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ANNUAL REPORT
& ACCOUNTS
2020
240101803_WPP_AR2020_Cover&Spine_Design_190321_SD.indd All Pages
26/03/2021 15:45
OUR PEOPLE ARE OUR COMPANY
This year the design of the Annual Report
is inspired by our people who, despite the
many challenges of Covid-19, have been
totally committed to supporting our clients,
looking after each other and serving the
communities in which we live and work.
Thank you to everyone across the Company
who kindly volunteered their images for
inclusion on this year’s front cover and
throughout the Annual Report.
WHO WE ARE
WPP IS A CREATIVE
TRANSFORMATION
COMPANY.
WE USE THE POWER OF
CREATIVITY TO BUILD
BETTER FUTURES FOR OUR
PEOPLE, PLANET, CLIENTS
AND COMMUNITIES.
This report provides an update
on strategic progress, financial
performance and sustainability
activities for the year ended
31 December 2020.
To learn more see wpp.com
This icon denotes more information
within the report
What you will find in this report
STRATEGIC REPORT
About us
2
Highlights
What we do
Where we are
Chief Executive’s statement
Key events of the year
Our business model
Investment case
The market
Our strategy
Key performance indicators
Chief Financial Officer’s statement
Financial review
Sustainability
Assessing and managing our risks
Jeremy Bullmore’s essay
CORPORATE GOVERNANCE
Chairman’s letter
Our Board
Our Executive Committee
How our Board engages
Division of responsibilities
Board activities
Composition, succession and evaluation
3
4
5
6
10
12
16
18
22
54
58
61
66
90
102
108
112
115
117
120
122
123
Nomination and Governance Committee report 126
Audit Committee report
Sustainability Committee report
Compensation Committee report
FINANCIAL STATEMENTS
Accounting policies
Consolidated financial statements
128
133
134
158
165
Notes to the consolidated financial statements
170
Company financial statements
199
Notes to the Company financial statements
202
Independent auditor’s report
Reconciliation to non-GAAP measures
of performance
ADDITIONAL INFORMATION
Task Force on Climate-related
Financial Disclosures statement
Other statutory information
Shareholder information
Adjustment of 30 June 2020
goodwill impairment
Five-year summary
Financial glossary
Where to find us
204
212
216
219
220
223
224
225
228
1
STRATEGIC REPORTWPP ANNUAL REPORT 2020 STRATEGIC REPORT
ABOUT US
MARKET
CONTEXT
PURPOSE
STRATEGY
OFFER
VALUES
The profound changes to consumer
behaviour brought about by Covid-19
have increased the need for
companies to invest in digital
technologies, ecommerce and
new customer experiences
The pandemic has accelerated the trends
on which we based our vision – growing
demand for digital services, ecommerce
solutions and simple, integrated offerings
that bring together creativity and skills in
technology and data
Read more on page 18
To use the power of creativity to
build better futures for our people,
planet, clients and communities
Through our own actions and our work with
clients we can help to build a sustainable
future and a more inclusive society
Read more on pages 8 and 66
– A new vision and contemporary offer
– Increased investment in creativity
– Harnessing our strengths in data
and technology
– A simpler structure
– Investment in our people and culture
Our strategy aims to return WPP to
sustainable growth, by combining creativity
with expertise in technology and data,
building stronger agency brands within a
simpler company structure, and investing in
talent, leadership and inclusive workplaces
Read more on page 22
WPP provides an integrated offer
of communications, experience,
commerce and technology
OPEN
OPTIMISTIC
EXTRAORDINARY
With our enhanced and modernised
offer to clients we deliver integrated
campaigns globally across digital and
traditional platforms
Read more on page 14
We want all our people to experience
a culture that is open, optimistic and
committed to extraordinary work
Read more on page 46
FINANCIAL
Our actions will enhance WPP’s
proposition to clients and drive
our growth
We are targeting a recovery to 2019
revenue less pass-through costs levels by
2022. And 3-4% annual growth in revenue
less pass-through costs from 2023
Read more on page 61
2
WPP ANNUAL REPORT 2020
STRATEGIC REPORT
HIGHLIGHTS
Although revenue has been impacted by Covid-19 our Company has
been resilient and our performance has exceeded expectations –
due to our actions over the last two years to simplify and strengthen
WPP, our response to the pandemic and the work of our people.
FINANCIAL
PERFORMANCE
£46.9bn
Billings
(2019: £53.1bn)
£12.0bn
Revenue
(2019: £13.2bn)
£9.8bn
Revenue less pass‑through costs
(2019: £10.8bn)
CLIENTS
PEOPLE
SUSTAINABILITY
COMMUNITIES
325 of the Fortune Global 500
62
30
61
of the Dow Jones 30
of the NASDAQ 100
of the FTSE 100
100,000 people
40%
33%
Women in executive leadership
roles (2019: 37%)
Employees in shared campuses
(2019: 26%)
21,000+
Technology accreditations
and certifications earned
from partners
0.52tCO₂e
Carbon emissions per person
from direct operations
(scope 1 and 2)
(2019: 0.82tCO2e)1
65%
Electricity purchased from
renewable sources
(2019: 37%)1
64%
of our top 50 clients have
committed to setting
science‑based carbon
reduction targets
10th
in the FTSE 100 Rankings for
Women on Boards, Hampton‑
Alexander Review (2019: 12th)
Leader
in the Bloomberg Gender
Equality Index for the third
year in a row
100%
in the Human Rights Campaign
Foundation’s Corporate
Equality Index (2019: 85%)
1 These figures have been restated due to the integration of new best practice carbon emissions reporting and data reviews upon joining RE100.
WPP ANNUAL REPORT 2020
3
STRATEGIC REPORT
WHAT WE DO
We now provide services to clients
through fewer, stronger, integrated
creative agencies, industry-leading
media agencies, global public relations
agencies and specialist agencies.
REVENUE LESS PASS-THROUGH COSTS
BY BUSINESS SECTOR
%
● Global Integrated
Agencies 75%
● Public Relations 9%
● Specialist Agencies 16%
GLOBAL INTEGRATED AGENCIES
Our creative services include advertising,
marketing and brand strategies and
campaigns across all media. We are
increasing our share in targeted
fast-growth areas including digital
communications, healthcare,
ecommerce, experience, marketing
technology and production.
Our media offer includes the full range
of media planning and buying services,
delivered primarily through GroupM, the
world’s leading media investment company,
and its agencies. Targeted growth segments
are digital media (search, social and
programmatic), new business models such as
Xaxis and Finecast, and data and technology.
PUBLIC RELATIONS
Our PR firms help clients communicate
with all their stakeholders, from consumers
and investors to governments and NGOs.
Purpose and reputation, sustainability, and
digital and social media are key growth areas.
SPECIALIST AGENCIES
Our specialist agencies provide services
by region or type. Brand experience and
identity, and specialist, targeted services
are the principal growth segments.
1 The visual above reflects the structure of the Company in 2020.
Following the alignment of AKQA and Grey, and the creation
of VMLY&R Commerce, from January 2021 AKQA and VMLY&R
Commerce are reported within Global Integrated Agencies.
4
WPP ANNUAL REPORT 2020
1
1
STRATEGIC REPORT
WHERE WE ARE
WPP companies operate in 111 countries,
providing us with global reach and scale.
Here we show our presence by region in
terms of revenue and people.
REVENUE BY REGION
%
● North America 37%
● United Kingdom 14%
● Western Continental
Europe 20%
● ROW (AP, LA, AME,
CEE) 29%
NORTH AMERICA
UNITED KINGDOM
WESTERN
CONTINENTAL EUROPE
CENTRAL &
EASTERN EUROPE (CEE)
PEOPLE
REVENUE
PEOPLE
REVENUE
PEOPLE
REVENUE
PEOPLE
REVENUE
21,000
£4.5bn
10,000
£1.6bn
21,000
£2.4bn
5,000
£0.3bn
Revenue
Denotes the collective
figure for all WPP
companies in a given
region or country.
People1
Denotes the number
of people employed by
WPP companies in a
given region or country.
LATIN AMERICA (LA)
AFRICA & MIDDLE EAST (AME)
ASIA PACIFIC (AP)
PEOPLE
REVENUE
PEOPLE
REVENUE
PEOPLE
REVENUE
As at 31 December 2020.
10,000
£0.5bn
5,000
£0.3bn
27,000
£2.4bn
1
Excludes 1,000 head office
employees.
WPP ANNUAL REPORT 2020
5
STRATEGIC REPORT
CHIEF EXECUTIVE’S
STATEMENT
We have made significant progress on our strategy,
with stronger agency brands, new leadership, a simpler
structure and a healthy balance sheet.
“ OUR COMPANY’S
PERFORMANCE HAS
BEEN REMARKABLY
RESILIENT, THANKS TO
THE EFFORTS OF OUR
PEOPLE AND THE
DEMONSTRABLE VALUE
OF WHAT WE DO FOR
OUR CLIENTS.”
6
WPP ANNUAL REPORT 2020
2020 was a tough year for everyone,
including our people as they faced the
personal and professional challenges of
Covid-19. Since March 16 last year, most of
them have been working, for most of the
time, from their homes – and dealing with all
the difficulties this brings. Their commitment
to our clients, support for one another and
contribution to the communities we serve
have been a constant source of inspiration
and pride.
Our Company’s performance has been
remarkably resilient, thanks to the efforts of
our people and the demonstrable value of
what we do for our clients. While revenues
were significantly impacted as clients reduced
spending, particularly in the second quarter,
our performance exceeded our own
expectations and those of the market
throughout the year.
The actions taken during 2018 and 2019
to streamline and simplify WPP, and the
reduction in our debt to sustainable levels
from the £3.5 billion raised by asset sales,
meant that we entered 2020 in a strong
financial position.
In March 2020 we took action to strengthen
our business further, including the suspension
of the Kantar share buyback scheme and final
dividend for 2019, and a comprehensive
programme of cost reduction and cash
conservation initiatives, with the aim of
protecting as many jobs as possible. More
than 3,000 senior executives, beginning
with the Board and Executive Committee,
volunteered to take a 20% cut in their fees
or salary for a three-month period.
We saw five years’ worth of innovation in
five weeks as society and the economy were
digitised at amazing speed. Platforms like
TikTok – with whom we signed an exclusive
global partnership at the beginning of 2021
– saw record growth. It quickly became clear
that the pandemic was accelerating the
trends on which we based our vision for
WPP, from the explosion of ecommerce
CHIEF EXECUTIVE’S STATEMENT
STRATEGIC REPORT
“IT QUICKLY BECAME
CLEAR THAT THE
PANDEMIC WAS
ACCELERATING THE
TRENDS ON WHICH
WE BASED OUR
VISION FOR WPP.”
and digital experiences as people’s lives
went online, to growing demand from clients
for simple, integrated solutions that combine
outstanding creativity with sophisticated
data and technology skills.
Having modernised our client offer,
simplified our structure and strengthened
our agency brands in the 18 months before
the pandemic began, we saw the benefits
of this acceleration in parts of our business.
And because we have such close
relationships with the world’s leading
companies, we could understand their
requirements, react quickly to changing
consumer behaviour and deliver what clients
need. Being fast was vital, and work that
might have taken weeks or months to
conceive and produce before the pandemic
was turned around in days or even hours.
We had a very positive year in terms of
client retention and business development,
winning an industry-leading $4.4 billion1 in
net new business during 2020 with clients
including Alibaba, HSBC, Intel, Uber and
Unilever. Our client satisfaction scores
continued to improve as we were recognised
for our capabilities in experience, commerce
and technology, alongside our classic
strengths in communications. During 2020
we worked with 76 of our top 100 clients
on ecommerce assignments.
A RESILIENT PERFORMANCE
Organic growth (like-for-like revenue less
pass-through costs growth) for the full year
was -8.2%, while reported revenue fell by
9.3%. We saw a sequential recovery in
organic growth following the initial
lockdowns: -15.1% in the second quarter,
-7.6% in Q3 and -6.5% in Q4.
Headline operating margin in 2020 was 12.9%,
down 1.5 margin points on the prior year as
cost savings of over £800 million offset the
majority of the revenue declines. In the second
half of the year headline operating margin
increased by 0.5 margin points. Reported
loss before tax was £2.8 billion, reflecting
£3.1 billion of impairments, while net debt at
31 December 2020 was £0.7 billion. This was
better than expected and down £0.8 billion
year-on-year, as a result of continued strong
working capital and cash management.
PLAYING OUR PART
While our industry is not on the front line
of tackling the pandemic, we do have an
extremely important role to play in shaping
consumer behaviour and actions. During 2020
we worked with governments, commercial
clients, NGOs and international health bodies
to produce public awareness campaigns to
help limit the spread and impact of Covid-19.
WPP supported the World Health Organization
globally and regionally on a pro bono basis,
leveraging the scale and expertise of our
agencies to help the WHO reach the public
with its vital communications promoting
social distancing and good hygiene. GroupM
secured and delivered more than $45 million
in advertising space and pro bono work to
support WHO campaigns. As scientific
breakthroughs gave us a glimpse of the light
at the end of the tunnel, many of our agencies
added their creativity – and their skills in
media, public relations, healthcare
communications, data and technology – to the
efforts to roll out and build public confidence
in vaccines, again working with a range of
public and private sector organisations.
PEOPLE AND PURPOSE
The exemplary way in which our people
responded to the pandemic was another
reminder of our most important strength.
Our people are our Company: 100,000 skilled
and motivated professionals dedicated to
serving our clients, increasingly fired by a
sense of purpose and determined to make
a difference in the world.
While our Company comprises strong
agency brands with their own rich histories
and cultures, we have worked in a far more
collaborative way over the last two years.
We now share in a common purpose, which
is to build better futures – for our people,
for the planet, for our clients and for the
communities in which we live and work.
That purpose, and that sense of commonality,
was put to the test in 2020 as the killings of
Ahmaud Arbery, Breonna Taylor and George
Floyd sparked protests around the world and
forced institutions and leaders of all kinds to
confront profound questions about their role
in the enduring and deep-seated inequalities
faced by Black citizens.
1 Billings as defined in the Financial Glossary on page 225.
WPP ANNUAL REPORT 2020
7
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
OUR PURPOSE
People
Planet
Clients
Communities
Our purpose is to use the power of
creativity to build better futures for our
people, planet, clients and communities.
In 2020 we made progress in each area.
For our people, we made a series of
commitments to tackle racism and invest
in Black talent; continued to improve
gender diversity, particularly at leadership
levels; expanded our development
programmes; and delivered a range of
new wellbeing resources and initiatives.
For the planet, we committed to setting
a strategy to achieve net zero emissions
in our value chain by 2030. We continued
to reduce our owned emissions and
obtained more of our electricity from
renewable sources.
For our clients, we were a trusted partner
during the pandemic: helping them react
by adjusting their marketing spend and
communications with customers; recover,
by getting back to business; and renew
their marketing and business models in
preparation for a post-Covid world.
And for our communities, we played our
part in the fight against Covid-19 by
working with clients, governments,
public health organisations and NGOs,
often on a pro bono basis, to provide
communications and other services to
help limit the spread of the virus.
8
WPP ANNUAL REPORT 2020
At WPP thousands of our people took part
in “safe room” meetings to share their
thoughts, fears and hopes for the future.
These were raw and deeply moving events
that delivered an urgent, impassioned and
crystal-clear message: we need to do so
much more – as individuals, as a Company
and as an industry – to tackle systemic
racism and to invest in the careers of our
Black colleagues.
In June we announced a series of
commitments designed to use our creativity,
our scale and our influence to bring about
change. These were to implement the 12
actions called for by more than 1,200 Black
advertising professionals in an open letter
to the industry (including conducting a
fundamental review of our hiring, retention,
promotion and development practices and
publishing our workforce diversity data),
to use our voice to advance racial equity,
and to invest $30 million over three years
to fund inclusion programmes within WPP
and support external organisations.
We also formed WPP’s first Global Inclusion
Council to work with me and the rest of the
Executive Committee to help us deliver
these commitments. We have made progress
towards our goals, which you can read about
on page 49 of this report. At the same time,
we recognise that we still have a huge amount
of work to do, and that real change will
require sustained effort, focus and vigilance.
INVESTING IN CULTURE
Ensuring everyone who works within WPP
experiences an inclusive and equitable
culture is one of the cornerstones of our
strategy. Our aim is for WPP to be the
employer of choice for all.
We have made significant progress in
driving gender equality, with women now
representing 51% of our senior managers.
At the most senior executive level, this figure
is 40%, up from 37% in the previous year,
and our aim is to achieve parity. We have
increased the proportion of women on our
Board to 43%.
In 2020 we were named a Forbes Top 20
Employer for Women in the United States,
and in 2021, an industry leader in the
Bloomberg Equality Index for the third year
running. Our UK gender pay gap narrowed
between 2019 and 2020, but for as long as
there is any gap, we cannot, of course,
be satisfied.
We are working hard to improve in all aspects
of diversity, equity and inclusion (DE&I) at WPP.
Success relies on accountability so, for the
first time, we have included DE&I goals in the
remuneration plans of all senior executives,
beginning in 2021. In 2020 we rolled out
mandatory inclusion training for all our
people, and this year we are launching a
new Inclusion Index to better understand
our people’s experience of belonging at
WPP, as part of the first pan-Company
employee listening programme.
We are placing DE&I at the heart of all our
talent processes, using analytics to inform
a more inclusive employee experience,
and identifying and supporting diverse
early-career talent. We have also formed
partnerships with leading inclusion and
diversity organisations such as Unstereotype
Alliance, The Valuable 500 and the LAGRANT
Foundation. For more on these and other
initiatives, please turn to the People section
of the Strategic Report from page 46.
A SUSTAINABLE FUTURE
Although WPP has been cutting carbon
emissions since 2006, we know we all need
to accelerate the pace of change. In 2020,
we amended our purpose statement to make
it explicit that our commitment to the planet
is integral to our business. We have since
committed to reach net zero emissions in
our operations by 2025 and in our value
chain by 2030.
A significant challenge for reducing carbon
emissions is being able to measure them
with confidence, but we are determined to
use our buying power to work with suppliers
to develop more robust protocols for
measuring emissions in our supply chain.
This work will benefit our whole industry
and, with it, our clients and the wider public.
As we help to develop better measurement,
we are also taking action, for example as a
founding member of AdGreen, a new
industry initiative to eliminate the negative
environmental impacts of production.
For full details of our sustainability strategy,
see page 66.
CHIEF EXECUTIVE’S STATEMENT
CHIEF EXECUTIVE’S STATEMENT
STRATEGIC REPORT
“ OUR AGENCIES ARE
THE PLATFORMS FOR
OUR FUTURE
GROWTH.”
ACCELERATING OUR GROWTH
In December 2020, two years on from the
launch of our strategy, we held a Capital
Markets Day to provide an update on
progress and to outline our plans to
accelerate our growth.
Over the last two years, we have radically
simplified our Company. We have fewer,
stronger agency brands, better positioned to
grow and fully equipped with the capabilities
– from outstanding creativity to technology
and data expertise – that modern clients
demand. We are continuing to align our
creative and digital credentials by bringing
together AKQA and Grey; we are creating an
ecommerce powerhouse by moving
Geometry into VMLY&R to form VMLY&R
Commerce; and we have merged three of
our public relations agencies to establish
global strategic communications firm
Finsbury Glover Hering.
Our agencies are the platforms for our future
growth: our integrated creative agencies, with
their excellence in digital communications and
increasingly important skills in experience
and ecommerce; our industry-leading media
agencies, which continue to dominate new
business rankings and have been the engine
of WPP for many years; our public relations
agencies, whose role has been so critical for
clients during the turbulence of the last year;
and our specialist agencies, which provide a
range of services to meet every client need.
By investing more in our agencies and their
capabilities, we aim to return our core
communications business to sustainable
growth while expanding further into the
high-growth areas of commerce, experience
and technology, which we expect to
increase from 25% of our business today
to 40% by 2025.
We will also leverage our global strength and
increase our focus on high growth potential
markets, such as China, India and Brazil.
This investment will be funded by gross
annual cost savings of around £600 million
by 2025, delivered through a Company-wide
transformation programme that will make
us more effective and efficient as we share
resources more systematically across the
Company. Approximately two thirds of the
savings will be reinvested in people, new
capabilities and technology.
You can read more in the Chief Financial
Officer’s statement on page 58.
THE WORLD’S MOST CREATIVE
COMPANY
In 2020 we were honoured to be named
most creative company of the decade by
the Cannes Lions International Festival of
Creativity. But we are setting our sights even
higher. Our ambition is to be known not only
as the most creative company in our
industry, but on the planet.
WPP already has one of the world’s largest
concentrations of creative talent in a single
organisation. With the help of our new
Global Chief Creative Officer, Rob Reilly,
who joins us this year, we intend to turn that
collective creative firepower into even greater
success for our clients and our agencies.
Ultimately that success depends on our
people, and we have no more important
task than to invest in a culture that attracts,
retains and develops the most talented in
and beyond our industry, and that reflects
our values of openness, optimism and a
commitment to extraordinary work.
I’d like to thank everyone at WPP who,
during these exceptional times, has helped
to bring that culture to life.
Mark Read
Chief Executive Officer
29 April 2021
WPP ANNUAL REPORT 2020
9
STRATEGIC REPORT
KEY EVENTS
OF THE YEAR
2020 was a year of challenges,
but also successes and progress1
2020
MARCH
– WPP moves to
remote working
due to Covid-19
restrictions and
outlines actions to
protect the business
FEBRUARY
– Wunderman
Thompson
acquires
XumaK
– MediaCom
becomes
global media
agency for
Hasbro
– HSBC appoints WPP
as lead agency for
its creative account
MARCH
– GroupM acquires
Sandtable
– AKQA, Ogilvy, VMLY&R
and Wunderman
Thompson included
in Gartner’s Magic
Quadrant
– GroupM names Karen
Blackett OBE UK CEO
– Mindshare tops WARC
media 100 rankings
– Intel chooses VMLY&R
as its global creative
agency
JANUARY
– WPP announces
appointment of
Sandrine Dufour
to the Board
– Bloomberg
Gender-Equality
Index names WPP
as industry leader
APRIL
– Ad Age names
Essence Data and
Analytics Agency
of the Year
– WPP named
Adobe’s 2020
Digital Experience
Solution UK Partner
of the Year
– WPP TV launched
MAY
– Nick Lawson
becomes Global
CEO of MediaCom
– WPP announces
global partnership
with SuperAwesome
– Simona Maggini
appointed Country
Manager for Italy
– Employee assistance
programme
launched globally
– H+K named PRovoke
EMEA agency of the
decade
MAY
– WPP wins Unilever
media account in
China
– MediaCom wins
Duracell global
media account
1 This timeline refers to the month each event was announced.
10
WPP ANNUAL REPORT 2020
APRIL
– WPP commits
to net zero
Campuses and
100% renewable
electricity by 2025
JUNE
– WPP announces
commitments to
fight racism and
invest in Black talent
– WPP named the
world’s most
effective
communications
company in the
Effie Index
– Ogilvy appoints
Andy Main as
Global CEO
– The One Show names
Ogilvy 2020 Network
of the Year
JUNE
– Grey partners with
US agency start-up
Cartwright
– WPP announces
appointment of
Angela Ahrendts
DBE to the Board
– The Cannes Lions
International
Festival of
Creativity names
WPP as the most
creative company
of the decade
KEY EVENTS OF THE YEAR
STRATEGIC REPORT
AUGUST
– WPP leads
R3’s global
new business
tables
– GroupM
appoints
Kirk McDonald
as North
America CEO
– WPP agencies
lead Festival of
Media APAC
awards
OCTOBER
– Walgreens Boots
Alliance renews and
extends relationship
with WPP
– Uber consolidates
global media account
with MediaCom
– Dell appoints VMLY&R
as lead creative
agency in India
SEPTEMBER
– Whirlpool EMEA
appoints WPP as its
communications
partner
– Wunderman
Thompson acquires
Velvet Consulting
– Alibaba appoints
Mindshare as its media
agency in China
– Mindshare ranks as
the top global
media agency in
COMvergence’s New
Business Barometer
– AKQA and WPP named
leaders in IDC
MarketScape report
– WPP becomes a
founding member
of AdGreen
DECEMBER
– Capital Markets Day for
investors and analysts
on the Company’s
strategic plans for
Accelerating Growth
– Mindshare names
Adam Gerhart as its
Global CEO
– BCW tops PRovoke’s
ranking of creative
excellence in PR
JULY
– Forbes names WPP
one of America’s Best
Employers for Women
– WPP establishes
Global Inclusion
Council to help
accelerate change
throughout
the Company
– WPP creates global
communications leader
Finsbury Glover Hering
OCTOBER
– Dr. Ya-Qin Zhang
joins the WPP
Board with effect
from January 2021
NOVEMBER
– AKQA and Grey unite
within AKQA Group
– Geometry joins
VMLY&R to create
VMLY&R Commerce
– WPP appoints
Tom Ilube CBE
to the Board
WPP ANNUAL REPORT 2020
11
To learn more see wpp.com
STRATEGIC REPORT
OUR BUSINESS
MODEL
Our strengths
Our work depends on our creative
talent, client relationships, integrated
agencies and technology capabilities.
We are a creative
transformation company,
offering clients a
comprehensive range
of communications,
experience, commerce
and technology services.
We provide these services
through a number of
integrated global agencies
and a client-first approach.
Our common approach to
production, technology and
data, fostering collaboration
and the sharing of knowledge
and customer insights,
enhances creativity and
drives efficiency for the
benefit of our clients.
We also share a common
purpose: to use the power
of creativity to build better
futures for our people, planet,
clients and communities.
12
WPP ANNUAL REPORT 2020
100,000
people
325
of the Fortune Global 500
are our clients
$4.4bn
of net new business in 20201
$30bn
of gross merchandise value
sales over WPP-built
ecommerce platforms
– The creative talent of our people
– Strong creative reputation reflected
in many industry awards, including
Cannes and Effies
– Continuing to attract top talent to
WPP and its agencies
– Deep understanding of consumers
and brands
– Our relationships with the world’s
most successful companies
– Global Client Leaders, providing
easy access to the breadth and
depth of WPP
– Unique partnerships with leading
technology companies, providing us
with preferential access to training,
new product development and joint
go-to-market programmes
– Home to many of the industry’s most
powerful and respected agency brands
– The #1 global media-buying
organisation, GroupM, and its
industry-leading agencies
– Iconic creative brands: AKQA, Grey,
Ogilvy, VMLY&R and Wunderman
Thompson
– Integrated agency model, meeting
all the needs of clients in
communications, experience, health,
ecommerce, data and technology
– The technology skills and platforms
to deliver modern marketing solutions
– Ability to deliver integrated
campaigns, globally across
traditional and digital platforms
– WPP Open – a common data and
technology platform for agencies
and clients to share the best
innovation from across WPP and
its strategic technology partners
1 Billings, as defined in the Financial Glossary on page 225.
OUR BUSINESS MODEL
STRATEGIC REPORT
Operating model
We meet our clients’ needs through a collaborative approach that works
on a global scale. This drives our revenue while controlling costs, to fund
re-investment into our capabilities and technology, for our agencies,
clients, people and shareholders.
WPP
AGENCIES
The central WPP team supports
our agency brands and the work
they do for our clients. It develops
and executes the strategy of the
Company, allocates capital to best
meet client needs and drive our
growth, and provides a range of
support functions in areas such as
communications, finance, legal
affairs, marketing & growth,
operations, people, sustainability
and technology.
CLIENTS
REVENUE
COSTS
PROFIT AND CASH
DIVIDENDS
REINVESTMENT:
PEOPLE,
CAPABILITIES,
EFFICIENT
PLATFORM
Our agencies operate in more than 100 markets
around the world, offering a range of services
across four key areas – communications, experience,
commerce and technology. Our ten largest agencies
are the core of the WPP offering and account for
85% of revenue less pass-through costs. Read more
on page 4.
The work we do for clients helps them communicate
their brands, services and products across a range of
digital and traditional media channels. Many of our
clients have Global Client Leaders assigned to ensure
easy access to the breadth and depth of WPP. Our client
portfolio is highly diversified and covers every business
sector. Our top 30 clients account for 31% of revenue less
pass-through costs.
Revenues are principally derived from fixed-fee contracts,
retainer agreements and commissions on media
placements. Some engagements include performance
incentives linking revenue to quantitative and qualitative
goals. We focus on revenue less pass-through costs as a
reflection of top-line performance. Our top 20 markets
account for 88% of revenue less pass-through costs.
Most of our costs are variable in nature. 61% of our total
headline costs are staff costs; 21% are pass-through
costs; 12% are general and administrative costs; and 6%
are establishment costs1. Pass-through costs comprise
fees paid to external suppliers where they are engaged
to perform part or all of a specific project and are
charged directly to clients – predominantly media and
data collection costs.
Our profit and cash generation has historically been
strong and we expect this to continue, supported by
annual gross cost savings of around £600 million by 2025.
This in turn will enable us to continue to invest in our
people, technology infrastructure, Campuses and
standardised systems for our people and clients. Starting
from the current year, we intend to grow the dividend
annually and to pay out approximately 40% of headline
earnings per share.
1 Total headline costs comprise costs of services and general and administrative
costs excluding gains/losses on disposal of investments and subsidiaries,
investment and other write-downs, goodwill impairment and other goodwill
write-downs, amortisation and impairment of acquired intangible assets,
restructuring and transformation costs, restructuring costs in relation to
Covid-19, litigation settlement and gains/losses on remeasurement of equity
interests arising from a change in scope of ownership.
WPP ANNUAL REPORT 2020
13
STRATEGIC REPORT OUR BUSINESS MODEL
Our offer
Our offer to clients covers four areas that are critical to modern
marketing: communications, and the higher-growth segments
of experience, commerce and technology.
COMMUNICATIONS
EXPERIENCE
COMMERCE
TECHNOLOGY
COMMUNICATIONS
We create powerful ideas based on deep
insights to connect brands with audiences at
the right moment and in the right channels.
This includes paid advertising campaigns
and public relations.
EXPERIENCE
We bring brands to life through engaging,
unexpected and interactive experiences.
This includes customer-facing platforms,
such as websites, applications and stores,
as well as broader touchpoints like product
design, packaging and loyalty programmes.
COMMERCE
We help our clients sell wherever and
however their consumers want to buy.
We advise on, build, run and activate
ecommerce and physical channels, from
direct-to-consumer websites and stores
to marketplaces and social commerce.
TECHNOLOGY
We build and optimise technology and
data solutions fit for our clients’ needs.
Our services include enterprise systems
work – architecture design, systems
implementation, managed services and data
analytics – and specific platforms such as
CRM, content and experience management,
and data management. We also use our
unique relationships with the world’s leading
technology companies – such as Adobe,
Amazon, Facebook, Google, IBM, Microsoft,
Salesforce and TikTok – to create unique
advantages for our clients.
REVENUE LESS PASS-THROUGH COSTS
BY OFFER
Communications 75%
Experience,
Commerce and
Technology 25%
14
WPP ANNUAL REPORT 2020
OUR BUSINESS MODEL
STRATEGIC REPORT
Stakeholder engagement
How we do business is driven by our purpose – to build better futures
for our people, for the planet, for our clients and for the communities
in which we live and work.
SHAREHOLDERS
Our shareholders provide the capital to invest in the business.
Shareholders benefit from the Board acting in the best interests
of the Company and investors for long-term value generation.
CLIENTS AND SUPPLIERS
Our clients come from businesses across every sector. The
work we do for clients provides our revenue and helps them
to grow their businesses, build relationships with their
customers, and ready themselves for future success.
Our suppliers range from small businesses to the world’s
largest technology partners. They provide us with the
products and services we need to meet our clients’ needs.
GOVERNMENTS AND REGULATORS
Governments receive the tax contributions we make to public
finances, enabling them to invest in public services.
Governments and regulators determine the policy frameworks
that impact on us and our stakeholders.
PEOPLE
We depend on the talent, creativity and technology skills
of our people. And we want our employees to embrace our
purpose, culture and values. In return our people receive
salaries, pension contributions, employee benefits, career
development and training.
THE PLANET
We are committed to responsible and sustainable business
practices. We take steps to optimise our own environmental
impact, but recognise that our greatest contribution to the
planet is through our work with clients, which can shift
attitudes and change behaviours to build a sustainable future
and a more inclusive society.
COMMUNITIES
We can help boost the impact of charities and non-
governmental organisations by providing marketing and
creative services, often on a pro bono basis, enabling them
to raise awareness and funds, recruit members, and achieve
campaign objectives. We believe, and so do many of our
stakeholders, that acting responsibly is both the right thing
to do and in our long-term interests.
– We have an extensive investor relations programme,
comprising investor days, the AGM, investor and analyst
meetings, webcasts and ongoing email exchanges
– We disclose relevant information to shareholders through
our annual report, quarterly financial statements and RNS
announcements
– In 2020 we paid £412 million in distributions to shareholders
– We engage with our major clients through our central team
of Global Client Leaders, our respective CEOs, and our
agency teams
– Our people regularly engage with suppliers and key
technology partners in joint product development, skills
development and joint go-to-market programmes
– We evaluate potential suppliers on a variety of factors
including workforce diversity and carbon reduction
– In 2020 our total revenue from clients was £12.0 billion
– We participate in company and industry meetings with
governments and regulators to ensure policies are developed
taking into account the interests of our clients and the
industry
– Our public affairs agencies engage in public policy activity on
behalf of clients, including direct lobbying of public officials
and influencing public opinion
– In 2020 we contributed £1.3 billion in taxes to public finances
– We regularly survey our staff about their experiences at work
– We have extensive internal communications programmes and
platforms to keep staff informed
– In 2020 we launched new wellbeing resources, including in
relation to mental health, and held CEO virtual townhalls and
“safe rooms” for open and candid discussions
– In 2020 we spent £19.7 million on staff training
– We aim to reach net zero carbon emissions across our value
chain by 2030, and to reach net zero emissions across our
owned operations and 100% renewable electricity by 2025.
– We engage with corporate, government and NGO clients,
on issues ranging from climate action to Covid-19 and human
rights, during the development of their campaigns
– We regularly meet with investors, rating agencies and
benchmarking organisations on sustainability issues
– Our total social contribution in 2020 was £76.2 million:
including pro bono work for NGOs and charities; negotiating
free media space on behalf of pro bono clients; and cash
donations to charities
– We encourage our people to volunteer their time
– We contribute to early-career development through
internships, apprenticeships and the WPP Foundation
For more on how the Board engages with our stakeholders, please see page 117.1 And to find out how we engage on sustainability, please see
the Sustainability Report 2020.
1 As a Jersey incorporated company, WPP is not subject to UK legislation. However, as a matter of good governance and in order to comply with the provisions of the 2018 UK Corporate Governance
Code, the Board considers the matters described in Section 172 of the Companies Act 2006 in its decision-making.
WPP ANNUAL REPORT 2020
15
STRATEGIC REPORT
INVESTMENT CASE
The unrivalled combination of
our deep client relationships,
global scale and value-creating
growth strategy underpins the
attractiveness of our investment
proposition.
In 2020 the attractiveness of our investment
proposition was demonstrated by our
performance, which exceeded both our own
expectations and those of the market. Against
this background, at our Capital Markets Day in
December we established a set of stretching
medium-term financial targets.
FINANCIAL TARGETS AND PERFORMANCE
Revenue less
pass-through
costs growth
-8.2%
mid-single-
digits
percentage
3-4%
2020 actual
2021 targets
2023 targets
Operating
margin
12.9%
Capital
expenditure
£273m
Average
net debt/
EBITDA
1.6x
13.5-14.0% £450-500m
15.5-16.0% £300-350m
1.5-1.75x
1.5-1.75x
Read more about our outlook
and guidance on page 65
1
2
3
4
5
6
1 Guidance as published in 2020 interim report.
16
WPP ANNUAL REPORT 2020
DEEP CLIENT RELATIONSHIPS WITH
LEADING GLOBAL BUSINESSES
DEEP CLIENT RELATIONSHIPS WITH LEADING GLOBAL BUSINESSES
– Partner to most of the world’s largest companies, including 325 of the Fortune Global 500
– Strong and unique CEO, CMO and CIO relationships
– Global Client Leaders, providing easy access to the breadth and depth of WPP
UNRIVALLED GLOBAL REACH
AND SCALE
ATTRACTIVE AND GROWING
ADDRESSABLE MARKETS
SIGNIFICANT STRENGTHS
IN TECHNOLOGY AND DATA
A STRONG FINANCIAL POSITION
VALUE CREATION FROM
STRATEGIC PLANS TO
ACCELERATE GROWTH
VALUE CREATION FROM STRATEGIC PLANS TO ACCELERATE GROWTH
– Expanding further into high-growth areas, from 25% of our business today to 40% by 2025
– Targeting annual gross cost savings of £600 million by 2025 and reinvesting £400 million
into talent, technology and incentives to drive growth
– Intention to grow dividend annually with a pay-out ratio around 40% of headline EPS
UNRIVALLED GLOBAL REACH AND SCALE
– A global network of leading agencies, providing unrivalled geographic reach
– Home to GroupM, the number one media-buying operation globally, providing value
and premium inventory
– Present in 111 countries worldwide, providing deep in-market expertise
ATTRACTIVE AND GROWING ADDRESSABLE MARKETS
– Extended offer to high-growth areas of commerce, experience and technology
– Repositioned traditional communications offer to faster-growth digital communications
– Over half of revenue is from companies in the consumer packaged goods, technology
and healthcare & pharma sectors, which were the least impacted by Covid-19
– Strong exposure to faster-growing economies such as China, India and Brazil
SIGNIFICANT STRENGTHS IN TECHNOLOGY AND DATA
– Scaled global partnerships with 25 leading technology companies
– WPP Open, our common data and technology platform for sharing innovations across
WPP and its strategic technology partners, agencies and clients
– Deep specialisation in technical capabilities in advertising and marketing technology
– Distributed innovation throughout our agencies
$10bn
of client billings
across Google,
Amazon and
Facebook
A STRONG FINANCIAL POSITION
– Diverse revenue streams from a balanced global portfolio
– Resilient revenue streams from a varied client base that covers all business sectors
– Predominantly variable cost structure, which protects profitability during a downturn
– Strong balance sheet and ample liquidity due to strong cash generation and over
60 disposals
8.1
of our revenue less
pass-through costs
Average client
satisfaction score
comes from our top
(out of 10)
31%
30 clients
111
countries in our
global network
$60bn+
GroupM annual media
investment
41%
10%pa
Digital % of GroupM
client spend
billings (+4ppt YoY)
growth expected
in commerce,
experience and
technology sectors
21,000+
technology partner
accreditations and
certifications earned
£6.4bn
of total liquidity
including £4.3bn
12.9%
Headline operating
margin
of cash
1.6x
Average net debt/Headline EBITDA
£3.5bn+
cash from >60
disposals
£600m
approximate annual
cost savings
expected by 2025
INVESTMENT CASE
STRATEGIC REPORT
UNRIVALLED GLOBAL REACH
AND SCALE
ATTRACTIVE AND GROWING
ADDRESSABLE MARKETS
SIGNIFICANT STRENGTHS
IN TECHNOLOGY AND DATA
A STRONG FINANCIAL POSITION
1
2
3
4
5
6
DEEP CLIENT RELATIONSHIPS WITH
LEADING GLOBAL BUSINESSES
DEEP CLIENT RELATIONSHIPS WITH LEADING GLOBAL BUSINESSES
– Partner to most of the world’s largest companies, including 325 of the Fortune Global 500
– Strong and unique CEO, CMO and CIO relationships
– Global Client Leaders, providing easy access to the breadth and depth of WPP
UNRIVALLED GLOBAL REACH AND SCALE
– A global network of leading agencies, providing unrivalled geographic reach
– Home to GroupM, the number one media-buying operation globally, providing value
and premium inventory
– Present in 111 countries worldwide, providing deep in-market expertise
ATTRACTIVE AND GROWING ADDRESSABLE MARKETS
– Extended offer to high-growth areas of commerce, experience and technology
– Repositioned traditional communications offer to faster-growth digital communications
– Over half of revenue is from companies in the consumer packaged goods, technology
and healthcare & pharma sectors, which were the least impacted by Covid-19
– Strong exposure to faster-growing economies such as China, India and Brazil
SIGNIFICANT STRENGTHS IN TECHNOLOGY AND DATA
– Scaled global partnerships with 25 leading technology companies
– WPP Open, our common data and technology platform for sharing innovations across
WPP and its strategic technology partners, agencies and clients
– Deep specialisation in technical capabilities in advertising and marketing technology
– Distributed innovation throughout our agencies
A STRONG FINANCIAL POSITION
– Diverse revenue streams from a balanced global portfolio
– Resilient revenue streams from a varied client base that covers all business sectors
– Predominantly variable cost structure, which protects profitability during a downturn
– Strong balance sheet and ample liquidity due to strong cash generation and over
60 disposals
VALUE CREATION FROM
STRATEGIC PLANS TO
ACCELERATE GROWTH
VALUE CREATION FROM STRATEGIC PLANS TO ACCELERATE GROWTH
– Expanding further into high-growth areas, from 25% of our business today to 40% by 2025
– Targeting annual gross cost savings of £600 million by 2025 and reinvesting £400 million
into talent, technology and incentives to drive growth
– Intention to grow dividend annually with a pay-out ratio around 40% of headline EPS
31%
of our revenue less
pass-through costs
comes from our top
30 clients
8.1
Average client
satisfaction score
(out of 10)
111
countries in our
global network
$60bn+
GroupM annual media
investment
10%pa
client spend
growth expected
in commerce,
experience and
technology sectors
21,000+
technology partner
accreditations and
certifications earned
12.9%
Headline operating
margin
41%
Digital % of GroupM
billings (+4ppt YoY)
$10bn
of client billings
across Google,
Amazon and
Facebook
£6.4bn
of total liquidity
including £4.3bn
of cash
1.6x
Average net debt/Headline EBITDA
£3.5bn+
cash from >60
disposals
£600m
approximate annual
cost savings
expected by 2025
WPP ANNUAL REPORT 2020
17
STRATEGIC REPORT
THE MARKET
Growth opportunities in digital,
ecommerce and purpose.
2020 MARKET OVERVIEW
The impact of Covid-19 began to be felt
from March onwards, causing widespread
restrictions on economic activity. The market
began to recover in the latter half of the
year, with GroupM estimating that global
advertising fell by 5.8% during 2020, a
substantially better outcome than the 11.8%
annual decline predicted in June. Within this,
spend on digital media increased to 59.3%
of total spend in 2020, from 51.6% in 2019,
underpinned by growth in ecommerce and
the increasing importance of a seamless
omnichannel customer experience.
DIGITAL AND ECOMMERCE DEMAND
ACCELERATING
One of the prevailing outcomes of the
pandemic has been the acceleration in
underlying structural trends. Lockdown
restrictions across the globe have brought
about unprecedented growth in ecommerce,
with a greater proportion of consumers
shopping online. GroupM estimates that
global retail ecommerce – including
automotive sales but excluding food and
delivery services – saw growth of 21% in
2020, amounting to 17% of global retail sales.
China, the world’s largest ecommerce
market, saw penetration reach 25% in 2020
and equivalent sales accounted for 14% and
18% of total retail activity in the United States
and UK, respectively. As a result, brands
have had to put greater focus on their
digital strategies.
In terms of trends by sector, linear TV
advertising has continued to decline with
production and live events taking a pause,
while streaming services have grown at a
rapid pace. Advertising spend on outdoor,
cinema and print has fallen significantly as
consumers have been spending an increased
amount of time at home.
Consumer packaged goods, technology and
pharmaceuticals businesses (57% of WPP’s
revenue less pass-through costs from our top
200 clients for 2020) have held up reasonably
well as demand for their services has either
been less impacted or, in some cases,
slightly increased. On the other hand,
automotive, luxury & premium, travel and
leisure businesses (22% of revenue less
pass-through costs from the top 200 clients)
have been the hardest hit and this in turn has
been reflected in their marketing spend.
GLOBAL ADDRESSABLE MARKETING
EXPENDITURE 2019 ($310bn)1
$bn
● Communications 168
● Experience 54
● Commerce 25
● Technology 63
Trends in spend by geography have
predominantly been driven by restrictions
on economic activity and the maturity of
digital channels. Based on GroupM findings,
China saw growth in advertising spend of
6.2% in the year, reflecting its rapid response
to the pandemic. Spend in the UK and
United States, excluding political advertising,
declined by 4.4% and 7.3% respectively,
with these markets performing better than
expected in the second half of the year as
they benefited from the growth in
ecommerce. Across other major markets
in Europe activity was mixed: France saw
advertising spend fall by 15.5%, while the
market in Germany was more robust with
spend falling by 2.0% in the year.
GLOBAL ADVERTISING SPEND BY MEDIA2
%
ECOMMERCE % OF RETAIL SALES3
%
35
REVENUE LESS PASS-THROUGH COSTS
BY CLIENT INDUSTRY4
2020
41
31
2015
69
25
15
5
59
2017
UK
2018
United States
2019
2020
Q3
● Digital
● Traditional (Outdoor, Cinema, Print and TV)
Source: IDC, except GroupM/WPP for communications.
1
2 Source: GroupM This Year Next Year report.
3 Source: US Consensus (Nov-20) and ONS internet
retail sales (UK).
4 % of total top 200 clients designated to each industry.
18
WPP ANNUAL REPORT 2020
Consumer Packaged
Goods 26%
Automotive 14%
Technology 18%
Healthcare & pharma 13%
Telecom, media &
entertainment 7%
Retail 5%
Other 5%
Financial services 4%
Luxury & premium 6%
Travel & leisure 2%
THE MARKET
STRATEGIC REPORT
Covid-19 is accelerating existing market trends
Why WPP is well positioned
to manage and benefit from this
Growing importance of
purpose and reputation
– Purpose and reputation are more critical
than ever, driven by the lasting impact
of the Covid-19 pandemic, the need for
racial equity, the safety of social media
platforms, and many other issues.
Consumers continue to expect more from
companies. In 2020 brands perceived as
having a high positive impact on society
grew at 2.5 times the rate of others1
85%
of consumers
believe that brands
should be about
more than just profit
Source: Wunderman
Thompson Intelligence
– Our agencies have the skills
to advise clients on how best
to embed purpose and
sustainability in their
marketing, and to meet the
growing demand for services
that promote and protect
the reputations of brands
and businesses
Technology reshaping old
consumer models – mass
media, bricks & mortar –
with new expectations
of personalisation and
immediacy
– Technology is disrupting traditional media
platforms: investment in physical retail
stores and linear television for mass-media
audiences is shifting towards ecommerce,
digital channels and personalised
messaging, requiring agencies to possess
skills in data and technology alongside
traditional strengths in communications
61%
digital % of global
ad spend by 2021
(2015: 31%)
Source: 2020 Gartner
CMO Spend Survey
Collision of
communications, content
and commerce, powered
by data and technology
– Covid-19 has accelerated the growth of
digital media channels: ecommerce
accounted for 27% of UK sales and 14%
in the United States in Q3 2020; and
demand for streaming services and social
media is exploding. These changes require
permanent shifts in the way media
strategies are designed and developed
1bn
hours of video
watched on
YouTube daily
Source: Digital TV research
– With our modern offer to
clients, we deliver integrated
campaigns across digital and
traditional platforms
– We are helping brands shift
to ecommerce, supporting
$30 billion of gross merchandise
value sales over WPP-built
ecommerce platforms
– Approximately 41% of our
media billings are digital
– Four of our creative and digital
agencies were named as
leaders in the influential
Gartner Magic Quadrant study
– We invest over $10 billion per
year for clients with Google,
Amazon and Facebook
CMOs are becoming
Chief Growth Officers,
requiring new skills
and support
– The structural change driven by
technology has broadened CMOs’
responsibilities, increasing the need to
deliver end-to-end customer experiences
and react to real-time changes in
consumer behaviour. This in turn requires
greater advice and support from agencies
68%
of CMOs expect
martech budgets
to increase
Source: 2020 Gartner
CMO Spend Survey
– Modern marketing technology
expertise: 3,200+ Adobe
Experience Cloud specialists
– We are a top three global
partner to Adobe and
Salesforce in marketing
technology
– Growing relationships with
client CIOs as well as CMOs
Marketing value chain is
evolving with disruptive
entrants and operating
models
– Alongside traditional competition from
“We have all the skills
– We differentiate ourselves
holding companies and specialist agencies,
newer challengers such as technology firms
and consultants are entering parts of the
value chain, requiring agencies to promote
their consulting and technology capabilities
alongside their creative offerings
our clients need,
and our creativity is
what sets us apart.”
Mark Read
Chief Executive Officer
through our strongest asset
– our creativity – which runs
throughout our modern
integrated offer of
communications, experience,
commerce and technology
1 Kantar Purpose 2020 report.
WPP ANNUAL REPORT 2020
19
STRATEGIC REPORT
20
WPP ANNUAL REPORT 2020
STRATEGIC REPORT
SCIENCE
WILL WIN
AGENCIES
GREY NEW YORK,
H+K, LANDOR & FITCH
CLIENT
PFIZER
Before the onset of the Covid-19
pandemic, Pfizer had asked Grey Health &
Wellness and H+K to create a corporate
reputation campaign, building on a brand
strategy devised by Landor & Fitch, to
support the company’s business and
cultural transformation.
Science Will Win highlighted the
company’s dedication to harnessing the
power of science to improve people’s
lives, but it soon turned into something
much bigger than that. As Covid-19 took
hold, Science Will Win became a rallying
cry. Grey created a moving spot featuring
Pfizer employees and saluting the global
scientific community’s unprecedented
collaborative effort to end the pandemic
and restore public health. Its message
was uplifting, optimistic and defiant, as
Pfizer and its peers raced to create and
roll out vaccines around the world, and it
struck a chord with millions of viewers.
YouGov named it one of the most
effective campaigns in the United States in
2020, and reported that Pfizer’s advertising
awareness grew by two thirds during the
year. As Science Will Win moves into
2021, H+K is helping the client to make
scientific storytelling more accessible and
inclusive, working with diverse voices to
promote Pfizer’s belief that science will
only win if it wins for everyone.
66%
increase in
awareness
WPP ANNUAL REPORT 2020
21
STRATEGIC REPORT
OUR STRATEGY
A strategy for
growth: for our
people, our clients,
our agencies and
our shareholders.
“ IN PARTNERSHIP
WITH OUR AGENCY
BRANDS WE ARE
DEEPENING AND
ACCELERATING THE
CHANGE ALREADY
HAPPENING
WITHIN WPP.”
Mark Read
Chief Executive Officer
We have made
significant progress
since launching our
new strategy in 2018.
22
WPP ANNUAL REPORT 2020
It has been two years since we set out our
strategy to return WPP to growth. We have
made significant progress, with stronger
agency brands, new leadership, a simpler
structure and a strong balance sheet. The
results were evident in our industry-leading
new business performance in 2020.
The events of 2020 have only accelerated
the structural changes in our industry, from
the expansion of digital channels to growing
demand for ecommerce solutions. The actions
that we have taken have positioned us well,
and we are already working with 76 of our
top 100 clients on ecommerce. There are
significant new growth opportunities for
WPP as clients demand simple, integrated
solutions that combine creativity with
technology and data expertise. Clients
need trusted partners more than ever to
help them transform and succeed.
In December 2020, we held a Capital Markets
Day to provide an update on progress and to
outline our plans to accelerate our growth.
We aim to return our communications
business to sustainable growth and invest
further in the high-growth areas of
commerce, experience and technology.
A new transformation programme will make
us more effective and efficient as we share
expertise across a simpler company of
stronger agency brands. We are targeting
approximately £600 million of cost savings
by 2025, of which £400 million will be used
to fund investment in the capabilities and
technology that will drive future growth for
our people, our clients, our agencies and
our shareholders.
OUR STRATEGY
STRATEGIC REPORT
VISION
& OFFER
Read more from page 24
CREATIVITY
Read more from page 28
DATA &
TECHNOLOGY
Read more from page 32
SIMPLER
STRUCTURE
Read more from page 38
PEOPLE &
CULTURE
Read more from page 46
A vision developed with
our people and clients
and a modern offer to
meet the needs of our
clients in a rapidly
changing market.
A renewed commitment
to creativity, WPP’s
most important
competitive advantage.
Harnessing the strength
of marketing and
advertising technology,
and our unique
partnerships with leading
technology firms.
Reducing complexity
and making sure our
clients can access the
best resources from
across the Company.
Investment in our people,
culture and values to
ensure WPP is the natural
home for the best and
brightest talent.
23
Our approach to sustainability
aligns with our strategy.
See page 66
WPP ANNUAL REPORT 2020
STRATEGIC REPORT OUR STRATEGY
VISION & OFFER
Meeting the needs of
modern marketing.
“ WE CAN HELP
BUSINESSES AND
BRANDS ADAPT AND
TRANSFORM
FASTER.”
Laurent Ezekiel
Chief Marketing & Growth Officer
A FOCUS ON HIGHER-GROWTH AREAS
In 2018 we set out a new vision and
contemporary offer to meet the needs of
modern marketing, spanning the full range
of services and disciplines essential for our
clients’ success. Alongside our core
strengths in communications, we have
also become a leader in experience,
commerce and technology.
The profound changes to consumer
behaviour brought about by Covid-19 have
only accelerated client demand for these
future-facing capabilities. According to
GroupM estimates, global retail ecommerce
grew 21% in 2020, representing 17% of
global retail sales1.
The market opportunity in these newer areas
is sizeable and we are strongly positioned to
capitalise on it. Just under half of the
addressable market is in the higher-growth
sectors of experience, commerce and
technology, where client spend is forecast to
increase by some 10% annually over the next
three years. The balance of spend is in our
core communications services, which are
expected to grow around 1% annually.
Given these trends, our goal is to return our
core communications business to sustainable
growth, through a focus on digital
communications, and to expand further into
the higher-growth areas – increasing their
share of revenue from 25% to 40% by 2025.
We are seeing increased demand from our
largest clients for these new services as they
invest in digital technologies, data-driven
marketing, ecommerce and personalised
customer experiences.
A recent example is the retention and
expansion of our relationship with Walgreens
Boots Alliance. At the heart of the new
partnership model is a data and technology
solution that will pair WBA’s rich first-party
data set with WPP’s industry-leading
marketing technology capabilities.
AGENCIES: OUR GROWTH PLATFORM
This re-orientation of the Company into the
growth areas of our industry is supported by
the move to fewer, stronger agency brands
within WPP, which have fully integrated
offers combining creativity and digital
expertise, and are better equipped to grow
as a result.
The newly integrated agencies Wunderman
Thompson and VMLY&R have been among
WPP’s strongest performers.
To support and increase our capabilities in
fast-growth areas we have continued to
make targeted acquisitions of technology,
digital innovation and data companies, such
as Sandtable, Xumak and – at the beginning
of 2021 – DTI Digital and NN4M. We have also
invested in the new innovation and business
transformation consultancy, Proto.
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WPP ANNUAL REPORT 2020
The effectiveness of our offer was reflected
in our industry-leading new business
performance in 2020 with $4.4 billion of
net new billings won during the year.
LOOKING AHEAD
As we look to the future, we will build on this
strength by investing further in the people,
platforms and partnerships that enhance our
capabilities at scale, and continue to engage
in targeted acquisitions, scalable across
WPP, which bring in additional talent, skills
and technology.
40%
Expected share of WPP revenue from
experience, commerce and technology
by 2025
1
Including automotive sales, but excluding food
and delivery services.
OUR STRATEGY
STRATEGIC REPORT
DISTANCE
DANCE
AGENCY
GREY NEW YORK
CLIENT
PROCTER & GAMBLE
Following a call from the Governor of
Ohio to the CEO of P&G, asking for help
in communicating stay-at-home and
social distancing messages to a younger
audience, the client reached out to Grey.
Grey collaborated with TikTok’s number
one global influencer, Charli D’Amelio,
to create #DistanceDance, a Covid-19
safety campaign designed to reach a
demographic who might not be watching
the news through traditional channels.
In its first week, #DistanceDance
attracted more than eight billion views
and 1.7 million imitation dances from
celebrities, other influencers, college
mascots, all of the major sports leagues
and members of the public. It became
the most viewed video in the history
of TikTok. By participating in the
#DistanceDance challenge, followers
generated donations, with P&G promising
to contribute to Feeding America and
humanitarian aid organisation Matthew 25:
Ministries for the first three million videos.
All parties donated their time and media
for the campaign.
17.7bn
views
#1
influencer recruited
on TikTok
@
charlidamelio
WPP ANNUAL REPORT 2020
25
STRATEGIC REPORT OUR STRATEGY
VISION & OFFER
26
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
NOT JUST A
CADBURY AD
AGENCIES
OGILVY MUMBAI, WAVEMAKER
CLIENT
CADBURY
Diwali is the festival of lights, but last
year the festivities were dimmed as the
pandemic adversely affected the Indian
economy. Everyone needed a little help to
get back on their feet, especially the small
local stores, so Ogilvy and Wavemaker
helped Cadbury launch #NotJustACadburyAd.
The brand didn’t just advertise itself, but
thousands of small businesses, too. The
agencies mapped local stores across India
through their pin codes and geo-targeted
customised ads to promote the stores in
their areas. Using AI, the agency created
thousands of hyper-personalised versions of
the same ad, prompting viewers to support
their local stores, and making everyone’s
Diwali happier and sweeter.
32%
sales increase
35m
total impressions,
with 9.4 million
video views
14.4%
6%
uplift in ad recall
uplift in consideration
WPP ANNUAL REPORT 2020
27
STRATEGIC REPORT OUR STRATEGY
CREATIVITY
Investing in extraordinary
work and the talented
people who produce it.
AWARDS IN 2020
Holding Company
of the Decade
Pencils won by eight
creative agencies
Most effective marketing
communications company
2012-2020
89 awards; top honours
to Ogilvy and AKQA
BCW first in 2020 Global
Creative Index
THE ESSENTIAL INGREDIENT
Our clients come to us for an increasingly
wide range of skills, services and
capabilities, but outstanding creativity
remains firmly at the top of the list. It is an
essential ingredient for the kind of truly
transformative work required to launch,
elevate, reinvent and future-proof the
world’s most successful brands.
Creativity takes many forms: from the classic
“Big Idea” to ground-breaking product
innovation, inspired media planning, the
forging of fresh paths to reach consumers,
ingenious public relations campaigns and
new ways of applying technology.
Take a look at the work of WPP agencies
at the Super Bowl – the world’s greatest
marketing showcase – and you will see
everything from moving and hilarious TV
spots to unique, technology-enabled
experiences and social media activations
that reach millions. Real creativity transcends
marketing channels and disciplines – at heart
it is about how we solve problems, and
generate impact.
INVESTING IN TALENT
Creativity is also a scarce resource. It takes
special talent, and that means investing in
the special people who possess it. In 2020
we recruited some of the industry’s brightest
creative talent, including Laura Jordan
Bambach and Justine Armour at Grey,
Danilo Boer and Marcos Kotlhar at Ogilvy, and
Walter Geer and Noel Cottrell at VMLY&R.
This year, we announced the appointment
of Rob Reilly as Global Chief Creative Officer
of WPP, with a brief to champion creativity
throughout the Company and foster a culture
that delivers extraordinary work for our
clients. He is also tasked with attracting and
nurturing the best creative talent, driving
inclusion and diversity in creative work and
teams, and working with technology
partners to fuel the creativity needed for
their platforms.
Rob, who was previously Global Creative
Chairman of McCann Worldgroup and joins
WPP in May, is one of the industry’s most
respected leaders, known for helping to
create iconic ideas for the most impactful
global brands. He will act as a partner to
CEO Mark Read, as well as the CEOs and
Chief Creative Officers of WPP’s agencies,
and his appointment is a clear signal of
WPP’s creative ambition.
Also this year, we appointed Dave Rolfe to
the new role of Global Head of Production for
WPP and Hogarth, our creative production
arm. Dave is widely acknowledged as a
pioneer in his field and celebrated for his
transformative work for clients. He will be
responsible for a strategy that lifts the role of
production in delivering creative excellence
across WPP.
BOLD AMBITIONS
The best creative people want to work for
the organisations with the strongest creative
reputations. At WPP our ambition is to be
seen not only as the most creative company
in our sector, but in the world.
We begin from a position of strength: in
2020 the Cannes Lions International Festival
of Creativity named WPP as the most
creative company of the decade, and we
were ranked the most effective marketing
communications company in the world in
the Effie Index, for the ninth successive year.
No fewer than eight WPP agencies were
recognised by D&AD, which celebrates
excellence in commercial creativity, and
BCW, our global public relations agency,
was ranked number one in PRovoke Media’s
annual Global Creative Index.
LOOKING AHEAD
Investing further in creativity – in particular
in the United States – will continue to be at
the heart of our strategy. As well as hiring
fresh talent we are funding development
programmes for our creative leaders to
ensure their skills evolve as fast as the
landscape around us; working with our
technology partners to bring new
innovations and ideas to life; and making
it easier for creative talent to move around
our agencies so they can build an entire
career within WPP.
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WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
WE WATCHED
IT ALL
AGENCY
AKQA SÃO PAULO
CLIENT
NETFLIX
As one of the last year’s few entertainment
options, Netflix has been both a source of
sanity, but also endless scrolling. Audiences
had spent so many hours in front of screens
that there was a collective feeling everything
had been watched on the platform. AKQA
helped Netflix to turn this phenomenon into
a celebration, a joyful playlist in an otherwise
melancholy year.
In a surreal musical film, after receiving a
prompt that he’s “finished Netflix”, a fan is
taken on an immersive trip down memory
lane – back through everything he and the
wider audience had watched and felt,
together.
As our hero moves through his retrospective
journey, the lyrics and bizarre visuals make
fan-centric references to some of 2020’s
most talked-about moments. The film was
teased with a back-and-forth on social media
between the protagonist and Netflix itself,
and followed up with augmented reality
filters and music track releases.
The film featured cameo appearances from
Chris Hemsworth (Extraction), Anya Taylor-
Joy (Queen’s Gambit), Álvaro Morte (La Casa
de Papel), Lily Collins (Emily in Paris), and Asa
Butterfield and Ncuti Gatwa (Sex Education).
204m
Netflix paid
memberships
190
Netflix countries with
paid memberships
WPP ANNUAL REPORT 2020
29
STRATEGIC REPORT OUR STRATEGY
CREATIVITY
THE MOLDY
WHOPPER
AGENCY
INGO STOCKHOLM, DAVID MIAMI,
PUBLICIS
CLIENT
BURGER KING
Over the past three years Burger King
has removed 8,500 tonnes of artificial
preservatives from its products worldwide.
The brief was to tell this story to the world.
Burger brands often showcase their
products in the same way: juicy, beautiful
and with over-produced photographs. As a
result, it can be hard to believe that the food
shown in those photos is real. So Burger King
decided to break with convention with a
campaign called the Moldy Whopper,
featuring the iconic burger rotting over
a period of 35 days.
A simple and clear message, showing that
Burger King food has no preservatives.
The campaign was talked about around the
world, delivering commercial results for
the client and winning numerous awards
for outstanding creativity.
+14%
sales
$40m
8.4bn
impressions
+88%
earned media value
positive sentiment
Winner
D&AD Black Pencil
The One Show –
Best of Show
ANDYs – Bravest
EPICA Grand Prix
30
WPP ANNUAL REPORT 2020
OUR STRATEGY
OUR STRATEGY
STRATEGIC REPORT
STRATEGIC REPORT
WPP ANNUAL REPORT 2020
31
STRATEGIC REPORT OUR STRATEGY
DATA & TECHNOLOGY
Fuelling our growth
and future-proofing
our strategy.
“ DATA AND
TECHNOLOGY ARE
FIRMLY EMBEDDED
AT THE HEART OF
WPP’S OFFER.”
Stephan Pretorius
Chief Technology Officer
A TECHNOLOGY-DRIVEN WORLD
We know that technology is shaping the
world around us. Technology underpins
every aspect of the work we do for clients:
how we understand consumers and markets,
how we plan, buy and optimise campaigns,
and how we connect consumers with brands
and businesses. It allows us to innovate,
it increases operational efficiency, and it
enables us to deliver work that moves
consumers and grows brands. Most of all, it
allows us to augment creativity and deliver
creative transformation for our clients.
OUR TECHNOLOGY STRATEGY
Our technology strategy is designed to
address four key trends in our industry:
– the increasing fragmentation and
complexity in the media landscape;
– consumers’ changing attitude to data
ownership and use;
– the use of marketing technology to deliver
connected consumer experiences;
– the consumerisation of creative
technologies.
In light of these trends we are re-inventing
what a best-in-class data and technology
offering looks like, building products and
solutions not currently available in the
market, and always focusing on empowering
our clients to be the masters of their own
data and technology destiny.
We are embedding a future-proofed strategy
across our business which harnesses our
strengths – distributed innovation, scaled
global partnerships, deep specialisation and
an open platform which will change how we
mobilise, utilise and administer data and
technology for our clients. This strategy is
built on three components: the Platform
to deliver our services; the People who
bring our offers to life; and the Partners
we work with.
PLATFORM
Throughout 2020 we have been rolling out
WPP Open, a common data and technology
platform that makes the best technology
innovation from across WPP available to our
agencies and clients. To date we have
developed and commercialised 30
proprietary data and technology products
through WPP Open.
PEOPLE
We are investing in our people and building
a learning culture to give them the right
technology skills across cloud, AI and data
science, marketing and advertising
technology, creative technologies and
digital media platforms. As a top three
partner with Adobe, we have developed
deep specialisation in Adobe services. More
than half (over 50,000) of WPP employees
use Adobe Creative Cloud daily.
We are also building expert communities
across WPP, intent on deepening
collaboration and expertise in the areas
of data and technology.
PARTNERS
We have holistic partnerships with many
of the world’s largest and most innovative
technology companies, including Adobe,
Amazon, Facebook, Google, IBM, Microsoft
and Salesforce, providing us with preferential
access to data and technology, joint product
development, skills development and joint
go-to-market programmes. We have
received over 21,000 accreditations and
certifications from these partners,
strengthening our technical expertise.
With the addition of TikTok in 2021, we now
have 25 global technology partners. This
first-of-its-kind agreement provides WPP
with early access to advertising products in
development, ensuring WPP and its clients
remain at the forefront of innovation as TikTok
further develops its suite of products for brands.
LOOKING AHEAD
The scale and adoption of WPP Open as our
core technology and data platform will be a
key focus for the year ahead. This will enable
us to double-down on innovating and
investing in areas of key client demand, be
that in addressable media, customer data
management, identity resolution, customer
experience, virtual production or commerce.
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WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
WPP AND TIKTOK:
A NEW GLOBAL
PARTNERSHIP
Fresh opportunities for creative
excellence and innovative ways for
clients to reach their customers.
In February 2021, WPP and TikTok – the
short-form mobile video phenomenon –
formed a global partnership that was the
first of its kind in the industry. It enables
WPP agencies and clients to tap into the
culture-shaping impact and reach of
TikTok, and to benefit from unique access
and capabilities on the platform.
The opportunities for brands from
short-form video and digital content
continue to grow. As TikTok’s designated
Lead Agency Development Partner for
new, creator-focused APIs, WPP will have
early access to advertising products in
development, ensuring we and our clients
remain at the forefront of innovation.
TikTok will also collaborate with its
talented community to build a diverse
network of creators to partner with WPP
and select advertisers.
Additionally, WPP and TikTok will
co-create an industry-leading training
and accreditation programme for WPP
agencies, which will secure priority
access to content tailored to media
and creative disciplines.
2bn+
TikTok app
downloads
3tn+
TikTok video views
700m+
TikTok monthly
active users
WPP ANNUAL REPORT 2020
33
STRATEGIC REPORT OUR STRATEGY
DATA & TECHNOLOGY
RESERVING
A LEGEND
AGENCIES
GTB, VMLY&R
CLIENT
FORD
For most people, buying a car is driven by
sense and feeling – the touch of the body,
the sound of the engine, the smell of the
interior. How then to drive desire ahead of
the launch of not one, but two iconic brands,
Bronco and Bronco Sport, during a global
pandemic? The experience also needed to
inspire trust and be hassle-free.
GTB and VMLY&R had already created Ford’s
first online reservation platform – for the
Ford Mustang Mach-E – at the beginning of
2020. With lessons from the Mustang Mach-E
launch in hand, the Ford Bronco and Bronco
Sport reservation experience was re-imagined.
The agencies worked with Ford to
understand the elements of the purchasing
process that could be optimised into a
singular online reservation experience for
all visitors to Ford.com, as well as their local
dealer’s website. The site enabled the
customer to explore the new models in
detail, while making it easy to convert
interest into a tangible experience with
a configurator that helped shoppers to
build their own virtual Bronco.
The results were stellar: the Ford Bronco First
Edition sold out in less than 24 hours, over
190,000 reservations were submitted in the
first three months after the Bronco’s reveal,
and almost half of them were for the most
expensive models. Within three days of the
configurator going live, over 450,000 virtual
Broncos were built.
24 hours
time required for the
Ford Bronco First
Edition to sell out
450,000
virtual Ford Broncos
built within three days
of the configurator
going live
190,000
reservations in the
first three months
34
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
WPP ANNUAL REPORT 2020
35
STRATEGIC REPORT OUR STRATEGY
DATA & TECHNOLOGY
36
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
ADDRESSING
AUDIENCES
AGENCY
FINECAST
Television remains an incredibly powerful
medium, but today people watch it in many
different ways using many different kinds of
devices. Finecast, which is part of our media
investment arm GroupM, provides advertisers
with a single point of access to the entire
modern TV ecosystem.
Finecast Audience Planner is the first and, so
far, the only technology platform globally to
provide holistic campaign planning, pricing
and forecasting capabilities across the
addressable TV marketplace.
It is attracting new clients and driving new
spend on TV by enabling brands to perform
precision targeting within their audiences
and activate first-party data. By integrating
with broadcasters, platforms, data partners
and advertisers, Audience Planner applies
audience intelligence at scale, enabling
clients to break through the complexity
and fragmentation of today’s market, and
to deliver effective, precision-targeted
campaigns across all major TV platforms.
Built from the ground up on WPP’s
technology infrastructure – including Google
Cloud Platform – Audience Planner is highly
scalable and customisable for any market,
with a simple and fast user interface.
The platform launched in the UK in 2020,
and is currently rolling out in every Finecast
market across the globe.
10
40m
markets live by
the end of 2021
TV devices being reached
across the UK
5,000+
campaigns planned
2,000+
audience segments
available to target
WPP ANNUAL REPORT 2020
37
STRATEGIC REPORT OUR STRATEGY
SIMPLER STRUCTURE
CLIENTS
Easy access to our
market-leading capabilities.
“ OUR CLIENT
SATISFACTION
SCORES IMPROVED
IN 2020 DUE TO
THE DEPTH OF OUR
RELATIONSHIPS,
STRENGTH OF
OUR OFFER AND
DEDICATION OF
OUR PEOPLE.”
Lindsay Pattison
Chief Client Officer
A DYNAMIC MARKET
The last year has seen many striking shifts
in the marketing ecosystem: from hyper-fast
changes in messaging and media spend, to
more structural developments such as the
pivot to ecommerce, and the importance
of embracing purpose, diversity and
sustainability to engage employees,
investors and customers.
Many of our largest clients have Global Client
Leaders. These experienced executives make
sure our clients have a simple and clear view
of all we can do across communications,
experience, commerce and technology; they
identify the right capabilities, expertise, and
talent within our agencies; and they ensure
cohesion and collaboration across the
Company for the benefit of our clients.
We are seeing very strong levels of
collaboration across WPP, with an increasing
roster of pitches involving multi-agency
teams and strong co-ordination and support
from the client, new business and technology
capability we are building at the centre of
WPP. This was demonstrated most recently
with the retention and expansion of our
relationship with Walgreens Boots Alliance.
In this context, there has never been a more
exciting time to partner with clients on their
transformation journey. And while many
things have changed during Covid-19, one
constant is the necessity of strong client
relationships.
Clients want their needs understood first,
and then they want WPP to bring its full
resources to provide the service they require
with simplicity, speed and agility across
integrated agency offerings – and with easy
access to best-fit and diverse talent.
A TRUSTED PARTNER TO OUR CLIENTS
Amongst our top 20 clients, we have four
of the world’s most valuable companies
by market capitalisation: Apple, Google,
Microsoft and Johnson & Johnson. Despite
the challenges of the pandemic, we grew
our relationships with half of our top 30
clients in the year – who represent 31%
of our revenue less pass-through costs.
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WPP ANNUAL REPORT 2020
In 2020 we had very positive feedback from
clients and our highest ever client satisfaction
scores, reflecting the strength of our offer,
the depth of our relationships with clients,
and the skills and dedication of our people
during a very challenging period in which
the vast majority were working from home
due to Covid-19 restrictions.
We have both expanded our remit with
existing clients and continued to win new
clients. In 2020 major assignment wins
included companies such as Alibaba, Dell,
HSBC, Intel, Uber, Unilever, WW and
Whirlpool. Overall we were the industry
leader in new business performance across
both creative and media, with $4.4 billion
of net new business won in 2020.1
A key measure of how well we serve our
clients is the improvement in our like-for-like
revenue growth relative to peers. In the final
quarter of 2018 WPP’s growth rate was
3.1 percentage points (pp) less than the
average of our competitors globally and
7.3pp less than the United States average.
Fast-forward two years, to the end of 2020,
and our relative position has improved
significantly: WPP’s growth rate was 0.9pp
better than the average globally and only
0.4pp behind the average in the United States.
LOOKING AHEAD
We still see more room for improvement;
in 2021 our central resources will be focused
on driving client satisfaction and organic
growth. There is significant headroom to
grow, particularly in the high-growth areas of
experience, commerce and technology, and
in enterprise-level initiatives such as business
transformation, DE&I and sustainability.
1 Billings, as defined in the Financial Glossary on page 225.
OUR STRATEGY
OUR STRATEGY
STRATEGIC REPORT
STRATEGIC REPORT
SERVING CLIENTS IN
A CHALLENGING YEAR
Continuous service to clients at a time when
the need for our solutions and expertise has
been greater than ever.
REACT
RECOVER
RENEW
1 SOURCE: GroupM This Year Next Year report total
advertising spend excluding political advertising
in the United States.
WHEN THE WORLD STOPPED
During this critical phase our clients were able
to depend on us for uninterrupted service:
from re-planning their communications
spend, redirecting resources to alternative
channels and maximising their return on
investment, to helping them to communicate
effectively and appropriately.
24 hours
Many new campaigns were developed
in a matter of hours or days instead of
weeks and months
GETTING BACK TO BUSINESS
As clients resumed and reorganised their
operations, they looked to WPP to deliver
new creative ideas and executions, and to
work closely with them to create the “new
normal”. This led to increasing demand for
our public relations, ecommerce, marketing
technology and production capabilities.
76%
We are working on ecommerce with more
than three quarters of our top 100 clients
LOOKING TO THE FUTURE
Today we are helping our clients adapt their
marketing approaches for a post-pandemic
world, in which digital communications,
experience, commerce and technology will
be of ever-greater importance.
