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2: EX-1.1 Underwriting Agreement or Conflict Minerals Report HTML 310K
3: EX-2.11 Plan of Acquisition, Reorganization, Arrangement, HTML 136K
Liquidation or Succession
4: EX-2.14 Plan of Acquisition, Reorganization, Arrangement, HTML 794K
Liquidation or Succession
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8: EX-13.1 Annual or Quarterly Report to Security Holders HTML 55K
9: EX-13.2 Annual or Quarterly Report to Security Holders HTML 55K
10: EX-14.1 Code of Ethics HTML 55K
11: EX-17.1 Correspondence re: Departure of a Director HTML 57K
6: EX-12.1 Statement re: the Computation of Ratios HTML 58K
7: EX-12.2 Statement re: the Computation of Ratios HTML 58K
17: R1 Cover HTML 129K
18: R2 Audit Information HTML 60K
19: R3 Consolidated Income Statement HTML 135K
20: R4 Consolidated Statement of Comprehensive Income HTML 118K
21: R5 Consolidated Cash Flow Statement HTML 118K
22: R6 Consolidated Balance Sheet HTML 166K
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60: R44 Costs of services and general and administrative HTML 126K
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revaluation and retranslation of financial
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- Additional Information (Detail)
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95: R79 Segment information - Contributions by HTML 86K
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96: R80 Costs of services and general and administrative HTML 115K
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98: R82 Costs of services and general and administrative HTML 74K
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Detailed Information About Amounts Of Discontinued
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Detailed Information About Gain On Sale Of
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Assets and Lease Liabilities (Details)
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(Details)
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Significant Goodwill (Detail)
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(Detail)
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Units With Significant Impairments Of Goodwill
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Property, Plant and Equipment (Detail)
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Information (Detail)
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investments - Movements in Associates, Joint
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investments - Principal Associates and Joint
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investments - Additional Information (Details)
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investments - Summary of Aggregate Financial
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for Financial Reporting Purposes (Details)
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Liabilities (Details)
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145: R129 Trade and other receivables - Summary of Trade and HTML 73K
Other Receivables, Amounts Falling Due Within One
Year (Details)
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Receivables and Other Financial Assets (Details)
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Other Receivables, Amounts Falling Due After More
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Information (Details)
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Other Payables, Amounts Falling Due within One
Year (Details)
151: R135 Trade and other payables - Summary of Trade and HTML 66K
Other Payables, Amounts Falling Due After More
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Overdrafts, Bonds and Bank Loans Amounts Falling
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Bonds and Bank Loans Amounts Falling Due After
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Information (Detail)
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Due on Corporate Bonds, Bank Loans and Overdrafts
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Incentive Plans (Details)
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(Details)
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Granted for Significant Restricted Stock Plans
(Details)
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Costs (Details)
163: R147 Provision for post-employment benefits - HTML 72K
Additional Information (Details)
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Average Assumptions Used For Actuarial Valuations
(Details)
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Expectancies for Defined Benefit Pension Plans
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Average Duration of Defined Benefit Pension
Obligations and Distribution of Timing of Benefit
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Sensitivity Analysis of Significant Actuarial
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Value of Assets and Assessed Present Value of
Liabilities in Pension Plans (Details)
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Surplus/(Deficit) in Plans by Region (Details)
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and Unfunded Pension Plans By Region (Details)
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Expense Charged to Operating Profit, Amounts
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Consolidated Statement of Comprehensive Income
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in Pension Plan Liabilities (Details)
173: R157 Provision for post-employment benefits - Movement HTML 91K
in Pension Plan Assets (Details)
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(Details)
175: R159 Risk management policies - Committed Facilities HTML 140K
(Details)
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risk (Details)
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(Details)
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Assets and Liabilities (Details)
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Instruments Measured at Fair Value (Details)
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Authorized and Issued Share Capital (Details)
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Information (Details)
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Granted, WPP Executive Share Option Scheme
(Detail)
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(Details)
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Exercise Prices of Options (Details)
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Average Fair Value of Options Granted and Weighted
Average Assumptions (Details)
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headline operating profit - Summary of
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‘20-F’ — Annual or Annual-Transition Report by a Foreign Non-Canadian Issuer
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title
of each class
Trading Symbol (s)
Name of each exchange on which registered
iOrdinary Shares of 10p each
iWPP
London
Stock Exchange
iAmerican Depositary Shares, each representing five Ordinary Shares (ADSs)
iWPP
iNew
York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Not applicable
___________________________________________
(Title of Class)
Not applicable
____________________________________________
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
____________________________________________
(Title of Class)
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
At December 31, 2021, the number of outstanding ordinary shares was i1,153,969,597 which included at such date 70,902,035 ordinary shares represented by 14,180,407 ADSs.
