue (2015: 83%); achieved through a
combination of direct testing and specified audit procedures
(including substantive analytical review procedures)
performed by the Group auditor and/or component auditors
across the world. Our audit work at the components is
executed at levels of materiality appropriate for such
components, which in all instances are capped at 50% of
Group materiality. In order to support our conclusion that
there were no significant risks of material misstatement
of the aggregated financial information of the remaining
components not subject to audit, we tested the consolidation
process and carried out analytical procedures at the parent
entity level using our bespoke data analytics tool.

We define materiality as the magnitude of misstatement
in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person
would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the
results of our work.

Proﬁt before tax
£1,891 million

Group materiality
£94.5m

Audit Committee
reporting threshold
£1m

Based on our professional judgement, we determined
materiality for the financial statements as a whole
as follows:

Group
materiality

Basis for
determining
materiality

Rationale
for the
benchmark
applied

£94.5 million (2015: £76.6 million)

5% of profit before tax (2015: 5% of profit before tax).

We have determined that the critical benchmark
for the Group was profit before tax because we
consider this measure to be what the shareholders
believe to be a key performance indicator for the
Group. We also considered this measure to be
suitable having compared to another benchmark:
our materiality is below 1% of equity (2015: below
1%). Materiality is higher than for the year ended
31 December 2015 primarily as a result of higher
profit before tax achieved in 2016.

We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess of
£1.0 million (2015: £0.75 million), as well as differences
below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.

230

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Independent auditors’ report

How we work closely with component
auditors

Matters on which we are required to report
by exception

The Group audit team plans its visits to component auditors
based on a carefully designed programme, which considers
a variety of factors including size of entity and number of
significant risks; this programme is put in place to check
that appropriate oversight and guidance is provided to the
component auditors through a combination of:

upfront team briefings to all component teams;
site visits;
central review of documentation; and
risk assessment discussions and detailed

workpaper reviews.

These are designed so that the Senior Statutory
Auditor visits all key locations across the Group on a
regular basis. In addition we assess the competence
of our component auditors.

In years when we do not visit a key location we will:
include the component audit partner in our team briefing;
discuss their risk assessment; and
review documentation of the findings from their work.
We also hold quarterly meetings with management

at a regional and global level in order to update our
understanding of the Group and its environment on an
on-going basis.

Adequacy of explanations received and
accounting records

Under the Companies (Jersey) Law 1991 we are required
to report to you if, in our opinion:

we have not received all the information and

explanations we require for our audit; or

proper accounting records have not been kept by the
Parent Company, or proper returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the

accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration

Under our engagement letter we are required to report if in
our opinion certain disclosures of directors’ remuneration
that would be required by the UK Companies Act 2006
have not been made or the part of the Directors’
Compensation Report to be audited is not in agreement
with the accounting records and returns.

We have nothing to report arising from these matters.

Opinion on other matters prescribed
by our engagement letter

Corporate Governance Statement

In our opinion, based on the work undertaken in the course
of the audit:

the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the
UK Companies Act 2006 as if that Act had applied to the
Company;

the information given in the Strategic Report and the

Under the Listing Rules we are also required to review part
of the Corporate Governance Statement relating to the
company’s compliance with certain provisions of the UK
Corporate Governance Code.

We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and

Under International Standards on Auditing (UK and
Ireland), we are required to report to you if, in our opinion,
information in the annual report is:

the Strategic Report and the Directors’ Report have been

materially inconsistent with the information in the

prepared in accordance with applicable legal requirements.

audited financial statements; or

In the light of the knowledge and understanding of the
company and its environment obtained in the course of the
audit, we have not identified any material misstatements
in the Strategic Report and the Directors’ Report.

apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in
the course of performing our audit; or

otherwise misleading.

WPP ANNUAL REPORT 2016

231

Scope of the audit of the financial
statements

An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the Group’s
and the Parent Company’s circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made
by the directors; and the overall presentation of the
financial statements. In addition, we read all the financial
and non-financial information in the annual report to
identify material inconsistencies with the audited financial
statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies
we consider the implications for our report.