59%
Share of digital in the advertising market1
For more information on how
we played our part in responding
to Covid-19 please see
wpp.com/featured/
how-wpp-is-responding-to-covid-19
WPP ANNUAL REPORT 2020
39
STRATEGIC REPORT OUR STRATEGY
SIMPLER STRUCTURE
COMPANIES
We have radically simplified
our structure.
“ WPP NOW HAS
FEWER, STRONGER
AGENCY BRANDS
WORKING BETTER
TOGETHER.”
Andrew Scott
Chief Operating Officer
LOOKING AHEAD
WPP has a material opportunity to leverage
our scale across our agencies, creating a
more efficient operating platform and
unlocking further cost savings.
We will achieve this in three ways:
simplifying our operating model, including
standardising technology and production
platforms across our companies and
consolidating our smaller local agencies;
buying more efficiently as a single
organisation; and reducing real estate
costs by consolidating more of our agencies
into fewer, larger, shared Campuses. For
more on these and other savings initiatives,
please turn to the Chief Financial Officer’s
statement on page 58.
FEWER, STRONGER BRANDS
Over the last two years we have made
substantial progress towards our goal of
radically simplifying our Company.
We now have fewer, stronger agency
brands, following a series of targeted actions
including the merger of several major agency
networks; the disposal of 60 non-core
businesses and investments; the merger of
100 small, local offices; and the closure of
a further 80 business units.
The asset sales have generated proceeds of
over £3.5 billion (including £2.5 billion from
the sale of a 60% stake in Kantar in 2019) and
significantly reduced our debt to low and
sustainable levels.
As a result of these actions, we have a more
streamlined and simplified structure, better
positioning us to serve our clients. We now
have a strong footprint of ten global agency
networks and our overall stable of brands
has been reduced from more than 500 to 220.
We have also grown our use of shared,
multi-agency Campuses for our people,
driving efficiencies and allowing clients
easier access to our talent and expertise.
Today we have a third of our people working
in our Campuses – a significant increase over
the last two years.
CREATING LEADING AGENCIES
In 2020, we announced we would bring
AKQA and Grey together within AKQA
Group, and move Geometry into VMLY&R to
create VMLY&R Commerce, a new end-to-end
creative commerce agency. These moves
follow the creation of Wunderman Thompson
and VMLY&R in prior years.
We now have the right structure of leading
integrated global creative agency brands,
providing clients with a full suite of modern
marketing solutions across communications,
experience, health, ecommerce, data and
technology.
In 2020 we also announced changes within
our public relations business, bringing
together three of our agencies to form
Finsbury Glover Hering, a leading global
strategic communications and public
affairs firm.
40
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
SIMPLER STRUCTURE
COUNTRIES
Integrated country
operations.
“ THROUGH
COLLABORATION
WE ARE ABLE TO
OFFER CLIENTS THE
BEST OF WPP.”
Karen Blackett OBE
WPP Country Manager for the UK
and GroupM UK CEO
GLOBAL SCALE AND LOCAL PRESENCE
Our size is one of our strengths. We have
industry-leading global media-buying scale,
providing both good value and premium
inventory, as well as strong positions in local
markets. This is complemented by a network
of global creative agencies, again with
strong local presence, providing clients with
an integrated suite of marketing solutions.
We have a unique position as one of the
most geographically diversified companies
in the industry with a worldwide reach to
over 100 markets. This comprises an
attractive combination of well-established
and highly profitable markets such as the
United States and UK, and structurally
faster-growing economies, such as India,
China and Brazil.
Within our three main geographic regions
our revenue is broadly balanced, with roughly
one-third each from North America, Western
Europe including the UK, and Rest of the
World markets (Asia Pacific, Latin America,
Africa & the Middle East and Central &
Eastern Europe). Our 20 largest countries are
the key drivers of performance, representing
88% of revenue less pass-through costs.
We are already working with some of the
world’s fastest-growing companies in
markets such as India, China and Brazil.
In 2020 Alibaba appointed Mindshare as its
media agency in China, Dell chose VMLY&R
as lead creative agency in India, and
Campari selected Ogilvy in Brazil.
COUNTRY-LEVEL INTEGRATION
Within our global footprint we have 18
Country and Regional Managers covering
many of our larger markets. As well as
providing depth of local understanding and
insight, they bring the best of WPP to their
markets by promoting WPP’s brand, strategy
and offer, and coordinating the resources of
WPP on behalf of clients.
Our Campus programme is also a key
element of our country-level integration
strategy of leveraging our strengths in
individual markets. Each Campus location
brings our agencies together in modern,
world-class workplaces for our people,
encouraging closer collaboration between
our agencies, providing clients with easier
access to our talent and expertise, and
unlocking efficiencies through consolidation
of smaller office buildings.
In 2020 we added three new Campuses, in
Chicago, Hong Kong and Rome, taking the
total to 20. Before the end of 2021 we expect
to open a further 11 sites. For WPP, every new
Campus is a sign of our commitment to that
country and investment in our people.
LOOKING AHEAD
As part of our strategy for growth, by
leveraging WPP’s existing global strength
we will accelerate our investment in high
growth potential markets, including China,
India and Brazil. For example, earlier this year
we acquired DTI Digital, a leading Brazilian
digital innovation and software engineering
company. These markets are attractive as we
expect them to grow at double-digits annual
rates over the next five years.
Under our simplification strategy, we expect
to locate 85% of our people in Campuses by
2025, compared to 33% today. There is no
doubt that a lasting legacy of Covid-19 will be
to change the way that we work, providing
an opportunity to reduce our space
requirements by about 15-20% on average.
WPP ANNUAL REPORT 2020
41
STRATEGIC REPORT OUR STRATEGY
SIMPLER STRUCTURE
42
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
STRATEGIC REPORT
BOOTIQUES:
BREAKING THE
MOULD OF
CHRISTMAS
AGENCIES
VMLY&R COMMERCE, OGILVY,
MEDIACOM
CLIENT
BOOTS (WALGREENS
BOOTS ALLIANCE)
For last year’s festive season, Boots decided
to break the mould of Christmas advertising.
Instead of an emotive TV spot, a team from
VMLY&R Commerce, MediaCom and Ogilvy
created a multichannel experience for UK
audiences, across digital and traditional
media, that the whole nation could interact
with and enjoy.
Knowing what to buy for your loved ones is
a perennial Christmas problem. Fortunately,
with over 2,500 stores across the UK, Boots
has extensive knowledge about what British
consumers love. Our agencies were able to
use this data to curate bespoke ranges,
answering every gifting problem, no matter
how niche.
The ambition was to speak to as many
consumer tribes as possible, which is why
the team decided to turn every single asset
created into its own shoppable Bootique.
So whatever tribe you were shopping for,
there was a Bootique for you.
The collaborative campaign – brought to
life by a cross-disciplinary team spanning
creative, PR, content, social, advertising,
loyalty and media – also included the launch
of physical Bootique stores across the UK.
+687%
social impressions
+95%
Boots.com
page views
223%
return on ad spend
WPP ANNUAL REPORT 2020
43
STRATEGIC REPORT OUR STRATEGY
SIMPLER STRUCTURE
WORLD-CLASS
WORKING
ENVIRONMENTS
OUR CAMPUS STRATEGY
The WPP Campus programme is a key pillar
of our country-level integration strategy:
providing inspiring spaces for our people to
work, learn and create; encouraging closer
collaboration between our agencies; and
giving clients easier access to our talent
and expertise.
We continue to move employees into
Campuses, closing multiple smaller sites
and replacing them with fewer, larger, more
environmentally friendly buildings that offer
modern, world-class workspaces.
The proportion of our people based in
Campuses has increased steadily from 15%
in 2018 to 33% in 2020, though most of our
colleagues have, of course, been working
from home during the last year. As of
December 2020 the level of office-based
working in some of our main markets was:
United States 2%, UK 3%, Germany 12%,
China 71% and India 10%.
Just as we are helping our clients look beyond
the pandemic, we are doing the same, and in
2020 we opened new Campuses in Chicago,
Hong Kong and Rome. During 2021 we plan
to open another 11 globally.
In the post-Covid world there will be a
greater emphasis on flexible, hybrid models
of working, which the Campus programme
will support through its focus on agility and
shared spaces.
By 2025 we expect 85% of WPP employees
to be based in Campuses, and a reduction
in our office space requirements of between
15 and 20%.
OPENING
IN 2021
Detroit
Düsseldorf
Gurugram
Jakarta
London –
Rose Court
Milan
Prague
San Francisco
Santiago
Seattle
Warsaw
EXISTING
CAMPUSES
Amsterdam
Beijing
Bogota
Bucharest
Chicago
Frankfurt
Hamburg
Helsinki
Hong Kong
Kansas
Lisbon
London –
Sea Containers
House
Madrid
Mexico City
Montevideo
Mumbai
New York – 3WTC
Rome
Shanghai
Singapore
85%
of WPP staff will be
based in a Campus
by 2025
44
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
THE HUNGER
MONSTER
AGENCY
BCW LONDON
CLIENT
ALDI
One in five children lives in food poverty in
the UK. To help combat this, BCW worked
with Aldi to raise awareness, and get
consumers involved in the retailer’s pledge
to donate ten million meals to families in
need in 2021. BCW created a poignant film,
The Hunger Monster, which depicts a young
child’s relationship with hunger and its
devastating effects in a poem by Giles
Andreae, while celebrated illustrator Lisa
Stickley brings the story to life through the
accompanying animation. The team secured
the support of Marcus Rashford MBE,
England footballer and campaigner, to
narrate the poem and throw his weight
behind the campaign.
1.9m
570
animation views
on social media
items of media
coverage
WPP ANNUAL REPORT 2020
45
STRATEGIC REPORT OUR STRATEGY
PEOPLE & CULTURE
How we fulfil our purpose
starts with our people.
“ OUR GOAL IS TO
ATTRACT, RETAIN
AND GROW THE
MOST TALENTED,
CREATIVE AND
INSPIRED PEOPLE
ON THE PLANET.”
Jacqui Canney
Chief People Officer
OUR PEOPLE ARE OUR COMPANY
At WPP we know that our people are our
Company. As we transform and help our
clients to do the same, we need three key
attributes: a clear purpose; a set of values that
guide us; and a strong strategy for growth.
All three come together in our people.
VALUES
Our core values inform how we work,
who we hire and the way we operate as
a business. We foster an inclusive culture
across WPP, one that is equitable, tolerant
and respectful of diverse thoughts and
individual expression. We aim to create a
work experience where people are open to
new ideas, optimistic about the future, and
empowered to do extraordinary work.
WORKING FROM HOME
Since the onset of the pandemic, the safety
and wellbeing of our people has been our
top priority. In 2020 we increased our
investment in wellbeing resources and
initiatives, especially in relation to mental
health – see page 48. We also created new
ways to connect across WPP, from CEO
virtual townhalls to “safe rooms” that offer
more space for open and candid discussions.
We are communicating more often, from
focusing on wellbeing in The Weekly, our
global internal newsletter, to launching WPP
TV, a new platform for our people to share
their creativity, expertise and insights.
Since March 2020 the large majority of our
people have been working remotely. Some
offices have reopened in certain countries
when local rules allowed – all on a voluntary
basis for those who need or want to return
– at reduced capacity and with strict safety
protocols. At the peak around 95% of our
colleagues were working away from the
office. We developed new resources and
guidance to help our people in caregiver
roles, from assisting sick relatives to taking
care of children studying at home.
OUR PEOPLE STRATEGY
Our people strategy is central to WPP’s
vision as a creative transformation company.
At its heart is our goal to attract, retain and
grow the most talented, creative and inspired
people on the planet, those who are drawn
to WPP by our purpose of building better
futures. The strategy is based on three key
pillars: being the employer of choice for all,
modernisation of experiences and growth.
EMPLOYER OF CHOICE FOR ALL
Being the employer of choice for all rests
on our ability to hire and retain exceptional,
diverse talent. Diversity and difference
power creativity – from sex, gender, race
and ethnicity to sexual orientation, age,
religion, disability, family status and so
much more. To succeed, we are seeking
out people who can bring more of these
different perspectives to our client work,
which is why we are partnering with
organisations such as Brixton Finishing
School, RARE recruitment, the One Club
For Creativity and adfellows.
We are also listening more closely to our
people. When we understand their
experiences and learn from them, we create
a deeper sense of belonging and an inclusive
environment where everyone can do
inspiring creative work. To this end, in 2020
we launched our first all-staff survey in our
top five markets to better anticipate our
people’s needs and to shape our people
strategy. This helped to form our 2021
Listening programme, which started with
WPP Pulse – an anonymous, quarterly global
survey, designed to gather and act on
unfiltered, honest feedback.
In June 2020 we made a number of
commitments to advance racial equity.
We view this work as a moral and business
imperative. We committed to take decisive
action on each of the 12 points in the “Call for
Change” open letter from more than 1,200
Black advertising professionals to the
industry; to use our voice within and beyond
our industry; and to invest $30 million over
three years to fund inclusion programmes
within WPP and to support external
organisations. We set out our progress
against these commitments on page 49
of this report, and in more detail in our
Sustainability Report.
46
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
100,000
people
95%
of employees worked from home
at the peak of the Covid-19 pandemic
50
editions of all-staff newsletter
The Weekly, with 1.8 million
unique opens
100%
of our employees have access to the
Employee Assistance Programme
51%
of our senior managers are women
28
CEO virtual townhalls in 2020,
with over 39,000 total participants
Much work remains, but we have made good
progress on gender diversity. The proportion of
women in executive leadership roles increased
to 40%, compared to 37% in 2019, and 43% of
the Board are women. We are currently running
several successful gender diversity initiatives
including WPP Stella, a senior leadership and
networking group, and women’s development
programmes such as Fast Forward and Walk
the Talk. In 2021 we were named an industry
leader in the Bloomberg Equality Index for
the third consecutive year.
In June 2020 we launched WPP Unite!, a
cross-agency LGBTQ+ community, which
advises on policies that impact the LGBTQ+
talent of WPP and its agencies. This year
we were proud to be named one of the
Best Places to Work for LGBTQ Equality
in the 2021 Corporate Equality Index.
MODERNISATION OF EXPERIENCES
We are using technology to improve the
experiences of our people, in the same way
we use it for our clients and their customers.
We are centralising our systems to provide
the data-driven insights for improved
decision-making. We are offering more
user-friendly self-service tools, deploying
new people management software and
helping our teams match employee skills
to client needs more effectively. And we
continue to bring more of our people into
modern, world-class Campuses, targeting
85% of employees by 2025.
Together these modernisation initiatives
to simplify and standardise how we work
form part of our wider business strategy to
generate cost and efficiency savings – which
will help us reinvest in talent and incentives
to drive our growth. For more on these and
other initiatives, please turn to the Chief
Financial Officer’s statement on page 58.
GROWTH
Talent is the life force of WPP. When we ask
our people what they want, opportunities to
grow and learn rank near the top. That is why
we invest in new hires, training and skills
development, to help us compete and to
grow our people, teams and business.
We have named many dynamic new leaders
in the last year, from internal promotions and
external hires. In 2020 we appointed Simona
Maggini as Country Manager for Italy, Nick
Lawson as Global CEO of MediaCom, Andy
Main to lead Ogilvy, and Adam Gerhart as
Mindshare Global CEO, along with other
senior leaders like Kirk McDonald, Devika
Bulchandani and Rachel Higham. In 2021 we
appointed Beth Ann Kaminkow as Global
CEO of VMLY&R Commerce and Rob Reilly
as WPP’s Global Chief Creative Officer.
We spent £19.7 million on training in 2020
with 77% of our people taking part in formal
training programmes. During 2020 we
continued to work with our leading
technology partners such as Adobe,
Amazon, Google, Microsoft and Salesforce to
enhance our technical expertise and gained
over 21,000 accreditations and certifications.
This year, we are increasing our investment
in development programmes to hone the
skills and capabilities we need to transform
and deliver on our business strategy. We are
investing more in leadership development
programmes for women, people of colour
and the next generation of leaders, because
our growth depends on effective, diverse
leadership for many years to come. And we
have launched our new Career Explorer
platform, which provides greater
transparency into job openings so current
and prospective employees have access
to more career paths across WPP.
LOOKING AHEAD
We plan to invest an additional £150 million
annually by 2025 in our people. This will be
targeted at increasing talent and skills in the
fast-growth areas of the industry – such as
experience, commerce and technology – and
boosting our capabilities in AI and machine
learning. The goals are simple: strengthen
skills that unlock better client relationships
and results, make it easier for our people to
move around our agencies, and ensure
more opportunities for growth are open
to all our people.
For more on our people, please turn to
Employer of Choice for All on page 76.
WPP ANNUAL REPORT 2020
47
STRATEGIC REPORT OUR STRATEGY
PEOPLE & CULTURE
WELLBEING
The challenges created by the Covid-19
pandemic, racial injustice, political
division, and many other issues around the
globe have taken their toll on people’s
mental, emotional, financial and physical
wellbeing. There are no simple answers
to these complex issues that affect each
person differently, but by increasing
investment in wellbeing resources for our
people we aim to anticipate and support
their needs.
During 2020 we rolled out our Employee
Assistance Programme to every market
globally to offer our people and eligible
family members access to free, confidential
counselling and support, and we shared
resources on topics such as managing
stress, dealing with loss, and how to
access local financial or legal help.
We launched our “safe room” series in
response to horrific acts of racially
motivated violence in the United States,
so our people would have a space for
open and honest conversations. The series
has since been extended to various
communities including Black women in
leadership and single parents.
To recognise World Mental Health Day
and Mental Health Awareness Month we
curated a global programme of wellbeing
sessions, highlighted educational
wellbeing resources and gave our people
a platform to share their personal tips and
advice on how to look after our mental
and emotional health during lockdown.
In May 2021, we are launching a new
Mental Health Allies programme in the UK,
with a pilot in the United States and the
intention of rolling it out across other
markets. Mental Health Allies are
employees who volunteer to be trained to
support others. As part of this initiative,
we are building a Wellbeing Academy at
the centre of WPP, where Allies and HR
professionals will be able to seek support,
continuous learning and advice.
100%
of employees
can access
Employee
Assistance
Programme
200
UK Mental
Health Allies
by May 2021
48
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
OUR RACIAL
EQUITY
COMMITMENTS
In June 2020, we set out a series of
commitments to help advance racial equity.
We said we would take decisive action on
each of the 12 points in the “Call for Change”
open letter to the industry from more than
1,200 Black advertising professionals; use
our voice to bring about change in and
beyond our industry; and invest $30 million
over three years to fund inclusion
programmes within WPP and to support
external organisations. While there is much
more work to be done, we have made
progress towards these commitments as
we embed diversity, equity and inclusion
(DE&I) into everything we do.
We have established our new Global
Inclusion Council to advise on DE&I goals,
recommend new systems and strategies,
and identify barriers to progress. We
released our most recent United States Equal
Employment Opportunity Commission data
and committed to reporting our workforce
diversity data annually in our Sustainability
Report. To embed DE&I into our hiring and
development processes, all our HR teams
received anti-bias training and we launched
a diverse candidate slate policy in the US
and UK.
We have partnered with organisations such
as the LAGRANT Foundation to help build a
more diverse future talent pool and launched
NextGen Leaders, a virtual learning series for
college students and recent graduates. 55% of
the 846 participants in 2020 were Black, Asian
and Latin American. We have implemented
and are expanding learning and development
opportunities for our employees of colour,
including our Elevate sponsorship programme.
We launched our mandatory Belonging at WPP
inclusion training for all staff globally and a
Conscious Inclusion programme, to raise our
awareness of unconscious bias. We created
an Inclusive Marketing Playbook to enable
WPP teams to put inclusive marketing
principles and best practice front and centre.
And we established our Diversity Review
Panel for our people to raise any concerns
regarding negative stereotypes in our work.
To ensure transparency and accountability,
we have committed to updating our
employees on progress against our DE&I
goals each quarter.
GLOBAL
INCLUSION
COUNCIL
$30m
investment over three years in inclusion
programmes within WPP and to support
external organisations
For further detail on our racial
equity commitments, please see
our 2020 Sustainability Report
WPP ANNUAL REPORT 2020
49
STRATEGIC REPORT OUR STRATEGY
PEOPLE & CULTURE
50
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
I AM
AGENCY
VMLY&R BRAZIL
CLIENT
STARBUCKS
In Brazil, trans people often suffer
prejudice when they don’t have their new
names on official documents. The process
for legally changing names is expensive
and bureaucratic, and the registry offices
where it happens are intimidating
environments for this community.
At Starbucks, anyone who orders a drink at
the counter has their name respected and
written on the cup without question.
So, VMLY&R decided to invite trans people to
have their names legally changed in a place
where they are always welcome. The agency
transformed a local Starbucks into a registry
office, and participants were able to leave
the store with official documents in their
new names – free of charge.
The result was a seven-times increase in daily
legal name changes for the city of São Paulo.
Winner
Grand Prix El Ojo 2020
WPP ANNUAL REPORT 2020
51
STRATEGIC REPORT
OUR STRATEGY
WINNING
IN MEDIA
GroupM is the world’s leading media
investment company, responsible for
more than $60 billion in annual media
investment through agencies Mindshare,
MediaCom, Wavemaker, Essence and
m/SIX. The strength of our media offer
was reflected in our industry-leading
new business performance in 2020,
with $4.8 billion of new media business
won during the year.
According to independent research
consultancy COMvergence, GroupM
won close to three times more new
business than its nearest competitor,
reflecting significant new assignments
during the year including Hasbro,
Sainsbury’s, Walgreens Boots Alliance,
Whirlpool and Uber.
Among individual media agencies,
GroupM companies led the global
rankings. MediaCom was first, with a total
new business value of $1.6 billion, and
Wavemaker second, with $1.4 billion.
HAVAS MEDIA
GROUP
1.1bn
MEDIABRANDS
0.8bn
2020 KEY MEDIA NEW
BUSINESS WINS
TOTAL NEW BUSINESS
VALUES 2020 ($bn)
(including billings retained)
GROUPM
4.8bn
OMNICOM
MEDIA
1.6bn
PUBLICIS
MEDIA
1.7bn
DENTSU
INTERNATIONAL
1.8bn
SOURCE: COMvergence, Billings Rankings 2019 and New Business Barometer FY 2020
52
WPP ANNUAL REPORT 2020
OUR STRATEGY
STRATEGIC REPORT
UNSCRIPTED
AGENCIES
WUNDERMAN THOMPSON
LONDON, ESSENCE LONDON
CLIENT
BT SPORT
BT Sport’s challenge to Wunderman
Thompson and Essence was to help it take
on and defeat its rivals in the battle for
subscriptions. So, the agencies decided to
ignite a global debate, using technology,
social media and a large dose of controversy.
Time and again, football shows just how
unpredictable live sport can be. You just
couldn’t write it. Or could you? Together
with BT Sport, the agencies united Opta,
the world’s leading supplier of sports data,
Squawka, the analytical sports agency, and
Google Cloud. Their goal: use big data and
AI to do the unthinkable – predict the entire
season in the form of a 60-page script, before
a ball had even been kicked. The next step
was to release the script to pundits, players,
influencers, journalists and fans – then sit
back and watch the fireworks.
What followed was a conversation explosion
across talk shows, newspapers, social media
and news channels, driving 30% more BT
Sport subscriptions than in the prior season.
137m
media impressions
across 44 countries
40,000
new followers of BT Sport
within the ten-day
campaign period
30%
increase in BT Sport
subscriptions
WPP ANNUAL REPORT 2020
53
STRATEGIC REPORT
KEY PERFORMANCE
INDICATORS
We track our performance against
indicators that reflect our strategic,
operational and financial progress,
as well as our impact on society and
the environment. These indicators
allow the Board, management and
stakeholders to compare our
performance to our goals.
At our Capital Markets Day in
December 2020, we introduced a
number of new metrics including
client satisfaction scores, digital
share of billings, the share of revenue
from experience, commerce and
technology, and the proportion of
employees in shared Campuses.
ALIGNING PERFORMANCE MEASUREMENT WITH STRATEGY
Performance measures are selected to align to our business strategy and include a range of financial and non-financial metrics. Non-financial
metrics are measured in a scorecard with appropriate measures set based on role and accountabilities.
STRATEGIC
ELEMENTS
Vision
& offer
Creativity
Data & technology Simpler
structure
People
& culture
Operational
Client satisfaction score
Digital % of media billings (GroupM)
Share of revenue less pass-through
costs from experience,
commerce and technology
People
Proportion of women in
senior executive positions
Employees in shared Campuses
Sustainability
Carbon emissions per person
from owned operations
Share of electricity purchased from
renewable sources
Financial
Like-for-like revenue less
pass-through costs growth
Headline operating profit margin
Like-for-like revenue less pass-through
costs growth versus competitors
Dividends
54
WPP ANNUAL REPORT 2020
KEY PERFORMANCE INDICATORS
STRATEGIC REPORT
OPERATIONAL
Our operational KPIs measure our
strategic progress towards a new
vision and contemporary offer to
meet the needs of modern marketing
and our clients’ future success.
We have continued to develop our
operational KPIs. Accordingly data
is not available for all three years for
each operational KPI. Data is shown
for the years it is available.
Read more on strategic progress
on pages 22-53
Client satisfaction score
(out of 10)
8.1
Digital % of media
billings (GroupM)
2020
2019
2018
8.1
7.7
7.4
2020
2019
2018 – Not available
41
41
38
Description and rationale
This measures how satisfied our clients
are with our services, based on 59,000
clients’ “Likelihood to Recommend” score
out of ten. Our ability to retain satisfied
clients is a key driver of our revenue1.
Description and rationale
Billings comprise our clients’ spend on
media, plus our fees2. We measure the
digital mix to ensure we are staying
relevant to our clients, particularly as
the digital media market now exceeds
traditional platforms.
Targets and performance
In a very challenging year, in which most
of our employees worked from home,
we achieved our highest ever satisfaction
scores, reflecting the strength of our
client relationships. We aim to maintain
top-quartile performance.
Targets and performance
GroupM’s digital billing mix increased
to 41% in 2020, compared with 38% in
2019, driven by the rapid growth in
demand from clients for ecommerce
services, across both our media and
integrated creative agencies.
Share of revenue less
pass-through costs from
experience, commerce
and technology (%)
2020 – Not yet available
2019
2018 – Not available
25
25
Description and rationale
Experience, commerce and technology
are attractive addressable areas of the
market where client spend is forecast to
grow at around 10% annually between
2021 and 2024 compared with 1% annually
for traditional communications.
Targets and performance
Our revenue mix in 2019 was approximately
75% in communications and 25% in
higher-growth areas. Our goal is to increase
our mix in higher-growth areas from 25% to
40% by 2025, so that we increase our share
of the higher-growth areas of client spend.
Includes Kantar.
1
2 For a full description see Financial Glossary
on page 225.
WPP ANNUAL REPORT 2020
55
STRATEGIC REPORT KEY PERFORMANCE INDICATORS
PEOPLE
Every WPP workplace should be
open, inclusive and collaborative to
allow our people to do their best
work. Our people KPIs assess our
progress against these aims.
Read more on:
Campuses – page 44
Women in leadership – pages 46 and 76
SUSTAINABILITY
We aim to be a sustainable business
and play our part in protecting the
planet. We have made a series of
commitments to reduce our
environmental impact, which are
captured in our KPIs.
Read more on our actions to tackle
the climate crisis on page 81
1 Defined as employees and freelancers in Campuses
divided by total employees and freelancers.
2 These figures have been restated due to the
integration of new best practice carbon
emissions reporting.
3 Figure restated as part of a data reviews upon
joining RE100.
56
WPP ANNUAL REPORT 2020
Proportion of women
in executive leadership
roles
(%)
40
% of employees in
shared Campuses1
33
2020
2019
2018
40
37
36
2020
2019
2018
15
33
26
Description and rationale
This measures our gender diversity.
We believe that diversity drives creativity,
so we are working hard to improve in all
aspects of diversity, equity and inclusion.
We aim to achieve equal representation of
women at the Board and all other levels.
Description and rationale
We have 20 world-class, shared Campus
workplaces across the globe in low-
carbon, energy-efficient buildings. Each
location encourages closer collaboration
between our agencies, providing clients
easier access to our talent and expertise.
Targets and performance
In 2020 the proportion of women in
executive leadership roles increased to
40% (2019: 37%). We are committed to
achieve parity. To support this goal,
we are running a number of leadership
development programmes for women.
Targets and performance
In 2020 33% of our employees were
located in Campuses. We expect this to
rise to 85% of employees in 60 Campuses
by 2025, providing an opportunity to
reduce both our office space and our
environmental footprint.
Carbon emissions
per person from our
owned operations
(tCO2e, scope 1 and 2)2
0.52
Share of electricity
purchased from
renewable sources
(%)
2020
2019
2018
0.52
0.82
0.76
2020
2019
2018
373
32
65
65
Description and rationale
We support urgent action to tackle the
climate crisis through the Paris Climate
Agreement. We measure carbon emissions
per employee, as headcount is closely
linked to levels of business activity and
this allows us to reflect the impact of
acquisitions and disposals without
needing to adjust our baseline.
Description and rationale
We have made good progress in reducing
our carbon footprint, but there is more
we can do, and we have committed to
solely using renewable electricity to
support our carbon reduction targets.
Targets and performance
We are committed to achieve net zero
emissions across our value chain by 2030
and to achieve net zero emissions across
our owned operations by 2025. In 2020
carbon emissions per employee reduced
by 37% compared with 2019.
Targets and performance
In 2020 we purchased 65% of our
electricity from renewable sources
(2019: 37%3), reflecting progress towards
our target of 100% by 2025. We are
currently at 100% in the United States,
Canada, UK and most European markets.
KEY PERFORMANCE INDICATORS
STRATEGIC REPORT
FINANCIAL
Our financial targets help us
to track the underlying health
of the Company; compare our
performance to competitors;
set financial guidance for
investors; and establish our
remuneration targets.
Read more on our financial
performance on pages 58-65
1
Includes 0.5-1.0pt annually of M&A contributions.
2 Organic revenue growth is defined as like-for-like
revenue less pass-through costs growth. This chart
shows year-end data.
3 For a full description see Financial Glossary on
page 225.
Like-for-like (LFL)
revenue less pass-
through costs growth
(%)
-8.2
Headline operating
profit margin
(%)
2020
-8.2
2019
2018
-1.6
-0.2
2020
2019
2018
12.9
12.9
14.4
15.2
Description and rationale
This is the main measure of our strategic
goal to return WPP to growth. Like-for-like
revenue growth excludes the impact of
currency and acquisitions. Pass-through
costs comprise fees paid to external
suppliers when they are engaged to
perform part or all of a specific project
and are charged directly to clients.
Description and rationale
This is a key indicator of our profitability.
It comprises profit on trading activities,
excluding certain one-off or exceptional
items3. These items are excluded because
their size and nature mask the true
underlying performance year-on-year.
Targets and performance
In 2020 revenue less pass-through costs
declined 8.2% as clients reduced
spending due to the pandemic. Our
targets are mid-single-digits % growth in
2021, recovery to 2019 levels by 2022 and
3-4%1 annual growth from 2023 onwards.
Targets and performance
In 2020 the headline operating margin
declined 150 basis points as cost savings
offset most of the revenue decline. We
expect the margin to recover to 13.5-14.0%
in 2021 and 15.5-16.0% in 2023, due to cost
savings and revenue recovery.
Organic revenue
growth versus
competitors2
(%)
+0.9
Dividends per share
(pence)
24.0
Q4 2020
Q4 2019
Q4 2018
-3.1
-1.1
0.9
2020
2019
2018
24.0
22.7
60.0
Description and rationale
This measures our growth relative to our
main competitors. It compares organic
revenue growth for WPP against the
average of our global marketing services
peers – Dentsu, Havas, IPG, Omnicom,
and Publicis.
Targets and performance
In Q4 2020, WPP’s growth rate was
0.9 percentage points faster than the
average of our main peers. Going forward
we aim to grow at a faster rate than the
industry average.
Description and rationale
Dividends are a key element of our returns
to shareholders. They are an annual share
of our profits and cash flow.
Targets and performance
In 2020 the Board paid an interim
dividend of 10p and has proposed a final
dividend of 14p, which is subject to
shareholder approval. Starting from 2020
the Board aims to grow the dividend
annually and to pay out approximately
40% of headline earnings per share.
WPP ANNUAL REPORT 2020
57
STRATEGIC REPORT
CHIEF FINANCIAL
OFFICER’S STATEMENT
Having simplified our business and reduced debt,
we are well positioned to support our clients in
achieving their growth aspirations.
“WE WERE ABLE TO
MAINTAIN A VERY
STRONG BALANCE
SHEET THROUGH A
PERIOD OF EXTREME
UNCERTAINTY.”
John Rogers
Chief Financial Officer
FIRST IMPRESSIONS
When I started at WPP in January 2020,
I could not have envisaged spending my
first year in front of a monitor, getting to
know my colleagues over a range of
video-conferencing tools. But the reaction
to an unprecedented global shock tells you
a lot about an organisation and its people,
and I have been constantly impressed by
the collective and individual professionalism,
commitment and resilience I have witnessed,
combined with the speed and agility of
response in those very difficult few weeks
when visibility was at its lowest. I am truly
thankful to my new colleagues for their
dedication.
58
WPP ANNUAL REPORT 2020
When I am asked what most attracted me to
WPP, the answer is very simple – opportunity.
I believe the services we offer are more
important to our clients than ever before,
as every industry is disrupted and the
marketing ecosystem becomes more
fragmented and complex. In addition,
we have the potential to be much more
than the sum of our parts: first, in the way we
bring the full power and range of expertise
across WPP to our clients in a more simple
and effective manner; and second, in the
way we run our own business, as we simplify
and standardise our operations, and reinvest
for future growth.
ACHIEVEMENTS OF 2020
In such a challenging year it is especially
important to reflect on what we did well.
First and foremost, we moved at high speed
to preserve the business. We took a number
of rapid measures to improve our liquidity,
including very tight control of working
capital, the suspension of our share buyback
and 2019 final dividend, and the issuing of
two new bonds. We also worked hard to
liberate “trapped” cash in a number of our
subsidiaries. As a result, we were able to
maintain a very strong balance sheet
through a period of extreme uncertainty,
and we have also retained a number of
practices (particularly with regard to
working capital) which can enhance our
financial position further.
We also reduced cost in a highly effective
manner: a £1,085 million reduction in revenue
less pass-through costs translated into a
£300 million reduction in headline operating
profit, thanks to our cost control. Margins
were much more robust than in the previous
downturn in 2008/9 and, unlike in previous
cycles, we were able to cut cost without
cutting into the core of the business.
Although there were inevitably some
headcount reductions, we kept these to
a minimum and are consequently well set
to best serve our clients as the market
recovers in 2021.
CHIEF FINANCIAL OFFICER’S STATEMENT
STRATEGIC REPORT
“WPP HAS A VERY
MATERIAL OPPORTUNITY
TO UNLOCK EFFICIENCY
SAVINGS.”
Of the total savings target, we anticipate
reinvesting around two-thirds into talent,
technology and incentives to drive
future growth.
INFORMED DECISION-MAKING
One of the significant benefits of the
transformation described above is that it
will improve the quality and speed of financial
and other management information available
to the business. This will empower finance
to shift its centre of gravity away from highly
detailed but ultimately backward-looking
financial reporting to more commercial and
real-time decision support: how best to bid
for business, how to allocate resource across
teams, and how to measure account and
project profitability, for example. It will
also facilitate automated, rolling forecast
updates with less need for the regular,
labour-intensive reviews that we
undertake today.
Finally, we built a robust corporate plan
across the organisation, with a clear focus
on growth, underpinned by efficiency and
reinvestment, and with clear commitments
and targets across the agencies. This forms
the foundation of the medium-term guidance
we have provided to our shareholders.
FINANCE PRIORITIES
CONTROL ENVIRONMENT
In such a large organisation as WPP, the
need for a rigorous control environment is
particularly important. Throughout 2020 the
Company continued to improve and enhance
controls across the business supported by
the Risk and Controls Group that was created
early in the year and is committed to the
remediation of the material weaknesses
reported as of 31 December 2020.
As the transformation programme continues
our governance structures allow us to evolve
and strengthen the control environment to
match our strategic goals.
TRANSFORMATION
WPP has a very material opportunity to
unlock efficiency savings, creating a more
effective operating platform for our
agencies, transforming the way we do
business and reinvesting the savings for
growth. We aim to achieve annual gross
savings of around £600 million by 2025 by
simplifying our operating model, generating
efficiencies in procurement and real estate,
and through improving the effectiveness of
our support functions and shared services.
The responsibility for delivering the savings
from this transformation sits across the
organisation, and one of my first priorities
is building a team that has the skills and
experience to deliver such a large and
complex transformation programme.
WPP ANNUAL REPORT 2020
59
STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S STATEMENT
CAPITAL ALLOCATION
The discipline with which companies
allocate capital is a key determinant of
growth and sustained financial returns.
Finance plays a crucial role in this process,
both in helping to set the overall framework
and in the assessment of each project.
Excess capital and leverage target:
we restarted the buyback, funded by the
proceeds of the Kantar transaction, in March
2021. We expect to generate and return
ongoing excess capital in future years,
subject to our leverage target of 1.5-1.75x
average net debt/EBITDA.
“STARTING FROM THE
CURRENT YEAR, WE
INTEND TO GROW THE
DIVIDEND ANNUALLY.”
The Company is in a robust financial position
with good liquidity, supported by strong free
cash flow generation; and has a very material
opportunity to unlock efficiency savings.
John Rogers
Chief Financial Officer
29 April 2021
As we set out in December 2020, the four
elements of our capital allocation strategy
are as follows:
Capital expenditure: we will continue to
invest in our technology infrastructure and
Campuses, building platforms for our people
and our clients, and supporting reduced
property costs and standardised systems.
Capex will rise to £450-500 million in 2021
and 2022, reflecting the peak of Campus and
IT investments and in part the postponement
of some 2020 spend. After 2022, we expect
capex to return to a more normalised range
of £300-350 million per annum.
Dividend: our goal is to pay a dividend that
is growing and sustainable, reflecting the
strong cash generation of the business
while allowing for sufficient reinvestment
for growth. Starting from the current year,
we intend to grow the dividend annually and
to pay out approximately 40% of headline
earnings per share. The full-year dividend
of 24.0p for 2020 is approximately 40% of
our 59.9p headline diluted EPS.
M&A: acquisitions have always been an
important engine for growth for WPP,
enhancing organic growth and introducing
future talent. We intend to pursue a focused
M&A strategy, building out our capabilities
in key growth areas, such as marketing
technology and ecommerce, and
concentrating on a few targets with critical
mass which are scalable across WPP’s
offering to our clients. We expect to spend
£200-400 million a year on acquisitions.
The two deals announced since year-end,
DTI in Brazil and NN4M in the UK, are exactly
aligned to this approach.
60
WPP ANNUAL REPORT 2020
STRATEGIC REPORT
FINANCIAL
REVIEW
REVIEW OF RESULTS
The financial results for 2020 are based on
the Group’s continuing operations and the
results of Kantar are presented separately
as discontinued operations.
Reported billings were £46.9 billion, down
11.6%, and down 9.6% like-for-like.
Reported revenue from continuing
operations was down 9.3% at £12.0 billion.
Revenue on a constant currency basis was
down 8.1% compared with last year. Net
changes from acquisitions and disposals
had a negative impact of 0.8% on growth,
leading to a like-for-like performance,
excluding the impact of currency and
acquisitions, of -7.3%.
Reported revenue less pass-through
costs was down 10.0%, and down 8.8%
on a constant currency basis. Excluding
the impact of acquisitions and disposals,
like-for-like growth was -8.2%. In the
fourth quarter, like-for-like revenue less
pass-through costs was down 6.5%,
reflecting a sequential recovery from Q3
as client spend showed some resilience
in response to renewed lockdowns.
OPERATING PROFITABILITY
Reported loss before tax was £2.8 billion,
compared to a profit of £1.2 billion in 2019,
reflecting principally the £3.1 billion of
impairment charges and investment
write-downs and £313 million of restructuring
and transformation costs.
Reported loss after tax was £2.9 billion
compared to a profit in 2019 of £939 million.
Headline EBITDA (including IFRS 16
depreciation) for 2020 was down 19.1% to
£1.5 billion, compared to £1.8 billion the
previous year, and down 17.7% in constant
currency. Headline operating profit was
down 19.2% to £1.3 billion, and down 17.2%
like-for-like. The sharp decline in profitability
year-on-year reflects the sudden and
significant impact of Covid-19 on revenue
less pass-through costs.
Headline operating margin1 was down 150
basis points to 12.9%, and down 140 basis
points like-for-like. Operating costs were
down 8.8%, with a year-on-year saving of
£810 million excluding severance. The main
areas of cost reduction were in travel and
discretionary expenditure (down 59.5%),
property costs (down 5.1%) and staff costs
(down 7.9%). Over the course of the year, we
offset 74.7% of the decline in revenue less
pass-through costs with cost saving actions.
In the second half, this figure was 92.4%.
The Group’s headline operating margin is
after charging £68 million of severance costs,
compared with £43 million in 2019 and
£185 million of incentive2 payments,
compared to £294 million in 2019.
On a like-for-like basis, the average number
of people in the Group in 2020 was 102,822
compared to 106,185 in 2019. On the same
basis, the total number of people at
31 December 2020 was 99,830 compared
to 106,478 at 31 December 2019.
IMPAIRMENTS
Impairments of £3.1 billion (including
£2.8 billion of goodwill impairments and
£0.3 billion of investment and other
write-downs) were recognised in 2020.
The goodwill impairments relate to historical
acquisitions whose carrying values have
been reassessed in light of the impact of
Covid-19. The impairments are driven by a
combination of higher discount rates used
to value future cash flows, a lower profit
base in 2020 and lower industry growth
rates. The majority of the impairments relate
to businesses acquired as part of the Y&R
acquisition in 2000.
Notes
1
Headline operating profit (excluding income from associates)
as a percentage of revenue less pass-through costs.
2 Short- and long-term incentives and the cost of
share-based incentives.
FINANCIAL HIGHLIGHTS (2020)
£12.0bn
Revenue from continuing
operations
(2019: £13.2bn)
-8.2%
Like-for-like revenue less
pass-through costs growth
(2019: -1.6%)
12.9%
Headline operating margin
(2019: 14.4%)
173.8%
Free cash flow conversion1
(2019: 89.3%)
This Strategic Report should be read in conjunction with pages 108-155 and pages 216-224. The Group’s key performance indicators are discussed on pages 54-57.
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 on pages 212 and 213 and are defined in the Financial Glossary on pages 225 and 226.
2019 figures have been restated as described in the Financial Statements on pages 158 and 159.
Note
1
Free cash flow conversion is the ratio of free cash flow to headline earnings. Free cash flow is after earnouts and changes in working capital and before new acquisition spend,
disposals and shareholder distributions. Free cash flow conversion represents total continuing and discontinued operations.
WPP ANNUAL REPORT 2020
61
STRATEGIC REPORT FINANCIAL REVIEW
REGIONAL REVIEW
North America like-for-like revenue less
pass-through costs was down 5.7% in the
final quarter. The United States continued
its trend of relative resilience compared to
other markets, with VMLY&R and BCW both
growing in the fourth quarter. This was offset
by GroupM, which saw a slight deterioration
compared to the third quarter. Canada
finished the year strongly, on the back of
new business wins. On a full-year basis,
like-for-like revenue less pass-through costs
in North America was -5.8%.
United Kingdom like-for-like revenue less
pass-through costs was down 7.4% in the
final quarter, a slight deterioration on the
third quarter. AKQA and BCW were the
best performers in the fourth quarter, both
growing year-on-year. The lockdown in
the UK limited the recovery in the larger
integrated agencies. On a full-year basis,
like-for-like revenue less pass-through
costs was -10.5%.
The goodwill impairment charge recognised
for the year ended 31 December 2020
includes £2.8 billion related to the six-month
period ended 30 June 2020. This figure is
£0.3 billion higher than the £2.5 billion
reported in our 30 June 2020 interim financial
statements as a result of an adjustment to
appropriately reflect the working capital
cash flow assumptions in the impairment
model. This has been fully reflected in the
consolidated financial statements for the
year ended 31 December 2020, and the
amount will be reflected in our future filings,
including in the comparatives within the
30 June 2021 financial statements. A full
analysis is provided on page 223.
EXCEPTIONAL ITEMS
In addition to the impairments outlined
above, the Group incurred a net exceptional
loss of £477 million in 2020. This comprises
the Group’s share of associate company
exceptional losses (£146 million),
restructuring and transformation costs
(£313 million) and other net exceptional
losses (£18 million). Restructuring and
transformation costs mainly comprise
severance and property-related costs arising
from the continuing structural review of
parts of the Group’s operations and our
response to the Covid-19 situation. This
compares with a net exceptional loss in
2019 of £136 million.
INTEREST AND TAXES
Net finance costs (excluding the revaluation
of financial instruments) were £229 million, a
decrease of £31 million year-on-year, primarily
as a result of lower average net debt.
The headline tax rate (excluding associate
income) was 23.5% (2019: 23.0%). The
reported tax charge was £129 million (2019:
£275 million). 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.
EARNINGS AND DIVIDENDS
Headline profit before tax was down 23.6%
to £1.0 billion, and down 24.6% like-for-like.
Losses attributable to shareholders were
£3.0 billion, again reflecting principally the
£3.1 billion of impairments and £477 million
of other net exceptional losses.
Headline diluted earnings per share from
continuing operations fell by 23.3% to 59.9p
and was down 3.8% like-for-like. Reported
diluted loss per share, on the same basis,
was 243.2p, compared to earnings per share
of 68.2p in the prior period.
The Board is proposing a final dividend for
2020 of 14.0p per share, which together with
the interim dividend paid in November 2020
gives a full-year dividend of 24.0p per share.
The record date for the final dividend is
11 June 2021, and the dividend will be
payable on 9 July 2021.
REVENUE LESS PASS-THROUGH COSTS GROWTH VERSUS 2019
%
Like-for-like
Acquisitions
FX
Reported
-8.2
-10.0
-0.6
-1.2
62
WPP ANNUAL REPORT 2020
FINANCIAL REVIEW
STRATEGIC REPORT
Western Continental Europe like-for-like
revenue less pass-through costs was down
3.9% in the final quarter, an improvement on
the third quarter performance. The recovery
was led by Germany, the Netherlands,
Denmark and Sweden. France, Spain and
Italy continued to experience Covid-related
headwinds. On a full-year basis, like-for-like
revenue less pass-through costs was -8.1%.
In Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe,
like-for-like revenue less pass-through costs
was down 8.8% in the final quarter, the best
quarter-on-quarter improvement of all the
regions. The sequential improvement from
the third quarter was driven by Asia Pacific
and Latin America, with performance in the
other regions slightly deteriorating in the
fourth quarter. On a full-year basis, like-for-like
revenue less pass-through costs was -10.3%.
REVENUE ANALYSIS
£ million
N. America
United Kingdom
W. Cont. Europe
AP, LA, AME, CEE2
Total Group
REVENUE LESS PASS-THROUGH COSTS ANALYSIS
£ million
N. America
United Kingdom
W. Cont. Europe
AP, LA, AME, CEE
Total Group
HEADLINE OPERATING PROFIT ANALYSIS
£ million
N. America
United Kingdom
W. Cont. Europe
AP, LA, AME, CEE
Total Group
2020
4,465
1,637
2,442
3,459
12,003
∆ reported
-8.0%
-8.9%
-7.1%
-12.5%
-9.3%
2020
3,744
1,234
2,019
2,765
9,762
∆ reported
-7.2%
-11.2%
-7.2%
-14.8%
-10.0%
∆ LFL1
-5.8%
-7.9%
-8.1%
-8.1%
-7.3%
∆ LFL
-5.8%
-10.5%
-8.1%
-10.3%
-8.2%
2019
4,855
1,797
2,629
3,953
13,234
2019
4,034
1,390
2,177
3,246
10,847
2020
612
138
199
312
1,261
% margin*
16.3%
11.2%
9.8%
11.3%
12.9%
2019
662
189
261
449
1,561
% margin*
16.4%
13.6%
12.0%
13.8%
14.4%
* Headline operating profit as a percentage of revenue less pass-through costs.
Notes
1
2 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals.
REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION VERSUS 2019
%
North America
United Kingdom
Western Continental Europe
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe
-14.8
-11.2
-7.2
-7.2
Total
-10.0
WPP ANNUAL REPORT 2020
63
STRATEGIC REPORT FINANCIAL REVIEW
BUSINESS SECTOR REVIEW
Global Integrated Agencies like-for-like
revenue less pass-through costs was down
6.3% in the final quarter, a small improvement
on the third quarter performance. VMLY&R
was the best performing integrated agency,
returning to growth in the fourth quarter
and demonstrating its improving business
momentum since the merger. GroupM
like-for-like revenue less pass-through costs
was down 4.1% in the fourth quarter, similar
to the third quarter. Of the other agencies,
Wunderman Thompson improved slightly
quarter-on-quarter, while trends at Ogilvy
and Grey marginally deteriorated. From 2021,
AKQA and Grey will come together within
the AKQA Group, and Geometry will be
incorporated within VMLY&R. For the full
year, like-for-like revenue less pass-through
costs for the segment was -7.9%.
Public Relations like-for-like revenue less
pass-through costs was -4.1% in the final
quarter. The trend at BCW, our largest
agency within Public Relations, continued to
improve, but H+K Strategies and Specialist
PR were weaker in the fourth quarter as a
result of a strong comparative period. In July,
we announced the merger of Finsbury,
Glover Park and Hering Schuppener to form
Finsbury Glover Hering, to create a leading
global strategic communications and public
affairs business. Since the transaction, the
business has achieved strong traction both
with clients and in attracting new talent.
For the full year, like-for-like revenue less
pass-through costs for the segment was -4.0%.
64
WPP ANNUAL REPORT 2020
REVENUE ANALYSIS
£ million
Global Integrated Agencies
Public Relations
Specialist Agencies
Total Group
REVENUE LESS PASS-THROUGH COSTS ANALYSIS
£ million
Global Integrated Agencies
Public Relations
Specialist Agencies
Total Group
2020
9,303
893
1,807
12,003
∆ reported
-8.8%
-6.6%
-12.8%
-9.3%
2020
7,319
854
1,589
9,762
∆ reported
-9.7%
-4.9%
-13.7%
-10.0%
∆ LFL1
-6.1%
-5.8%
-13.3%
-7.3%
∆ LFL
-7.9%
-4.0%
-11.5%
-8.2%
2019
10,205
957
2,072
13,234
2019
8,108
898
1,841
10,847
HEADLINE OPERATING PROFIT ANALYSIS
£ million
Global Integrated Agencies
Public Relations
Specialist Agencies
Total Group
2020
968
141
152
1,261
% margin*
13.2%
16.5%
9.5%
12.9%
2019
1,219
141
201
1,561
% margin*
15.0%
15.7%
10.9%
14.4%
* Headline operating profit as a percentage of revenue less pass-through costs.
Note
1 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals.
REVENUE LESS PASS-THROUGH COSTS BY BUSINESS VERSUS 2019
%
Global Integrated Agencies
-9.7
Public Relations
-4.9
Specialist Agencies
-13.7
Total
-10.0
FINANCIAL REVIEW
STRATEGIC REPORT
MEDIUM-TERM GUIDANCE
At our Capital Markets Day in December
2020, we set out our new medium-term
financial targets that will allow us to invest in
talent, incentives and technology, improve
our competitive position and deliver
sustainable long-term growth. These are:
– Recovery to 2019 revenue less pass-through
costs levels by 2022;
– 3-4% annual growth in revenue less
pass-through costs from 2023, including
M&A benefit of 0.5-1.0% annually;
– 15.5–16.0% headline operating margin
in 2023;
– Dividend: intention to grow annually with
a pay-out ratio around 40% of headline
diluted EPS;
– Average net debt/EBITDA maintained in
the range 1.5-1.75x.
Note
1
Free cash flow conversion is the ratio of free cash flow to
headline earnings. Free cash flow is after earnouts and
changes in working capital and before new acquisition spend,
disposals and shareholder distributions.
Specialist Agencies like-for-like revenue less
pass-through costs was down 8.6% in the final
quarter. All of our main agencies improved
performance over the third quarter, with
AKQA, Superunion and Landor & Fitch showing
the biggest sequential improvements. For the
full year, like-for-like revenue less pass-through
costs for the segment was -11.5%.
CASH FLOW HIGHLIGHTS
In 2020, net cash inflow was £1.0 billion,
compared to £2.5 billion in 2019. The main
drivers of the cash flow performance
year-on-year were the lower operating profit
as a result of the impact of the pandemic,
lower net disposal proceeds, and the share
buybacks, offset by the very strong working
capital performance and a reduction in
the dividend.
Free cash flow conversion1 in 2020 was
173.8% (2019: 89.3%).
BALANCE SHEET HIGHLIGHTS
As at 31 December 2020 we had cash and
cash equivalents of £4.3 billion and total
liquidity, including undrawn credit facilities,
of £6.4 billion. Average net debt in 2020
was £2.3 billion, compared to £4.4 billion
in the prior period, at 2020 exchange rates.
On 31 December 2020 net debt was
£0.7 billion, against £1.5 billion on 31 December
2019, a reduction of £1.0 billion at 2020
exchange rates. The reduced net debt figure
year-on-year mainly reflects the benefit of the
improved working capital performance and the
reduced outflow from dividend payments.
In May 2020, we issued bonds of €750 million
and £250 million. Our bond portfolio at
31 December 2020 had an average maturity
of 7.4 years, with no maturities until 2022.
The average net debt to EBITDA ratio in the
12 months to 31 December 2020 is 1.57x,
which excludes the impact of IFRS 16. This is
within our target range of 1.5-1.75x average
net debt to EBITDA.
OUTLOOK
As the global economy starts to recover
from Covid-19, having simplified our business
and reduced debt, WPP is well positioned to
support our clients in achieving their growth
aspirations.
We reiterate our guidance for 2021:
– Organic growth (defined as like-for-like
revenue less pass-through costs growth)
of mid-single-digits percentage, returning
to growth in Q2 2021;
– Headline operating margin in the range
of 13.5-14.0%;
– Capex £450-500 million.
In addition, our current projections for
foreign exchange movements imply around
a five percentage point drag to reported
revenue less pass-through costs from the
strength of sterling year-on-year. We also
anticipate a net working capital outflow for
2021 of £200-£300 million, reflecting some
normalisation from the very strong position
at the end of 2020.
NET DEBT
£ million
4,483
4,131
4,017
1,540
696
2016
2017
2018
2019
2020
WPP ANNUAL REPORT 2020
65
For more information on our
strategy see pages 22-53
STRATEGIC REPORT
SUSTAINABILITY
At WPP we use the
power of creativity
to build better futures
for our people,
planet, clients and
communities.
“ OUR EXPERTISE,
CREATIVITY AND
ABILITY TO SHIFT
OPINION AND
CHANGE BEHAVIOUR
CAN HELP TO BUILD
A MORE SUSTAINABLE
AND EQUITABLE
WORLD.”
David Henderson
Global Corporate Affairs Director
We know we have
the opportunity to
reset and to create
a more sustainable
and equitable future.
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WPP ANNUAL REPORT 2020
WHY SUSTAINABILITY MATTERS
Like few other years before it, 2020 revealed
the fragility of what was our way of life.
The pandemic forced us to understand and
appreciate those among us who have always
been essential workers. The capturing on film
of the most shocking of killings compelled
us to face the truth that racial injustice is
pervasive and endemic.
2020 also reassured. We have been reminded
that necessity is the mother of invention;
forced to work at home, we adapted fast.
And with the resources of the global
scientific community and the will of the
whole world, we invented multiple ways to
inoculate against a virus that was unknown
before last year.
OUR RESPONSE
Although the human and economic toll has
been immense, our collective response and
ingenuity again gives us reason for hope.
We know we have the opportunity to reset
how we live our lives, and to create a more
sustainable and equitable future.
The task ahead may seem difficult, but 2020
should give us reason to be optimistic. At WPP,
we are working with our people, clients and
partners to take action, shift opinion and
change behaviour in the ways that we need
to achieve that goal.
SUSTAINABILITY
STRATEGIC REPORT
COURAGE IS
BEAUTIFUL
AGENCY
OGILVY LONDON & TORONTO
CLIENT
DOVE (UNILEVER)
In times of crisis, beauty isn’t how you look,
but what you do. And during the pandemic,
frontline workers have epitomised this
beauty, reminding us there is no greater
expression of yourself than the qualities
of selflessness and bravery.
We have all seen striking images of nurses,
doctors and other health professionals,
their faces bruised by protective masks
after long, exhausting shifts caring for
Covid-19 patients.
Dove, which has challenged conventional
notions of beauty for the last 15 years
through its advertising, decided to
honour the sacrifice and courage these
images represent.
Ogilvy’s challenge was to create a
campaign that was true to Dove’s brand
purpose and deeply respectful of the
healthcare workers shown. The team
featured their powerful portraits in digital
out-of-home media and films, thanking
them directly and showing that Courage
is Beautiful.
Launched in North America before rolling
out across 15 countries, the campaign was
covered by CNN, The New York Times,
CBS, NBC and countless other media
outlets, touching the hearts of millions
and celebrating the extraordinary efforts
of frontline workers around the world.
2bn
earned media
impressions
360,000
hashtag mentions on
Twitter on the first day
WPP ANNUAL REPORT 2020
67
STRATEGIC REPORT SUSTAINABILITY
OUR SUSTAINABILITY STRATEGY
PEOPLE
PLANET
CLIENTS
COMMUNITIES
MISSION
Become the employer of
choice for all.
Maximise our positive impact
on the planet.
Enable our clients on their
sustainability journeys.
Use the power of our creativity
and voice to create healthy and
vibrant communities.
DELIVERED BY
DRIVING DIVERSITY, EQUITY AND INCLUSION
Ensuring an inclusive
working environment with
fair representation.
Building Campuses which
make a positive contribution
to local communities.
Ensuring our client work is
inclusive and accessible.
Advancing equity and inclusion
through our work, external
partnerships and initiatives.
ACCELERATING THE SUSTAINABLE ECONOMY
Growing sustainability skills
and knowledge across our
industry.
Reaching net zero across our
value chain by 2030.
Supporting our clients
to reduce their emissions
and deliver their
sustainability goals.
Working with partners, social
enterprises and clients to drive
sustainability.
ENSURING TRUST, FAIRNESS AND GOVERNANCE
A culture where everyone is
treated with dignity and
respect.
Developing common carbon
metrics as we move to
integrated reporting.
Ensuring fairness and high
privacy and data ethics
standards in our work.
Buying responsibly and
building a diverse supplier
network.
METRICS
– Proportion of women in
senior leadership positions
– Continued improvement of
ethnicity data disclosure
– Employee participation in
listening and engagement
programmes
– Number of participants in
sustainability or DE&I
training programmes
– Sustainability strategy
embedded in executive
remuneration
– Progress towards net zero
carbon emissions in our
operations by 2025 (scope 1
and 2) and in our value
chain by 2030 (scope 3)
– Progress towards 100%
renewable electricity
– Phase out single-use plastics
in our offices by 2021
– Roll out diversity evaluation
scores to track progress in
inclusive marketing
– Rate of growth in
sustainable and inclusive
client briefs
– Building common standards
to measure carbon emissions
in media and production
– Investment in pro bono
work and free media space
– Progress towards investing
$30 million in racial equity
initiatives
We have set a new sustainability strategy
that directs us to use the power of creativity
to build better futures for our people, planet,
clients and communities. It sets out the
action we are taking to make sure we are
the employer of choice for all people – a
company where a sense of belonging is felt
by everyone, and our differences are
celebrated. And it shows how we are
tackling the greatest environmental
challenges we face, committing to reach
net zero carbon emissions across our value
chain by 2030.
We know our clients also recognise these
challenges and are looking for support and
advice. That is why we are increasing our
skills and capacity to assist them to make
the transition to a sustainable and inclusive
world. As an employer of 100,000 people
in more than 100 countries, we are using
our unique convening power and global
partnerships to effect positive change for
society as a whole. That is why we are
proud to partner with the United Nations,
especially the World Health Organization
and UN Women, to provide our skills in
creativity, communications, data and
technology to support them as they
support the world.
There has never been a better time to
seize the opportunities before us. We are
determined to do our very best to realise
this potential.
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WPP ANNUAL REPORT 2020
SUSTAINABILITY
STRATEGIC REPORT
Our sustainability strategy is aligned to all five elements of our corporate strategy.
STRATEGIC ELEMENT
SUSTAINABILITY STRATEGY
VISION & OFFER
SUSTAINABILITY AT THE HEART OF OUR OFFER
FOR CLIENTS
A growing number of clients are embracing
inclusion, diversity and sustainability and looking
to articulate the purpose of their brands. They look
for partners who share their sustainability values
and aspirations. Our commitment to responsible
and sustainable business practices helps us to
broaden and deepen these partnerships, and to
meet the growing expectations and sustainability
requirements in client procurement processes.
Sustainability at the
heart of our offer for
clients, see page 72
Transparency and
trust, see page 86
CREATIVITY
SOCIAL INVESTMENT
Our pro bono work can make a significant
difference to charities and NGOs, enabling our
partners to raise awareness and funds, recruit
members and achieve campaign objectives.
Pro bono work benefits our business too, providing
rewarding creative opportunities for our people
that often result in award-winning campaigns that
raise the profile of our companies.
Investing in
communities,
see page 74
DIVERSE, EQUITABLE AND INCLUSIVE TEAMS
Diversity and difference power creativity. We
foster an inclusive culture across WPP: one that
is equitable, tolerant and respectful of diverse
thoughts and individual expression. We want all
of our people to feel valued and able to fulfil their
potential, regardless of background, lived
experience, sex, gender, race and ethnicity,
thinking style, sexual orientation, age, religion,
disability, family status and so much more.
Employer of choice for
all, see pages 76-78
DATA &
TECHNOLOGY
SIMPLER
STRUCTURE
PRIVACY AND DATA ETHICS
Data – including consumer data – can play an
essential role in our work for clients. Data security
and privacy are increasingly high-profile topics for
regulators, consumers and our clients. We have a
responsibility to look after this data carefully,
to collect data only when needed and with
consent where required, and to store and
transfer data securely.
Privacy and data
ethics, see page 88
GREENER OFFICE SPACE
Our work to simplify our structure and consolidate
our office space is driving a positive impact on our
energy use and carbon footprint. We continue to
move employees into Campuses, closing multiple
smaller sites and replacing them with fewer, larger,
more environmentally friendly buildings that offer
modern, world-class workspaces.
Planet, see pages 81
PEOPLE & CULTURE
SHARED VALUES ACROSS OUR BUSINESS
AND SUPPLY CHAIN
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.
Selecting suppliers and partners who adopt
standards consistent with our own can reduce
costs, improve efficiency and protect our
reputation.
Employer of choice for
all, see pages 76-78
Supply network, see
page 83
WPP ANNUAL REPORT 2020
69
STRATEGIC REPORT SUSTAINABILITY
THE CHOICE
AGENCIES
CARTWRIGHT AND
GREY NEW YORK
CLIENT
PROCTER & GAMBLE
The Choice is a film designed to move
people to go beyond expressing feelings
on social media and to take action.
It asks white people to use their power to
tackle systemic racism and help fight the
battle that Black people cannot win alone.
The Choice was developed by Grey New
York and Cartwright, and debuted on
Oprah Winfrey’s townhall Where Do We
Go From Here? in the aftermath of the
killing of George Floyd.
The film is the third in a series that began
with The Talk and The Look, and which
has reached huge mainstream audiences
and started important conversations
about race in America.
The series is part of P&G’s ongoing
anti-racism programme “Take on Race”,
which includes anti-racism resources on
P&G’s website and a $5 million fund to
aid social justice organisations.
528m
impressions in the
first 20 days
Winner
Marketing Dive’s
Campaign of
the Year
70
WPP ANNUAL REPORT 2020
SUSTAINABILITY
STRATEGIC REPORT
WPP ANNUAL REPORT 2020
71
STRATEGIC REPORT SUSTAINABILITY
PUTTING SUSTAINABILITY AT THE
HEART OF OUR OFFER FOR CLIENTS
The work we do has the power to shift opinion
and change behaviour, supporting our clients to
transition to a sustainable and inclusive world.
We are working closely with clients as they
adapt to a post-pandemic world and embrace
purpose, diversity and sustainability to create
a regenerative and inclusive “new normal”.
While challenging, today’s landscape also
offers major opportunities to create new
markets for more inclusive and sustainable
products and services.
WORK WITH IMPACT
The breadth and depth of our expertise
means we can offer clients the latest
technology alongside the creativity and
sustainability expertise needed to inspire
consumers and help shift behaviour to more
sustainable norms.
Recognising our clients’ growing focus on
sustainable products and practices, we
continue to strengthen our offer to ensure
we can provide our clients with the best
support and the expertise they need to
deliver against their own sustainability
ambitions. For example, in 2020 we became
a founding member of AdGreen – alongside
clients and partners including Google,
Sky and Unilever – an initiative to unite
the advertising industry to eliminate
the negative environmental impacts
of production.
During the year we established a Diversity
Review Panel to provide a forum to escalate
concerns around potentially offensive or
culturally insensitive work and receive
guidance and advice designed to ensure
those concerns are appropriately addressed.
To train and equip our client leads for the
complexity of this issue, our new Inclusive
Marketing Playbook and resource library
codifies inclusive marketing principles and
best practice for communications, marketing
and new business projects. In 2021 we will
also launch our Sustainability Playbook.
COMPLIANCE WITH MARKETING
STANDARDS
Marketing is powerful – it can change
attitudes and behaviour. It is critical that
we apply high ethical standards to our work
to ensure those changes are for the better.
All the content we produce for clients has
to meet rigorous standards and we will not
undertake work which is intended or
designed to mislead or deceive. This is
covered in our Code of Conduct. We work
hard to maintain high standards and strong
compliance in areas such as ethics, human
rights, privacy and data security.
There is growing scrutiny – from consumers
and regulators – of the descriptions and
labels used to promote the environmental
credentials of products and services. We are
working closely with our agencies to make
sure that we are contributing to the
discussion and to ensure that our marketing
services promote transparency on the
environmental attributes of products.
We require that all the work our companies
produce for clients complies with all relevant
legal requirements, codes of practice and
marketing standards. There are occasional
complaints made about campaigns we have
worked on, and some of these are upheld
by marketing standards authorities. Our
agencies take action where needed to
prevent a recurrence.
Our agencies have policies and processes to
mitigate against online advertising appearing
on sites with illegal, illicit or unsuitable content.
As part of our commitment to ensure
children’s safety while engaging with
content online, in 2020 WPP launched a
partnership with SuperAwesome, the
leading kidtech platform, to give our
people and clients access to training,
industry-leading strategies and the latest
privacy-by-design technology for the
under-16 digital media space.
We also partnered with adtech start-up,
Anzu, to help bring commonly accepted
and widely applied digital advertising
standards to fast-growing esports and
gaming audiences.
ETHICAL DECISIONS IN OUR WORK
We have a review and referral process for
work that may present an ethical risk, such as
work for government clients, work relating to
sensitive products or marketing to children.
Before our people can accept potentially
sensitive work, they must refer the decision
to the most senior person in the relevant
office and then to the most senior WPP
executive in the country concerned, who
will decide if further referral to a global WPP
executive is required. This referral process
is covered in our How We Behave online
training, which all staff (including freelancers
working for more than four weeks) are
required to complete annually.
Our companies also have copy-checking
and clearance processes for the legal team
to review campaigns before publication.
These processes have strict requirements
in highly regulated sectors such as
pharmaceutical marketing.
Each of our agencies has a global Risk
Committee, chaired by its respective CEO, to
ensure that leadership has a full understanding
of the risks across businesses and markets
(see page 90).
For more examples of our client work
to address social and environmental
issues, download our Sustainability
Report 2020 from wpp.com/
sustainability
72
WPP ANNUAL REPORT 2020
SUSTAINABILITY
STRATEGIC REPORT
U BY KOTEX®
AGENCY
MINDSHARE NEW YORK
CLIENT
KIMBERLY-CLARK
Today’s advertisers have thousands
of words and phrases on keyword
exclusion lists, which tell automated
digital advertising models not to place
a brand’s messages alongside content
that is inappropriate or does not align
with their values.
An unintended consequence is that
important news stories and
underrepresented communities can be
excluded. Words like “dope” or “bomb”,
for example, can be incorrectly flagged as
relating to drugs or violence, even though
they are everyday jargon in Black culture
– meaning that content brands may want
to support is blocked, publishers lose out
on revenue, and Black voices are, in
effect, censored.
To address the problem, Mindshare
launched a Black community private
marketplace (PMP) to financially support
Black journalism and community voices
– with U by Kotex®, a brand that stands
for championing women’s progress, as
the launch partner. The agency curated a
list of Black publishers, content creators
and artists for the PMP, which features
everything from partners such as Pod
Digital (the first Black-owned and curated
podcast network) to a deal with Zefr that
brings in over 150 Black YouTube creators.
It was the second in a series of “Inclusion
PMPs” launched by the agency to help
underrepresented communities in
journalism; the first was a LGBTQ PMP
launched in February 2020.
22%
efficiency saving
on expected cost
per thousand
impressions
5%
brand awareness
increase
WPP ANNUAL REPORT 2020
73
STRATEGIC REPORT SUSTAINABILITY
INVESTING IN COMMUNITIES
We aim to give creativity back at scale. We can help
boost the impact of charities and non-governmental
organisations (NGOs) by providing marketing and
creative services, often on a pro bono basis (for little
or no fee).
This work is mutually rewarding. While
enabling our voluntary sector clients to raise
money and awareness, recruit members, and
achieve campaign objectives, pro bono work
also provides opportunities for our people to
work on fulfilling, impactful and sometimes
award-winning campaigns that raise the
profile of our companies.
During the pandemic, we worked with
governments, commercial clients, NGOs
and international health bodies to produce
public awareness campaigns to help limit the
spread and impact of Covid-19. We secured
and delivered more than $45 million in free
media space ($43.5m) and pro bono work
($1.5m) to provide global and regional
support to the World Health Organization
(WHO) to help it reach the public with its
vital communications promoting social
distancing and good hygiene.
In June 2020 WPP and its agencies made a
number of commitments to advance racial
equity (see page 49). These included a
commitment to use our voice to bring about
change, and to invest $30 million over three
years to fund inclusion programmes within
WPP and support external organisations.
In the second half of the year, our focus was
on establishing a governance process to
monitor and manage donations and ensure
this fund has impact. We will report
donations in 2021.
WHAT WE GAVE IN 2020
Our pro bono work was worth £12.6 million
(2019: £10.6 million), for clients including UN
Women and the World Health Organization.
We also made cash donations to charities of
£4.3 million (2019: £5.2 million). Our pro bono
work, combined with cash donations, resulted
in a total social investment of £16.9 million
(2019: £15.8 million), equivalent to 1.6% of
headline profit before tax (2019: 1.2%1).
WPP media agencies negotiated free media
space worth £59.3 million on behalf of pro
bono clients (2019: £18.9 million). Our total
social contribution, taking into account cash
donations, pro bono work and free media
space, was £76.2 million, a significant
increase versus 2019 (£34.7 million).
VOLUNTEERING
In addition to providing donations and pro
bono services, we encourage our people to
volunteer their time.
In 2020, 66% of our agencies took part in
organised volunteering activities as part of
their support for local communities. For
example, to mark its Foundation Day VMLY&R
ceased normal business operations for a day
to give nearly 7,000 employees around the
world the opportunity to support their local
community through virtual and in-person
charitable volunteer projects.
SOCIAL IMPACT
Our support helps charities and NGOs to
continue to grow their work in critical areas
such as improving health and education,
reducing inequality and protecting human
rights. Pro bono work is often worth more
than an equivalent cash donation as it raises
awareness of our partners’ work while
helping to increase donations, recruit
members, change behaviour and achieve
campaign goals.
We have conducted research to quantify
this wider impact. Our most recent analysis
shows that in 2020 our pro bono work
created wider social benefits worth
£108 million (2019: £92 million). This includes,
for example, the impact of charities being
able to improve health and wellbeing in
communities. Adding in our charitable
donations and free media space as well as
our pro bono work, the wider social benefits
created in 2020 were worth an estimated
£649 million (2019: £291 million), a significant
increase versus 2019 as our agencies have
supported WHO campaigns to help fight
the Covid-19 pandemic.
COMMON GROUND
Good communications are essential to bring
about the shift in attitudes and behaviour
needed to end extreme poverty, inequality
and climate change by 2030 through the UN
Sustainable Development Goals. Common
Ground is a collaboration between the
world’s six largest advertising and marketing
services groups and the United Nations,
created to serve that purpose.
We work directly with the UN through our
Common Ground initiative, partnering with
UN Women to tackle gender inequality.
£108m
wider social benefits created by pro bono
work in 2020
£649m
wider social benefits from pro bono work,
charitable donations and free media space
in 2020
1 We have restated this figure using headline profit before tax
to provide a comparable measure against 2019. Reported
pre-tax profits have been restated as described in the
accounting policies.
Read our Quantifying our Impacts report and
see more examples of our pro bono work in
our Sustainability Report 2020.
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WPP ANNUAL REPORT 2020
SUSTAINABILITY
STRATEGIC REPORT
MANTRA
AGENCY
WUNDERMAN THOMPSON
SÃO PAULO
CLIENT
AVON
In 2019, Brazilian soccer legend Marta Vieira
da Silva was wearing Avon lipstick when she
scored the goal that made her the top scorer
in World Cup history. It was the perfect
response to the prejudice that still exists
towards female athletes in Brazil, sending the
defiant message – as The New York Times
put it – that “muscles and make-up mix just
fine, thanks”.
Following the success of the World Cup
partnership with Marta, Avon wanted to
go further and launch a complete range of
long-lasting beauty products. So, it invited
athletes Pâmela Rosa (world record holder
in street skateboarding), Raissa Machado
(Paralympic record holder in javelin), and
Vitória Rosa (Olympic Brazilian sprinter)
to join Marta in a campaign for the new
Power Stay collection.
Wunderman Thompson made a film
demonstrating that Power Stay foundation,
lipstick and concealer would stick with
women all day, even while training. And to
connect the challenges faced by female
athletes in Brazil with the performance of
the products, the traditional voiceover was
replaced with a form of prayer – a mantra.
2bn+
77m
media impressions
views
WPP ANNUAL REPORT 2020
75
STRATEGIC REPORT SUSTAINABILITY
EMPLOYER OF CHOICE FOR ALL
We foster an inclusive culture across WPP:
one that is equitable, tolerant and respectful
of diverse thoughts and individual expression.
DIVERSITY, EQUITY AND INCLUSION
Diversity and difference power creativity –
from background, lived experience, sex,
gender, race and ethnicity, to thinking style,
sexual orientation, age, religion, disability,
family status and so much more.
