WPP plc (WPP) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to WPP 2025 Interim Results Conference Call and Webcast. [Operator Instructions] Today's conference is being recorded. Now I would like to hand it over to WPP CEO, Mr. Mark Read. Please go ahead, sir.

Thank you very much, and good morning, everybody, and welcome to our 2025 interim results earnings call, and thank you for joining us. I'm on today's call with Joanne Wilson, our CFO; Brian Lesser, the CEO of WPP Media; and Tom Singlehurst, our Head of Investor Relations. And before we get started, please do look at the cautionary statement, which you can see on Slide 2 and read that carefully. So turning to the highlights on Page 5 of presentation. First, in terms of the first half performance by 2025, when we updated June, early July, we went through how the more challenging macro environment, coupled with a slower net new business environment and weighed on our performance in the second quarter and in particular in June. And Joanne will take you through the details shortly, but the performance in the first half is in line with those revised expectations, with H1 organic net sales growth of minus 4.3% is consistent with the second quarter down 5.8%. Now as we said on July 9, the second quarter was impacted by several one-off factors that negatively impacted our growth rate. Even excluding those, our H1 growth was minus 3.8% and minus 4.8% in the second quarter below our expectations at the start of the year. Now in the face of this, we are maintaining strong financial discipline. Head count has come down by 3.7% since the start of the year, brought in line with the organic growth trends. In addition, we continue to take out structural costs and focus on back office efficiently -- efficiency, underlining our disciplined approach to managing the cost base. As a result, headline operating margin was 8.2%, down by 290 basis points on a like-for-like basis, but this includes the cost of severance action taken in particular at WPP Media, which has not been treated as an exceptional, and we expect margins to improve in second half of the year. As importantly, the operating environment we saw in the first half hasn't stopped us in taking significant action against our strategic goals. And in February, we talked about 3 strategic -- specific priorities for 2025, driving adoption of WPP OPEN, getting GroupM, now WPP Media back to growth and winning more new business. And we've made progress on those. I'll talk about in a minute. But more broadly, I want to emphasize, it has been improved intense activity across the group, whether that be the release of new products we put out to consult on reputation capital indicates, we're starting to do partnerships, for example, coverages, TikTok, latter being particularly important in terms of further strengthening our retail media offer within WPP Media. It's also been a very busy period to be working with top talent to organization, Vincent Basin Shar, who joins us from Accenture and Accenture Song as CEO of AKQA, which has had some more success in AKQA in the past few months in terms of winning new business. And I think we will see a continued turnaround in that business, which is reassuring. When Daniel Barrack, who joins us from RGA is a global as an innovation need working on a very important takes focus on and technics. So coming back specifically to the 2025 priorities on Slide 6, and those 3 -- taking those 3 in turn. First, in terms of adoption of WPP OPEN, it's growing fast at over 80% of our client-facing people actively using the platform. And with adoption running ahead of our expectations, we're now pushing for greater engagement per user. Just to give you some statistics, but in context of what we're doing, in the last month, our team created more than 1 million images, 240,000 videos on the platform, and we now have more than 50,000 agents active across WPP, helping our people to use AI to deliver work for clients. The second priority was media. And one of the drivers for highly increased adoption of WPP OPEN has been rapid expansion in Open Media Studio, which is encouraging itself, but more important to the progress made by Brian and his team, and he'll take you through that in a few minutes, but an enormous amount has been achieved in the first half, not only in terms of reengineering the operational model, making WPP Media much more client-centric organization, but also in terms of bringing AI-enabled technology platform to market by acquisition and integration of InfoSum, the launch of Open Intelligence, the data performance brand that powers the open and reissue. And on the third priority in our business, I would say this has been a source of relative disappointment. Now to be clear, we have had some significant wins, whether that's the Hero, MotorCore in Media, L'Oreal in Influencer, TJ Maxx in PR, Heineken in Commerce, IT and Creative, but that have been set back. So overall, it has been a much slower new business environment. I mean, as the chart shows, new business running at less than half the typical rate at this point in the year. Now my view is that clients have been dealing with a lot of short-term issues, whether that's pressure on to assume the spend with the impact of tariffs or commodity prices, and these are delayed pictures and prolonged decision-making. And I'm sure we've discussed that in the call and the Q&A. For now, I'll hand over to Joanne to take you through the details of the first half performance. Joanne?