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
iYes
x
No
¨
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes
¨
iNo
x
Note
– Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
iYes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
iYes
x
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,”“accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
iLarge
Accelerated Filer
x
Accelerated Filer
¨
Non-accelerated Filer
o
Emerging Growth Company
i¨
If an emerging
growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5,
2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
ix
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨
iInternational
Financial Reporting Standards as issued
by the International Accounting Standards Board x
Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item
17
¨
Item 18
¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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 economic and geopolitical impact of the Russian invasion of Ukraine; 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 in Item 3D, captioned “Risk Factors,” 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 of 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.
Unless otherwise specified, content on hyperlinked websites is not incorporated by reference and does not form a part of
this Annual Report on Form 20-F.
1
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.
KEY INFORMATION
Overview
WPP plc and its subsidiaries (WPP) is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services across digital and traditional platforms. At 31 December 2021, the Group, excluding associates, had 109,382 employees. For the year ended 31 December 2021, the Group had revenue of £12,801.1 million and operating profit of £1,229.0 million.
Unless the context otherwise requires, the terms “Company”, “Group” and “Registrant” as used herein shall also mean WPP.
A.
[Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
The Company is subject to a variety of possible risks that could adversely impact its revenues, results
of operations, reputation or financial condition. Some of these risks relate to the industries in which the Company operates while others are more specific to the Company. The table below sets out principal risks the Company has identified that could adversely affect it. See also the discussion of Forward-Looking Statements preceding Item 1 of this Annual Report on Form 20-F.
Principal risk
Potential
impact
Covid-19 Pandemic
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, any existing or new variants, government actions to mitigate the effects of the pandemic and the intermediate and long-term impact of the pandemic on our clients’ spending plans.
The Covid-19 pandemic and any new variants 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.
Strategic risks
The
failure to successfully complete the strategic plan updated in December 2020 to return the business to sustained 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 sustained growth may have a material adverse effect on our market share and our business, revenues, results of operations, financial condition or prospects.
2
Principal risk
Potential
impact
Operational risks
Clients
We compete for clients in a highly competitive industry which has been evolving and undergoing structural change. Client loss to competitors or as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions triggered by the pandemic, the invasion of Ukraine by Russia, or a geopolitical change or 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 more traditional services and operators in our sector is being challenged. Competitors include multinational advertising and marketing communication groups, marketing services companies, database marketing information and measurement 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 pandemic and the geopolitical and economic consequences of the invasion of Ukraine and imposition of sanctions. 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 15% of revenues in the year ended 31 December
2021. 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.
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.
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.
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.
The Group has in the past and may in the future experience a cyber-attack which results in disruption to one or more of our businesses or the security of data being compromised.
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.
The imposition of sanctions following the Russian invasion of Ukraine has triggered an increase in cyber-attacks generally.
Financial
risks
Economic and Credit risk
Economic conditions have a direct impact on our business, results of operations and financial position. Adverse economic conditions, including those caused by the pandemic, invasion of Ukraine by Russia, severe and sustained inflation in key markets where we operate, supply chain issues affecting the distribution of our clients’ products and/or disruption in credit markets, pose a risk our clients may reduce, suspend or cancel spend with us or be unable to satisfy obligations. We are subject to credit risk through the default of a client or other counterparty.
We are generally paid in arrears for our services.
Invoices are typically payable within 30 to 60 days.
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.
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Principal risk
Potential
impact
Internal controls
Our performance could be adversely impacted if we failed to ensure adequate internal control procedures are in place.
We have previously identified material weaknesses in our internal control over financial reporting. If we failed to properly remediate these material weaknesses or new material weaknesses are identified, they could adversely affect our results of operations, investor confidence in the Group and the market price of our ADSs and ordinary shares.
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 Item 15, in connection with the Group’s assessment of the effectiveness of internal control over financial reporting as of 31 December 2020, we previously 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). We implemented remedial measures during 2021 and believe that we have remediated each of these material weaknesses such that our internal control over financial reporting is effective as at 31 December 2021.
If the remedial measures were ultimately 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.