WPP does not tolerate harassment,
discrimination or offensive behaviour of any
kind. Our Code of Business Conduct sets out
our commitment to select and promote our
people without discrimination or concern
for factors such as sex, gender, race and
ethnicity, sexual orientation, age, religion,
disability or family status. This Code applies
to all our people. In 2020, we launched
mandatory global inclusion and diversity
training called Belonging, as part of our
wider How We Behave ethics training.
Progress relies on accountability so, for the
first time, we have included diversity, equity
and inclusion goals in our incentive plans for
senior executives from 2021.
For information on our Code of Conduct and
How We Behave training, see page 86
ETHNICITY
In July 2020, we released our United States
Equal Employment Opportunity Commission
(EEOC) data for 2018 and committed to
reporting our workforce diversity data
annually in our Sustainability Report. For our
UK and United States data, see our 2020
Sustainability Report.
For information on our commitments to
advance racial equity, see page 49
DISABILITY
We recruit, select and promote our people
without discrimination or concern for disability.
Candidates are assessed objectively against
the requirements of the job, taking account
of any reasonable adjustments that may be
required for candidates with a disability. For
people who develop a disability during their
employment, we make adjustments to their
working environment or other employment
arrangements wherever possible, within a
reasonable time frame and in consultation
with the employee.
As an inclusive business we have signed up
to The Valuable 500, a global initiative that is
putting disability on the boardroom agenda
by celebrating inclusion among 500 influential
businesses. As part of our commitment,
we established a centre of excellence for
inclusive design to help our clients make
their customer experiences disability-
inclusive and accessible.
GENDER BALANCE
Much work remains to be done, but we have
made good progress on gender diversity.
51% of our senior managers are women
(2019: 50%) and the proportion of women in
executive leadership roles increased to 40%
(2019: 37%). At Board level, the proportion of
women is 43%, compared with 40% in 2019.
We aim to reach parity at all levels. We were
ranked tenth by the Hampton-Alexander
Review’s FTSE 100 rankings for Women
on Boards.
In 2019, WPP joined the 30% Club, a
campaign group of Chairs and CEOs taking
action to increase gender diversity on
boards and management teams to a
minimum of 30% female representation.
GENDER DIVERSITY
Board and Executive
40% (1,506)
60% (2,302)
2020
37% (1,513)
63% (2,577)
2019
Senior managers
51% (8,298)
49% (7,901)
2020
50% (8,689)
50% (8,578)
2019
All other employees
57% (44,604)
43% (33,755)
2020
57% (47,625)
43% (36,118)
2019
Total employees
55% (54,408)
45% (43,958)
2020
55% (57,827)
45% (47,273)
2019
● Female ● Male
AGE DIVERSITY
● 19 or under 0%
● 20-29 34%
● 30-39 39%
● 40-49 18%
● 50-59 7%
● 60 and over 2%
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STRATEGIC REPORT
We remain a committed signatory of the
Women’s Empowerment Principles, a guide
for businesses on how to empower women in
the workplace, marketplace and community.
We are also a proud partner of UN Women,
which is a significant beneficiary of our
pro bono work.
Our Employee Assistance Programme is a
24/7 service for employees and eligible
family members that provides access to free
confidential counselling and support, as well
as resources on topics such as managing
stress, dealing with loss and referrals to local
financial or legal help. The programme now
covers all of our people around the world.
Though having good policies and
procedures in place for managing mental
health issues is important, we also need a
working culture where people feel able to
discuss concerns and seek support. Read
more about how we are promoting
employee wellbeing on page 48.
LGBTQ+
In June 2020 we launched WPP Unite!,
a cross-agency LGBTQ+ community, which
advises on policies that impact the LGBTQ+
talent of WPP and its agencies. This year
we were proud to be named one of the
Best Places to Work for LGBTQ Equality
in the 2021 Corporate Equality Index.
HEALTH, SAFETY AND WELLBEING
Supporting our people’s physical and mental
health and wellbeing is good for our people
and good for business. Our companies are
required to have a health and safety policy
in place.
Our overall sickness absence rate in 2020
was 3.0 days per employee (2019: 3.8).
This includes non-work-related illness and
injuries, work-related illness and injuries, and
occupational diseases such as work-related
stress and ergonomic injuries. There were
no work-related fatalities in 2020.
Work-related stress is one of our main – and
growing – health and safety hazards. In 2020,
the challenges created by the Covid-19
pandemic have taken their toll on our mental,
emotional and physical wellbeing.
COORDINATED RESPONSE
TO COVID-19
To help coordinate our response to the
Covid-19 pandemic, our Covid-19 tracker
app records real-time case status around
the world.
Anonymised data is entered by local offices
and aggregated, so users can drill down by
agency and by country to get the latest
status on Covid-19 cases. A “World Status
dashboard” uses data from external sources
to provide valuable context on topics
including national case numbers and
policies. We also use the app to track
country-level changes to lockdowns,
including restrictions on retail, hospitality
and travel. This gives us a clear picture of
the Covid-19 response by market.
DAYS LOST DUE TO SICKNESS
3.8
404,381
3.1
330,264
3.0
299,657
2018
2019
2020
Days lost due to sickness
Days lost per person
WPP ANNUAL REPORT 2020
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STRATEGIC REPORT SUSTAINABILITY
EMPLOYER OF CHOICE FOR ALL
EMPLOYEE LISTENING AND
ENGAGEMENT
We use formal and informal mechanisms to
assess and improve employee engagement
and satisfaction.
In 2020, we launched our first all-staff survey
across our top five markets to better
anticipate our people’s needs and to shape
our people strategy. This helped to form our
2021 Listening programme, which started
with WPP Pulse – an anonymous, quarterly
global survey, designed to gather and act
on unfiltered, honest feedback.
We also launched new employee listening
channels, including: virtual townhalls with
the WPP CEO, which reached 39,000
participants; a series of “safe rooms” for
open and candid discussions; and WPP TV,
a channel for our people to share their
creativity, expertise and insights.
Development needs are assessed during a
formal appraisal process. In 2020, 89% of our
people had a formal appraisal at least once
a year (2019: 86%), including 360-degree
appraisals for 69% of employees (2019: 65%).
For information on skills, training and
development, see Growth section on page 47
The vast majority (99%) of our companies
carry out exit interviews with leavers, which
often provide helpful feedback on our
culture and practices in order to best
implement changes and target areas for
development and continuous improvement.
To ensure our Board understands the views
of our employees on WPP’s purpose, values
and strategy, and to consult on key people
issues, in 2019 we established our first People
Forum in UK. Sponsored by our UK Country
Manager, the Forum has representatives from
across our UK business who gather feedback
from their agencies to feed up to the WPP
Board. In 2020, we held our first People
Forum in the United States and established
an India People Forum, which met for the
first time in February 2021.
LABOUR RELATIONS
We support the rights of our people to join
trade unions and to bargain collectively,
although trade union membership is not
particularly widespread in our industry.
In 2020, around 4% of our employees were
either members of a trade union or covered
by a collective bargaining agreement
(2019: 5%). We held 185 consultations with
works councils, mainly in Europe (2019: 1,507).
We have made around 7,000 redundancies
as a consequence of the Covid-19 pandemic
and also as part of our transformation
programme, as we merge and restructure
some agencies. We consulted with our
employees as appropriate and supported
affected people through our employee
assistance programmes which includes
outplacement in appropriate cases. We have
also created an internal talent marketplace
to try and ensure any open roles are filled by
employees who have the right skills before
recruiting for those roles externally.
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DENTISTS
FOR ME
AGENCY
VMLY&R MUMBAI
CLIENT
COLGATE
When India went into lockdown to control
the Covid-19 pandemic, people suffering
from urgent dental problems had little or
no access to dental care. Time was of the
essence, so the VMLY&R team moved quickly,
and in only three weeks launched Colgate
Dentists for Me – India’s first online dental
consultation platform. The platform allows
users to connect for free to nearby dentists
for remote consultations and oral check-ups,
via chat messaging, audio and video calls.
The agency led everything from initial
insights to the platform’s design, content
and development across web and apps. It
also created a digital film as part of the social
media strategy to showcase the service.
135,000
minutes of consultations
between dentists and
patients
50,000
unique sign-ups
WPP ANNUAL REPORT 2020
79
H&M LOOOP
AGENCY
AKQA GOTHENBURG,
UNIVERSAL LONDON
CLIENT
H&M
84% of clothing ends up as landfill or
in the incinerator. It’s time to change
the way we see our old and worn-out
clothes. Not as waste, but as a resource.
The solution? Give H&M customers the
opportunity to recycle old clothing into
something new, with Looop, the world’s
first in-store garment-to-garment
recycling system.
Housed in a stunning glass box at an H&M
store in central Stockholm, visitors select
one of eight new, ready-to-wear designs,
configured through the app, and watch
as unwanted garments are fed into the
Looop to get cleaned, shredded and
spun into yarn without the use of water
or chemicals.
Opposite the machine, eight giant
screens display the end-to-end process
behind it. Each depicts an individual step
as a beautifully animated loop, which
comes to life as customers walk by.
ASMR sound enriches each film to
heighten the sensory experience, and
an accompanying website brings this
revolutionary recycling system and its
story to a global audience.
STRATEGIC REPORT SUSTAINABILITY
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SUSTAINABILITY
STRATEGIC REPORT
PLANET
We support urgent action to tackle
the climate crisis.
We recognise that modern lifestyles and
demand for goods have contributed
significantly to the climate crisis and
environmental degradation. WPP is a proud
signatory to the UN Global Compact’s
Business Ambition for 1.5°C and we aim to
be net zero across our supply chain by 2030.
We have managed our carbon footprint
from owned emissions (scopes 1 and 2) and
business travel (limited scope 3) for 15 years.
We have cut carbon emissions per employee
by 37% and absolute market-based scope 1
and 2 emissions by 41%, both since 2019.
During the year we carried out an assessment
of our full value chain emissions. In 2019,
WPP’s scope 1, 2 and 3 emissions totalled
5.4m tCO2e. Our new goals are underpinned
by targets that are in line with the Paris
Climate Agreement and will be verified by
the Science Based Targets initiative across
our value chain (scopes 1, 2 and 3) set against
a 2019 baseline.
RENEWABLE ELECTRICITY 1
WPP is a member of RE100 and has
committed to sourcing 100% of its electricity
from renewable sources by 2025. In 2020,
we purchased 65% of our electricity from
renewable sources (2019: 37%1), including
100% of electricity purchased in the United
States and, for the first time, in Canada, the
UK and most European markets.
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
We support the TCFD and are developing our
disclosures in line with its recommendations.
Our third statement (see pages 216-218) is
structured around four themes: governance,
strategy, risk management, and monitoring
progress. It sets out how we manage
physical and transition climate-related risks
and opportunities. Our climate risks include
extreme weather and climate-related natural
disasters, and reputational risk associated
with misrepresenting environmental claims,
working with oil and gas companies, and
taking on environmentally detrimental briefs.
Our opportunities include demand for
sustainable products and services, and
achieving resource efficiencies through
cutting our carbon footprint and improving
energy efficiency.
CIRCULAR ECONOMY
It has never been more important to transition
to a circular economy. During the year, the
Covid-19 pandemic increased global demand
for single-use plastics. We remain committed
to phasing out plastics that cannot be reused,
recycled or composted across all of our
offices and Campuses worldwide. To give our
offices – many of which were unoccupied for
much of 2020 – time to adjust to new safety
requirements and consumption patterns, we
have extended our timeline to December
2021. We are applying a new level of rigour to
how we source products to ensure they comply
with our Circular Economy Plastics Policy.
PERFORMANCE SUMMARY
SCOPE 1 AND 2 (MARKET BASED)
TONNES CO2e EMISSIONS PER PERSON
2.0
1.5
1.0
0.5
● Headcount intensity
0.52
2008 2010 2012 2014 2016 2018 2020
Our scope 1 and 2 market-based emissions for 2020
were 0.52tCO2e/head, a 37% reduction from 2019.
Our carbon intensity per £1 million revenue was
4.33 tCO2e, a 35% reduction since 2019.
ELECTRICITY FROM RENEWABLE
SOURCES
%
100
65
32
371
2018
2019
2020 2025
target
1 Figure restated as part of data reviews upon joining RE100.
For our carbon emissions statement,
see page 219
TARGETS AND COMMITMENTS
2030
2025
net zero carbon emissions across
our supply chain (scope 3)
net zero carbon emissions across
owned operations (scope 1 and 2)
100%
renewable electricity by 2025
Zero
phase out plastics that cannot be
reused, recycled or composted
across our offices by end of 2021
WPP ANNUAL REPORT 2020
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STRATEGIC REPORT SUSTAINABILITY
THE GOOD
DRUG
TRAFFICKING
AGENCY
VMLY&R COMMERCE BOGOTÁ
CLIENT
COLIBRI FOUNDATION
With the ongoing humanitarian crisis in
Venezuela, VMLY&R Commerce united
with non-profit organisations to create
The Good Drug Trafficking – a service that
works with former smugglers to deliver
restricted medicines and health supplies
from Colombia to Venezuela in a safe and
legal way.
Donations collected in Colombia by NGOs
were given to foundations in Venezuela,
through a network of volunteers advised
by former traffickers who wanted to use
their experience for good.
This huge campaign required the
co-ordination of a large team of volunteers,
foundations and NGOs, and meant that vital
supplies continued to reach Venezuelan
families in the greatest need.
30
tonnes of humanitarian
aid has crossed the
border since 2019
Winner
Gold El Ojo
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SUSTAINABILITY
STRATEGIC REPORT
SUPPLY NETWORK
WPP is committed to creating an inclusive,
sustainable, ethical and diverse supplier network
of business-enabling vendors.
Our Group procurement team manages
centrally negotiated contracts with preferred
suppliers. A significant proportion of
additional procurement is delivered through
contracts negotiated by budget holders
within our agencies.
In 2020, we began an extensive transformation
programme to modernise our procurement
ecosystem and infrastructure and optimise
how we buy. Workstreams include expanding
our spend analytics tool across all markets
by the end of 2022 and standardising
processes and systems, beginning with the
global roll-out of our travel programme in
the second half of 2021.
SOURCING STANDARDS
Our Supplier Code of Conduct includes
requirements relating to labour practices
(such as anti-harassment and discrimination,
and health and safety), human rights
(including modern slavery issues such as
child, forced or bonded labour), social
impacts (such as anti-bribery and corruption)
as well as other sustainability issues. Our
Code requires suppliers to apply similar
standards to companies within their own
supply chain, including evidencing diversity
and social responsibility in their cultures,
behaviours and attitudes.
SUPPLIER SELECTION
Our procurement policy requires that anyone
who buys goods and services in any WPP
agency considers sustainability risks and
criteria to determine whether suppliers are
fit for purpose. In 2020 we launched new
Mindful Purchasing Guidelines which outline
how to select suppliers and partners that
meet our responsible sourcing standards.
sustainability. In 2020 we revised our supplier
questionnaire to include new questions on
supplier diversity and carbon reduction.
SUPPLIER DIVERSITY
WPP is committed to including Certified
Diverse Suppliers in its purchasing
lifecycle, both internally and for the
benefit of our clients.1
In 2020 we relaunched our Supplier
Diversity Programme to support and
encourage buying from Certified Diverse
Suppliers. We also joined the Global Supplier
Diversity Alliance with memberships in
Australia, the UK and the United States,
giving us access to global directories of
Certified Diverse Suppliers and guiding us
on best practice so diverse suppliers can
win contracts and thrive in our ecosystem.
HUMAN RIGHTS
Respect for human rights is a fundamental
principle for WPP. We aim to prevent,
identify and address any negative impacts
on human rights associated with our
business activities.
Our human rights policy statement
summarises our approach. It reflects
international standards and principles,
including the International Bill of Human
Rights, the UN 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.
We are a member of the United Nations
Global Compact and report progress
against its ten principles annually.
bargaining, and we do not tolerate harassment
or any form of forced, compulsory or child
labour. Human rights are included in the
ethics training completed by all employees,
which we updated in 2020.
We work with clients to manage any human
rights risks from marketing campaigns, for
example by protecting children’s rights in
relation to marketing. WPP companies will
not undertake work designed to mislead
on human rights issues.
MODERN SLAVERY
We do not tolerate any form of modern
slavery in our business or supply chain.
WPP recognises the prevalence of modern
slavery across all countries. We aim to
implement appropriate measures to mitigate
the risk of it occurring, either in our own
operations or those of our partners. In 2020,
we trained more than 100 members of our
HR community on modern slavery risks and
how to mitigate against these by following
our responsible recruitment and mindful
purchasing processes.
As part of our due diligence process, our
supplier questionnaires include an assessment
of modern slavery risk. Our Global Supplier
Agreement includes a specific clause relating
to modern slavery.
1 Certified Diverse Suppliers are defined as minority-owned,
women-owned, veteran-owned, LGBT-owned, service
disabled veteran-owned, historically underutilised businesses
and small businesses.
To learn more about our Supplier Code of Conduct,
Human Rights Policy, and Modern Slavery Act
Transparency Statement, see:
As part of our supplier onboarding process,
we evaluate potential suppliers on factors
including assurance of diversity of workforce,
supply, quality, service, cost, innovation and
Our most direct impact on human rights
is as a major employer. We recognise the
rights of our people, including those relating
to freedom of association and collective
wpp.com/sustainability/
policies-and-resources
WPP ANNUAL REPORT 2020
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SUSTAINABILITY
EARTH SPEAKR:
IT’S TIME TO
START
LISTENING
AGENCY
AKQA COPENHAGEN
CLIENT
STUDIO OLAFUR ELIASSON
Earth Speakr is an interactive, augmented
reality artwork, developed by contemporary
artist Olafur Eliasson in collaboration with
AKQA. It amplifies children’s views on the
future wellbeing of the planet, by inviting
adults and today’s decision-makers,
change-agents and global leaders to listen
to what young people have to say.
Earth Speakr uses augmented reality to
blend children’s faces with objects or
materials in their surroundings – or even
the planet itself – as they literally speak up
on behalf of the environment. Adults are
invited to participate by listening to the
messages and creating augmented reality
“Loud Speakrs” to amplify the powerful
messages kids have to share.
Earth Speakr was funded by the German
Federal Foreign Office on the occasion
of the German Presidency of the Council
of the European Union 2020 and realised
in cooperation with the Goethe-Institut.
It is available in the 24 official languages
of the European Union and can be
accessed worldwide.
2.5m
450,000
messages listened to
app downloads
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TRANSPARENCY AND TRUST
We identify any specific human rights risks
associated with different countries of
operation, using sources such as the
Transparency International Corruption Index,
Human Rights Watch country reports and
government guidance.
Acquired businesses must adopt our
policies and their people must undertake
our ethics training within a month of joining
WPP. This is agreed in an integration plan
before the acquisition is finalised, and we
monitor progress.
INSTITUTE OF BUSINESS ETHICS
WPP is a member of the Institute of Business
Ethics (IBE) and considers it an important
partner and support for the approach that
the Company takes to business integrity,
sustainability and ethics. As set out more
fully in Risk Governance Framework and
Business Integrity Programme on page 90,
we want to champion and facilitate a culture
where our people feel that acting with
honesty and integrity is an expected metric
for success and this is also the IBE’s ethos.
The IBE shares knowledge and good practice
as well as advice on the development and
embedding of relevant policies through
networking events, regular publications and
training sessions, research and benchmarking
reports. The IBE is a registered charity funded
by corporate and individual donations.
We set clear standards, policies and
procedures to ensure high levels of
transparency and trust throughout
our business.
OUR CODE OF CONDUCT
Our policy framework and training set clear
ethical standards for our people and agencies.
The WPP Code of Business Conduct
applies to everyone at WPP. It sets out our
responsibilities to our people, partners
and shareholders to act ethically and
with integrity.
It is underpinned by more detailed policies
on topics including anti-bribery and
corruption, hospitality and gifts, facilitation
payments, the use of third-party advisors,
human rights and sustainability.
We want to embed a culture of integrity
and transparency in which our people
recognise that doing the right thing is
good business.
We require our people to take our online
ethics training, How We Behave, on joining
and then on a regular basis, including after
each update (at least every two to three
years). Topics include diversity, human rights,
conflicts of interest and avoiding misleading
work. In 2020, How We Behave was refreshed
to include new modules on sustainability
and business integrity. More than 95,000
employees completed the training.
Our online training on anti-bribery and
corruption covers the requirements of the
Foreign Corrupt Practices Act and UK Bribery
Act, including issues such as hospitality and
gifts, facilitation payments and the use of
third-party advisors.
Part of WPP’s Code of Conduct is making
sure that our people have the confidence
to speak up and raise concerns through
various channels without fear of retaliation.
Our approach is described under
Whistleblowing on page 92.
MANAGEMENT AND COMPLIANCE
Our Group Chief Counsel oversees our
approach to ethics and compliance. Senior
managers in all our agencies and our
business and supplier partners are asked to
sign a copy of the WPP Code of Business
Conduct each year to confirm they will
comply with its principles. Our Board-level
Sustainability Committee and Executive
Committee sustainability working group
provide additional oversight and guidance
on any ethical issues that may arise.
Our people can report concerns or suspected
cases of misconduct confidentially (and, if
they wish, anonymously) through our
independently managed Right to Speak
facility, which is overseen by our legal and
business integrity teams and is available via
phone or email in local languages. We
publicise the facility in induction packs, on
our intranet and external website, in offices,
in the WPP Policy Book and via our ethics
training. Our people can also speak directly
to our business integrity team who receive
a number of reports through emails, calls,
texts and in person appointments.
In 2020, we received 418 Right to Speak
reports (2019: 361), all of which were
followed up, investigated where appropriate
by our legal and business integrity teams,
and reported to the Audit Committee
(see page 128).
ASSOCIATES, AFFILIATES AND
ACQUISITIONS
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.
Our due diligence process for acquisitions
and expansion into new markets includes
a review of ethical risks including those
relating to bribery and corruption, human
rights or ethical issues associated with
client work.
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PUBLIC POLICY
We believe that business can make a valuable
contribution to public policy debate. To
protect the public interest, it is important
to conduct all lobbying with integrity
and transparency.
Most of our public policy activity is work
that our public affairs businesses carry out
for clients, including direct lobbying of
public officials and influencing public
opinion. On occasion, we also advocate
on issues that affect our business.
Our public affairs companies include BCW,
Finsbury Glover Hering and Hill+Knowlton
Strategies. The majority of their work takes
place in the United States, the UK and the
EU, although many clients are multinational
businesses operating in many countries.
OUR STANDARDS
Our Code of Business Conduct and Political
Activities and Engagement Policy govern our
political activities, and both are available on
our website. These documents commit us to
acting ethically in all aspects of our business
and to maintaining the highest standards of
honesty and integrity. Political activities in
particular should be conducted legally,
ethically and transparently and all related
communication should be honest, factual
and accurate. Our policies apply to all
agencies and employees at all levels.
Many of our companies are members of
professional organisations and abide by
their codes of conduct. Examples include
the UK Association of Professional Political
Consultants (APPC), and the European Public
Affairs Consultancies’ Association (EPACA).
WPP companies comply with all applicable
laws and regulations governing the
disclosure of public affairs activities. In the
United States, this includes the Lobby
Disclosure Act and the Foreign Agent
Registration Act, which are designed to
achieve transparency on client representation
and require lobby firms to register the names
of clients on whose behalf they contact
legislators or executive branch personnel.
A number of our agencies are listed on
the voluntary EU Transparency Register of
lobbying activities.
Our companies in the United States whose
sole or primary business is lobbying have
representatives of both major political
parties among senior management.
LOBBYING AND POLITICAL ADVOCACY
We occasionally contribute to the debate on
public policy issues relevant to our business,
sometimes through our public affairs agencies.
We will not undertake work that is intended
to mislead and always seek to identify the
underlying client before taking on work. We
do not knowingly represent “front groups”
purporting to be independent campaign
groups but which are in fact controlled by
another organisation for the purpose of
misleading.
Our Group Corporate Affairs Director has
responsibility for developing and
implementing our political activity policy
and public reporting procedures. The CEO
and CFO in each country or region are
responsible for implementing our policy
at the local level.
Any third parties conducting political
activities on behalf of WPP or its agencies
must comply with our Political Activities
and Engagement Policy. Third parties are
required to complete the WPP ethics training
or equivalent within their own organisation.
POLITICAL CONTRIBUTIONS
WPP agencies are not permitted to make
direct cash donations. Other political
donations can only be made with the prior
written approval of a WPP executive
director. Donations must be reported to
WPP legal before they are made, to confirm
they comply with this policy and to obtain
the necessary approvals.
POLITICAL ACTION COMMITTEES
In countries where it is consistent with
applicable law, individuals working at WPP
companies may make personal voluntary
political contributions directly to candidates
for office. Several of our businesses,
including BCW and Finsbury Glover Hering
also maintain political action committees
(PACs) which accept voluntary donations
from their people to support political
candidates. In 2020, these PACs made
disbursements worth $108,037 (data from
fec.gov).
We advocate on sustainability issues, through
partnerships such as the Common Ground
initiative in support of the UN Sustainable
Development Goals. Demet İkiler, WPP’s
Turkey Country Manager and EMEA CEO of
GroupM, serves on the local board of the
UN Global Compact with responsibility for
diversity and inclusion. Karen Blackett OBE,
WPP’s UK Country Manager and GroupM UK
CEO, serves as a member of the Board of
the UK’s Cabinet Office.
Our agencies contribute to public policy
debate in areas where they have expertise and
a special interest. Our digital and research
companies, for example, are involved in
privacy and data protection issues.
WPP agencies must implement clear
procedures for employing serving or former
politicians, including a six-month “cooling-
off” period for people joining WPP from
public office or the public sector.
MEMBERSHIP OF TRADE ASSOCIATIONS
We are members of trade associations,
industry groups and membership
organisations which undertake lobbying
activity on behalf of their members. We
select organisations with priorities and
values aligned with our own and with robust
governance processes. WPP companies
must nominate a senior manager to manage
and oversee trade association relationships.
At a Company level, our memberships
include: 30% Club, the American Benefits
Council, BritishAmerican Business Inc.,
Business Disability Forum, CBI, China Britain
Business Council, Executive Leadership
Council, Institute of Business Ethics, the
Northeast Business Group on Health, PARC,
RE100, The Valuable 500, Women on Boards,
and the World Economic Forum.
In our markets, our agencies are often
members of local advertising, PR, public
affairs and market research industry
associations, as well as national chambers
of commerce and business councils.
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PRIVACY AND DATA ETHICS
Throughout 2020 we continued to build
on our established foundations for data
protection and particularly for data privacy.
With increasing regulation and the increased
importance of these matters for consumers,
WPP demonstrates, through its expertise
and direct engagement, that we are a
trusted partner for our clients, suppliers
and associates.
We are seeing – and responding to –
increased regulation with the introduction
of new laws in Brazil, California and South
Africa and we have policies and governance
implemented ensuring we are well placed
as countries introduce similar regulation.
Through our active engagement in industry
bodies, particularly in the UK with the
Advertising Association and the United
States with the 4As and the Network
Advertising Initiative, we are able to
monitor and influence the changing
regulatory landscape.
Our Group Chief Privacy Officer leads our
work on privacy, supported by our Global
Data Protection Officer. Together, they provide
practical guidance and support to our
agencies, ensure that privacy risks are well
understood, and promote best practices.
CLIENTS
We are understandably seeing increased
interest and engagement from our clients
on data privacy, protection and ethics, not
only through commercial and contractual
negotiations, but throughout the operational
relationship. Our privacy teams have
established direct relationships with their
client counterparts to ensure alignment and
engagement on this subject and we have
jointly hosted privacy-focused client sessions
establishing a shared understanding in the
work being undertaken.
DATA ETHICS
Data ethics continues to be a focus for WPP.
In 2020 we launched the WPP Data Ethics
Statement, complemented by the WPP AI
Statement, outlining to our people, clients
and stakeholders the foundations of our
ethical data processing. In 2021 we will be
introducing full policies for both data ethics
and AI.
GroupM, WPP’s media investment group,
recently launched the industry’s first tool to
operationalise data ethics. The Data Ethics
Compass allows advertisers to evaluate the
ethical risk level of data assets and decisions.
groupm.com/newsroom/groupm-
operationalizes-data-ethics-with-a-
proprietary-scoring-logic-criteria-and-
standardization-tool/
DIVERSITY, EQUITY AND INCLUSION
WPP is committed to diversity, equity and
inclusion in our business, supply chains and
client work. Whilst this is achieved through
our actions and initiatives, we must also
measure achievement against our own
commitments. Clients are increasingly asking
us to demonstrate our people are from
diverse backgrounds and representative of
their own customers. For over 30 of our
markets, we have developed detailed
guidance on how we can collect and report
on such data in line with regulations and in
a way that is culturally sensitive to our
own people.
For information on ethnicity data,
see our Sustainability Report 2020
GOVERNANCE, POLICIES AND
TRAINING
We have established the WPP Risk
Sub-committee focusing on data privacy,
security and ethics. Co-chaired by WPP’s
Chief Privacy Officer and Chief Information
Officer, the Sub-committee consists of
representation from across the security,
technology and data leadership. The
Sub-committee is responsible for reviewing
and monitoring the Group’s approach to
regulatory and legal compliance, as well as
monitoring data privacy, ethics and security
risk. This Sub-committee is pivotal in our
approach to our own and our clients’ data, as
well as contributing to our overall strategy.
2020 saw the first full-increment version of
the WPP Data Privacy & Security Charter.
Bringing together our related policies, the
Charter communicates our approach to data,
setting out core principles for responsible
data management through our Data Code of
Conduct, our technology, privacy and social
media policies, and our security standards
(based on ISO 27001).
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WPP ANNUAL REPORT 2020
Last year we launched the revised data
protection and privacy Safer Data training
as part of the relaunch of the WPP How We
Behave training. Completed by all staff,
the new training completely overhauls the
content and delivery. This training is
augmented by subject-focused training,
where required, covering specific
regulations, regional laws or activities
undertaken by our agencies.
Our annual Data Health Checker provides
us with insight into how data is used, stored
and transferred and helps to identify any
parts of the business that need further
support on data practices. The results show
us that the majority of our agencies continue
to have mitigation measures that match or
exceed their level of privacy risk, with the
average risk score being 1.6 out of five,
where five is the maximum score possible
and indicates maximum risk.
ARTIFICIAL INTELLIGENCE, MACHINE
LEARNING AND DATA
The Privacy, Data Protection and Security
teams work closely with the Group WPP
CTO function facilitating both strategic and
compliance alignment particularly for the
development of client-focused data services.
Specifically, we recognise our clients’ focus
on the increasing importance of first-party
data and data access and variety rather than
acquisition at volume.
We are developing skilled, knowledgeable
teams with an awareness and understanding
about the centrality of data to our business
(supported by programmes such as
Demystify AI). We have launched a
partnership with the Open Data Institute
and are rolling out the WPP AI Academy in
partnership with Coursera.
Recognition and elevation of the
contribution that our data specialists make
to our business has been fostered through
the launch of the highly successful WPP
Open Data & AI Community along with the
Chief Data Officers’ Group, which both
seek to encourage a culture of curiosity
and sharing.
SUSTAINABILITY
STRATEGIC REPORT
OUR APPROACH TO SUSTAINABILITY
EMBEDDING SUSTAINABILITY IN
OUR COMPANIES
WPP sets sustainability policy, with every
agency responsible for implementation.
We have a clear policy framework through
our Code of Business Conduct, Sustainability
Policy, Supplier Code of Conduct, Data
Privacy and Security Charter, Human Rights
Policy Statement and other policies included
in the WPP Policy Book. We track progress
using our social and environmental key
performance indicators.
Our internal sustainability advisors are
working to ensure consistent implementation
of our standards. In 2020, we launched a
sustainability audit across 21 countries to
establish a baseline of sustainability policies
and performance.
We also established new green teams in
India and the Netherlands to share best
practice and encourage collaboration.
STAKEHOLDER ENGAGEMENT
Dialogue with our stakeholders, including
our people, clients and shareholders,
provides valuable feedback and insight into
sustainability risks and opportunities, for our
Company and our clients.
Most stakeholder engagement takes place
in the course of doing business. We work
with clients on sustainability issues (see page
72). Information on employee engagement is
on page 78. In 2020, as part of our
sustainability strategy review, we conducted
a formal sustainability stakeholder mapping
exercise with H+K to help strengthen the
effectiveness of our engagement on
sustainability issues.
INVESTOR ENGAGEMENT
Our involvement with investors, rating
agencies and benchmarking organisations
on sustainability during 2020 included:
Bloomberg Gender-Equality Index; Ecovadis;
Ethibel; Vigeo Eiris; FTSE Russell; Human
Rights Campaign Foundation’s Corporate
Equality Index; MSCI Research Inc.;
Sustainalytics; Thomson Reuters D&I Index;
and Workforce Disclosure Initiative (WDI).
We are included in the FTSE4Good Index
and participate in the CDP climate change
benchmark, receiving a rating of B in 2020
(2019: B).
OUR MATERIALITY PROCESS
We use a materiality process to ensure our
strategy, investments and reporting focus
on the issues of greatest importance and
relevance to our business and our
stakeholders.
Our first formal materiality assessment in
2014 included interviews with clients,
investors, NGOs, and sustainable business
experts, as well as with senior executives in
our Company functions and our agencies.
We carried out further reviews in 2016 and
2017. Our most recent formal materiality
assessment was completed in January 2020
and reflected our new corporate strategy
and changing stakeholder priorities (see
2020 Sustainability Report).
UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS (SDGs)
We support the UN SDGs as a framework
for government agencies, civil society, the
private sector and citizens to work together
to create a more sustainable future.
We have analysed the 17 Global Goals and
the 169 targets which sit behind them to
identify those which are most relevant for
our business. To learn more about the Goals
we believe we can make the most significant
contribution towards, see our full Sustainability
Report 2020, available as a PDF download.
ABOUT OUR REPORTING
Data included in this Annual Report is for the
calendar year 2020 and covers all subsidiaries
of the Company. Some key environmental
and people data is verified by Bureau Veritas,
an independent assurance provider (see
2020 Sustainability Report).
We use external frameworks to help us
implement good reporting practice, to
ensure we are covering the topics of most
interest to stakeholders and to aid
comparison with other companies.
To find further details, data, our materiality
analysis, case studies and our reporting standards
index, listing disclosures including GRI and UNGC
and their location in our report, visit:
wpp.com
NON-FINANCIAL
INFORMATION STATEMENT
This section provides information required
by regulation in relation to:
– environmental matters (page 81) and
TCFD Statement, pages 216-218);
– our people (page 76);
– social matters (page 74);
– human rights (page 83); and corruption
and bribery (page 86).
In addition, other related information can be
found as follows:
– business model (page 12);
– principal risks and how they are managed
(page 95); and
– non-financial key performance indicators
(page 54).
WPP ANNUAL REPORT 2020
89
STRATEGIC REPORT
ASSESSING AND
MANAGING OUR RISKS
The success of our strategic objectives
as discussed in this report depends to a
significant extent on how we identify and
address the current and emerging risks and
uncertainties we face as a business. The
Board, assisted by the Audit Committee, has
oversight and responsibility for our approach
to risk management which is structured
through our three lines of defence model and
driven by our risk governance framework,
business integrity programme, culture based
upon the principles set out in our Code of
Conduct and our internal control framework.
The Board has reviewed the design and
effectiveness of this system during the year
and up to the date of this report and carried
out a robust assessment of the principal
risks that could impact our business.
The system of controls described below is
designed to manage and mitigate, but may
not eliminate, the risk of failure to achieve
our strategic objectives and is not an
absolute assurance against material
misstatement or loss.
RISK GOVERNANCE FRAMEWORK AND
BUSINESS INTEGRITY PROGRAMME
A key element of our risk governance
framework is our Risk Committees. Each
network has a global Risk Committee chaired
by the CEO and with key senior managers
participating to ensure that leadership has
a full understanding of the risks across
businesses and the remediation steps
required from time to time in certain markets.
We also have a WPP Risk Committee which
has oversight of all network Risk Committees
and itself reports into the Audit Committee.
In 2020 we established two sub-committees
to focus on the detail of risks relating to Data
Privacy, Security and Ethics and to Controls
at both WPP and network level.
The agenda of the Risk Committees is to
review, monitor and advise on: compliance
with laws, regulations, internal procedures,
and industry standards, including anti-bribery
and corruption matters; the implementation
of our compliance framework (including
setting clear standards and reporting lines
for the accurate and timely monitoring of
exposures and certain risk types of
importance); compliance policies and
practices; and risks that present themselves
throughout each network. This agenda is
framed by our business integrity programme
and internal control environment. In 2020
the WPP Risk Committee’s terms of
reference were updated to hone in on the
appropriateness of WPP’s values, culture
and reward systems for managing risk and
internal controls, and the extent to which
culture and values are embedded at all
levels of WPP.
In order to carry out their duties
comprehensively, each Risk Committee has
secure access to an increasing central pool
of data from, or with the potential to impact,
their network that is crucial to the ability
to recognise and monitor a full risk and
compliance picture; this includes internal
audit reports, Internal Controls over Financial
Reporting (ICFR) results, general computing
controls results, information from
whistleblowers, findings from investigations,
responses from our annual risk mapping
process and the results of our annual
assessment of business integrity risk.
WPP’S RISK GOVERNANCE FRAMEWORK
BUSINESS INTEGRITY PROGRAMME
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INTERNAL AUDIT
FINDINGS
ICFR
RESULTS
CERTIFICATIONS
AND
DISCLOSURES
WHISTLEBLOWING
FINANCIALS
BUSINESS
INTEGRITY RISK
ASSESSMENT
INTERNAL CONTROL FRAMEWORK
90
WPP ANNUAL REPORT 2020
ASSESSING AND MANAGING OUR RISKS
STRATEGIC REPORT
WPP’S RISK GOVERNANCE
FRAMEWORK
Our business integrity programme is integral
to ensuring that the policies, procedures
and control environment set by the Board
are understood and adhered to across all
geographies and markets. It is produced by
mapping resources, systems and processes
against WPP’s risk appetite (which the
business integrity function supports the
Board and WPP Risk Committee to set),
governance requirements and regulator
expectations and then crafting actions from
the results for both the business integrity
team and the Risk Committees.
Actions for the business integrity team focus
on tackling root causes of risk and include:
– in respect of resources, championing
and enhancing messages and examples
from global, regional and local leadership
with communications, training sessions,
workshops, townhalls and practical
guidance, knowhow and resources for
our people and providing “on the ground”
support for day to day queries from
our networks;
– in respect of systems, advising on the
implementation of WPP’s policies,
procedures and controls (including around
internal reporting and approvals) and
providing a compliance lens for the design
and structure of our enterprise resource
planning (ERP) environment (including
ensuring that its functionality is leveraged
to restrict access to key transactions to
appropriate parties and ensure adequate
segregation of duties and assets); and
– in terms of processes, conducting an
annual assessment of business integrity
risk, monitoring dynamic data feeds
(including our financials, internal audit
findings and ICFR results), pro-active
management of self-certifications and
disclosures from our people, reviewing
and investigating whistleblowing reports
and tracking remediation efforts.
POLICIES, PROCEDURES AND CULTURE
The quality and competence of our people,
their integrity, ethics and behaviour, and the
culture embedded within our businesses are
all vital to the maintenance of our system of
internal control which is maintained and
reviewed in accordance with the UK
WPP’S BUSINESS INTEGRITY PROGRAMME
OUR RISK APPETITE
GOVERNANCE REQUIREMENTS
REGULATOR EXPECTATIONS
RESOURCES
Our people – everyone is accountable
Leadership
Communications, training and guidance
“On the ground” support
SYSTEMS
ERP environment
Policies, procedures and controls
Financial reporting
Internal reporting and approvals
PROCESSES
Business integrity risk assessment
Monitoring dynamic data feeds
Whistleblowing
Due diligence
Certifications and disclosures
Remediation – and focus on root causes
Disciplinary measures and incentives
Corporate Governance Code, FRC guidance
on risk management and internal control and
the COSO framework.
In order to help our people make the right
decisions, we provide a number of tools.
The baseline reference of our policies and
procedures are set out in our Policy Book,
internal control bulletins and accounting
guidelines. To help our people understand
the ethical and business objectives set out in
the WPP Policy Book, WPP has a mandatory
online training programme which all our
people (including freelancers working for
more than four weeks) are required to
complete on an annual basis. The programme
content was refreshed in 2020 and comprises
five modules: How We Behave, Business
Integrity, Safer Data, Sustainability and
Belonging. In addition, WPP’s business
integrity function organises in-person (or,
through the lockdown months, video call)
training sessions, townhalls and workshops
throughout the year on topics thought
necessary or relevant such as Ethics &
Integrity, Respect in the Workplace and
The ABCs of ABC (Anti-Bribery and
Corruption). This top-up programme is
designed in response to data collected
and reviewed by WPP’s business integrity
function including from concerns raised and
corroborated through investigations and our
annual assessment of business integrity risks.
It is underpinned with daily support on the
ground from our regional compliance
directors and managers. The business
integrity function also houses an e-library
of practical guides and compliance FAQs.
The core of our Policy Book is our Code
of Business Conduct, which is regularly
reviewed by the Board and sets out the
principal obligations of all of our people.
As a Group and as individuals we have
a collective responsibility to behave in the
right way, to live up to our values and to
conduct our business with integrity. Our
Code outlines the commitments we make
to each other, our business partners, and
others with a stake in what we do. The
principles of the Code are embedded in
our training courses and workshops and
our senior managers are required to certify
compliance with the Code on an annual basis.
WPP ANNUAL REPORT 2020
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STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS
Our Anti-Bribery and Corruption Policy
prohibits any form of bribery across the
Group and is supported by the Advisor
Payment Policy which restricts the use of
advisors and details the due diligence that
must be undertaken in the limited cases
where advisors may be used. Our Gifts and
Hospitality Policy sets limits on values that
may be given or received, supported in
each company by a gift register.
Our Code of Conduct for suppliers replicates
all of these obligations in our supply chain.
Our Policy Book also includes required
practices in many operational, tax, legal
and human resource areas.
The application of our policies and
procedures is monitored within each
company and by the internal audit, legal,
business integrity and risk and controls
functions. Breaches are investigated by our
legal and business integrity teams and,
where appropriate, external advisors.
WPP’s business integrity function has a
mandate to make recommendations to
realign and support WPP’s networks where
required to manage and reduce risk.
Recommended remediation can include
disciplinary action, changes to systems,
controls, approvals or functions, monitoring
and training sessions. This approach is
formalised through WPP’s Whistleblowing
Protocol and Investigations Protocol. The
Compensation Committee continues to
review how the Group’s performance
rewards support the risk management and
internal control systems now supported, as
noted above, by the WPP Risk Committee.
WHISTLEBLOWING
WPP’s Code of Conduct sets out our
responsibilities to our people, partners
and shareholders to act ethically and with
integrity. We want to embed a culture of
integrity and transparency and where our
people recognise that doing the right thing
is good business.
Part of this culture is making sure that our
people have confidence to speak up and
raise concerns with their managers or
supporting teams, or through their employee
forums or our Right to Speak hotline (which
is confidential and allows for anonymity) if
they experience or are concerned about
behaviour which conflicts with our Code.
WPP is continuously raising awareness of
these channels among our people and other
stakeholders and as a result there has been
a steady increase in the number of reports
received over the past few years. In 2020,
a total of 418 reports were received from
whistleblowers, 312 of which were through
the Right to Speak hotline. The most
commonly raised concerns were about
respect in the workplace and protection
of WPP’s assets.
RISK IMPACT FROM WHISTLEBLOWER
REPORTS 2020
All whistleblower reports received by the
Group Chief Counsel and General Counsel,
Corporate Risk, which includes all Right to
Speak reports, are handled in line with WPP’s
Whistleblowing and Investigations Protocols
and logged, investigated and tracked through
to a conclusion including any remediation or
follow-up actions that might be required.
Reports are also analysed for risk impact and
root causes. Learnings generated from this
analysis are converted into recommendations
including for training sessions, workshops
and practical resources by WPP’s business
integrity function and implemented together
with the support and input of the Risk
Committees. Recommended remediation
can also include disciplinary action, changes
to systems, controls and processes or wider
review and monitoring for a particular
time period.
The nature of each report, action taken and
outcome is reported to the Audit Committee
and the approach and process are reviewed
by the auditors. WPP is committed to
providing a safe and confidential way for
people with genuine concerns to raise them,
and to do so without fear of reprisals. WPP
does not tolerate any retaliatory behaviour
against individuals reporting concerns and
is equally committed to preserving the
anonymity of an individual who makes a
report and does not wish to have their
identity revealed.
The consequences of misconduct or
retaliation range from individual performance
management, training for a business or an
office and one-on-one training or coaching
for an individual through to staff relocation
and staff dismissal.
TOTAL NUMBER OF REPORTS
FROM WHISTLEBLOWERS
RISK IMPACT FROM WHISTLEBLOWER REPORTS
%
418
361
200
2018
2019
2020
14.9%
7.7%
People
Financial
Legal and Regulatory
Operational
Clients
Strategic
Data Privacy,
Security and Ethics
2.3%
1.7%
1.4%
0.5%
71.5%
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WPP ANNUAL REPORT 2020
ASSESSING AND MANAGING OUR RISKS
STRATEGIC REPORT
In 2020 the Company also established the
Risk and Controls Group to drive continuous
improvement in WPP’s internal control
environment. The new function focuses on
the design and implementation of internal
financial controls as well as controls that
support WPP’s risk framework and
transformation programmes.
3. INTERNAL AUDIT AND AUDIT
COMMITTEE OVERSIGHT
The internal audit function, 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 programme for ICFR.
RISK MANAGEMENT
We use a “three lines of defence” model
in relation to risk management:
1. COMPANY REVIEWS
Each company undertakes monthly and
quarterly procedures and day-to-day
management activities to review their
operations and business risks, supported
by our policies, training and guidance on
required internal controls over financial
reporting and monitoring controls and
reviews within their network.
In addition, our companies must 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 information collated feeds up to each
network’s Risk Committee which uses it to
assess and monitor current risk exposures,
identify new risk types and set future risk
strategy as well as compile it into reporting
and insights for the WPP Risk Committee
and executive management.
2. EXECUTIVE MANAGEMENT REVIEWS
The company reviews are formally
communicated to executive management
in monthly reports and quarterly review
meetings and, in turn, to the Board. At each
Board meeting, the management team
presents a business review of each of the
operations, including an assessment of the
risks in each business and details of any
change in the risk profile since the last
Board meeting.
The business review includes the possibility
of winning or losing major business;
succession and the addition or loss of a key
employee; regulatory changes; sustainability,
including risks relating to marketing ethics,
privacy, diversity and employment; political
instability; and changes in accounting or
corporate governance practice.
To add to this, the WPP Risk Committee,
supported by the business integrity function,
is evolving our enterprise-wide risk
management process through the design
and build of a risk analytics platform which
will sit over dynamic data feeds and
alongside refreshed risk appetite statements,
drivers and tolerances and incorporate our
internal control framework. The resulting
dashboard analysis will allow risks to be
monitored and tracked across all businesses
and markets and will feed into the regular
risk discussions of executive management,
the Audit Committee and the Board.
LINES OF DEFENCE
FIRST LINE OF DEFENCE
Functions that own and manage risk
SECOND LINE OF DEFENCE
Functions that oversee or specialise in
risk management and business integrity
THIRD LINE OF DEFENCE
Functions that provide independent
assurance, above all internal audit
THE NEWLY ESTABLISHED RISK AND
CONTROLS GROUP IS PART OF OUR SECOND
LINE OF DEFENCE
– To drive continuous improvement in WPP’s
control environment through strengthening
ownership and accountability for internal
controls at all levels of the organisation
– To drive culture change throughout WPP and
improving understanding of internal controls
– To provide training and development as to
“what good looks like” in relation to controls
and demonstrating the value of good controls
throughout WPP
WPP ANNUAL REPORT 2020
93
STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS
– the ongoing transformation programme
updated in this report;
– the changes taking place in our industry;
– the long-term impact of technological
disruption; and
– the ongoing simplification of the Group
structure and improving integrated service
offering to clients.
Having assessed the current position of the
Company, its prospects and principal risks
and taking into account the assumptions
above, the Board has determined that it has
a reasonable expectation that the Company
will be able to continue in operation and
meet its liabilities as they fall due over a
period of three years from 1 January 2021.
GOING CONCERN
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Financial Review on pages
61-65 and Principal Risks and Uncertainties
on pages 95-101. The financial position of the
Group, its cash flows, liquidity position and
borrowing facilities are described in the
Financial Statements and the Notes to the
Financial Statements include the Company’s
objectives, policies and processes for
managing its capital; its financial risk
management objectives; details of its
financial instruments and hedging activities;
and its exposures to credit risk and liquidity
risk. The Company’s forecasts and projections,
taking account of (i) reasonably possible
declines in revenue less pass-through costs;
and (ii) remote declines in revenue less
pass-through costs for stress-testing
purposes as a consequence of the Covid-19
pandemic compared to 2020, considering
the Group’s bank covenant and liquidity
headroom taking into account the suspension
of share buybacks, dividends and acquisitions,
and cost mitigation actions which are and
which could be implemented, show that the
Company and the Group would be able to
operate with appropriate liquidity and within
its banking covenants and be able to meet
its liabilities as they fall due. The Company
modelled a range of revenue less pass-through
cost declines up to 30% compared with the
year ended 31 December 2020. The Directors
therefore have a reasonable expectation
that the Company and the Group have
adequate resources to continue in
operational existence for the foreseeable
future. Thus they continue to adopt the
going concern basis of accounting in
preparing the financial statements.
This period has been chosen as it aligns
with our three-year budget process and
reflects the Board’s best estimate of the
future viability of the Company. Whilst we
have built a five-year plan, levels of
uncertainty increase as the planning horizon
extends and the Group’s plans focus more
closely on the next three years. The Board
therefore considers a period of three years
to be an appropriate period over which to
assess the long term viability of the
Company. In testing the viability of the
Company, we have undertaken a robust
scenario assessment of the principal risks
which could threaten the viability or
existence of the Company. The impact of
Brexit has been considered and it is not
deemed to have a significant impact on this
assessment. In the scenario modelling of the
principal risks, we have stress-tested our
forecast cash flows to reflect the potential
impact of one or more of the Group’s
principal risks occurring and leading to client
loss, loss of reputation, contract breach, our
inability to win new business, and the impact
of revenue less pass-through costs decline.
The Company’s forecasts and projections
took account of (i) reasonably possible
declines in revenue less pass-through costs;
and (ii) remote declines in revenue less
pass-through costs for stress-testing
purposes; and considered the Group’s bank
covenants and liquidity headroom including
the suspension of share buybacks, dividends
and acquisitions.
The Company modelled a range of revenue
less pass-through cost declines up to a
decline of 30% compared with the year
ended 31 December 2020. In the most
extreme scenarios tested, the Directors have
considered the further actions that could be
taken to mitigate negative cash flow impact
and ensure additional liquidity. The Directors
have assumed that the Company will be able
to refinance existing bonds and, as a result,
the Company will continue to operate in
accordance with its bank covenants.
However the long-term viability of the
Company could be impacted by other as
yet unforeseen risks and the mitigating
actions that have been put in place in
respect of the principal risks could turn
out to be less effective than intended.
VIABILITY STATEMENT
RISK ASSESSMENT
ASSESSMENT OF PROSPECTS
An understanding of the Group’s business
model and strategy detailed on pages 12 and
22 is central to understanding its prospects.
The Group’s business model, transformation
programme and diversification across
marketing services businesses which operate
in 111 countries, with a broad spectrum of
clients, technology partners and suppliers
and track record of making acquisitions and
setting up new businesses, are all relevant to
any consideration of prospects and viability.
The Directors assess the Group’s prospects
on a regular basis through the financial
reporting and planning process, the business
reviews at each Board meeting, quarterly
reviews of our businesses by the executive
team and ongoing reviews of the Group’s
profitability, cash flows and funding
requirements. The Board has considered
the longer-term risks and opportunities for
the Group discussed in the Strategic Report
at a Board strategy session in 2020 and the
potential impact of competition for talent
and competition from consulting firms,
technological disruption, climate change and
regulation. The Board has also considered
the impact of the Covid-19 pandemic which
adversely affected our business and our
clients’ and suppliers’ businesses across all
of the countries in which we operate but
which also accelerated changes in our
sector. The Group has experienced and
expects to continue to experience
unpredictable reductions in demand for
our services from clients in sectors
impacted by the pandemic.
VIABILITY STATEMENT
The Directors’ assessment of the Group’s
viability for the next three years has been
made with reference to:
– the impact on the Group of the Covid-19
pandemic and the measures to contain
its spread, including restrictions on
businesses, social activities and travel, any
failure to realise anticipated benefits from
the roll-out of vaccination campaigns and
the resulting impact on the economies in
which the Group operates, our clients and
demand for our services;
– the ongoing reviews, short-term notice
periods or assignment nature of many of
the client engagements;
– the volatility of global economic
conditions and impact of a global
recession as a consequence of the
Covid-19 pandemic;
– the Group’s current position and
prospects;
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STRATEGIC REPORT
PRINCIPAL RISKS AND
UNCERTAINTIES
The Board has carried out a robust assessment of the principal risks and uncertainties affecting the Group and the markets
we operate in and strategic decisions taken by the Board as at 31 December 2020 and up to the date of this report
including any adverse effects of the Covid-19 pandemic and which are described in the table on the following pages.
PRINCIPAL RISK
POTENTIAL IMPACT
HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
The Covid-19 pandemic and the measures to contain
its spread may have a continuing adverse effect on our
business, revenues, results of operations and financial
condition and prospects.
A strong balance sheet, supported further by action to
maintain liquidity including, if needed, the suspension of
share buybacks, dividends and acquisitions, cost reduction
and cash conservation measures, savings on property and
IT capex. Constant monitoring of working capital position.
COVID-19 PANDEMIC
The coronavirus pandemic
negatively impacted our business,
revenues, results of operations,
financial condition and prospects in
2020. The extent of the continued
impact of the Covid-19 pandemic
on our business will depend on
numerous factors that we are not
able to accurately predict, including
the duration and scope of the
pandemic, government actions to
mitigate the effects of the pandemic
and the intermediate and long-term
impact of the pandemic on our
clients’ spending plans.
STRATEGIC RISKS
The failure to successfully complete
the strategic plan updated in
December 2020 to return the
business to growth and simplify
our structure.
A failure or delay in implementing or realising the
benefits from the transformation plan and/or returning
the business to growth may have a material adverse
effect on our market share and our business, revenues,
results of operations, financial condition or prospects.
Board oversight of the implementation of the strategic
plan and regular briefings on the Group’s response to the
Covid-19 pandemic.
The Executive Committee regularly reviews progress against
the strategic plan and actions required to deliver against the
plan and convenes regularly to discuss the Group’s response
to and implementation of the measures highlighted above to
mitigate the impact of the Covid-19 pandemic on the Group’s
operations, people, clients and financial condition.
The impact of the pandemic and focus on managing cost
and changes in ways of working have accelerated aspects
of the transformation as we move faster towards a simplified
company structure and enhanced use of technology by our
people as a consequence of adapting to remote working.
KEY
Increased risk
No change from last year
Reduced risk
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PRINCIPAL RISK
POTENTIAL IMPACT
HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
OPERATIONAL RISKS
CLIENTS
We compete for clients in a
highly competitive industry
which has been evolving and
undergoing structural change,
now accelerated by the
Covid-19 pandemic. Client
loss to competitors or as a
consequence of client
consolidation, insolvency or
a reduction in marketing
budgets due to recessionary
economic conditions or a shift
in client spending would have
a material adverse effect on
our market share, business,
revenues, results of
operations, financial
condition and prospects.
The competitive landscape in our industry is constantly
evolving and the role of traditional agencies is being challenged.
Competitors include multinational advertising and marketing
communication groups, marketing services companies, database
marketing information and measurement, social media and
professional services and consultants and consulting internet
companies.
Client contracts can generally be terminated on 90 days’ notice
or are on an assignment basis and 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 if we fail to react quickly
enough to changes in the market and to evolve our structure,
and by loss of reputation, and may be limited by clients’ policies
on conflicts of interest.
There are a range of different impacts on our clients globally as
a consequence of the Covid-19 pandemic. In the past, clients
have responded to weak economic and financial conditions by
reducing or shifting their marketing budgets which are easier to
reduce in the short term than their other operating expenses.
We receive a significant
portion of our revenues from a
limited number of large clients
and the net loss of one or
more of these clients could
have a material adverse effect
on our prospects, business,
financial condition and results
of operations.
A relatively small number of clients contribute a significant
percentage of our consolidated revenues. Our ten largest clients
accounted for 21% of revenue less pass-through costs in the year
ended 31 December 2020. Clients can reduce their marketing
spend, terminate contracts or cancel projects on short notice.
The loss of one or more of our largest clients, if not replaced by
new accounts or an increase in business from existing clients,
would adversely affect our financial condition.
The transformation plan updated in December 2020.
Emphasis on providing faster, more agile and more
effectively integrated solutions for our clients.
Simplifying our organisational structure such as the
disposal of 60% of our interest in Kantar and the disposal
of non-core minority holdings.
Launch of further Campus co-locations including
in Chicago, Hong Kong and Rome. Embedding data and
technology more deeply into our offer to clients.
Board focus on the importance of a positive and inclusive
culture across our business to attract and retain talent
and clients. Creation of a team focused on culture,
diversity and inclusion across the Group. Creation of the
WPP Global Inclusion Council in 2020 and commitments
to anti-racism.
Continuous improvement of our creative capability and
reputation of our businesses.
The development and implementation of senior
leadership incentives to align more closely with
our strategy and performance.
Business review at every Board, Management and
Executive Committee meeting to identify client loss.
Monthly updates to the management team on the status
of the Group’s major clients and upcoming pitches for
potential new clients. Continuous engagement with our
clients and suppliers through this period of uncertainty
and reduction in economic activity.
Increased flexibility in the cost structure (including
incentives, consultants and freelancers).
Business review at every Board meeting and regular
engagement at executive level with our clients.
A monthly new and existing business tracker is reviewed
by the Executive Committee on a monthly basis with
regular updates to the Board.
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HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
Our 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.
We are working across the businesses to embed
collaboration and investing in training and development
to retain and attract talented people. The investment in
co-located Campus properties is increasing the cooperation
across our companies and provides extremely attractive
and motivating working environments.
Succession planning for the Chief Executive Officer,
the Chief Financial Officer 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. Our first priority
during the Covid-19 pandemic has been the safety and
welfare of our people and seeking to protect them as
much as possible as well as maintaining the ability to
serve clients and win new business as markets recover.
The IT transformation programmes will underpin our
strategic plan and enhance our data security.
There is a rolling programme to retire servers across the
Group and move to cloud solutions.
We monitor and log our network and systems and keep
raising our people’s security awareness through our
WPP Safer Data training and mock phishing attacks.
Heightened focus on monitoring our network and systems
and raising awareness of the potential for phishing and
other cyber-attacks during the period of remote working
and an increased focus on our control environment.
PRINCIPAL RISK
POTENTIAL IMPACT
We are highly dependent on the talent, creative abilities
and technical skills of our people as well as their relationships
with clients. We are vulnerable to the loss of people to
competitors (traditional and emerging) and clients, leading
to disruption to the business.
We may be subject to investigative or enforcement action or
legal claims or incur fines, damages, or costs and client loss if we
fail to adequately protect data. A system breakdown or intrusion
could have a material adverse effect on our business, revenues,
results of operations, financial condition or prospects and have
an impact on long-term reputation and lead to client loss.
A significant number of the Group’s people are working
remotely as a consequence of the Covid-19 pandemic which has
the potential to increase the risk of compromised data security
and cyber-attacks.
PEOPLE, CULTURE AND
SUCCESSION
Our performance could be
adversely affected if we do
not react quickly enough
to changes in our market
and fail to attract, develop
and retain key creative,
commercial, technology
and management talent,
or are unable to retain
and incentivise key and
diverse talent.
CYBER AND
INFORMATION
SECURITY
We are undertaking a series
of IT transformation
programmes to support
the Group’s strategic plan
and a failure or delay in
implementing the IT
programmes may have a
material adverse effect on
its business, revenues, results
of operations, financial
conditions or prospects.
The Group is reliant on third
parties for the performance
of a significant portion of
our worldwide information
technology and operations
functions. A failure to provide
these functions could have
an adverse effect on our
business. During the
transformation, we are still
reliant on legacy systems
which could restrict our
ability to change rapidly.
A cyber-attack could result
in disruption to one or more
of our businesses or the
security of data being
compromised.
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PRINCIPAL RISK
POTENTIAL IMPACT
HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
FINANCIAL RISKS
CREDIT RISK
We are subject to credit risk
through the default of a client
or other counterparty.
INTERNAL CONTROLS
Our performance could be
adversely impacted if we
failed to ensure adequate
internal control procedures
are in place.
We have identified material
weaknesses in our internal
control over financial
reporting that, if not properly
remediated, could adversely
affect our results of
operations, investor
confidence in the Group and
the market price of our ADSs
and ordinary shares.
We are generally paid in arrears for our services. Invoices are
typically payable within 30 to 60 days.
Evaluating and monitoring clients’ ongoing
creditworthiness and in some cases requiring credit
insurance or payments in advance.
We commit to media and production purchases on behalf of
some of our 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 us to pay those
amounts and there could be an adverse effect on our working
capital and operating cash flow.
Failure to ensure that our businesses have robust control
environments, or that the services we provide and trading
activities within the Group are compliant with client obligations,
could adversely impact client relationships and business volumes
and revenues.
As disclosed in our Form 20-F, in connection with the Group’s
assessment of the effectiveness of internal control over financial
reporting as of December 31, 2020, we identified material
weaknesses in our internal control over financial reporting with
respect to management’s review of the impairment assessment
of intangible assets and goodwill (specifically the selection of
appropriate discount rates for use in the impairment calculations,
the determination of the appropriateness of the cash flow
periods and associated discounting and determination of the
assumptions in respect of working capital cash flows, in each
case used in the impairment calculation); the design and
implementation of internal controls to ensure that the complex
accounting matters and judgements are assessed against the
requirements of IFRS and to reflect changes in the applicable
accounting standards and interpretations or changes in the
underlying business on a timely basis; and our net investment
hedging arrangements (specifically concerning the eligibility of
hedging relationships under IFRS, the adequacy and maintenance
of contemporaneous documentation of the application of hedge
accounting, and the review of the impact of changes in internal
financing structures on such hedging relationships). As a result
of such material weaknesses, we concluded that our internal
control over financial reporting was not effective.
If remedial measures are insufficient to address the material
weaknesses, or if additional material weaknesses in internal
control are discovered or occur in the future, our ability to
accurately record, process and report financial information and
consequently, our ability to prepare financial statements within
required time periods, could be adversely affected. In addition,
the Group may be unable to maintain compliance with the
federal securities laws and NYSE listing requirements regarding
the timely filing of periodic reports. Any of the foregoing could
cause investors to lose confidence in the reliability of our
financial reporting, which could have a negative effect on the
trading price of the Group’s ADSs and ordinary shares.
We are working closely with our clients during this period
of economic uncertainty to ensure timely payment for
services in line with contractual commitments and with
vendors to maintain the settlement flow on media.
Our treasury position and compliance with lending
covenants is a recurring agenda item for the Audit
Committee and Board.
Increased management processes to manage working
capital and review cash outflows and receipts during
the Covid-19 pandemic.
Transparency and contract compliance are embedded
through the networks and reinforced by audits at a WPP
and network level.
Regular monitoring of key performance indicators for
trading are undertaken to identify trends and issues.
An authorisation matrix on inventory trading is agreed
with the Company and the Audit Committee.
A new controls function has been established in 2020 to
review and enhance controls across the Group. We have
issued renewed guidance to our businesses of the need
to focus on controls through the period of remote
working as a consequence of the Covid-19 pandemic.
Management is committed to maintaining a strong internal
control environment and remediating the identified
material weaknesses in a timely manner, with appropriate
oversight from our Audit Committee. We have made
progress towards remediation and continue to implement
our remediation plan. We have engaged an independent
valuation specialist, on an on-going basis with oversight
by management, to assist us as an integral part of the
discount rate and cash flow determination process in the
impairment assessment of intangible assets and goodwill.
This has included such items as updating our discount
determination methodology for a current market
participant approach; enhancing the level of review
and controls related to the selection of the variables
underpinning the discount rate calculation, the discount
rate methodology and annual refresh; and implementing
additional validation controls and additional reviews of
the selection of cash flow periods and net working
capital assumptions. In the case of complex accounting
matters and hedging arrangements, we are performing
a comprehensive retrospective review of our controls
and procedures and implementing enhanced periodic
controls into our control framework and have engaged
outside advisors with specialist expertise in the
respective subject matter areas to assist with the
performance of the comprehensive retrospective review.
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STRATEGIC REPORT
STRATEGIC REPORT
PRINCIPAL RISK
POTENTIAL IMPACT
HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
COMPLIANCE RISKS
DATA PRIVACY
We are subject to strict data
protection and privacy
legislation in the jurisdictions
in which we operate and rely
extensively on information
technology systems. We
store, transmit and rely 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.
– Data transfers between
our global operating
companies, clients or
vendors may be
interrupted due to changes
in law (eg EU adequacy
decisions, CJEU Schrems II
decision)
We may be subject to investigative or enforcement action
or legal claims or incur fines, damages, or costs and client loss if
we fail to adequately protect data or observe privacy legislation
in every instance:
– A system breakdown or intrusion could have a material
adverse effect on our business, revenues, results of
operations, financial condition or prospects
– Restrictions or limitations on international data transfers could
have an adverse effect on our business and operations.
We develop principles on privacy and data protection
and compliance with local laws. We also monitor
pending changes to regulations and identify changes
to our processes and policies that would need to be
implemented. In the case of data transfers, we also
identify alternative approaches, including using other
permitted transfer mechanisms, in order to limit any
potential disruption (eg SCCs instead of Privacy Shield
following the CJEU Schrems II decision).
We implemented extensive training ahead of GDPR and
CPPA implementation and the roll-out of toolkits to assist
our people to prepare for implementation and will do
the same as new legislation is adopted in other markets.
A Chief Privacy Officer and Data Protection Officer have
been appointed at the Company and Data Protection
Officers are in place at a number of our companies.
Our people must take Privacy & Data Security Awareness
training and understand the WPP Data Code of Conduct
and WPP policies on data privacy and security.
The Data Health Checker survey is performed annually to
understand the scale and breadth of data we collect so
the level of risk associated with this can be assessed.
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PRINCIPAL RISK
POTENTIAL IMPACT
HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
We actively monitor any proposed regulatory or
statutory changes and consult 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 executive management. We engage advisors
and legal counsel to obtain opinions on tax legislation
and principles.
Online and in-country ethics, anti-bribery, anti-corruption
and anti-trust training on a Group-wide basis to raise
awareness and seek compliance with our Code of
Conduct and the Anti-Bribery & Corruption Policy.
A continuously evolving business integrity function to
ensure compliance with our codes and policies and
remediation of any breaches of policy.
Continuous communication of the Right to Speak
confidential, independently operated helpline for our
people and stakeholders to raise any potential breaches
of our Code and policies, 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 client
pitches. Rolling programme of creating shared financial
services in the markets in which we operate and the
creation of a new controls function in 2020.
Risk Committees are well established at WPP and across
the networks to monitor risk and compliance through all
of our businesses and the enhancement of our business
integrity programme across our markets.
Gift and hospitality register and approvals process.
Online training to raise awareness and seek compliance
and updates for our companies on any new sanctions.
Regular briefings to the Audit Committee and constant
monitoring by the WPP legal team with assistance from
external advisors of the sanctions regimes.
COMPLIANCE RISKS
TAXATION
We may be subject to
regulations restricting our
activities or effecting changes
in taxation.
Changes in local or international tax rules, for example,
as a consequence of the financial support programmes
implemented by governments during the Covid-19 pandemic,
changes arising from the application of existing rules, or
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.
REGULATORY
We are subject to strict
anti-corruption, anti-bribery
and anti-trust legislation and
enforcement in the countries
in which we operate.
We operate 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 culture opposed
to corruption or failing to instil business practices that prevent
corruption could expose us to civil and criminal sanctions.
SANCTIONS
We are subject to the laws of
the United States, 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 us to civil
and criminal penalties including fines and the imposition of
economic sanctions against us and reputational damage
and withdrawal of banking facilities which could materially
impact our results.
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STRATEGIC REPORT
PRINCIPAL RISK
POTENTIAL IMPACT
HOW IT IS MANAGED AND REFLECTED
IN OUR STRATEGIC PRIORITIES
EMERGING RISKS
Increased frequency of
extreme weather and
climate-related natural
disasters.
This includes storms, flooding, wildfires and water and
heat stress which can damage our buildings, jeopardise the
safety of our people and significantly disrupt our operations.
At present 10% of our headcount is located in countries at
“extreme” risk from the physical impacts of climate change
in the next 30 years.
Our strategy of co-locating our people in WPP
Campuses is enabling us to centralise emergency
preparedness procedures. It will also enable us to more
efficiently deploy climate mitigation measures. We
intend to integrate climate-related risk assessment into
the technical due diligence suite that we follow when
we invest in a new Campus building to help ensure that
material, acute and chronic physical climate risks are
considered in design and embedded into business
continuity procedures.
Increased reputational risk
associated with working on
environmentally detrimental
client briefs and/or
misrepresenting
environmental claims.
As consumer consciousness around climate change rises,
our sector is seeing increased scrutiny of our role in driving
unsustainable consumption. Our clients seek expert partners
who can give recommendations that take into account
stakeholder concerns around climate change.
Our climate crisis training will ensure that our people
recognise the importance of our sector’s role in
addressing the climate crisis. It will be part of a broader
sustainability training programme which we will run in
multiple markets with localised content in key regions.
Additionally, WPP serves some clients whose business models
are under increased scrutiny, for example oil and gas companies
or associated industry groups who are not actively decarbonising.
This creates both a reputational and related financial risk for WPP
if we are not rigorous in our content standards as we grow our
sustainability-related services.
We are also developing internal tools to help our
people identify environmentally harmful briefs. These
tools will embed climate-related issues within existing
content-review procedures across the organisation.
The misrepresentation of environmental issues is
governed by our Code of Conduct. We are also
reviewing our policies to reduce the risk that any
client brief undermines the implementation of the
Paris Agreement.
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STRATEGIC REPORT
NOW IS THE TIME FOR
BRANDS TO MAKE UP
FOR LOST TIME.
BY JEREMY BULLMORE
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WPP ANNUAL REPORT 2020
On one subject, at least,
all commentators are
agreed. This last year has
called for an unprecedented
degree of re‑examination. (And an
unprecedented use of the word
unprecedented.) Nothing can be
taken comfortably for granted; just
about everything needs to be pulled
up by its roots, interrogated and
tested for its inherent worth. And that
is certainly true for The Brand.
It’s easy to forget that a common
understanding of the nature of brands is
relatively recent. Sixty years ago, the word
brand meant nothing more than a product
with a name attached and it was applied
almost exclusively to household goods.
Washing powders were the archetypal
brands. When the new discipline of account
planning was introduced in advertising
agencies, the name Brand Planning was
rejected as being too restrictive. Banks,
retailers and venerable institutions would
certainly not have seen themselves as brands
– and would have been deeply affronted had
any agency been insensitive enough to
suggest that they were.
FUNCTION AND REPUTATION
Products were evaluated and promoted
almost entirely on function. When the UK
Consumers’ Association introduced product
testing, there was a brief flurry of concern
in the advertising community that the CA’s
well-publicised Best Buy rankings could
make advertising redundant. Had an
understanding of the nature of brands
been more widespread, the theory of the
Unique Selling Proposition could never
have achieved its pernicious popularity. By
encouraging companies to identify – or more
often to confect – some functional product
distinction, and to trumpet that distinction
verbally and repetitively, USP practitioners
inflicted on a luckless public some of the most
insensitive advertising ever perpetrated.
Only the fortuitous fact that simple name
registration has a commercial value saved
USP-inspired advertising from being not
just sub-optimal but actually damaging to
its subjects.
JEREMY BULLMORE’S ESSAY
STRATEGIC REPORT
TIME TO REPAIR
The planet’s response to the coronavirus
has changed the behaviour of the planet’s
population to a degree never before
experienced. (Yes: it’s been unprecedented.)
Habits have been broken because they’ve
had to be broken. Links between people and
things have been weakened – and in many
cases lost altogether. Some brands, in the
right place at the right time, have benefited
mightily. Others have suffered helplessly,
their familiarity fading fast.
For many brands, the year 2021 will need
to be a year of repair; a year where
communications are called upon to help
compensate for the absence of direct
experience. It will demand creative
excellence of the highest order;
communications that are so true to the
personality of the brand that they come
close to being its proxy.
Jeremy Bullmore is a former Chairman of
J. Walter Thompson London. He has also
been a Non-Executive Director of WPP and
a member of its Advisory Board. He has
been described by Campaign magazine
as “quite possibly the most admired man
in advertising” and “Adland’s greatest
philosopher.” Marketing magazine simply
observed: “When Mr Bullmore speaks,
the world listens.”
When mass manufacturing and mass media
first made advertising necessary, it was
known as “salesmanship in print”. Its job
was to get as close to an actual sale as was
possible. You featured a new range of socks
in your local newspaper and expected them
to sell out the following day. Today, this
immediate role for advertising, “brand
activation”, is largely provided by online
platforms. The new media are flexible,
personal and accountable. Their success has
been earned through demonstrable delivery.
They are today’s direct salesmen – but it
should never be forgotten that they work
most efficiently when the brands that they
feature are already well-known and are
already thought to be desirable.
THE VALUE OF FAMILIARITY
Of all the properties that a strong brand
needs, simple familiarity must top the list.
You’re in a strange city, struck down by a
minor ailment and the pharmacist doesn’t
speak your language. Then, on a shelf behind
her, you spot the very same bottle you keep
in your bathroom at home. Strange
circumstances highlight the value of brand
familiarity; and we’ve been experiencing
many strange circumstances in recent
months. So people can feel possessive about
their brands – particularly repeat-purchase
brands. Just as they talk about “my pub”, or
“my football club”, so they feel about their
favoured brands. Familiarity implies trust,
reassurance – even affection.
Familiarity is acquired and maintained
directly through experience and remotely
through communications. The word
“maintained” is important: familiarity can
never achieve permanent status. When
direct contact becomes less frequent or
disappears altogether, familiarity fades.
And as any publicist will confirm, once
a client ceases to be in the public eye,
demand for that client will dwindle –
as will the size of any suggested fee.
What inhibited the understanding of brands
– and still makes any meaningful discussion
of brands a bit of a minefield – is language.
We struggle to find words to describe what
is essentially a set of beliefs and feelings in
other people’s heads. As with humans,
products have reputations. This is their
Brand Image. But while their function may
be susceptible to objective analysis, their
reputation is not, because one of the key
factors affecting the image of a brand is
the composition of the individual mind
entertaining that image; and no two minds
are identical. If a thousand people hold an
opinion of the same object or person,
they will hold a thousand subtly different
opinions. It’s true that there can exist what
has been called a consensus of subjectivity,
where millions of different minds working
independently construct very similar
images of the same object; but it should
never be forgotten that a brand’s image –
whose very existence defines the difference
between a brand and a mere product – is an
elusive, subjective Non-Thing. This much we
have learned.