Thank you, Mark, and good morning, everyone. So let me start by kicking through where our performance has landed relative to the revised guidance we set at the beginning of July, and you can see this on Slide 8. Like-for-like revenue less pass-through costs fell 5.8% in the quarter, which was in line with the anticipated range. This leaves the first half organic decline at 4.3%. As mentioned in our July trading update, there were some one-off factors, which did weigh on the second quarter performance. Excluding this, the like-for-like decline would have been 3.8% in the first half and 4.8% in the second quarter. Turning to headline operating profit. This came in at GBP 412 million, in the middle of our range. This is consistent with the margin of 8.2%, with a 290 basis point like-for-like decline driven by a combination of the impact of negative operating leverage on lower net sales and higher severance in particular, at WPP Media. Moving on to Slide 9 and looking at performance across our business. Global Integrated Agencies saw a like-for-like decline of 6% in the second quarter, a step down from minus 2.8% in the first quarter. Within this, WPP Media was down 4.7%, which saw the U.S. decline against a tougher comp reflecting client losses. Trends remained tough in the U.K. as we continue to be impacted by prior year client losses, and Western Continental Europe was impacted by one-off factors amplifying the effect of a more challenging media environment. Excluding one-off factors, WPP Media declined 1.6% in H1 and minus 2.3% in Q2. Like-for-like for other integrated creative agencies fell 7.2% in the second quarter and compared with the decline of 4.4% in the first quarter of 2025. Within this, the main moving part is Ogilvy, which declined high single digits in the first half and was down double digits in the second quarter, impacted by cuts in client spending, in particular, in CPG, tech and government. We continue to see an impact from weakness in project-based work. However, AKQA saw a slight sequential improvement quarter-on-quarter on easier comps. Turning to PR. Like-for-like declined by 7.8% in the second quarter, a slight step down from 6.6% in the first quarter. This performance reflects a more challenging environment for client discretionary spend, particularly in Europe and across smaller local clients. Looking forward, we are encouraged by improved momentum on new business in North America. And finally, specialist agencies saw a like-for-like decline of 1.9% in the quarter, with continued double-digit growth from C&I, our specialist health care media agency, and a return to growth of Design Bridge and Partners, offset by continued, albeit moderating declines at Landor and other smaller specialist agencies. Turning now to the performance by region on Slide 10. North America declined by 4.6% in the second quarter, following a decline of 0.1% in the first quarter. While there was a toughing comp, the performance was impacted by cuts in client spend, particularly impacted Ogilvy and the ramp down of a Q1 client loss. The United Kingdom declined by 6.5% in the second quarter, a slight deterioration on the 5.5% decline in the first quarter despite a lease income. Performance continues to be impacted by its higher weighting towards project-based work and the impact of client losses at WPP Media, although Ogilvy posted positive growth. Western Continental Europe saw an overall like-for-like decline of 6.5%, again, versus an easy year-on-year comp and reflecting the impact of one-off factors. The rest of world declined 6.8% in the second quarter, largely driven by consistent pressures in China, which declined 15.9%. As discussed on the first quarter call, we expected performance to continue to be challenging in China in the first half of 2025 with some improvement later in the year. Against this, we saw a relatively better performance in India, which was flat at 0.1% in the first half driven by WPP Media. Central and Eastern Europe saw a robust performance, up 2.4% in the second quarter. Slide 11 shows Q2 performance across our client sectors. Having been stable in the first quarter, CPG saw a step down in the second quarter, declining 8.3%. Cuts to client spending and the loss of a large client in North America were key factors. Performance in the tech client sector moderated in the second quarter, showing a decline of 1.2%, having seen Q1 growth continue to improve at 4.5%. Geographically, the U.S. saw the biggest delta driven by client spending cuts, with trends elsewhere more robust. Health care has continued to stabilize with broadly flat growth in the quarter, the 2023 client losses start to roll off. But automotive and financial services, which both started the year well saw a step down in the second quarter. The performance of our top clients continues to be relatively more robust than for the group as a whole, with our top 25 clients growing 0.1% in the first half, albeit this is consistent with the low single-digit decline in the second quarter. The waterfall chart on Slide 12 bridges our headline operating margin from 11.5% in the first half of 2024 to 8.2% in 2025, a 3.3 percentage point decline on a reported basis and a 2.9 percentage point move like-for-like adjusting for FGS and FX. The main moving part to the expected negative operational gearing on the reduced like-for-like net sales as well as the impact of severance. To take some numbers to this, although our overall staff cost, excluding severance and incentives, is down GBP 261 million, given the decline in net sales, this is still consistent of the 250 basis points decline in margin. This reflects a 6% reduction in headcount when compared to June 30, 2024, and reduced usage of freelances, but also the impact of the FGS Global disposal. Severance and other associated costs is up -- is down GBP 59 million year-on-year, and this takes another 130 basis points off margin. This is primarily driven by actions in WPP Media, and we expect to pay back progressively through the second half and into 2026. As we discussed in July, we estimate the annualized gross savings benefit associated with these actions will be at least GBP 150 million, and we anticipate margins in the second half to improve in the