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:
- The Group has in the past and may
in the future experience a system breakdown or intrusion that 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
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, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, and 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 has previously and could expose us to civil and criminal sanctions.
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Principal
risk
Potential impact
Sanctions
We are subject to the laws of the United States, the EU, the UK and other jurisdictions that impose sanctions and regulate the supply of services to certain countries. The Russian invasion of Ukraine has caused the adoption of comprehensive sanctions by, among others, the EU, the United States and the UK, which restrict a wide range of trade and financial dealings with Russia and Russian persons.
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.
Civil liabilities or judgements against the Company or its directors or officers based on United States federal or state securities laws may not be enforceable in the United States or in England and Wales or in Jersey.
The Company is a public limited company incorporated under the laws of Jersey. Some of the Company’s directors and officers reside outside of the United States. In addition, a substantial portion of the directly owned assets of the
Company are located outside of the United States. As a result, it may be difficult or impossible for investors to effect service of process within the United States against the Company or its directors and officers or to enforce against them any of the judgements, including those obtained in original actions or in actions to enforce judgements of the United States courts, predicated upon the civil liability provisions of the federal or state securities laws of the United States.
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.
Increased reputational risk associated with working on client briefs perceived to be environmentally detrimental and/or misrepresenting environmental claims.
As consumer consciousness around climate change rises, our sector is seeing increased scrutiny of its role in driving unsustainable consumption. Our clients seek expert partners who can give recommendations that take into account stakeholder concerns around climate change. Additionally, WPP serves some clients whose business models are under increased
scrutiny, for example energy 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.
Changes in regulation and reporting standards.
We could be subject to increased costs to comply with potential future changes in environmental laws and regulations and increasing carbon offset pricing to meet its net zero commitments. Carbon emission accounting for marketing and media is in its infancy and methodologies continue to evolve. This is particularly the case for emissions associated with digital media.
WPP is a leading worldwide creative transformation company offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services. The Company provides these services through a number of established global, multinational and national operating companies that are organised into three reportable segments. The largest reportable segment is Global Integrated Agencies, which accounted for approximately 85% of the Company’s revenues in 2021. The remaining 15% of our revenues were derived from the reportable segments of Public Relations and Specialist Agencies. Excluding associates,
the Company currently employs approximately 109,000 people in 112 countries.
The Company’s ordinary shares are admitted to the Official List of the UK Listing Authority and trade on the London Stock Exchange and American Depositary Shares (which are evidenced by American Depositary Receipts (ADRs) or held in book-entry form) representing deposited ordinary shares are listed on the New York Stock Exchange (NYSE). At 31 December 2021 the Company had a market capitalisation of approximately £12.919 billion.
The Company’s executive office is located at
Sea Containers, 18 Upper Ground, London, United Kingdom, SE1 9GL, Tel: +44 (0)20 7282 4600 and its registered office is located at 13 Castle Street, St Helier, Jersey, JE1 1ES.
WPP plc was incorporated in Jersey on 25 October 2012 under the name WPP 2012 plc.
On 2 January 2013, under a scheme of arrangement between WPP 2012 Limited (formerly known as WPP plc), (Old WPP), the former holding company of the Group, and its share owners pursuant to Article 125 of the Companies (Jersey) Law 1991, and as sanctioned by the Royal Court of Jersey (the Jersey Court), a Jersey incorporated and United Kingdom tax
resident company, WPP 2012 plc became the new parent company of the WPP Group and adopted the name WPP plc. Under the scheme of arrangement, all the issued shares in Old WPP were cancelled and the same number of new shares were issued to WPP plc in consideration for the allotment to share owners of one share in WPP plc for each share in Old WPP held on the record date, 31 December 2012. Citibank, N.A., depositary for the ADSs representing Old WPP shares, cancelled Old WPP ADSs held in
5
book-entry uncertificated form in the direct registration system maintained by it and issued ADSs representing shares of WPP plc in book entry uncertificated form in the direct registration system maintained by it to the holders. Holders of certificated ADSs, or ADRs, of Old WPP were entitled
to receive ADSs of WPP plc upon surrender of the Old WPP ADSs, or ADRs, to the Depositary. Each Old WPP ADS represented five shares of Old WPP and each WPP plc ADS represents five shares of WPP plc.
Pursuant to Rule 12g-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), WPP plc succeeded to Old WPP’s registration and periodic reporting obligations under the Exchange Act.