Richard Muschamp
for and on behalf of Deloitte LLP
Chartered Accountants and Recognised Auditor
London, United Kingdom
19 April 2017

Our 2016 financial statements
Independent auditors’ report

In particular, we are required to consider whether we
have identified any inconsistencies between our knowledge
acquired during the audit and the directors’ statement
that they consider the annual report is fair, balanced
and understandable and whether the annual report
appropriately discloses those matters that we
communicated to the Audit Committee which we
consider should have been disclosed.

We confirm that we have not identified any such

inconsistencies or misleading statements.

Respective responsibilities of directors
and auditor

As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in
accordance with applicable law and International Standards
on Auditing (UK and Ireland). We also comply with
International Standard on Quality Control 1 (UK and
Ireland). Our audit methodology and tools aim to ensure
that our quality control procedures are effective,
understood and applied. Our quality controls and systems
include our dedicated professional standards review team
and independent partner reviews.

This report is made solely to the company’s members,

as a body, in accordance with Article 113A of the
Companies (Jersey) Law 1991. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them in
an auditor’s report and/or those further matters we have
expressly agreed to report to them on in our engagement
letter and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.

232

WPP ANNUAL REPORT 2016

Five-year summary

Income statement
Billings1
Revenue
Net sales1
Operating profit
Headline EBITDA2
Headline PBIT2
Profit before taxation
Headline PBT2
Profit for the year

Net sales margin2

Balance sheet
Non-current assets3
Net current liabilities4
Net assets
Net debt
Average net debt

Our people
Revenue per employee (£000)
Net sales per employee (£000)
Staff cost per employee (£000)
Average headcount
Share information
Headline5 – basic earnings per share

– diluted earnings per share

Reported – basic earnings per share

– diluted earnings per share

Dividends per share6
Dividend payout ratio on headline diluted earnings per share
Share price – high
– low

Market capitalisation at year-end (£m)

Our 2016 financial statements

2016
£m

2015
£m

2014
£m

2013
£m

2012
£m

55,245.2
14,388.9
12,397.8
2,063.1
2,419.7
2,160.3
1,890.5
1,986.2
1,501.6

47,631.9
12,235.2
10,524.3
1,632.0
2,002.4
1,774.0
1,492.6
1,622.3
1,245.1

46,186.3
11,528.9
10,064.8
1,507.3
1,909.5
1,680.6
1,451.9
1,512.6
1,151.5

46,209.3
11,019.4
10,076.1
1,410.3
1,896.3
1,661.6
1,295.8
1,458.0
1,012.1

44,405.3
10,373.1
9,514.8
1,241.1
1,755.7
1,531.0
1,091.9
1,317.1
894.7

17.4%

16.9%

16.7%

16.5%

16.1%

19,125.3
(1,322.2)
9,767.6
(4,130.5)
(4,340.5)

15,373.8
(840.1)
8,015.8
(3,210.8)
(3,562.3)

14,107.3
(521.4)
7,826.8
(2,275.4)
(3,000.8)

13,225.3
(384.6)
7,846.5
(2,240.4)
(2,988.7)

13,452.9
(1,047.2)
7,060.6
(2,821.2)
(3,202.5)

2016

2015

2014

2013

2012

108.5
93.5
58.7
132,657

97.9
84.2
53.3
124,930

95.4p
114.8p
93.6p
113.2p
90.0p
109.6p
88.4p
108.0p
44.69p
56.60p
48%
50%
1,611.0p
1,850.0p
1,338.0p 1,304.0p
20,236.9
23,260.3

95.0
82.9
53.1
121,397

86.9p
84.9p
82.4p
80.5p
38.20p
45%
1,383.0p
1,117.0p
17,831.3

94.1
86.0
55.3
117,115

84.1p
80.8p
72.4p
69.6p
34.21p
42%
1,383.0p
905.5p
18,612.5

90.6
83.1
53.3
114,490

77.7p
73.4p
66.2p
62.8p
28.51p
39%
894.5p
669.0p
11,236.8

Notes
1 Billings and net sales are defined on page 234.
2 The calculation of ‘headline’ measures of performance (including headline EBITDA, headline PBIT, net sales margin and headline PBT) is set out in note 31 of the

financial statements.

3 Prior year balance sheets in 2014 and 2013 have been restated to reduce both the deferred tax assets and deferred tax liabilities, by a corresponding amount.