results. While total IT costs have remained broadly flat, this represents back office savings and enterprise tech, offset by our continued investment in WPP Open, AI and data. Total IT costs were a 0.6 percentage point drag on margin. On Slide 13, we look in detail restructuring costs and conduct ongoing severance actions, both in reaction to the weaker top line as well as the more strategic actions at WPP Media are included in the headline operating profit. Restructuring costs associated with historical programs are coming down and in the first half were GBP 45 million compared to GBP 153 million in the first half of 2024. GBP 40 million in restructuring costs are cash and primarily related to the ongoing IT transformation as well as property-related costs from historical impairments. We are running below the previous full year modeling assumption of GBP 110 million, and we have reduced our full year expectation for restructuring costs to GBP 90 million. We put this altogether to headline P&L on Slide 14. Overall reported revenue less pass-through costs was GBP 5 billion, a decrease of 10.2% period-on-period. FX contributed to a 2.4% drag, with M&A a further 3.5% headwind, leaving a like-for-like decline of 4.3%. Moving down the P&L. I remind you that income from associates excludes any contributions from Kantar, in accordance with IAS 28 due to no carrying value on our balance sheet. Net finance costs of GBP 129 million was down year-on-year, reflecting the lower average adjusted net debt. Our effective tax rate at 18.3% is down year-on-year, principally driven by the benefit of credits from the successful resolution of a tax matter. Given the impact from a lower level of profits based on our revised guidance, our modeling assumption is the full year effective tax rate will be 31%. Noncontrolling interests of GBP 26 million were down significantly year-on-year, largely reflecting the impact of the disposal of FGS Global. Headline diluted EPS of 20p is down 35% on a reported basis, a 10.9p move consistent with an 8.8p decline like-for-like and a 2.1p impact from FX and M&A. Turning to the dividend. The Board recognizes the importance of dividends to shareholders and also the importance of retaining financial flexibility for the business. With UC EU starting imminently alongside a review of the strategy, we will evaluate our capital allocation policy to ensure we align our financial resources and distribution policy with our strategy and our priority to drive sustainable growth. As a result, and after careful consideration, the Board has declared an interim dividend of 7.5p. Moving to Slide 15 and the reconciliation between our headline and reported operating profit. Headline operating profit of GBP 412 million is adjusted for goodwill impairment of GBP 116 million, which relates to AKQA and Grey. Gains on disposal are fairly minimal at GBP 2 million in the first half, while amortization and impairment of acquired intangibles is also lower year-on-year. As already discussed, we've seen a fall in restructuring and transformation costs to GBP 45 million from GBP 153 million a year ago. Putting these items together, that leaves our reported operating profit at GBP 221 million in the first half with a decline slightly lower than the move in headline operating profit. Slide 16 looks at our adjusted operating cash flow and bridges the year-on-year movement in adjusted net debt to June 2025. Our 12-month adjusted operating cash flow before working capital to June 2025 was GBP 1.2 billion. While we continue to focus on working capital management, we saw a working capital outflow of GBP 175 million in the 12-month period. We saw a net outflow of GBP 118 million, comprising the net impact of dividends from associates -- to minorities and including M&A earn-outs. Net interest and tax contributed to GBP 633 million outflow with the cash tax, including GBP 43 million of tax associated with the FGS Global disposal. Net M&A and disposals was at GBP 383 million inflow, primarily reflecting the disposal of FGS in the second half of 2024 and the acquisition of InfoSum. Cash dividends paid in the 12-month period was consistent with prior year, while pay back -- while buybacks and other items amounted to an outflow of GBP 104 million. And moving now to Slide 17, which shows the movement in net debt to the end of June with adjusted net debt of GBP 3.3 billion, down year-on-year but up from year-end, reflecting our typical cash cycle. Average adjusted net debt better captures the normal pattern of working capital moves across the year, and this is slightly down through the first half at GBP 3.4 billion. Despite a reduced net debt balance, the average adjusted net debt to headline EBITDA ratio at June 30 is outside our 1.5 to 1.75x target range, given a little of profit, and our expectation is that we will be above our target range for the full year 2025. Our balance sheet, however, remains robust. The weighted average maturity of our GBP 3.8 billion of bond debt is 6.4 years, and this has an average coupon rate of 3.5%. Meanwhile, our total available liquidity across the group stood at GBP 3 billion at June 30, 2025, including a $2.5 billion committed RCF, which matures in February 2030 Neither our bond debt nor our RCF of any covenants on our credit remains investment-grade. And finally for me, turning to Slide 18, which shows our guidance for the full year. At our July trading update, we shared a revised guidance for revenue and operating profit with a like-for-like decline in the range of minus 3% to minus 5% and a headline operating margin decline of 50 to 175 basis points. Looking beyond the net sales and margin guidance and reflecting the change to those revenue and margin guidance, we now expect adjusted operating cash flow before working capital to be GBP 1.1 billion to GBP L 1.2 billion. As already mentioned, the lower level of anticipated profitability in 2025 drives changes to our assumption for the effective tax rate. We also expect a lower level of CapEx and cash restructuring costs than our guidance at the start of the year. Elsewhere, either the impact of FX or of M&A has materially changed since the first quarter results. So thank you, and I will now hand over to Brian. [Presentation]