Old WPP was incorporated in Jersey on 12 September 2008 and became the holding company of the WPP Group on 19 November 2008 when the company now known as WPP 2008 Limited, the prior holding company of the WPP Group which was incorporated in England and Wales, completed a reorganisation of its capital and corporate structure. WPP 2008 Limited had become the holding company of the Group
on 25 October 2005 when the company now known as WPP 2005 Limited, the original holding company of the WPP Group, completed a reorganisation of its capital and corporate structure. WPP 2005 Limited was incorporated and registered in England and Wales in 1971 and is a private limited company under the Companies Act 1985, and until 1985 operated as a manufacturer and distributor of wire and plastic products. In 1985, new investors acquired a significant interest in WPP and changed the strategic direction of the Company from being a wire and plastic products manufacturer and distributor to being a multinational communications services organisation. Since then, the Company has grown both organically and by the acquisition
of companies, most significantly the acquisitions of J. Walter Thompson Group, Inc. (now known as Wunderman Thompson LLC) in 1987, The Ogilvy Group, Inc. (now known as The Ogilvy Group LLC) in 1989, Young & Rubicam Inc. (now known as Young & Rubicam LLC) in 2000, Tempus Group plc (Tempus) in 2001, Cordiant Communications Group plc (Cordiant) in 2003, Grey Global Group, LLC (Grey) in 2005, 24/7 Real Media Inc (now known as Xaxis LLC) in 2007, Taylor Nelson Sofres plc (TNS) in 2008, AKQA Holdings, Inc. (AKQA) in 2012, IBOPE Participações Ltda (IBOPE) in 2015, Triad Digital Media, LLC and the merger of most of the Group’s Australian and New Zealand assets with STW Communications Group Limited in Australia (re-named WPP AUNZ Limited) in 2016. During 2018, the Company focused on simplifying its organisation with the completion of the merger of VML and Y&R to create VMLY&R
as well as the merger of Burson-Marsteller and Cohn & Wolfe to create Burson Cohn & Wolfe (BCW). The merger of Wunderman and J. Walter Thompson to create Wunderman Thompson began at the end of 2018 and was finalized in 2019. In December 2019, the Company sold 60% of the Kantar group to Bain Capital Private Equity. In May 2021 WPP completed the acquisition of the remaining shares in WPP AUNZ Limited (WPP AUNZ) by way of a scheme of arrangement. During 2020, the Group announced the intention to combine Grey and AKQA into AKQA Group, and to bring Geometry and GTB into VMLY&R, and International Healthcare into VMLY&R and Ogilvy. As a result, AKQA, Geometry, GTB and International Healthcare are now reported within Global Integrated Agencies, having previously been reported within Specialist Agencies.
The
Company paid £453.3 million in 2021 and received £13.3 million and £1,917.0 million related to acquisitions and disposals in 2020 and 2019, respectively, including proceeds on disposal of investments and subsidiaries, payments in respect of earnout payments resulting from acquisitions in prior years and net of cash and cash equivalents disposed. For the same periods, cash spent on purchases of property, plant and equipment and other intangible assets was £293.1 million, £272.7 million and £394.1 million, respectively, and cash spent on share repurchases and buybacks was £818.5 million, £290.2 million and £43.8 million, respectively.
The Company is subject to the informational requirements of the Exchange Act. In accordance with these requirements,
the Company files reports and other information with the United States Securities and Exchange Commission. You may read and copy any materials filed with the SEC at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC. The Company’s Form 20-F is also available on the Company’s website, http://www.wpp.com.
B.
Business Overview
Introduction
Certain Non-GAAP measures included in this business overview and in the operating and financial review and prospects have been derived from amounts calculated in accordance with IFRS but are not themselves IFRS measures. They should not be viewed in isolation as alternatives to the equivalent IFRS measure, rather they should be read in conjunction with the equivalent IFRS measure. These include constant currency, pro-forma (‘like-for-like’), headline operating profit, headline PBIT (Profit Before Interest and Taxation), headline PBT (Profit Before Taxation), billings and estimated net new business/billings, free cash flow and adjusted net debt and average adjusted net debt, which we define, explain the use of and reconcile to the nearest IFRS measure on pages 22 to 25.
Management believes that these measures are
both useful and necessary to present herein because they are used by management for internal performance analyses; the presentation of these measures facilitates comparability with other companies, although
6
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.
In the calculation of headline profit, judgement is required by management in determining which revenues and costs are considered to be significant, non-recurring or volatile items that are to be excluded.