No restatement was required in 2012.

4 Prior year balance sheets in 2014, 2013 and 2012 have been restated to reclassify all income tax creditors from non-current liabilities to current liabilities.
5 Headline earnings per share for 2016, 2015 and 2014 is set out in note 9 of the financial statements.
6 Dividends per share represents the dividends declared in respect of each year.

The information on this page is unaudited.

WPP ANNUAL REPORT 2016 233

Our 2016 financial statements

Financial glossary

Term used in Annual Report

US equivalent or brief description

Issued

American Depositary Receipts/American Depositary Shares. The Group uses
the terms ADR and ADS interchangeably. One ADR/ADS represents five
ordinary shares

Average net debt is calculated as the average daily net borrowings of the
Group. Net debt at a period end is calculated as the sum of the net borrowings
of the Group, derived from the cash ledgers and accounts in the balance sheet

Billings comprise the gross amounts billed to clients in respect of commission-
based/fee-based income together with the total of other fees earned

Ordinary shares, issued and fully paid

The Group uses US dollar-based, constant currency models to measure
performance. These are calculated by applying budgeted 2016 exchange
rates to local currency reported results for the current and prior year. This gives
a US dollar-denominated income statement which exclude any variances
attributable to foreign exchange rate movements

Employee share ownership plan

Net new billings represent the estimated annualised impact on billings of new
business gained from both existing and new clients, net of existing client
business lost. The estimated impact is based upon initial assessments of the
clients’ marketing budgets, which may not necessarily result in actual billings
of the same amount

The euro area inter-bank offered rate for euro deposits

Capital lease

Free cash flow is calculated as headline operating profit before non-cash
charges for share-based incentive plans, depreciation of property, plant and
equipment and amortisation of other intangible assets, including dividends
received from associates, interest received, investment income received,
proceeds from the issue of shares, and proceeds from the disposal of property,
plant and equipment, less corporation and overseas tax paid, interest and
similar charges paid, dividends paid to non-controlling interests in subsidiary
undertakings, purchases of property, plant and equipment and purchases of
other intangible assets

Ownership with absolute rights in perpetuity

Headline PBT less taxation (excluding tax charge/deferred tax relating to
gains on disposals of investments and subsidiaries, deferred tax impact of
the amortisation of acquired intangible assets and other goodwill items and
tax charge/credit relating to restructuring costs)

Profit before finance income/costs and revaluation of financial instruments,
taxation, investment gains/losses and write-downs, goodwill impairment and
other goodwill write-downs, amortisation and impairment of intangible assets,
IT asset write-downs, share of exceptional losses/gains of associates,
depreciation of property, plant and equipment, losses/gains on remeasurement
of equity interests arising from a change in scope of ownership and Group
restructuring costs

PBIT excluding share of results of associates before investment gains/losses
and write-downs, goodwill impairment and other goodwill write-downs,
amortisation and impairment of acquired intangible assets, gains/losses on
remeasurement of equity interest on acquisition of controlling interest, IT asset
write-downs and Group restructuring costs

Allotted

ADRs/ADSs

Average net debt and net debt

Billings

Called-up share capital

Constant currency

ESOP

Estimated net new billings

EURIBOR

Finance lease

Free cash flow

Freehold

Headline earnings

Headline EBITDA

Headline operating profit

234

WPP ANNUAL REPORT 2016

Our 2016 financial statements
Financial glossary

Term used in Annual Report

Headline PBIT

Headline PBT

IFRS/IAS

LIBOR

Net sales/Net sales margin

OCI

Operating margin

Profit

Profit attributable to equity holders of the parent

Pro forma (‘like-for-like’)

Sarbanes-Oxley Act

Share capital

Share premium account

Shares in issue

UK Corporate Governance Code

US equivalent or brief description

Profit before finance income/costs and revaluation of financial instruments,
taxation, gains/losses on disposal of investments and subsidiaries, investment
write-downs, goodwill impairment and other goodwill write-downs,
amortisation and impairment of acquired intangible assets, Group
restructuring costs, IT asset write-downs, share of exceptional gains/losses of
associates and gains/losses on remeasurement of equity interests arising from
a change in scope of ownership