Good morning, everyone. That video you just watched captures just a glimpse of the energy and momentum behind what we're building at WPP Media. It's been almost 11 months since I rejoined GroupM, now WPP Media, and about 4 months since we formally introduced the market to the scale and scope of the transformation underway. This morning, I want to go beyond what's changing to focus on what's already taken hold, how we operate what this organization looks like today and why we're in a strong position to win. In February, I laid out our 5 strategic priorities. Today, I'll walk you through the meaningful progress we've made, particularly in how we've evolved our data, technology and organizational design. I'm pleased with the collective progress we've made in the first half of this year. From launching Open Media Studio in our largest markets, to debuting Open Intelligence, restructuring our teams and centralizing leadership, we're laying the foundation for a stronger, more agile organization. We've also accelerated our data strategy with the acquisition of InfoSum. This is a reflection of the collective effort of thousands of people working toward a common goal. It's progress worth acknowledging and momentum we're committed to building on. We know the transformation at this scale doesn't happen quietly. It takes clarity of vision, conviction and execution and, above all, commitment from our internal teams. As you know, we made bold decisions to overhaul our operating model, integrated marketing services that focus on one team, one process and one platform. One team. We've broken down silos to operate as a single global organization with local relevance. Whether you sit in Mindshare or Wavemaker, in London or in Vietnam, you're part of a connected system with shared goals, led by a newly reorganized leadership team solely focused on driving results. One process. We've streamlined how we plan, activate and optimize campaigns. This alignment not only increases efficiency, it reduces friction for our clients. One platform. This is where it all comes together with the culmination of several years of development. WPP OPEN is the operational backbone of our business that is powered by Open Intelligence. This platform is more than workflow automation. It's how we deliver media infused with AI and supported by one of the most advanced data models in the industry. We now have more data than any of our competition, reaching 5 billion consumers, connecting intelligence of all forms, including IDs across the vast Federated ecosystem. Our platform connects hundreds of data sources, publisher, retail, platform, client structured and unstructured and extracts insight through Federated Learning and AI native tools. That's how we move from reactive to predictive by optimizing hindsight to anticipate what's next. It's what will separate us from our competitors and allow us to operate at speed for our clients. This isn't theoretical. It's live, it's adopted, and it's already delivering measurable value for our clients. For our brands in a highly impulsive category, our platform used behavioral signals like commuting patterns and content consumption habits to identify moments of peak buying potential. That campaign drove a 10x improvement in reach to high propensity buyers. In another case, we doubled in-store sales for a CPG brand by predicting exactly when and where to engage Gen Z shoppers near retail hotspots. Technology without people is just potential. Since our last update, we've reshaped our organization around this vision. Today, WPP Media is a fundamentally different company than it was a year ago, not just in name. We centralized leadership where it matters and empowered local markets where it counts. We have restructured teams to focus on transformation, growth and client experience. We've added world-class talent from tech, consulting and media who bring new thinking and challenge old assumptions. The result, clients no longer see a network of agencies. They see one WPP Media with a unified vision, a modern capability set and a consistent global offering. Since we last spoke, we've moved from strategizing to operating, from talking about change to leading it. We have a simplified, aligned organization. We have a world-class platform, AI-enabled, future-proofed and live today. We have a client value proposition that is stronger than it's ever been. We've built a global platform that meets the unique needs of multinational advertisers, while unlocking the benefits of those investments for clients in every market and creating more opportunities for value-added proprietary offerings within that platform. Now our focus is execution at scale, growth with discipline, leadership through performance and, as always, the client at the heart of everything we do. We have the team, the process, the platform and the opportunity. I'm incredibly proud of what we've built and excited about what's ahead. Thank you, and I look forward to continuing this journey together. Now I will hand it back over to the team in London, and I look forward to your questions during the Q&A.