We have also learned of the immense
commercial value of a strong brand
reputation. We know beyond doubt that
a strong brand is more resistant to
competition; is less dependent on price
promotions to maintain volume sales; and is
as secure a certainty of future profit as is
possible in any organic, competitive market.
At much the same time, we have begun to
understand the contribution that advertising
can make to the reputation of brands.
People construct their feelings about a brand,
automatically and unconsciously, as a result
of every encounter, actual or remote, that
they have with that brand. Function remains
central. For a brand to deliver satisfaction
at an acceptable price is an entry-level
requirement – but that’s just the beginning.
An almost limitless number of brand
encounters can have some small but
significant effect on a person’s perception
of a brand, from whether or not their mother
used the brand to an unfavourable news
item about the company that makes it.
Advertising is an obvious contributor to
brand reputation – but if a brand is to enjoy
the greatest return on its advertising, it has
to be advertising of a certain style; the
specific style of that specific brand.
WPP ANNUAL REPORT 2020
103
STRATEGIC REPORT
THE ERICSSON
EFFECT
AGENCY
SUPERUNION LONDON
CLIENT
ERICSSON
Ericsson, the global telecoms giant,
is a pioneer of technology that connects
people, places and things, enabling
transformation on an industrial scale:
from autonomous agriculture and smart
cities to driverless cars.
The growth potential of its pioneering
technology is limitless. By 2050 there
will be three times as many connected
devices as people on this planet.
24 billion intelligent things.
But scale does not equal familiarity.
Through stakeholder interviews,
creative workshops and market research,
Superunion found that the digitalisation
of industries remained misunderstood,
tangled in cold, technical language and
intangible visual references.
So they helped Ericsson fix that, by
putting its unmistakeable identity on
an invisible technology, and conveying
the beauty and potential of connected
devices in a voice that could resonate
with many different audiences.
For the visual expression, the Ericsson
icon was placed at the heart of a series
of idents, conjuring a positive vision of
the future for different industries and
global environments. This innovative
application of the brand shone a spotlight
on the positive impact of technology,
and its ability to transform the world for
the better – which Superunion named
“The Ericsson Effect”.
24bn
connected
devices by 2050
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WPP ANNUAL REPORT 2020
STRATEGIC REPORT
WPP ANNUAL REPORT 2020
105
CORPORATE GOVERNANCE
106
WPP ANNUAL REPORT 2020
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29/03/2021 17:43
CORPORATE
GOVERNANCE
Chairman’s letter
Our Board
Our Executive Committee
How our Board engages
Division of responsibilities
Board activities
Composition, succession and evaluation
Nomination and Governance
Committee report
Audit Committee report
Sustainability Committee report
Compensation Committee report
108
112
115
117
120
122
123
126
128
133
134
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WPP ANNUAL REPORT 2020
107
29/03/2021 17:43
CORPORATE GOVERNANCE
CHAIRMAN’S
LETTER
An early decision was made to put in place
a global policy of managed remote working,
and the Company significantly increased its
investment in wellbeing resources and
initiatives for employees.
A comprehensive programme of internal
communications and engagement ensured a
regular flow of information from the centre of
WPP – where the global strategic decisions
were made – as well as from the agencies
that employ our people directly. Our CEO
Mark Read hosted 28 virtual townhalls during
the year, providing the opportunity for
people to ask questions and raise issues,
and the Company to take the pulse of the
organisation.
Our people and agencies put their skills to
work to help combat the virus, creating and
delivering public awareness campaigns
advocating good hygiene and social
distancing, and – more recently – supporting
the roll-out of vaccines.
Throughout the year, the Board was provided
with regular updates on the impact of the
pandemic on the Company’s people and
performance. As Mark notes in his statement,
that performance exceeded the expectations
of the market, as WPP demonstrated its
great resilience.
STRATEGIC PROGRESS
Covid-19 has only increased the pace of the
changes already happening in the sectors in
which WPP operates, not least the growth
of digital advertising and ecommerce.
The leadership team responded by
accelerating the existing strategy with, for
example, the further simplification of the
Company and strengthening of its agency
brands through the creation of AKQA Group,
VMLY&R Commerce and Finsbury Glover
Hering announced during 2020.
“THAT WPP HAS CONTINUED
TO OPERATE SO WELL IN
2020 DESPITE WIDESPREAD
LOCKDOWN-ENFORCED
REMOTE WORKING REMINDS
US THAT WE ARE A TRUE
PEOPLE COMPANY.”
In 2020 WPP was tested in ways that no-one
could have predicted. The fundamental
strength of the Company, the actions taken
by leadership – both in prior years and in
response to the pandemic – and the
incredible efforts of our people helped it
to pass that test.
As Covid-19 began to wreak havoc around
the world, the executive team, with the full
backing of the Board, acted swiftly to
protect the business and its employees
through a range of financial measures and
operational decisions.
To secure the Company’s position, the share
buyback scheme and 2019 final dividend were
suspended, costs were reduced substantially
and leaders – including the Board and
Executive Committee – volunteered to give
up a portion of their salaries and fees.
108
WPP ANNUAL REPORT 2020
CHAIRMAN’S LETTER
CORPORATE GOVERNANCE
In December a very well-received Capital
Markets Day laid out the next phase of the
Company’s strategy for growth, plans for
capital allocation and new medium-term
financial targets, including the announcement
of a new dividend policy. Starting from the
current year, we intend to grow the dividend
annually and to pay out approximately 40%
of headline earnings per share.
The Board held a Strategy Day with the
executive team in advance of the Capital
Markets Day to consider the strategy and
to align around the vision and future
prospects of the Company over the next
three to five years.
Throughout the year we also received
presentations from the leaders of WPP’s
agencies on their work to support WPP’s
wider strategy, providing an opportunity for
the Board to see the strength of alignment
across the Company.
BOARD COMPOSITION AND
EFFECTIVENESS
To ensure the Board has the necessary
skills, experience and diversity to effectively
support and review the Company’s strategic
progress, we have continued our proactive
review of its non-executive membership.
During 2020 we announced the
appointment of three new Board members:
Angela Ahrendts DBE, Tom Ilube CBE and
Dr. Ya-Qin Zhang.
Angela was Senior Vice President, Retail at
Apple, Inc. from May 2014 until April 2019,
where she oversaw the company’s global
retail operations and the integration of its
physical and digital businesses. She joined
Apple from Burberry, where she was CEO
from 2006 to 2014, and led the company
through a period of global growth based
on the adoption of new technologies,
the launch of new product lines and the
expansion of retail operations into new
markets. Angela has joined our
Sustainability Committee.
Tom is a technology entrepreneur and
educational philanthropist. He is the
founder and CEO of AIM-listed Crossword
Cybersecurity Plc, and has launched several
other technology start-ups. During his
30-year career in the UK technology sector
he has held senior leadership roles in
organisations including Callcredit
Information Group and Egg Banking plc.
Tom is also a Non-Executive Director of the
BBC. He sits on the Audit Committee, the
Nomination and Governance Committee
and the Compensation Committee of WPP.
Dr. Zhang is a world-renowned technologist,
scientist and entrepreneur, who served as
President of Baidu Inc, the global internet
services and AI company headquartered in
Beijing, between 2014 and 2019. In this role,
he oversaw the company’s overall
technologies, emerging businesses and
global operations, and helped the company
to push new frontiers including cloud
computing, autonomous driving, quantum
computing, and AI/machine learning systems.
Prior to Baidu, Dr. Zhang held various senior
positions during a 16-year tenure with
Microsoft, both in the United States and
in China.
I am pleased to confirm that, as at the date
of this report, we exceeded both diversity
targets set by the Hampton-Alexander and
Parker reports on gender and ethnic diversity.
Women represented 43% of the Board and
three directors are from an ethnic minority
background. Our ambition for Board gender
diversity is to reach parity.
Today we have a strong Board and executive
team, but we must, of course, continue to
look to the future. Succession planning, both
for the Board and senior management roles,
was overseen by the Nomination and
Governance Committee and by the Board.
Alongside Board membership we have
also continuously reviewed the governance
architecture of the Board’s committees
and made changes to their composition
accordingly. The reports from our committee
chairs can be found on the pages that follow.
And finally, as part of our ongoing
assessment of Board effectiveness, our
Senior Independent Director, Nicole
Seligman, carried out a Board evaluation
exercise considering the performance of the
Board and its committees, the results of
which are set out on page 125. I am pleased
to report that the evaluation concluded that
the Board and its committees continue to
operate effectively.
ENGAGING OUR STAKEHOLDERS
To succeed in an open and interconnected
world, organisations need to demonstrate
their value to all stakeholders, to operate by
the principles of sustainable and responsible
business at all times, and to be seen to do so.
The Board conducted deep-dives on a range
of environmental, social and corporate
governance (ESG) matters during 2020, from
the mitigation of the Company’s climate
impacts to a full review of its sustainability
strategy and statement of purpose.
The Board approved the change of the
Company’s purpose to include explicit
reference to the planet. Reflecting this
change, the leadership team committed
WPP to achieving net zero carbon emissions
across its value chain by 2030, supported by
science-based targets.
WPP ANNUAL REPORT 2020
109
CORPORATE GOVERNANCE CHAIRMAN’S LETTER
Exceptional people are not only our
greatest asset but the key to our future
growth. WPP has made great strides over
the last two-and-a-half years in building a
culture of openness, tolerance and respect
throughout the organisation.
As well as being self-evidently the right thing
to do, this is a prerequisite for success when
success relies upon the ability to attract and
retain the very best, in an organisation that
welcomes and supports everyone equally.
The leadership team has placed diversity,
equity and inclusion at the heart of the
Company’s strategy, and the Board tracks
progress in this area just as closely as it does
financial performance metrics.
From 2021 that progress will also be reported
internally to all employees on a quarterly
basis, so that it is clear to everyone how we
are doing, and where we need to do better.
The Company will also continue to provide a
variety of ways for our people to make their
voices heard.
That internal dialogue is vital because
WPP’s performance is simply a reflection
of the collective effort and dedication of
the many thousands of people within our
organisation. As always, the Board’s thanks
go to all of them.
Roberto Quarta
Chairman
29 April 2021
Understanding how WPP’s activities impact
our various stakeholder groups and taking
their views and interests into account when
making decisions is one of the Board’s most
important responsibilities.
During 2020 the Board oversaw an investor
perception study to provide a detailed
analysis of how investors view the Company,
its investment proposition and future
prospects. In addition, we reviewed the
results of the Company’s first ever cross-
agency employee survey and received
updates on WPP’s client satisfaction scores.
Both the Chair of the Compensation
Committee and I also conducted extensive
consultations with investors to discuss
targets for the performance measures in the
2020 Executive Performance Share Plan.
MANAGING RISKS
To safeguard our business and our people,
along with the interests of our shareholders
and wider stakeholder groups, the Board
constantly identifies, monitors and analyses
the risks facing the Company and the
markets in which it operates.
During the year the Board conducted a
thorough assessment of WPP’s principal risks
and uncertainties, as well as strategic risk
reviews focused on areas including cyber
and information security.
Our risk governance framework is set out
on page 90 of this report.
OUR PEOPLE
The fact that WPP has continued to operate
so well in 2020 despite widespread
lockdown-enforced remote working reminds
us that we are a true “people company”.
Their talent, expertise and commitment, and
the technology to connect to one another,
were all our people needed to continue
delivering results for our clients.
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WPP ANNUAL REPORT 2020
GOVERNANCE
AT A GLANCE
HIGHLIGHTS
46%
female
representation
on the Board as at
31 December
2021
Exceeded Parker
Review diversity
target
Launched new
sustainability
strategy
10th
in the FTSE 100
2020 Hampton-
Alexander
Review
Full compliance
with provisions
of the Code
3
new NED
appointments
announced in 2020
CORPORATE GOVERNANCE
COMPLIANCE WITH THE CODE
During the year ended 31 December 2020, we applied the principles of good
governance contained in the 2018 UK Corporate Governance Code (the “Code”)
and have been compliant with its provisions. The table below shows where
shareholders can find further information on how the Company has complied
with the Code. The Company’s American Depositary Shares are listed on the
New York Stock Exchange (NYSE) and we are therefore subject to the rules of
the NYSE as well as to the US securities laws and the rules of the Securities and
Exchange Commission (SEC) applicable to foreign private issuers. As the
Company follows UK corporate governance standards, differences from the
NYSE governance standards are summarised in the Company’s Form 20-F filing.
1. BOARD LEADERSHIP AND COMPANY PURPOSE
READ MORE
– Long-term value and sustainability
– Culture
– Shareholder and other stakeholder engagement
– Conflicts of interest
2. DIVISION OF RESPONSIBILITIES
– Role of the Chairman and Chief Executive Officer
– Non-Executive Directors
3. COMPOSITION, SUCCESSION AND EVALUATION
– Appointment and succession planning
– Skills and experience
– Evaluation
– Diversity
4. AUDIT, RISK AND INTERNAL CONTROL
– Integrity of Financial Statements
– Fair, balanced and understandable
– Internal controls and risk management
– External auditor
Page 122
Page 122
Page 117
Page 127
Page 120
Page 120
Page 126
Page 123
Page 125
Page 124
Page 129
Page 129
Page 130
Page 131
– Principal and emerging risks
Pages 95-101
5. REMUNERATION
– Policies and practices
Pages 134-154
– Alignment with purpose, values and long-term strategy
Pages 134-154
– Independent judgement and discretion
Pages 134-154
WPP ANNUAL REPORT 2020
111
CORPORATE GOVERNANCE
OUR BOARD
THE FOLLOWING DIRECTORS
RETIRED FROM THE BOARD
DURING THE YEAR:
Sir John Hood – retired on
10 June 2020
Daniela Riccardi – retired on
10 June 2020
Paul Richardson – retired on
1 May 2020
Solomon (Sol) Trujillo – retired
on 10 June 2020
COMMITTEE
MEMBERSHIP KEY
Audit
Compensation
Nomination and Governance
Sustainability
Committee Chairman
ROBERTO QUARTA
CHAIRMAN
Appointed: 1 January 2015
(Chairman 9 June 2015)
Nationality: Italian and American
Skills and experience:
Roberto has extensive and diverse
experience in corporate governance
and global commerce having served
on the boards of a number of UK and
international companies. His career
in private equity brings valuable
experience to WPP, particularly when
evaluating acquisitions and new
business opportunities.
He is Chairman of Smith & Nephew plc,
a Partner of Clayton, Dubilier & Rice and
Chairman of Clayton, Dubilier & Rice
Europe. Previously he was Chief
Executive and then Chairman of BBA
Group plc, Chairman of Rexel SA,
Chairman of IMI plc and a Non-Executive
Director at BAE Systems plc, Equant NV,
Foster Wheeler AG and PowerGen plc.
External appointments:
Chairman, Smith & Nephew; Partner,
Clayton, Dubilier & Rice; Chairman,
Clayton, Dubilier & Rice Europe.
INDEPENDENT NON-EXECUTIVE
DIRECTOR
MARK READ
CHIEF EXECUTIVE OFFICER
Appointed: 3 September 2018
Nationality: British
Skills and experience:
Mark has a deep understanding of the
industry having held multiple leadership
positions at WPP since he joined in 1989.
As Head of Strategy and then CEO of
WPP Digital he was responsible for
WPP’s first moves into technology.
In 2015, he became Global CEO of
Wunderman, which he transformed into
one of the world’s leading creative, data
and technology agencies. Earlier in his
career, he co-founded internet start-up
WebRewards and specialised in media
and marketing as a principal at consultancy
Booz Allen Hamilton. Mark was voted
the industry’s Most Influential Person of
2019 in Econsultancy’s Top 100 Digital
Agencies report and was recognised
as a HERoes Champion of Women in
Business in 2018, 2019 and 2020.
Mark has an MBA from INSEAD and an
Economics degree from Trinity College,
University of Cambridge, and was a
Henry Fellow at Harvard University.
External appointments:
Chairman of the Natural History Museum
Digital Council.
JOHN ROGERS
CHIEF FINANCIAL OFFICER
Appointed: 3 February 2020,
Chief Financial Officer from 1 May 2020
Nationality: British
Skills and experience:
John has extensive finance, strategy,
digital, property and retail experience.
He joined WPP from J Sainsbury plc
where he was Chief Executive Officer of
Sainsbury’s Argos. John was previously
the Chief Financial Officer of J Sainsbury
plc, responsible for business strategy,
new business development, Sainsbury’s
Online and Sainsbury’s Bank, in addition
to its core finance functions.
John is a member of The Prince’s
Advisory Council for Accounting for
Sustainability. He also sits on the Retail
Sector Council, which acts as a point
of liaison between the UK Government
and retail sector.
External appointments:
Non-Executive Director and Chair of the
Audit Committee, Travis Perkins plc;
Member, The Prince’s Advisory Council
for Accounting for Sustainability;
Member, Retail Sector Council.
NON-EXECUTIVE
DIRECTOR TENURE AS
AT 31 DECEMBER 2020
GENDER AS AT
31 DECEMBER 2020
• 0-3 years 6
• 3-6 years 1
• 6-9 years 4
• 9+ years 0
• Male 7
• Female 6
NICOLE SELIGMAN
SENIOR INDEPENDENT DIRECTOR,
NON-EXECUTIVE DIRECTOR
Appointed: 1 January 2014
Nationality: American
Skills and experience:
Nicole is a global business leader and
an internationally recognised lawyer.
She brings to the Board analytical skills,
in-depth knowledge of public
company corporate governance and
a comprehensive understanding of
media and business issues. Nicole
was previously President of Sony
Entertainment, Inc. and global General
Counsel for Sony Corporation. Prior to
that, as a partner at law firm Williams &
Connolly, Nicole represented key public
figures and major media and other
companies in complex litigation.
She is a Magna Cum Laude graduate
of both Harvard College and Harvard
Law School.
External appointments:
Non-Executive Director, ViacomCBS
Inc.; Non-Executive Director, MeiraGTx
Holdings plc; Non-Executive Director,
Far Peak Acquisition Corporation.
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WPP ANNUAL REPORT 2020
OUR BOARD
CORPORATE GOVERNANCE
INDEPENDENT NON-EXECUTIVE DIRECTORS
ANGELA AHRENDTS DBE
NON-EXECUTIVE DIRECTOR
Appointed: 1 July 2020
Nationality: British and American
JACQUES AIGRAIN
NON-EXECUTIVE DIRECTOR
Appointed: 13 May 2013
Nationality: Swiss and French
SANDRINE DUFOUR
NON-EXECUTIVE DIRECTOR
Appointed: 3 February 2020
Nationality: French
Skills and experience:
Angela brings expertise as a leader of
creative and technology-driven global
businesses. From 2014 until 2019, she
was Senior Vice President, Retail at
Apple, Inc., where she integrated and
redesigned the physical and digital
global consumer experience. Angela
was CEO of Burberry from 2006 to 2014,
where she repositioned the brand as
a luxury high-growth company and
created the Burberry Foundation. Prior
to Burberry, Angela was Executive Vice
President at Liz Claiborne, Inc. and
President of Donna Karan International,
Inc. Angela was a member of the UK
Prime Minister’s Business Advisory
Council from 2010 to 2015.
External appointments:
Non-Executive Director, Ralph Lauren
Corporation and Airbnb, Inc.; Chair of
Save the Children International;
Non-Executive Director, Charity: Water
and The HOW Institute for Society;
member of the Global Leadership
Council of the Oxford University Saïd
Business School and BritishAmerican
Business International Advisory Board.
Skills and experience:
Jacques has extensive business,
corporate finance and governance
expertise. He was a Senior Advisor at
Warburg Pincus LLP from 2001 to 2009.
Jacques was a member of the Executive
Committee of Swiss Re AG and CEO
from 2006. Prior to Swiss Re, he spent
20 years with JPMorgan Chase. Jacques
was previously Chairman of LCH
Clearnet Group Ltd from 2010, a
Director of the Qatar Financial Centre
Authority and a Supervisory Board
Member of Lufthansa AG and Swiss
International Airlines AG.
He holds a PhD in Economics from
Sorbonne University and an MA in
Economics from Paris Dauphine
University.
External appointments:
Chairman, LyondellBasell NV;
Non-Executive Director, London Stock
Exchange Group plc; Chairman, Singular
SAU (private company); Chairman,
ACUTRONIC Holding AG (private
company); Non-Executive Director,
Clearwater Analytics (private company).
Skills and experience:
Sandrine brings substantial financial
expertise gained in global companies
and strong strategic capability to the
Board. She has executive leadership
experience in the telecommunications,
entertainment and media industries and
an enthusiasm for cultural, technological
and business transformation. Sandrine
is currently Chief Financial Officer of
UCB, a global pharmaceutical company.
Previously she was CFO of Proximus.
She held a number of leadership roles
at Vivendi, in France and in the United
States, across its entertainment and
telecommunications business.
Sandrine began her career as a financial
analyst at BNP and then Credit Agricole
in the telecoms sector. She has held
other non-executive director roles,
most recently at Solocal Group.
External appointments:
Chief Financial Officer, UCB.
TAREK FARAHAT
NON-EXECUTIVE DIRECTOR
Appointed: 11 October 2016
Nationality: Brazilian and Egyptian
TOM ILUBE CBE
NON-EXECUTIVE DIRECTOR
Appointed: 5 October 2020
Nationality: British
Skills and experience:
Tarek has extensive leadership and
brand-building experience gained in
leading businesses in the Americas,
Europe, Middle East and Africa. He
worked for Procter & Gamble for over
26 years, his last position as President
of Procter & Gamble Latin America and
member of the Global Leadership
Council. Tarek was previously Chairman
of the board of JBS S.A. and a board
member of Pilgrim’s Pride Corporation
and Alpargatas. Tarek is currently a
strategic advisor, consultant and
partner for companies in the consumer
goods, Fintec and healthcare sectors.
Tarek is a graduate of the American
University in Cairo, Faculty of
Commerce and Finance.
External appointments:
None.
Skills and experience:
Tom brings a wealth of expertise
as a technology entrepreneur. He is
the founder and CEO of Crossword
Cybersecurity Plc. From 2010 to 2014,
Tom was Managing Director of Consumer
Markets at Callcredit Information Group.
Prior to Callcredit, Tom founded and
was CEO of Garlik, a venture capital-
backed identity protection company.
His 30-year career in the UK technology
sector includes roles at Egg Banking plc,
PricewaterhouseCoopers, Goldman
Sachs and the London Stock Exchange.
He was made a Doctor of Science (Honoris
Causa) by City, University of London, an
Honorary Doctor of Technology by the
University of Wolverhampton, an Honorary
Fellow of Jesus College, Oxford and an
Advisory Fellow at St Anne’s College. In
2017 Tom topped the Powerlist ranking
of the most influential people of African
or African Caribbean heritage in the UK.
External appointments:
Founder and CEO, Crossword
Cybersecurity plc; Non-Executive
Director, BBC; Chair, Deathio Ltd; Founder
and Chair, African Gifted Foundation.
CINDY ROSE OBE
NON-EXECUTIVE DIRECTOR
Appointed: 1 April 2019
Nationality: British and American
Skills and experience:
Cindy has extensive experience as a
leader in the technology and media
sectors and a deep understanding of
the role of technology in business
transformation. She was appointed
President of Microsoft Western Europe
in October 2020, prior to which she
was Microsoft UK CEO from 2016. She
previously held roles as Managing
Director of the UK consumer division
at Vodafone and as Executive Director
of Digital Entertainment at Virgin Media.
She also spent 15 years at The Walt
Disney Company, ultimately as Senior
Vice President & Managing Director of
Disney Interactive Media Group.
Cindy is a graduate of Columbia
University and New York Law School.
External appointments:
President, Microsoft Western Europe;
Member of the advisory board of
Imperial College Business School in
London; Member of the advisory board
of McLaren.
WPP ANNUAL REPORT 2020
113
CORPORATE GOVERNANCE OUR BOARD
INDEPENDENT NON-EXECUTIVE DIRECTORS
COMPANY SECRETARY
SALLY SUSMAN
NON-EXECUTIVE DIRECTOR
Appointed: 13 May 2013
Nationality: American
KEITH WEED CBE
NON-EXECUTIVE DIRECTOR
Appointed: 1 November 2019
Nationality: British
JASMINE WHITBREAD
NON-EXECUTIVE DIRECTOR
Appointed: 1 September 2019
Nationality: British and Swiss
BALBIR KELLY-BISLA
COMPANY SECRETARY
Appointed: 27 April 2020
Skills and experience:
Sally brings expertise in
communications, public affairs,
governance and strategy. She is
Executive Vice President, Chief
Corporate Affairs Officer for Pfizer
and also heads Pfizer’s corporate
responsibility group. Before joining
Pfizer in 2007, Sally was Executive Vice
President of Global Communications at
Estée Lauder, where she directed global
corporate affairs strategy and served as
a member of the Executive Committee.
She previously held several senior
corporate affairs posts at American
Express, in both London and the United
States. She started her career in
government service where positions
included Deputy Assistant Secretary
for Legislative and Intergovernmental
Affairs in the U.S. Department of
Commerce.
Sally has a BA in Government from
Connecticut College and has studied
at the London School of Economics.
External appointments:
Executive Vice President, Chief
Corporate Affairs Officer, Pfizer; Co-Chair,
International Rescue Committee.
Skills and experience:
Keith has a wealth of experience as a
marketing and digital leader and an
understanding of the ways in which
technology is transforming businesses.
From 2010 to 2019, Keith was Chief
Marketing and Communications Officer
at Unilever, a role that included creating
and leading Unilever’s sustainability
programme. Keith was named the
World’s Most Influential Chief Marketing
Officer by Forbes in 2017, 2018 and 2019,
and Global Marketer of the Year 2017 by
the World Federation of Advertisers.
He received The Drum’s Lifetime
Achievement Award in 2018 and was
inducted into the Marketing Hall of
Fame in 2019. Keith is a Non-Executive
Director of J Sainsbury plc.
External appointments:
Non-Executive Director, J Sainsbury plc;
Trustee Director of Business in the
Community; Board Trustee Grange Park
Opera; President of the UK Advertising
Association; President of the Royal
Horticultural Society.
Skills and experience:
Jasmine’s experience spans marketing,
technology, finance, media,
telecommunications, and not-for-profit
organisations, and she brings this
breadth of perspective and knowledge
of many of WPP’s client sectors.
Jasmine began her career in marketing
in the technology sector, including with
Thomson Financial in the US. After
completing the Stanford Executive
Program, Jasmine went on to hold
leadership roles with Oxfam and Save
the Children, starting in 1999 in West
Africa and, from 2010-15, as the first
Chief Executive of Save the Children
International.
Jasmine was a Non-Executive Director
of BT Group plc from 2011 to 2019 and
Chief Executive Officer of London First
from 2016 until March 2021.
External appointments:
Chair of the Board, Travis Perkins plc
effective 31 March 2021; Non-Executive
Director, Standard Chartered plc;
Advisor to the Ethics Committee,
Compagnie Financière Richemont SA;
Visiting Fellow, Oxford University.
Skills and experience:
Balbir has significant governance
experience across various roles, most
recently as Company Secretary of
William Hill plc. Prior to joining William
Hill, Balbir was Director of Investor
Relations at GlaxoSmithKline plc (GSK),
leading on engagement with
ESG-focused investors, and before
that held company secretarial roles
at GSK, Lastminute.com, Royal & Sun
Alliance and Segro plc.
DIRECTOR APPOINTMENT
SINCE YEAR-END
DR. YA-QIN ZHANG
NON-EXECUTIVE DIRECTOR
Appointed: 1 January 2021
Nationality: Chinese
Skills and experience:
Ya-Qin is a world-renowned
technologist, scientist and entrepreneur
with a particular understanding of the
changing consumer technology landscape
in China. He was President of Baidu Inc.,
the global internet services and AI
company headquartered in Beijing,
between 2014 and 2019. Prior to joining
Baidu, he held several positions during
his 16-year tenure at Microsoft, both in
the United States and China, including
Corporate Vice President and Chairman
of Microsoft China. Ya-Qin is currently
a Non-Executive Director of Fortescue
Metals Group, AsiaInfo Technologies
Limited and ChinaSoft International
Limited. He is also Chair Professor of
AI Science at Tsinghua University and
the founding Dean of the Institute for AI
Industry Research at the same university.
External appointments:
Non-Executive Director of Fortescue
Metals Group, AsiaInfo Technologies
Limited and ChinaSoft International
Limited; Chair Professor of AI Science at
Tsinghua University and the founding
Dean of the Institute for AI Industry
Research at the same university; Fellow,
American Academy of Arts and Sciences.
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WPP ANNUAL REPORT 2020
CORPORATE GOVERNANCE
OUR EXECUTIVE COMMITTEE
The Executive Committee of WPP is responsible for
leading the Company and executing its strategy.
Its members lead WPP’s largest operating companies
and central corporate functions.
MARK READ
CHIEF EXECUTIVE OFFICER
Biography can be found on page 112.
JOHN ROGERS
CHIEF FINANCIAL OFFICER
Biography can be found on page 112.
AJAZ AHMED
CHIEF EXECUTIVE OFFICER, AKQA
Ajaz is the CEO of AKQA, which recently
joined forces with Grey within AKQA
Group. Recognised as a creative
pioneer, AKQA has won over 60 Agency
of the Year awards.
JACQUI CANNEY
CHIEF PEOPLE OFFICER
Jacqui joined WPP in 2019 from
Walmart, where she served as Chief
People Officer, having previously worked
at Accenture. She is responsible for all
elements of WPP’s people strategy.
JON COOK
GLOBAL CHIEF EXECUTIVE OFFICER,
VMLY&R
Jon has led VMLY&R since its formation
in 2018 as WPP’s new global brand and
customer experience agency. He was
formerly Global CEO of VML, which he
joined in 1996.
MEL EDWARDS
GLOBAL CHIEF EXECUTIVE OFFICER,
WUNDERMAN THOMPSON
Mel was appointed as CEO of the newly
formed Wunderman Thompson in 2018,
having previously been the Global CEO
of Wunderman. She joined Wunderman
as UK CEO in 2012.
LAURENT EZEKIEL
CHIEF MARKETING
& GROWTH OFFICER
Laurent became WPP’s first Chief
Marketing & Growth Officer in 2019.
He joined from Publicis where he was
President of Digitas, North America, and
International and Client Leader for GSK.
RICHARD GLASSON
GLOBAL CHIEF EXECUTIVE OFFICER,
HOGARTH
Richard was appointed CEO of Hogarth
Worldwide in 2016, having joined the
company in 2011. Prior to this he was
CEO of Gyro, the B2B marketing
specialist.
ANDREA HARRIS
GROUP CHIEF COUNSEL
Andrea was appointed as Group Chief
Counsel in 2005 having joined WPP
in 1996. Andrea is Chair of the Risk
Committee and a member of the ExCo
Sustainability Committee.
WPP ANNUAL REPORT 2020
115
CORPORATE GOVERNANCE OUR EXECUTIVE COMMITTEE
MICHAEL HOUSTON
GLOBAL CHIEF EXECUTIVE OFFICER,
GREY
Grey is among the industry’s most
awarded creative agencies. Michael
became CEO of Grey Group in 2017,
after roles including Global President
and CEO of Grey North America.
DONNA IMPERATO
GLOBAL CHIEF EXECUTIVE OFFICER,
BCW (BURSON COHN & WOLFE)
Donna was appointed CEO of BCW,
one of the world’s largest earned-first
creative communications agencies,
in 2018. Before taking the helm of
BCW, Donna served for 15 years as
CEO of Cohn & Wolfe.
TOBY JENNER
GLOBAL CHIEF EXECUTIVE OFFICER,
WAVEMAKER
Toby joined global media network
Wavemaker as CEO in 2019. Previously
he held senior roles with MediaCom in
New York, Singapore, Sydney and lastly
in London as Worldwide Chief
Operating Officer.
CHRISTIAN JUHL
GLOBAL CHIEF EXECUTIVE OFFICER,
GROUPM
GroupM is the world’s largest media
investment group and home to WPP’s
media agencies. Formerly Global CEO
of Essence, Christian was appointed
CEO of GroupM in 2019.
LINDSAY PATTISON
CHIEF CLIENT OFFICER
STEPHAN PRETORIUS
CHIEF TECHNOLOGY OFFICER
ANDREW SCOTT
CHIEF OPERATING OFFICER
Lindsay became Chief Client Officer
of WPP in 2018. Prior roles include
Chief Transformation Officer of WPP
and Global CEO of Maxus, which she
joined as UK CEO in 2009.
Stephan was appointed as WPP’s first
CTO in 2018. Before that he was UK
Group CEO and Global CTO of
Wunderman, having joined the
company in 2016.
Andrew joined WPP in 1999 as Director
of Corporate Development. He held a
number of other senior roles including
Chief Operating Officer for Europe
before being appointed COO in 2018.
ANDY MAIN
WORLDWIDE CHIEF EXECUTIVE
OFFICER, OGILVY
Prior to joining Ogilvy in 2020, Andy
led Deloitte Digital and scaled it into a
multi-billion-dollar global business. He’s
an entrepreneur who helped reshape
the industry by making the first move by
consultancies into creative services.
APPOINTMENT SINCE YEAR-END
ROB REILLY
GLOBAL CHIEF CREATIVE OFFICER
Appointed with effect from 1 May 2021
Rob was previously Global Creative
Chairman of McCann Worldgroup,
which was named Network of the Year
by Cannes Lions and The Effies during
his tenure. Before McCann he was
Partner and Worldwide Chief Creative
Officer at CP+B, helping it to win
Ad Age’s Agency of the Decade.
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WPP ANNUAL REPORT 2020
HOW OUR
BOARD ENGAGES
CORPORATE GOVERNANCE
OUR APPROACH TO ENGAGEMENT
The success of our business is dependent
upon our ability to understand and respond
to the needs of the various stakeholders
connected with WPP. When making
decisions, our Board and its Committees
consider which course of action best leads
to the success of the Company over the
long term, which requires an understanding
of how our decisions impact these
stakeholder groups.
Through open and transparent dialogue with
our key stakeholders, we have been able to
develop a clear understanding of their needs,
assess their perspectives and monitor their
impact on our strategic ambition and culture.
Decisions of the Board are taken after
receiving reports from management on
issues concerning our stakeholders and after
discussing the potential impact of decisions
on our key stakeholders, reflecting what are
referred to as Section 172 factors. As a Jersey
incorporated company, WPP is not subject
to UK legislation. However, as a matter of
good governance and in order to comply
with the provisions of the 2018 UK Corporate
Governance Code, the Board considers the
matters described in Section 172 of the
Companies Act 2006 in its decision-making.
Illustrations of how Section 172 factors have
been applied by the Board can be found
throughout the Strategic Report including
the Covid-19 case study on page 119.
OUR ENGAGEMENT DURING 2020
Page 15 within the Strategic Report sets out our most important stakeholders and how, as a Company, we engage with these stakeholders on
an operational level. The following table summarises how the Board engages with each of these stakeholder groups.
STAKEHOLDER GROUP
DIRECT BOARD ENGAGEMENT IN 2020
INDIRECT BOARD ENGAGEMENT
SHAREHOLDERS
Our shareholders provide capital to
invest in the business. Shareholders
benefit from the Board acting in the
best interests of the Company and
investors for long-term value
generation.
CLIENTS AND SUPPLIERS
Our clients come from businesses
across every sector. The work we do for
clients provides our revenue and helps
them to grow their businesses, build
relationships with their customers and
ready themselves for future success.
Our suppliers range from small
businesses to the world’s largest
technology partners. They provide us
with the products and services we
need to meet our clients’ needs.
The Capital Markets Day in December 2020
enabled WPP’s shareholders to hear from the
Chief Executive Officer, Chief Financial Officer and
Chief People Officer about the strategy for growth
and plans for capital allocation and to share their
views directly through the interactive webinar.
The Chairman and Executive Directors met
regularly with institutional investors to discuss
the business and to respond to any concerns.
The Committee Chairs met with major
shareholders to discuss matters within their remit,
such as targets for the performance measures in
the 2020 Executive Performance Share Plan.
A webcast hosted by the Chairman and Chief
Executive Officer followed the 2020 AGM,
where shareholders had the opportunity to
submit questions.
Engaged with clients on issues including strategy,
changes taking place in our market and
understanding the changes taking place in our
clients’ and suppliers’ markets.
Through our Chief Executive Officer, engaged
with suppliers in joint product development, skills
development and joint go-to-market programmes.
Feedback to the Board on investor views,
particularly from the Chairman, Chief Executive
Officer and Chief Financial Officer.
Reports to the Board detailing investor relations
activities, key themes of interest from investors
and share register composition and movements.
Analyst and broker briefings and reports of
meetings with major shareholders.
Investor perception study conducted, which
detailed how investors view the Company, its
investment proposition and future prospects.
Received updates on WPP’s client satisfaction
scores.
Received reports from operating companies,
which included updates on customers, in
particular how customer relationships were being
managed in response to the Covid-19 pandemic.
Received reports from the Chief Executive Officer
on the impact of the Covid-19 pandemic on clients
and the Group’s response.
Received updates on the supplier onboarding
process, including the addition of workforce
diversity and carbon reduction metrics.
WPP ANNUAL REPORT 2020
117
CORPORATE GOVERNANCE HOW OUR BOARD ENGAGES
OUR ENGAGEMENT DURING 2020 CONTINUED
STAKEHOLDER GROUP
DIRECT BOARD ENGAGEMENT IN 2020
INDIRECT BOARD ENGAGEMENT
GOVERNMENTS AND REGULATORS
Governments receive the tax
contributions we make to public
finances, enabling them to invest in
public services.
Governments and regulators determine
the policy frameworks that impact us
and our stakeholders.
PEOPLE
We depend on the talent, creativity and
technology skills of our people. And we
want our employees to embrace our
purpose, culture and values. In return,
our people receive salaries, pension
contributions, employee benefits,
career development and training.
PLANET
We are committed to responsible
and sustainable business practices.
We take steps to optimise our own
environmental impact, but recognise
that our greatest contribution to the
planet is through our work with clients,
which can shift attitudes and change
behaviours to build a sustainable future
and a more inclusive society.
COMMUNITIES
We can help boost the impact of
charities and non-governmental
organisations by providing marketing
and creative services, often on a pro
bono basis, enabling them to raise
awareness and funds, recruit members,
and achieve campaign objectives.
We believe, and so do many of our
stakeholders, that acting responsibly
is both the right thing to do and in our
long-term interests.
As a listed global company, engagement with
listing authorities and financial regulators.
The Chief Executive Officer met regularly with
government representatives and regulators
around the world.
Approved WPP’s Modern Slavery Act Statement.
Responded to government consultations, such
as the Parker Review.
Cindy Rose, our Workforce Engagement
Non-Executive Director, attended meetings of the
Workforce Advisory Panel (WAP) and updated the
Board on matters discussed. Wellbeing initiatives
were introduced in response to issues raised at
forums such as the WAP. For more detail see
page 48.
The Chief Executive Officer hosted 28 virtual
townhalls, which gave him the chance to speak
to people directly and to hear from attendees
in return.
The Chief Executive Officer hosted a global
webcast with Tom Ilube to discuss championing
greater diversity within our agencies and work.
Board engagement with senior managers at the
Board Strategy Day.
Reports to the Board and its Committees on
regulatory changes from the Group Chief Counsel,
Global Corporate Affairs Director and Group
Company Secretary.
Formal reports to the Board from the Chief
Executive Officer and Chief People Officer included:
– In-depth reviews of the people strategy,
people risk and workforce engagement
– The impact of the Covid-19 pandemic on our
people and actions being taken to support them
– Progress on diversity & inclusion initiatives
– Actions taken to address employee feedback
Endorsed the establishment of WPP’s first Global
Inclusion Council to deliver on our diversity, equity
and inclusion commitments.
Reports at each Audit Committee meeting were
received on issues raised via ‘Right to Speak’
channels.
The Board undertook deep dives on a range of
environmental, social and governance (ESG)
topics, including the development of a Company-
wide net zero carbon strategy. For more detail
see page 68.
Reports to the Sustainability Committee included
updates on:
– Progress on WPP’s single-use plastics
commitment
– Performance against sustainability KPIs
The Board approved the change of the Company’s
purpose to include reference to “planet”.
including renewable energy, carbon reduction
and waste management
The Board and Sustainability Committee reviewed
climate-related risks and opportunities as part of
its review and approval of WPP’s Task Force on
Climate-related Financial Disclosures statement
on page 216.
Chief Executive Officer visit to a WPP Foundation
School in India.
The Board endorsed the commitment to spend
$30 million over three years to fund inclusion
programmes within WPP and support external
organisations. To read more about how we are
investing in our communities, please see page 74.
– the development of a company-wide net zero
carbon strategy
Reports from the Chief Executive Officer received
on the Group’s response to Covid-19, including
delivering public awareness campaigns.
The Sustainability Committee oversaw the work
on the new sustainability strategy and the
progress made on establishing Group-wide
sustainability targets tied to the WPP purpose
statement.
Reports to the Sustainability Committee included
updates on performance against KPIs including
donations and pro bono work.
Updates received from the business on elements
of the Group’s operations which impact the wider
community, including the Group’s tax strategy.
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WPP ANNUAL REPORT 2020
HOW OUR BOARD ENGAGES
CORPORATE GOVERNANCE
ENGAGEMENT
IN ACTION
The Board had an active oversight role in WPP’s response
to the Covid-19 pandemic.
For more information on how we played our part in responding to Covid-19
please see wpp.com/featured/how-wpp-is-responding-to-covid-19
OUR RESPONSE TO THE COVID-19 PANDEMIC
PEOPLE
An early decision was made to put in place a global
policy of managed remote working, and the Company
significantly increased its investment in employee
support services, with a particular focus on mental
health and wellbeing.
A comprehensive programme of internal
communications and engagement ensured a regular
flow of information from the centre of WPP as well as
from the agencies that employ our people directly.
Our CEO hosted 28 virtual townhalls during the year,
giving people the opportunity to ask questions and
raise issues, and the Company the chance to take the
pulse of the organisation. The Board received regular
updates on workforce communications.
SHAREHOLDERS
Covid-19 has required the Board to balance the
long-term consequences of decisions and the
shorter-term requirements for operational resilience.
As a result, the Board took the decision to suspend the
Kantar share buyback scheme and final dividend for
2019, costs were reduced substantially and leaders –
including the Board and Executive Committee –
volunteered to take a 20% cut in their fees or salary
for a three-month period.
The unique nature of the Covid-19 pandemic brought
logistical challenges for interacting with shareholders.
To protect and keep our shareholders and people safe
and in line with the advice from the UK Government, it
was not possible for shareholders to attend our AGM.
However, shareholders were able to submit questions
to the Chairman and CEO at the shareholder
presentation webcast following the closed AGM.
CLIENTS AND SUPPLIERS
WPP worked with our clients to help them get
back to business, adapt their marketing strategies
at speed and reshape their operations. We
worked with 76 of our top 100 clients on
ecommerce during 2020.
For more information about how WPP has served
our clients in a challenging year, please turn to
page 38.
GOVERNMENTS, REGULATORS
AND COMMUNITIES
We continued to work with governments,
commercial clients, NGOs and international health
bodies to produce public awareness campaigns
to help limit the spread and impact of Covid-19.
WPP supported the World Health Organization
(WHO) globally and regionally on a pro bono basis,
leveraging the scale and expertise of our agencies
to help the WHO reach the public with its vital
communications promoting social distancing and
good hygiene. More recently, the Ogilvy Consulting
team has been advising WHO and UNICEF in the
United States on the behavioural science of health
communications, with a focus on vaccine hesitancy
and the importance of customised messages
which take into account specific world views
and cultural filters.
WPP did not consider it appropriate to make use
of the UK Government furlough scheme.
WPP ANNUAL REPORT 2020
119
CORPORATE GOVERNANCE
DIVISION OF RESPONSIBILITIES
The WPP Board is committed to ensuring there is a strong and
effective system of corporate governance in place to support
the successful execution of the Company’s strategy.
GOVERNANCE MODEL
THE BOARD
– Responsible for the overall long-term
success of WPP and for setting the
Company’s purpose, values and culture
and strategic direction
– Oversees the implementation of appropriate
risk assessment processes to identify and
mitigate WPP’s principal risks
– Responsible for corporate governance
– Oversees the execution of the strategy and
responsible for the overall financial
performance of the Group
The Matters Reserved for the Board are
available on our website, wpp.com
CHAIRMAN
– Responsible for Board governance principles,
including setting the Board agenda and
ensuring the Board receives timely and
accurate information
– Ensures all Directors are enabled to play their
full part in Board activities
– Represents the Board in discussions with
shareholders and other stakeholders
CHIEF EXECUTIVE OFFICER
– Responsible for the day-to-day leadership of
the Group, representing the Company to clients,
suppliers, governments and employees
– Develops the strategic direction for
consideration by the Board
– Sets the tone at the top with regard to culture
and values
– Ensures there are effective processes for
engaging with and listening to employees
and other stakeholders
NON-EXECUTIVE DIRECTORS
– Bring an external perspective to support and
challenge the performance of management
– Assist in developing the Company’s strategy and
offer specialist advice to management based on
their particular skills and experience
SENIOR INDEPENDENT DIRECTOR
– Provides a sounding board for the Chairman and
acts as an intermediary for the other Directors
– Meets with the Non-Executive Directors (without
the Chairman present) when necessary and at
least once a year to appraise the Chairman’s
performance and communicates the results to
the Chairman
COMPANY SECRETARY
– Ensures the Board operates in accordance with
the corporate governance framework and that
there are good information flows between the
Board and Committees
– Advises the Board on matters of corporate
governance
– Supports the Board’s development through
organising training and induction programmes
– Supports the Board and Committee Chairs with
annual agenda planning
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WPP ANNUAL REPORT 2020
DIVISION OF RESPONSIBILITIES
CORPORATE GOVERNANCE
BOARD COMMITTEES
NOMINATION AND GOVERNANCE
COMMITTEE
– Reviews the size, skills, diversity,
AUDIT COMMITTEE
– Monitors the integrity of the Financial
Statements
experience and composition of the Board
– Provides oversight of internal controls and
– Leads the process for Director
risk management
COMPENSATION COMMITTEE
– Sets, reviews and recommends the
policy on remuneration of the Chairman,
executives and senior management team
– Monitors the implementation of the
– Manages the relationship with the external
Compensation Policy
appointments and Director and senior
management succession planning
– Oversees general governance matters,
including the ongoing suitability of the
governance framework
auditor, including making recommendations
to the Board and shareholders in relation to
the appointment and re-appointment of the
external auditor
Read more on page 126
Read more on page 128
Read more on page 134
SUSTAINABILITY COMMITTEE
– Supports the Board in its oversight of
corporate responsibility, sustainability and
reputational matters
– Reviews and monitors implementation of
the Company’s sustainability strategy
– Reviews policy statements on environmental
and social matters
Read more on page 133
EXECUTIVE COMMITTEES
EXECUTIVE COMMITTEE
Assists the Chief Executive Officer in
discharging his responsibilities and is
collectively responsible for implementing
strategy, ensuring consistent execution
and embedding the Company’s culture
and values.
DISCLOSURE COMMITTEE
An executive Disclosure Committee responsible
for overseeing the accuracy and timeliness of
Group disclosures and reviewing controls and
procedures in relation to the public disclosure
of financial information.
RISK COMMITTEE
An executive Risk Committee, which assists the
Board and Audit Committee in discharging its
responsibilities by reviewing, monitoring and
advising on the design and implementation of
WPP’s compliance framework, compliance
policies and procedures and risks that present
themselves throughout WPP.
WPP ANNUAL REPORT 2020
121
CORPORATE GOVERNANCE
BOARD ACTIVITIES
The key areas of focus considered by the Board during 2020
are set out below.
The Board recognises the importance of considering the
perspectives of, and the potential impact on, the Company’s key
stakeholders in its discussions. Its responsibilities are discharged
through an annual programme of meetings, each of which follows
a tailored agenda. A typical Board meeting will comprise reports
on operational and financial performance, progress on strategy,
people updates and a deep-dive into a particular ESG topic.
PERFORMANCE
STRATEGY & PURPOSE
PEOPLE & CULTURE
GOVERNANCE &
COMPLIANCE
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WPP ANNUAL REPORT 2020
MATTERS CONSIDERED
– Received regular updates on the Group’s financial performance including to assess the impact of the
Covid-19 pandemic
– Actions taken to maintain the Company’s strong liquidity position included suspension of the share
buyback and cancelling the 2019 final dividend
– Reviewed the Company’s financial results, earnings guidance, investor materials and related
announcements
– Considered performance against the 2019-2020 budget and agreed on the 2020-2021 budget
– Confirmation of the viability statement and going concern
– Undertook an investor perception study to ascertain how investors view the Company, its investment
proposition and future prospects
– Board strategy meeting to consider the end-to-end strategy and to align around the vision and future
prospects of the Company over the next 3 to 5 years
– Capital Markets Day held to update investors on the Company’s strategy for growth, plans for capital
allocation and new medium-term financial targets, including the announcement of a new dividend policy
– Approved a revised purpose statement to demonstrate the growing importance of sustainability and
to deliver value for shareholders and broader stakeholders
– Received presentations from the agencies on their work to support WPP’s strategy
– M&A activities, including the acquisition of the remaining shares in WPP AUNZ Limited and the merger
of Finsbury, The Glover Park Group and Hering Schuppener to form Finsbury Glover Hering
– Simplification activities, including bringing together AKQA and Grey and Geometry moving into VMLY&R
– Prioritised people matters throughout the Covid-19 pandemic, receiving insights from the leadership
team through their continuous engagement with people
– Received regular updates from the Chief People Officer on talent, succession planning and employee
engagement, with a particular focus on driving greater diversity and inclusion in terms of gender and
ethnicity, data and insights
– Received regular updates from the designated NED on the Workforce Advisory Panel
– Considered how the people strategy would enable the overall business strategy
– Announced a set of commitments and actions to advance racial equity
– Received reports from Board Committees and the external auditor
– Reviewed and approved the 2019 Annual Report, Form 20-F and Sustainability Report
– Reviewed the 2020 Modern Slavery Act Statement and approved it for publication on the Company website
– Reviewed Annual General Meeting arrangements to consider the impact of Covid-19 and approved the
2020 Notice of Annual General Meeting
– Considered the output of the Board performance evaluation. For more details see page 125.
– Continued focus on the Board’s composition, diversity and succession plans, resulting in the
appointment of new Non-Executive Directors and Board Committee membership changes
– Reviewed the risk management and internal controls across the Group. In-depth reviews of internal
controls over financial reporting, with a focus on remediation of material weaknesses. For more details
see page 130.
– Carried out a robust assessment of the principal risks and uncertainties affecting the Group and the
markets we operate in and strategic risk reviews including cyber and information security
COMPOSITION, SUCCESSION
AND EVALUATION
CORPORATE GOVERNANCE
BOARD ATTENDANCE TABLE: 2020
Total number of scheduled meetings
Members
Roberto Quarta
Mark Read
John Rogers – appointed on 3 February 2020
Angela Ahrendts DBE – appointed on 1 July 2020
Jacques Aigrain
Sandrine Dufour – appointed on 3 February 2020
Tarek Farahat
Tom Ilube CBE – appointed on 5 October 2020
Cindy Rose OBE
Nicole Seligman
Sally Susman
Keith Weed
Jasmine Whitbread
Former Directors who served for part of the year
Sir John Hood – retired on 10 June 2020
Daniela Riccardi – retired on 10 June 2020
Paul Richardson – retired on 1 May 2020
Solomon D. (Sol) Trujillo – retired on 10 June 2020
Number of ad hoc meetings
Audit
Committee
Compensation
Committee
Nomination
and
Governance
Committee
Sustainability
Committee
8
3
4
4
Board
6
Attended
Attended
Attended
Attended
Attended
6
6
6
3(3)
6
6
6
2(2)
6
6
6
6
6
3(3)
3(3)
2(2)
3(3)
7
8
8
8
8
4
4
4
3
3
3
3
2(2)
3(3)
5(5)
1
8
2
4
4
4
2
For Directors who served for part of the year, the numbers in brackets denote the number of meetings the Directors were eligible to attend.
BOARD COMPOSITION
As at the date of this report, our Board
comprised 11 independent Non-Executive
Directors, the Chairman and two Executive
Directors. The aim is to ensure the balance
of the Board reflects the needs of the
Company, is culturally diverse and is able to
consider matters from a broad perspective,
understanding the views of all our
stakeholders. Each individual Board
member brings a wide range of skills and
experience from different business
backgrounds to Board deliberations. Further
details, including the external appointments
held by Board members and their Committee
membership, can be found on pages 112-114.
Further detail on the responsibilities of the
Chair and members of the Board can be
found on pages 120-121.
The chart opposite details those skills and
experience of our Board which are identified
as being particularly important to the
execution of the Company’s strategy.
OUR BOARD – A DIVERSE MIX OF SKILLS,
EXPERIENCE AND KNOWLEDGE*
SKILLS
13
9
8
5
13
12
10
9
Corporate
governance
Audit and
Risk
Management
Finance
FMCG
Global
media &
advertising
Technology Sustainability
Strategy,
Transactions,
M&A
GEOGRAPHICAL EXPERIENCE
9
8
13
11
12
5
Africa &
Middle
East
Asia
Pacific
Europe
International
Latin
America
North
America
* Information as at 31 December 2020.
WPP ANNUAL REPORT 2020
123
CORPORATE GOVERNANCE COMPOSITION, SUCCESSION AND EVALUATION
DIVERSITY
WPP believes that diversity and difference
of thought, gender, background and outlook,
leads to more rewarding and successful
workplaces and the same principle applies
to the composition of our Board. The Board
has a diverse range of experience by way
of expertise, business sector background
and length of tenure on the Board. Our
Non-Executive Directors demonstrate
expertise from a range of industries including
tech, marketing, financial services, FMCG and
pharma, representative of our customer
base. The chart on page 123 illustrates the
range of skills across the Board, with the
new appointments in 2020-2021 bringing
additional expertise in technology,
transformation and finance.
The Board’s Diversity Policy, which is
available on our website, wpp.com,
reinforces the Board’s ongoing commitment
to all aspects of diversity and supports the
principles of the Hampton-Alexander and
Parker reviews on gender and ethnic
diversity. We are pleased to confirm that as
at the date of this report, we met both
diversity targets as women represented 43%
of the Board (46% as at 31 December 2020)
and three Directors are from an ethnic
minority background. The 2020 Hampton-
Alexander Review of FTSE Women Leaders
placed WPP at 10th in the FTSE 100. Our
ambition for Board gender diversity is to
reach parity.
Diversity, equity and inclusion is also
integrated across workforce policy and
the Board is provided with regular updates
covering a range of metrics and measures,
including trends around gender and
ethnic diversity.
For more information on gender diversity
in executive leadership roles see page 47.
RE-ELECTION OF DIRECTORS
The Chair, Senior Independent Director and
Non-Executive Directors are appointed for a
three-year term, subject to annual re-election
by the shareholders at the AGM. 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 United
States standards, which is nine years. With
the exception of Angela Ahrendts, Tom Ilube
and Dr. Zhang who are standing for election
for the first time, all Directors will stand for
re-election at the AGM with the support of
the Board. The Non-Executive Directors’
letters of appointment are available for
inspection at the Company’s registered office.
INDUCTION PROGRAMME
To ensure that they are able to effectively
contribute to discussion and decision-
making, all Directors participate in an
induction programme on joining the Board.
Each induction programme is tailored to the
individual Director, based on their personal
experience and background, including
matters specific to their role as a member
of the Committees upon which they sit.
CASE STUDY: DIRECTOR INDUCTIONS
DURING THE COVID-19 PANDEMIC
Angela Ahrendts and Tom Ilube joined the
Board in July and October respectively.
Typically, induction programmes would include
visits to operating companies in different
markets and face-to-face meetings; however
most meetings were held virtually in 2020
due to Covid-19 travel and meeting
restrictions.
While virtual meetings expanded the scope
of interactions possible across the Company,
our new Directors look forward to continuing
their induction programmes with site visits,
and meeting clients and employees once
Covid-19 restrictions are lifted.
Each induction programme includes
meetings with members of the Executive
Committee, senior management and external
advisors including the external auditor and
the Company’s corporate brokers. New
Directors will also receive a Board induction
pack, which is devised to assist with building
an understanding of the Company and to
introduce the Company’s key stakeholders,
as well as explain the commercial and
regulatory environment in which the
Company operates.
KEY AREAS OF FOCUS
MEETINGS
Meetings with Board members and the
Executive management team, including
WPP’s operating company leaders and
country managers in key markets
BRIEFINGS
Briefing sessions on the financial structure
and organisation, key financial metrics,
principal risks and the Company’s internal
control framework were provided by the
Chief Financial Officer, the Group Chief
Counsel and the Group’s external auditor
STAKEHOLDERS
Stakeholder perceptions and key issues
raised by, for example, investors, regulators
and industry groups were explained by our
investor relations and sustainability teams,
as well as the Company’s external advisors
CORPORATE GOVERNANCE
The Group Company Secretary provided
advice on corporate governance matters,
including duties and responsibilities as a
director of a listed company. Training
and development requirements were
identified as part of the induction
124
WPP ANNUAL REPORT 2020
COMPOSITION, SUCCESSION AND EVALUATION
CORPORATE GOVERNANCE
BOARD TRAINING AND DEVELOPMENT
To assist the Board in undertaking its
responsibilities, ongoing training is provided
to all Directors and training needs are
assessed as part of the induction programme
and Board evaluation process. In 2020, the
Board programme included regular
presentations from the management teams
of our businesses on developments in our
sector and our operating environment,
particularly focused on the impact of
Covid-19 and action being taken to respond
to changing and new opportunities and risks.
At the Board strategy meeting in October,
members of the senior management team
together with the Board, had an opportunity
to review WPP’s strategy for growth,
operating model and data and technology
approach. The Group Chief Counsel and the
Group Company Secretary provide updates
on current legal and governance matters
relevant to WPP. The Board activities
schedule on page 122 sets out further detail
on topics covered during the year. The Board
also completed a programme of mandatory
training covering WPP’s Code of Conduct
and Business Ethics.
All Directors have access to the advice and
services of the Group Chief Counsel and the
Group Company Secretary. The Board also
obtains advice from professional advisors,
as and when required, and Directors may,
as required, obtain external advice at the
expense of the Company.
TIME COMMITMENT
In addition to attending Board and
Committee meetings, each of the
Non-Executive Directors devotes
sufficient time to the Company to ensure
that their responsibilities are met effectively.
When making new appointments, the Board
takes into account other demands on
Directors’ time. Prior to appointment,
significant commitments are disclosed by
Directors to the Board. Any additional
external appointments are not undertaken
by any of the Directors without prior
approval from the Board.
INDEMNIFICATION OF DIRECTORS
Liability insurance and third-party indemnity
provisions are in force for the benefit of
directors and officers who held office during
the year and up to the approval of the
Annual Report.
BOARD EVALUATION
Each year, WPP completes a review of the
Board and its Committees to monitor their
effectiveness and identify improvement
opportunities. Progress against the outcomes
of the 2019 evaluation conducted by Nicole
Seligman, Senior Independent Director, are
set out in the table shown to the right.
2020 BOARD EVALUATION
The 2020 evaluation was internally facilitated
by the Senior Independent Director. The
review comprised a questionnaire and
discussions with each member of the Board
based around a number of themes, including
performance and strategy, the evolution of
WPP’s purpose, sustainability strategy and
the wider stakeholder engagement approach.
The output of the 2020 review was that the
Board is operating effectively, with strong
support for the quality of the relationships
between the Chairman, the Senior
Independent Director, Non-Executive
Directors and the Executive. Good progress
was also acknowledged to have been made
in the year to further enhance the skills and
experience on the Board and Committees.
The Board continues to be positively
engaged with the strategic process
and transformation plan.
KEY RECOMMENDATIONS FOR 2020
WHAT WE HAVE DONE IN 2020
TRANSFORMATION AND SIMPLIFICATION
Continued focus on domain knowledge for
the Board and new members, understanding
the evolving landscape and process of
transformation
FOCUS ON THE RISK FRAMEWORK
Continued focus on risk and risk appetite,
enterprise resilience, business integrity and
culture and the controls framework from the
Board and its Committees
The Board strategy meeting was an opportunity
for in-depth discussions on strategy for
growth, operating model and data and
technology approach. Simplification of the
Group structure and improving integrated
service offering is ongoing.
The Board continued its focus on risk
management and reviewing the effectiveness
of the Company’s approach to risk management
and the internal control framework
BOARD MODUS OPERANDI
Ensuring the Board continues to evolve how
it functions, its skills mix and how it engages
with stakeholders
Board refreshment continued in 2020. Read
more about our new Directors on page 109
and how they engaged with shareholders and
other key stakeholders on pages 117-119
Key areas of focus in 2021 will be:
– Sustainability and ESG: build further on
WPP’s sustainability strategy and
commitment to ESG matters, with ongoing
dialogue with stakeholders to gather
valuable insights into sustainability risks
and opportunities, for our Company.
– Strategy: maintain momentum on the
execution of the strategy, monitor
effectiveness and keep stakeholders
informed of progress.
– Risk Framework: continue to focus on the
effectiveness of the Company’s approach
to risk management and system of internal
controls, as well as monitoring future risks
and challenges across businesses
and markets.
– Consider organisation of meetings post
Covid-19 to create opportunities again and
time for discussion and renewed exposure
to senior management and key stakeholders.
REVIEW OF CHAIRMAN’S
PERFORMANCE
The Senior Independent Director met with the
Non-Executive Directors during the year to
appraise the performance of the Chairman.
2021 EVALUATION
In accordance with the Code requirements,
it is expected that the 2021 evaluation will
be externally facilitated as part of the
three-year cycle.
WPP ANNUAL REPORT 2020
125
CORPORATE GOVERNANCE
NOMINATION AND
GOVERNANCE COMMITTEE REPORT
Committee members
– Roberto Quarta (Chair)
– Nicole Seligman
– Sally Susman
– Tom Ilube (appointed 1 January 2021)
The Company Secretary is Secretary to the
Committee and attends all meetings.
Key responsibilities:
– Reviewing the composition of the Board
including the balance of skills, knowledge,
experience and diversity
– In conjunction with the Board,
considering succession planning for
Non-Executive Directors, Executive
Directors and senior management
– Making recommendations to the Board
for the appointment or reappointment
of Directors
– Considering other significant commitments
of prospective directors and reviewing the
external commitments of Directors
– Monitoring external governance
developments and bringing any issues to
the attention of the Board
Attendance at Committee meetings during
the year can be found on page 123.
NON-EXECUTIVE DIRECTOR
APPOINTMENT PROCESS
STEP 1
Engage with search consultancy
and provide them with a search
specification
STEP 2
Shortlisting candidates
by Committee
STEP 3
Interview process with
Committee members and
Chief Executive Officer
STEP 4
Recommendation to the Board
on the chosen candidate
STEP 5
Appointment terms drafted
and agreed with the
selected candidate
126
WPP ANNUAL REPORT 2020
BOARD AND COMMITTEE CHANGES
As noted in last year’s report, three of our
long-standing Non-Executive Directors, Sol
Trujillo, Sir John Hood and Daniela Riccardi
stepped down from the Board prior to the
2020 AGM.
During the year, the Committee took the
opportunity to review the composition and
membership of the Board Committees.
Jasmine Whitbread succeeded Sir John Hood
as Chair of the Compensation Committee
following the AGM and effective 1 January
2021; Angela Ahrendts joined the
Sustainability Committee; Sandrine Dufour
joined the Compensation Committee; and
Tom Ilube joined the Audit Committee and
the Nomination and Governance Committee.
Tom Ilube also joined the Compensation
Committee in February 2021, together with
Cindy Rose.
SUCCESSION PLANNING
Succession planning continued to be a key
focus and the Committee took an approach
looking out over several years. The Committee
reviewed the composition of the Board and
its Committees to ensure strong alignment
with the strategic priorities. In 2020, the
Committee identified the need to enhance
the Board with Non-Executive Directors
with a strong degree of financial literacy,
experience of working in technology
industries, and knowledge and experience
of the China market. These attributes were
underlined by the commitment to continue
to build greater diversity on the Board.
The Board also considered emergency
succession planning in response to the
Covid-19 pandemic.
Russell Reynolds, who are independent of
the Company and all the Directors, assisted
the Committee during the search process for
new Non-Executive Directors. The
Committee considered a list of potential
candidates for each role and took into
account the balance of skills, knowledge,
independence, diversity and experience of
the Board, together with an assessment of the
time commitment expected. The preferred
candidates met with the Chairman and other
members of the Committee, following which
the Committee recommended to the Board
the appointments of Angela Ahrendts,
Tom Ilube and Dr. Zhang.
ROBERTO QUARTA
CHAIR OF THE NOMINATION
AND GOVERNANCE COMMITTEE
DEAR SHAREHOLDER
As Chair of the Nomination and Governance
Committee, I am pleased to present the
Committee’s 2020 report.
Board composition and succession to support
the next phase of the Company’s strategy
continued to be a key area of focus this year. In
addition to John Rogers and Sandrine Dufour
joining the Board in February (John Rogers
took over as CFO in May 2020), we were
delighted to welcome two new Directors in
2020 – Angela Ahrendts and Tom Ilube, who
joined as independent Non-Executive Directors
in June and October respectively. The Board
was further enhanced with the appointment
of Dr. Zhang who joined as a Non-Executive
Director in January 2021. These appointments
support the Committee’s priority to diversify
the Board and bring different perspectives
to discussions, reflective of our stakeholders
and the markets in which we operate.
The Committee also considered the findings
of the 2020 Board evaluation and I am
pleased that the review concluded that the
Board is operating effectively.
Lastly, the Committee continued to review
action taken to comply with the Code and
other legal, governance and regulatory
obligations during the year.
I should like to thank the other Committee
members for their dedication throughout the
year and the sections that follow provide
more detail on the work undertaken by the
Committee during the year.
Roberto Quarta
Chair of the Nomination
and Governance Committee
29 April 2021
NOMINATION AND GOVERNANCE COMMITTEE REPORT
CORPORATE GOVERNANCE
The Chief Executive Officer and the Chief
People Officer provided frequent People
updates to the Board, including results on
the various employee engagement and
belonging surveys undertaken through the
year. For more information on actions taken
in response to employee feedback, please
see page 46.
In addition, templates and guidance for
Board and Committee presentations were
altered in order to support the Board and
Committees’ consideration of employee
and other stakeholder views when
making decisions.
FOCUS FOR 2021
During the course of the next year, the
Committee will continue to monitor its
compliance with the Code and, in
conjunction with the Board, review
succession plans in order to further
enhance the cultural diversity and skills
balance across the business.
TERMS OF REFERENCE
The Committee’s terms of reference are
adopted by the Board and reviewed annually
by the Committee, most recently on
9 December 2020. A copy of the Committee’s
terms of reference is available on the
Company’s website at wpp.com/investors/
corporate-governance
Angela Ahrendts, Tom Ilube and Dr Zhang
will stand for election at the AGM. All other
Directors will stand for re-election.
The Committee supported the Board on
succession plans for management and
Executive Committee members to ensure
a diverse pipeline of potential successors
to support the transformation plan.
ASSESSMENT OF INDEPENDENCE OF
NON-EXECUTIVE DIRECTORS
The Committee assessed the independence
of all the Non-Executive Directors pursuant
to the Code and concluded that all are
considered independent and continue to
make independent contributions and
effectively challenge management. We were
satisfied with the contributions and time
commitment of all the Non-Executive
Directors during the year.
Effective 31 March 2021, Jasmine Whitbread
was appointed as a director and Chair of
Travis Perkins plc, of which John Rogers is
also a Non-Executive Director. As Jasmine
consistently demonstrates independence
of thought and challenge, the Board has
determined this cross-directorship does not
affect its assessment of her independence.
CONFLICTS OF INTEREST
The Committee and the Board are satisfied
that the external commitments of the
Non-Executive Directors and of me, your
Chairman, do not conflict with our duties and
commitments as Directors of the Company,
and that each Non-Executive Director is
able to dedicate sufficient time to the
Company’s affairs.
Directors have a duty to avoid a situation
in which they have, or may have a direct
or indirect interest that conflicts, or might
conflict with the interests of the Company.
This duty is in addition to the existing duty
owed to the Company to disclose to the
Board any interest in a transaction or
arrangement under consideration by the
Company. Our Directors must: report any
changes to their commitments to the Board;
immediately notify the Company of actual
or potential conflicts or a change in
circumstances relating to an existing
authorisation; and complete an annual
conflicts questionnaire. Any conflicts or
potential conflicts identified are considered
and, as appropriate, authorised by the Board
in accordance with the Company’s Articles
of Association. A register of authorised
conflicts is also reviewed periodically.
During the financial year, no actual or
potential conflicts were identified.
BOARD EVALUATION
The Committee considered the findings of
the 2020 Board evaluation. Further details
on the process and output is set out on
page 125.
The performance of the Committee was also
considered as part of the evaluation process,
which concluded that the Committee is
operating effectively and has successfully
managed the changes to the Board and its
Committees to ensure greater diversity and
an enhanced mix of skills and expertise.
GOVERNANCE
The Committee has responsibility for
overseeing the effective governance of the
Board and its Committees and for making
recommendations to the Board to ensure
arrangements are consistent with emerging
best practice. During the year, the Committee
undertook a review of its terms of reference
and recommended various changes to the
Board for approval.
The Committee also reviewed the
composition and make-up of the Board
Committees as detailed above.
WORKFORCE ENGAGEMENT
In order to apply the requirements of the
UK Corporate Governance Code that relate
to workforce engagement, WPP has
established a Workforce Advisory Panel
(WAP) and appointed Cindy Rose as the
designated Non-Executive Director. Cindy
attends the WAP meetings and presents
updates on issues discussed at Board
meetings throughout the year and shares
feedback from the Board with the WAP on
matters considered. Issues raised at the WAP
which were then discussed by the Board
included employee wellbeing and burnout
due to Covid-19, diversity and inclusion and
future working environments post Covid-19.
WPP ANNUAL REPORT 2020
127
CORPORATE GOVERNANCE
AUDIT COMMITTEE
REPORT
Committee members
– Jacques Aigrain (Chair)
– Sandrine Dufour
(appointed 3 February 2020)
– Tarek Farahat
– Cindy Rose
– Tom Ilube (appointed 1 January 2021)
The Company Secretary is Secretary to the
Committee and attends all meetings.
The entire Board is invited to attend the
Committee meetings and typically the
Chairman of the Board and the Senior
Independent Director attend.
Other regular attendees include the Chief
Executive Officer, the Chief Financial Officer,
the Chief Operating Officer, the Group Chief
Counsel, the Group Chief Accountant, the
Global Director Risk and Controls, General
Counsel Corporate Risk, the Director of
Internal Audit, and the external auditor.
The Board has designated the Committee Chair
as the Committee’s financial expert as defined by
the Sarbanes-Oxley Act 2002 and, together with
Sandrine Dufour and Tarek Farahat, as having
recent and relevant financial experience for the
purposes of the 2018 UK Corporate Governance
Code. Both are determined to be independent
within the meaning of the Securities Exchange
Act 1934, as amended. The Committee has, as a
whole, competence relevant to the sectors in
which the Company operates.
Key responsibilities
– Monitoring the integrity of financial
information provided to shareholders,
including the review of significant
financial reporting judgements
– Reviewing the integrity, adequacy and
effectiveness of the Group’s internal
financial controls and the internal control
and risk management systems, including
the risk management framework and
related compliance activities
– Monitoring and reviewing the Group’s
internal audit function
– Reviewing the selection and appointment
of the external auditor
– Reviewing the effectiveness of the external
audit process and reviewing and monitoring
the independence and objectivity of the
external auditor
Attendance at Committee meetings during
the year can be found on page 123.
128
WPP ANNUAL REPORT 2020
– ongoing monitoring of the business
integrity programme, including oversight
of whistleblower reports;
– assessing the effectiveness of WPP’s IT
Covid-19 response, including IT and cyber
security; and
– continuing to engage with the Internal
Audit plan and monitoring progress.
JACQUES AIGRAIN
CHAIR OF THE AUDIT COMMITTEE
Other reviews undertaken in 2020 by the
Committee included:
DEAR SHAREHOLDER
As Chair of the Audit Committee, I am
pleased to present the Committee’s 2020
report. In the following pages of this report,
we have set out an overview of the activities
undertaken or overseen by the Committee
during the year.
In 2020, the Committee continued to fulfil
its important oversight role, monitoring the
integrity of the Group’s financial reporting
and the effectiveness of internal control and
risk management systems on which it has
reported to the Board. The delivery of the
Committee’s responsibilities during a period
of considerable uncertainty arising from the
Covid-19 pandemic has been more important
than ever to help demonstrate the
effectiveness of the Company’s strategy
to its stakeholders.
Key areas of focus for the Committee in
2020 included:
– monitoring the impact of Covid-19 on
the financial resilience of the business,
including carrying out additional reviews
on goodwill impairment and providing a
recommendation to the Board to cancel
the 2019 final dividend and suspend the
share buyback programme;
– monitoring the role of the newly
established Risk and Controls Group and
its objectives to strengthen the Internal
Financial Controls Framework, particularly
focused on Sarbanes-Oxley Act
compliance, and developing controls
relating to risks identified in the Risk
Appetite Framework;
– in-depth reviews of the Group’s internal
controls over financial reporting,
particularly in relation to the material
weaknesses identified, which are detailed
on page 130.
– Group tax strategy, performance and
drivers of the Group’s effective tax rate;
– reports on any actual or potential material
litigation; and
– Group Treasury performance and risk
management.
The annual Board effectiveness evaluation
assessed the performance of the Committee
and I am pleased that this concluded that
we operate effectively and the Board takes
reassurance from the quality of our work.
The Board is satisfied that the Committee
members bring a wide range and depth
of financial and commercial experience
and all members have recent and relevant
financial experience.
The composition of the Committee has been
further strengthened by the appointment of
Tom Ilube who became a member on
1 January 2021.
John Rogers joined as Chief Financial Officer
during the year and has kept the Committee
updated on initiatives he is leading on,
including finance transformation and
simplification.
And finally, I would like to thank the other
members of the Committee, together with
management, for their support during the
year and I look forward to continuing our
work in 2021. The sections that follow
provide a more detailed explanation of the
work of the Committee undertaken during
the year.
Jacques Aigrain
Chair of the Audit Committee
29 April 2021
AUDIT COMMITTEE REPORT
CORPORATE GOVERNANCE
The Committee therefore recommended
to the Board (which the Board subsequently
approved) that, taken as a whole, the 2020
Annual Report and Accounts is fair,
balanced and understandable and provides
the necessary information for shareholders
to assess the Company’s position and
performance, business model and strategy.
INTERNAL AUDIT
The Internal Audit team provides
independent assurance over the Company’s
risk management and internal controls
processes via internal audits and the testing
programme for the Sarbanes-Oxley Act.