Profit before taxation, gains/losses on disposal of investments and subsidiaries,
investment write-downs, goodwill impairment and other goodwill write-
downs, amortisation and impairment of acquired intangible assets, Group
restructuring costs, IT asset write-downs, share of exceptional gains/losses of
associates, gains/losses arising from the revaluation of financial instruments,
and gains/losses on remeasurement of equity interests arising from a change
in scope of ownership

International Financial Reporting Standard/International Accounting Standard

The London inter-bank offered rate

Net sales are revenue less direct costs. Net sales margin is calculated as
headline PBIT (defined above) as a percentage of net sales. The Group has
previously used the terms gross margin and gross profit to refer to net sales.

Consolidated statement of comprehensive income

Headline PBIT as a percentage of net sales

Income

Net income

Pro forma comparisons are calculated as follows: current year, constant
currency actual results (which include acquisitions from the relevant date of
completion) are compared with prior year, constant currency actual results,
adjusted to include the results of acquisitions for the commensurate period
in the prior year. The Group uses the terms ‘pro forma’ and ‘like-for-like’
interchangeably

An Act passed in the US to protect investors by improving the accuracy and
reliability of corporate disclosures made pursuant to the securities laws, and for
other purposes

Ordinary shares, capital stock or common stock issued and fully paid

Additional paid-in capital or paid-in surplus (not distributable)

Shares outstanding

The UK Corporate Governance Code published by the Financial Reporting
Council dated September 2014

WPP ANNUAL REPORT 2016 235

Information for share owners
Share owners’ register

A register of share owners’ interests is kept at the Company’s registrar’s office in Jersey and is available for inspection
on request. The register includes information on nominee accounts and their beneficial owners.

Analysis of shareholdings at 31 December 2016

Issued share capital as at 31 December 2016: 1,331,880,730 ordinary shares.

Number of shares held
1-100
101-250
251-500
501-1,000
1,001-5,000
5,001-10,000
10,001-25,000
25,001-50,000
50,001-100,000
100,001-500,000
500,001-1,000,000
1,000,001-2,000,000
2,000,001-3,000,000
3,000,001-4,000,000
4,000,001 and above
Total

Number of holders
2,077
1,524
1,350
1,198
2,153
777
1,043
832
767
1,199
237
124
42
25
40
13,388

% owners
15.5
11.4
10.1
8.9
16.1
5.8
7.8
6.2
5.7
9.0
1.8
0.9
0.3
0.2
0.3
100%

Shareholdings
54,404
242,352
470,384
811,694
4,912,063
5,518,257
16,955,360
29,804,640
55,244,342
266,949,087
164,960,823
170,179,492
102,019,737
85,817,229
427,940,866
1,331,880,730

% outstanding*
0.0
0.0
0.0
0.1
0.4
0.4
1.3
2.2
4.2
20.0
12.4
12.8
7.7
6.4
32.1
100%

* All calculations are based on the percentage outstanding on the share register as of 31 December 2016.

Share owners by geography
UK
US
Rest of world
Total

%
33
33
34
100

Share owners by type
Institutional investors
Our people
Other individuals
Total

%
94
3
3
100

Share owners by geography %

Share owners by type %

o UK
o US
o Rest of world

33
33
34

o Institutional investors
o Our people*
o Other individuals

94
3
3

* In addition 1.4% of the Company’s share

capital (excluding treasury shares) is under
option to our people.

WPP ANNUAL REPORT 2016 237

About share ownership
Information for share owners

Dividends

Ordinary share owners have received the following dividends in respect of each financial year:

Interim or first interim dividend per ordinary share
Final dividend per ordinary share
Total

2016
19.55p
37.05p
56.60p

2015
15.91p
28.78p
44.69p

2014
11.62p
26.58p
38.20p

2013
10.56p
23.65p
34.21p

2012
8.80p
19.71p
28.51p

Financial calendar

Access numbers/Ticker symbols

The 2016 final dividend will be paid on 3 July 2017

to share owners on the register at 9 June 2017.

Interim statements for the half-year ending 30 June

are issued in August.

Quarterly trading announcements are issued in April

and October.

Interim dividends are paid in November.
Preliminary announcements of results for the financial

year ending 31 December are issued in the first quarter.
Annual Reports are posted to share owners in April.
Annual General Meetings are held in London in June.