Yes. Thank you, Brian. So as we all know, the work that you and your team at WPP Media doing is critical to getting us back to where we need to be in terms of growth and also strengthening our long-term competitive position. And we wanted to do here today, so that the financial community can see the strategic focus on data and technology within our Media business and the progress that you're making. We have great confidence that WPP Media will not just catch up, but in time, lead the market in terms of a data-driven media operation. So turning to the summary. As you know, I announced in June that I plan to stand down after 7 years as CEO, and I'm delighted to be handing over to Cindy Rose, who will be taking over on September 1. And I have to say WPP is an incredible company. And while I know well that we have immediate challenges, we also have tremendous assets, not least our people and our clients. And I thought it would be helpful for me to end my last call of many, I must say, with my reflections on where we are as an industry and as WPP and why I'm positive about the outlook, both for our industry and for WPP. Taking a step back in our industry, I firmly believe that what we do collectively is critical to our clients, the world's largest companies and, in WPP's case, the world's 5 most valuable businesses. These global organizations rely on us to help them build their brands, manage their reputation, sell their product, get high rankings in search engines, sell in retail channels, design their packaging identities and produce their work. And yes, increasing to advise them on how to adapt to an AI world and how to take advantage of it in their marketing to drive higher returns and reduce cost. We said in more than 2 years that AI is no doubt going to fundamentally change what we do and how we do it. It's also going to give us new opportunities, as technology has always done in the past. And I'd say that at least half of the jobs in WPP today were not in the company 10 years ago, and that will be increasingly true in the future. But I still believe our clients will need the creativity, the strategic judgment, the objectivity and insights that we and our industry bring them if they're going to successfully differentiate themselves from competition and navigate an increasingly complex media and technology landscape. That's what our industry does, what I believe it will continue to do in the future, even if it is in a very different form and with much more data and technology. And just as we've adapted in the past, we will adapt in the future. So yes, AI will change how we work. But if we embrace it fully, it needs to enhance our people and human expertise, then I believe we'll make it stronger, bring new business opportunities and create more value for our clients and, in the long run, more value for our shareholders as well. I believe the critical question is how ready is WPP for this AI-powered future. And there, the answer is I believe we are very well prepared and certainly as well, if not better prepared as anyone in our industry. And let's go through that on Slide 25. And to start with, we're a much simpler company. Today, 6 brands make up close to 95% of WPP's business. That's important as we're much more integrated, no longer organized in analog and digital silos. But its importance goes beyond this, though, that this is a simpler company allows us to move faster to take out structural costs, to focus our resources on clients and to deploy technology much more quickly across the business. The work that Brian and his team have been done -- doing in WPP Media this year may have been disruptive, but it's been necessary work, and we set WPP Media as a much stronger organization to deliver to clients in the future. And beside these things, we've not been adapting our client-facing organization. We also brought together our technology teams and dozens of teams across WPP as one product organization with a common vision. And similar work has been done in production with Hogarth, in our offshore development teams in India and our global development centers and our commerce capabilities in WPP Commerce, which as Unite won the Unilever Media Shopper Work last year. Secondly, we have a transformed offer. When we use the word creative to describe our agencies, I don't think it captures the work that they do that goes way beyond television ads. Our agencies like VML and Ogilvy have completely transformed the work that they do, developing great ideas that work on TikTok and YouTube as well or better than they do on NBC or ITV. We now lead our industry, in my view, for our creative reputation. And here, I should call out the efforts of Rob Reilly and our creative leaders. While awards are side products of great work, not an end in themselves, our clients who work -- led WPP being awarded Creative Company of the Year at Cannes come to us because of the creative quality of the work that we do for them. And I continue to believe that will be even more critical in an AI-driven future where creativity is what will differentiate companies. And despite its challenges this year, WPP Media remains the world's leading media industry. You've heard from Brian and with new leadership, a new AI-led approach to data aimed to leapfrog legacy systems, I firmly believe that when the new business environment picks up, they will convert strongly. We've also built a strong technology service offer. VML Enterprise Solutions is now a $1.5 billion business, offering e-commerce, CRM, marketing automation operations to companies around the world with strong practice with Adobe, Salesforce, Braze and the other marketing technology companies. Similarly, AKQA combines creativity, innovation and technology now with new leadership joining us, as I said, from Accenture. Our production business, Hogarth, is now the market leader in production globally. I don't think it always gets the credit that it deserves. It's actually been the fastest-growing capability within WPP, all delivered entirely organically and in partnership with our agencies. There's also Burson, now the world's second largest public relations company with new leadership now beyond the merger within Burson, starting to win some major client assignments. And finally, and where necessary come with discipline. We've invested early in new areas like influencer marketing, making acquisitions of agencies like DoT, Village and obviously. As a result, our client satisfaction scores has improved, and they are now at the highest level since I became CEO. We see that in the growth of our largest clients in the first half of this year, which continued to grow despite the overall disappointing performance. And we get better at telling the story to prospective clients in my view. Thirdly, WPP is in a much more solid financial footing. We've moved from a situation where we're heavily indebted to a significantly firmer financial footing while returning over GBP 5.5 billion to shareholders. We shouldn't forget the role that Kantar played in this. We sold a $4 billion valuation to Bain Capital, giving us financial security to navigate COVID. We still have a valuable and some overlooked 40% interest in the company. And then the FGS Global, which we created with Roland and his management team sold to KKR, creating close to $1 billion in value for WPP. But my fourth and final most important reason being positive is our investment in AI. There's no doubt in my mind or that of our Board that AI will be fundamental to WPP's success in the future. We've been investing significantly in that. And if I can be competitive and highlight what I believe are our strengths, Firstly, we've taken a very broad strategic approach to AI. We haven't looked at it just as a data opportunity or just in our media or our production business. We consider the impact of AI on the end-to-end marketing process. And over time, the comprehensiveness of our approach will be a source of increasing competitive advantage and disciplines integrate. Secondly, we've built into WPP Open, a single AI-powered marketing platform that spans the whole of WPP, something we struggled to do for many years. WPP Open now powers our work, delivering the best AI solution at the right time. As I said earlier, we have 69,000 people using AI in their work. I don't believe there's many companies of our size or scale that have deployed it at that size. And finally, our acquisition of Satalia has been critical to our efforts, and the expertise that they bring in the application of AI, I think, has really helped us build this differentiated platform. Now I know that for many, AI is the source of concern for WPP. There's a fear that as an our space business, for many people, this is going to be value disruptive. I take a somewhat different position, which is that if we embrace it and we make our people use it, it will add more value to our clients. And if we can create more work more quickly, that will create additional value. It's going to open up new opportunities and new horizons for WPP. And overall, my observation will be that those parts of our business that have best embraced technology, our Media and Production business have been the strongest, and AI offers the opportunity to bring data and technology to all of WPP, particularly our Creative businesses. And I believe that, that will make us collectively stronger. So turning to Slide 26. I do believe that WPP is making significant slides -- strides in getting ready for the future. That said, there's absolutely no doubt in my mind or that of our management team that we have work to do. We have to strengthen WPP Media and deliver on the promise of WPP Open and Open Intelligence that Brian outlined. Clients need to see the power of our new data approach and how we can use it to drive stronger returns. We have to improve our new business conversion, so new clients can see the strength of our offer, the quality of our work and our ability to work across WPP to deliver integrated solutions that our existing clients see that is reflected in our client satisfaction scores. And as I said before, we have to embrace the opportunities and challenges of AI. But I firmly believe that we come out this challenge with an extremely strong set of capabilities, a well-balanced offer across creative, production and media. We're a leader in AI and technology. We have a unique global footprint with partner to the world's largest clients, 4 of the world's 5 most valuable companies, we have an extremely strong bench of talent and culture that takes us into the future. So to wrap up, I'd like to end by thanking our people. You are, I think, what I will miss most in the next chapter, and I wish you all the best. I know that the past 6 months have been challenging, but if we approach the future with the same determination as we did in COVID and the many other challenges we face, then we will succeed. It has been, I would say, a privilege to lead this great company and the successes that we have all down to you. I'll be handing over to Cindy in a few weeks, and I'm sure that you and our clients are in very good hands. So thank you all very much for listening. And now we're ready to take your questions.