The Internal Audit team has unrestricted
access to all Group documentation, premises,
functions and employees to enable it to
perform its work. The Committee Chair met
regularly with the Director of Internal Audit
during the year without executive
management present.
The annual internal audit plan, including the
list of units for internal audit review, was
approved by the Committee and progress
against the plan was monitored throughout
the year. There was particular focus on how
the plan would be completed due to site and
system restrictions as a result of Covid-19.
This was largely addressed through reviews
being completed remotely. Significant issues
identified within internal audit reports were
discussed in detail by the Committee along
with the remediation plans to resolve them.
In March 2021, the Committee approved
the appointment of Phil Gerrard as Director
of Internal Audit, in succession to Paul
Stanley who will retire later in the year.
The Committee also considered 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.
FINANCIAL REPORTING
The Committee is responsible for reviewing
the quarterly, half yearly and annual financial
results, including the Annual Report, with
management, focusing on the integrity of
the financial reporting process, compliance
with relevant legal and financial reporting
standards and application of accounting
policies and judgements.
During the year, the Committee considered
management’s application of key accounting
policies, compliance with disclosure
requirements and information presented on
significant matters of judgement to ensure
the adequacy, clarity and completeness of
half yearly and annual financial results
announcements. The Committee undertook
a detailed review before recommending to
the Board that the Company continues to
adopt the going concern basis in preparing
the annual financial statements.
The Committee also reviewed various
materials to support the statements in the
Annual Report on risk management and
internal control and the assessment of the
Group’s long-term viability – see page 94
for more details.
FAIR, BALANCED AND
UNDERSTANDABLE
To support the Board’s confirmation that
the Annual Report and Accounts, taken as a
whole, is considered to be fair, balanced and
understandable, and provide the information
necessary for shareholders to assess the
Group’s position, performance, business
model and strategy, the Committee oversaw
the process by which the Annual Report and
Accounts were prepared.
The Committee received a summary of
the approach taken by management in the
preparation of the Annual Report and
Accounts, and considered in particular the
accuracy, integrity and consistency of the
messages conveyed in the Annual Report;
the appropriateness of the level of detail in
the narrative reporting; and that a balance
had been sought between describing
potential challenges and opportunities.
WPP ANNUAL REPORT 2020
129
CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT
RISK MANAGEMENT AND INTERNAL
CONTROL
The Board has overall responsibility for
setting the Company’s risk appetite and for
ensuring there is effective risk management.
The Committee supports the Board in the
management of risk and, in 2020, was
responsible for monitoring and reviewing
the effectiveness of the Company’s
approach to risk management and the
internal control framework.
Under the overall supervision of the
Committee, the WPP Risk Committee, an
executive committee supported by Risk
Committees in each network, assesses
emerging and principal risks and oversees
and manages day-to-day risk in the business.
The General Counsel, Corporate Risk
provides regular updates to the Committee
on risk matters including emerging risks,
adherence to the Company’s business
integrity programme (including mitigating
and remediation actions) and the monitoring
and evolution of the Company’s four risk
modules: governance, culture, appetite
and management.
An overview of how our risks are assessed
and managed and how these were reviewed
to assess the Group’s viability can be found
on pages 90-94 together with an assessment
of the principal risks and uncertainties facing
the Group on pages 95-101.
In fulfilling its responsibilities, the Committee
received reports throughout 2020 to enable
evaluation of the control environment and
risk management framework.
INTERNAL CONTROLS OVER
FINANCIAL REPORTING
The Committee carried out in-depth reviews
of the Group’s internal controls over financial
reporting, with a focus on monitoring,
remediation of material weaknesses and
compliance with Section 404 of the
Sarbanes-Oxley Act. The following
paragraphs outline the approach taken by
management in relation to the remediation
of material weaknesses, which the Committee
oversaw and continues to monitor.
In response to the material weakness
identified in 2019 relating to the control
over the discount rate methodology used
in impairment testing, management has
enhanced its risk assessment of the
impairment assessment process and has
changed the approach to determining
inputs with respect to the discount rates
used in impairment assessments and has
established a more comprehensive review
process over inputs and the overall discount
rate methodology. Management has also
engaged an independent valuation specialist
to assist as an integral part of the input
determination process on an ongoing
basis and implemented additional
validation controls.
In respect of the years ended 31 December
2019, 2018 and 2017, and for each of the interim
half year periods ended 30 June 2020 and
2019, material weaknesses were identified
relating to the application of IAS 32 and IAS
39, which resulted in material misstatements.
The Company filed a Form 20-F/A and Form
6-K/A with the SEC on 12 February 2021
restating the relevant Financial Statements
to correct the identified misstatements. The
Board determined these errors resulted from
material weaknesses in its internal control
over financial reporting as at 31 December
2019 and the Group concluded that its internal
control over financial reporting was not
effective. Management is committed to
remediating the identified material
weaknesses in a timely manner, with
appropriate oversight from the Audit
Committee. As part of the remediation,
management is undertaking a series of steps
to complete a comprehensive review and
remediation of our controls and procedures
and has engaged outside advisors to assist
with this. In addition to the comprehensive
retrospective reviews of the Company’s
controls, management is implementing
enhanced periodic controls including to
identify and evaluate amended or clarified
accounting standards, or new guidance
with respect to accounting standards, as
well as controls surrounding the verification
of critical accounting judgments, including
those most likely to be impacted by
amendments to or clarifications of
accounting standards we have adopted.
Management is also re-reviewing our
hedging relationships and the associated
documentation and analysing the application
130
WPP ANNUAL REPORT 2020
of hedge accounting to all other financial
instruments to which such accounting
treatment is being applied. Management
has updated the design of our controls to
verify the nature and existence of
contemporaneous hedge documentation
in accordance with IAS 39. Each material
weakness will not be considered fully
remediated until all aspects of the applicable
remediation plan for that material weakness
have been implemented and such controls
operate for a sufficient period of time to
allow management to conclude, through
testing, that these controls are operating
effectively. The Committee continues to
monitor the progress of the remediation.
BUSINESS INTEGRITY
During the year, the Committee reviewed
the adherence to, and evolution of, the
business integrity programme. The Group
has established procedures by which all
employees may, in confidence (and, if they
wish, anonymously) report any concerns and
more information on this can be found on
page 92. The Committee received regular
updates on the Company’s systems and
controls for ethical behaviour, which
included matters reported on the Group’s
Right to Speak helpline and investigations
and actions undertaken in response. The
Committee received regular reports on the
total number and nature of reports from
whistleblowers and investigations by region
and by network both for substantiated and
unsubstantiated cases. During the year the
Committee was satisfied that the Right to
Speak helpline arrangements are effective and
facilitate the proportionate and independent
investigation of reported matters and allow
appropriate follow-up action.
TERMS OF REFERENCE
The Committee’s terms of reference are
adopted by the Board and reviewed annually
by the Committee, most recently on
4 February 2021. A copy of the Committee’s
terms of reference is available on the
Company’s website at wpp.com/investors/
corporate-governance
AUDIT COMMITTEE REPORT
CORPORATE GOVERNANCE
EXTERNAL AUDITOR
The Committee has primary responsibility for
overseeing the relationship with the external
auditor, including assessing its performance,
effectiveness and independence annually prior
to making a recommendation to the Board in
respect of its reappointment or removal.
Deloitte was appointed external auditor of
the Company in 2002 and, as defined by the
transitional arrangements for competitive
tender, they are not permitted to be
reappointed as the Company’s auditor after
the 2023 fiscal year-end. An audit tender
process has been initiated with a view to
the selected firm auditing the financial
statements for the financial year ending
31 December 2024. The tender process will
be overseen by the Committee and is
expected to conclude later this year.
The Company has complied with the
Competition and Markets Authority’s Statutory
Audit Services Order 2014 for the financial year
under review in respect to audit tendering
and the provision of non-audit services.
EFFECTIVENESS AND INDEPENDENCE
OF THE EXTERNAL AUDITOR
In 2020, the Committee evaluated the
effectiveness of the external audit process
through its ongoing review of the external
audit planning process and discussions with
key members of the Group’s finance team.
The Committee also considered:
– a report from Deloitte confirming it
maintains appropriate internal safeguards
in line with applicable professional
standards to remain independent, and
mitigation actions to safeguard Deloitte’s
independence such as the operation of the
non-audit services policy and the tenure
of the lead audit partner (Robert Topley
was appointed in 2019); and
– the Financial Reporting Council’s (FRC)
Audit Quality Review Inspection Report
on the audit of the Company’s Financial
Statements for the year ended
31 December 2019. As the report was
close to completion at the time the
material misstatements (as detailed on
page 130) were identified, the FRC has
advised it will review separately Deloitte’s
audit of the areas giving rise to the material
misstatements identified and therefore did
not provide an assessment of the overall
quality of Deloitte’s audit work. The report
from the FRC highlighted three areas which
the FRC considered to be good practice
and contained no key findings. One “other
finding” was included in the report which
the Audit Committee is satisfied did not
affect the effectiveness of the external audit.
AUDIT/NON-AUDIT SERVICES
£m
2020
2019
Audit fees
Non audit-related fees
30.5
42.7
Deloitte attended all Committee meetings
in 2020 and met at least once without
executive management present.
Overall therefore, the Committee concluded
that:
– it continues to be satisfied with the
performance of the external auditor and
with the policies and procedures in place
to maintain its objectivity and
independence; and
– Deloitte possesses the skills and
experience required to fulfil its duties,
there was constructive challenge where
necessary to ensure balanced reporting
and that the audit for the year ended
31 December 2020 was effective.
APPOINTMENT OF EXTERNAL AUDITOR
AT GENERAL MEETING
The Committee has recommended to the
Board that Deloitte should be reappointed
as auditor. Resolutions will be put to the
2021 Annual General Meeting proposing the
re-appointment of Deloitte and to authorise
the Audit Committee to determine the
auditor’s remuneration.
NON-AUDIT SERVICES
To preserve objectivity and independence,
Deloitte is not asked to provide other
services unless it is in the best interests
of the Company, in accordance with the
Non-Audit Services Policy that sets out the
circumstances and financial limits within
which Deloitte is permitted to provide
certain non-audit services.
All fees are summarised periodically for the
Committee to assess the aggregate value of
non-audit fees against audit fees. During the
year, Deloitte received £29.3 million in fees
for work relating to the audit services it
provides the Group. Non-audit related work
undertaken by Deloitte amounted to fees of
£1,243,000 this year, which amounted to
4.2% of the total audit fees paid.
WPP ANNUAL REPORT 2020
131
CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT
FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL JUDGEMENTS
Key accounting judgements made by management were reported to and examined by the Committee and discussed with management
and Deloitte. The Committee considered the following significant financial reporting judgements in relation to the financial statements:
AREA OF FOCUS
ACTIONS TAKEN/CONCLUSION
Headline profit
Judgements relating to headline profit.
The Committee considered the judgement applied by management in calculating headline profit, in order
to present an alternative picture of performance by excluding significant, non-recurring or volatile items
otherwise included in the reportable figures.
Impact of Covid-19
The Committee considered the impact of Covid-19 on accounting judgements relating to goodwill, debtor
and other financial asset provisions under IFRS 9, leases and going concern.
Goodwill impairments
Judgements in relation to goodwill
impairment testing.
Leases
The Committee challenged the appropriateness of the assumptions used by management in the goodwill
impairment assessment model, with a particular focus on the discount rate and growth assumptions.
The Committee reviewed the judgements made by management in the application of IFRS 16 Leases and
was satisfied that these were appropriate.
Liabilities in respect of put options and earnouts
The accuracy of the calculation of the fair value of
liabilities in respect of put options and earnouts.
The Committee considered management’s calculations of the fair value of liabilities in respect of put
option agreements and payments due to vendors (earnout agreements), including the forecasts, growth
rates and discount rates used in these calculations. The Committee was satisfied that liabilities for
potential future earnout payments have been accounted for appropriately.
Investments
The valuations of non-controlled investments.
The Committee examined management’s valuations, based on forecasts, recent third-party investment,
external transactions and/or other available information such as industry valuation multiples. The
Committee considered Deloitte’s testing of the valuations and agreed that the valuations were
appropriate based on the information available to the Group.
Debtors and other financial assets
Expected credit losses under IFRS 9 Financial
Instruments.
The Committee reviewed the judgements made by management in their assessment of expected credit
losses of financial assets under IFRS 9. The Committee concluded that the level of provisions was
appropriate.
Remuneration
Accounting for the judgemental elements
of remuneration.
The Committee reviewed the assumptions applied by management in relation to judgemental elements
of remuneration, including pensions, bonus accrual, severances and share-based payments and agreed
that these are reasonable.
Taxation
The judgements made in respect of tax.
The Group Tax Director presented to the Committee in December 2020. The Committee considered
management’s assumptions, in particular in relation to the level of central tax provisions, and believes that
the level of central tax provisions is reasonable.
Going concern
The going concern assessment and
viability statement.
The Committee reviewed the scenarios modelled by management given the uncertainty caused by
Covid-19 and the cost mitigation actions available to management. The Committee assessed
management’s view that the likelihood of declines of over 30% of revenue less pass-through costs
compared to 2020 was remote. The Committee has considered and concurs with management’s going
concern, viability and forecasting assumptions, as set out on page 94.
Restructuring and transformation costs
Recognition of restructuring and
transformation costs.
The Committee reviewed management’s key accounting judgements and procedures relating to
restructuring and transformation costs, including associated property impairment charges. The Committee
was satisfied with the quantum of costs recognised in 2020 and the presentation of such costs in the
Financial Statements.
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WPP ANNUAL REPORT 2020
SUSTAINABILITY
COMMITTEE REPORT
CORPORATE GOVERNANCE
Committee members in 2020
– Sally Susman (Co-Chair)
– Keith Weed (Co-Chair)
– Angela Ahrendts (appointed
1 January 2021)
– Jasmine Whitbread
Regular attendees include the Chief
Executive Officer, the Chief Financial
Officer, the Chief People Officer, the
Director of Sustainability, the Global
Corporate Affairs Director, the Senior
Independent Director and the Group
Chief Counsel.
The Company Secretary is Secretary to
the Committee and attends all meetings.
Key responsibilities
– Understanding the sustainability
risks and opportunities for
the Company
– Assisting the Board in its oversight
of corporate responsibility,
sustainability and reputation
matters taking into account the
Company’s purpose, strategy
and culture
– Assessing the Company’s current
sustainability footprint, reviewing
sustainability targets and
commitments and materiality
Attendance at Committee meetings
during the year can be found on
page 123.
SALLY SUSMAN
CO-CHAIR OF THE
SUSTAINABILITY COMMITTEE
KEITH WEED CBE
CO-CHAIR OF THE
SUSTAINABILITY COMMITTEE
CLIMATE CHANGE
Recognising the growing urgency of the
climate crisis, and as part of the Company’s
sustainability strategy review, WPP revised
its purpose to include the word “planet”.
The Committee had regular in-depth
progress reviews as the Company built an
inventory of its value chain emissions
(scope 1, 2 and 3). The sustainability section
on pages 68-69 sets out the Company’s new
commitment to reach net zero emissions
across its value chain by 2030, an ambition
which will be underpinned by science-based
targets in 2021.
LAUNCH OF SUSTAINABILITY
STRATEGY
In December, our attention turned to the
launch of WPP’s sustainability strategy.
The Committee will continue to monitor
sustainability KPIs to measure delivery
against the Company’s strategy and targets,
and supporting management’s engagement
strategy on sustainability.
We would like to thank the members of the
Committee and the management team for
their continued commitment throughout the
year and look forward to continuing our work
in 2021.
Keith Weed
Sally Susman
Co-Chairs of the
Sustainability Committee
29 April 2021
DEAR SHAREHOLDER
As the Co-Chairs of the Sustainability
Committee, we are pleased to present the
Committee’s 2020 report.
The challenges created by the Covid-19
pandemic, racial unrest, political division,
and climate-related disasters around the
globe have accelerated focus on
environmental, social and governance (ESG)
matters and sustainability, with significant
risks and opportunities for our business and
our clients.
The Committee was formed in December
2019 to give increased focus on sustainability
for the Board and the Company, to strive to
meet the expectations of our stakeholders as
well as to ensure we are managing our risks
and taking advantage of the opportunities.
In its inaugural year, the Committee first
identified what was material in forming WPP’s
sustainability strategy, with an in-depth
review of sustainability workstreams in
January. The Committee also reviewed
WPP’s sustainability assessment.
SUSTAINABILITY FRAMEWORK
The focus for the Board and the Group in
2020 has been the development of a new
sustainability strategy for WPP, set out on
pages 68-69. In July, the Sustainability
Committee discussed a sustainability
framework with workstreams focused on
environmental reset, social impact and
governance. The framework was designed
to deliver a new sustainability objective and
targets for the Company. The Committee
reviewed progress against these workstreams
in December. Critical to this programme of
work has been a sustainability audit across
21 markets to establish a “baseline” of ESG
performance across the Company.
WPP ANNUAL REPORT 2020
133
CORPORATE GOVERNANCE
COMPENSATION COMMITTEE REPORT
Committee members
– Jasmine Whitbread (Chair)
– Jacques Aigrain
– Sandrine Dufour (appointed on 1 January 2021)
– Tom Ilube (appointed on 5 February 2021)
– Roberto Quarta
– Cindy Rose (appointed on 5 February 2021)
– Nicole Seligman
Attendees
Other attendees at the Committee
meetings were:
– Chief Executive Officer
– Chief Financial Officer
– Chief People Officer
– Global Reward and Performance Director
– Company Secretary
– Committee advisor (Willis Towers Watson)
The Chief Executive Officer and Chief Financial
Officer are not present when matters relating
to their own compensation or contracts are
discussed and decided.
Key responsibilities
– Setting the Compensation Policy and the
terms and conditions for the Chairman of
the Board, Executive Committee and
Company Secretary
– Designing and monitoring incentive
arrangements including setting targets
and assessing performance
– Maintaining an active dialogue with
shareholders and ensuring WPP practice
aligns with corporate governance standards
“ THE IMPACT OF COVID-19
ON OUR BUSINESS, OUR
PEOPLE AND ON THE WIDER
STAKEHOLDER GROUP HAS
BEEN A KEY CONSIDERATION
FOR THE COMPENSATION
DECISIONS MADE DURING
THE YEAR.”
Jasmine Whitbread
Chair of the
Compensation Committee
To learn more see
wpp.com/about/
corporate-governance
134
WPP ANNUAL REPORT 2020
The wellbeing of our people has been
front and centre throughout this year. The
vast majority of our workforce has been
successfully working from home throughout
the pandemic, continuing to deliver for
clients and for our business. This was
underpinned by increased investment in
our wellbeing programme to ensure our
people have the support they need, and a
step up in internal communications to keep
everyone connected.
Early in the year, to address uncertainty at
the beginning of the pandemic, management
set a cost-reduction target and implemented
a series of measures to protect the business
and our people. This included a reduction to
travel and property costs, suspension (and
subsequent cancellation) of the 2019 final
dividend, a hiring freeze, the removal of
salary increase budgets for 2020 as well
as a voluntary 20% salary reduction for the
Executive Directors and other senior
management for a period of three months,
extended for a fourth month for the
Executive Directors. A corresponding fee
reduction was implemented for the Chairman
of the Board and Non-Executive Directors.
Management did not consider it
appropriate to make use of the UK
Government furlough scheme and took
limited advantage of government support
measures in other jurisdictions.
In making decisions this year, the
Compensation Committee considered a
wide range of factors. We took into account
the negative impact that Covid-19 had on the
financial performance of the business, but
also the resilience of the Company and how
well positioned WPP has been to respond
when the pandemic drove greater digital
technology enablement. We took account
of wider stakeholder groups’ experience, in
particular the cancellation of the 2019 final
dividend and the impact on shareholders.
We have an exceptional leadership team
in place, which has delivered performance
exceeding expectations in an incredibly
challenging environment. We recognise the
role that compensation plays in the global
competition for talent and in the retention
and incentivisation of the leadership team
to deliver a demanding plan for growth and
value creation.
JASMINE WHITBREAD
Chair of the
Compensation Committee
DEAR SHAREHOLDER
On behalf of the WPP Board, I am pleased
to present the Compensation Committee
report for the financial year ended
31 December 2020. In the report, I include
my introductory letter and At a Glance
summary of compensation, an overview
of the Directors’ Compensation Policy
approved by shareholders at the 2020 AGM
and the Annual Report on Compensation
setting out the implementation of the Policy
in 2020. The Report also sets out the
proposed implementation for 2021.
COVID-19 CONTEXT
This has been an exceptionally difficult year
with the Covid-19 pandemic presenting
unprecedented challenges for all our
stakeholders.
Revenues were significantly impacted during
the year, particularly in the second quarter,
as clients reduced their spending. Significant
cost savings offset the majority of revenue
decline and headline operating profit was
down 1.5 margin points on the prior year.
The Committee has been impressed by
the resilience shown by our people who
continued to service clients with agility and
collaboration, helping them shape their
response to the pandemic and earning
improved client satisfaction scores across
the year, as well as achieving material client
wins for WPP against the backdrop of tough
competition. The ongoing simplification of
our business, integration of our capabilities,
and investment in creativity and technology
meant we were well placed to deliver a
resilient business performance.
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
COMPENSATION IN 2020
STIP 2020
Due to the impact of Covid-19 on the
financial performance of WPP, the financial
component will not pay out. In an exceptional
year, when leadership not only delivered a
resilient performance with an agile response
to the crisis, but also remained focused on
progressing the transformation agenda,
the Committee considered whether the
non-financial measures should still be
assessed. However, taking the wider
stakeholder group into account, the decision
was made not to make an award under the
short-term incentive plan (STIP) for 2020.
A reduced STIP pool has been made
available for the wider workforce to allow
leaders to recognise exceptional
contributions over the year.
LTIP 2016-2020
The 2016 Executive Performance Share
Plan (EPSP) award completed its five-year
performance period on 31 December 2020.
This is a performance share plan that
measures performance against three
metrics: relative total shareholder return
(TSR), return on equity (ROE) and earnings
per share (EPS). The Committee has used
its discretion to adjust the ROE to ensure
management does not benefit from goodwill
impairments made during the year. Following
this adjustment, ROE performance fell below
threshold levels, therefore no payout in
respect of ROE was earned. With respect to
the remaining performance measures, EPS
performance was below threshold and the
TSR component of the award achieved a
threshold level of performance. This resulted
in an overall total vesting of 5%.
IMPLEMENTING THE NEW DIRECTORS’
COMPENSATION POLICY
We were pleased to receive strong
shareholder support for our updated
Directors’ Compensation Policy at the 2020
AGM. This policy included a restructured
Executive Performance Share Plan (EPSP)
with reduced normal grant values and metrics
more closely aligned to WPP strategy, using
return on invested capital (ROIC) and adjusted
free cash flow (AFCF) together with relative
TSR to measure performance.
Due to uncertainty around the impact of
Covid-19, at the suggestion of some of our
shareholders, we took the unusual step of
delaying target setting and therefore not
setting out the financial targets for ROIC
and AFCF in the 2019 Compensation
Committee Report.
Paul was succeeded by John Rogers,
who joined on 27 January 2020 and was
appointed to the Board on 3 February 2020.
John was appointed on a competitive salary
package and received buy-out awards in line
with the approved Directors’ Compensation
Policy. Detail is disclosed in this report.
LOOKING FORWARD TO 2021
2020 was a year that highlighted the
inequalities in our society, particularly those
faced by Black citizens throughout the world.
We have made a series of commitments to
tackle racism and invest in Black talent,
alongside goals to improve gender diversity
at senior leadership levels. Progress in these
areas requires accountability throughout the
business, but particularly at a leadership
level. We have, therefore, included diversity,
equity and inclusion (DE&I) goals in our
incentive plans for senior executives from
2021 onwards.
CONCLUSION
I would like to thank the leadership team
for making an exceptional contribution in
an extraordinary year, while forgoing
compensation and benefits at the same time.
Furthermore, I would like to express my
thanks to Committee members who have
given generously of their time in what has
been a particularly demanding year, and
also to the key investors for their insight
and contributions during our consultations.
I believe that the decisions taken this year
have been balanced, fair and in the
long-term interests of all stakeholders.
Jasmine Whitbread
Chair of the
Compensation Committee
29 April 2021
Instead, we waited until we had greater
clarity in relation to the financial outlook and
consulted our key shareholders in relation
to the existing landscape, the definitions of
the measures, the targets and the value of
2020 awards.
During the consultation, it was
acknowledged that the impact of the
pandemic meant in-flight LTIPs and STIP
have a limited retention or incentivisation
effect and going forward this needed to
be addressed. It was further recognised in
respect of the proposed 2020 award that,
to achieve vesting at the upper end of the
scale, management would need to deliver
strong performance against stretching
targets creating long-term value for
shareholders. The Committee carefully
considered the views expressed, including
the suggestion to include full commentary
on the context in this report. The awards
were subsequently made at the new reduced
Policy normal levels (350% for the Chief
Executive Officer and 300% for the Chief
Financial Officer).
The Committee is mindful of recent investor
guidance regarding windfall gains. The
Committee has the discretion to adjust the
formulaic outcome of the award to ensure
that vesting reflects underlying Company
performance and value creation for
shareholders.
BOARD CHANGES
As previously announced, Paul Richardson
stepped down from the Board and his
position as Group Finance Director with
effect from 1 May 2020. Paul was treated in
line with the Directors’ Compensation Policy
and therefore received his base salary,
benefits cash allowance and pension up to
the date of his retirement, and a payment
relating to outstanding annual leave. He was
not eligible to receive a 2020 short-term
incentive and was treated as a good leaver
for the purposes of his outstanding share
awards (see page 142).
WPP ANNUAL REPORT 2020
135
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
COMPENSATION
AT A GLANCE
IMPACT OF COVID-19 ON EXECUTIVE COMPENSATION
The impact of Covid-19 on our people, our business and on the wider stakeholder group has been a key determinant in many of the
Committee’s decisions. The table below summarises the decisions made by the Committee during the year in the context of the pandemic.
COMMITTEE DECISION
RATIONALE
ELEMENT OF
COMPENSATION
● 2020 salary
● 2020 STIP
Review
The CEO’s salary has not been
reviewed since appointment in
September 2018 and was due for
review in 2020. This review has
been postponed to 2021.
Temporary salary reduction
Base salaries for the CEO and the
CFO were reduced by 20% for a
period of four months, together
with a reduction to the
Chairman’s fee. There was a
corresponding reduction in fees
paid to Non-Executive Directors.
Financial measures
Due to the impact of Covid-19
on the financial performance of
WPP, the financial component
of the STIP will not pay out.
Non-financial measures
Taking the wider stakeholder
group into account, the decision
was made not to award a STIP
based on non-financial
performance in 2020.
● Long-term
incentive plan
2016-2020 Vesting
The 2016 EPSP award vested
in March 2021 at 5%.
2020-2022 Grant
Following a consultation with
shareholders in respect of the
definition of the new
performance measures (ROIC,
AFCF and TSR), the targets and
award values, the Committee
made the decision to grant
2020 EPSP awards at the new
reduced normal level (350% for
the CEO and 300% for the CFO).
136
WPP ANNUAL REPORT 2020
– The Committee considered the employee and shareholder experience, including
our focus on cost reduction, the postponement of salary increases for all
employees, the suspension (and subsequent cancellation) of the 2019 dividend,
and the associated performance of our share price. In light of these factors, the
Committee took the decision to postpone the CEO’s salary review to ensure
alignment with the wider employee and stakeholder group.
– As part of a series of cost-reduction measures to protect the business and our
people, the decision was made to temporarily reduce the salaries of the Executive
Directors and other senior leaders.
– The Committee is of the view that the Executive Directors have shown outstanding
leadership during 2020 responding to the pandemic with an agility that ensured the
protection of our business and our people, whilst responding to evolving client
needs. The leadership team achieved some exceptional milestones in respect of
progress against the strategy and have been integral in positioning the Company
for growth in 2021.
– However, in light of the impact of the pandemic on the business, our people and
our shareholders, the Committee has made the decision not to award a STIP in
respect of 2020.
– The Committee has used its discretion to adjust the ROE to ensure management does
not benefit from goodwill impairments made during the year. Following this adjustment,
ROE performance fell below threshold levels. EPS performance was below threshold
and the TSR component of the award achieved a threshold level of performance.
This resulted in an overall total vesting of 5% which the Committee deemed a fair
reflection of financial performance against the targets set five years previously.
– During consultation with shareholders, we noted that existing incentives provided
limited retention and the need to ensure that the 2020 award incentivised
management to deliver strong performance.
– The Committee considered whether any adjustment should be made to the multiple
of salary taking into account the Company’s share price. However, the performance
measures are well aligned to strategy and our robust target-setting process ensures
that the maximum end of the performance ranges represent exceptional
performance and significant value for shareholders. Maximum and normal award
levels under the Directors’ Compensation Policy reflect a reduction compared with
the previous policy and the decision was made to make awards at this level. The
Committee is confident that such awards will fulfil their purpose of incentivising
and retaining an exceptional management team at a crucial time for the business.
– The Committee is mindful of recent investor guidance regarding windfall gains.
Under our Directors’ Compensation Policy, the Committee has the discretion to
adjust the formulaic vesting opportunity when determining the final level of
vesting, to ensure that it reflects underlying Company performance and value
creation for shareholders.
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
ALIGNING COMPENSATION WITH STRATEGY
Performance measures are selected to align to our business strategy and include a range of financial and non-financial metrics. Non-financial
metrics are measured in a scorecard with appropriate measures set based on role and accountabilities. These measures are based on four
categories: Client – relating to new business and client satisfaction; People and DE&I – this will include improvements in relation to diversity
as well as the delivery of our people strategy; ESG – aligned to the Company’s sustainability strategy and the management of governance
and controls; and Strategic priorities – in relation to our Group-wide transformation.
STRATEGIC ELEMENTS
Vision
& offer
Creativity
Data &
technology
Simpler
structure
People
& culture
Short-term
incentive plan
(STIP)
Financial measures
Like-for-like headline
operating profit growth
Headline operating profit margin
Like-for-like revenue less
pass-through costs growth
Non financial scorecard
Client
People and DE&I
ESG
Strategic priorities
Long-term
incentive plan
(EPSP)
Return on invested capital
Adjusted free cash flow
Relative TSR
2020 PERFORMANCE OUTCOMES
STIP
Due to the impact of Covid-19 on the financial performance of WPP, the financial component of the STIP will not pay out. The Committee
recognises the exceptional performance of both Executive Directors in delivering resilient performance in a challenging year whilst
progressing the transformation agenda. However, taking account of the wider stakeholder experience, the decision was made not to
award a STIP in respect of 2020 performance.
EPSP
The Committee has used its discretion to adjust the ROE to ensure management does not benefit from goodwill impairments made
during the year.
WEIGHTING
Threshold
(20% payable)
Maximum
(100% payable)
Average ROE over five years
EPS growth over five years
Relative TSR (common currency)
– assessed as outperformance against
set % of peer group
Relative TSR (local currency)
– assessed as outperformance against
set % of peer group
1/3
1/3
1/3
-8.6%
32%
Total
100%
14.7%
15%
7%
50%
50%
55%
18%
14%
90%
90%
OUTCOME
ACHIEVED
0%
0%
15%
5%
WPP ANNUAL REPORT 2020
137
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
COMPENSATION AT A GLANCE
TOTAL COMPENSATION 2020
£000
Mark Read
2020
(maximum)
2020
(target)
2020
(actual)
2019
(actual)
4,448
1,136
2,594
John Rogers
Joined the Company on 27 January 2020
2020
(maximum)
7,032
2020
(target)
2020
(actual)
3,009
4,729
4,385
0
2,000
4,000
6,000
8,000
0
2,000
4,000
6,000
8,000
• Fixed, consisting of base salary, benefits and pension
• Short-term incentives (STIP)
• Long-term incentives (EPSP)
• Buy-out awards (see page 142)
SHAREHOLDING REQUIREMENTS
Both Mark Read and John Rogers are on target to reach their shareholding requirements within seven years of their appointment
as Executive Directors, as required by the Policy. Their shareholding is shown below as a percentage of base salary.
Mark Read
Appointed to the Board 3 September 2018
John Rogers
Appointed to the Board 3 February 2020
2018
2019
2020
Target
121%
215%
305%
600%
2020
Target
77%
300%
PENSIONS
As set out in our 2019 report, Mark Read’s pension contribution is being reduced to align executive pensions with the wider workforce in the
UK and will be 10% of base salary by the end of the policy period. The chart below shows the contribution levels at year end throughout the
policy period. John Rogers’ pension contribution is already aligned at 10% of base salary.
2019
2020
2021
2022
17.6%
15%
12%
10%
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WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
COMPENSATION POLICY
The Directors’ Compensation Policy was approved by shareholders at the 2020 AGM. The table below shows a summary of the policy and
how it will be implemented for 2021. Full details of the policy can be found at pages 120-125 of the 2019 Annual Report and Accounts.
TIMELINE OF COMPENSATION ELEMENTS
2021
2022
2023
2024
2025
● Base salary
● Benefits
● Pension
● Short-term
incentive
● Long-term
incentive
Cash
Deferred shares (Executive Share Award)
Performance period
Holding period
FIXED ELEMENTS OF COMPENSATION
COMPONENT AND
TIME HORIZON
● Base salary
● Benefits
PURPOSE
AND LINK
TO STRATEGY
To maintain
package
competitiveness
and reflect skills
and experience;
to enable
recruitment and
retention.
Provide an annual
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.
OPERATION
OPPORTUNITY
Base salary is typically reviewed every two years
but may be reviewed annually if the Committee
deems appropriate.
The Committee may realign base salary over a
phased period for new Board appointees who
start on a lower-than-market salary.
Salary levels and increases take into consideration:
– Salary increases awarded across the Group
– Individual performance
– Levels in other companies of similar size,
scope and complexity
Increases for executives will usually be
aligned to the wider workforce which
will reflect the performance of the
Company, individual and local
economic factors.
Increases above the normal level may
be made to take into account special
circumstances such as:
– Increase in the nature or scope of
the role
– To reflect development in a role
such as in the case of an executive
appointed at a below-market
salary
IMPLEMENTATION
FOR 2021
Mark Read: £975,000
John Rogers: £740,000
Salary levels may be
reviewed in 2021.
The fixed annual 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 move to a
different country, a relocation benefit may be
provided in addition to the usual benefit allowance.
The maximum benefit allowance
payable is £50,000.
Mark Read: £35,000
John Rogers: £30,000
● Pension
To enable
provision for
retirement
benefits.
Pension is provided by way of contribution to a
defined contribution retirement arrangement,
or as a cash allowance, determined as a
percentage of base salary.
Executive Director: 10% of base salary.
Mark Read: 15%*
Current:
CEO – 15% of base salary reducing to
10% over the 2020-2022 Policy period.
CFO – 10% of base salary.
John Rogers: 10%
* To be reduced to 12% during
2021 as part of plans to align
executive pensions with the
wider workforce.
WPP ANNUAL REPORT 2020
139
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
COMPENSATION POLICY
VARIABLE ELEMENTS OF COMPENSATION
COMPONENT AND
TIME HORIZON
● Short-term
incentive plan
(STIP)
● Long-term
incentive plan
– Executive
Performance
Share Plan
(EPSP)
● Shareholding
requirements
PURPOSE
AND LINK
TO STRATEGY
– Cash bonus
– Executive
Share Award
(ESA)
To drive the
achievement
of strategic
priorities for the
financial year
and to motivate,
retain and reward
executives over
the short and
medium term.
The ESA element
of the incentive
aligns executives
with shareholder
interests.
To drive the
achievement
of long-term
strategic
priorities, to aid
retention and to
align executive
and shareholder
interests over
the long term.
To align the
interests of
Executive
Directors with
shareholders.
Executive
Directors are
required to hold
100% of their
shareholding
requirement for
a period of one
year following
cessation of
employment,
reducing to 50%
for a second year.
IMPLEMENTATION
FOR 2021
Mark Read: 0-250%
John Rogers: 0-225%
75% financial and
25% non-financial
targets
OPERATION
OPPORTUNITY
PERFORMANCE
Performance measures and
targets are reviewed and
set annually to ensure
continued strategic
alignment.
Financial measures may
represent a minimum of 75%
of the award and a
maximum of 100%.
Individual strategic or
non-financial objectives
may represent up to 25%
of the award.
Maximum
opportunity
– 250% of base
salary
Target opportunity
– 50% of the
maximum
opportunity
Less than the
maximum
opportunity may
be applied to
executives.
Dividends will accrue
on the ESA during
the deferral period.
Targets are set early in the year.
The Committee determines the
extent to which these targets have
been achieved at the end of the
year based on performance.
The STIP is delivered as follows:
– At least 40% of the STIP pay-out
is delivered in the form of
conditional deferred shares (ESA)
which will be released after a
period of two years
– The Committee has discretion
to adjust the formulaic bonus
outcomes both upwards and
downwards (including to zero) if
it is determined that performance
has been impacted by unforeseen
circumstances and the outcome
is not reflective of the underlying
company performance
– STIP is subject to the malus and
clawback policy
The EPSP comprises a grant of
performance share awards which will
vest subject to the achievement of
performance conditions.
Maximum
opportunity
– 400% of base
salary
Vesting of the EPSP is
subject to the achievement
of demanding performance
targets.
Mark Read: 0-350%
John Rogers: 0-300%
The EPSP has a performance period of
three years, followed by a two-year
holding period of the vested shares.
The Committee has the discretion to
adjust the formulaic outcome of the
award to ensure that vesting reflects
underlying Company performance
and value creation for shareholders.
Less than the
maximum
opportunity may
be applied to
executives.
Dividends will accrue
on awards during the
performance period.
EPSP is subject to the malus and
clawback policy.
Executive Directors and other
members of the senior management
team are subject to shareholding
requirements which seek to reinforce
the WPP principle of alignment of
management’s interests with those
of shareholders.
Chief Executive
Officer: 600% of
base salary.
Chief Financial
Officer: 300% of
base salary.
Minimum for any
other new executive
appointed to the
Board: 200% of
base salary.
Executive Directors
will be permitted a
period of seven years
from the date of
their appointment
to achieve the
required level.
Performance measures are
set by the Committee and
may be a mix of market,
financial and non-financial
measures. In 2021 the
measures will be relative
TSR, ROIC and cumulative
adjusted free cash flow
(AFCF).
Threshold performance will
produce an award of 20%
of the award granted and
increase on a sliding scale
to 100% for maximum
performance achievement.
If an Executive Director fails
to achieve the required
levels of shareholding, 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
shareholding requirements.
If the Executive Director
fails to maintain their
shareholding requirement
post-employment, this may
result in a reduction of
outstanding awards.
140
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
ANNUAL REPORT
ON COMPENSATION
This section of the report sets out details
of how the Directors’ Compensation Policy
was implemented in 2020. We start by
setting out the details of the operation of
the Compensation Committee and then
present a summary of the 2020 Director
compensation together with a summary
of pay across the Group.
Payments have been made in accordance
with the Directors’ Compensation Policy,
approved by shareholders at the 2020 AGM.
The information included in this section has
been audited where stated.
GOVERNANCE IN RELATION
TO COMPENSATION
During 2020, there were three scheduled
and eight unscheduled Compensation
Committee meetings. A table of Board and
Committee attendance can be found on
page 123 and the detail of key activities
discussed is set out below.
EXTERNAL ADVISORS
The Committee retains Willis Towers Watson
(WTW) to act as independent advisors.
They provide advice to the Compensation
Committee and work with management on
matters related to our compensation policy
and practices. They are a member of the
Remuneration Consultants Group and have
signed the code of conduct relating to the
provision of advice in the UK. Considering
this, and the level and nature of the service
received, the Committee remains satisfied
that the advice is objective and independent.
WTW provides limited other services at a
Group level and some of our operating
companies engage them as advisors at a
local level. In 2020, WTW received fees of
£166,265 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.
The Committee members have no personal
financial interest (other than as a shareholder
as disclosed on page 151) 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 Company’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. The
Committee invites certain individuals to
attend meetings, including the Chief
Executive Officer and Chief Financial Officer
(who are not present when matters relating
to their own compensation or contracts
are discussed and decided), the Company
Secretary, the Chief People Officer and the
Global Reward and Performance 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 Committee’s external advisors.
ACTIVITY DURING THE YEAR
The key activities of the Compensation Committee are set out below. In addition to the specific items outlined, the Committee reviews any
compensation matters relating to the Executive Directors and the Executive Committee, as well as all compensation governance matters.
2020
Q1
Q3
– Determined performance outcomes for 2015-2019 EPSP and 2019 STIP
– Consideration of 2020 STIP and EPSP targets in the context of the emerging
– Received further updates on compensation implications of Covid-19
throughout the workforce
Covid-19 pandemic
– Agreement of retirement terms for the outgoing Group Finance Director
– Reviewed and approved updated terms of reference
– Reviewed and approved 2019 Compensation Committee Report
– Approved salary reinstatement for Executive Directors and fees for Chairman
– Consideration of ESG measures in incentives
– Reviewed and approved design concepts for 2021 incentives for the
Executive Directors and Executive Committee
Q2
Q4
– Received an update on the compensation implications of Covid-19
– Reviewed and approved proposals to reduce salaries as a cost reduction
measure at the executive and senior leadership level
– Received an update on the executive compensation landscape
– Received update on the performance of inflight EPSP awards
– Considered proposed targets for delayed 2020 EPSP awards
– Shareholder consultation regarding proposed 2020 EPSP awards
– Received an update on the gender pay gap analysis and wider
workforce incentives
– Finalised EPSP 2020 targets based on shareholder feedback and
approved awards
– Considered TSR peer groups for 2021 EPSP awards
To learn more see
wpp.com/about/
corporate-governance
WPP ANNUAL REPORT 2020
141
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
– Awards made in cash on appointment
totalling £729,707
– An award made in cash paid in May 2020
of £727,831
– Two awards made in restricted stock of
£288,514 and £364,100, vesting in
November 2021 and May 2021 respectively
– Two awards made in performance shares
under the EPSP of £1,069,783 and
£1,427,990 vesting in March 2021 and 2022
respectively. Both these awards are
subject to a TSR performance condition
and discretionary ROIC underpin over the
respective performance periods
DIRECTOR CHANGES DURING THE YEAR
Paul Richardson retired from the Company
with effect from 1 May 2020. John Rogers
joined the Company as Chief Financial
Officer Designate on 27 January 2020 and
was appointed to the Board on 3 February
2020. Mr Rogers became Chief Financial
Officer following Paul Richardson’s
retirement on 1 May 2020.
PAUL RICHARDSON
In line with the current Directors’
Compensation Policy, Paul Richardson
received his base salary, benefits cash
allowance and pension up to the date of
his retirement and a payment relating to
outstanding annual leave, details of which
are included in the single figure table on
page 143. Mr Richardson was not eligible to
receive a 2020 short-term incentive. He was
treated as a good leaver for the purposes of
his outstanding share awards. Unvested ESA
awards will be reduced on a time pro-rata
basis and paid on the normal vesting date.
Outstanding EPSP awards will vest subject to
performance at the end of the performance
period and time pro-rating. Awards will be
paid on the normal vesting date.
JOHN ROGERS
As announced on 1 October 2019, John
Rogers’ compensation package, in line with
the shareholder approved Policy, consists
of the following:
– Base salary of £740,000
– Annual bonus opportunity of 225%
– An award of 300% of base salary under
the EPSP
– A benefits allowance of £30,000 per annum
– A cash allowance in lieu of pension of 10%
of base salary
Mr Rogers also received buy-out awards to
compensate for the forfeiture of incentive
awards from his previous employer. The
awards have been determined according to
the Policy, such that 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 method of
payment has been set in an appropriate
manner at the discretion of the Committee:
STATEMENT OF SHAREHOLDER VOTING
The results of the shareholder vote at the Company’s 2020 AGM in respect of the 2019 Compensation Committee Report and the Directors’
Compensation Policy are shown below:
Voting outcome for 2019 Compensation Committee Report (At 2020 AGM)
VOTES FOR
VOTES AGAINST
VOTES CAST
VOTES WITHHELD
Resolution
Number
%
Number
To approve the
Compensation
Committee Report
874,512,819
90.72
89,440,199
Voting outcome for 2020 Compensation Policy (At 2020 AGM)
%
9.28
Number
963,953,018
Number
25,281,512
VOTES FOR
VOTES AGAINST
VOTES CAST
VOTES WITHHELD
Resolution
Number
%
Number
To approve the
Compensation Policy
885,129,086
90.76
90,096,398
%
9.24
Number
Number
975,225,484
14,009,046
142
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED)
Single total figure of compensation
Mark Read
John Rogers1
Paul Richardson2
2020
2019
2020
2020
2019
Short-term incentive £000
Base
salary3
£000
910
975
643
282
840
Benefits
£000
Pension
£000
36
35
30
25
67
158
171
64
62
252
Total
fixed
£000
1,104
1,181
737
369
1,159
Cash
Deferred
Long-term
incentive4
£000
Total
variable
£000
Other 4,5
£000
Total annual
compensation
£000
–
805
–
–
670
–
537
–
–
–
32
71
1,538
105
201
32
1,413
1,538
105
871
–
–
2,110
242
–
1,136
2,594
4,385
716
2,030
1 John Rogers joined the Company on 27 January 2020. His base salary and benefits reflect his time in role.
2 Paul Richardson retired effective 1 May 2020. His 2020 base salary, contractual fee for his directorship of WPP plc and benefits reflect his time in role. Paul Richardson’s base salary and benefits allowance
are denominated in US dollars and have been converted at an exchange rate of $1.2836 to £1. Mr Richardson was not eligible to receive an annual bonus for 2020 and his 2016 EPSP vesting has been
prorated to reflect his time in role in accordance with the Directors’ Compensation Policy.
3 Mark Read and John Rogers voluntarily reduced their base salary for a four-month period during the year as part of cost-reduction targets implemented during the Covid-19 pandemic.
4 John Rogers received buy-out awards to compensate for the forfeiture of incentive awards from his previous employer. This comprises cash of £1,457,538, restricted stock of £652,614 and an EPSP which
vested in March 2021 based on a performance period of 1 Jan 2019 to 31 Dec 2020 with a final vesting value of £1,538,363.
5 Paul Richardson received a payment in relation to accumulated outstanding annual leave on retirement.
FIXED ELEMENTS OF COMPENSATION (AUDITED)
The Compensation Policy summaries below are from the 2020 Directors’ Compensation Policy, as approved by shareholders, and represent
the maximum levels applicable.
BASE SALARY
Base
salary
policy
Typically reviewed every
two years but may be
reviewed annually if the
Committee deems
appropriate
Salary levels and increases take into consideration:
– Salary increases awarded across the Group
– Individual performance
– Levels in other companies of similar size, scope
and complexity
Increases for executives will usually
be aligned to the wider workforce
which will reflect the performance of
the Company, individual and local
economic factors
Mark Read and John Rogers voluntarily
reduced their salaries by 20% for the
period 1 April to 31 July 2020 as part of
plans to reduce cost during the Covid-19
pandemic.
Mark Read
John Rogers
Paul Richardson1
Effective date
3 September 2018
27 January 2020
Annual base
salary
000
£975
£740
1 July 2013
$945 and £100
Base salary
received
in 2020
000
£910
£643
£282
1 Paul Richardson received a salary denominated in US dollars and a fee for directorship of WPP plc denominated in
pounds sterling. The base salary has been converted at an exchange rate of $1.2836 to £1. Paul Richardson retired
with effect from 1 May 2020. His salary and Director’s fee have been prorated to reflect this.
WPP ANNUAL REPORT 2020
143
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
BENEFITS
Benefits
policy
Fixed, non-itemised
allowance enabling
executives to procure
their own benefits
as required
Allowance as follows:
Maximum – £50,000
CEO – £35,000
CFO – £30,000
Reviewed periodically by the
Committee
In addition to the allowance received, the values
disclosed include the value of expenses related
directly to attendance at Board meetings that would
be chargeable to UK income tax. The expenses for
Mark Read were £945 (£2,442 in 2019), for John Rogers
were £1,641 and for Paul Richardson were £2,458
(£7,626 in 2019).
PENSION
Mark Read
John Rogers
Paul Richardson1
2020
Benefits
£000
36
30
25
1 Paul Richardson retired with effect from 1 May 2020. His benefits allowance has been pro-rated to reflect this.
His allowance is denominated in US dollars and has been converted at an exchange rate of $1.2836 to £1.
Contribution to a defined
contribution retirement
arrangement, or a cash
allowance
Pension
policy
Opportunity is as follows:
Only base salary is pensionable
Executive Director – 10% of base salary
Current:
CEO – 15% of base salary reducing to 10% over the
Policy period
CFO – 10% of base salary
Mark Read was awarded an allowance of 20% less
employer’s national insurance contribution of 13.8%
resulting in a net pension contribution of 17.6%. This
reduced to 15% during 2020 and will reduce to 12%
in 2021 and 10% in 2022 to ensure alignment with the
wider workforce by the end of 2022.
Mark Read
John Rogers
Paul Richardson1
Contractual
pension
(% of base salary)
15
10
30
2020
Pension
£000
158
64
62
1 Paul Richardson’s pension is denominated in US dollars and has been converted at an exchange rate of $1.2836 to £1.
SHORT-TERM INCENTIVE (AUDITED)
Short-term
incentive
policy
Maximum opportunity
– 250% of base salary
Target opportunity
– 50% of the maximum
opportunity
Financial measures may
represent a minimum of
75% of the award and a
maximum of 100%
Individual strategic or
non-financial objectives
may represent up to 25%
of the award
At least 40% of the STIP
payout is deferred into
shares, vesting after
two years
Deferred shares are subject
to malus provisions
Cash bonus is subject to
clawback provisions
PERFORMANCE AGAINST 2020 OBJECTIVES
Due to the impact of Covid-19 on the performance of WPP and the uncertainty over future performance, the Committee determined it was
not possible to set meaningful financial targets. As a result, the financial component will not pay out. The Committee considered whether the
non-financial measures should be assessed and a STIP awarded. The Committee recognised the exceptional performance of both Executive
Directors in delivering resilient performance in a challenging year whilst progressing the transformation agenda. However, taking the wider
stakeholder group into account, the decision was made not to award a STIP in respect of 2020 performance.
144
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
SHORT-TERM INCENTIVE WEIGHTINGS AND MEASURES FOR 2021
The Committee has reviewed the performance objectives for 2021 to ensure continued alignment with Company strategy. The Group financial
measures are headline operating profit growth, headline operating profit margin improvement and revenue less pass-through costs growth.
Non-financial performance will be measured based on a scorecard including the following metrics: Client – relating to new business and client
satisfaction; People and DE&I – this will include improvements in relation to diversity as well as the delivery of our people strategy; ESG –
aligned to the Company’s sustainability strategy and the management of governance and controls; and Strategic priorities – in relation to our
Group-wide transformation.
The Committee is of the view that the specific 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, as we have done in previous years.
LONG-TERM INCENTIVES (AUDITED)
VESTING OF 2016-2020 EPSP AWARDS
Vesting of the 2016 EPSP awards was dependent on performance against three measures, all assessed over a five-year period:
– WPP’s relative TSR, measured in common and local currency, against a custom group of WPP’s comparators (Dentsu, Interpublic, Ipsos,
Nielsen, Omnicom and Publicis – GfK and Havas were removed from the peer group as they were subject to complete acquisitions in 2017
and were listed for less than 40% of the performance period), weighted by their respective market capitalisation
– Compound annual growth in headline EPS
– Average ROE
The Committee has used its discretion to adjust the ROE to ensure management does not benefit from goodwill impairments made during
the year. In aggregate, WPP’s performance against the three measures resulted in an overall achievement of 5.0% of the maximum award as
set out below.
Performance measure
Weighting
%
%
Threshold
Maximum
Actual
Relative TSR (common currency)
Relative TSR (local currency)
EPS growth
Average ROE
Total vesting (% of maximum)
Mark Read
Paul Richardson2
50% of
weighted peer
group
outperformed
90% of
weighted peer
group
outperformed
7.0
15.0
14.0
18.0
1/3
1/3
1/3
%
32
55
-8.6
14.7
% of maximum
achieved
15.0
0.0
0.0
5.0
Number of
shares awarded
58,644
41,536
Additional
shares in respect
of dividend
accrual
Number of
shares vesting
Share price
on vesting
Value of vested
2016-2020
EPSP awards1
000
545
333
3,477
2,132
£9.111
$62.922
£32
$134
1 None of the value of the vested awards is attributable to share price appreciation.
2 Paul Richardson’s EPSP awards were granted in the form of ADRs. In addition to the application of the performance outcome, Paul Richardson’s award was time prorated in accordance with the Plan Rules.
WPP ANNUAL REPORT 2020
145
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
2020 EPSP AWARDS GRANTED
Executive
Performance
Share Plan
(EPSP) Policy
Maximum opportunity
– 400% of base salary
Threshold performance will
result in 20% vesting
increasing on a straight line
basis to 100% for maximum
performance
1/3 ROIC
1/3 AFCF
1/3 TSR
Three-year performance
period plus two-year
holding period
Subject to malus and
clawback provisions
Awards accrue dividends
In 2020, the Executive Directors were granted awards under the EPSP as approved by shareholders in 2020. The performance measures are
ROIC, AFCF and relative TSR. In order to set meaningful targets, an extensive target-setting process took place which had been delayed as set
out in the 2019 Annual Report. This ensured targets could take account of greater clarity in relation to the financial outlook. Proposed targets
were developed based on detailed medium-term financial plans and robust modelling, with reference to analyst consensus estimates. As part
of the consultation with our key shareholders on the metrics and their associated definitions, we also sought input on potential targets to
inform the eventual goal-setting for the awards subsequently granted.
Definition of measure
Relative TSR
AFCF
(Adjusted free cash flow)
TSR performance is compared to that of five comparators: Dentsu, IPG, Omnicom, Publicis and the
FTSE 100 Index. Each comparator carries an equal weighting. TSR performance is calculated both in
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.
A cumulative AFCF for each of the three years in the performance period. Adjusted free cash flow is
calculated as cash generated by operations plus dividends received from associates, interest received,
investment income received, and proceeds from the issue of shares, less interest and similar charges
paid, dividends paid to non-controlling interests in subsidiary undertakings, repayment of lease liabilities
(including interest), and purchases of property, plant and equipment and purchases of other intangible
assets over the course of the performance period.
ROIC
(Return on invested capital)
An average of the year end ROIC for each of the three years in the performance period calculated as:
Headline operating profit/Invested capital
Where invested capital =
(Opening net assets + closing net assets)/2
+ average net debt
+ average lease liabilities (opening lease liabilities + closing lease liabilities)/2
The table below summarises the awards granted and the performance conditions against which participants will be measured.
Awards granted in 2020
Mark Read
John Rogers
Performance measure
Weight
Nature
Basis and level of award
(% of salary)
Number of
shares awarded
350
300
460,464
299,554
Face value at
date of grant1
£000
3,413
2,220
Relative TSR
One-third
Relative to peers
AFCF
One-third
Cumulative
Performance zone (threshold to maximum)
Median to upper decile
£2,300m-£3,100m
ROIC
One-third
Average
11.5%-12.9%
Payout
Performance period
Holding period
For performance below threshold there is nil vesting. 20% vesting occurs at threshold performance,
100% vesting at maximum performance and straight-line vesting between threshold and maximum
1 January 2020 to 31 December 2022
1 January 2023 to 31 December 2024
1 Awards were granted on 24 November 2020. Face value is calculated based on the five-day average share price preceding the date of award (£7.411).
146
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
ADDITIONAL SHARE AWARDS – BUY-OUT AWARDS
John Rogers received buy-out awards to compensate for the forfeiture of incentive awards from his previous employer. These awards were
determined in accordance with the Policy and comprise cash, restricted stock and performance shares. The table below summarises the
awards granted by way of restricted stock and performance shares (see page 142 and the single figure table on page 143 for further
information in relation to the cash elements).
Restricted stock award1
Restricted stock award1
EPSP award2
Number of
shares awarded
66,176
52,438
182,744
Face value
at date
of grant
£000
364
289
1,070
Vesting date
4 May 2021
15 Nov 2021
15 March 2021
No
No
Yes
EPSP award2
243,934
1,428
15 March 2022
Yes
Subject to
performance
Performance conditions
–
–
Relative TSR over the 2-year
period 1 Jan 2019 to 31 Dec 2020
and discretionary ROIC underpin3
Relative TSR over the 3-year
period 1 Jan 2019 to 31 Dec 2021
and discretionary ROIC underpin3
1 Granted on 14 May 2020 at a share price of £5.502.
2 Granted on 14 May 2020 at a share price of £5.854.
3 The TSR peer group and calculation method is as per the terms of the 2019 EPSP award. The comparator group comprised Dentsu, Interpublic, Ipsos, Nielsen, Omnicom and Publicis. TSR performance is
calculated on a market capitalisation-weighted basis in both common and local currency (weighted equally). A discretionary ROIC underpin may be applied.
The first of the EPSP awards granted to John Rogers has vested following achievement of the TSR performance measure. The Committee has
the discretion to determine the extent to which the award will vest if an average ROIC of 7.5% over the performance period is not achieved.
Relative TSR common currency
Relative TSR local currency
Average ROIC
Total vesting (as a % of maximum)
John Rogers
Weighting
50%
50%
Threshold
(15% payable)
50% of weighted
peer group
outperformed
Maximum
(100% payable)
90% of weighted
peer group
outperformed
Underpin
Average ROIC of 7.5%
Actual performance
Vesting
87%
85%
8.1%
93%
89%
–
91%
Number of shares
awarded
Additional shares
in respect of
dividend accrual
182,744
2,546
Number of
shares vesting
168,843
Share price
on vesting1
£9.111
Value of
vested shares1
000
£1,538
1 The share price increased 55.6% between the grant and vest dates for this award. £549,956 of the total value of vested shares is attributable to share price appreciation.
EPSP MEASURES AND TARGETS FOR 2021
The table below shows the targets against which performance will be measured for the awards granted in 2021. In setting the targets the
Committee took into account the exceptional working capital performance in 2020 which impacts on the adjusted free cash flow metric.
The Committee considers the measures and targets set to be appropriate and challenging.
Performance measure
Weight
Nature
Relative TSR
One-third
Relative to peers
AFCF
One-third
Cumulative
Performance zone (threshold to maximum)
Median to upper decile
£2,100m-£2,900m
ROIC
One-third
Average
14.1%-15.9%
Payout
Performance period
Holding period
For performance below threshold there is nil vesting. 20% vesting occurs at threshold performance,
100% vesting at maximum performance and straight-line vesting between threshold and maximum
1 January 2021 to 31 December 2023
1 January 2024 to 31 December 2025
WPP ANNUAL REPORT 2020
147
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
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 ten years for the CEO. With respect to 2018, the pay for both the current and
previous CEO are included, as separate sets of data.
HISTORICAL TSR PERFORMANCE1
Value of hypothetical £100 holding
300
200
100
0
£163
£144
WPP
FTSE 100
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: S&P Capital IQ.
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 TSR (%)3
Change in five-year TSR (%)4
2011
11,941
3
77
46
(13)
13
2012
2013
2014
2015
2016
2017
2018
MSS5
17,543
29,846
42,704
70,409
48,148
13,930
3,085
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
(71)
0
73
(20)
96
(78)
0
33
(33)
(1)
2018
MR5
965
n/a
30
33
(33)
(1)
2019
2,594
2020
1,136
1696
(56)
55
15
27
(4)
0
5
(20)
(44)
1 Growth in the value of a hypothetical £100 holding of WPP ordinary shares over ten 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: CapIQ.
2 Calculated based on the methodology used for disclosing compensation in the single total figure of compensation table.
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 EPSP.
5 Sir Martin Sorrell (MSS) left the company on 14 April 2018; Mark Read (MR) was appointed as Chief Executive Officer from 3 September 2018.
6 Mark Read was appointed to the role of Chief Executive Officer in September 2018. The year-on-year change has been calculated based on the total compensation for this four-month period.
148
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
NON-EXECUTIVE DIRECTORS’ FEES
Non-Executive
Director policy
Base fees reflect the skills,
experience and time
required to undertake
the role
Additional fees reflect
additional time required
in any additional duties for
the Company
To enable the Chairman and
Non-Executive Directors to
undertake their roles
No element of pay is
performance-linked
The fees due to Non-Executive Directors were reviewed and increased in 2018. The Chairman’s fee was reviewed and increased effective
July 2019. The fees are shown in the table below:
Chairman
Non-Executive Director
Senior Independent Director
Chair of Audit or Compensation Committee
Chair of Nomination and Governance Committee
Chair of Sustainability Committee1
Member of Audit or Compensation Committee
Member of Nomination and Governance Committee
Member of Sustainability Committee
1 The Sustainability Committee is currently co-chaired. Each Chair receives a £15,000 fee.
£000
525
85
30
40
15
15
20
10
10
NON-EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED)
The single figure table below details fee payments received by the Non-Executive Directors while they held a position on the Board.
During both 2019 and 2020, 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 above.
Roberto Quarta2
Angela Ahrendts, appointed 1 July 2020
Jacques Aigrain
Sandrine Dufour, appointed 3 February 2020
Tarek Farahat
Sir John Hood, retired 10 June 2020
Tom Ilube, appointed 3 October 2020
Daniela Riccardi, retired 10 June 2020
Cindy Rose3
Nicole Seligman
Sally Susman4
Sol Trujillo, retired 10 June 2020
Keith Weed3,4
Jasmine Whitbread3
Fees
£000
20201
490
41
135
89
98
51
20
39
98
135
103
43
93
118
2019
500
n/a
145
n/a
105
125
n/a
95
79
145
98
105
17
37
Benefits
£000
2020
27
0
2
1
0
3
1
1
5
1
1
1
5
5
Total
£000
2020
2019
517
41
137
90
98
54
21
40
103
136
104
44
98
123
557
n/a
151
n/a
106
135
n/a
96
81
145
98
106
18
37
2019
57
n/a
6
n/a
1
10
n/a
1
2
0
0
1
1
0
1 The Non-Executive Directors took a voluntary 20% reduction in fees for four months between April and July 2020.
2 The Chairman’s fee was reviewed and increased effective July 2019.
3 Cindy Rose, Keith Weed and Jasmine Whitbread were appointed to the Board in 1 April 2019, 1 November 2019 and 1 September 2019 respectively.
4 Sally Susman and Keith Weed co-chair the Sustainability Committee. The Committee was set up at the end of 2019, having its first meeting in December 2019.
WPP ANNUAL REPORT 2020
149
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
PAST DIRECTORS
Since his retirement from the Board, Timothy Shriver provided consultancy services advising the Company on certain client relationships until
30 June 2020. He received a payment of £77,906 in 2020 for his consultancy services.
The Compensation Committee exercised its discretion under the terms of the EPSP to make malus adjustments. It determined that the 2016
and 2017 EPSP Awards granted to Sir Martin Sorrell, the former Group Chief Executive, will lapse as a result of Sir Martin Sorrell’s disclosure of
confidential information belonging to WPP and certain of its clients to the media during his tenure as a WPP director.
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,
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 Employee Share Ownership Plan Trusts (ESOPs).
More specifically, the Executive Directors have potential interests in shares related to the outstanding awards under the EPSP and outstanding
ESAs. As at 31 December 2020, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive
dividends) held in total 4,863,244 shares in the Company (9,219,837 in 2019).
Director
Mark Read
John Rogers
At 31 December 2020
At 23 April 20215
At 31 December 2020
At 23 April 20215
Total
beneficial
interests
395,039
466,265
75,838
208,234
Shares without
performance
conditions
(unvested)1,2
Shares with
performance
conditions
(unvested)3,4
200,744
137,910
118,614
118,614
1,362,282
1,672,916
726,232
783,721
Total
unvested
shares
1,563,026
1,810,826
844,846
902,335
Paul Richardson
At 1 May 2020
1,080,145
10,485
943,450
953,935
Shareholding requirements
% of
base salary
On track
600%
300%
Subject to
post-
employment
requirements
1 For Mark Read, shares due pursuant to the 2018 and 2019 Executive Share awards and 2018 Retention awards, and for Paul Richardson, the 2018 Executive Share award. Full details of these awards can be
found on pages 151 and 152. Additional dividend shares will be due on vesting.
2 As noted in footnote 1 above, less 2018 Executive Share award, which vested on 12 March 2021 (full details can be found on page 151).
3 Maximum number of shares due on vesting pursuant to the outstanding EPSP awards, full details of which can be found on page 152. Additional dividend shares will be due on vesting.
4 As noted in footnote 3 above, less the maximum due under the 2016 EPSP award, and for John Rogers a portion of his buy-out award, both of which vested on 15 March 2021 (full details can be found on
pages 145 and 147), plus the 2021 EPSP granted on 28 March 2021.
5 Total beneficial interests calculated at the last practicable date for this Annual Report.
SHAREHOLDING REQUIREMENTS
As detailed in the Directors’ Compensation Policy, the Executive Directors are required to achieve a minimum level of shareholding of
WPP shares. The Chief Executive Officer and Chief Financial Officer are required to hold shares to the value of 600% and 300% of base salary
respectively.
As at 31 December 2020, the Chief Executive Officer held shares to the value of 305% of his base salary. At the same date, the Chief Financial
Officer held shares to the value of 77% of his base salary. Both Directors have seven years from the date they were appointed to their
respective roles in which to reach the required level.
Paul Richardson, who retired effective 1st May 2020, held shares to the value of 740% of his base salary when he retired. He is required to
maintain his shareholding requirement of at least 300% of base salary in the year following his retirement and 150% of base salary for the
second year.
150
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
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,
no Non-Executive Director had any interest in any contract of significance with the Group during the year.
Non-Executive Director
Roberto Quarta
Angela Ahrendts, appointed 1 July 2020
Jacques Aigrain
Sandrine Dufour, appointed 3 February 2020
Tarek Farahat
Sir John Hood, retired 10 June 2020
Tom Ilube, appointed 3 October 2020
Daniela Riccardi, retired 10 June 2020
Cindy Rose
Nicole Seligman
Sally Susman
Sol Trujillo, retired 10 June 2020
Keith Weed
Jasmine Whitbread
Total interests at
31 December 20201
Total interests at
23 April 20212
87,500
12,571
34,000
15,000
3,775
3,000
–
4,100
8,000
8,750
5,000
10,000
5,353
3,330
87,500
12,571
34,000
15,000
3,775
n/a
1,000
n/a
8,000
8,750
5,000
n/a
5,353
3,330
1 Or at date of retirement if retired during the year.
2 Total beneficial interests calculated at the last practicable date for this Annual Report.
OUTSTANDING SHARE-BASED AWARDS
EXECUTIVE SHARE AWARDS (ESAS) HELD BY EXECUTIVE DIRECTORS
All Executive Share Awards (ESAs) or Performance Share Awards (PSAs) granted under the Restricted Stock Plan and its successor, the WPP
Stock Plan 2018, are made on the basis of satisfaction of previous performance conditions and are subject to continuous employment until the
vesting date. Mark Read received ESA and PSA awards prior to his appointment as Executive Director. The table below shows outstanding
ESAs at 31 December 2020. Unless otherwise noted, awards are made in the form of WPP ordinary shares.
Mark Read
Paul Richardson1
2017 PSA
2018 ESA
2019 ESA
2018 ESA
Grant date
12.06.18
30.05.19
14.05.20
30.05.19
Share/ADR
price on
grant date
£12.380
£9.484
£5.502
$60.060
No. of
shares/
ADRs
granted2
38,317
62,834
97,523
2,847
Face value on
grant date
0003
Additional
shares
granted in
lieu of
dividends
Total shares
vesting
Vesting date4
£474
£596
£537
$171
4,692
43,009
–
–
–
–
–
–
10.03.20
06.03.21
06.03.22
06.03.21
Shares/ADR
price on
vesting
£6.681
Value on
vesting
000
£287
–
–
–
–
–
–
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 trading day preceding the date of grant (as set out in the table).
4 The 2018 ESA vested on 12 March 2021 due to an extended close period.
WPP ANNUAL REPORT 2020
151
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
OUTSTANDING SHARE-BASED AWARDS CONTINUED
LONG-TERM INCENTIVE PLANS – EXECUTIVE PERFORMANCE SHARE PLAN
The following table summarises all of the awards outstanding under the Executive Performance Share Plan.
Grant date
Performance period
Shares/ADR
price on grant
date
Maximum
number of nil
cost options
over shares/
ADRs awarded2
Options
vested/(lapsed)
Additional
dividend shares
Options
exercised
During 2020
Mark Read
Paul Richardson1
John Rogers
28.11.16
04.12.17
06.12.18
24.09.19
24.11.20
28.11.16
04.12.17
06.12.18
24.09.19
24.11.20
01.01.16-31.12.20
01.01.17-31.12.21
01.01.18-31.12.22
01.01.19-31.12.23
01.01.20-31.12.22
01.01.16-31.12.20
01.01.17-31.12.21
01.01.18-31.12.22
01.01.19-31.12.23
01.01.20-31.12.22
£17.052
£12.911
£8.604
£10.035
£7.411
$105.931
$86.914
$55.263
$62.653
£7.411
58,644
106,498
396,617
340,059
460,464
41,536
36,933
58,628
51,593
299,554
1 Paul Richardson’s EPSP awards were granted in respect of ADRs.
2 Dividend shares will be due on these awards.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Maximum number
of nil cost options
over shares/ADRs
at 31 December
2020
58,644
106,498
396,617
340,059
460,464
41,536
36,933
58,628
51,593
299,554
Full details of the 2020 EPSP award, including performance measures and targets, can be found on page 146.
ADDITIONAL SHARE AWARDS
Mark Read received awards prior to his appointment as CEO under the management incentive plans. In addition, he received awards on his
appointment as joint-COO in April 2018. While the Board decided on the appointment of the next CEO, a special one-off award was made
recognising the importance and scale of the additional responsibilities that were being undertaken. Each award is subject to continuous
employment and malus and clawback. The awards were made under the Restricted Stock Plan and the WPP Stock Plan 2018. John Rogers
received buy-out awards to compensate for the forfeiture of incentive awards from his previous employer. See page 147 for further detail.
Mark Read
Leaders 2017
John Rogers
Special
award1
2019 EPSP
Grant
date
04.12.17
Share price
on
grant date
£13.085
No. of shares
granted2
11,463
12.06.18
£12.380
80,774
Face value on
grant date
£0003
150
500
500
Additional
shares
granted in
lieu of
dividends
1,600
4,946
–
Total shares
vesting Vesting date
15.11.20
13,063
01.05.20
45,333
01.05.21
–
Share price
on
vesting
£7.537
£5.940
–
Value on
vesting
£000
98
269
–
award 14.05.20
£5.854
182,744
2019 EPSP
award 14.05.20
£5.854
243,934
Contractual
award 14.05.20
£5.502
66,176
Contractual
award 14.05.20
£5.502
52,438
1,070
1,428
364
289
–
–
–
–
–
–
–
–
15.03.21
15.03.22
04.05.21
15.11.21
–
–
–
–
–
–
–
–
1 This award vested in three tranches – the first on 1 May 2019, the second on 1 May 2020 and the third is due to vest on 1 May 2021.
2 Dividend shares will be due on these awards.
3 Face value has been calculated using the average closing share price for the trading day preceding the date of grant (as set out in the table).
152
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
COMPENSATION IN THE WIDER CONTEXT
When setting the Directors’ Compensation Policy and making decisions in relation to Executive Compensation, the Compensation Committee
considers the wider workforce and the broader compensation context. The Committee places significant value on the views of employees
and has facilitated the engagement with the Workforce Advisory Panel (WAP) on compensation matters at the executive level and throughout
the organisation. This included the Global Reward and Performance Director’s attendance at a WAP meeting to discuss how executive
compensation aligns with wider Company compensation policies. Further information on the Workforce Advisory Panel can be found in the
Nomination Committee report on page 127.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table sets out the percentage change in total staff costs, headcount, dividends and share buybacks.
Total staff costs (continuing operations)
Headcount – average over year
Dividends and share buybacks
2020
2019
% change
£6,556.5m
£7,090.6m
104,163
£412.2m
132,823
£794.3m
(7.5)
(21.6)
(48.1)
ANNUAL PERCENTAGE CHANGE IN COMPENSATION OF DIRECTORS AND EMPLOYEES
As required under the Shareholder Rights Directive, this section has been expanded compared with prior years to show the comparison of
the annual change in each individual Director’s pay to the annual average percentage change for employees of the head office between the
year ended 31 December 2019 and 31 December 2020. Owing to changes in travel during the pandemic and changes to Board composition,
values may vary significantly compared with 2019.
Executive Directors
Mark Read
John Rogers, appointed 27 July 2020
Non-Executive Directors
Roberto Quarta
Angela Ahrendts, appointed 1 July 2020
Jacques Aigrain
Sandrine Dufour, appointed 3 February 2020
Tarek Farahat
Sir John Hood, retired 10 June 2020
Tom Ilube, appointed 3 October 2020
Daniela Riccardi, retired 10 June 2020
Cindy Rose3
Nicole Seligman
Sally Susman
Sol Trujillo, retired 10 June 2020
Keith Weed3
Jasmine Whitbread3
Average employees4
Change in pay between 2019 and 2020
Base salary/Fees
% change1
Benefits
% change
Annual bonus
% change2
(6.7)
n/a
(2.0)
n/a
(6.9)
n/a
(6.7)
(59.2)
n/a
(58.9)
24.1
(6.9)
5.1
(59.0)
447.1
218.9
1.2%
0
n/a
(51.9)
n/a
(73.3)
n/a
(57.2)
(68.4)
n/a
3.8
113.8
47.2
135.3
(17.8)
820.9
1,318.1
0%
(100)
n/a
Non-Executive
Directors do
not receive
variable
compensation
23.6%
1 The base salary/fee reductions reflect the 20% voluntary salary/fee reduction taken by the Executive and Non-Executive Directors for a period of four months.
2 The annual percentage change in bonus is calculated by reference to the bonus payable in respect of the financial year ended 31 December 2020 compared to the financial year ended
31 December 2019 for Executive Directors, and by reference to all bonus payments received during the financial year ended 31 December 2020 in comparison to the financial year ended
31 December 2019 for Parent Company employees. Non-Executive Directors do not receive variable compensation.
3 Cindy Rose, Keith Weed and Jasmine Whitbread were appointed to the Board on 1 April 2019, 1 November 2019 and 1 September 2019 respectively.
4 Based on full-time equivalent comparisons. Average is calculated by reference to the median percentage change.
WPP ANNUAL REPORT 2020
153
CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT
ANNUAL REPORT ON COMPENSATION
CEO PAY RATIO
The ratios shown in the table below compare the total compensation of the CEO (as shown in the single figure table on page 143) to the
compensation of the median UK employee and those at the lower and upper quartile.