Share price

The closing price of the shares at 31 December was as follows:

At 12
April 2017

2016

2015

2014

2013

2012

Ordinary
10p shares 1,737.0p 1,816.0p 1,563.0p 1,345.0p 1,380.0p 888.0p

Share price information is also available online at
wpp.com/investor.

Ordinary shares
American
Depositary Shares

NASDAQ
–

Reuters
Bloomberg
WPP.L WPP LN

WPPGY WPPGY.O WPPGY US

Registrar and transfer office

Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
Enquiry number: 0870 707 1411

American Depositary Receipts (ADRs) office

Citibank N.A.
PO Box 43077
Providence
RI 02940-3077

Online information

WPP’s public website, wpp.com, provides current and
historical financial information, news releases, trading reports
and share price information. Go to wpp.com/investor.

Telephone enquiries: within the US +1 877 248 4237
Telephone enquiries: outside the US +1 781 575 4555
E-mail enquiries: citibank@shareholders-online.com

WPP registered office

Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES

238

WPP ANNUAL REPORT 2016

The Company’s registered number is 111714.

About share ownership
Information for share owners

American Depositary Receipts (ADRs)

Tax information

Each ADR represents five ordinary shares.

ADR holders receive the annual and interim reports

UK taxation

issued by WPP plc.

WPP plc is subject to the informational requirements of
the US securities laws applicable to foreign companies and
files an annual report on Form 20-F and other information
with the US Securities and Exchange Commission. These
documents are available at the Commission’s website,
sec.gov. Our reports on Form 20-F are also available from
our Investor Relations department in New York.

ADR dividends

ADR holders are eligible for all stock dividends or other
entitlements accruing on the underlying WPP plc shares and
receive all cash dividends in US dollars. These are normally
paid twice a year.

Dividend cheques are mailed directly to the ADR holder
on the payment date if ADRs are registered with WPP’s US
depositary. Dividends on ADRs that are registered with
brokers are sent to the brokers, who forward them to ADR
holders. WPP’s US depositary is Citibank N.A. (address on
page 238).

Dividends per ADR in respect of each financial year are

set out below.

In £ sterling
Interim1
Final
Total

In US dollars2
Interim1
Final
Total

2016

2015

2014

2013

2012

97.75p 79.55p 58.10p 52.80p 44.00p
185.25p 143.90p 132.90p 118.25p 98.55p
283.00p 223.45p 191.00p 171.05p 142.55p

69.75¢
95.72¢
132.42¢ 121.62¢
250.96¢ 219.99¢ 218.95¢ 185.01¢ 156.22¢
383.38¢ 341.61¢ 314.67¢ 267.62¢ 225.97¢

82.61¢

1 In 2012, first interim dividend.
2 These figures have been translated for convenience purposes only, using the
approximate average rate for the year shown on page 186. This conversion
should not be construed as a representation that the pound sterling amounts
actually represent, or could be converted into, US dollars at the rates indicated.

Dollar amounts paid to ADR holders depend on the
sterling/dollar exchange rate at the time of payment.

No withholding tax is imposed on dividends paid to ADR

holders and there will be no entitlement to offset any part
of the notional UK taxation credit against any US taxation
liability. The dividends received will be subject to US taxation.

Dividends received from 6 April 2016
From 6 April 2016, the dividend tax credit previously
available to UK resident individuals is replaced by a
Dividend Allowance in the form of a 0% tax rate on the
first £5,000 of dividend income received each tax year.
Any dividends received over the £5,000 allowance are
taxed at a rate of 7.5% on dividend income for individuals
in the basic rate band, 32.5% for higher rate tax payers and
at 38.1% for individuals with income of £150,000 or more.

Dividends received on or before 5 April 2016
Cash dividends received from WPP plc by individual share
owners resident in the UK will generally be subject to UK
income tax on the gross amount of any dividends paid by
WPP with a tax credit equal to one-ninth of the dividend
received; tax credits are not repayable to UK holders with
no tax liability.