[Operator Instructions] We will now take our first question from Laura Metayer with Morgan Stanley.

Mark, it's been a pleasure to interact with you, and my best wishes for the next step in your career. Three questions from me, please. The first one is on the pricing environment. What are you seeing in terms of pricing in this challenging macro environment? Would you say there are some pressures or it's been relatively flat? Second question is, can you tell us a little bit more about your product offering in influencer marketing? One of your competitors acquired a relatively large influencer platform, so I was wondering if you believe you need to make more acquisitions in this space or if you have already the required capabilities. And how do you see this market evolving more broadly? And then lastly, can you tell us a little bit more about the one-off that you mentioned that negatively impacted H1 '25?

Thank you, Laura. Thanks for your wishes. I'll take the first 2 questions and then Joanne can add anything she like on pricing and talk about the one-off. Look, I think our industry has always been very competitive, and it remains competitive. And I think to some extent, the larger the review, the more competitive it becomes. And there has been, perhaps in a slower new business environment, a slightly tougher financial environment. I think our job is to respond to that. But I think we do find that as we win clients and expand scopes, we can address some of the pricing issues that inevitably come. I think we will see with AI, and one of the things we're doing is using WPP Open to demonstrate to clients how we can deliver work more quickly and more efficiently. And I think that will be a source of competitive advantage for us in responding to some of the pricing challenges. In terms of influencer marketing, look, I think we're very confident in the strength of the offer that we have. We won a number of assignments. I would call out L'Oreal and other clients. We acquired 3 businesses, I mentioned actually on Goat inside WPP Media that focuses on using influencer marketing to drive business success for clients to have a global platform and some scale. We acquired a smaller business, Village, about 3 or 4 years ago into what's now VML and an extremely talented team. They do all the work for Kamala Harris around the DMC. And while ultimately she wasn't successful, obviously, in the election, I think that work was recognized as sort of at least starting her campaign in a very positive position. We have obviously another strong influencer business. And actually, Ogilvy has built one of the strongest influencer businesses totally organically. So I don't think we're in a situation where we need to make acquisitions, and clients can get everything that they need for us from an influencer position in terms of the capabilities that we have today. And we've probably been slightly ahead of some of the competition in terms of making those acquisitions. Joanne, will you take the financial questions?

Yes. So Laura, thanks for the question. On one-off factors, the related to contractual obligations in our Media business and impacted Western Continental Europe. Given the nature that we don't expect them to repeat in the balance of the year, we've called the market because it was meaningful in Q2 and, therefore, helpful to understand the Q2 relative performance. But from a full year perspective, they will obviously be less meaningful.

Our next question comes from Adam Berlin with UBS.

I want to also wish Mark the best for the future. A few questions, if I can. The first is on Hogarth. You talked, Mark, about how that's been a real source of growth. But I did notice that in the first half, it was only flat. And I think given people's concerns about AI and the progress people are making using AI to do production, could you explain a bit more why Hogarth was flat? And why we've seen that deceleration in Hogarth, just to -- is there an AI impact there? Or is it just to do with the overall market slowdown? So that's the first question. Second, I want to ask Brian about his comments around data within WPP Media. I think you said that you have more data than your competitors. I think people would find that surprising because, obviously, purposes of Epson and IPG of Acxiom, which seem to be kind of large data assets. Can you talk a little bit about what you mean by that? Like what data do you have that they don't have? How do you -- where do you get this data from that they don't have access to? Just trying to unpack that comment a little bit because I'd just like to understand better what you mean. And then thirdly, I'll ask, you cut staff incentives in H1 by about 60%. I know some of that was M&A. Is that the right way to be thinking about H2 as well? Just to understand the plan there on the current guidance.

Okay. So I'll take the Hogarth question. I think Joanne can take, because she's in the room with me, the second -- third question. Then we would leave Brian to end on Peter. But I think in terms of Hogarth, we have seen continued structural growth. There are -- as I mentioned, it's been a very volatile client environment, and we've seen lots of clients -- I've never seen -- divergence in performance in time, some growing and some cutting back, and Hogarth has been, to some extent, the victim of some timing issues on product launches for some clients. So I don't think there's anything there. There's nothing there in terms of impact of AI. I think the impact of AI in Hogarth business will only be positive, and I'll give you a good example. We recently took a client -- I can't tell you client's Super Bowl commercial that they shot, and we remade it using Google VO2 insight Hogarth. And if you run the 2 commercial side by side, people can't tell -- people don't know which one was done with AI and which one was done in a real shoot. And I think that's sort of a tremendous growth opportunity for Hogarth. Currently, we don't produce television commercials. But actually, this gives us the ability to produce even more work. And we did actually for CoreWAve create a commercial entirely in AI as they run on -- in a network television in the U.S. So I think AI will be a source of growth for Hogarth. And I think what we're seeing is really just largely timing issue on projects within their business. Joanne, do you want to tackle the question, then we'll go to Brian?

Yes. So on the incentives, we are a performance-based business. And in the first half, the results of incentives is really mechanical, and it reflects the performance in the first half. And I would expect for the full year, based on our outlook for incentives, will be down. We'll confirm by how much at the full year. But we are very sensitive to the importance of motivating and retaining our top talent. And we do review our incentives on a discretionary basis when we have the full year results, and this is reflected in our planning assumptions.

Adam, on your question about data, what I would say is we have more data than other holding companies because we think about how to incorporate data into our performance model differently. The business for 20 years has focused on how much traditional legacy CRM data you can collect in a database. And that notion of collecting legacy data is increasingly under pressure as what we do evolves to go beyond just paid media on traditional channels to include things like content development, influencer marketing, retail media. And so our model, which is called Open Intelligence, has the same amount of traditional identity data, but also includes hundreds of other partners, including data companies and media companies. And we use InfoSum and a technology called Federated Learning to learn from those sources of data, so that we can more accurately predict the performance of campaigns before we run those campaigns. So we have the identity data for the traditional approach to digital advertising. And we also have hundreds of data partners that help us better understand consumer behavior to drive performance. And we've seen that outperform our competition on existing campaign.

I want to ask, Brian, if you could just give an example of like one of those data providers would be just to bring it to life a bit more.