Year
2020
2019
Total compensation
Total compensation
Methodology used 25th percentile pay ratio 50th percentile pay ratio
24:1
Option B
36:1
75th percentile pay ratio
15:1
Option B
79:1
55:1
34:1
Given the complexity of WPP and the number of payrolls used across the UK Group, Option B was the most appropriate methodology to use to
determine the CEO pay ratio. We believe this approach provides accurate information and representation of the ratios. The latest data collected
as part of gender pay reporting was used, with a snapshot date of 5 April 2020. The ratio has been computed taking into account the pay and
benefits of over 10,000 UK employees, other than the role of the CEO. Where an employee works part-time, fixed pay, benefits, and any variable
pay were adjusted, where appropriate, to reflect full-time equivalent compensation. The 25th, 50th and 75th percentile employees were
determined based on this adjusted data and are considered to be representative. Total compensation for 2020 was calculated using single figure
table methodology for these employees in order to provide a meaningful comparison with the CEO. We are satisfied that the median pay ratio
is consistent with the compensation policies for our UK workforce taken as a whole and our objective of delivering market competitive pay for
each role.
The salary and total pay and benefits for the 25th, 50th and 75th percentile employees are shown in the table below:
Year
2020
2019
Salary
Total pay and benefits
Salary
Total pay and benefits
Methodology used 25th percentile pay ratio 50th percentile pay ratio
£45,000
Option B
£30,000
75th percentile pay ratio
£71,000
Option B
Option B
Option B
£31,800
£31,000
£32,636
£46,800
£44,739
£46,975
£73,840
£70,000
£77,416
The pay ratio reflects how the structure and approach to compensation changes with increased seniority and accountability within the Group and
is therefore consistent with pay, reward and progression policies. The CEO’s pay is significantly weighted towards performance-related pay with a
focus on aligning with long-term performance and the interests of shareholders. The CEO’s variable compensation for 2020 was substantially below
that in 2019, whereas employee pay at the 25th, 50th and 75th percentile has remained broadly the same, resulting in a lower CEO pay ratio for the year.
SHARE-BASED COMPENSATION BELOW THE BOARD
The Company uses share-based compensation programmes to incentivise and retain employees, recruit new talent and encourage a strong
ownership culture among employees. The use of the core share plans in 2020 is described below.
WPP STOCK PLAN 2018 (WSP)
The WPP Leaders, Partners and High Potential programme made awards under the WSP to about 1,600 of our key executives in 2020. Awards
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 aspect of the WSP except for shares granted as part of the STIP. All awards granted under the
WSP are subject to malus and clawback conditions.
WPP SHARE OPTION PLAN 2015
During 2020, the WPP Share Option Plan 2015 was used to make awards to over 41,000 employees. By 31 December 2020, options under this plan, and
its predecessor, the Worldwide Ownership Plan, had been granted to approximately 196,000 employees over 100 million shares since March 1997.
While the Share Option Plan provides the authority to make executive option awards, in addition to all employee awards, no awards were
granted in 2020. The Executive Directors do not participate in this plan.
SHARE INCENTIVE DILUTION FOR 2010 TO 2020
The share incentive dilution level, measured on a ten-year rolling basis, was at 2.8% at 31 December 2020 (2019: 3.3%). 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.
Jasmine Whitbread
Chair of the Compensation Committee
on behalf of the Board of Directors of WPP plc
29 April 2021
154
WPP ANNUAL REPORT 2020
COMPENSATION COMMITTEE REPORT
CORPORATE GOVERNANCE
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 pursuant to
Regulation (EC) No 1606/2002 as it applies in 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:
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 129.
The Board considers the Annual Report and financial statements, taken as
a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position, performance,
business model and strategy.
The letters from the Chairs of the Sustainability, 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 are
included in the Directors’ report, which also includes the Strategic Report and
Corporate Governance sections.
– properly select and apply accounting policies;
– present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
By Order of the Board
– 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.
Balbir Kelly-Bisla
Company Secretary
29 April 2021
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FINANCIAL STATEMENTS
156
156
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FINANCIAL
STATEMENTS
Accounting policies
Consolidated financial statements
158
165
Notes to the consolidated financial statements
170
Company financial statements
199
Notes to the Company financial statements
202
Independent auditor's report
Reconciliation to non-GAAP measures
of performance
204
212
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FINANCIAL STATEMENTS ACCOUNTING POLICIES
ACCOUNTING POLICIES
The consolidated financial statements of WPP plc and its subsidiaries (the Group)
for the year ended 31 December 2020 have been prepared in accordance with
International Financial Reporting Standards (IFRS) pursuant to Regulation (EC)
No 1606/2002 as adopted by the European Union as they apply to the financial
statements of the Group for the year ended 31 December 2020.
The Group’s financial statements have also been prepared in accordance
with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB).
BASIS OF PREPARATION
The consolidated financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial instruments and
held for sale assets. The financial statements have been prepared using the
going concern basis of accounting. 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.
IMPACT OF INTEREST RATE BENCHMARK REFORM PHASE 2
The amendments issued by the IASB, Interest Rate Benchmark Reform – Phase
2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16), are mandatory
and are effective from 1 January 2021. They address issues arising from the
implementation of the reforms. A practical expedient is provided such that the
change to contractual cash flows for financial assets and liabilities (including
lease liabilities) is accounted for prospectively by revising the effective interest
rate. In addition, hedge accounting will not be discontinued solely because of
the IBOR reform. The Group does not consider that these amendments will have
a significant impact on the financial statements as they provide relief for the
possible effects of the uncertainty arising from interest rate benchmark reform.
RESTATEMENT
After the consolidated financial statements for the year ended 31 December
2019 were issued, it was determined that they did not comply with certain
elements of the application of IAS 32 Financial Instruments: Presentation and
IAS 39 Financial Instruments: Recognition and Measurement, resulting in the
incorrect presentation of the Company’s notional cash pooling arrangements
on the balance sheet, the inappropriate deferral of foreign exchange
movements in the Company’s translation reserve due to the inappropriate
application of hedge accounting in respect of non-derivative financial
instruments and the inappropriate discount rate being applied in the
calculation of the fair value of liabilities in respect of put option agreements
and payments due to vendors (earnout agreements).
The presentation of cash and overdrafts within notional cash pooling
arrangements did not meet the requirements for offsetting in accordance
with IAS 32 Financial Instruments: Presentation. This resulted in the incorrect
presentation of the notional cash pooling arrangements on the balance sheet.
Therefore, there has been a restatement of the year ended 31 December 2019
and 2018. The impact of this change is to increase cash and short-term deposits
and bank overdrafts, bonds and bank loans by £8,336.7 million for the year
ended 31 December 2019 (2018: £8,422.6 million), while having no impact on
the Company’s net debt position. This adjustment does not impact the
consolidated income statement or consolidated cash flow statement.
Net investment hedging was inappropriately applied against certain foreign
exchange exposures and net investment in foreign operations, where the
relationship was either an ineligible hedging relationship under IFRS or
insufficiently documented, such that the criteria to apply hedge accounting
under IAS 39 Financial Instruments: Recognition and Measurement were not
met. Therefore, there has been a restatement of the year ended 31 December
2019 and 2018, resulting in the reclassification of gains/losses recognised in
exchange adjustments on foreign currency net investments within the
consolidated statement of comprehensive income to be reported in the
consolidated income statement as revaluation and retranslation of financial
instruments (note 6). The impact of this change is a £245.7 million gain for the
year ended 31 December 2019 (2018: £205.1 million loss) being recognised in
revaluation and retranslation of financial instruments. This change also reduces
the opening retained earnings balance as at 1 January 2019 by £517.4 million
with a corresponding increase in the foreign currency translation reserve.
The fair value of liabilities in respect of put option agreements and payments
due to vendors (earnout agreements) are recorded at the present value of the
expected cash outflows of the obligation. The discount rate historically used
in this calculation represented the Company’s cost of debt. To fully reflect the
risk in the cash flows, the Company has changed the discount rate used in this
calculation, and restated the years ending 31 December 2019 and 2018 to
reflect the change, which resulted in the following adjustments:
NEW IFRS ACCOUNTING PRONOUNCEMENTS
In the current year, the following Standards and Interpretations became
effective:
– Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39
and IFRS 7);
– Impact of Covid-19 Related Rent Concessions (Amendment to IFRS 16).
The Group does not consider that other standards or amendments to
standards adopted during the year have a significant impact on the financial
statements.
IMPACT OF INTEREST RATE BENCHMARK REFORM
The amendments issued by the IASB, Interest Rate Benchmark Reform
(Amendments to IFRS 9, IAS 39 and IFRS 7), are mandatory and are effective from
1 January 2020. They provide relief on specific aspects of pre-replacement
issues that impact hedge accounting, whereby entities applying hedge
accounting requirements will be able to assume that the interest rate
benchmark on which the hedged cash flows and cash flows of the hedging
instrument are based are not altered as a result of Interest Rate Benchmark
Reform. The Group does not consider that these amendments have a
significant impact on the financial statements as they provide relief for the
possible effects of the uncertainty arising from interest rate benchmark reform.
IMPACT OF COVID-19-RELATED RENT CONCESSIONS
The amendment to IFRS 16, Covid-19-Related Rent Concessions, was issued by
the IASB in May 2020 and is effective from 1 June 2020. It provides practical
relief to lessees in accounting for rent concessions occurring as a direct
consequence of Covid-19, by introducing a practical expedient to IFRS 16.
The practical expedient permits a lessee to elect not to assess whether a
Covid-19-related rent concession is a lease modification. The Group has
elected to apply the practical expedient. There has been no material impact
to our financial statements as a result of the application of this amendment.
At the date of authorisation of these financial statements, the following
amendments to standards, which have not been applied in these financial
statements, were in issue but not yet effective:
– Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16).
The Group does not consider that other standards or amendments to
standards in issue but not yet effective will have a significant impact on the
financial statements.
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WPP ANNUAL REPORT 2020
ACCOUNTING POLICIES
FINANCIAL STATEMENTS
– Liabilities in respect of put options (note 19 and 20) have decreased by
£22.3 million at 31 December 2019 (2018: £34.0 million) and a charge of
£10.8 million in 2019 (2018: £8.5 million) recognised in the consolidated
income statement within the revaluation and retranslation of financial
instruments (note 6). Other reserves on the consolidated balance sheet
increased by £59.6 million at 31 December 2019 (2018: £51.5 million);
– Payments due to vendors (earnout agreements) (note 20) have decreased
by £10.1 million at 31 December 2019 (2018: £13.9 million) and a charge of
£2.7 million in 2019 (2018: £32.1 million) recognised in the consolidated
income statement within the revaluation and retranslation of financial
instruments (note 6). Goodwill on the consolidated balance sheet
decreased by £60.1 million at 31 December 2019 (2018: £70.2 million);
– The goodwill impairment charge (note 3) decreased by £7.4 million in 2018,
as a result of the above adjustments that decreased goodwill and payments
due to vendors (earnout agreements) on the consolidated balance sheet;
– These changes also decreased the opening retained earnings balance as
at 1 January 2019 by £73.8 million.
The restatements described in this note resulted in an increase in the basic
and diluted earnings per share from continuing and discontinued operations
of 18.6p and 18.4p, respectively, for the year ended 31 December 2019
(2018: decrease of 19.1p and 18.9p, respectively).
IMPACT OF COVID-19 ON CRITICAL JUDGEMENTS AND
ESTIMATION UNCERTAINTY
The critical judgements and estimation uncertainty in applying accounting
policies are set out on page 164, however Covid-19 has had the most significant
impact on the below areas of estimation uncertainty.
IMPAIRMENT OF GOODWILL:
Given the Covid-19 pandemic, impairment indicators such as a decline in
revenue less pass-through costs forecasts, and downturns in the global
economy and the advertising industry were identified in 2020. As such, the
Group performed impairment tests over goodwill and intangible assets with
indefinite useful lives. In performing the impairment tests, estimates are
required in regard to the discount rates, long-term growth rates and the level
of cash flows during the five-year projection period, which involves judgement
on the duration and shape of the recovery from Covid-19. Further details of the
goodwill impairment charge are outlined in note 14.
EXPECTED CREDIT LOSSES:
Under IFRS 9 Financial Instruments, the expected credit losses are measured
as the difference between the asset’s gross carrying amount and the present
value of discounted estimated future cash flows. As a result of the Covid-19
pandemic on the Group’s clients, estimates of future cash flows from clients
involve significant judgement. The Group performed a detailed review of trade
receivables, work in progress and accrued income at 31 December 2020,
focusing on significant individual clients along with the industry and country
in which the clients operate where there is increased risk due to the pandemic.
The Group’s approach to expected credit losses is outlined in note 18.
PAYMENTS DUE TO VENDORS (EARNOUT AGREEMENTS) AND
LIABILITIES IN RESPECT OF PUT OPTIONS:
When measuring the liabilities for earnouts and put options, estimates are
required regarding discount rates and growth rates in determining future
financial performance, which involves judgement on the duration and shape
of the recovery from Covid-19 in this period. Further details on growth rates,
discount rates and the sensitivity to these estimates are set out in note 26.
GOVERNMENT SUPPORT
In reaction to the Covid-19 pandemic, certain governments have introduced
measures to assist companies. A reduction to operating costs is recorded in
relation to government subsidies/schemes where these amounts will never
have to be repaid. Further details of such amounts are included in note 3.
In other cases, this involves the deferral of certain tax payments in order to
stimulate the economy. The deferral of payments does not impact the income
statement and these are charged as normal in the period they are incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS
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 recoverable amount,
defined as the higher of fair value less costs to sell and value in use. The net
present value of future cash flows is 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
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 and retranslation of financial instruments.
WPP ANNUAL REPORT 2020
159
FINANCIAL STATEMENTS ACCOUNTING POLICIES
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.
INTERESTS IN ASSOCIATES AND JOINT VENTURES
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 recoverable
amount is defined as the higher of fair value less costs to sell and value in use.
The Group accounts for joint venture investments under the equity method
which is consistent with the Group’s treatment of associates.
OTHER INVESTMENTS
Certain equity investments are designated as either fair value through other
comprehensive income or fair value through profit or loss. Movements in
fair value through profit or loss are recorded in the consolidated income
statement within revaluation of financial instruments.
The Group generally elects to classify equity investments as fair value through
other comprehensive income where the Group forms a strategic partnership
with the investee.
NON-CURRENT ASSETS HELD FOR SALE AND
DISCONTINUED OPERATIONS
Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations,
where certain conditions are met, an asset or disposal group that is for sale
is recognised as "held for sale". The Group has classified a disposal group as
held for sale if the carrying amount will be recovered principally through a
sale transaction rather than through continuing use. For this to be the case,
the disposal group must be available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of
such assets and its sale must be highly probable. Such assets are measured
at the lower of carrying amount and fair value less costs to sell, and are not
depreciated or amortised, excluding certain assets that are carried at fair
value under IFRS 5. Furthermore, when an associate is classified as held for
sale, equity accounting ceases.
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WPP ANNUAL REPORT 2020
A discontinued operation is a component of the entity that has been disposed
of or is classified as held for sale and that represents a separate major line of
business or geographical area of operations, is part of a single co-ordinated
plan to dispose of such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The profit or loss from a discontinued
operation is shown as a single amount on the face of the income statement
and the comparatives and related notes restated accordingly. This represents
total post-tax profit of the disposal group for the whole of the financial year
including any post-tax gain or loss on the measurement of fair value less costs
to sell, as well as the post-tax loss on sale of the disposal group. Assets and
liabilities classified as held for sale are shown as a separate line on the
balance sheet.
ACCRUED AND DEFERRED INCOME
Accrued income is a contract asset and is recognised when a performance
obligation has been satisfied but has not yet been billed. Contract assets are
transferred to receivables when the right to consideration is unconditional
and billed per the terms of the contractual agreement.
In certain cases, payments are received from customers or amounts are billed
with an unconditional right to receive consideration prior to satisfaction of
performance obligations and recognised as deferred income. These balances
are considered contract liabilities and are typically related to prepayments
for third-party expenses that are incurred shortly after billing.
TRADE RECEIVABLES AND WORK IN PROGRESS
Trade receivables are stated net of provisions for bad and doubtful debts.
Work in progress includes outlays incurred on behalf of clients, including
production costs, and other third-party costs that have not yet been billed
and are considered receivables under IFRS 15 Revenue from Contracts
with Customers.
EXPECTED CREDIT LOSSES
The Group has applied the simplified approach to measuring expected credit
losses, as permitted by IFRS 9 Financial Instruments. Under this approach, the
Group utilises a provision matrix based on the age of the trade receivables and
historical loss rates to determine the expected credit losses. Where relevant,
the Group also considers forward looking information. Therefore the Group
does not track changes in credit risk, but recognises a loss allowance based
on the financial asset's lifetime expected credit loss.
Under IFRS 9, the expected credit losses are measured as the difference
between the asset’s gross carrying amount and the present value of estimated
future cash flows discounted at the financial asset’s original effective interest
rate. Given the short-term nature of the Group’s trade receivables, work in
progress and accrued income, which are mainly due from large national or
multinational companies, the Group's assessment of expected credit losses
includes provisions for specific clients and receivables where the contractual
cash flow is deemed at risk. Additional provisions are made based on the
assessment of recoverability of aged receivables, where the following criteria
are met:
– 100% of the asset aged over one year;
– 50% of the asset aged between 180 days and one year; and
– sufficient evidence of recoverability is not evident.
Further details on provisions for bad and doubtful debts are provided in note 18.
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.
ACCOUNTING POLICIES
FINANCIAL STATEMENTS
At the inception of the hedge relationship, the Group 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 26 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 recognised in
other comprehensive income and 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, 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.
LIABILITIES IN RESPECT OF OPTION AGREEMENTS
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, the financial liability is
measured in accordance with IFRS 9 Financial Instruments. Changes in the
measurement of the financial liability due to the unwinding of the discount or
changes in the amount that the Group could be required to pay are recognised
in profit or loss within revaluation and retranslation of financial instruments in
the consolidated income statement.
DERECOGNITION OF FINANCIAL LIABILITIES
In accordance with IFRS 9 Financial Instruments, a financial liability of the
Group is only released to the consolidated income statement when the
underlying legal obligation is extinguished.
DEBT
Interest-bearing debt is recorded at the proceeds received, net of direct
issue costs.
The Group’s bank overdrafts are included in cash and cash equivalents where
they are repayable on demand, are components of the Group’s centralised
treasury strategy employed across the Group and form an integral part of the
Group’s cash management, in accordance with IAS 7 Statement of Cash Flows.
BORROWING COSTS
Finance costs of borrowing are recognised in the consolidated income
statement over the term of those borrowings.
REVENUE RECOGNITION
The Group is a leading worldwide creative transformation organisation offering
national and multinational clients a comprehensive range of communications,
experience, commerce and technology services. Contracts often involve
multiple agencies offering different services in different countries. As such, the
terms of local, regional and global contracts can vary to meet client needs and
regulatory requirements. Consistent with the industry, contracts are typically
short-term in nature and tend to be cancellable by either party with 90 days'
notice. The Group is generally entitled to payment for work performed to date.
The Group is generally paid in arrears for its services. Invoices are typically
payable within 30 to 60 days. Revenue comprises commissions and fees
earned in respect of amounts billed and is stated exclusive of VAT, sales taxes
and trade discounts. Pass-through costs comprise fees paid to external
suppliers when they are engaged to perform part or all of a specific project
and are charged directly to clients, predominantly media costs. Costs to
obtain a contract are typically expensed as incurred as the contracts are
generally short-term in nature.
In most instances, promised services in a contract are not considered distinct
or represent a series of services that are substantially the same with the same
pattern of transfer to the customer and, as such, are accounted for as a single
performance obligation. However, where there are contracts with services
that are capable of being distinct, are distinct within the context of the
contract, and are accounted for as separate performance obligations,
revenue is allocated to each of the performance obligations based on
relative stand-alone selling prices.
Revenue is recognised when a performance obligation is satisfied, in
accordance with the terms of the contractual arrangement. Typically,
performance obligations are satisfied over time as services are rendered.
Revenue recognised over time is based on the proportion of the level of
service performed. Either an input method or an output method, depending
on the particular arrangement, is used to measure progress for each
performance obligation. For most fee arrangements, costs incurred are
used as an objective input measure of performance. The primary input of
substantially all work performed under these arrangements is labour. There
is normally a direct relationship between costs incurred and the proportion
of the contract performed to date. In other circumstances relevant output
measures, such as the achievement of any project milestones stipulated in
the contract, are used to assess proportional performance.
For our retainer arrangements, we have a stand-ready obligation to perform
services on an ongoing basis over the life of the contract. The scope of these
arrangements are broad and generally are not reconcilable to another input or
output criteria. In these instances, revenue is recognised using a time-based
method resulting in straight-line revenue recognition.
The amount of revenue recognised depends on whether we act as an agent
or as a principal. Certain arrangements with our clients are such that our
responsibility is to arrange for a third party to provide a specified good or
service to the client. In these cases we are acting as an agent as we do not
control the relevant good or service before it is transferred to the client. When
we act as an agent, the revenue recorded is the net amount retained. Costs
incurred with external suppliers (such as production costs and media suppliers)
are excluded from revenue and recorded as work in progress until billed.
The Group acts as principal when we control the specified good or service
prior to transfer. When the Group acts as a principal (such as when supplying
in-house production services, events and branding), the revenue recorded is
the gross amount billed. Billings related to out-of-pocket costs such as travel
are also recognised at the gross amount billed with a corresponding amount
recorded as an expense.
Further details on revenue recognition are detailed by sector below.
WPP ANNUAL REPORT 2020
161
FINANCIAL STATEMENTS ACCOUNTING POLICIES
GLOBAL INTEGRATED AGENCIES
Revenue is typically derived from integrated product offerings including media
placements and creative 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 for commissions on purchased
media is typically recognised at the point in time the media is run.
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.
Variable incentive-based revenue typically comprises both quantitative and
qualitative elements. Incentive compensation is estimated using the most
likely amount and is included in revenue up to the amount that is highly
probable not to result in a significant reversal of cumulative revenue
recognised. The Group recognises incentive revenue as the related
performance obligation is satisfied.
PUBLIC RELATIONS AND SPECIALIST AGENCIES
Revenue for these services is typically derived from retainer fees and fees for
services to be performed subject to specific agreement. Most revenue under
these arrangements is earned over time, in accordance with the terms of the
contractual arrangement.
DISCONTINUED OPERATIONS (DATA INVESTMENT MANAGEMENT)
Revenue for market research services is typically recognised over time based
on input measures. For certain performance obligations, 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 are used to measure progress.
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. When the
terms of the transaction provide for licensing the right to access a product
on a subscription basis, revenue is recognised over the subscription period,
typically on a straight-line basis.
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.
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.
RETIREMENT BENEFIT COSTS
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.
PROVISIONS FOR LIABILITIES AND CHARGES
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 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.
162
WPP ANNUAL REPORT 2020
ACCOUNTING POLICIES
FINANCIAL STATEMENTS
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 foreign 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.
HYPERINFLATION IN ARGENTINA
During 2020, 2019 and 2018, Argentina was designated as a hyperinflationary
economy and the financial statements of the Group’s subsidiaries in Argentina
have been adjusted for the effects of inflation in accordance with IAS 29
Financial Reporting in Hyperinflationary Economies.
IAS 29 requires that the income statement is adjusted for inflation in the
period and translated at the year-end foreign exchange rate and that
non-monetary assets and liabilities on the balance sheet are restated to
reflect the change in purchasing power caused by inflation from the date
of initial recognition. In 2020, this resulted in an increase in goodwill of
£22.6 million (2019: £41.0 million, 2018: £105.8 million), an increase in other
intangibles of £5.3 million (2019: £7.1 million, 2018: £19.5 million), and an
increase in property, plant and equipment of £19.3 million (2019: £10.7 million,
2018: £3.3 million). A consumer price index (CPI) of 385.9 was used at
31 December 2020 (2019: 283.4, 2018: 184.3). The impact on other
non-monetary assets and liabilities and the impact on the Group’s
income statement in the year were immaterial.
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 23 and 27.
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.
LEASES
The Group leases most of its offices in cities where it operates. Other lease
contracts include office equipment and motor vehicles.
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease based on whether the contract conveys the right to control the
use of an identified asset for a period of time in exchange for consideration.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured based on the
initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred, less any
lease incentives received. The assets are depreciated over the term of the lease
using the straight-line method. The lease term includes periods covered by an
option to extend if the Group is reasonably certain to exercise that option.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily determined,
the Group’s incremental borrowing rate for the same term as the underlying
lease. Lease payments included in the measurement of lease liabilities
comprise fixed payments less any lease incentives receivable and variable
lease payments that depend on an index or a rate as at the commencement
date. Lease modifications result in remeasurement of the lease liability.
Depreciation is recognised in both costs of services and general and
administrative costs and interest expense is recognised under finance costs
in the consolidated income statement.
The Group has elected to use the exemption not to recognise right-of-use
assets and lease liabilities for short-term leases that have a lease term of
12 months or less and leases of low-value assets (under $5,000). The payments
associated with these leases are recognised as cost of services and general
and administrative costs within the consolidated income statement on a
straight-line basis over the lease term.
The Group assesses at the reporting date whether there are any indicators
of impairment and performs an impairment test when an impairment
indicator exists. The Group tests a right-of use asset as a stand-alone asset
for impairment when it either meets the definition of investment property
which generates independent cash flows or it is vacant with minimal to no
continued utility for the Company. When a right-of-use asset is tested as a
stand-alone asset, an impairment loss is recognised when the carrying amount
of the right-of-use asset exceeds its recoverable amount. The recoverable
amount of a right-of-use asset is estimated mainly based on the present value
of the estimated sublease income, discounted using the property yield rates.
The property held by the Group as right-of-use assets to earn rentals is
classified as investment property. The Company measures its investment
property applying the cost model.
In 2018 leases were accounted for per IAS 17 Leases. The following policies
were applicable:
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 LEASES
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.
WPP ANNUAL REPORT 2020
163
FINANCIAL STATEMENTS ACCOUNTING POLICIES
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. These estimates and judgements are reviewed
on an ongoing basis. 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.
The most significant areas of estimation uncertainty include:
– Goodwill: the discounted cash flow methodology employed by the
Group when testing for goodwill impairment requires estimates regarding
revenue growth, operating margins, discount rates and working capital
requirements. Further details of the methodology, discount rates, long-term
growth rates and estimates used in relation to the goodwill impairment,
and sensitivites to these estimates are set out in note 14;
– Payments due to vendors (earnout agreements) and liabilities in respect
of put options: estimates are required regarding growth rates in deriving
future financial performance and discount rates to be applied when
measuring the liabilities for earnouts and put options. Further details on
growth rates and discount rates and the sensitivity to these estimates
are set out in note 26;
– Provision for post-employment benefits: estimates are required in the
accounting for defined benefit pension plans, including establishing
discount rates, rates of increase in salaries and pensions in payment,
inflation and mortality assumptions. These estimates are made by
management based on the advice of qualified advisors. Details of the
assumptions used and the sensitivity of the benefit obligation to these
assumptions are set out in note 24;
– Deferred consideration on the Kantar disposal: as per the terms of the
Kantar disposal, deferred consideration consisted of amounts expected
to be received in future periods on satisfaction of certain conditions and
the deferral of consideration against services to be provided to Kantar in
the future, as detailed in note 12. Estimates are required in determining
amounts to be received and the value of services to be provided, taking
into account uncertainty in the ultimate timing and resolution of each of
these. The sensitivity to these estimates is specific to each individual
circumstance and no individual estimate is expected to result in a material
change to the amount recognised;
– Taxation: Estimates are required in determining whether a provision is
required and, the amount of taxes that will be due, particularly given the
many countries in which the Group operates. Where the final tax outcome
is different from the amounts recorded, such differences may expose the
Group to additional tax liabilities or impact the carrying value of deferred
tax assets, which would affect the future tax charge. Further details on the
tax charge, corporate income tax payable and deferred tax balances are
set out in the income statement, balance sheet and notes 7 and 17.
The most significant areas of judgements include:
– Revenue recognition: judgement is required regarding the timing of
recognition, particularly in relation to assessing progress on performance
obligations where revenue is recognised over time. Further details are set
out in the accounting policy.
164
WPP ANNUAL REPORT 2020
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Continuing operations
Revenue
Costs of services
Gross profit
General and administrative costs
Operating (loss)/profit
Share of results of associates
(Loss)/profit before interest and taxation
Finance and investment income
Finance costs
Revaluation and retranslation of financial instruments
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year from continuing operations
Discontinued operations
Profit for the year from discontinued operations
(Loss)/profit for the year
Attributable to
Equity holders of the parent:
Continuing operations
Discontinued operations
Non-controlling interests:
Continuing operations
Discontinued operations
Earnings per share from continuing and discontinued operations
Basic earnings per ordinary share
Diluted earnings per ordinary share
Earnings per share from continuing operations
Basic earnings per ordinary share
Diluted earnings per ordinary share
Notes
The accompanying notes form an integral part of this consolidated income statement.
1 Figures have been restated as described in the accounting policies.
FINANCIAL STATEMENTS
Notes
2020
£m
20191
£m
20181
£m
2
3
3
4
6
6
6
7
12,002.8
(9,987.9)
2,014.9
(4,293.0)
(2,278.1)
(136.0)
(2,414.1)
82.7
(312.0)
(147.2)
(2,790.6)
(129.3)
(2,919.9)
13,234.1
(10,825.1)
2,409.0
(1,113.1)
1,295.9
14.7
1,310.6
99.0
(359.1)
163.8
1,214.3
(275.0)
939.3
13,046.7
(10,559.1)
2,487.6
(1,242.3)
1,245.3
30.5
1,275.8
98.9
(279.1)
(76.3)
1,019.3
(256.0)
763.3
12
16.4
10.8
137.8
(2,903.5)
950.1
901.1
(2,973.8)
6.5
(2,967.3)
53.9
9.9
63.8
(2,903.5)
860.1
(3.8)
856.3
79.2
14.6
93.8
950.1
698.2
126.4
824.6
65.1
11.4
76.5
901.1
9
9
9
9
(242.7p)
(242.7p)
68.5p
67.9p
66.1p
65.4p
(243.2p)
(243.2p)
68.8p
68.2p
56.0p
55.4p
WPP ANNUAL REPORT 2020
165
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
(Loss)/profit for the year
Items that may be reclassified subsequently to profit or loss
Exchange adjustments on foreign currency net investments
Exchange adjustments recycled to the income statement on disposal of discontinued operations
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit pension plans
Deferred tax on defined benefit pension plans
Movements on equity investments held at fair value through other comprehensive income
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Attributable to
Equity holders of the parent:
Continuing operations
Discontinued operations
Non-controlling interests:
Continuing operations
Discontinued operations
Notes
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
1 Figures have been restated as described in the accounting policies.
2020
£m
(2,903.5)
23.6
(20.6)
3.0
2.0
7.4
(127.7)
(118.3)
(115.3)
(3,018.8)
(3,066.1)
(12.6)
(3,078.7)
50.5
9.4
59.9
(3,018.8)
20191
£m
950.1
(625.1)
(284.0)
(909.1)
(36.6)
6.4
(141.4)
(171.6)
(1,080.7)
(130.6)
180.0
(386.4)
(206.4)
61.9
13.9
75.8
(130.6)
20181
£m
901.1
284.0
–
284.0
8.9
(0.7)
(247.9)
(239.7)
44.3
945.4
697.7
162.2
859.9
73.8
11.7
85.5
945.4
166
WPP ANNUAL REPORT 2020
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Net cash inflow from operating activities
Investing activities
Acquisitions
Disposal of investments and subsidiaries
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)/inflow from investing activities
Financing activities
Repayment of lease liabilities
Share option proceeds
Cash consideration for non-controlling interests
Share repurchases and buybacks
Proceeds from issue of bonds
Repayment of 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 increase in cash and cash equivalents
Translation of cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents including cash held in disposal group at end of year
Cash and cash equivalents held in disposal group presented as held for sale
Cash and cash equivalents at end of year
Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents
Cash (inflow)/outflow from (increase)/decrease in debt financing
Other movements
Translation differences
Movement of net debt in the year
Net debt at beginning of year
Net debt including net debt in disposal group at end of year
Net debt in disposal group
Net debt at end of year
Note
The accompanying notes form an integral part of this consolidated cash flow statement.
FINANCIAL STATEMENTS
Notes
11
2020
£m
2,054.8
2019
£m
1,850.5
2018
£m
1,693.8
11
11
11
11
11
11
11
10
(178.4)
272.3
(218.3)
(54.4)
11.2
(167.6)
(300.1)
–
(80.6)
(290.2)
915.5
(282.7)
(7.1)
(122.0)
(83.3)
(250.5)
1,636.7
(99.2)
2,799.6
4,337.1
–
4,337.1
1,636.7
(625.7)
(6.1)
(227.2)
777.7
(1,473.3)
(695.6)
–
(695.6)
(161.3)
2,141.0
(339.3)
(54.8)
174.0
1,759.6
(249.8)
0.6
(62.7)
(43.8)
–
(1,713.2)
(6.4)
(750.5)
(96.2)
(2,922.0)
688.1
(89.7)
2,201.2
2,799.6
(66.3)
2,733.3
688.1
1,719.6
(32.5)
168.2
2,543.4
(4,016.7)
(1,473.3)
(66.3)
(1,539.6)
(283.7)
833.9
(314.8)
(60.4)
9.5
184.5
–
1.2
(109.9)
(207.1)
656.8
(1,097.4)
(3.8)
(747.4)
(106.2)
(1,613.8)
264.5
(61.5)
1,998.2
2,201.2
–
2,201.2
264.5
444.4
(1.4)
(241.1)
466.4
(4,483.1)
(4,016.7)
–
(4,016.7)
WPP ANNUAL REPORT 2020
167
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2020
Non-current assets
Intangible assets:
Goodwill
Other
Property, plant and equipment
Right-of-use assets
Interests in associates and joint ventures
Other investments
Deferred tax assets
Corporate income tax recoverable
Trade and other receivables
Current assets
Corporate income tax recoverable
Trade and other receivables
Cash and short-term deposits
Assets classified as held for sale
Current liabilities
Trade and other payables
Corporate income tax payable
Short-term lease liabilities
Bank overdrafts, bonds and bank loans
Liabilities associated with assets classified as held for sale
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Bonds and bank loans
Trade and other payables
Corporate income tax payable
Deferred tax liabilities
Provision for post-employment benefits
Provisions for liabilities and charges
Long-term lease liabilities
Net assets
Equity
Called-up share capital
Share premium account
Other reserves
Own shares
Retained earnings
Equity shareholders’ funds
Non-controlling interests
Total equity
Notes
The accompanying notes form an integral part of this consolidated balance sheet.
1 Figures have been restated as described in the accounting policies.
The financial statements were approved by the Board of Directors and authorised for issue on 29 April 2021.
Signed on behalf of the Board:
Mark Read
Chief Executive Officer
John Rogers
Chief Financial Officer
168
WPP ANNUAL REPORT 2020
Notes
2020
£m
20191
£m
20181
£m
14
14
15
13
16
16
17
18
18
19
13
21
21
20
17
24
22
13
27
28
7,388.8
1,389.3
790.9
1,504.5
330.7
387.3
212.9
24.8
156.2
12,185.4
133.1
10,972.3
12,899.1
24,004.5
–
24,004.5
(13,859.7)
(330.9)
(323.8)
(8,619.2)
(23,133.6)
–
(23,133.6)
870.9
13,056.3
(4,975.5)
(313.5)
(1.3)
(304.1)
(156.7)
(306.3)
(1,832.5)
(7,889.9)
5,166.4
129.6
570.3
196.0
(1,118.3)
5,070.7
4,848.3
318.1
5,166.4
10,110.6
1,468.8
876.0
1,734.5
813.0
498.3
187.9
–
137.6
15,826.7
165.4
11,822.3
11,305.7
23,293.4
485.3
23,778.7
(14,188.1)
(499.9)
(302.2)
(8,798.0)
(23,788.2)
(170.4)
(23,958.6)
(179.9)
15,646.8
(4,047.3)
(449.6)
–
(379.8)
(159.0)
(247.8)
(1,947.5)
(7,231.0)
8,415.8
132.8
570.3
(169.9)
(1,178.7)
8,689.9
8,044.4
371.4
8,415.8
13,132.6
1,842.0
1,083.0
–
796.8
666.7
153.0
–
180.0
17,854.1
198.7
13,101.5
11,065.8
24,366.0
–
24,366.0
(15,021.9)
(545.9)
–
(9,447.7)
(25,015.5)
–
(25,015.5)
(649.5)
17,204.6
(5,634.8)
(810.0)
–
(479.5)
(184.3)
(311.7)
–
(7,420.3)
9,784.3
133.3
569.7
962.4
(1,255.7)
8,950.2
9,359.9
424.4
9,784.3
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Balance at 1 January 2019
Restatement1
Restated balance at 1 January 2019
Accounting policy change (IFRS 16)
Deferred tax on accounting policy change (IFRS 16)
Revised balance at 1 January 2019
Ordinary shares issued
Share cancellations
Treasury share allocations
Profit for the year
Exchange adjustments on foreign currency net investments
Exchange adjustments recycled to the income statement
on disposal of discontinued operations
Movements on equity investments held at fair value through
other comprehensive income
Actuarial loss on defined benefit pension plans
Deferred tax on defined benefit pension plans
Other comprehensive loss
Total 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 commitments3
Acquisition of subsidiaries4
Restated balance at 31 December 2019
Share cancellations
Treasury share allocations
(Loss)/profit for the year
Exchange adjustments on foreign currency net investments
Exchange adjustments recycled to the income statement on disposal
of discontinued operations
Movements on equity investments held at fair value through
other comprehensive income
Actuarial gain on defined benefit pension plans
Deferred tax on defined benefit pension plans
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Dividends paid
Non-cash share-based incentive plans (including share options)
Net movement in own shares held by ESOP Trusts
Recognition/remeasurement of financial instruments
Share purchases – close period commitments3
Acquisition of subsidiaries4
Balance at 31 December 2020
Called-up
share
capital
£m
133.3
−
133.3
−
−
133.3
–
(0.5)
–
–
–
Share
premium
account
£m
569.7
−
569.7
−
−
569.7
0.6
–
–
–
–
Other
reserves1,2
£m
393.5
568.9
962.4
–
–
962.4
–
0.5
–
–
(607.1)
Own
shares
£m
(1,255.7)
−
Retained
earnings1
£m
9,541.4
(591.2)
(1,255.7) 8,950.2
(128.9)
27.8
(1,255.7) 8,849.1
–
(47.7)
(1.0)
856.3
–
–
–
1.0
–
–
–
–
Total
equity
shareholders’
funds1
£m
9,382.2
(22.3)
9,359.9
(128.9)
27.8
9,258.8
0.6
(47.7)
–
856.3
(607.1)
Non-
controlling
interests
£m
424.4
−
424.4
–
–
424.4
–
–
–
93.8
(18.0)
Total1
£m
9,806.6
(22.3)
9,784.3
(128.9)
27.8
9,683.2
0.6
(47.7)
–
950.1
(625.1)
–
–
(284.0)
–
–
(284.0)
–
(284.0)
–
–
–
–
–
–
–
–
–
–
–
–
132.8
(3.2)
−
−
−
–
–
–
–
–
–
–
–
–
–
–
–
570.3
−
−
−
−
–
–
–
(891.1)
(891.1)
–
–
–
–
10.6
(252.3)
–
(169.9)
3.2
−
−
27.5
–
–
–
–
–
–
–
–
76.0
–
–
–
(141.4)
(36.6)
6.4
(171.6)
684.7
(750.5)
71.4
3.1
(76.0)
13.1
–
(56.3)
(1,178.7) 8,689.9
(281.2)
(0.6)
(2,967.3)
−
–
0.6
−
−
(141.4)
(36.6)
6.4
(1,062.7)
(206.4)
(750.5)
71.4
3.1
–
23.7
(252.3)
(56.3)
8,044.4
(281.2)
–
(2,967.3)
27.5
–
–
–
(18.0)
75.8
(96.2)
–
–
–
–
–
(32.6)
371.4
–
–
63.8
(3.9)
(141.4)
(36.6)
6.4
(1,080.7)
(130.6)
(846.7)
71.4
3.1
–
23.7
(252.3)
(88.9)
8,415.8
(281.2)
–
(2,903.5)
23.6
−
−
(20.6)
−
−
(20.6)
–
(20.6)
−
−
−
−
−
−
−
−
−
−
−
129.6
−
−
−
−
−
−
−
−
−
−
−
570.3
−
−
−
6.9
6.9
–
–
–
103.5
252.3
–
196.0
−
−
−
–
–
–
–
59.8
–
–
–
(127.7)
2.0
7.4
(118.3)
(3,085.6)
(122.0)
74.4
(64.9)
(26.6)
–
(112.7)
(1,118.3) 5,070.7
(127.7)
2.0
7.4
(111.4)
(3,078.7)
(122.0)
74.4
(5.1)
76.9
252.3
(112.7)
4,848.3
–
–
–
(3.9)
59.9
(83.3)
–
–
–
–
(29.9)
318.1
(127.7)
2.0
7.4
(115.3)
(3,018.8)
(205.3)
74.4
(5.1)
76.9
252.3
(142.6)
5,166.4
Notes
The accompanying notes form an integral part of this consolidated statement of changes in equity.
1 Figures have been restated as described in the accounting policies.
2 Other reserves are analysed in note 28.
3 During 2019, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 2 January 2020 and ending on 27 February 2020,
in accordance with UK listing rules. The commitment resulting from this agreement constitutes a liability at 31 December 2019, which is included in Trade and other payables: amounts falling due within
one year and has been recognised as a movement in equity. As the close period ended on 27 February 2020 the movement in other reserves has been reversed in the year ended 31 December 2020.
4 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.
WPP ANNUAL REPORT 2020
169
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. GENERAL INFORMATION
WPP plc is a company incorporated in Jersey. The address of the registered office is 13 Castle Street, St Helier, Jersey, JE1 1ES and the address of the principal
executive office is Sea Containers, 18 Upper Ground, London, United Kingdom, SE1 9GL. 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 creative transformation organisation offering national and multinational clients a comprehensive range of communications,
experience, commerce and technology services. Substantially all of the Group’s revenue is from contracts with customers.
Reportable segments
Reported contributions were as follows:
Continuing operations – Income statement
2020
Global Integrated Agencies
Public Relations
Specialist Agencies
2019
Global Integrated Agencies
Public Relations
Specialist Agencies
2018
Global Integrated Agencies
Public Relations
Specialist Agencies
Intersegment sales have not been separately disclosed as they are not material.
Notes
1
2 Revenue less pass-through costs is defined on page 212.
3 A reconciliation from reported operating profit to headline operating profit is provided on page 212.
Revenue less
pass-through
costs2
£m
Headline
operating
profit3
£m
Revenue1
£m
9,302.5
892.9
1,807.4
12,002.8
10,205.2
956.5
2,072.4
13,234.1
9,930.7
931.7
2,184.3
13,046.7
7,318.5
854.4
1,589.1
9,762.0
8,108.1
898.0
1,840.4
10,846.5
8,070.8
879.9
1,925.0
10,875.7
967.8
141.3
151.4
1,260.5
1,219.5
140.6
200.5
1,560.6
1,228.2
139.2
283.8
1,651.2
170
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Continuing operations – Other information
2020
Global Integrated Agencies
Public Relations
Specialist Agencies4
2019
Global Integrated Agencies
Public Relations
Specialist Agencies4
2018
Global Integrated Agencies
Public Relations
Specialist Agencies4
Share-based
payments
£m
Capital
additions1
£m
Depreciation
and
amortisation2
£m
Goodwill
impairment3
£m
Share of
results of
associates
£m
Interests in
associates and
joint ventures
£m
55.0
8.0
11.4
74.4
54.3
4.6
7.1
66.0
59.5
7.1
11.7
78.3
201.6
15.5
55.5
272.6
265.6
17.5
46.7
329.8
255.6
12.5
45.9
314.0
408.9
32.8
100.2
541.9
392.8
31.5
84.0
508.3
159.1
10.8
39.4
209.3
1,820.1
161.5
841.3
2,822.9
4.8
–
42.9
47.7
142.8
–
33.7
176.5
17.7
1.3
(155.0)
(136.0)
17.0
(0.3)
(2.0)
14.7
25.4
1.3
3.8
30.5
154.0
6.4
170.3
330.7
164.2
5.5
643.3
813.0
175.1
6.2
615.5
796.8
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, depreciation of right-of-use assets and amortisation of other intangible assets.
3 Figures have been restated as described in the accounting policies.
4 Specialist Agencies includes the Kantar associates and amounts previously reported under the Data Investment Management segment.
Non-current assets2
North America3
United Kingdom
Western Continental Europe
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe
2020
£m
20191
£m
4,962.1
1,488.7
2,745.0
6,812.6
1,743.3
3,417.2
2,767.1
3,665.7
11,962.9 15,638.8
Notes
1 Figures have been restated as described in the accounting policies.
2 Non-current assets excluding financial instruments and deferred tax.
3 North America includes the United States with non-current assets of £4,609.0 million
(2019: £6,354.7 million).
Contributions by geographical area were as follows:
Continuing operations
Revenue1
North America2
United Kingdom
Western Continental Europe
Asia Pacific, Latin America,
Africa & Middle East and
Central & Eastern Europe
Revenue less pass-through costs3
North America2
United Kingdom
Western Continental Europe
Asia Pacific, Latin America,
Africa & Middle East and
Central & Eastern Europe
Headline operating profit3
North America2
United Kingdom
Western Continental Europe
Asia Pacific, Latin America,
Africa & Middle East and
Central & Eastern Europe
2020
£m
2019
£m
2018
£m
4,464.9
1,637.0
2,441.6
4,854.7
1,797.1
2,628.8
4,851.7
1,785.6
2,589.6
3,459.3
12,002.8
3,953.5
13,234.1
3,819.8
13,046.7
3,743.4
1,233.8
2,019.4
4,034.3
1,390.1
2,176.4
4,059.7
1,393.8
2,182.9
3,245.7
2,765.4
9,762.0 10,846.5
3,239.3
10,875.7
611.9
137.7
198.7
662.0
188.5
261.5
710.6
179.6
289.4
312.2
1,260.5
448.6
1,560.6
471.6
1,651.2
Intersegment sales have not been separately disclosed as they are not material.
Notes
1
2 North America includes the United States with revenue of £4,216.1 million (2019: £4,576.5 million,
2018: £4,576.1 million), revenue less pass-through costs of £3,524.8 million (2019: £3,806.3 million,
2018: £3,836.0 million) and headline operating profit of £563.7 million (2019: £620.6 million, 2018:
£674.4 million).
3 Revenue less pass-through costs and headline operating profit are defined on page 212.
WPP ANNUAL REPORT 2020
171
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. COSTS OF SERVICES AND GENERAL
AND ADMINISTRATIVE COSTS
Continuing operations
Costs of services
General and administrative costs
2020
£m
9,987.9
4,293.0
14,280.9
2019
£m
10,825.1
1,113.1
11,938.2
20181
£m
10,559.1
1,242.3
11,801.4
Costs of services and general and administrative costs include:
Continuing operations
Staff costs (note 5)
Establishment costs
Media pass-through costs
Other costs of services and general
and administrative costs2
2020
£m
6,556.5
638.5
1,555.2
2019
£m
7,090.6
672.9
1,656.2
20181
£m
6,950.6
756.6
1,458.0
5,530.7
14,280.9
2,518.5
11,938.2
2,636.2
11,801.4
Included within costs of services and general administrative costs are the
following:
Continuing operations
Goodwill impairment (note 14)
Investment and other write-downs
Restructuring and transformation costs
Restructuring costs in relation to Covid-19
Litigation settlement
Gain on sale of freehold property in New York
Amortisation and impairment of acquired
intangible assets
Amortisation of other intangible assets
Depreciation of property, plant
and equipment
Depreciation of right-of-use assets
Losses 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 losses/(gains)
Short-term lease expense
Low-value lease expense
2020
£m
2,822.9
296.2
80.7
232.5
25.6
–
89.1
35.2
174.8
331.9
2019
£m
47.7
7.5
153.5
–
(16.8)
(7.9)
121.5
21.2
185.5
301.6
20181
£m
176.5
2.0
265.5
–
–
–
201.8
20.7
188.6
–
0.3
3.2
0.6
(7.8)
(40.4)
(237.9)
(0.6)
5.9
36.7
2.3
(0.4)
6.1
83.8
2.9
(2.0)
(13.0)
–
–
Notes
1 Figures have been restated as described in the accounting policies.
2 Other costs of services and general and administrative costs include £685.6 million
(2019: £731.4 million, 2018: £713.0 million) of other pass-through costs.
In 2020, operating profit includes credits totalling £46.3 million (2019:
£26.9 million, 2018: £25.6 million) relating to the release of excess provisions
and other balances established in respect of acquisitions completed prior
to 2019. Further details of the Group’s approach to acquisition reserves,
as required by IFRS 3 Business Combinations, are given in note 29.
Amortisation and impairment of acquired intangibles in 2020 includes an
impairment charge in the year of £21.6 million (2019: £26.5 million, 2018:
£89.1 million) in regard to certain brand names that are no longer in use
and customer relationships where the underlying clients have been lost.
Further details of the goodwill impairment charge of £2,822.9 million are
provided in note 14. In 2019, the goodwill impairment charge of £47.7 million
relates to a number of under-performing businesses in the Group where the
impact of past, local economic conditions and trading circumstances on these
businesses was sufficiently severe to indicate impairment to the carrying value
of goodwill. In 2018, the goodwill impairment charge of £176.5 million primarily
relates to a charge of £142.8 million on VMLY&R.
Investment and other write-downs of £296.2 million primarily relate to the
impairment of certain investments in associates, including £255.6 million in
relation to Imagina in Spain. Further details of the Group’s impairment review
are provided in note 14.
Gains on disposal of investments and subsidiaries of £40.4 million in 2019
include a gain of £28.6 million on the disposal of the Group’s interest in Chime.
Gains on disposal of investments and subsidiaries of £237.9 million in 2018
include a gain of £185.3 million on the disposal of the Group’s interest in
Globant S.A.
Restructuring costs in relation to Covid-19 of £232.5 million primarily relate to
severance and property costs which the Group undertook in response to the
Covid-19 pandemic. As management continues to assess the impact of
Covid-19 on long-term working practices and the Group’s real estate portfolio,
further impairments may occur in the future.
Restructuring and transformation costs of £80.7 million (2019: £153.5 million,
2018: £265.5 million) are in relation to the continuing restructuring plan,
first outlined on the Investor Day in December 2018. As part of that plan,
restructuring actions have been taken to right-size under-performing
businesses, address high-cost severance markets and simplify operational
structures. Further restructuring and transformation costs will be incurred
in 2021.
Total impairment charges included in restructuring costs of £196.7 million
consist of £147.6 million within restructuring costs in relation to Covid-19 and
£49.1 million within restructuring and transformation costs. These impairment
charges include £117.0 million in relation to right-of-use assets and £79.7 million
of related property, plant and equipment, arising from the Group’s re-
assessment of its property requirements as a result of effective remote
working practises during the Covid-19 pandemic and continued focus on
campuses.
In 2020, a provision of £25.6 million was made for potential legal settlements.
In 2019, the Group received £16.8 million in settlement of a class action lawsuit
against Comscore Inc. for providing materially false and misleading
information regarding their company and its financial performance.
In 2020, the Group received £77.1 million of aid from governments around the
world in relation to the Covid-19 pandemic, predominantly in Western
Continental Europe and Asia Pacific, which is included as a credit in other
staff costs.
In March 2019, the Group entered into a sale and leaseback agreement for its
office space at 3 Columbus Circle in New York. The Group sold the freehold
for proceeds of £159.0 million and simultaneously entered into a 15-year lease.
The net gain recognised from the sale and leaseback is £7.9 million.
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
Audit-related services2
Tax compliance services
Total other fees
Total fees
Notes
1
2 Audit-related services include audits for earnout purposes.
Includes a true-up of £3.5 million.
2020
£m
2019
£m
1.9
22.9
4.5
29.3
1.1
0.1
1.2
30.5
1.5
28.0
5.0
34.5
8.2
–
8.2
42.7
2018
£m
1.4
25.21
4.2
30.8
4.7
0.1
4.8
35.6
172
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
6. FINANCE AND INVESTMENT INCOME, FINANCE COSTS
AND REVALUATION AND RETRANSLATION OF FINANCIAL
INSTRUMENTS
Finance and investment income includes:
Continuing operations
Income from equity investments
Interest income
Finance costs include:
Continuing operations
Net interest expense on pension plans
Interest on other long-term employee benefits
Interest expense and similar charges1
Interest expense related to lease liabilities
2020
£m
8.7
74.0
82.7
2020
£m
2.9
3.1
205.0
101.0
312.0
2019
£m
18.3
80.7
99.0
2019
£m
3.5
3.9
252.0
99.7
359.1
2018
£m
15.2
83.7
98.9
2018
£m
3.6
3.5
272.0
–
279.1
Revaluation and retranslation of financial instruments include:
Continuing operations
Movements in fair value of treasury
instruments
Premium on the early repayment of bonds
Revaluation of investments held at
fair value through profit or loss
Revaluation of put options over
non-controlling interests
Revaluation of payments due to
vendors (earnout agreements)
Retranslation of financial instruments
2020
£m
15.4
–
8.0
20192
£m
0.4
(63.4)
20182
£m
(11.0)
–
9.1
67.8
12.3
(24.3)
25.9
13.4
(196.3)
(147.2)
(3.7)
245.7
163.8
46.1
(205.1)
(76.3)
Notes
1
Interest expense and similar charges are payable on bank overdrafts, bonds and bank loans
held at amortised cost.
2 Figures have been restated as described in the accounting policies.
The majority of the Group’s long-term debt is represented by $1,563 million
of US dollar bonds at an average interest rate of 4.06%, €3,600 million of
Eurobonds at an average interest rate of 2.05% and £650 million of Sterling
bonds at an average interest rate of 3.21%.
Average borrowings under the US Dollar Revolving Credit Facilities
(note 10) amounted to the equivalent of nil (2019: $72 million at an average
interest rate of 1.11%).
Average borrowings under the Australian Dollar Revolving Credit Facilities
amounted to A$151 million at an average rate of 2.06% (2019: A$310 million at
an average rate of 2.95%).
Average borrowings under the US Commercial Paper Programme for 2020
amounted to $2 million at an average interest rate of 1.66% inclusive of margin
(2019: $41 million at an average interest rate of 2.46% inclusive of margin).
Average borrowings under the Euro Commercial Paper Programme for
2020 amounted to nil (2019: £255 million at an average interest rate of 1.16%
inclusive of currency swaps).
4. SHARE OF RESULTS OF ASSOCIATES
Share of results of associates includes:
Continuing operations
Share of profit before interest and taxation
Share of exceptional losses
Share of interest and non-controlling interests
Share of taxation
2020
£m
142.5
(146.1)
(91.4)
(41.0)
(136.0)
2019
£m
99.2
(47.8)
(19.4)
(17.3)
14.7
2018
£m
110.8
(41.5)
(15.1)
(23.7)
30.5
Share of exceptional losses of £146.1 million (2019: £47.8 million, 2018: £41.5 million)
primarily comprise £54.3 million (2019: £5.3 million, 2018 £nil) of amortisation
and impairment of acquired intangible assets as well as restructuring and
one-off transaction costs of £89.3 million (2019: £20.3 million, 2018: £nil)
within Kantar.
5. OUR PEOPLE
Our staff numbers, including the Kantar disposal group up to the date of
disposal, averaged 104,163 for the year ended 31 December 2020 against
132,823 in 2019 and 133,903 in 2018. Their geographical distribution
was as follows:
North America
United Kingdom
Western Continental Europe
Asia Pacific, Latin America, Africa &
Middle East and Central & Eastern Europe
2020
21,524
10,670
21,551
2019
25,008
14,192
26,973
2018
25,990
14,331
26,825
50,418
104,163
66,650
132,823
66,757
133,903
Their reportable segment distribution was as follows:
Global Integrated Agencies
Data Investment Management
Public Relations
Specialist Agencies
2020
79,937
1,341
6,810
16,075
104,163
2019
82,295
26,325
6,890
17,313
132,823
2018
83,015
27,813
6,891
16,184
133,903
At the end of 2020, staff numbers were 99,830 (2019: 106,786, 2018: 134,281).
Staff costs include:
Continuing operations
Wages and salaries
Cash-based incentive plans
Share-based incentive plans
Social security costs
Pension costs
Severance
Other staff costs1
2020
£m
4,781.0
110.7
74.4
570.9
171.7
68.2
779.6
6,556.5
2019
£m
4,946.2
227.6
66.0
591.7
169.7
42.6
1,046.8
7,090.6
2018
£m
4,828.0
233.0
78.3
579.0
160.9
30.0
1,041.4
6,950.6
Note
1 Freelance and temporary staff costs are included in other staff costs.
Compensation for key management personnel includes:
Short-term employee benefits
Pensions and other post-retirement benefits
Share-based payments
2020
£m
17.9
1.0
10.3
29.2
2019
£m
18.3
1.0
10.8
30.1
2018
£m
3.5
0.4
3.8
7.7
Key management personnel comprises the Board and the Executive
Committee. The Executive Committee was established in 2019 therefore is not
included in the 2018 figures above. Further details of compensation for the
Board are disclosed on pages 134-154.
WPP ANNUAL REPORT 2020
173
FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS
The tax charge may be affected by the impact of acquisitions, disposals and
other corporate restructurings, the resolution of open tax issues, and the
ability to use brought forward tax losses. Changes in local or international tax
rules, for example, as a consequence of the financial support programmes
implemented by governments during the Covid-19 pandemic, changes arising
from the application of existing rules or challenges by tax or competition
authorities, may expose the Group to additional tax liabilities or impact the
carrying value of deferred tax assets, which could affect the future tax charge.
Liabilities relating to open and judgemental matters are based upon an
assessment of whether the tax authorities will accept the position taken, 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, such differences will impact the current and deferred income tax
assets and liabilities in the period in which such determination is made.
The Group does not currently consider that judgements made in assessing tax
liabilities have a significant risk of resulting in any material additional charges
or credits in respect of these matters, within the next financial year, beyond
the amounts already provided.
In the UK Budget on 3 March 2021, the Chancellor of the Exchequer announced
an increase in the UK corporation tax rate from 19% to 25%, which is due to be
effective from 1 April 2023. This change was not substantively enacted at the
balance sheet date and hence has not been reflected in the measurement of
deferred tax balances at the period end. This change is not expected to have
a material impact on the Group’s deferred tax balances.
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.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. TAXATION
The tax rate on reported (loss)/profit before tax was -4.6% (2019: 22.6%,
2018: 25.1%).
The tax charge comprises:
Continuing operations
Corporation tax
Current year
Prior years
Deferred tax
Current year
Prior years
Tax charge
2020
£m
2019
£m
2018
£m
310.0
(83.2)
226.8
(80.2)
(17.3)
(97.5)
129.3
423.0
(63.4)
359.6
(78.3)
(6.3)
(84.6)
275.0
404.2
(108.1)
296.1
(41.5)
1.4
(40.1)
256.0
The corporation tax credit for prior years in 2020, 2019, and 2018, mainly
comprises the release of a number of provisions following the resolution
of tax matters in various countries.
The tax charge for the year can be reconciled to (loss)/profit before taxation
in the consolidated income statement as follows:
Continuing operations
(Loss)/profit before taxation
Tax at the corporation tax rate of 19.0%2
Tax effect of share of results of associates
Irrecoverable withholding taxes
Items that are not deductible in determining
taxable profit
Goodwill impairment
Effect of different tax rates in subsidiaries
operating in other jurisdictions
US Transition Tax related to unremitted
foreign earnings
Origination and reversal on 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 (loss)/profit before tax
2020
£m
(2,790.6)
(530.2)
16.2
49.4
20191
£m
1,214.3
230.7
(2.7)
44.7
20181
£m
1,019.3
193.7
(5.8)
48.9
69.2
542.4
92.7
–
41.5
10.4
77.1
34.1
33.1
71.2
–
(4.6)
(29.3)
(3.4)
21.1
13.2
5.1
19.9
(1.7)
(42.7)
(25.5)
–
(24.1)
(7.4)
(1.7)
(98.8)
129.3
(4.6%)
(19.9)
(49.8)
275.0
22.6%
(20.4)
(86.3)
256.0
25.1%
Notes
1 Figures have been restated as described in the accounting policies.
2 As the Group is subject to the tax rates of more than one country, it has chosen to present
its reconciliation of the tax charge using the UK corporation tax rate of 19.0% (2019: 19.0%,
2018: 19.0%).
174
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
8. ORDINARY DIVIDENDS
Amounts recognised as distributions to equity holders in the year:
DILUTED EPS
The calculation of diluted reported and headline EPS is as follows:
2020
2019
2018
2020
2019
2018
Per share
2019 Final dividend
–
2020 Interim dividend 10.00p
10.00p
Pence per share
37.30p
22.70p
60.00p
37.30p
22.70p
60.00p
2020
2019
2018
Per ADR1
2019 Final dividend
–
2020 Interim dividend 64.18¢
64.18¢
Cents per ADR
249.00¢
144.88¢
393.88¢
240.34¢
151.53¢
391.87¢
£m
–
122.0
122.0
2020
$m
–
156.6
156.6
£m
466.4
284.1
750.5
£m
464.6
282.8
747.4
2019
2018
$m
622.8
362.6
985.4
$m
598.7
377.6
976.3
Proposed final dividend for the year ended 31 December 2020:
Per share
Final dividend
Per ADR1
Final dividend
2020
2019
2018
Pence per share
14.00p
–
37.3p
2020
2019
2018
Cents per share
89.85¢
–
249.00¢
Note
1
These figures have been translated for convenience purposes only, using the approximate
average rate for the year of US$1.2836 (2019: US$1.2765, 2018: US$1.3351). 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.
Final dividends are paid in the subsequent year to which they relate. The 2019
final dividend which was due to be paid in 2020 was cancelled to protect
liquidity in light of the threat from Covid-19 at that time.
9. EARNINGS PER SHARE
BASIC EPS
The calculation of basic reported and headline EPS is as follows:
Continuing operations
Diluted reported earnings (£m)
Diluted headline earnings (£m)
Weighted average shares used in reported
diluted EPS calculation (m)2
Weighted average shares used in headline
diluted EPS calculation (m)
Diluted reported EPS
Diluted headline EPS
2020
(2,973.8)
740.3
20191
860.1
984.2
20181
698.2
1,153.1
1,223.0
1,260.6
1,261.2
1,236.0
(243.2p)
59.9p
1,260.6
68.2p
78.1p
1,261.2
55.4p
91.4p
Discontinued operations
Diluted reported earnings (£m)
Weighted average shares used in diluted
EPS calculation (m)2
Diluted reported EPS
2020
6.5
2019
(3.8)
2018
126.4
1,223.0
0.5p
1,260.6
(0.3p)
1,261.2
10.0p
Continuing and discontinued operations
Diluted reported earnings (£m)
Weighted average shares used in diluted
EPS calculation (m)2
Diluted reported EPS
2020
(2,967.3)
20191
856.3
20181
824.6
1,223.0
(242.7p)
1,260.6
67.9p
1,261.2
65.4p
Notes
1 Earnings figures have been restated as described in the accounting policies.
2 The weighted average shares used in the basic EPS calculation for 2020 has also been used for
reported diluted EPS due to the anti-dilutive effect of the weighted average shares calculated for
the reported diluted EPS calculation.
Diluted EPS has been calculated based on the diluted reported and diluted
headline earnings amounts above. At 31 December 2020, options to purchase
14.2 million ordinary shares (2019: 19.3 million, 2018: 16.9 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:
Continuing operations
Reported earnings2 (£m)
Headline earnings (£m) (page 212)
Weighted average shares used in basic
EPS calculation (m)
Reported EPS
Headline EPS
Discontinued operations
Reported earnings2 (£m)
Weighted average shares used in basic
EPS calculation (m)
Reported EPS
2020
(2,973.8)
740.3
20191
860.1
984.2
20181
698.2
1,153.1
1,223.0 1,250.0 1,247.8
56.0p
(243.2p) 68.8p
92.4p
78.7p
60.5p
Weighted average shares used in basic EPS
calculation
Dilutive share options outstanding
Other potentially issuable shares
Weighted average shares used in diluted EPS
calculation
2020
m
2019
m
2018
m
1,223.0
–
13.0
1,250.0
0.3
10.3
1,247.8
1.6
11.8
1,236.0
1,260.6
1,261.2
2020
6.5
2019
(3.8)
2018
126.4
At 31 December 2020 there were 1,296,080,242 (2019: 1,328,167,813, 2018:
1,332,678,227) ordinary shares in issue, including 70,748,100 treasury shares
(2019: 70,787,730, 2018: 70,854,553).
1,223.0 1,250.0 1,247.8
10.1p
(0.3p)
0.5p
Continuing and discontinued operations
Reported earnings2 (£m)
Weighted average shares used in basic
EPS calculation (m)
Reported EPS
2020
20191
(2,967.3) 856.3
20181
824.6
1,223.0 1,250.0 1,247.8
66.1p
(242.7p) 68.5p
Notes
1 Earnings figures have been restated as described in the accounting policies.
2 Reported earnings is equivalent to (loss)/profit for the year attributable to equity holders of
the parent.
WPP ANNUAL REPORT 2020
175
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
Share cancellations
Net increase/(decrease) in
drawings on bank
loans and corporate bonds
Amortisation of financing costs
included in debt
Changes in fair value due to
hedging arrangements
Other movements
Exchange adjustments
End of year
Shares
Debt
2020
£m
703.1
–
(3.2)
–
–
–
–
–
699.9
2019
£m
703.0
0.6
(0.5)
–
–
–
–
–
703.1
2020
£m
4,272.9
–
–
2019
£m
6,217.9
–
–
632.8
(1,713.2)
7.5
10.3
(1.4)
(7.1)
128.0
5,032.7
14.3
1.5
(257.9)
4,272.9
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 2020, the Company’s share base was entirely composed
of ordinary equity share capital and share premium of £699.9 million
(2019: £703.1 million), further details of which are disclosed in note 27.
DEBT
US$ bonds The Group has in issue $500 million of 3.625% bonds due
September 2022, $750 million of 3.75% bonds due September 2024, $93 million
of 5.125% bonds due September 2042 and $220 million of 5.625% bonds due
November 2043.
Eurobonds During the year, the Group issued €750 million of 2.375% bonds
due May 2027. The Group also has in issue €750 million of 3.0% bonds due
November 2023, €500 million of 1.375% bonds due March 2025, €750 million
of 2.25% bonds due September 2026, €600 million of 1.625% bonds due March
2030, and €250 million of Floating Rate Notes carrying a coupon of 3m
EURIBOR +0.45% due March 2022.
Sterling bonds During the year, the Group issued £250 million of 3.750% bonds
due May 2032. The Group also has in issue £400 million of 2.875% bonds due
September 2046.
Revolving Credit Facility The Group has a five-year Revolving Credit Facility
of $2.5 billion due March 2025, signed in March 2019 and extended in February
2020. The Group’s borrowing under these facilities, which are drawn down
predominantly in pounds sterling, averaged the equivalent of $nil in 2020.
At 31 December 2020, the Group's subsidiary, WPP AUNZ had a A$150 million
Revolving Credit Facility due June 2020 and a A$270 million Revolving Credit
Facility due June 2021. In August 2020, the A$150 million Revolving Credit
Facility was extended to August 2021 and the A$270 million Revolving Credit
Facility was extended to August 2023. The Group’s borrowings under the
Australian dollar facilities which were drawn down in Australian dollars and
New Zealand dollars, averaged the equivalent of A$151 million in 2020.
The Group had available undrawn committed credit facilities of
£2,023.2 million at 31 December 2020 (2019: £2,005.6 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$150 million Revolving Credit Facility and the
A$270 million Revolving Credit Facility are governed by certain financial
covenants based on the results and financial position of WPP AUNZ.
The $2.5 billion Revolving Credit Facility, due March 2025, includes terms
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 February 2021, the $2.5 billion Revolving Credit Facility was extended to
March 2026.
176
WPP ANNUAL REPORT 2020
COMMERCIAL PAPER PROGRAMMES
The Group operates commercial paper programmes using its Revolving Credit
Facility as a backstop. The average US commercial paper outstanding in 2020
was $2 million (2019: $41 million). The average Euro commercial paper
outstanding in 2020 was £nil (2019: £255 million) inclusive of the effect of
currency swaps. There was no US or Euro commercial paper outstanding at
31 December 2020.
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
Note
1 Figures have been restated as described in the accounting policies.
2020
£m
(182.2)
(725.6)
(795.7)
(649.1)
(528.2)
(3,387.1)
20191
£m
(324.8)
(204.0)
(692.1)
(726.3)
(634.2)
(2,761.9)
(5,343.3)
(6,267.9)
(8,572.4)
(8,562.0)
(14,829.9) (13,915.7)
1,070.4
(13,594.7) (12,845.3)
11,305.7
12,899.1
(1,539.6)
(695.6)
1,235.2
Analysis of fixed and floating rate debt by currency including the effect of
interest rate and cross-currency swaps:
2020
Currency
$
£
€
– fixed
– fixed
– fixed
– floating
Other
2019
Currency
$
£
€
– fixed
– fixed
– fixed
– floating
Other
£m
Fixed
rate1
Floating
basis
Period
(months)1
1,585.1
1,094.1
2,104.6
223.9
25.0
5,032.7
n/a
4.06
n/a
3.21
n/a
2.20
n/a EURIBOR
n/a
n/a
70
167
79
15
n/a
£m
Fixed
rate1
Floating
basis
Period
(months)1
1,178.2
844.1
1,777.7
423.3
49.6
4,272.9
n/a
4.06
n/a
2.73
2.34
n/a
n/a EURIBOR
n/a
n/a
95
188
82
16
n/a
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 undiscounted anticipated cash flows
in relation to the Group’s financial derivatives, which include interest rate swaps,
forward contracts and other foreign exchange swaps assuming interest rates
and foreign exchange rates as at 31 December:
2020
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
Payable
£m
201.7
11.6
41.9
11.6
449.8
–
716.6
Receivable
£m
195.4
6.2
35.7
6.3
466.3
–
709.9
Financial assets
Payable
£m
102.3
17.8
449.2
–
–
–
569.3
Receivable
£m
98.2
13.6
461.2
–
–
–
573.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
2019
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
Payable
£m
113.6
17.5
11.8
11.6
11.6
449.8
615.9
Receivable
£m
107.8
10.9
6.2
6.1
6.1
456.3
593.4
Financial assets
Payable
£m
44.0
–
–
–
–
–
44.0
Receivable
£m
45.0
–
–
–
–
–
45.0
11. ANALYSIS OF CASH FLOWS
The following tables analyse the items included within the main cash flow
headings on page 167.
Net cash from operating activities:
Acquisitions and disposals:
Initial cash consideration
Cash and cash equivalents acquired
Earnout payments
Purchase of other investments
(including associates)
Acquisitions
Proceeds on disposal of investments
and subsidiaries1
Cash and cash equivalents disposed
Disposals of investments and subsidiaries
Cash consideration for non-controlling
interests
Net acquisition payments and
disposal proceeds
2020
£m
(32.8)
−
(115.2)
2019
£m
(3.9)
–
(130.2)
2018
£m
(126.7)
11.3
(120.2)
(30.4)
(178.4)
(27.2)
(161.3)
(48.1)
(283.7)
320.0
(47.7)
272.3
2,468.5
(327.5)
2,141.0
849.0
(15.1)
833.9
(80.6)
(62.7)
(109.9)
13.3
1,917.0
440.3
(Loss)/profit for the year
Taxation
Revaluation and retranslation of financial
instruments
Finance costs
Finance and investment income
Share of results of associates
Goodwill impairment on classification as held for
sale
Gain on sale of discontinued operations
Attributable tax expense on sale of discontinued
operations
Operating (loss)/profit of continuing
and discontinued operations
Adjustments for
Non-cash share-based incentive plans (including
share options)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Impairment charges included within restructuring
costs
Impairment of goodwill
Amortisation and impairment of acquired
intangible assets
Amortisation of other intangible assets
Investment and other write-downs
Gains on disposal of investments and subsidiaries
Gains on remeasurement of equity interests
arising from a change in scope of ownership
Gain on sale of freehold property in New York
Losses on sale of property, plant and equipment
Operating cash flow before movements
in working capital and provisions
Decrease/(increase) in trade receivables and
accrued income
Increase in trade payables and deferred income
Decrease/(increase) in other receivables
Decrease in other payables – short-term
(Decrease)/increase in other payables – long-term
Increase in provisions
Cash generated by operations
Corporation and overseas tax paid
Payment on early settlement of bonds
Interest and similar charges paid
Interest paid on lease liabilities
Interest received
Investment income
Dividends from associates
Net cash inflow from operating activities
2020
£m
(2,903.5)
131.5
20191
£m
950.1
353.8
20181
£m
901.1
323.9
147.2
312.3
(82.8)
136.0
(154.4)
376.4
(102.6)
(21.2)
72.8
289.3
(104.8)
(43.5)
–
(10.0)
94.5
(73.8)
1.9
157.4
–
–
–
(2,267.4) 1,580.2 1,438.8
74.4
174.8
331.9
196.7
2,822.9
71.4
203.2
317.9
–
47.7
84.8
225.1
–
–
176.5
89.1
35.2
296.2
(7.8)
(0.6)
–
0.3
135.6
29.6
7.5
(45.1)
280.0
38.7
2.0
(235.5)
(0.4)
(7.9)
3.2
(2.0)
–
0.6
1,745.7 2,342.9 2,009.0
585.2
195.0
123.3
(36.6)
(44.3)
15.6
159.0
394.7
(263.8)
(16.4)
53.7
23.1
(298.9)
500.9
(52.9)
(31.8)
0.4
48.0
2,583.9 2,693.2 2,174.7
(383.6)
(536.0)
–
(63.4)
(252.8)
(270.6)
–
(105.1)
90.4
80.8
15.4
18.3
49.7
33.3
2,054.8 1,850.5 1,693.8
(371.5)
–
(173.9)
(98.5)
73.6
8.7
32.5
Note
1 Figures have been restated as described in the accounting policies.
Note
1 Proceeds on disposal of investments and subsidiaries includes return of capital from investments
in associates.
Share repurchases and buybacks:
Purchase of own shares by ESOP Trusts
Shares purchased into treasury
Net cash outflow
Proceeds from issue of bonds:
Proceeds from issue of €750 million bonds
Proceeds from issue of £250 million bonds
Proceeds from issue of €250 million bonds
Proceeds from issue of €500 million bonds
Net cash inflow
Repayment of borrowings:
Decrease in drawings on bank loans
Repayment of €250 million bonds
Repayment of €600 million bonds
Repayment of $812 million bonds
Partial repayment of $272 million bonds
Partial repayment of $450 million bonds
Repayment of £200 million bonds
Repayment of €252 million bonds
Net cash outflow
Cash and cash equivalents:
Cash at bank and in hand
Short-term bank deposits
Overdrafts2
2020
£m
(5.1)
(285.1)
(290.2)
2019
£m
–
(43.8)
(43.8)
2018
£m
(102.8)
(104.3)
(207.1)
2020
£m
665.5
250.0
−
−
915.5
2019
£m
–
–
–
–
–
2018
£m
–
–
218.8
438.0
656.8
2020
£m
(59.6)
(223.1)
−
−
−
−
−
−
(282.7)
2019
£m
(70.6)
–
(512.7)
(618.8)
(135.4)
(176.2)
(199.5)
–
(1,713.2)
2018
£m
(819.3)
–
–
–
(20.8)
(37.3)
–
(220.0)
(1,097.4)
2020
£m
20191
£m
10,075.0 10,442.1
863.6
2,824.1
(8,572.4)
(8,562.0)
2,733.3
4,337.1
20181
£m
10,433.4
632.4
(8,864.6)
2,201.2
Notes
1 Figures have been restated as described in the accounting policies.
2 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.