Individuals whose income is within the basic tax rate

band are liable to tax at 10% on the dividend income
and the tax credit will satisfy their income tax liability
on UK dividends. For higher tax rate payers the rate of
tax on dividend income for dividends is 32.5% whilst for
individuals with income of £150,000 or more, the rate
is 37.5%, with relief available for the tax credit referred
to above. The gross amount of the cash dividend will be
regarded as the top slice of the WPP share owner’s income
and will be subject to UK income tax as set out above.

Capital gains tax
The market value of an ordinary share at 31 March 1982
was 39p. Since that date rights issues have occurred in
September 1986, August 1987 and April 1993. For capital
gains tax purposes the acquisition cost of ordinary shares
is adjusted to take account of such rights issues. Since any
adjustments will depend on individual circumstances, share
owners are advised to consult their professional advisors.

Capital gains
As liability to capital gains tax on a disposal of WPP shares
will depend on individual circumstances, share owners are
advised to consult their professional advisors.

WPP ANNUAL REPORT 2016 239

About the artists

T here’s a case to be made for street

art being one of the most important
artistic movements of the 21st
century. The world over, it is
reclaiming and redefining urban space
with clever, confident, compelling imagery.

For this Annual Report, we are featuring work by 13
of today’s leading street artists. Their subject matter may
vary, but they are united by a desire to take art out of its
museum setting and on to the streets for all to see.

The movement has its roots in history, in the Ice Age
paintings – on ceilings and walls – at the caves of Lascaux
in France and Altamira in Spain.

Yet street art is a highly-contemporary practice,
facilitated by two key factors. First, rapid urbanisation,
which has meant an ever-growing ‘canvas’ of grey city
settings waiting to be adorned. Second, the rise of social
media, which has created a buzz around artists and
locations, making local works globally celebrated.

The art reproduced in this report can be found
across Western Europe, in Germany, France, Italy, Spain
and the UK.

Frenchmen Dominique Antony and Patrick Commecy

use trompe-l’œil to trick the viewer into thinking they
are seeing things that aren’t there. Those include a giant
wave on the wall of a beach house on the Bay of Biscay;
and a collection of local French celebrities at balconies
or windows on the wall of a three-storey building
in Montpellier.

Bristol’s JPS does something similar with a cat painted

on a wall. In a neat piece of optical illusion, it seems to
be walking towards us along an actual chain beneath its
feet, which stretches out from the wall.

In street art, size matters. Its makers tend to use the

very large space on an urban wall to paint very large
subjects: two pairs of twins from Italy’s Agostino Iacurci;
a blonde comic-book heroine, inspired by Roy Lichtenstein,
in the case of Stepan Krasnov; and a couple of pouting
silver-screen icons by Rone.

OAKOAK, of Saint-Étienne, however, bucks that trend,

preferring a smaller scale, with touches of visual whimsy
and a keen eye for detail. He hones in on architectural
features such as peeling paint, which most of us would
barely register. For his two works in this report, he
deployed the bars of a tiny ventilation shaft to represent
the stripes of a zebra; and the horizontal crack in a wall
as a horizon in the desert, on which he drew tiny camels.
What unites all 13 of our chosen artists is that their
imagery is figurative: something that’s true of most street
art. It’s a movement that aims to communicate its message
fast – where the viewer doesn’t need to be steeped in
art history.

The work is accessible to all people in all places: such

as Florentine artist Exit Enter’s image of a stick man
grabbing on to a red heart that’s about to fly away; and
Jef Aérosol’s Nuée de papillons, in which a young boy
throws a swarm of butterflies into the sky.

O ver the years, WPP’s Annual Reports have

drawn visual inspiration from different
geographical markets important to our
clients and our companies. In turn, we
have embraced artists from India, China, Africa,
Brazil, the US, Eastern Europe, the UK, Indonesia,
Mexico and last year – as the first major international
communications services group to have a presence
on the island – we looked to Cuba.

While the UK may have chosen to leave the

EU, Continental Europe is more important than ever
to WPP. More than 30,000 of our people work in

Western Continental Europe, which includes three
of our top 10 markets worldwide, and many of our
people in Britain are non-UK EU nationals. This year’s
choice of artwork recognises that fact, and celebrates
the ever-stronger connections with our European
colleagues, partners and clients.