The exclusion of certain adjusting items may result in headline profit
measures being materially higher or lower than reported profit measures, for example when significant impairments or restructuring charges are excluded but the related benefits are included, headline profit measures will be higher. Headline measures should not be considered in isolation as they provide additional information to aid the understanding of the Group’s financial performance.
The Company is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services.
A key element of our strategy is to align our technology capabilities more closely with our creative expertise, and to simplify WPP through the creation of fewer, stronger, integrated agencies. During 2021, we achieved
many significant wins in pitches, from media, creative and PR to design, technology and production, culminating in WPP’s appointment as The Coca-Cola Company’s Global Marketing Network Partner. Other major cross-agency wins included AstraZeneca, Beiersdorf, L’Oréal, Sainsbury’s, TD Bank and Under Armour. Overall, on new business in 2021, we ranked as number one for both creative and media wins according to R3, with a total of $8.7 billion of net new business won.
Global Integrated Agencies
The principal functions of integrated agencies are the planning and creation of marketing and branding campaigns, design and production of advertisements across all media, and media buying services including strategy & business development, media investment, data & technology and content. In 2021, WPP’s integrated agency networks included Ogilvy, VMLY&R, Wunderman Thompson, AKQA Group,
GroupM, and Hogarth.
Public Relations
WPP’s public relations companies advise clients who are seeking to communicate with a range of stakeholders from consumers to governments and the business and financial communities. Our public affairs companies include Burson Cohn & Wolfe (BCW), Finsbury Glover Hering & Sard Verbinnen & Co, 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.
Specialist Agencies
Our specialist agencies provide services by region or type. In 2021, they included the brand consultancies Landor & Fitch, Superunion, and the specialist healthcare media business CMI.
During
2020, we announced that we would bring together Grey and AKQA under the AKQA Group, and we brought Geometry and GTB into VMLY&R, and International Healthcare into VMLY&R and Ogilvy. As a result AKQA Group, Geometry, GTB and International Healthcare are now reported within Global Integrated Agencies, having previously been reported within Specialist Agencies. Prior year figures have been re-presented to reflect these changes.
The following tables show, for the last three fiscal years, reported revenue and revenue less pass-through costs from continuing operations attributable to each reportable segment in which the Company operates.
Revenue1
2021
2020
2019
£m
%
of total
£m
% of total
£m
% of total
Global Integrated Agencies
10,836.3
84.7
10,265.5
85.6
11,269.2
85.2
Public
Relations
959.0
7.4
892.9
7.4
956.5
7.2
Specialist Agencies
1,005.8
7.9
844.4
7.0
1,008.4
7.6
Total
12,801.1
100.0
12,002.8
100.0
13,234.1
100.0
1Intersegment
sales have not been separately disclosed as they are not material.
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Revenue
less pass-through costs1
2021
2020
2019
£m
% of total
£m
% of total
£m
% of total
Global Integrated
Agencies
8,638.7
83.1
8,194.2
84.0
9,090.4
83.8
Public Relations
909.7
8.7
854.4
8.7
898.0
8.3
Specialist
Agencies
848.8
8.2
713.4
7.3
858.1
7.9
1Revenue less pass-through costs is revenue less media and other pass-through costs. 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 costs. See note 3 to the consolidated financial statements for more details of the pass-through costs.
The following tables show, for the last three fiscal years, reported revenue and revenue less pass-through costs from continuing operations attributable to each geographic area in which the Company operates and demonstrates the Company’s regional diversity.
Revenue1
2021
2020
2019
£m
%
of total
£m
% of total
£m
% of total
North America2
4,494.2
35.1
4,464.9
37.3
4,854.7
36.7
United
Kingdom
1,866.9
14.6
1,637.0
13.6
1,797.1
13.6
Western Continental Europe
2,786.3
21.8
2,441.6
20.3
2,628.8
19.8
Asia Pacific, Latin America,
Africa & Middle East and Central & Eastern Europe
3,653.7
28.5
3,459.3
28.8
3,953.5
29.9
Total
12,801.1
100.0
12,002.8
100.0
13,234.1
100.0
1Intersegment
sales have not been separately disclosed as they are not material.
2North America includes the United States with revenue of £4,220.8 million (2020: £4,216.1 million, 2019: £4,576.5 million).