WPP ANNUAL REPORT 2020
177
Results of the discontinued operations, which have been included in profit for
the year, were as follows:
Non-controlling interests
Net assets excluding non-controlling interests
The gain on sale of discontinued operations disposed by 31 December 2020 is
calculated as follows:
Intangible assets (including goodwill)
Property, plant and equipment
Right-of-use assets
Interests in associates and joint ventures
Other investments
Deferred tax assets
Corporate income tax recoverable
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporate income tax payable
Lease liabilities
Deferred tax liabilities
Provisions for post-employment benefits
Provisions for liabilities and charges
Net assets
2020
£m
162.5
15.1
27.2
4.6
–
6.1
16.9
170.3
32.2
(141.6)
(5.6)
(23.2)
(1.3)
(7.9)
(0.6)
254.7
2019
£m
2,410.0
115.7
103.5
92.3
11.5
44.1
49.8
748.8
324.9
(839.8)
(48.2)
(106.3)
(98.6)
(26.7)
(22.4)
2,758.6
(6.1)
248.6
(19.1)
2,739.5
240.9
–
(4.5)
1.6
238.0
2,352.1
231.7
(56.1)
1.6
2,529.3
Consideration received in cash and cash equivalents
Re-investment in equity stake1
Transaction costs
Deferred consideration2
Total consideration received
Loss on sale before exchange adjustments
Exchange adjustments recycled to the income statement
Gain on sale of discontinued operation
(10.6)
20.6
10.0
(210.2)
284.0
73.8
Notes
1 Re-investment in equity stake represents the value of the Group’s 40% stake in the new Kantar
group as part of the disposal.
2 Deferred consideration in 2019 is made up of £79.6 million expected to be received in future
periods on the satisfaction of certain conditions and the deferral of £78.0 million consideration
against services the Group will supply to Kantar on favourable terms in the future. The conditions
expected to be met in the future include the settlement of ongoing legal cases, realisation of the
value of certain investments and the utilisation of certain tax losses and allowances. There was
uncertainty at the date of disposal in regard to the ultimate resolution of these items and
estimates of amounts due to be received were required to be made; there were no individually
material estimates. Future services provided by the Group to Kantar arose through the
negotiation of Transition Service Arrangements, as is customary for a disposal of this magnitude.
The Group will support Kantar for a period of up to four years, primarily in the area of IT, on terms
which are favourable to the disposal group. As such, an element of consideration has been
deferred and will be recognised as the services are provided.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
In July 2019, the Group announced the proposed sale of its Kantar business to
Bain Capital. On 5 December 2019 the first stage of the transaction completed,
consisting of approximately 90% of the Kantar group, with consideration of
£2,140.2 million after tax and disposal costs. The sale involved the Group
disposing of the Kantar business and holding 40% equity stakes post-transaction
which are treated as associates. This generated a pre-tax gain of £73.8 million,
tax charge of £157.4 million and goodwill impairment of £94.5 million for the
Group. In 2020, the remaining stages of the transaction completed with total
consideration of £236.1 million after tax and disposal costs. This generated a
pre-tax gain of £10.0 million and a tax charge of £1.9 million.
Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
where certain conditions are met, an asset or disposal group that has been
put up for sale should be recognised as "held for sale". The criterion was met
on 9 July 2019, following Board approval of the disposal of Kantar to Bain
Capital, representing the date at which the appropriate level of management
was committed to a plan to sell the disposal group. The Kantar disposal
group therefore became held for sale on this date.
The Kantar group is classified as a discontinued operation in 2019 and 2020
under IFRS 5, as it forms a separate major line of business and there was a
single co-ordinated plan to dispose of it.
Revenue
Costs of services
Gross profit
General and administrative costs
Operating profit
Share of results of associates
Profit before interest and taxation
Finance and investment income
Finance costs
Revaluation and retranslation of financial
instruments
Profit before taxation
Attributable tax expense
Profit after taxation
Goodwill impairment on classification
as held for sale1
Gain on sale of discontinued operations
Attributable tax expense on sale
of discontinued operations
2020
£m
107.4
(92.3)
15.1
(4.4)
10.7
–
10.7
0.1
(0.3)
–
10.5
(2.2)
8.3
2019
£m
2,387.5
(1,951.5)
436.0
(151.7)
284.3
6.5
290.8
3.6
(17.3)
(9.4)
267.7
(78.8)
188.9
2018
£m
2,555.7
(2,104.4)
451.3
(257.8)
193.5
13.0
206.5
5.4
(9.7)
3.5
205.7
(67.9)
137.8
–
10.0
(94.5)
73.8
(1.9)
(157.4)
–
–
–
Net gain attributable to discontinued operations
16.4
10.8
137.8
Attributable to
Equity holders of the parent
Non-controlling interests²
6.5
9.9
16.4
(3.8)
14.6
10.8
126.4
11.4
137.8
Notes
1
In 2019, goodwill impairment of £94.5 million arose from the assessment of fair value less costs
to sell under IFRS 5.
2 In 2020, non-controlling interests includes £9.3 million recognised on the disposal of Kantar
within WPP Scangroup, a 56% owned subsidiary of the Group.
For the year ended 31 December 2020, the Kantar group contributed
£30.8 million (2019: £322.9 million, 2018: £292.5 million) to the Group’s net
operating cash flows, paid £0.9 million (2019: £53.2 million, 2018: £59.5 million)
in respect of investing activities and paid £0.7 million (2019: £27.2 million,
2018: £7.9 million) in respect of financing activities.
178
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
13. LEASES
The movements in 2020 and 2019 were as follows:
The maturity of lease liabilities at 31 December 2020 were as follows:
Right-of-use assets
1 January 2019
Additions
Transfers to net investment in subleases2
Disposals
Depreciation of right-of-use assets
Transfer to disposal group classified
as held for sale
31 December 2019
Additions
Disposals
Depreciation of right-of-use assets
Impairment charges included in restructuring
costs
Other write-downs
Exchange adjustments
31 December 2020
Land and
buildings1
£m
1,862.5
348.1
(37.6)
(31.0)
(301.5)
Plant and
machinery
£m
32.6
16.5
–
(0.6)
(16.4)
(134.4)
1,706.1
233.0
(40.5)
(312.1)
(117.0)
(8.1)
0.4
1,461.8
(3.7)
28.4
35.0
(1.9)
(19.8)
–
–
1.0
42.7
Total
£m
1,895.1
364.6
(37.6)
(31.6)
(317.9)
(138.1)
1,734.5
268.0
(42.4)
(331.9)
(117.0)
(8.1)
1.4
1,504.5
Notes
1 For the year ended 31 December 2020 and 2019, the Company has £67.9 million and £27.4 million
of right-of-use assets that are classified as investment property, respectively.
2 The sublease of certain office space is classified as a finance lease and relates primarily to Kantar
business units that were sold. The Company de-recognised the right-of-use asset (to the extent
that it is subject to the sublease) and recognised the net investment in subleases, which is
included within trade and other receivables. No other disclosures are deemed necessary as it is
not material.
Lease liabilities
1 January 2019
Additions
Interest expense related to lease liabilities (net)
Disposals
Repayment of lease liabilities (including interest)
Transfer to disposal group classified
as held for sale
31 December 2019
Additions
Interest expense related to lease liabilities (net)
Disposals
Repayment of lease liabilities (including interest)
Exchange adjustments
31 December 2020
Land and
buildings
£m
2,294.4
325.9
101.5
(27.5)
(326.2)
Plant and
machinery
£m
31.8
12.3
1.2
(0.2)
(14.9)
(144.7)
2,223.4
226.9
96.8
(49.4)
(379.1)
(6.8)
2,111.8
(3.9)
26.3
37.1
1.7
(1.7)
(19.5)
0.6
44.5
Total
£m
2,326.2
338.2
102.7
(27.7)
(341.1)
(148.6)
2,249.7
264.0
98.5
(51.1)
(398.6)
(6.2)
2,156.3
The following table shows the breakdown of the lease expense between
amounts charged to operating profit and amounts charged to finance costs:
Continuing operations
Depreciation of right-of-use assets:
Land and buildings
Plant and machinery
Impairment charges
Short-term lease expense
Low-value lease expense
Variable lease expense
Sublease income
Charge to operating profit
Interest expense related to lease liabilities
Charge to profit before taxation for leases
2020
£m
2019
£m
(312.1)
(19.8)
(125.1)
(36.7)
(2.3)
(65.4)
25.3
(536.1)
(101.0)
(637.1)
(286.5)
(15.1)
–
(83.8)
(2.9)
(74.2)
17.5
(445.0)
(99.7)
(544.7)
Variable lease payments primarily include real estate taxes and insurance costs.
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
Effect of discounting
Lease liability at end of year
Short-term lease liability
Long-term lease liability
2020
£m
412.3
357.7
309.0
255.3
209.9
1,238.9
2,783.1
(626.8)
2,156.3
323.8
1,832.5
2019
£m
385.9
384.0
335.4
283.0
220.5
1,393.7
3,002.5
(752.8)
2,249.7
302.2
1,947.5
The total committed future cash flows for leases not yet commenced at
31 December 2020 is £674.3 million.
The Group does not face a significant liquidity risk with regard to its lease
liabilities. Refer to note 25 for management of liquidity risk.
14. INTANGIBLE ASSETS
GOODWILL
The movements in 2020 and 2019 were as follows:
Cost
1 January 2019
Additions2
Revision of earnout estimates
Disposals
Transfer to disposal group classified as held for sale
Exchange adjustments
31 December 2019
Additions2
Revision of earnout estimates
Disposals
Exchange adjustments
31 December 2020
Accumulated impairment losses and write-downs
1 January 2019
Impairment on classification as held for sale3
Impairment losses for the year
Transfer to disposal group classified as held for sale
Exchange adjustments
31 December 2019
Impairment losses for the year
Exchange adjustments
31 December 2020
Net book value
31 December 2020
31 December 2019
1 January 2019
£m1
14,051.9
8.5
(14.1)
(18.6)
(2,729.1)
(410.0)
10,888.6
40.1
(2.8)
(24.6)
(94.0)
10,807.3
919.3
70.9
47.7
(230.6)
(29.3)
778.0
2,822.9
(182.4)
3,418.5
7,388.8
10,110.6
13,132.6
Notes
1 Figures have been restated as described in the accounting policies.
2 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.
3 Goodwill impairment of £70.9 million arose from the assessment of fair value less costs to sell
of the Kantar group on classification as held for sale under IFRS 5.
WPP ANNUAL REPORT 2020
179
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. INTANGIBLE ASSETS CONTINUED
OTHER INTANGIBLE ASSETS
The movements in 2020 and 2019 were as follows:
Brands
with an
indefinite
useful life
£m
Acquired
intangibles
£m
Other
£m
Total
£m
Cost
1 January 2019
Additions
Disposals
New acquisitions
Other movements1
Exchange adjustments
Transfer to disposal group classified
as held for sale
31 December 2019
Additions
Disposals
New acquisitions
Other movements1
Exchange adjustments
31 December 2020
Amortisation and impairment
1 January 2019
Charge for the year
Disposals
Other movements
Exchange adjustments
Transfer to disposal group classified
as held for sale
31 December 2019
Charge for the year
Disposals
Other movements
Exchange adjustments
31 December 2020
1,132.8
–
–
–
–
(41.4)
–
1,091.4
–
–
–
–
(19.5)
1,071.9
–
13.2
–
–
–
–
13.2
–
–
–
(0.4)
12.8
2,610.0
–
(3.4)
3.5
–
(28.2)
(979.0)
1,602.9
–
(21.5)
4.8
5.7
(22.2)
1,569.7
2,015.2
116.8
(1.6)
–
(15.2)
(835.9)
1,279.3
88.5
(17.4)
5.7
(26.9)
1,329.2
437.3
43.2
(41.0)
–
(1.4)
(9.9)
(115.9)
312.3
54.3
(74.8)
0.2
13.1
(4.8)
300.3
322.9
29.6
(37.7)
2.6
(9.1)
(63.0)
245.3
35.2
(72.0)
5.4
(3.3)
210.6
4,180.1
43.2
(44.4)
3.5
(1.4)
(79.5)
(1,094.9)
3,006.6
54.3
(96.3)
5.0
18.8
(46.5)
2,941.9
2,338.1
159.6
(39.3)
2.6
(24.3)
(898.9)
1,537.8
123.7
(89.4)
11.1
(30.6)
1,552.6
Net book value
31 December 2020
31 December 2019
1 January 2019
1,059.1
1,078.2
1,132.8
240.5
323.6
594.8
89.7
67.0
114.4
1,389.3
1,468.8
1,842.0
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.
Cash-generating units (CGUs) with significant goodwill and brands with an
indefinite useful life as at 31 December are:
GroupM
Wunderman Thompson
VMLY&R
Ogilvy
Burson Cohn & Wolfe
Other
Goodwill
Brands with an
indefinite useful life
2020
£m
2,953.7
949.4
411.9
782.0
591.1
1,700.7
7,388.8
20191
£m
2,921.7
2,121.9
901.0
758.6
739.3
2,668.1
10,110.6
2020
£m
–
403.9
193.4
206.5
128.8
126.5
1,059.1
2019
£m
–
409.7
199.1
211.1
130.2
128.1
1,078.2
Note
1 Figures have been restated, as described in the accounting policies.
Other goodwill represents goodwill on a large number of CGUs, none of which
is individually significant in comparison to the total carrying value of goodwill.
Separately identifiable 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 other brands with an indefinite useful life 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 2020 include
brand names of £172.8 million (2019: £218.6 million), customer-related
intangibles of £67.1 million (2019: £100.6 million), and other assets (including
proprietary tools) of £0.6 million (2019: £4.4 million).
The total amortisation and impairment of acquired intangible assets of
£89.1 million (2019: £121.5 million) includes an impairment charge of £21.6 million
(2019: £26.5 million) comprising £13.5 million in regard to certain brand names
that are no longer in use, and £8.1 million in regard to customer relationships
where the underlying clients have been lost. £16.4 million of the impairment
charge relates to the Global Integrated Agencies segment, and £5.2 million
relates to the Specialist Agencies segment. In addition, the total amortisation
and impairment of acquired intangible assets includes £0.6 million (2019:
£5.6 million) in relation to associates.
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 impairment review is
undertaken annually on 30 September. Given the Covid-19 pandemic,
impairment indicators such as a decline in revenue less pass-through costs
forecasts, and downturns in the global economy and the advertising industry
were identified in the first half of 2020. As such, the Group performed an
impairment test over goodwill and intangible assets with indefinite useful lives
as at 30 June 2020. Given the continued impact of Covid-19, an additional
impairment test was performed as of 31 December 2020.
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.
The review assessed whether the carrying value of goodwill and intangible
assets with indefinite useful lives was supported by the value in use
determined as the net present value of future cash flows.
180
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
14. INTANGIBLE ASSETS CONTINUED
Due to the significant number of CGUs, the impairment test was performed in
two steps. In the first step, the recoverable amount was calculated for each
CGU using the latest available forecasts for 2020 and/or 2021, nil growth rate
thereafter (2019: 3.0%) and a conservative pre-tax discount rate of 13.5% (2019:
8.5%). The pre-tax discount rate of 13.5% was above the rate calculated for the
global networks of 12.5%. For smaller CGUs that operate primarily in a particular
region subject to higher risk, the higher of 13.5% or 100 basis points above the
regional discount rate was used in the first step.
The pre-tax discount rate applied to the cash flow projections for the CGUs
that operate globally was 12.5% (2019: 6.3% to 7.4%). We developed a global
discount rate that takes into account the diverse nature of the operations, as
these CGUs operate with a diverse range of clients in a range of industries
throughout the world, hence are subject to similar levels of market risks. The
pre-tax discount rates applied to the CGUs that have more regional specific
operations ranged from 10.8% to 18.6% for the 30 June 2020 test, 11.3% to
14.4% for the 30 September 2020 test, and 11.2% to 13.6% for the 31 December
2020 test (2019: 4.1% to 13.6%).
The recoverable amount was then compared to the carrying amount, which
includes goodwill, intangible assets, and other assets. CGUs where the
recoverable amount exceeded the carrying amount were not considered to
be impaired. Those CGUs where the recoverable amount did not exceed the
carrying amount were then further reviewed in the second step.
In the second step, these CGUs were retested for impairment using more
refined assumptions. This included using a CGU specific pre-tax discount rate
and management forecasts for a projection period of up to five-years, followed
by an assumed long-term growth rate of 2.0% (2019: 3.0%). If the recoverable
amount using the more specific assumptions did not exceed the carrying value
of a CGU, an impairment charge was recorded.
In developing the cash flows, we considered the impact of the Covid-19
pandemic to our businesses and adjusted projected revenue less pass-through
costs and operating margins in 2020 and/or 2021 accordingly. For the
remaining years in the projection period, we assessed when the cash flows
would recover to 2019 levels as representative of pre-Covid-19 revenue less
pass-through costs and operating margins. For many of our CGUs, recovery to
2019 levels by 2023 was estimated with some CGUs using alternative recovery
profiles as considered appropriate.
The long-term growth rate is derived from management’s best estimate of
the likely long-term trading performance with reference to external industry
reports and other relevant market trends. As at 31 December 2020, we have
assessed long-term industry trends based on recent historical data including
the long-term impact of Covid-19 and assumed a long-term growth rate of 2.0%
(2019: 3.0%). Management have made the judgement that the long-term growth
rate does not exceed the long-term average growth rate for the industry.
The discount rate uses the capital asset pricing model (CAPM) to derive
the cost of equity along with an estimated cost of debt that is weighted by
an appropriate capital structure to derive an indication of a weighted
average cost of capital. The cost of equity is calculated based on long-term
government bond yield, an estimate of the required premium for investment
in equity relative to government securities and further considers the volatility
associated with peer public companies relative to the market. The cost of debt
reflects an estimated market yield for long-term debt financing after taking
into account the credit profile of public peer companies in the industry. The
capital structure used to weight the cost of equity and cost of debt has been
derived from the observed capital structure of public peer companies.
Given market factors in the period, there has been an increase in the estimated
cost of equity from previous years. This has been driven by increased levels of
market uncertainty and volatility which is reflected in the market valuations for
global advertising agencies. This has led to upward adjustments to the estimates
for the equity risk premium as well as the applicable beta (ie, volatility of public
peer companies relative to the market). Additionally, given the magnitude of
the declines in our market capitalisation, the cost of equity reflects an increase
in the size premium applicable to the Group, and a company specific risk
premium to reflect implied market discount rates. This increase in the cost of
equity, combined with an increase in the cost of debt as a result of increased
corporate bond yields, resulted in the discount rates applied to our CGUs
increasing relative to the prior year.
Our approach in determining the recoverable amount utilises a discounted cash
flow methodology, which necessarily involves making numerous estimates and
assumptions regarding revenue less pass-through costs 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 less pass-through costs growth and
operating margins. The key assumptions take account of the business’
expectations for the projection period. These expectations consider the
macroeconomic environment, industry and market conditions, the CGU’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 CGU 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.
As part of the overall effort to simplify operations and become more
client-centric, certain operations have been realigned between the various
networks. These realignments have been reflected in the CGUs being tested.
The most significant of these for the 30 June 2020 test included the treatment
of Landor and Fitch as a single CGU given the collaboration of the two brands
from both a management and client perspective; the shift of certain European
operations into VMLY&R; and the transfer of certain Asian operations from
VMLY&R to Ogilvy in order to improve the operational synergies and offer in
the respective regions.
Subsequent realignments to improve the operational synergies and regional
offers were reflected in the September and December tests including the shift
of certain Latin American and European operations between Wunderman
Thompson, VMLY&R and GroupM; and the transfer of certain Asian operations
to VMLY&R that previously operated independently from a network.
The transfers of carrying value between CGUs were determined on a relative
value basis. The impact of these realignments has not had a significant impact
on the impairment figures recognised.
The goodwill impairment charge of £2,822.9 million largely reflects the
adverse impacts of Covid-19 on a number of businesses in the Group. The
impact of these global economic conditions and trading circumstances was
sufficiently severe to indicate impairment to the carrying value of goodwill.
By operating sector, £1,820.1 million of the impairment charge relates to
Global Integrated Agencies, £161.5 million relates to Public Relations and
£841.3 million relates to Specialist Agencies.
The CGUs with significant impairments of goodwill as at 31 December 2020
are set out in the below table with the latest recoverable amount determined
as of the December test.
Operating Sector
Wunderman Thompson Global Integrated Agencies
Global Integrated Agencies
VMLY&R
Public Relations
Burson Cohn & Wolfe
Specialist Agencies
Geometry Global
Specialist Agencies
Landor & Fitch
Other
Recoverable
amount
£m
1,956.8
1,075.7
790.2
164.4
177.6
1,409.5
5,574.2
Goodwill
impairment
charge
£m
1,207.5
516.9
144.8
305.8
185.4
462.5
2,822.9
WPP ANNUAL REPORT 2020
181
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. INTANGIBLE ASSETS CONTINUED
The goodwill impairment charge recognised for the year ended 31 December
2020 includes £2,812.9 million related to the six-month period ended 30 June
2020. This figure is £328.2 million higher than the £2,484.7 million previously
reported in the 30 June 2020 interim financial statements as a result of an
adjustment to appropriately reflect the working capital cash flow assumptions
in the impairment model. This has been fully reflected in the consolidated
financial statements for the year ended 31 December 2020, and the amount
will be reflected in the comparatives included in the 30 June 2021 financial
statements. Refer to page 223 for additional information.
As of the December test, the recoverable amounts of all CGUs were
determined to be above their carrying values. Burson Cohn & Wolfe's
recoverable amount exceeded its carrying value by £14.4 million and is the
only significant CGU that is sensitive to changes in the key assumptions used
in determining the cash flows as of the December test. The average operating
margins used in the five-year projection period for CGUs with significant
goodwill and brands with an indefinite useful life ranged from 12.5% to 21.3%.
The average operating margin of Burson Cohn & Wolfe would have to
decrease by 0.3% to cause its carrying value to be above its recoverable
amount. The long-term cash flow growth rate would also have to decrease
by 0.3% to cause the carrying value of Burson Cohn & Wolfe to be above its
recoverable amount. Burson Cohn & Wolfe is not sensitive to a reasonably
possible change in the revenue less pass-through costs growth used in the
five-year projection period.
As of the December test, a reasonably possible change in the key assumptions
noted above would not result in a material amount of further impairments for
Burson Cohn & Wolfe or any other CGU individually or in aggregate.
A change in the discount rate applied to the cash flows in the December
impairment test up or down by 1.5% is considered reasonably possible. An
increase of the discount rate by 1.5% would have resulted in £84.3 million
additional impairment, £70.9 million of which would be attributable to Burson
Cohn & Wolfe. As of the December test, Landor & Fitch's recoverable amount
exceeded its carrying value by £19.4 million. Increasing the discount rate by
1.5% would result in additional impairment of £2.6 million for Landor & Fitch
with the remaining impairment attributable to other CGUs not individually
significant. The discount rates would have to increase by 0.2% and 1.3%
respectively to cause the carrying values of Burson Cohn & Wolfe and
Landor & Fitch to be above their recoverable amounts.
15. PROPERTY, PLANT AND EQUIPMENT
The movements in 2020 and 2019 were as follows:
Freehold
buildings
£m
Leasehold
buildings
£m
Land
£m
Fixtures,
fittings and
equipment
£m
Computer
equipment
£m
Total
£m
37.1
–
–
–
135.5
33.7
–
(109.0)
1,202.4
158.5
–
(167.3)
375.3
35.0
0.1
(68.3)
690.4 2,440.7
294.9
0.1
(420.9)
67.7
–
(76.3)
(2.8)
(17.1)
(98.1)
(115.2)
(231.5)
(464.7)
–
34.3
–
–
–
–
34.3
(16.9)
26.2
8.9
–
(0.2)
(46.7)
1,048.8
135.7
0.2
(99.1)
4.7
39.6
(33.1)
1,052.5
(14.5)
212.4
25.0
–
(41.1)
(7.0)
189.3
(26.4)
(104.5)
423.9 1,745.6
218.3
48.7
0.4
0.2
(224.1)
(83.7)
(7.4)
(42.8)
381.7 1,697.4
–
–
–
–
–
–
–
–
–
–
–
–
27.1
1.5
(7.2)
567.3
79.9
(129.9)
229.7
36.3
(59.9)
533.6 1,357.7
185.5
(271.5)
67.8
(74.5)
(15.6)
(56.1)
(81.7)
(192.6)
(346.0)
(1.6)
4.2
1.2
(17.9)
443.3
76.6
–
–
–
72.1
2.6
(79.0)
(3.1)
2.3
(5.2)
510.4
(13.2)
111.2
33.2
6.3
–
(38.3)
(5.5)
106.9
(23.4)
310.9
63.8
(56.1)
869.6
174.8
1.3
–
(82.5)
79.7
2.6
(199.8)
(6.6)
286.9
(20.4)
906.5
34.3
34.3
37.1
37.3
22.0
108.4
542.1
605.5
635.1
82.4
101.2
145.6
790.9
94.8
113.0
876.0
156.8 1,083.0
Cost
1 January 2019
Additions
New acquisitions
Disposals
Transfer to disposal
group classified as
held for sale
Exchange
adjustments
31 December 2019
Additions
New acquisitions
Disposals
Exchange
adjustments
31 December 2020
Depreciation
1 January 2019
Charge for the year
Disposals
Transfer to disposal
group classified as
held for sale
Exchange
adjustments
31 December 2019
Charge for the year
Impairment charges
included in
restructuring costs
Other write-downs
Disposals
Exchange
adjustments
31 December 2020
Net book value
31 December 2020
31 December 2019
1 January 2019
At 31 December 2020, capital commitments contracted, but not provided
for in respect of property, plant and equipment, were £132.5 million
(2019: £165.0 million). The decrease is due to a number of property
development projects near completion, or completed, during 2020 in
North America, UK and Latin America.
182
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The market value of the Group’s shares in its principal listed associate
undertakings at 31 December 2020 was as follows: GIIR Inc: £19.0 million,
and High Co SA: £32.8 million (2019: GIIR Inc: £21.2 million and High Co SA:
£39.4 million). The carrying value (including goodwill and other intangibles)
of these equity interests in the Group’s consolidated balance sheet at
31 December 2020 was as follows: GIIR Inc: £41.2 million and High Co SA:
£38.9 million (2019: GIIR Inc: £37.7 million and High Co SA: £35.4 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 14, which represents the value
in use.
The Group’s investments in its principal associate undertakings are
represented by ordinary shares.
AGGREGATE INFORMATION OF ASSOCIATES THAT ARE NOT
INDIVIDUALLY MATERIAL
The following table presents a summary of the aggregate financial
performance of the Group’s associate undertakings and joint ventures.
Continuing operations
Share of results of associate
undertakings (note 4)
Share of other comprehensive loss of
associate undertakings
Share of total comprehensive (loss)/
income of associate undertakings
2020
£m
(136.0)
(61.5)
(197.5)
2019
£m
14.7
–
14.7
2018
£m
30.5
–
30.5
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.
In the year ended 31 December 2020, share of losses of £62.9 million were not
recognised in relation to Imagina, an associate in Spain, as the investment was
reduced to zero. The cumulative share of unrecognised losses relating to
Imagina is £62.9 million.
At 31 December 2020, capital commitments contracted, but not provided for,
in respect of interests in associates and other investments were £7.5 million
(2019: £21.8 million).
16. INTERESTS IN ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS
The movements in 2020 and 2019 were as follows:
1 January 2019
Additions
Share of results of associate undertakings
Dividends
Other movements
Exchange adjustments
Disposals
Reclassification to subsidiaries
Revaluation of other investments through profit or loss
Revaluation of other investments through other
comprehensive income
Amortisation of other intangible assets
Transfer to disposal group classified as held for sale
Write-downs
31 December 2019
Additions
Share of results of associate undertakings
Dividends
Other movements
Exchange adjustments
Disposals
Reclassification from subsidiaries
Reclassification from other investments to associates
Revaluation of other investments through profit or loss
Revaluation of other investments through other
comprehensive income
Amortisation of other intangible assets
Write-downs
31 December 2020
Interests in
associates
and joint
ventures
£m
796.8
236.6
21.2
(33.3)
1.2
(35.5)
(51.5)
(0.3)
–
Other
investments
£m
666.7
18.3
–
–
–
–
(42.3)
–
9.1
–
(5.6)
(109.1)
(7.5)
813.0
15.2
(136.0)
(32.5)
(5.2)
(39.7)
(7.3)
4.5
0.2
–
–
(0.6)
(280.9)
330.7
(141.4)
–
(12.1)
–
498.3
15.9
–
–
–
–
(7.0)
–
(0.2)
8.0
(127.7)
–
–
387.3
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 information from outside sources.
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 2020
included:
Advantage Smollan Ltd
Barrows Design and Manufacturing (Pty) Limited
Dat Viet VAC Media Corporation
GIIR Inc.
Haworth Marketing & Media Company
High Co SA
Nanjing Yindu Ogilvy Advertising Co. Ltd
PRAP Japan, Inc
Smollan Holdings (Pty) Ltd
Summer (BC) US JVCo SCSp1
Note
1 Representing the Group's interest in Kantar in the United States.
Country of
incorporation
UK
South Africa
Vietnam
Korea
USA
France
China
Japan
South Africa
Luxembourg
% owned
18.7
35.0
30.0
30.0
49.0
34.1
49.0
23.4
24.8
40.0
WPP ANNUAL REPORT 2020
183
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. 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 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, 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.
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
2020
£m
477.5
(568.7)
(91.2)
Offset
2020
£m
(264.6)
264.6
–
As
reported
2020
£m
212.9
(304.1)
(91.2)
Gross
2019
£m
430.9
(622.8)
(191.9)
Offset
2019
£m
(243.0)
243.0
–
As
reported
2019
£m
187.9
(379.8)
(191.9)
The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2020 and 2019:
1 January 2019
(Charge)/credit to income
Charge to other comprehensive income
Credit to equity
Transfer to disposal group
classified as held for sale
Exchange differences and other
movements
31 December 2019
(Charge)/credit to income
Credit to other comprehensive income
Exchange differences and other
movements
31 December 2020
Deferred
compensation
£m
61.6
(1.7)
–
–
Accounting
provisions
and accruals
£m
101.4
10.2
–
–
Retirement
benefit
obligations
£m
68.5
6.7
(3.2)
–
Property,
plant and
equipment
£m
47.9
19.4
–
27.8
Tax losses
and credits
£m
67.1
24.2
–
–
Share-based
payments
£m
16.8
2.9
–
3.1
Restructuring
provisions
£m
17.3
12.5
–
–
Other
temporary
differences
£m
31.4
(16.6)
–
–
(4.2)
(2.2)
53.5
(1.5)
–
(2.5)
49.5
(19.2)
(5.0)
87.4
30.3
–
(8.2)
109.5
(12.3)
(13.6)
(2.2)
57.5
(3.5)
7.4
(3.5)
57.9
3.2
84.7
(3.4)
–
(0.4)
80.9
(3.0)
(2.0)
86.3
5.9
–
(1.9)
90.3
(0.7)
(0.6)
21.5
0.4
–
(0.5)
21.4
(3.4)
(0.6)
25.8
31.9
–
(1.3)
56.4
0.1
(0.7)
14.2
(2.7)
–
0.1
11.6
Total
£m
412.0
57.6
(3.2)
30.9
(56.3)
(10.1)
430.9
57.4
7.4
(18.2)
477.5
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. At 31 December 2020 the balance related to temporary differences in relation to revenue adjustments, tax deductible goodwill, fair value
adjustments, and other temporary differences.
184
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2020 and 2019:
1 January 2019
Acquisition of subsidiaries
(Credit)/charge to income
Credit to other comprehensive income
Transfer to disposal group classified as held for sale
Exchange differences and other movements
31 December 2019
Acquisition of subsidiaries
(Credit)/charge to income
Exchange differences and other movements
31 December 2020
Brands
and other
intangibles
£m
438.6
0.8
(31.2)
–
(46.6)
(9.3)
352.3
1.5
(22.3)
(4.7)
326.8
Associate
earnings
£m
17.6
–
68.6
–
(7.9)
(1.8)
76.5
–
(16.7)
(1.8)
58.0
Property,
plant and
equipment
£m
22.2
–
(22.2)
–
–
–
–
–
–
–
–
Financial
instruments
£m
39.9
–
(0.7)
–
–
(2.3)
36.9
–
–
(1.1)
35.8
Other
temporary
differences
£m
37.9
–
(6.7)
(9.6)
0.6
(0.5)
21.7
–
6.7
(3.4)
25.0
Goodwill
£m
182.3
–
10.3
–
(51.7)
(5.5)
135.4
–
(7.8)
(4.5)
123.1
Total
£m
738.5
0.8
18.1
(9.6)
(105.6)
(19.4)
622.8
1.5
(40.1)
(15.5)
568.7
At the balance sheet date, the Group has gross tax losses and other temporary
differences of £6,895.2 million (2019: £6,475.6 million) available for offset against
future profits. Deferred tax assets have been recognised in respect of the tax
benefit of £2,041.3 million (2019: £1,856.6 million) of such tax losses and other
temporary differences. No deferred tax asset has been recognised in respect
of the remaining £4,853.9 million (2019: £4,619.0 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 £65.4 million (2019: £60.7 million) that will expire
within one to ten years, and £4,594.9 million (2019: £4,437.6 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 £1,655.3 million (2019: £2,165.3 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.
WPP ANNUAL REPORT 2020
185
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. TRADE AND OTHER RECEIVABLES
The following are included in trade and other receivables:
The allowance for bad and doubtful debts is equivalent to 1.7% (2019: 1.6%)
of gross trade accounts receivables.
2020
£m
2019
£m
Impairment losses on work in progress and accrued income were immaterial
for the years presented.
Amounts falling due within one year
Trade receivables (net of bad debt provision)
Work in progress
VAT and sales taxes recoverable
Prepayments
Accrued income
Fair value of derivatives
Other debtors
6,572.2
264.1
236.6
248.1
3,150.1
0.2
501.0
10,972.3
7,007.6
349.5
212.7
287.1
3,292.7
1.4
671.3
11,822.3
The ageing of trade receivables and other financial assets by due date is
as follows:
Days past due
Carrying
amount at
31 December
2020
£m
Not past
due
£m
0-30
days
£m
31-90
days
£m
91-180
days
£m
181
days-
1 year
£m
Greater
than
1 year
£m
6,572.2 5,692.4
660.0
167.3
40.4
7.5
4.6
The Group considers that the carrying amount of trade and other receivables
approximates their fair value.
EXPECTED CREDIT LOSSES
The Group has applied the simplified approach to measuring expected credit
losses, as permitted by IFRS 9. Under this approach, the Group utilises a
provision matrix based on the age of the trade receivables and historical loss
rates to determine the expected credit losses. Where relevant, the Group also
considers forward looking information. Therefore the Group does not track
changes in credit risk over the life of a financial asset, but recognises a loss
allowance based on the financial asset's lifetime expected credit loss. Under
IFRS 9, the expected credit losses are measured as the difference between the
asset’s gross carrying amount and the present value of estimated future cash
flows discounted at the financial asset’s original effective interest rate. Given
the short-term nature of the Group’s trade receivables, work in progress and
accrued income, which are mainly due from large national or multinational
companies, the Group's assessment of expected credit losses includes
provisions for specific clients and receivables where the contractual cash flow
is deemed at risk. Additional provisions are made based on the assessment of
recoverability of aged receivables, where the following criteria are met:
527.2
451.8
7,099.4 6,144.2
32.5
692.5
8.6
175.9
11.8
52.2
4.3
11.8
18.2
22.8
– 100% of the asset aged over one year;
– 50% of the asset aged between 180 days and one year; and
– sufficient evidence of recoverability is not evident.
Days past due
Carrying
amount at
31 December
2019
£m
Not past
due
£m
0-30
days
£m
31-90
days
£m
91-180
days
£m
181
days-
1 year
£m
Greater
than
1 year
£m
7,007.6 5,553.3
934.9
341.0
92.1
22.4
63.9
582.5
129.9
357.6
7,590.1 5,910.9 1,064.8
48.3
389.3
16.2
108.3
5.2
27.6
25.3
89.2
As a result of the Covid-19 pandemic, the Group also performed a detailed
review of trade receivables, work in progress and accrued income aged less
than 180 days, taking into account the level of credit insurance the Group has
along with internal and external data including historical and forward looking
information. This review focused on significant individual clients along with the
industry and country in which the clients operate where there is increased risk
due to the pandemic.
19. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN
ONE YEAR
The following are included in trade and other payables falling due within
one year:
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
Fair value of derivatives
Other debtors
2020
£m
2019
£m
2.8
9.6
143.8
156.2
2.2
–
135.4
137.6
Trade payables
Deferred income
Payments due to vendors (earnout agreements)
Liabilities in respect of put option agreements with
vendors
Fair value of derivatives
Share repurchases – close period commitments2
Other creditors and accruals
2020
£m
10,206.5
1,153.7
57.8
20191
£m
10,112.1
1,024.6
143.4
9.3
1.8
–
2,430.6
13,859.7
75.7
1.5
252.3
2,578.5
14,188.1
2020
Trade
receivables
Other
financial
assets
2019
Trade
receivables
Other
financial
assets
Notes
1 Figures have been restated as described in the accounting policies.
2 During 2019, the Company entered into an arrangement with a third party to conduct share
buybacks on its behalf in the close period commencing on 2 January 2020 and ending on
27 February 2020, in accordance with UK listing rules. The commitment resulting from this
agreement constitutes a liability at 31 December 2019, which is included in Trade and other
payables: amounts falling due within one year and has been recognised as a movement in equity.
The Group considers that the carrying amount of trade and other payables
approximates their fair value.
The Group has applied the practical expedient permitted by IFRS 15 to not
disclose the transaction price allocated to performance obligations unsatisfied
(or partially unsatisfied) as of the end of the reporting period as contracts
typically have an original expected duration of a year or less.
Bad debt provisions
At beginning of year
New acquisitions
Charged to the income statement
Released to the income statement
Exchange adjustments
Transfer to disposal group classified as held for sale
Utilisations and other movements
At end of year
2020
£m
2019
£m
111.7
3.5
50.6
(9.8)
(2.8)
–
(40.7)
112.5
116.6
5.0
45.4
(19.0)
(4.1)
(8.9)
(23.3)
111.7
186
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
20. 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:
The Group considers that the carrying amount of bank overdrafts
approximates their fair value.
Amounts 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
2020
£m
56.5
101.4
11.2
144.4
313.5
20191
£m
100.3
128.8
21.2
199.3
449.6
Corporate bonds and bank loans
2020
£m
4,975.5
2019
£m
4,047.3
The Group estimates that the fair value of corporate bonds is £5,509.1 million
at 31 December 2020 (2019: £4,439.8 million). The fair values of the corporate
bonds are based on quoted market prices.
Note
1 Figures have been restated as described in the accounting policies.
The Group considers that the carrying amount of bank loans of £57.2 million
(2019: £110.4 million) approximates their fair value.
The Group considers that the carrying amount of trade and other payables
approximates their fair value.
The corporate bonds, bank loans and overdrafts included within liabilities fall
due for repayment as follows:
The following tables set out payments due to vendors, comprising
contingent 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
Note
1 Figures have been restated as described in the accounting policies.
At beginning of year
Earnouts paid
New acquisitions
Revision of estimates taken to goodwill (note 14)
Revaluation of payments due to vendors
Transfer to disposal group classified as held for sale
Exchange adjustments
At end of year
Note
1 Figures have been restated as described in the accounting policies.
2020
£m
57.8
17.2
6.0
30.5
2.8
–
114.3
2020
£m
243.7
(115.2)
7.3
(2.8)
(13.4)
−
(5.3)
114.3
20191
£m
143.4
36.3
34.6
12.3
7.7
9.4
243.7
20191
£m
400.8
(130.0)
9.6
(14.1)
3.8
(11.5)
(14.9)
243.7
As of 31 December 2020, 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
ranges from £nil to £41 million (2019: £nil to £14 million) and £nil to £808 million
(2019: £nil to £1,110 million), respectively. The decrease in the maximum
potential undiscounted amount of future payments for all earnout agreements
is due to earnout arrangements that have completed and payments made on
active arrangements during the year, and exchange adjustments, partially
offset by earnout arrangements related to new acquisitions.
21. BANK OVERDRAFTS, BONDS AND BANK LOANS
Amounts falling due within one year:
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
2020
£m
8,619.2
590.9
669.4
540.2
445.6
2,729.4
13,594.7
20191
£m
8,798.0
96.4
590.4
632.1
554.3
2,174.1
12,845.3
Note
1 Figures have been restated as described in the accounting policies.
22. PROVISIONS FOR LIABILITIES AND CHARGES
The movements in 2020 and 2019 were as follows:
1 January 2019
Charged to the income statement
Acquisitions1
Utilised
Released to the income statement
Other movements2
Transfer to disposal group classified as held
for sale
Exchange adjustments
31 December 2019
Charged to the income statement
Acquisitions1
Utilised
Released to the income statement
Other movements
Exchange adjustments
31 December 2020
Property
£m
118.7
39.5
–
(1.2)
(10.3)
(58.4)
(6.2)
(0.6)
81.5
14.8
–
(1.6)
(1.5)
(15.0)
(1.5)
76.7
Other
£m
193.0
7.6
0.7
(12.2)
(6.9)
9.2
(18.4)
(6.7)
166.3
50.4
0.7
(17.0)
(15.0)
48.7
(4.5)
229.6
Total
£m
311.7
47.1
0.7
(13.4)
(17.2)
(49.2)
(24.6)
(7.3)
247.8
65.2
0.7
(18.6)
(16.5)
33.7
(6.0)
306.3
Notes
1 Acquisitions include £0.4 million (2019: £0.7 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.
2 In 2019, other movements include transfers of property provisions related to property leases
which are now recognised in right-of-use assets, and certain long-term employee benefits.
Bank overdrafts
Corporate bonds and bank loans
Note
1 Figures have been restated as described in the accounting policies.
2020
£m
8,562.0
57.2
8,619.2
20191
£m
8,572.4
225.6
8,798.0
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.
WPP ANNUAL REPORT 2020
187
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. SHARE-BASED PAYMENTS
Charges for share-based incentive plans were as follows:
Continuing operations
Share-based payments
2020
£m
74.4
2019
£m
66.0
2018
£m
78.3
Share-based payments comprise charges for stock options and restricted
stock awards to employees of the Group.
As of 31 December 2020, there was £134.9 million (2019: £140.7 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 27.
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:
EXECUTIVE PERFORMANCE SHARE PLAN (EPSP)
This scheme is intended to reward and incentivise the most senior executives
of the Group. The performance period is three or 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 performance
period. Vesting is conditional on continued employment throughout the
vesting period.
The 2020 EPSP awards are subject to three equally weighted performance
conditions: three-year average Return on Invested Capital (ROIC), cumulative
Adjusted Free Cash Flow (AFCF), and relative Total Shareholder Return (TSR).
Achieving the threshold performance requirement will result in a vesting
opportunity of 20% for that element. The vesting opportunity will increase
on a straight line basis to 100% of the award for maximum performance.
The Compensation Committee has an overriding discretion to determine
the extent to which the award will vest.
The 2019 EPSP awards are subject to a relative TSR performance condition,
with a ROIC underpin. TSR performance will be compared to companies
representing the most relevant, listed global competitors, with performance
below median resulting in zero vesting. Performance between median and
upper decile provides for a vesting opportunity of between 15% and 100%.
The awards will vest subject to a ROIC underpin of an average of 7.5% over
the performance period. The Compensation Committee has an overriding
discretion to determine the extent to which the award will vest.
For EPSP awards granted between 2013 and 2018 there are three performance
criteria, each constituting one-third of the vesting value, and each measured
over the performance 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 shareholders’ equity.
Threshold performance ranges between 10-14% average annual ROE and
maximum performance ranges between 14-18%. Threshold again gives rise
to a 20% vest, 100% for maximum, with a sliding scale in between.
PERFORMANCE SHARE AWARDS (PSA)
Conditional stock awards made under the 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 makes annual conditional stock awards to approximately 1,600
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 27, 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. EPSP
is 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 charge
for each grant is revised, if appropriate, to take account of any changes in
estimate of the likely number of shares expected to vest.
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
2020
number
m
8.8
2.6
9.3
Granted
number
m
Forfeited
number
m
Vested
number
m
Non-
vested 31
December
2020
number
m
6.5
3.3
4.9
(2.0)
(0.3)
13.0
(0.3)
(1.3)
(0.7)
(2.5)
4.3
11.0
1,198p
742p
1,336p
1,481p
943p
1,081p
546p
787p
1,136p
675p
974p
719p
879p
1,131p
831p
Executive Performance
Share Plan (EPSP)
Performance Share
Awards (PSA)
Leaders, Partners and
High Potential Group
Weighted average fair
value (pence per share)
Executive Performance
Share Plan (EPSP)
Performance Share
Awards (PSA)
Leaders, Partners and
High Potential Group
The total fair value of shares vested for all the Group’s restricted stock plans
during the year ended 31 December 2020 was £71.6 million (2019: £90.8 million,
2018: £107.2 million).
188
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
24. 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:
Continuing operations
Defined contribution plans
Defined benefit plans charge to operating profit
Pension costs (note 5)
Net interest expense on pension plans (note 6)
2020
£m
157.8
13.9
171.7
2.9
174.6
2019
£m
154.9
14.8
169.7
3.5
173.2
2018
£m
146.7
14.2
160.9
3.6
164.5
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 2020.
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.
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 majority of plans provide final salary benefits, with plan benefits typically
based either on mandatory plans under local legislation, eg, termination
indemnity benefits, or on the rules of WPP sponsored supplementary plans.
The implications of IFRIC 14 have been allowed for where relevant, in particular
with regard to the asset ceiling/irrecoverable surplus.
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.
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 2020 amounted to £20.3 million (2019: £37.1 million, 2018:
£44.9 million). Employer contributions and benefit payments in 2021 are
expected to be approximately £25 million.
(A) ASSUMPTIONS
There are a number of areas in pension accounting that involve estimates
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:
2020
% pa
2019
% pa
2018
% pa
2017
% pa
UK
Discount rate1
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
1.3
4.4
2.8
2.0
3.0
n/a
0.9
2.2
1.8
1.7
4.2
5.2
3.7
2.0
4.4
2.6
3.0
3.0
n/a
1.2
2.2
1.8
1.7
4.6
6.1
3.7
2.8
4.3
2.8
4.1
3.0
n/a
2.0
2.3
1.2
1.7
5.0
5.8
3.6
2.4
4.1
2.7
3.5
3.1
4.0
1.9
1.9
1.2
1.7
4.2
5.5
4.0
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.
At 31 December 2020, the life expectancies underlying the value of the
accrued liabilities for the main defined benefit pension plans operated by the
Group were as follows:
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
All
plans
North
America
22.1
23.6
21.7
23.1
Western
Continental
Europe
20.9
24.0
UK
23.1
24.1
Other1
13.8
17.0
23.7
23.1
24.7
23.3
13.8
25.2
24.5
25.9
26.0
17.0
Note
1
Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
The life expectancies after age 65 at 31 December 2019 were 22.2 years and
23.7 years for male and female current pensioners (at age 65) respectively, and
23.8 years and 25.4 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.
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 ten years. The duration corresponds to the
weighted average length of the underlying cash flows.
Weighted average duration of the
defined benefit obligation (years)
Expected benefit payments over
the next ten years (£m)
Benefits expected to be paid within
12 months
Benefits expected to be paid in 2022
Benefits expected to be paid in 2023
Benefits expected to be paid in 2024
Benefits expected to be paid in 2025
Benefits expected to be paid in the
next five years
All
plans
North
America
Western
Continental
UK
Europe Other1
11.5
9.6
13.8
12.8
6.8
49.8
46.9
45.2
43.2
43.1
24.4
24.7
21.9
21.1
19.1
15.1
12.8
13.5
13.2
14.0
5.8
6.2
6.1
5.8
6.2
4.5
3.2
3.7
3.1
3.8
222.1
94.1
70.1
34.3 23.6
Note
1
Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
WPP ANNUAL REPORT 2020
189
(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 annuities1
Property
Cash
Other
Total fair value of assets
Present value of liabilities
Deficit in the plans
Irrecoverable surplus
Net liability2
Plans in surplus
Plans in deficit
%
9.1
64.8
10.8
0.1
3.7
11.5
100.0
%
6.7
46.1
41.0
0.1
2.4
3.7
100.0
2020
£m
41.6
284.2
252.8
0.7
14.7
22.6
616.6
(772.7)
(156.1)
(0.6)
(156.7)
27.2
(183.9)
2019
£m
55.5
272.5
239.1
0.7
17.7
23.0
608.5
(767.5)
(159.0)
–
(159.0)
20.6
(179.6)
%
9.1
44.8
39.3
0.1
2.9
3.8
100.0
2018
£m
76.5
544.9
90.9
0.9
31.1
96.3
840.6
(1,024.0)
(183.4)
(0.9)
(184.3)
42.8
(227.1)
Notes
1 The increase in 2019 from 2018 in the amount of assets held in insured annuities is attributable to
the completion of buy-in transactions during 2019 for certain UK plans. The invested assets for
these plans, as at 31 December 2018 consisted of a mixture of equities, bonds, cash and other
assets, were transferred to an insurance company and, in accordance with IAS 19, all assets for
these plans are now classified as insured annuities.
2 The related deferred tax asset is discussed in note 17.
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
2020
£m
0.7
(37.9)
(85.9)
2019
£m
0.3
(45.2)
(79.4)
2018
£m
33.7
(68.7)
(104.6)
(33.0)
(156.1)
(34.7)
(159.0)
(43.8)
(183.4)
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.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. PROVISION FOR POST-EMPLOYMENT BENEFITS CONTINUED
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.
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.
(Decrease)/increase
in benefit obligation
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:
Western Continental Europe
Other1
Decrease by 25 basis points:
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
2020
£m
(8.8)
(7.6)
(4.0)
(0.6)
9.1
7.8
4.3
0.6
0.9
0.6
(0.9)
(0.5)
1.1
2.1
(0.7)
(2.0)
14.0
5.9
4.8
2019
£m
(8.2)
(7.5)
(3.8)
(0.7)
8.5
7.7
3.9
0.7
0.8
0.6
(0.8)
(0.6)
0.7
1.9
(0.6)
(1.9)
11.7
5.9
4.3
Note
1
Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
190
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The following table shows the split of the deficit at 31 December between
funded and unfunded pension plans.
(D) MOVEMENT IN PLAN LIABILITIES
The following table shows an analysis of the movement in the pension plan
liabilities for each accounting period:
2020
Surplus/
(deficit)
£m
2020
Present
value of
liabilities
£m
2019
Surplus/
(deficit)
£m
2019
Present
value of
liabilities
£m
2018
Surplus/
(deficit)
£m
2018
Present
value of
liabilities
£m
0.7
17.4
(262.7)
(271.8)
0.3
12.8
(247.6)
(286.2)
33.7
(4.6)
(290.5)
(375.3)
(38.6)
(84.3)
(33.3)
(77.6)
(35.8)
(168.4)
(5.8)
(24.1)
(3.6)
(20.9)
(6.6)
(19.7)
(26.3)
(642.9)
(23.8)
(632.3)
(13.3)
(853.9)
(55.3)
(55.3)
(58.0)
(58.0)
(64.1)
(64.1)
(47.3)
(47.3)
(46.1)
(46.1)
(68.8)
(68.8)
(27.2)
(27.2)
(31.1)
(31.1)
(37.2)
(37.2)
(129.8)
(129.8)
(135.2)
(135.2)
(170.1)
(170.1)
(156.1)
(772.7)
(159.0)
(767.5)
(183.4) (1,024.0)
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
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
In accordance with IAS 19, plans that are wholly or partially funded are
considered funded plans.
(C) PENSION EXPENSE
The following tables show the breakdown of the pension expense between
amounts charged to operating profit and amounts charged to finance costs:
Continuing operations
Service cost1
Administrative expenses
Charge to operating profit
Net interest expense on pension plans
Charge to profit before taxation for defined
benefit plans
2020
£m
12.0
1.9
13.9
2.9
2019
£m
12.9
1.9
14.8
3.5
2018
£m
12.0
2.2
14.2
3.6
16.8
18.3
17.8
Note
1
Includes current service cost, past service costs related to plan amendments and (gain)/loss on
settlements and curtailments.
The following table shows the breakdown of amounts recognised in the
consolidated statement of comprehensive income (OCI):
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 (loss)/gain arising on the plan liabilities
Change in irrecoverable surplus
Actuarial gain/(loss) recognised in OCI
2020
£m
57.2
2019
£m
16.7
2018
£m
(43.9)
3.8
5.9
3.8
(54.0)
(4.4)
(0.6)
2.0
(64.3)
5.1
–
(36.6)
45.2
3.8
–
8.9
Plan liabilities at beginning of year
Service cost1
Interest cost
Actuarial (gain)/loss:
2019
£m
2020
£m
2018
£m
767.5 1,024.0 1,135.4
15.5
14.9
12.0
30.7
26.2
17.0
Effect of changes in demographic assumptions
Effect of changes in financial assumptions
Effect of experience adjustments
Benefits paid2
(Gain)/loss due to exchange rate movements
Settlement payments3
Transfer to disposal group classified as held for sale
Other 4
Plan liabilities at end of year
(3.8)
54.0
4.4
(59.6)
(4.2)
(17.0)
–
2.4
772.7
(5.9)
64.3
(5.1)
(140.8)
(22.7)
(47.4)
(148.0)
8.0
(3.8)
(45.2)
(3.8)
(75.6)
30.0
(70.4)
–
11.2
767.5 1,024.0
Notes
1
Includes current service cost, past service costs related to plan amendments and (gain)/loss
on settlements and curtailments.
2 In 2019, there was an amendment to a United States defined benefit plan that allowed certain
participants to receive immediate lump sum pay-outs, which totalled £69.7 million.
3 In 2019 and 2018, the Group completed the transfer of the defined benefit obligations for certain
UK plans to an insurer resulting in £47.1 million and £70.4 million, respectively, in settlement
payments.
4 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 paid1
(Loss)/gain due to exchange rate movements
Settlement payments2
Administrative expenses
Transfer to disposal group classified as held for sale
Other3
Fair value of plan assets at end of year
Actual return on plan assets
2020
£m
608.5
14.1
57.2
20.3
(59.6)
(6.8)
(17.0)
(1.9)
–
1.8
616.6
71.3
2019
£m
840.6
22.4
16.7
37.1
(140.8)
(15.7)
(47.4)
(2.1)
(111.1)
8.8
608.5
39.1
2018
£m
930.0
26.3
(43.9)
44.9
(75.6)
23.0
(70.4)
(3.4)
–
9.7
840.6
(17.6)
Notes
1
In 2019, there was an amendment to a United States defined benefit plan that allowed certain
participants to receive immediate lump sum pay-outs, which totalled £69.7 million.
2 In 2019 and 2018, the Group completed the transfer of the defined benefit obligations for certain UK
plans to an insurer resulting in £47.1 million and £70.4 million, respectively, in settlement payments.
3 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.
WPP ANNUAL REPORT 2020
191
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. 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 partially 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 2020
were primarily made up of $2,167 million, £1,094 million and €2,600 million
(2019: $1,563 million, £844 million and €2,600 million). The Group’s average
gross debt during the course of 2020 was $2,311 million, £999 million and
€2,409 million (2019: $2,509 million, £947 million and €3,128 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, 100% of the
year-end US dollar debt is at fixed rates averaging 4.06% for an average period
of 70 months; 100% of the sterling debt is at a fixed rate of 3.21% for an average
period of 167 months; 90.4% of the euro debt is at fixed rates averaging 2.20%
for an average period of 79 months and 9.6% of the euro debt is at floating
rates averaging 0.04% for an average of 15 months.
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 Company’s forecasts and projections, taking account of (i) reasonably
possible declines in revenue less pass-through costs; (ii) remote declines in
revenue less pass-through costs for stress-testing purposes as a consequence
of the Covid-19 pandemic compared to 2020; and considering the Group's
bank covenant and liquidity headroom and cost mitigation actions which are
and which could be implemented, show that the Company and the Group
would be able to operate with appropriate liquidity and within its banking
covenants and be able to meet its liabilities as they fall due. The Company
modelled a range of revenue less pass-through costs up to a decline of 30%
compared with the year ended 31 December 2020 and a number of mitigating
cost actions that are available to the Company. The Directors have concluded
that the Group will 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 and that there are no material uncertainties which gives rise to
a significant going concern risk.
At 31 December 2020, the Group has access to £7.1 billion of committed facilities with maturity dates spread over the years 2021 to 2046 as illustrated below:
2021
£m
2022
£m
2023
£m
2024
£m
2025+
£m
400.0
160.8
67.9
250.0
537.3
671.7
671.7
447.8
1,828.8
365.8
223.9
589.7
589.7
84.5
84.5
42.3
671.7
152.2
823.9
671.7
548.6
548.6
548.6
5,036.0
3,207.2
400.0
160.8
67.9
250.0
537.3
671.7
671.7
447.8
1,828.8
548.6
671.7
365.8
223.9
236.7
7,082.7
5,059.5
2,023.2
5,059.5
(4,337.1)
(26.8)
695.6
£ bonds £400m (2.875% 2046)
US bond $220m (5.625% 2043)
US bond $93m (5.125% 2042)
£ bonds £250m (3.75% 2032)
Eurobonds €600m (1.625% 2030)
Eurobonds €750m (2.375% 2027)
Eurobonds €750m (2.25% 2026)
Eurobonds €500m (1.375% 2025)
Bank revolver ($2,500m 2025)
US bond $750m (3.75% 2024)
Eurobonds €750m (3.0% 2023)
US bond $500m (3.625% 2022)
Eurobonds €250m (3m EURIBOR + 0.45% 2022)
Bank revolver (A$150m 2021, A$270m 2023)
Total committed facilities available
Drawn down facilities at 31 December 2020
Undrawn committed credit facilities
Drawn down facilities at 31 December 2020
Net cash at 31 December 2020
Other adjustments
Net debt at 31 December 2020
192
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
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 27 and 28.
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 26.
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 expected losses, 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 7% of total trade receivables as at 31 December 2020.
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. Clients can reduce their marketing spend, terminate contracts, or
cancel projects on short notice. The loss of one or more of our largest clients,
if not replaced by new accounts or an increase in business from existing
clients, would adversely affect our financial condition.
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
A 10% weakening of sterling against the Group’s major currencies would result
in the following losses, which would arise on the retranslation of foreign
currency denominated borrowings and derivatives. These losses would be
partially offset in equity by a corresponding gain arising on the retranslation
of the Group’s foreign currency net assets. A 10% strengthening of sterling
would have an equal and opposite effect.
US dollar
Euro
Note
1 Figures have been restated as described in the accounting policies.
2020
£m
159.1
167.2
20191
£m
240.5
153.0
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 2020 would
increase profit before tax by approximately £40.9 million (2019: £22.6 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.
26. 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.
The Group also designates certain cross currency swaps as hedging
instruments in cash flow hedges to manage its exposure to foreign exchange
movements on its borrowings. Contracts due in November 2023 have receipts
of €500.0 million and payments of $604.2 million.
At 31 December 2020, the fair value of the Group’s currency derivatives is
estimated to be a net liability of approximately £1.6 million (2019: £21.2 million).
These amounts are based on market values of equivalent instruments at the
balance sheet date, comprising £9.6 million (2019: £nil) assets included in trade
and other receivables and £11.2 million (2019: £21.2 million) liabilities included in
trade and other payables. The amounts taken to and deferred in equity during
the year for currency derivatives that are designated and effective hedges was
a credit of £9.7 million (2019: £nil) for net investment hedges and a debit of
£5.9 million (2019: £nil) for cash flow hedges. 2019 figures have been restated
as described in the accounting policies.
Changes in the fair value relating to the ineffective portion of the currency
derivatives that are designated hedges amounted to £nil (2019: £nil). At the
balance sheet date, the total nominal amount of outstanding forward
foreign exchange contracts not designated as hedges was £304.6 million
(2019: £151.7 million). The Group estimates the fair value of these contracts
to be a net liability of £1.6 million (2019: £0.1 million).
These arrangements are designed to address significant exchange exposure
and are renewed on a revolving basis as required.
WPP ANNUAL REPORT 2020
193
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. FINANCIAL INSTRUMENTS CONTINUED
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 borrowing. There were
no interest rate swaps in existence throughout 2020. During 2019 the Group terminated contracts that had a nominal value of $812 million which had fixed rate
receipts of 4.75% and floating interest payments averaging LIBOR plus 2.34% until November 2021. The Group also terminated contracts in 2019 that had a
nominal value of $500 million which had fixed rate receipts of 3.63% and floating interest payments averaging LIBOR plus 1.52% until September 2022.
An analysis of the Group’s financial assets and liabilities by accounting classification is set out below:
2020
Other investments
Cash and short-term deposits
Bank overdrafts, bonds and bank 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 20)
Liabilities in respect of put options
2019
Other investments
Cash and short-term deposits1
Bank overdrafts, bonds and bank loans1
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 liabilities1
Payments due to vendors (earnout agreements) (note 20)1
Liabilities in respect of put options1
Note
1 Figures have been restated as described in the accounting policies.
Derivatives in
designated
hedge
relationships
£m
Held at fair
value through
profit or loss
£m
Held at
fair value
through other
comprehensive
income
£m
–
–
–
–
–
–
–
–
9.6
(6.3)
–
–
3.3
263.3
–
–
–
–
–
–
–
0.2
(6.7)
(114.3)
(110.7)
31.8
124.0
–
–
–
–
–
–
–
–
–
–
–
124.0
Held at fair
value through
profit or loss
£m
Held at
fair value
through other
comprehensive
income
£m
255.7
–
–
–
–
–
–
–
1.4
(22.7)
(243.7)
(204.5)
(213.8)
242.6
–
–
–
–
–
–
–
–
–
–
–
242.6
Amortised
cost
£m
Carrying
value
£m
–
12,899.1
(8,619.2)
(4,975.5)
6,989.3
110.1
(10,268.0)
(0.9)
–
–
–
–
(3,865.1)
387.3
12,899.1
(8,619.2)
(4,975.5)
6,989.3
110.1
(10,268.0)
(0.9)
9.8
(13.0)
(114.3)
(110.7)
(3,706.0)
Amortised
cost
£m
Carrying
value
£m
–
11,305.7
(8,798.0)
(4,047.3)
7,530.8
59.3
(10,191.6)
(2.6)
–
–
–
–
(4,143.7)
498.3
11,305.7
(8,798.0)
(4,047.3)
7,530.8
59.3
(10,191.6)
(2.6)
1.4
(22.7)
(243.7)
(204.5)
(4,114.9)
194
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
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 available information from
outside sources. There have been no movements between level 3 and
other levels.
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. After recognition,
the liability is remeasured in accordance with IFRS 9 and is subject to the
estimation of future performance of the business acquired. Changes in the
estimation result in re-measurement of the liability through the income
statement. 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 2020, the weighted average growth rate
in estimating future financial performance was 14.8% (2019: 19.5%), which
reflects the prevalence of acquisitions in the faster-growing markets and new
media sectors. The decrease in the weighted average growth rate from 19.5%
to 14.8% is due primarily to completed, settled or cancelled obligations and
partially due to the effects of Covid-19 to the future financial performance of
the entity. The weighted average of the risk-adjusted discount rate applied to
these obligations at 31 December 2020 was approximately 4.0% (2019: 3.2%).
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
£1.5 million (2019: £3.8 million) and £1.4 million (2019: £6.6 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
£2.0 million (2019: £3.9 million) and £2.0 million (2019: £4.0 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 is 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 information from outside sources using the most
appropriate valuation technique, including all external funding rounds, revenue
and EBITDA multiples, the share of fund net asset value and discounted cash
flows. Certain investments are valued using revenue multiples. An increase or
decrease in this multiple of 0.5 times revenue would result in an increase or
decrease in the value of investments of £24.2 million, which would result in
a credit or charge to the income statement of £1.5 million and equity of
£22.7 million. The sensitivity to changes in unobservable inputs is specific
to each individual investment.
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 (ie as prices) or indirectly (ie 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).
2020
Derivatives in designated hedge relationships
Derivative assets
Derivative liabilities
Held at fair value through profit or loss
Other investments
Derivative assets
Derivative liabilities
Payments due to vendors (earnout agreements)
(note 20)
Liabilities in respect of put options
Held at fair value through other
comprehensive income
Other investments
2019
Held at fair value through profit or loss
Other investments
Derivative assets
Derivative liabilities
Payments due to vendors (earnout agreements)
(note 20)
Liabilities in respect of put options
Held at fair value through other
comprehensive income
Other investments
Level 1
£m
Level 2
£m
Level 3
£m
–
–
0.1
–
–
–
–
20.6
9.6
(6.3)
–
0.2
(6.7)
–
–
–
–
–
263.2
–
–
(114.3)
(110.7)
103.4
Level 1
£m
Level 21
Level 31
£m
£m
–
–
–
–
–
42.2
–
1.4
(22.7)
255.7
–
–
–
–
–
(243.7)
(204.5)
200.4
Note
1 Figures have been restated as described in the accounting policies.
There have been no transfers between these levels in the years presented.
Reconciliation of level 3 fair value measurements1:
1 January 2019
(Losses)/gains recognised in the income statement
Losses recognised in other comprehensive income
Exchange adjustments
Additions
Disposals
Cancellations
Transfer to disposal group classified as held for sale
Settlements
31 December 2019
Gains recognised in the income statement
Losses recognised in other comprehensive income
Exchange adjustments
Additions
Disposals
Reclassification from other investments to interests
in associates
Cancellations
Settlements
31 December 2020
Liabilities in
respect of
put options2
£m
(208.0)
(30.1)
–
6.9
(34.8)
–
9.7
31.0
20.8
(204.5)
12.3
–
2.3
(4.2)
–
Other
investments
£m
538.2
9.1
(55.4)
–
18.2
(53.4)
–
(0.6)
–
456.1
7.9
(106.1)
–
15.9
(7.0)
–
30.5
52.9
(110.7)
(0.2)
–
–
366.6
Notes
1 The reconciliation of payments due to vendors (earnout agreements) is presented in note 20.
2 Figures have been restated as described in the accounting policies.
WPP ANNUAL REPORT 2020
195
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. AUTHORISED AND ISSUED SHARE CAPITAL
Equity
ordinary
shares
Nominal
value
£m
WPP WORLDWIDE SHARE OWNERSHIP PROGRAMME (WWOP)
As at 31 December 2020, unexercised options over ordinary shares of 1,330,679
and unexercised options over ADRs of 233,799 have been granted under the
WPP Worldwide Share Ownership Programme as follows:
Authorised
1 January 2019
31 December 2019
31 December 2020
Issued and fully paid
1 January 2019
Exercise of share options
Share cancellations
At 31 December 2019
Exercise of share options
Share cancellations
At 31 December 2020
1,750,000,000
1,750,000,000
1,750,000,000
1,332,678,227
75,625
(4,586,039)
1,328,167,813
1,000
(32,088,571)
1,296,080,242
175.0
175.0
175.0
133.3
–
(0.5)
132.8
–
(3.2)
129.6
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 the Company 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 134-154.
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 2020 was 4,863,244
(2019: 9,219,837), and £38.9 million (2019: £98.3 million) respectively.
The number and market value of ordinary shares held in treasury at
31 December 2020 was 70,748,100 (2019: 70,787,730) and £566.0 million
(2019: £755.0 million) respectively.
SHARE OPTIONS
WPP EXECUTIVE SHARE OPTION SCHEME (WPP)
As at 31 December 2020, unexercised options over ordinary shares of 6,741
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 ordinary
shares under option
45,325
7,250
88,604
28,125
897,100
4,250
259,150
875
Number of ADRs
under option
14,930
25,234
105,545
88,090
Exercise price
per share (£)
6.268
6.268
8.458
13.145
13.145
13.145
13.505
13.505
Exercise price
per ADR ($)
49.230
67.490
102.670
110.760
Exercise
dates
2014-2021
2015-2021
2015-2022
2017-2021
2017-2024
2018-2024
2016-2023
2017-2023
Exercise
dates
2014-2021
2015-2022
2017-2024
2016-2023
WPP SHARE OPTION PLAN 2015 (WSOP)
As at 31 December 2020, unexercised options over ordinary shares of
11,276,225 and unexercised options over ADRs of 1,332,900 have been granted
under the WPP Share Option Plan as follows:
Number of ordinary
shares under option
14,875
3,109,225
10,500
1,920,375
12,375
2,336,975
10,375
1,538,225
37,625
1,042,700
5,125
8,125
1,229,725
Number of ADRs
under option
364,225
229,810
287,790
180,155
150,955
119,965
Exercise price
per share (£)
7.344
7.344
8.372
8.372
9.600
9.600
13.085
13.085
15.150
15.150
15.150
17.055
17.055
Exercise price
per ADR ($)
48.950
53.140
62.590
88.260
105.490
115.940
Exercise
dates
2023-2027
2023-2030
2021-2025
2021-2028
2022-2026
2022-2029
2020-2024
2020-2027
2018-2022
2018-2025
2019-2025
2019-2023
2019-2026
Exercise
dates
2023-2030
2021-2028
2022-2029
2020-2027
2020-2026
2018-2025
196
WPP ANNUAL REPORT 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The aggregate status of the WPP Share Option Plans during 2020 was as follows:
Movements on options granted (represented in ordinary shares)
WPP
WWOP
WSOP
Weighted-average exercise price for options over
Ordinary shares (£)
WPP
WWOP
WSOP
ADRs ($)
WWOP
WSOP
1 January
2020
6,741
4,701,924
20,397,150
25,105,815
1 January
2020
9.355
12.421
12.121
96.744
79.798
Granted
Exercised
Forfeited
Outstanding
31 December
2020
Exercisable
31 December
2020
–
–
4,990,300
4,990,300
–
(1,000)
–
(1,000)
–
(2,201,250)
(7,446,725)
(9,647,975)
6,741
2,499,674
17,940,725
20,447,140
–
127,225
6,094,275
6,221,500
Granted
Exercised
Forfeited
Outstanding
31 December
2020
Exercisable
31 December
2020
–
–
7.344
–
48.950
–
6.268
–
–
–
–
12.229
12.530
94.083
82.605
9.355
12.631
10.596
98.509
70.363
–
6.268
7.344
49.230
50.571
OPTIONS OVER ORDINARY SHARES
Outstanding
OPTIONS OVER ADRs
Outstanding
Range of
exercise prices
£
6.268-17.055
Weighted
average
exercise price
£
10.810
Weighted
average
contractual life
Months
91
Range of
exercise prices
$
48.950-115.940
Weighted
average
exercise price
$
74.563
Weighted
average
contractual life
Months
89
As at 31 December 2020 there was £7.2 million (2019: £7.3 million) of total
unrecognised compensation costs related to share options. That cost is
expected to be recognised over a weighted average period of 20 months
(2019: 19 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
2020
128.0p
$8.95
-0.02%
0.31%
48
34%
4.2%
2019
117.0p
$8.49
0.57%
1.61%
48
24%
3.8%
2018
107.0p
$8.09
0.78%
2.74%
48
24%
3.5%
Options are issued at an exercise price equal to market value on the date
of grant.
The average share price of the Group for the year ended 31 December 2020
was £6.96 (2019: £9.39, 2018: £11.56) and the average ADR price for the same
period was $44.56 (2019: $59.93, 2018: $77.31).
Expected volatility is sourced from external market data and represents the
historical volatility in the Company’s share price over a period equivalent to
the expected option life.
Expected life is based on a review of historical exercise behaviour in the context
of the contractual terms of the options, as described in more detail below.
WPP ANNUAL REPORT 2020
197
29. 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.
Goodwill arising from acquisitions represents the value of synergies with
our existing portfolio of businesses and skilled staff to deliver services to
our clients.
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
in the year ended 31 December 2020 or between 31 December 2020 and the
date the financial statements have been authorised for issue.
30. RELATED PARTY TRANSACTIONS
From time to time the Group enters into transactions with its associate
undertakings.
The Group has continuing transactions with Kantar, including sales, purchases,
the provision of IT services, subleases and property related items. None of
these were material in the period after 5 December 2019, when Kantar became
an associate, to 31 December 2019, or in 2020.
In 2020, revenue of £90.6 million was reported in relation to Compas, an
associate in the United States. All other transactions in the periods presented
were immaterial.
The following amounts were outstanding at 31 December:
Amounts owed by related parties
–
–
–
27.5
27.5
Kantar
Other
(20.6)
–
(20.6)
3.2
Amounts owed to related parties
–
103.5
–
103.5
–
6.4
252.3
(122.3)
–
311.9
252.3
196.0
Kantar
Other
2020
£m
39.0
27.9
66.9
(5.6)
(36.0)
(41.6)
2019
£m
87.5
87.5
175.0
(36.5)
(49.6)
(86.1)
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. AUTHORISED AND ISSUED SHARE CAPITAL CONTINUED
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 Programme 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 programmes
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 terms of these stock options are such that if,
after nine years and eight months, the performance conditions have not
been met, the stock option will vest automatically.
The Group grants stock options with a life of ten years, including the
vesting period.
28. OTHER RESERVES
Other reserves comprise the following:
Equity
reserve1
Translation
reserve1
£m
(236.4)
£m
1,196.1
Total
other
reserves1
£m
962.4
–
–
–
(607.1)
(607.1)
(284.0)
–
(284.0)
0.5
10.6
–
10.6
(252.3)
(478.1)
–
305.0
(252.3)
(169.9)
Capital
redemption
reserve
£m
2.7
–
–
0.5
–
–
3.2
–
–
3.2
1 January 2019
Exchange adjustments on foreign
currency net investments
Exchange adjustments recycled to
the income statement on disposal
of discontinued operations
Share cancellations
Recognition and remeasurement of
financial instruments
Share purchases – close period
commitments
31 December 2019
Exchange adjustments on foreign
currency net investments
Exchange adjustments recycled to
the income statement on disposal
of discontinued operations
Share cancellations
Recognition and remeasurement of
financial instruments
Share purchases – close period
commitments
31 December 2020
Note
1 Figures have been restated as described in the accounting policies.
198
WPP ANNUAL REPORT 2020
COMPANY PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2020
Turnover
Operating income
Operating profit
Interest receivable and similar income
Interest payable and similar charges
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.