In that spirit, we have taken our cue from

Western Europe – focusing on Germany, France,
Italy, Spain and the UK – as seen through the eyes
of some of the most engaging street artists currently
enlivening our city walls. For once, these are walls
that unite not divide.

240

WPP ANNUAL REPORT 2016

About the artists
Art of the street

Mark Seliger
Mark Seliger is a well-known
American photographer noted
for his portraiture. His credits
include Rolling Stone, where
he was chief photographer
for 10 years, shooting over
125 covers. In 2001 he moved
to Condé Nast. He shoots
frequently for Vanity Fair,
Details, Italian Vogue, German
Vogue among others. His
work has been exhibited in
museums and galleries.

Often relying on visual puns or double
takes, street art doesn’t demand linguistic
understanding either. It bridges cultures, borders
and also dictionaries. It gives sometimes harsh
environments a sense of place and community.
Certain artists use recurring characters.
XOOOOX achieves this with his introspective
fashion models; as does Nick Walker with his
artist-gentleman, in bowler hat and pin-striped
suit, regularly depicted in the act of creating a
piece of street art.

Many times, of course, works invite the
viewer to stop and reflect. David de la Mano,
for example, with Diaspora, in which a black
mass of silhouetted humans – with flippers for
legs – appear to be taking flight. His fellow
Spaniard, Pablo S. Herrero, uses bare trees
that seem to suggest nature reclaiming the
streets ever so slowly from metropolitan forces.

All 13 of these artists, then, are
transforming urban environments across
the continent. They combine wit, a gift for
communicating with large audiences and a
position at the cutting edge of today’s art.
These are walls, but ones that bring people
together rather than divide.

y
e
d
a
h
s
d
o
P
n
a
h
t

a
N
©

1 cover

2 page 17

WPP ANNUAL REPORT 2016

241

About the artists
Art of the street

3 page 9

4 page 113

5 page 22

6 page 159

7 page 114

8 page 98

9 page 168

242

WPP ANNUAL REPORT 2016

About the artists
Art of the street

1 Rone
Whispers

Berlin, Germany

2 JPS

Untitled
Barcelona, Spain

3 Stepan Krasnov

Dream
Barcelona, Spain

4 XOOOOX

Untitled
Berlin, Germany

5 Dominique Antony

La grande vague (The great wave)
Hossegor, France

6 David de la Mano

Diaspora
Salamanca, Spain

8 Jef Aérosol
Nuée de papillons (Cloud of butterflies)

Boston, US

9 Nick Walker
Love Vandal
Paris, France

10 Pablo S. Herrero

Brecha (Opening)
Salamanca, Spain

11 Agostino Iacurci

Siamese
Courtesy of Urban Outfitters
London, UK

12 Exit Enter

Love is the exit
Florence, Italy

13 OAKOAK

Urban zebra
Saint-Étienne, France

14 OAKOAK

La caravane passe
(The caravan goes by)
Saint-Étienne, France

WPP ANNUAL REPORT 2016 243

10 page 176

11 page 236

12 page 80

13 page 120

14 page 160

Awards for recent WPP Annual Reports

2012

2013

2014

2015

LACP Vision Awards

Gold Award and
ranked in the Top 50
Annual Reports EMEA.

International

ARC Awards
Gold.

Galaxy Awards

Gold.

Communicate
magazine’s Corporate
and Financial Awards
Gold for Best Printed
Report, Silver for Best
Online Report.

PwC Building
Public Trust Awards
Winner.

Astrid Awards (for
design communications)
Bronze.

LACP Vision Awards
Ranked 5 out of Top 100
Annual Reports
Worldwide.
Ranked 3 out of Top 80
Annual Reports EMEA.

LACP Vision Awards
Ranked 1 out of Top 100
Annual Reports
Worldwide.
Ranked 1 out of Top 50
Annual Reports EMEA.

LACP Vision Awards
Ranked 3 out of Top 100
Annual Reports
Worldwide.
Ranked 2 out of Top 80
Annual Reports EMEA.

LACP Vision Awards

Four Platinum Awards:

LACP Vision Awards
Three Platinum Awards:

• Industry Excellence,

Print.

• Industry Excellence,

Online.

• Best Annual Report

Narrative, Worldwide.

• Best Annual Report
Narrative, EMEA.