Sure. There are providers like Google, like Amazon, like TikTok, traditionally considered walled gardens of information. If you were to ask many media companies to spend data into a central database, of course, they would be reluctant to do that. But using InfoSum and technologies like Federated Learning, we can learn from those data sets without having to centralize the data and own it and broker data, which is a business we'd rather not be in.

Our next question comes from Annick Maas with Bernstein.

My first question, maybe it's a bit too early, but can you just talk to us potentially about what the dividend reset means for the dividend strategy going forward? My second one is on staff turnover. So I guess, in recent months, you've also seen some senior staff departures. And I kind of want to understand, I guess, with the senior staff -- people usually come very high -- come with a good client relationship. So how have you accounted for potential client losses because of the senior staff departures? And then my next question is for Mark. I guess, if you take a step back and if you think about what -- if you knew when you started what you know today about AI, about the industry, about tariffs, how would you have differently approached WPP when you became CEO?

Okay. Why don't I start there and maybe -- look, I think looking back 7 years, there's obviously things I would do differently. I mean, you would be -- I won't be human to say, but you wouldn't do some things differently. I think like most CEOs, every year have ever spoken to, they always do all the things that work more quickly, and none of those things that didn't work. And I think in my case, I'm sure there are things that I would do differently and things I would do more quickly. I think as I tried to summarize, I think the direction that we have taken the business to integrate it more, to integrate analog and digital, to put technology at the core, to focus on the quality of the work have all been the right steps. And probably, as you say, inevitably, one should done those things more quickly, except what has been successful. I do think that the brand structure that we have has been effective. And I think that they still remain important, but they need to be more brands, less companies. And in order to manage talent, not to manage the organization. So I think there's all directions in which I'm not going to set the strategy for Cindy or ever comment on it in any way. I think there's all directions I'm sure that she will look at to actually take the company. Yes, I do think that the acquisition of Satalia will stand out as being an excellent move that we made, and many people, not just who were involved in making that decision. I think it's given us now close to 200 people who are world-class AI experts, able to build a platform with more power on what we do. And we saw the cost of seeing what the impact of AI beyond. This is probably -- that's the thing -- I mean, other than beyond the people and the client think I'm mostly seeing how we implement that. Joanne, do you want to tackle the other questions?

Yes. So let me just start with the dividend one. So -- and where I would start is the Board and management's top priorities to drive sustainable growth. And in the context of our current performance, reducing the interim dividend gives a greater degree of financial flexibility to support that growth. Obviously, Cindy starting on September 1, and we will review the strategy alongside her, and that will include an evaluation of our capital allocation policy and our distribution to shareholders. The reduction of the interim dividend by 50% gives that greater flexibility, but it also reflects the importance of shareholders -- or the importance of shareholders who put on the dividend. I think it would be premature to assume that the payout biz and the half year earnings will be the basis for the ongoing policy. But of course, we will update in due course alongside the strategy. And sorry, you had a second question just on staff turnover. I would say on that, there's been some staff turnover, yes, but also we have attracted very senior strong talent into the business as well. I think it's no higher or lower than what it has been historically. And specifically to client losses, I mean, the short answer is no. It's not driving client losses. We have a very strong team of client leaders, but our client relationships are not really based on any one individual. They are very long-standing and deep partnerships that we have across many parts of the business.

Our next question comes from Adrien de Saint Hilaire with Bank of America.

Yes. And first of all, again, extending the gratitude to Mark for all those years and then best wishes for the future. A few questions, if you don't mind. First of all, there was a piece in campaign that discussed a potential partnership between Accenture and WPP. Can you provide any comments around that? And then maybe some questions for Joanne. Can you comment a bit on Q3 trading to date versus the underlying minus 4.8% that you had in the second quarter? And then can we talk also about where you expect average net debt to land for the year? What's the underlying working capital outflow assumption? It was a minus 168% for the last 12 months, as you highlighted. So what are you baking in for the year? And then I've got a last financial question. You said your tax rate at 31% for the year given a lower profit before tax. Do you think that's the new sustainable level going forward? Or should we go back to 29% as you rebuild profitability looking out?

Okay. I mean, on campaign, it's an excellent publication and one I look forward to continue reading, but it's not always entirely actual at the moment and we can't comment much more beyond that. Joanne, do you want to take the financial question?

Yes. So just starting with Q3 trading to date, look, it's early in the quarter. Trading -- the trading environment does remain challenging, and I want to avoid getting into month-by-month detail, but there's nothing that we have seen that would change our revised guidance range. In terms of the average net debt, the average net debt has been coming down, and that partly reflects the use of the FGS proceeds to reduce debt last year. In terms of where we expect average net dent to be this year, we have guided to adjusted operating cash flow before working capital. We've guided on tax, interest, restructuring costs. We don't guide on working capital, and that's consistent with our peers. Our working capital can fluctuate at the end of the year. We have GBP 60 billion plus going through our balance sheet. And so a GBP 200 million, GBP 300 million movement either way is not unreasonable amounts. But we are very, very focused on continuing to reduce that average net debt as we move forward. And in terms of the ETR, it was very much -- the 31% really is mechanical, reflecting the lower level of profit and the impact of nondeductible expenses. The share price reduction had a bit of an impact as well on deferred tax assets. I mean, going forward, the tax rate will really depend on business mix and level of profits. And we'll update on the 2026 rate in February.

Our next question comes from Julien Roch with Barclays.