FINANCIAL STATEMENTS
Notes
32
33
2020
£m
−
0.8
0.8
0.3
(128.1)
(127.0)
−
(127.0)
2019
£m
–
0.5
0.5
0.1
(138.9)
(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.
WPP ANNUAL REPORT 2020
199
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2020
Fixed assets
Investments
Current assets
Debtors due within 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 shareholders’ funds
Note
The accompanying notes form an integral part of this balance sheet.
The financial statements were approved by the Board of Directors and authorised for issue on 29 April 2021.
Mark Read
Chief Executive Officer
John Rogers
Chief Financial Officer
Registered Company Number: 111714
Notes
2020
£m
2019
£m
34
35
36
37
38
13,303.6
13,303.6
13,231.5
13,231.5
1,997.6
0.3
1,997.9
(9,063.7)
(7,065.8)
6,237.8
(479.7)
5,758.1
129.6
570.3
(10.0)
6.4
(1,045.3)
6,107.1
5,758.1
1,647.9
216.8
1,864.7
(8,446.3)
(6,581.6)
6,649.9
(688.3)
5,961.6
132.8
570.3
(262.3)
3.2
(1,045.9)
6,563.5
5,961.6
200
WPP ANNUAL REPORT 2020
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Balance at 1 January 2019
Ordinary shares issued
Share cancellations
Treasury share allocations
Loss for the year
Dividends paid
Non-cash share-based incentive plans (including share options)
Share purchases – close period commitments
Balance at 31 December 2019
Share cancellations
Treasury share allocations
Loss for the year
Dividends paid
Non-cash share-based incentive plans (including share options)
Share purchases – close period commitments
Balance at 31 December 2020
Notes
The accompanying notes form an integral part of this statement of changes in equity.
1 Other reserves are analysed in note 38.
Ordinary share
capital
£m
133.3
–
(0.5)
–
–
–
–
–
132.8
(3.2)
–
–
–
–
–
129.6
Share
premium
£m
569.7
0.6
–
–
–
–
–
–
570.3
–
–
–
–
–
–
570.3
Other
reserves1
£m
(10.0)
–
–
–
–
–
–
(252.3)
(262.3)
–
–
–
–
–
252.3
(10.0)
Capital
redemption
reserve
£m
2.7
–
0.5
–
–
–
–
–
3.2
3.2
–
–
–
–
–
6.4
Own
shares
£m
(1,046.9)
–
–
1.0
–
–
–
–
(1,045.9)
–
0.6
–
–
–
–
(1,045.3)
Profit and
loss account
£m
7,429.6
–
(47.7)
(1.0)
(138.3)
(750.5)
71.4
–
6,563.5
(281.2)
(0.6)
(127.0)
(122.0)
74.4
–
6,107.1
Total
equity
shareholders’
funds
£m
7,078.4
0.6
(47.7)
–
(138.3)
(750.5)
71.4
(252.3)
5,961.6
(281.2)
–
(127.0)
(122.0)
74.4
252.3
5,758.1
WPP ANNUAL REPORT 2020
201
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
31. 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.
(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.
(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 (FRS 101). 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 Strategic Report on page 94.
(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.
Investments are tested for impairment annually. At 31 December 2020, the
recoverable amount was assessed based on the Group's market value and
exceeded the carrying value at that 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 Payments 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
WPP plc, the Company has recognised an addition to fixed asset investments
of the aggregate amount of these contributions of £74.4 million in 2020
(2019: £71.4 million), with a credit to equity for the same amount.
(F) EXPECTED CREDIT LOSSES
Amounts owed by subsidiaries are recorded at amortised cost and are
reduced by expected credit losses. Under IFRS 9 Financial Instruments, the
expected credit losses are measured as the difference between the asset’s
gross carrying amount and the present value of estimated future cash flows
discounted at the financial asset’s original effective interest rate.
202
WPP ANNUAL REPORT 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
32. INTEREST PAYABLE AND SIMILAR CHARGES
36. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
The following are included in creditors falling due within one year:
Bank and other interest payable
Interest payable to subsidiary undertakings
2020
£m
12.0
116.1
128.1
2019
£m
26.9
112.0
138.9
33. 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 19% (2019: 19%). The differences are
explained below:
Loss on ordinary activities before tax
Tax at the rate of 19% (2019: 19%) thereon
Factors affecting tax charge for the year
Group relief not paid for
Items that are not deductible
Tax charge for the year
2020
£m
(127.0)
24.1
(23.0)
(1.1)
–
2019
£m
(138.3)
26.3
(26.3)
–
–
Bank overdrafts
Amounts due to subsidiary undertakings
Share purchases – close period commitments
Other creditors and accruals
2020
£m
716.4
8,344.9
–
2.4
9,063.7
2019
£m
1,222.5
6,964.3
252.3
7.2
8,446.3
37. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN
ONE YEAR
The following are included in creditors falling due after more than one year:
Amounts due to subsidiary undertakings
Total borrowings are repayable as follows:
34. FIXED ASSET INVESTMENTS
The following are included in the net book value of fixed asset investments:
Within one year
Between one and five years
Over five years
2020
£m
479.7
2019
£m
688.3
2020
£m
9,063.7
331.4
148.3
9,543.4
2019
£m
8,446.3
535.4
152.9
9,134.6
38. EQUITY SHAREHOLDERS’ FUNDS
Other reserves at 31 December 2020 comprise a translation reserve
of £10.0 million (2019: £10.0 million) and an equity reserve of £nil
(2019: £252.3 million).
At 31 December 2020 the Company’s distributable reserves amounted to
£5,622.1 million (2019: £5,825.6 million). Further details of the Company’s
share capital are shown in note 27.
Cost
1 January 2019
Additions
31 December 2019
Additions
31 December 2020
Accumulated impairment losses and write-downs
1 January 2019 and 31 December 2019
Impairment losses for the year
31 December 2020
Net book value
31 December 2020
31 December 2019
1 January 2019
Subsidiary
undertakings
£m
13,160.1
71.4
13,231.5
74.4
13,305.9
–
(2.3)
(2.3)
13,303.6
13,231.5
13,160.1
Fixed asset investments primarily represent 100% of the issued share
capital of WPP Emerald Limited, a company incorporated in Ireland.
Fixed asset investments were purchased in a share-for-share exchange.
35. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
The following are included in debtors falling due within one year:
Amounts owed by subsidiary undertakings
Other debtors
2020
£m
1,997.3
0.3
1,997.6
2019
£m
1,646.8
1.1
1,647.9
There were no expected credit losses on debtors in the year ended
31 December 2020 (2019: £nil).
WPP ANNUAL REPORT 2020
203
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WPP PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
1. OPINION
In our opinion:
– the financial statements of WPP plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs as at 31 December 2020 and of the
Group’s and of the Parent Company’s loss for the year then ended;
– the Group financial statements have been properly prepared in accordance
with international accounting standards in conformity with the
requirements of the International Financial Reporting Standards (IFRSs) as
adopted by the European Union and IFRSs as issued by the International
Accounting Standards Board (IASB);
– the Parent Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice,
including Financial Reporting Standard 101 “Reduced Disclosure
Framework”; and
– the financial statements have been prepared in accordance with the
requirements of the Companies Jersey Law 1991.
We have audited the financial statements which comprise:
– the accounting policies;
– the consolidated income statement;
– 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 38.
The financial reporting framework that has been applied in the preparation of
the Group financial statements is applicable law and IFRSs as adopted by the
European Union and IFRSs as issued by the IASB. 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, including FRS 101 “Reduced Disclosure Framework” (United
Kingdom Generally Accepted Accounting Practice).
2. BASIS FOR OPINION
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit
of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’)
Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and Parent
Company for the year are disclosed in note 3 to the financial statements.
We confirm that the non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
3. SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
– Goodwill
– Revenue !
Within this report, any new key audit matters are identified with ! and any key audit matters which are similar to the prior year are
identified with
.
We considered a number of metrics when determining Group materiality, including: pre-tax profit from continuing operations adjusted to
exclude impairment of goodwill and investments in associates, and retranslation of financial instruments; revenue; and headline EBITDA.
Our selected materiality figure represents 9.5% of pre-tax profit from continuing operations adjusted to exclude impairment of goodwill
and investments in associates, and retranslation of financial instruments, 0.4% of revenue (2019: 0.4%) and 2.8% of Headline EBITDA
(2019: 2.6%).
Those entities subject to audit represented 73% of the Group’s consolidated revenue from continuing operations (2019: 75%) 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.
We have revised our assessment of key audit matters as compared to the prior year as discussed below.
Materiality
Scoping
Significant changes
in our approach
204
WPP ANNUAL REPORT 2020
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
FINANCIAL STATEMENTS
4. CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the directors’ use
of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and Parent
Company’s ability to continue to adopt the going concern basis of accounting
included:
– testing the operating effectiveness of controls over management’s going
concern model, including the review of the inputs and assumptions used in
the model;
– identifying the key assumptions and evaluating the appropriateness of these
assumptions and their consistency with management’s presentations to the
Board and Audit Committee;
– comparing the forecasts within the going concern model to recent
historical financial information;
– testing the mechanical accuracy of the going concern model;
– testing the covenant compliance calculations and headroom thereof;
– confirming the existence and availability of financing facilities;
– evaluating the appropriateness of management’s sensitivity analysis
modelled under their most severe scenario; and
– evaluating the disclosures on going concern.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group's and Parent Company’s ability to
continue as a going concern for a period of at least twelve months from when
the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in
relation to the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
5. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
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.
During the year we reassessed the risks of material misstatement in respect of
revenue recognition, recognising in part the impact of the Covid-19 pandemic
on the performance of the Group. As a result, revenue recognition for open
contracts at 31 December 2020 in certain of the Group’s operating companies
accounted for on a percentage of completion basis has been identified as a
new key audit matter in the current period.
In the prior year audit we identified assets held for sale and discontinued
operations in relation to the Kantar disposal as a key audit matter. Given the
transaction substantially completed during the year ended 31 December 2019,
assets held for sale and discontinued operations in relation to the Kantar
disposal is no longer a key audit matter.
As there were no new significant uncertain tax positions (UTPs) or significant
changes to existing UTPs which arose during the year, we no longer consider
UTPs to be a key audit matter.
We determined that going concern is no longer a key audit matter given
the Group’s trading performance in the year is significantly better than
management’s most severe scenarios modelled in connection with the directors’
going concern assessment in respect of the 2019 financial statements.
WPP ANNUAL REPORT 2020
205
FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
Key audit matter description
How the scope of our audit responded to the key audit matter
Key observations
GOODWILL
(Refer to the Accounting Policies and Notes 3 (Costs of services and general and administrative costs) and 14 (Intangible assets) to the financial statements,
and the Audit Committee Report)
The Group’s assessment of goodwill for impairment involves
the comparison of the recoverable amount of goodwill to its
carrying value at each measurement date, calculated as the
higher of fair value less costs to sell and value in use. The Group
used the value in use approach, which uses a discounted cash
flow model to estimate the recoverable amount of each cash
generating unit or group of cash generating units and requires
management to make significant estimates and assumptions
related to discount rates, short-term forecasts and long-term
growth rates. The net book value of goodwill was £7,389 million
as at 31 December 2020 (2019: £10,111 million). In the current year,
an impairment charge of £2,823 million was recorded (2019:
£48 million) related to a number of businesses that were either
underperforming or impacted by the Covid-19 pandemic.
We identified goodwill valuation as a key audit matter because
of the significant judgements made by management, which
consider future impacts of the Covid-19 pandemic, to estimate
the recoverable amount of goodwill, the sensitivity of certain
inputs to the value in use calculations for certain groups of cash
generating units, and the increased auditor judgement and level
of audit effort required to obtain evidence to test these
significant judgements. Estimates of future performance and
market conditions used to arrive at the net present value of
future cash flows at the relevant assessment date, which is used
within the goodwill impairment analysis, are subjective in nature
with increased uncertainty as a result of the Covid-19 pandemic.
Through our risk assessment procedures, we identified those
inputs that were the most sensitive to the recoverable values
computed by the value in use calculations for certain groups of
cash generating units, which enabled us to design our audit
procedures to address the most significant risk areas in our work,
focusing on those estimates that are either complex, including
the discount rate calculations, or subjective in nature, including
the short-term forecast and long-term growth rates.
Our audit procedures focused on challenging the discount rates,
short-term forecasts and long-term growth rates used in the
respective discounted cash flow models to determine the
recoverable amount of each group of cash generating units and
included the following audit procedures, among others:
– We tested the effectiveness of controls over management’s
selection of long-term growth rates used to determine the
recoverable amount for each group of cash generating units.
– We assessed the appropriateness of forecasted revenue and
operating margin growth rates by comparing with external
economic data, including peers, market data and wider
economic forecasts, with a particular focus on the impact
of Covid-19 on those forecasts.
– We evaluated management’s ability to accurately forecast
future revenues and growth rates by comparing actual results
to management’s historical forecasts.
– We assessed the mechanical accuracy of the impairment
models and the methodology applied by management for
consistency with the requirements of IAS 36.
– With the assistance of our valuation specialists, we evaluated
the appropriateness of the discount rates and long-term
growth rates used for each group of cash generating units by:
– Testing the source information underlying the
determination of the discount rate and the mathematical
accuracy of the calculation;
– Assessing the methodology applied in the discount rate
calculation against market practice valuation techniques;
and
– Assessing the long-term growth rates against
independently derived weighted average rate for each
country, based on their GDP forecasts.
– We compared the long-term growth rates to independent
market data to assess the appropriateness of the management’s
long-term growth rates used within the forecasts.
– We evaluated the Group’s disclosures on goodwill against
the requirements of IFRS.
Based on our
procedures, we
determined
management’s
assumptions used
in the valuation of
goodwill to be
reasonable.
As set out in the
Audit Committee
Report on page 130,
a control weakness was
identified with respect
to management’s
review and selection
of the appropriate
discount rates, the
determination of the
appropriateness of the
cash flow periods and
associated discounting,
and assumptions in
respect of working
capital cash flows
included in the
impairment
calculations.
206
WPP ANNUAL REPORT 2020
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
FINANCIAL STATEMENTS
Key audit matter description
How the scope of our audit responded to the key audit matter
Key observations
REVENUE RECOGNITION !
(Refer to the Accounting Policies in the financial statements)
The Group recognises revenue when a performance obligation
is satisfied, in accordance with the terms of its contractual
arrangements. Typically, performance obligations are satisfied
over time as services are rendered. Revenue recognised over
time is based on the proportion of the service performed,
using either an input method or an output method, depending
on the particular arrangement, to measure progress for each
performance obligation. For most contracts where revenue is
recognised over time using the input method, costs incurred
are used as an objective measure of performance. The Group’s
revenue was £12,003 million for the year ended 31 December
2020 (2019: £13,234 million).
We identified the revenue recognition for open contracts at
31 December 2020 in certain of the Group’s operating companies
accounted for on a percentage of completion basis as a key audit
matter because of the management judgement required to
estimate the proportion of the service performed and therefore
the revenue to be recognised on these contracts at year end.
Auditing these estimates was challenging and required extensive
audit effort and a high degree of auditor judgement given the
bespoke nature of each contract and limited availability of
external evidence to support the percentage of completion
determined.
Based on our
procedures, we
determined
management’s
judgement to estimate
the proportion of the
service performed, and
therefore the revenue
to be recognised on
open contracts at year
end to be reasonable.
Our audit procedures related to the key audit matter for revenue
recognition included the following, among others:
– We tested the effectiveness of controls for over time
recognition of revenue, including management’s controls
over the recording of costs incurred and estimates of costs to
complete for the remaining contract performance obligations.
– We evaluated the accuracy of management’s previous
forecasts of costs to complete projects by performing
retrospective reviews of such estimates as compared to actual
results for performance obligations that have been fulfilled.
– We selected a sample of contracts with customers and
performed the following:
– Recalculated revenue recognised based on the percentage
of completion by obtaining schedules of estimated costs
to complete from project managers and challenging the
key underlying assumptions to test their completeness
and accuracy.
– Evaluated whether the contracts were properly included in
management’s calculation of revenue recognised over time
based on the terms and conditions of each contract and
confirmed contract values by verifying the values against
signed agreements and any contract amendments.
– Tested the completeness and accuracy of costs incurred to
date to determine fulfilment of the performance obligations.
– Evaluated the reasonableness and consistency of the
methods and assumptions used by management to develop
the estimates of costs to complete.
– Evaluated management’s ability to achieve the estimates of
future costs to complete by performing inquiries with the
Group’s project managers related to project status and
comparing estimates to project work plans.
– Tested the mathematical accuracy of cost estimates.
– Recalculated deferred and accrued income balances based
on the contract terms, costs incurred to date and remaining
cost estimates to conclude on the appropriateness of the
revenue recognised at year end.
WPP ANNUAL REPORT 2020
207
FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
6. OUR APPLICATION OF MATERIALITY
6.1. MATERIALITY
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group
financial statements
Parent Company
financial statements
Materiality
£50 million (2019: £55 million)
£25 million (2019: £22 million)
Basis for determining
materiality
We considered a number of metrics when determining Group
materiality, including: pre-tax profit from continuing operations
adjusted to exclude impairment of goodwill and investments in
associates, and retranslation of financial instruments; revenue; and
headline EBITDA. Our selected materiality figure represents 9.5%
of pre-tax profit from continuing operations adjusted to exclude
impairment of goodwill and investments in associates, and
retranslation of financial instruments, 0.4% of revenue (2019: 0.4%)
and 2.8% of Headline EBITDA (2019: 2.6%).
In 2019, we determined materiality to be £55 million, as 5.6% of
pre-tax profit from continuing operations.
The basis for materiality is shareholder's equity. The materiality used
is less than 1% of shareholders’ equity (2019: less than 1% of
shareholders’ equity).
Rationale
for the benchmark
applied
The significant impairment charges of £3,119 million recognised
in 2020 caused us to place more emphasis on pre-tax profit from
continuing operations adjusted to exclude impairment of goodwill
and investments in associates, and retranslation of financial
instruments, revenue and Headline EBITDA in our determination
of materiality this year.
Due to the nature of the Company as a parent entity holding
company, we consider shareholders’ equity to be the most
appropriate basis for materiality.
Group materiality
£50m
Component materiality
£16.25m
Audit Committee
reporting threshold
£2m
Group materiality
PBT
£525m
Profit before tax from
continuing operations
adjusted to exclude
goodwill and investment
in associate impairment
charges, and retranslation
of financial instruments
208
WPP ANNUAL REPORT 2020
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
FINANCIAL STATEMENTS
6.2. PERFORMANCE MATERIALITY
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed
the materiality for the financial statements as a whole.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group
financial statements
Parent Company
financial statements
65% (2019: 60%) of Group materiality
65% (2019: 70%) of Parent Company materiality
In determining performance materiality, we considered
factors including:
The Parent Company performance materiality has been set at 65%
of Parent Company materiality, to align with the Group performance
materiality threshold used.
– our risk assessment, including our assessment of the Group’s
overall control environment and that we consider it appropriate
to rely on controls, financial processes and systems in the
majority of areas of the audit; and
– our past experience of the audit, which has indicated a low
value of uncorrected misstatements identified in prior periods.
6.3. ERROR REPORTING THRESHOLD
We agreed with the Audit Committee that we would report to the Committee
all audit differences in excess of £2.0 million (2019: £1.5 million), as well as
differences below that threshold that, in our view, warranted reporting on
qualitative grounds. The change in the reporting threshold has been made
following our reassessment of matters requiring communication. We also
report to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
7.2. OUR CONSIDERATION OF THE CONTROL ENVIRONMENT
WPP plc is reliant on the effectiveness of a number of IT applications and
controls to ensure that financial transactions are processed and recorded
completely and accurately. As the Group files its financial statements in the US,
the Group is required to comply with the US Sarbanes Oxley Act. Accordingly,
we perform testing of the operating effectiveness of internal controls, including
the general IT controls, over financial reporting in all areas of the audit.
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1. IDENTIFICATION AND SCOPING OF COMPONENTS
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
ensure that the components selected for audit 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 subjected to audit represented 73% of the Group’s consolidated
revenue from continuing operations (2019: 75%) achieved through a
combination of direct testing and specified audit procedures, including
substantive analytical review procedures, performed by the Group auditor and
component auditors across the world. Our audit work on components is
executed at levels of materiality appropriate for such components, many of
which are local statutory materiality levels which in all instances are no higher
than 50% of Group performance materiality.
As set out in the Audit Committee’s report, management identified material
weaknesses in internal control over financial reporting with respect to three
areas of financial reporting. We have assessed the impact of these material
weaknesses on our audit and we have not relied upon controls in our
substantive testing of the related areas.
7.3. WORKING WITH OTHER AUDITORS
The Group audit team exercises its oversight of component auditors using a
carefully designed programme, which considers a variety of factors including
the size of entity and number of significant risks. This programme is put in
place to ensure that appropriate guidance is provided to the component
auditors through a combination of:
– upfront planning meetings with all component teams;
– site visits;
– central review of documentation; and
– risk assessment discussions and detailed review of workpapers.
As a result of the Covid-19 pandemic, our oversight of component auditors
including site visits was conducted largely remotely using video conferencing.
In years when we elect to not visit a key location, either physically or virtually, we:
In order to support our conclusion that there were no significant risks of
material misstatement of the aggregated financial information of the remaining
components, we tested the consolidation process and performed analytical
procedures at both the Group level and component level for components
deemed to be out-of-scope.
– include the component audit partner in our team planning meeting;
– discuss their risk assessment; and
– review the documentation of the findings from their work and discuss with
them as needed.
27%
Revenue
73%
Full audit scope
Scoped out
These are designed so that the Senior Statutory Auditor or a senior member
of the Group audit team can have oversight of the work of our component
auditors on a regular basis. In addition we assess the competence of each of
our component auditors.
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 ongoing basis.
WPP ANNUAL REPORT 2020
209
FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
8. OTHER INFORMATION
The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon.
The directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
9. RESPONSIBILITIES OF DIRECTORS
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, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements
is located on the FRC’s website at: frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF
DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
11.1. IDENTIFYING AND ASSESSING POTENTIAL RISKS RELATED TO
IRREGULARITIES
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations,
we considered the following:
– the nature of the industry and sector, control environment and business
performance including the design of the Group’s remuneration policies, key
drivers for directors’ remuneration, bonus levels and performance targets;
– the Group’s own assessment of the risks that irregularities may occur either
as a result of fraud or error that was approved by the board;
– results of our enquiries of management, the Group’s general counsel,
internal audit and the audit committee about their own identification and
assessment of the risks of irregularities;
– any matters we identified having obtained and reviewed the Group’s
documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have
knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-
compliance with laws and regulations; and
– the matters discussed among the audit engagement team including
significant component audit teams and relevant internal specialists,
including tax, valuations, pensions and IT specialists regarding how and
where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified the
greatest potential for fraud in the areas of goodwill impairment and revenue
recognition related to open contracts at year-end accounted for using the
percentage of completion method. In common with all audits under ISAs (UK),
we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory frameworks
that the Group operates in, focusing on provisions of those laws and
regulations that had a direct effect on the determination of material amounts
and disclosures in the financial statements. The key laws and regulations we
considered in this context included the Securities and Exchange Commission
rules, Securities Law in the UK and US, the UK Listing Rules, Companies (Jersey)
Law and tax legislation in the Group’s various jurisdictions.
In addition, we considered provisions of other laws and regulations that do not
have a direct effect on the financial statements but compliance with which
may be fundamental to the Group’s ability to operate or to avoid a material
penalty. These included the US Foreign Corrupt Practices Act and the UK
Bribery Act.
11.2. AUDIT RESPONSE TO RISKS IDENTIFIED
As a result of performing the above, we identified goodwill impairment and
revenue recognition related to open contracts at year-end accounted for using
the percentage of completion method as key audit matters related to the
potential risk of fraud. The key audit matters section of our report explains the
matters in more detail and also describes the specific procedures we
performed in response to those key audit matters.
210
WPP ANNUAL REPORT 2020
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC
FINANCIAL STATEMENTS
Our procedures to respond to risks identified included the following:
– reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws and
regulations described as having a direct effect on the financial statements;
– enquiring of management, the audit committee and external legal counsel
14. MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
14.1. ADEQUACY OF EXPLANATIONS RECEIVED AND ACCOUNTING RECORDS
Under the Companies (Jersey) Law 1991 we are required to report to you if,
in our opinion:
concerning actual and potential litigation and claims;
– we have not received all the information and explanations we require for our
– performing analytical procedures to identify any unusual or unexpected
audit; or
relationships that may indicate risks of material misstatement due to fraud;
– reading minutes of meetings of those charged with governance, reviewing
internal audit reports and reviewing correspondence with relevant tax
authorities; and
– proper accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
– the Parent Company financial statements are not in agreement with the
– in addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates
are indicative of a potential bias; and evaluating the business rationale of
any significant transactions that are unusual or outside the normal course
of business.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members including internal specialists and
significant component audit teams, and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the audit.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. OPINIONS ON OTHER MATTERS PRESCRIBED BY OUR
ENGAGEMENT LETTER
In our opinion the part of the directors’ remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006 as if that
Act had applied to the Group.
In our opinion, based on the work undertaken in the course of the audit:
accounting records and returns.
We have nothing to report in respect of these matters.
14.2 DIRECTORS’ REMUNERATION
Under our engagement letter we are also required to report if in our opinion
certain disclosures of directors’ remuneration have not been made or the part
of the directors’ remuneration report to be audited is not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
15. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
15.1. AUDITOR TENURE
Following the recommendation of the audit committee, we were appointed
by the Company at the Annual General Meeting on 20 May 2002 to audit the
financial statements for the year ending 31 December 2002 and subsequent
financial periods. The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is 19 years, covering the
years ending 31 December 2002 to 31 December 2020.
– the information given in the strategic report and the corporate governance
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
– the strategic report and the corporate governance report have been
15.2. CONSISTENCY OF THE AUDIT REPORT WITH THE ADDITIONAL REPORT
TO THE AUDIT COMMITTEE
Our audit opinion is consistent with the additional report to the audit
committee we are required to provide in accordance with ISAs (UK).
prepared in accordance with applicable legal requirements.
16. USE OF OUR REPORT
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 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.
Robert Topley, FCA
For and on behalf of Deloitte LLP
Recognized auditor
London, United Kingdom
29 April 2021
In the light of the knowledge and understanding of the Group and the Parent
Company and their environment obtained in the course of the audit, we have
not identified any material misstatements in the strategic report or the
directors’ report.
13. CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors' statement in relation
to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that
each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements and our knowledge
obtained during the audit:
– the directors’ statement with regards to the appropriateness of adopting
the going concern basis of accounting and any material uncertainties
identified set out on page 94;
– the directors’ explanation as to its assessment of the Group’s prospects, the
period this assessment covers and why the period is appropriate set out on
page 94;
– the directors' statement on fair, balanced and understandable set out on
page 155;
– the board’s confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on pages 95-101;
– the section of the annual report that describes the review of effectiveness
of risk management and internal control systems set out on page 130; and
– the section describing the work of the audit committee set out on pages
128-132.
WPP ANNUAL REPORT 2020
211
FINANCIAL STATEMENTS
RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE
Headline operating profit margin before and after share of results of associates:
Continuing operations
Revenue less pass-
through costs
Headline operating profit
Share of results of
associates (excluding
exceptional gains/losses)
Headline PBIT
Margin
%
2020
£m
Margin
%
2019
£m
Margin
%
2018
£m
9,762.0
12.9 1,260.5
10,846.5
14.4 1,560.6
10,875.7
15.2 1,651.2
10.1
13.0 1,270.6
62.5
15.0 1,623.1
72.0
15.8 1,723.2
Calculation of headline EBITDA:
Continuing operations
Headline PBIT (as above)
Depreciation of property, plant and equipment
Amortisation of other intangible assets
Headline EBITDA (including depreciation
of right-of-use assets)
Depreciation of right-of-use assets
Headline EBITDA
2020
£m
2019
£m
1,270.6 1,623.1
185.5
21.2
174.8
35.2
2018
£m
1,723.2
188.6
20.7
1,480.6 1,829.8 1,932.5
–
301.6
1,812.5 2,131.4 1,932.5
331.9
Headline EBITDA is a key metric that private equity firms, for example, use for
valuing companies, and is one of the metrics that management uses to assess
the performance of the business. Headline EBITDA (including depreciation of
right-of-use assets) is used in the Group’s key leverage metric.
Reconciliation of (loss)/profit before taxation to headline PBT and headline
earnings:
Continuing operations
(Loss)/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 and other write-downs
Restructuring and transformation costs
Restructuring costs in relation to Covid-19
Share of exceptional losses of associates
Litigation settlement
Gain on sale of freehold property in New York
Revaluation and retranslation of financial
instruments
Headline PBT
Headline tax charge
Headline non-controlling interests
Headline earnings
2020
£m
20191
£m
(2,790.6) 1,214.3
20181
£m
1,019.3
89.1
2,822.9
(7.8)
(0.6)
296.2
80.7
232.5
146.1
25.6
–
121.5
47.7
(40.4)
(0.4)
7.5
153.5
–
47.8
(16.8)
(7.9)
201.8
176.5
(237.9)
(2.0)
2.0
265.5
–
41.5
–
–
147.2
76.3
(163.8)
1,041.3 1,363.0 1,543.0
(320.1)
(299.6)
(242.1)
(69.8)
(79.2)
(58.9)
1,153.1
984.2
740.3
Note
1 Figures have been restated as described in the accounting policies.
Headline PBT and headline earnings are metrics that management use to
assess the performance of the business.
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 revenue to revenue less pass-through costs:
Continuing operations
Revenue
Media pass-through costs
Other pass-through costs
Revenue less pass-through costs
2018
2019
2020
£m
£m
£m
13,046.7
13,234.1
12,002.8
(1,458.0)
(1,656.2)
(1,555.2)
(713.0)
(731.4)
(685.6)
9,762.0 10,846.5 10,875.7
Pass-through costs comprise fees paid to external suppliers when they are
engaged to perform part or all of a specific project and are charged directly
to clients. This includes the cost of media where the Group is buying digital
media for its own account on a transparent opt-in basis and, as a result, the
subsequent media pass-through costs have to be accounted for as revenue,
as well as billings. Therefore, management considers that revenue less
pass-through costs gives a helpful reflection of top-line growth.
Reconciliation of operating (loss)/profit to headline operating profit:
Continuing operations
Operating (loss)/profit
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 and other write-downs
Litigation settlement
Gain on sale of freehold property in New York
Restructuring and transformation costs
Restructuring costs in relation to Covid-19
Headline operating profit
Finance and investment income
Finance costs (excluding interest expense
related to lease liabilities)
Interest cover2 on headline operating profit
2020
£m
(2,278.1)
2019
£m
1,295.9
20181
£m
1,245.3
89.1
2,822.9
121.5
47.7
201.8
176.5
(7.8)
(40.4)
(237.9)
(0.6)
296.2
25.6
–
80.7
232.5
1,260.5
82.7
(211.0)
(128.3)
9.8
times
(0.4)
7.5
(16.8)
(7.9)
153.5
–
1,560.6
99.0
(259.4)
(160.4)
9.7
times
(2.0)
2.0
–
–
265.5
–
1,651.2
98.9
(279.1)
(180.2)
9.2
times
Notes
1 Figures have been restated as described in the accounting policies.
2 Interest expense related to lease liabilities is excluded from interest cover as lease liabilities are
excluded from the Group’s key leverage metrics.
Headline operating profit is one of the metrics that management uses to
assess the performance of the business.
212
WPP ANNUAL REPORT 2020
RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE
FINANCIAL STATEMENTS
The Group bases its internal cash flow objectives on free cash flow.
Management believes free cash flow is meaningful to investors because it is
the measure of the Group’s funds available for acquisition related payments,
dividends to shareholders, share repurchases and debt repayment. The purpose
of presenting free cash flow is to indicate the ongoing cash generation within the
control of the Group after taking account of the necessary cash expenditures
of maintaining the capital and operating structure of the Group (in the form of
payments of interest, corporate taxation and capital expenditure).
CONSTANT CURRENCY AND PRO FORMA (‘LIKE-FOR-LIKE’)
These consolidated financial statements are presented in pounds sterling.
However, the Group’s significant international operations give rise to
fluctuations in foreign exchange rates. To neutralise foreign exchange impact
and illustrate the underlying change in revenue and profit from one year to the
next, the Group has adopted the practice of discussing results in both reportable
currency (local currency results translated into pounds sterling at the
prevailing foreign exchange rate) and constant currency.
Management also believes that discussing pro forma or like-for-like contributes
to the understanding of the Group’s performance and trends because it allows
for meaningful comparisons of the current year to that of prior years.
Further details of the constant currency and pro forma methods are given in
the Financial Glossary on pages 225 and 226.
Calculation of headline taxation:
Continuing operations
Headline PBT
Share of results of associates
(excluding exceptional gains/losses)
Headline PBT excluding headline share of results
of associates
Tax charge
Tax charge relating to gains on
disposal of investments and subsidiaries
Tax credit relating to gain on sale of
freehold property in New York
Tax credit/(charge) relating to litigation settlement
Deferred tax impact of the amortisation of acquired
intangible assets and other goodwill items
Tax credit relating to restructuring
and transformation costs
Tax credit relating to restructuring
and transformation costs in relation to Covid-19
Tax impact of US tax reform
Deferred tax relating to gains on
disposal of investments and subsidiaries
Headline tax charge
Headline tax rate
2020
£m
2018
£m
1,041.3 1,363.0 1,543.0
2019
£m
(10.1)
(62.5)
(72.0)
1,031.2 1,300.5 1,471.0
256.0
275.0
129.3
(2.7)
(6.9)
(0.8)
–
5.4
0.5
(4.2)
–
–
36.0
13.3
12.9
14.3
29.2
51.2
–
–
–
41.1
–
11.6
(0.7)
(7.3)
8.6
320.1
299.6
242.1
23.5% 23.0% 21.8%
Following the disposal of a majority stake in Kantar and its subsequent
classification as an associate in December 2019, the Group considers the most
relevant metric to assess the underlying tax charge is to use the headline tax
charge on headline PBT excluding the share of headline results of associates,
as the tax charge on associate income is reflected within the share of results
of associates. On this basis, the headline tax rate was 23.5% (2019: 23.0%,
2018: 21.8%).
Given the Group’s geographic mix of profits and the changing international tax
environment, the headline tax rate is expected to increase slightly over the
next few years.
Calculation of headline non-controlling interests:
Continuing operations
Non-controlling interests
Non-controlling interests relating to restructuring
costs in relation to Covid-19
Non-controlling interests relating to restructuring
and transformation costs
Headline non-controlling interests
Reconciliation of free cash flow:
Cash generated by continuing and discontinued
operations (note 11)
Plus
Interest received
Investment income
Dividends from associates
Share option proceeds
Less
Earnout payments
Interest and similar charges paid
Purchases of property, plant and equipment
Purchase of other intangible assets (including
capitalised computer software)
Repayment of lease liabilities
Interest paid on lease liabilities
Corporation and overseas tax paid
Dividends paid to non-controlling interests in
subsidiary undertakings
Free cash flow
2020
£m
53.9
5.0
–
58.9
2019
£m
79.2
2018
£m
65.1
–
–
–
79.2
4.7
69.8
2020
£m
2019
£m
2018
£m
2,583.9 2,693.2 2,174.7
73.6
8.7
32.5
–
80.8
18.3
33.3
0.6
90.4
15.4
49.7
1.2
(115.2)
(173.9)
(218.3)
(130.2)
(270.6)
(339.3)
(120.2)
(252.8)
(314.8)
(54.4)
(300.1)
(98.5)
(371.5)
(54.8)
(249.8)
(105.1)
(536.0)
(60.4)
–
–
(383.6)
(83.3)
(106.2)
1,283.5 1,044.2 1,093.4
(96.2)
WPP ANNUAL REPORT 2020
213
ADDITIONAL INFORMATION
214
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29/03/2021 17:55
WPP ANNUAL REPORT 2020
ADDITIONAL
INFORMATION
Task Force on Climate-related
Financial Disclosures statement
Other statutory information
Shareholder information
Adjustment of 30 June 2020
goodwill impairment
Five-year summary
Financial glossary
Where to find us
216
219
220
223
224
225
228
240101803_WPP_AR2020_IFC_Dividers_design_190321_SD.indd 216-217
215
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WPP ANNUAL REPORT 2020
ADDITIONAL INFORMATION
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES STATEMENT
We support the Task Force on Climate-related Financial Disclosures and aim
to develop our disclosures in line with its recommendations. This voluntary
framework seeks to encourage businesses to disclose climate-related risks
and opportunities and is structured around four themes: governance, strategy,
risk management, and metrics and targets. Our disclosure, across these four
themes, is set out below. WPP’s overall approach to risk management and a
summary of our principal risks can be found on pages 90-101 of this Annual
Report. Our CDP response provides further disclosures on our approach to
climate change and is available at cdp.net/en.
GOVERNANCE
Our Executive Directors have overall responsibility for climate-related risks
and opportunities and our performance on carbon reduction is integrated into
their incentive plans. At Board level, the Sustainability Committee steers our
approach and is attended by both the CEO and CFO, as well as experienced
Non-Executive Directors. The Committee meets at least four times per year.
Its remit includes reviewing our sustainability strategy and evaluating our
performance against targets and commitments. As our clients integrate
climate adaptation and mitigation into their business strategies, the
Committee will review the growth of services which maximise their success.
It will also review climate adaptation and transition plans, including steps to
ensure that our Campuses and offices are resilient to extreme weather and
that we are meeting growing regulatory requirements that face both WPP
and its clients. In 2020, climate strategy was discussed at all meetings as the
Committee monitored the development of WPP’s science-based carbon
target and net zero strategy.
Our Executive Committee working group on sustainability also works to
guide our strategy and oversee our approach across agencies. This group
includes WPP’s Chief Financial Officer, Chief Marketing and Growth Officer,
Group Chief Counsel, and agency CEOs. The wider Executive Committee
includes the leaders of WPP’s largest agencies and Group functional leaders.
In 2021, we will build implementation plans for our sustainability strategy,
net zero carbon commitments, and climate-related risk and opportunity
management. Further information on sustainability governance is provided
on page 89 of this Annual Report.
IDENTIFYING CLIMATE RISK AND OPPORTUNITY
Sustainability risks are integrated into our overall risk management processes.
Performance and updated risk implications are reviewed by the Audit Committee
on a regular basis. Assessment of risk is informed by feedback from investors,
clients and our people. Our overall risk management process is outlined on
pages 90-101 and climate change risk is included as an emerging risk as part
of our principal risks and uncertainties disclosure on page 101. WPP has
implemented Risk Committees in our operating companies with the aim of
ensuring accountability at the network level to monitor risk and compliance
and we are embedding climate risks in their agendas. Our business integrity
programme is integral to ensuring that the policies, procedures and control
environment set by the Board are understood and adhered to across all
geographies and markets. In 2020, the business continuity implications of
physical climate change and the risk of not meeting WPP’s sustainability
commitments was integrated into the Business Integrity function’s annual
risk assessment.
The Board Sustainability Committee reviews WPP’s climate-related risks and
opportunities on an annual basis. This analysis is informed by interviews with
sustainability and consumer experts from within WPP’s agencies and external
data sources including Maplecroft’s Climate Change Exposure Index and the
Intergovernmental Panel on Climate Change (IPCC) Representative
Concentration Pathways (RCPs). Factors considered include regulatory
requirements, reputational risk, physical risks, and opportunities to advise
our clients. Evaluation criteria include relevance to our industry, relevance
to sustainability, regulatory and legal risks, financial implications and the
operations affected.
216
WPP ANNUAL REPORT 2020
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION
CLIMATE CHANGE AND OUR STRATEGY
The nature of the risks and opportunities that we face depend not just on the
physical aspects of climate change, but also on: the trajectory our clients take
in adapting their business models; regulations in the markets in which we
operate; and our ability to understand and shape a culture of climate action.
Our response to our principal climate risks and opportunities involves a range
of WPP Group functions and responses by our companies.
KEY
Risk
Opportunity
CLIMATE-RELATED
RISK OR
OPPORTUNITY
POTENTIAL IMPACT
HOW IT IS MANAGED
PHYSICAL RISKS AND OPPORTUNITIES
Increased frequency
of extreme weather
and climate-related
natural disasters
This includes storms, flooding, wildfires and
water and heat stress which can damage our
buildings, jeopardise the safety of our people
and significantly disrupt our operations.
Our assessment of physical climate risk on our
Campus buildings shows that 10% of headcount
will be located in countries at “extreme” risk from
the physical impacts of climate change in the
next 30 years, up from 9% in 2019. In addition, 15%
of our headcount is in markets where climate risk
exposure has increased by more than 10% in the
past five years1. This includes our operations in
Canada, China, Italy, Turkey and the United Arab
Emirates.
TRANSITION RISKS AND OPPORTUNITIES
Increased demand for
sustainable products
and services
Our clients are grappling with sustainability
challenges and looking to transition their business
models away from fossil fuels. For example, 64%
of our top 50 clients have committed to setting
science-based carbon reduction targets,
representing 33% of total revenues in 2020.
As clients increase their ambitions in this space,
there is an opportunity for WPP to grow revenues
from products and services which support the
sustainability ambitions of our clients as they
transition their businesses away from fossil fuels.
This may include developing low or net zero
marketing and ecommerce services, developing
sustainability-focused brand strategies, and
promoting sustainable consumption norms
to consumers.
Co-locating our people through our Campus strategy has enabled
us to centralise emergency preparedness procedures. In 2021 we
will integrate climate-related risk assessment into the technical due
diligence suite that we follow when we invest in a new Campus
building. This will help to ensure that material acute and chronic
physical climate risks are considered in design and embedded into
business continuity procedures. Further details on our Campus
strategy are outlined on page 44.
Our annual risk assessment identified the need to develop tools and
guidance to support our People teams in identifying and responding
to emergent physical climate risk. In 2021, we will work with our
Business Integrity function to develop resources and deploy them
across WPP agencies.
To realise this opportunity, we will need to invest in the innovation
and growth of sustainability-focused services.
Our sustainability strategy (see page 68) outlines our commitment to
developing products and services which enable our clients to adopt
leadership positions on climate change and exceed the expectations
of consumers.
In 2020 we increased investment in our virtual advertising production
capability, which reduces the emissions and environmental impact of
production shoots.
Increasingly, our agencies are hiring for sustainability-focused
leadership roles. We expect this community to continue to grow.
Additionally, we are evaluating whether to increase our sustainability
resources for clients organically or by acquisition.
We are already upskilling our people in carbon reduction and
climate-related issues. In 2020, we started training our people to
deliver net zero products and services through programmes such as
AdGreen (page 72) and to innovate on behalf of our clients through
initiatives like Change the Brief. Through our strategy, we will be
developing materials and training programmes to upskill our people
on climate-related issues.
1 Based on the Maplecroft Climate Risk Exposure Index values, December 2020.
WPP ANNUAL REPORT 2020
217
ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT
CLIMATE-RELATED
RISK OR
OPPORTUNITY
POTENTIAL IMPACT
HOW IT IS MANAGED
TRANSITION RISKS AND OPPORTUNITIES
Achieving resource
efficiencies through
cutting our carbon
footprint and improving
energy efficiency
Through carbon reduction initiatives we have the
opportunity to decrease the costs associated with
energy use and avoid increased costs associated
with carbon taxation. This relates both to our
buildings, and to energy-intense activities such
as data storage.
Through energy audits we have identified that
moving to offices which are certified to advanced
sustainability standards reduced energy
consumption by 21% per location. As part of our
net zero strategy we are working to identify the
potential cost savings of embedding best-
practice solutions in our buildings.
Our industry is increasingly reliant on data,
digital content and centralised cloud computing.
In coming years, we expect to see an increase in
externality taxes designed to curb the carbon
emissions associated with data storage, which
may lead to companies embedding data
minimisation strategies1. This creates an
opportunity for networks such as WPP, which are
following a policy of using data well rather than
focusing on collection, to emerge as practice
leaders and drive innovation.
As consumer consciousness around climate
change rises, there is increased scrutiny of
our sector’s role in driving unsustainable
consumption. Increased regulatory scrutiny,
including government consultations,
demonstrates the growing reputational,
financial and regulatory risks associated with
the misrepresentation of environmental claims
in marketing and advertising content.
Increased reputational
risk associated with
misrepresenting
environmental claims in
marketing and
advertising content
Increased reputational
risk associated with
working with oil and
gas companies and
taking on
environmentally
detrimental briefs
WPP agencies are working with a number of
energy clients. In many cases we are helping
them to reshape their strategies and to embed
the principles of sustainability within their
operations, products and marketing.
Working with oil and gas companies, or
associated industry groups, who are not actively
decarbonising could result in weakened
employee morale, lower client confidence and
greater regulatory burden.
Through our Campus strategy we have been driving energy
efficiency gains by ensuring that all buildings with a floor space
exceeding 50,000 square feet will be certified to advanced
sustainability standards including LEED and BREEAM. As part of our
net zero strategy we are working with our real estate function to
embed sustainability best practice into our Campus strategy. For
more details see our Sustainability Report.
We are working to embed our net zero ambitions in our data and AI
strategy to maximise carbon reduction opportunities. This includes
through traditional methods such as embedding the use of efficient
hardware and renewable energy into purchasing decisions, and by
pursuing data minimisation, federation and virtualisation solutions
which reduce energy consumption by keeping data in its place
of origin.
The misrepresentation of environmental issues is governed by our
Code of Conduct, which makes clear that we will not take on work
or produce content that is designed or intended to mislead. We train
our people on avoiding misleading work through our online ethics
training, How We Behave, on joining and then on a regular basis,
including after each update. Our people, suppliers and partners can
report concerns or suspected cases of misconduct through our
independently managed Right to Speak facility. For further details,
see “Policies, Procedures and Culture” (page 91).
Through our sustainability strategy, we are developing additional
training and resources to help our people to avoid misrepresentation
in the work we do on behalf of clients.
Our sustainability strategy outlines our commitment to supporting
our clients’ on their sustainability journeys (see page 72). We are
reviewing our policies to reduce the risk that any client brief
undermines the implementation of the Paris Agreement.
MONITORING OUR PROGRESS
We have been reporting on our performance on carbon emissions’ reduction
since 2006. Our carbon emissions’ statement is included on page 219 of WPP’s
2020 Sustainability Report. In 2020 and early 2021 we worked with the
consultancy Carbon Intelligence to develop a net zero carbon strategy. WPP
has committed to setting carbon reduction targets in line with Science Based
Targets initiative (SBTi) requirements for 1.5°C and is a signatory to the
Business Ambition for 1.5°C. This year we have published our full scope 3
inventory for the first time (see wpp.com/netzero). WPP’s net zero strategy
and the metrics we will use to monitor its implementation and progress are
outlined on page 81 and in the Planet chapter of our Sustainability Report
2020. Our most material climate-related opportunities relate to our client
work. As part of our sustainability strategy we will develop metrics which
track the growth of sustainable products and services. Examples of work
relating to climate change are included in our downloadable Sustainability
Report 2020: wpp.com/sustainability.
1 WPP, Data 2030: what does the future of data look like.
218
WPP ANNUAL REPORT 2020
ADDITIONAL INFORMATION
2020
2019
2018
4,069
692
17,041
21,802
28,984
31,671
1,177
61,832
28,983
0
1,177
30,160
83,634
51,962
23,325
23,325
2020
0.52
4.33
0.23
6,299
541
18,175
25,015
56,421
27,324
1,820
85,565
60,750
0
1,820
62,570
5,804
1,505
n/a
7,309
66,848
26,370
1,925
95,143
71,905
0
1,925
73,830
110,580
102,452
87,585
122,967
122,967
81,139
131,313
131,313
2019
0.82
6.62
1.15
2018
0.76
6.22
1.24
Our carbon data is reviewed by Bureau Veritas, an independent assurance
provider. See its Independent Verification Statement on our website
wpp.com/sustainability. Additional information on our carbon emissions
methodology is included in our Sustainability Report.
OTHER STATUTORY INFORMATION
CARBON EMISSIONS STATEMENT
CO2e EMISSIONS BREAKDOWN (TONNES OF CO2e)
Emissions source
Continuing operations
Scope 1
Natural Gas
Diesel and Heating Oil
Company cars1
Total scope 1
Scope 2
Scope 2 emissions from standard electricity (location-based)
Scope 2 emissions from green and renewable electricity (location-based)
Scope 2 emissions from heat and steam
Total scope 2 (location-based)
Scope 2 emissions from standard electricity (market-based)
Scope 2 emissions from green and renewable electricity (market-based)
Scope 2 emissions from heat and steam
Total scope 2 (market-based)1
Total scope 1 and 2
Total scope 1 and 2 CO2e emissions (location-based)
Total scope 1 and 2 CO2e emissions (market-based)
Scope 3
Business air travel
Total scope 31
WPP’S CARBON INTENSITY (TONNES OF CO2e)
Intensity metric
Total scope 1 and 2
Tonnes CO2e per full-time employee (market-based)
Tonnes CO2e per £million revenue (market-based)
Scope 3
Tonnes CO2e per full time employee
NOTES TO CARBON EMISSIONS STATEMENT 2020
Our carbon emissions statement has been prepared in accordance with the
Greenhouse Gas Protocol and aligns with the scope 2 market-based emissions
methodology guidance. Our reporting incorporates carbon dioxide equivalent
emissions from building energy use and business air travel. Emissions data is
included for all operations for which WPP and its subsidiaries have operational
control. Associate companies are excluded. This covers 99,830 people.
1 As part of our net zero strategy we have updated our emissions
methodology. We are therefore restating our 2019 carbon emissions to
capture best practice in emissions reporting and ensure the best possible
baseline for our carbon reduction targets. Updates to our methodology have
incorporated reporting on the emissions associated with company cars,
updating our business air travel emissions factors to include radiative forcing
and rectifying a material error found in the 2019 emissions factor applied for
Australia. Further details of the restatement are included in the content index
of our Sustainability Report.
WPP ANNUAL REPORT 2020
219
ADDITIONAL INFORMATION
SHAREHOLDER INFORMATION
SHARE CAPITAL AND CONTROL
Details of our issued share capital and the number of shares held in Treasury
as at 31 December 2020 can be found in note 27 to the financial statements.
Our ordinary shares are listed on the London Stock Exchange (LSE) and are also
quoted on the New York Stock Exchange (NYSE) in the form of American
Depositary Receipts (ADRs).
MAJOR SHAREHOLDERS
The table below shows the holdings of major shareholders in the Company’s
issued ordinary share capital in accordance with the Disclosure Guidance and
Transparency Rules (DTRs) notified to the Company as at 31 December 2020.
Information provided to the Company under the DTRs is publicly available via
the regulatory information services and on the Company’s website.
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.
Harris Associates LP
BlackRock Inc
At the AGM on 10 June 2020, shareholders passed resolutions authorising the
Company, in accordance with its Articles, to allot shares up to a maximum
nominal amount of £40,844,302 of which £6,126,645 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 27 to the financial statements on pages 196-198.
AUTHORITY FOR PURCHASE OF OWN SHARES
At the AGM on 10 June 2020, shareholders passed a special resolution
authorising the Company, in accordance with its Articles of Association,
to purchase up to 122,532,907 of its own shares in the market. In the year
under review, 32,088,571 ordinary shares were purchased.
Harris Associates LP
BlackRock Inc
SHAREHOLDERS AS AT 31 DECEMBER 2020
Holding of shares
Up to 1,000
1,001 to 5,000
5,001 to 100,000
100,001 to 1,000,000
Over 1,000,000
Number of
holders
5,810
1,634
2,247
987
254
% Owners
53.1
15.0
20.6
9.0
2.3
Shareholdings
1,538,230
3,920,826
69,828,801
328,301,356
892,491,029
%
Outstanding
0.1
0.3
5.4
25.3
68.9
At 30 December
2020
4.51%
7.56%
At 23 April
2021
3.75%
8.04%
Shareholders by geography
UK
United States
Rest of World
Total
%
30.6
36.0
33.4
100
Shareholders by type
Institutional investors
Our people
Other individuals
Total
%
95.2
0.6
4.2
100
220
WPP ANNUAL REPORT 2020
SHAREHOLDER INFORMATION
ADDITIONAL INFORMATION
SHARE PRICE
The closing price of the shares at 31 December was as follows:
Ordinary 10p shares
Share price information is also available online at wpp.com/investors/share-price
At 23 April
2021
967.8p
2020
800.0p
2019
1,066.5p
2018
846.6p
2017
1,341.0p
2016
1,816.0p
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 of our US$ bonds 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 March 2025, 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 February 2021, the lending banks approved an
extension of the term of the Revolving Credit Facility to March 2026.
In general terms, awards granted under WPP’s incentive plans will usually vest on a change of control, albeit on a prorated basis. Where awards are subject to
performance conditions, those conditions will still need to be met, also on a prorated basis. Certain incentive plans allow the Compensation Committee to
require outstanding awards to be exchanged for equivalent awards in the acquiring company.
SHARE BUY-BACK PROGRAMME
The Board has been authorised to issue and allot Ordinary Shares under Article 12 of the company’s Articles of Association. The power under Article 12 and the
authority for the company to make purchases of its own shares are subject to shareholder authorities which are sought on an annual basis at our Annual General
Meeting (AGM). Any shares purchased by the company may be cancelled, held as Treasury shares or used for satisfying share options and grants under the
Group’s employee share plans.
The Company announced on 31 March 2020 its decision to suspend the £950 million share buyback, funded by proceeds from the Kantar transaction, with
immediate effect. The Company announced a £300 million share buy-back programme on 11 March 2021, which would take place during the period commencing
11 March 2021 and ending no later than 18 June 2021.
DIVIDENDS
Subject to shareholder approval at the 2021 AGM, the final dividend for 2020 will become due and payable on 9 July 2021 to all holders of ordinary shares on the
Register of Members at the close of business on 11 June 2021.
The table below sets out the dividend per share ordinary shareholders have received for the last five years:
Interim dividend per ordinary share
Final dividend per ordinary share
Total
AMERICAN DEPOSITARY RECEIPTS (ADRS)
Each ADR represents five ordinary shares.
2020
10.00p
14.00p
24.00p
2019
22.70p
–
22.70p
2018
22.70p
37.30p
60.00p
2017
22.70p
37.30p
60.00p
2016
19.55p
37.05p
56.60p
WPP plc is subject to the informational requirements of the United States’ 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.
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 222).
Dividends per ADR in respect of each financial year are set out below.
In £ sterling
Interim
Final
Total
In US dollars1
Interim
Final
Total
2020
2019
2018
2017
2016
50.00p
70.00p
120.00p
113.50p
–
113.50p
113.50p
186.50p
300.00p
113.50p
186.50p
300.00p
97.75p
185.25p
283.00p
64.18¢
89.85¢
154.03¢
144.88¢
–
144.88¢
151.53¢
249.00¢
400.53¢
146.27¢
240.34¢
386.61¢
132.42¢
250.96¢
383.38¢
1 These figures have been translated for convenience purposes only, using the approximate average rate for the year of US$1.2836 (2019: US$1.2765, 2018: US$1.3351). 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. The dividends received will be subject to United States’ taxation.
WPP ANNUAL REPORT 2020
221
ADDITIONAL INFORMATION SHAREHOLDER INFORMATION
LISTING RULES
For the purposes of Listing Rule (LR) 9.8.4R, the information required to be
disclosed by that section can be found in the following locations:
SHAREHOLDER CONTACTS
ORDINARY SHARES
For any queries regarding your shareholding, please contact Computershare:
By telephone: +44 (0)870 707 1411
Lines are open from Monday to Friday, 8.30am to 5.30pm UK time, excluding
public holidays.
Using the contact form on the website: investorcentre.co.uk/je/contactus
In writing: Computershare Investor Services (Jersey) Limited, 13 Castle Street,
St Helier, Jersey, JE1 1ES
AMERICAN DEPOSITARY RECEIPTS (ADRS) OFFICE
For any queries regarding WPP ADRs, please contact Citibank Shareholder
Services (Citibank):
By telephone: +1 877 248 4237
Opening hours are Monday to Friday, 8.30am to 6pm US Eastern Standard
Time. Please call +1 781 575 4555 if calling from outside of the US.
By email: citibank@shareholders-online.com
In writing: Citibank N.A., PO Box 43077, Providence, RI 02940–3077, USA
REGISTERED OFFICE
WPP plc
13 Castle Street, St Helier
Jersey, JE1 1ES
Telephone: +44 (0)20 7282 4600
Registered number: 111714
Website: wpp.com
TAXATION INFORMATION
As this is a complex area investors should consult their own tax advisor
regarding the US federal, state and local, the UK and other tax consequences
of owning and disposing of shares and ADSs in their particular circumstances.
DIVIDENDS RECEIVED
UK resident individuals receive a Dividend Allowance in the form of a 0% tax
rate on the first £2,000 of dividend income received each tax year.
Any dividends received over the Dividend 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.
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, shareholders 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, shareholders are advised to consult their
professional advisors.
Section
Applicable sub-paragraph
within LR 9.8.4R
Location
4
5
6
Details of long-term
incentive schemes
Details of Directors’
waiver of emoluments
Director waiver of future
emoluments
Directors’ compensation report
page 134-154
Directors’ compensation report
page 134-154
Directors’ compensation report
page 134-154
The above table sets out only those sections of LR 9.8.4R which are relevant. The remaining
sections of LR 9.8.4R are not applicable.
ARTICLES OF ASSOCIATION
There are no restrictions on amending the Articles of Association of the
Company (Articles) other than the requirement to pass a special resolution
of the shareholders at a general meeting. Subject to applicable law and the
Company’s Articles, the Directors may exercise all powers of the Company.
The Articles are available on the Company’s website at
wpp.com/investors/corporate-governance
2021 FINANCIAL CALENDAR
Ordinary dividend timetable
Ordinary ex-dividend date
Dividend record date
Final
10 June 2021
11 June 2021
Interim
October 2021
October 2021
Dividend payment date
9 July 2021
November 2021
Other key dates:
2020 preliminary results
11 March 2021
First quarter trading update
28 April 2021
Annual General Meeting
9 June 2021
2021 interim results
announcement
Third quarter trading update October 2021
August 2021
RESULTS ANNOUNCEMENTS
Results announcements are issued to the London Stock Exchange and are
available on its news service. They are also sent to the US Securities and
Exchange Commission and the NYSE, issued to the media and made available
on our website.
SHAREHOLDER COMMUNICATIONS
A growing number of our shareholders have opted to receive communications
from us electronically. The use of electronic communications, rather than
printed paper documents, means information about the Company can be
accessed through emails or the Company’s website, thus reducing our impact
on the environment. Shareholders who have elected for electronic
communication will be sent an email alert containing a link to the relevant
documents. We encourage all our shareholders to sign up for this service. You
can register for this service at investorcentre.co.uk or by contacting
Computershare by the telephone number provided below.
WPP’s public website, wpp.com, provides current and historical financial
information, news releases, trading reports and share price information. Go to
wpp.com/investors
SHAREHOLDERS’ REGISTER
A register of shareholders’ 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.
ACCESS NUMBERS/TICKER SYMBOLS
Ordinary shares
American Depositary Shares WPP
NYSE
–
Reuters
WPP.L
WPP.N
Bloomberg
WPP LN
WPP US
222
WPP ANNUAL REPORT 2020
ADDITIONAL INFORMATION
ADJUSTMENT OF 30 JUNE 2020 GOODWILL IMPAIRMENT
The goodwill impairment charge recognised for the year ended 31 December
2020 includes £2,812.9 million related to the six-month period ended 30 June
2020. This figure is £328.2 million higher than the £2,484.7 million previously
reported in the 30 June 2020 interim financial statements as a result of an
adjustment to appropriately reflect the working capital cash flow assumptions
in the impairment model.
The table below reflects the impact of the adjustment on key income
statement and balance sheet line items. The £333.3 million adjustment reflects
the £328.2 million increase in the goodwill impairment charge and a £5.1 million
increase primarily in impairment of right-of-use assets with a related increase
in the deferred tax credit of £13.1 million and a corresponding decrease in
deferred tax liabilities.
The following table presents the CGUs with significant goodwill impairments
that were recognised as at 30 June 2020, both as previously reported and as
adjusted for the identified adjustment.
As reported
As adjusted
Goodwill
impairment
charge for
the period
ended
30 June
2020
£m
Goodwill
impairment
charge for
the period
ended
30 June
2020
£m
Recoverable
amount as at
30 June
2020
£m
Recoverable
amount as at
30 June
2020
£m
1,932.2
1,054.4
1,759.5
1,207.5
918.3
472.0
859.8
127.0
871.0
845.9
516.9
140.3
205.9
232.5
128.4
305.8
197.5
1,349.3
5,463.0
158.1
440.7
2,484.7
169.5
1,325.7
5,100.0
185.4
457.0
2,812.9
CGU
Wunderman
Thompson
VMLY&R
Burson Cohn
& Wolfe
Geometry
Global
Landor &
Fitch
Other
Operating
Sector
Global
Integrated
Agencies
Global
Integrated
Agencies
Public
Relations
Specialist
Agencies
Specialist
Agencies
Six months ended 30 June 2020
Continuing operations
General and administrative costs
Operating loss
Loss before interest and taxation
Loss before taxation
Loss for the period from continuing operations
Loss for the period
Headline operating profit
Loss for the period attributable to equity
holders of the parent
Weighted average shares used in basic EPS
calculation (million)
Reported basic earnings per share
Goodwill
Deferred tax liabilities
Net assets
As previously
reported
£m
3,195.3
(2,417.3)
(2,469.2)
(2,843.9)
(2,867.9)
(2,864.8)
382.3
Adjusted
£m
3,528.6
(2,750.6)
(2,802.5)
(3,177.2)
(3,188.1)
(3,185.0)
382.3
(2,889.0)
(3,209.2)
1,224.7
(235.9p)
8,096.3
(398.9)
5,779.7
1,224.7
(262.0p)
7,768.1
(385.8)
5,459.5
We will reflect these adjustments in the comparatives included in the 2021
interim financial statements.
WPP ANNUAL REPORT 2020
223
ADDITIONAL INFORMATION
FIVE-YEAR SUMMARY
Income statement
Billings3
Revenue
Revenue less pass-through costs3
Operating (loss)/profit
Headline EBITDA4
Headline operating profit 4
(Loss)/profit before taxation
Headline PBT 4
(Loss)/profit for the year
Continuing operations
2020
£m
20191
£m
20181
£m
20171
£m
46,917.8
12,002.8
9,762.0
(2,278.1)
1,812.5
1,260.5
(2,790.6)
1,041.3
(2,919.9)
53,059.0
13,234.1
10,846.5
1,295.9
2,131.4
1,560.6
1,214.3
1,363.0
939.3
53,219.7
13,046.7
10,875.7
1,245.3
1,932.5
1,651.2
1,019.3
1,543.0
763.3
52,915.4
13,146.4
11,143.9
1,577.9
2,099.6
1,793.1
1,894.0
1,717.6
1,811.0
Continuing and
discontinued
operations
20162
£m
55,278.0
14,887.3
12,428.6
2,063.1
2,419.7
2,095.3
1,890.5
1,986.2
1,501.6
Headline operating profit margin4
12.9%
14.4%
15.2%
16.1%
16.9%
Balance sheet
Non-current assets
Net current assets/(liabilities)
Net assets
Net debt
Average net debt
Our people
Revenue per employee (£000)
Revenue less pass-through costs3 per employee (£000)
Staff cost per employee (£000)
Average headcount5
Share information
Headline6 – basic earnings per share from continuing operations
– diluted earnings per share from continuing operations
Reported – basic earnings per share from continuing operations
– diluted earnings per share from continuing operations
Dividends per share7
Share price – high
– low
Market capitalisation at year-end (£m)
12,185.4
870.9
5,166.4
(695.6)
(2,331.0)
15,826.7
(179.9)
8,415.8
(1,539.6)
(4,282.0)
17,854.1
(649.5)
9,784.3
(4,016.7)
(4,965.6)
18,427.7
(356.1)
9,960.5
(4,483.1)
(5,142.7)
19,125.3
(1,328.1)
9,761.7
(4,130.5)
(4,340.5)
2020
2019
2018
2017
2016
116.7
94.9
63.8
102,822
60.5p
59.9p
(243.2p)
(243.2p)
24.00p
1,071.0p
483.7p
9,802.7
124.3
101.8
66.6
106,498
78.7p
78.1p
68.8p
68.2p
22.70p
1,077.5p
800.4p
13,410.0
123.0
102.5
65.5
106,090
92.4p
91.4p
56.0p
55.4p
60.00p
1,471.0p
805.0p
10,682.6
123.5
104.7
66.4
106,414
104.2p
103.0p
136.9p
135.3p
60.00p
1,921.0p
1,253.0p
17,029.8
112.2
93.7
58.7
132,657
114.8p
113.2p
109.6p
108.0p
56.60p
1,850.0p
1,338.0p
23,260.3
Notes
1 Figures have been restated as described in the accounting policies.
2 2016 figures have not been re-presented in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations therefore represent total continuing and discontinued operations.
2016 figures have also not been restated to reflect the impact of the change in the discount rate used in the calculation of the present value of the expected cash outflows in respect of put option
agreements and payments due to vendors (earnout agreements).
3 Billings and revenue less pass-through costs are defined on pages 225 and 226.
4 The calculation of ‘headline’ measures of performance (including headline EBITDA, headline operating profit, headline operating profit margin and headline PBT) is set out on pages 212 and 213.
5 2016 average headcount includes the Kantar disposal group.
6 Headline earnings per share is set out in note 9 of the financial statements.
7 Dividends per share represents the dividends declared in respect of each year.
The information on this page is unaudited.
224
WPP ANNUAL REPORT 2020
ADDITIONAL INFORMATION
FINANCIAL GLOSSARY
Term used in Annual Report
United States’ equivalent or brief description
ADRs/ADSs
Allotted
Average net debt and net debt
Billings and estimated net new billings
American Depositary Receipts/American Depositary Shares. The Group uses the terms ADR and
ADS interchangeably. One ADR/ADS represents five ordinary shares
Issued
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. Net debt excludes lease liabilities
Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based
income together with the total of other fees earned. 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
Called-up share capital
Ordinary shares, issued and fully paid
Company or Parent Company
WPP plc
Constant currency
ESOP
EURIBOR
Finance lease
Free cash flow
The Group uses US dollar-based, constant currency models to measure performance. These are
calculated by applying budgeted 2020 exchange rates to local currency reported results for the
current and prior year. This gives a US dollar-denominated income statement which excludes any
variances attributable to foreign exchange rate movements
Employee share ownership plan
The euro area inter-bank offered rate for euro deposits
Capital lease
Free cash flow is calculated as cash generated by operations plus dividends received from
associates, interest received, investment income received, and proceeds from the issue of
shares, less corporation and overseas tax paid, interest and similar charges paid, dividends paid
to non-controlling interests in subsidiary undertakings, repayment of lease liabilities (including
interest), earnout payments and purchases of property, plant and equipment and purchases of
other intangible assets
Freehold
Ownership with absolute rights in perpetuity
General and administrative costs
Group
Headline earnings
Headline EBITDA
Headline operating profit
Headline operating profit margin
Headline PBIT
General and administrative costs include marketing costs, certain professional fees and an
allocation of other costs, including staff and establishment costs, based on the function of
employees within the Group
WPP plc and its subsidiaries
Headline PBT less headline tax charge and non-controlling interests
Profit before finance and investment income/costs and revaluation of financial instruments,
taxation, gains/losses on disposal of investments and subsidiaries, investment and other
write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment
of acquired intangible assets, amortisation of other intangibles, depreciation of property, plant
and equipment, depreciation of right-of-use assets, restructuring and transformation costs,
restructuring costs in relation to Covid-19, litigation settlement, gain on sale of freehold property
in New York, share of exceptional gains/losses of associates and gains/losses on remeasurement
of equity interests arising from a change in scope of ownership
Operating profit before gains/losses on disposal of investments and subsidiaries, investment
and other write-downs, goodwill impairment and other goodwill write-downs, amortisation and
impairment of acquired intangible assets, restructuring and transformation costs, restructuring
costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York and
gains/losses on remeasurement of equity interests arising from a change in scope of ownership
Headline operating profit margin is calculated as headline operating profit (defined above) as
a percentage of revenue less pass-through costs
Profit before finance and investment income/costs and revaluation of financial instruments,
taxation, gains/losses on disposal of investments and subsidiaries, investment and other
write-downs, goodwill impairment and other goodwill write-downs, amortisation and
impairment of acquired intangible assets, restructuring and transformation costs, restructuring
costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York,
share of exceptional gains/losses of associates and gains/losses on remeasurement of equity
interests arising from a change in scope of ownership
WPP ANNUAL REPORT 2020
225
ADDITIONAL INFORMATION FINANCIAL GLOSSARY
Term used in Annual Report
United States’ equivalent or brief description
Headline PBT
Headline tax charge
IFRS/IAS
LIBOR
Net working capital
OCI
Pass-through costs
Pro forma (“like-for-like”)
Profit before taxation, gains/losses on disposal of investments and subsidiaries, investment and
other write-downs, goodwill impairment and other goodwill write-downs, amortisation and
impairment of acquired intangible assets, restructuring and transformation costs, restructuring
costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York,
share of exceptional gains/losses of associates, gains/losses arising from the revaluation and
retranslation of financial instruments and gains/losses on remeasurement of equity interests
arising from a change in scope of ownership
Taxation excluding tax/deferred tax relating to gains/losses on disposal of investments and
subsidiaries, investment and other write-downs, goodwill impairment and other goodwill
write-downs, restructuring and transformation costs, restructuring costs in relation to Covid-19,
litigation settlement, gain on sale of freehold property in New York, and the deferred tax impact
of the amortisation of acquired intangible assets and other goodwill items
International Financial Reporting Standards/International Accounting Standards
The London inter-bank offered rate
The movement in net working capital consists of movements in trade working capital and
movements in other working capital and provisions per the analysis of cash flows note
Consolidated statement of comprehensive income
Pass-through costs comprise fees paid to external suppliers where they are engaged to perform
part or all of a specific project and are charged directly to clients, predominantly media and data
collection costs
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
Profit
Income
Profit attributable to equity holders of the parent
Net income
Revenue less pass-through costs
Sarbanes-Oxley Act or SOX
Share capital
Shares in issue
Revenue less pass-through costs is revenue less media, data collection and other
pass-through costs
An Act passed in the United States 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
Shares outstanding
Share premium account
Additional paid-in capital or paid-in surplus (not distributable)
UK Corporate Governance Code
The UK Corporate Governance Code published by the Financial Reporting Council dated
April 2018
WPP
WPP plc and its subsidiaries
226
WPP ANNUAL REPORT 2020
ADDITIONAL INFORMATION
FORWARD-LOOKING STATEMENT
In connection with the provisions of the U.S. 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, beliefs,
intentions, strategies, projections and anticipated future economic
performance based on assumptions and the like that are subject to risks and
uncertainties. These statements can be identified by the fact that they do not
relate strictly to historical or current facts. They use words such as ‘anticipate’,
‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’, ‘believe’, ‘target’, and other
words and similar references to future periods but are not the exclusive means
of identifying such statements. As such, all forward-looking statements involve
risk and uncertainty because they relate to future events and circumstances
that are beyond the control of the Company. Actual results or outcomes may
differ materially from those discussed or implied in the forward-looking
statements. Therefore, you should not rely on such forward-looking
statements, which speak only as of the date they are made, as a prediction of
actual results or otherwise. Important factors which may cause actual results
to differ include but are not limited to: the impact of outbreaks, epidemics or
pandemics, such as the Covid-19 pandemic and ongoing challenges and
uncertainties posed by the Covid-19 pandemic for businesses and
governments around the world; 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;
changes in competitive factors in the industries in which we operate and
demand for our products and services; our inability to realise the future
anticipated benefits of acquisitions; failure to realise our assumptions
regarding goodwill and indefinite lived intangible assets; natural disasters
or acts of terrorism; the Company’s ability to attract new clients; the UK’s exit
from the EU; the risk of global economic downturn; technological changes and
risks to the security of IT and operational infrastructure, systems, data and
information resulting from increased threat of cyber and other attacks; 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 on pages 95-101,
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. Neither the Company, nor any its directors, officers or
employees, provides any representation, assurance or guarantee that the
occurrence of any events anticipated, expressed or implied in any forward-
looking statements will actually occur. 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.
WEBSITE
WPP’s website wpp.com gives additional information on the Group.
Notwithstanding the references we make in this Annual Report to WPP’s
website, none of the information made available on the website constitutes
part of this Annual Report or shall be deemed to be incorporated by
reference herein.
WPP ANNUAL REPORT 2020
227
ADDITIONAL INFORMATION
WHERE TO FIND US
COMPANY CENTRES
WPP NEW YORK
3 World Trade Center
175 Greenwich Street
New York NY 10007
Tel +1 (212) 632 2200
WPP LONDON
Sea Containers
18 Upper Ground
London SE1 9GL
Tel +44 (0)20 7282 4600
WPP ASIA PACIFIC
50 Scotts Road
Singapore 228242
Tel +65 6508 5219
COMPANY INFORMATION
If you would like further general information about WPP, its
companies or any of the programmes or initiatives mentioned in this
Annual Report, please visit our website, wpp.com, or email:
enquiries@wpp.com
BUSINESS DEVELOPMENT
For more about WPP companies’ professional services,
please contact:
Jason Day
jason.day@wpp.com
228
WPP ANNUAL REPORT 2020
CONTACT POINTS
INVESTOR RELATIONS
John Rogers
Chief Financial Officer
Tel +44 (0)20 7282 4600
john.rogers@wpp.com
Peregrine Riviere
Group Investor Relations Director
London
Tel +44 (0)20 7282 4600
peregrine.riviere@wpp.com
Fran Butera
Investor Relations Director
New York
Tel +1 (212) 632 2235
fran.butera@wpp.com
INVESTOR INFORMATION
Investor relations material and our financial statements are available
online at wpp.com/investors
CORPORATE COMMUNICATIONS
AND MEDIA RELATIONS
Chris Wade
Chief Communications Officer
Tel +44 (0)20 7282 4600
chris.wade@wpp.com
EMEA
Niken Wresniwiro
Tel +44 (0)20 7282 4600
niken.wresniwiro@wpp.com
NORTH AMERICA
Martina Suess
Tel +1 (212) 632 2522
martina.suess@wpp.com
ASIA PACIFIC
Juliana Yeh
Tel +852 2280 3790
juliana.yeh@wpp.com
SUSTAINABILITY
David Henderson
Global Corporate Affairs Director
Tel +44 (0)20 7282 4600
david.henderson@wpp.com
Written by WPP
Designed and produced by Superunion, London
superunion.com
©WPP 2021
This report is printed on Arena Extra White Smooth which is made of FSC®
certified and other controlled material. Printed in the UK by Pureprint Group.
A CarbonNeutral® company, certificated to Environmental Management
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ANNUAL REPORT
& ACCOUNTS
2020
240101803_WPP_AR2020_Cover&Spine_Design_190321_SD.indd All Pages
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