• Industry Excellence.
• Best Agency, Worldwide.
• Best Agency, EMEA.

Digital Impact Awards
Gold, Best Online Annual
Report.

International

ARC Awards
Gold.

International

ARC Awards
Gold and Silver.

Galaxy Awards

Silver, Print and Honours,
Design.

Galaxy Awards

Silver, Print and Honours,
Design.

244

WPP ANNUAL REPORT 2016

WPP news and updates

You can sign up to receive WPP’s
public monthly online news bulletin at
wpp.com/subscriptions

Become a fan on Facebook
facebook.com/wpp

Watch us on YouTube
youtube.com/wpp

Connect with us on LinkedIn
linkedin.com/company/wpp

WPP ANNUAL REPORT 2016 245

Parent company centres

Contact points

WPP Regional, Sub-Regional
and Country Managers

Andina region (Bolivia,
Colombia, Ecuador & Peru):
Roberto Coimbra
Australia & New Zealand:
Geoff Wild
Cuba:
Miguel Barroso
Czech Republic:
David Lhota
France:
Pierre Conte
Greater China:
TB Song
Patrick Xu
Shenan Chuang
India:
Ranjan Kapur
Indonesia & Vietnam:
Ranjana Singh
Ireland:
JP Donnelly
Italy:
Massimo Costa
Mexico:
Polo Garza
Middle East & North Africa:
Roy Haddad
Portugal:
Manuel Maltez
Russia:
Ruslan Tagiev
South Korea:
Sung Lee
Turkey:
Demet Ikiler
UK & Continental Europe:
Andrew Scott

WPP New York
100 Park Avenue
New York NY 10017
Tel +1 (212) 632 2200

WPP London
27 Farm Street
London W1J 5RJ
Tel +44 (0)20 7408 2204

WPP Asia Pacific
50 Scotts Road
Singapore 228242
Tel +65 6508 5219

Group information

If you would like further general
information about WPP, its companies
or any of the programs, publications
or initiatives mentioned in this
Annual Report, please visit our website,
wpp.com, or email
enquiries@wpp.com

Parent company
regional contacts

WPP Asia Pacific
Scott Spirit
Chief strategy officer and
chief digital officer
scott.spirit@wpp.com

WPP Latin America
Ann Newman
ann.newman@wpp.com

Business development

For more about WPP companies’
professional services, please contact:
George Rogers
george.rogers@wpp.com

246

WPP ANNUAL REPORT 2016

Investor relations
Paul Richardson
Group finance director
Tel +1 (212) 632 2200
paul.richardson@wpp.com

Fran Butera
Investor relations director
Tel +1 (212) 632 2235
fran.butera@wpp.com

Lisa Hau
Director, investor relations Europe
& Asia
Tel +44 (0)20 7408 2204
lisa.hau@wpp.com

Investor information
Investor relations material and our
financial statements are available
online at wpp.com/investor.

Corporate communications
and media relations
Feona McEwan
Group communications director
Tel +44 (0)20 7408 2204
feona.mcewan@wpp.com

North America
Kevin McCormack
Tel +1 (212) 632 2239
kevin.mccormack@wpp.com

Asia Pacific
Juliana Yeh
Tel +852 2280 3790
juliana.yeh@wpp.com

EMEA
Chris Wade
Tel +44 (0)20 7408 2204
chris.wade@wpp.com

Sustainability
Vanessa Edwards
Andrea Harris
Tel +44 (0)20 7408 2204
vanessa.edwards@wpp.com
andrea.harris@wpp.com

Visit us online

Annual Report
wpp.com/annualreport2016

Sustainability Report*
wpp.com/sustainabilityreport2016-17

Pro bono work 2016*
wpp.com/probonoreport2016-17

*June 2017

This Annual Report is printed on Amadeus 50 Silk, Offenbach Bible
Paper and Amadeus Gloss. All three papers are FSC® certified.
The Amadeus Silk contains 50% recovered fibre which is Elemental
Chlorine Free (ECF) bleached. Printed in the UK using vegetable
based inks throughout. Pureprint is a CarbonNeutral® company.
Both the manufacturing mill and the printer are registered to
Environmental Management System ISO14001 and are Forest
Stewardship Council (FSC) chain-of-custody certified.

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