First of all, Mark, best wishes on your next chapter. I think people underappreciated how much you have transformed WPP. I'll start with you. In your minus 5% to minus 3% organic guidance, what did you put in for new business and macro? If you were to lose do, I hope not, all the GBP 1 billion of billings you are still defending, could it be worse than minus 5%? Or would the impact be mostly next year? If the macro is worse in Q4 in December, could it be worse than minus 5%, so kind of new business and macro parameters to lend within minus 5% to minus 3%? That's my first question. The second for Brian. Your single media platform is live in the U.S. and the U.K., so not globally, which means you are not done in terms of transforming WPP Media. So when do you think you'll be mostly done? Are you going to every pitch with the solutions and products you want? Is it end of '25, some time in '26? And was Open fully operational when you pitched for Mark and PayPal? And lastly, probably for Joanne, how much was a gap of net sales in full year '24?

Okay. Joanne, do you want to tackle those? And then we go to Brian.

Yes. Let me tackle 1 and 3, Julien, and then if Mark wants to build and maybe he can. On Hogarth, it was about 5% of total net sales last year. And then in terms of the guidance, as we described in July, the revision in guidance is really split roughly equally between the macro impact that we're seeing. So perhaps, we talked about that at the media. And then the 80% of net business, and we've been in that new business, it's really incremental client losses since the start of the year. And again, that's really in media. And then a weaker new business performance, driven by conversion, but also just the lower volume of new business that we're seeing. Convergence talked about Media pitch volumes being a third of what they were in the first half of 2024. So there is a lower volume of that. In new business specifically, at the start of the year, we were expecting it to be broadly flat. We're now expecting to be a drag of 100 to 150 basis points for the reasons I outlined. And if you look at it from a gross client loss perspective for the full year, we're probably expecting around 3% to 4% of the drag from that. So hopefully, that gives you some of the levers within it. In terms of the reengineer, the wide range, and I think that reflects the volatility that we're seeing in the market at the lower end of that range assumes 0.7%, that's what we expect, just worse than the half and also deterioration of the underline second quarter performance. And at the top end, it's declined -- and really, there's variability within that are the macro and the continuing business was launched. Brian, I'll hand to you.

Yes, Julien, thanks for the question. In terms of the implementation of Open Media Studio, we will be substantially done with the deployment of the platform by the end of 2025. So we're prioritizing by market and by client, but that rollout is happening as we speak. In terms of Mars, we were in the process of deploying Open Media Studio for Mars. And in terms of PayPal, we did not fit for PayPal, and we resigned the PayPal business.

Our next question comes from Steve Liechti from Deutsche Numis.

Yes. Can I just focus on the media side? Just -- and sorry if this replicates Julien's last question actually. Just on Open Intelligence rollout, just to confirm, U.S. and U.K., it's with existing clients. And then have you got any evidence in terms of pictures that you are using it for where you've had success or not at this stage? Or is it just too early where we are? Second question is on the media changes and the sort of consolidation there. Clearly, a lot of disruption in the first half. Can you just confirm that, that disruption is being contained? Or is there a further drag into the third and fourth quarter? Are things happening perhaps you weren't planning for in terms of you cut too hard here or there? Just to give us some comfort that where -- when does that Media business stabilize and get back to where you want to be, I guess, in terms of operationally. I'll leave it there.

Any time you try and turn a business as dramatically as we have, you're going to experience some disruption, and we did see that in the first half. We are substantially through that transformation. And I don't expect any lingering effects in the second half. We've restructured the company. We put new leadership in place. We are consolidating onto one platform. So I feel very good about going into pitches in the second half of 2025. In terms of the Open intelligence rollout, Open Intelligence is our data model. It underlies Open Media Studio, which is our platform. And yes, we have seen success already on some of our long-standing clients in terms of outperforming traditional identity-based approaches to performance.

I just add to Brian's point. The U.S. and the U.K., the 2 most important markets in which we need to implement Open Intelligence, they're the most sophisticated data markets and the area where we have, let's say, the biggest gap versus the competition. I think that has to be the priority. And I think that Brian correctly focused on that, and the rollout in the other markets is taking place. But I think that does close the gap in an important way. But yes, you ask you a further question here.

Yes. Sorry. Yes, the follow-up really was when we were in Cannes, it kind of felt like you were still really introducing Open Intelligence to clients. I just really wanted more comfort that you're actually out there deploying it, and it was being successfully used in pitches. Anything you can just say on that, please, would be helpful.

Well, frankly, I wish there were more pitches, but it is being successfully used on pitches. We're towards the tail end of some pitches now. So I expect it to produce great results on pitches. But as you know, we can't necessarily control how many pitches there are in the market. What I can tell you is as we adopt Open Intelligence for our incumbent clients, we are seeing performance gains that are substantial as compared to traditional approaches to identity.

We currently have no further questions at this time. I would now hand the call over to Mr. Mark Read for further closing remarks.

So thank you very much. There's no more questions. I think we'll leave it there. So before I go, I just want to say thank our clients and our people for their ongoing trust and support. And also to thank all of you, the analysts and investor community, with your interest in WPP and engagement I've enjoyed. I think I've enjoyed these calls over the years, and maybe the thing I will miss the most, or not. So look, it's a continuing challenging environment out there. And I think we're under no illusions about that, as you say, but I think we have made some difficult decisions that some of these decisions we made today. But I am positive about the future. I look forward to seeing what comes next. I think it ends by thanking, in particular, videos to meet that particular and this year for her support and Scott support over the last 7 years, to the Board. I wish Cindy all the best in taking over the reins. And thank you all very much, and goodbye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.