Revenue
less pass-through costs1
2021
2020
2019
£m
% of total
£m
% of total
£m
% of total
North America2
3,849.2
37.0
3,743.4
38.4
4,034.3
37.2
United
Kingdom
1,414.3
13.6
1,233.8
12.6
1,390.1
12.8
Western Continental Europe
2,225.4
21.4
2,019.4
20.7
2,176.4
20.1
Asia Pacific, Latin America,
Africa & Middle East and Central & Eastern Europe
2,908.3
28.0
2,765.4
28.3
3,245.7
29.9
1Revenue less pass-through costs is revenue less media and other pass-through costs. 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 costs. See note 3 to the consolidated financial statements for more details of the pass-through costs.
2North America includes the United States with revenue less pass-through costs of £3,597.4 million (2020: £3,524.8 million, 2019: £3,806.3 million).
WPP Head Office
The central functions of WPP, with the principal executive office in London, are to develop the strategy of the Company, coordinate the provision of services to cross-Company clients, perform a range of cross-Company functions in areas such as new business, talent recruitment and development, training, IT, finance, audit, legal affairs, mergers & acquisitions (M&A), property,
sustainability, investor relations and communications, promote best practice in areas such as our agencies’ approach to diversity and inclusion, drive operating efficiencies and monitor the financial performance of WPP’s operating companies.
Our strategy
It has been three years since we set out our strategy to return WPP to growth. 2021 was an outstanding year for WPP. As clients seek to accelerate their growth and transform how they reach customers, the depth, breadth and global scale of our offer – which combines creativity with technology and data, through Choreograph, and the largest global media platform in GroupM – is proving its value for existing and new clients. The talent, dynamism and commitment of our people have also shone through. Our extensive partnership with The Coca-Cola Company, the expansion of our work with Google and the continuation of our longstanding relationship
with Unilever demonstrate the value that three of the world’s leading marketing organisations place in WPP.
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We have made substantial strategic progress, creating the world’s leading board-level communications firm through the merger of Finsbury Glover Hering and Sard Verbinnen, and acquiring capabilities in AI, commerce and technology services to leverage across all of WPP for future growth. Cash generation continues to be very strong, underpinned by efficiencies achieved in our transformation programme, allowing us to make significant investments in our offer and reward our people for their huge contribution, while returning over £1 billion in cash to shareholders through dividends and share buybacks. The five elements of our corporate strategy are:
•Vision &
Offer. A vision developed with our people and clients and a modern offer to meet the needs of a rapidly changing market.
•Creativity. A renewed commitment to creativity, WPP’s most important competitive advantage.
•Data & Technology. Harnessing the strength of marketing and advertising technology, and our unique partnerships with leading technology firms.
•Simpler Structure. Reducing complexity and ensuring our clients can access the best resources from across the Company.
•People & Culture. Investment in our people, culture and values to ensure WPP is the natural home for the best and brightest talent.
Sustainability
Our
sustainability strategy directs us to use the power of creativity to build better futures for our people, planet, clients and communities, and supports all five elements of our corporate strategy. Our sustainability strategy sets out the action we are taking to be the employer of choice for all people, knowing that when all our people feel secure, safe and confident to share their ideas, it has a direct impact on creativity and the power of collaboration. It shows how we are tackling the greatest environmental challenges we face, committing to reach net zero carbon emissions across our supply chain by 2030.
Our clients are increasingly focused on how to ensure their own targets, from combatting climate change to tackling inequity, translate into tangible change. We are building our skills and capacity to assist them on their own sustainability journeys.
The greatest impact we have
is through our work for clients, which reaches billions of people and – through its influence on consumer choice, behaviour and outlook – has the power to bring about positive change. We are proud to partner with the United Nations, especially the World Health Organization (WHO) and UN Women, to use our creativity and expertise to support their work.
These commitments are not just the right thing to do; they are cutting through with our clients and people, who want to work with and for companies that share their values and help them to achieve their own goals.
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.
Our sustainability strategy is aligned to all five elements of our corporate 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.
•Creativity.
Social investment: Our pro bono work can make a significant difference to charities and non-governmental organisations (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.
Diverse, equitable and inclusive teams: Diversity and difference power creativity. We foster an inclusive culture across WPP: one that is equitable 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.
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•Data & Technology.
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.
•Simpler Structure.
Net zero campuses: 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. By 2025, we expect 85,000 of our people will work in at least 65 net zero campuses powered by renewable electricity.
•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.
People
•Our success is powered by our people. This year we have launched and developed a number of initiatives across our agencies to foster an open and inclusive culture. The pilot of our Inclusive Leadership in a Hybrid World programme equipped 1,000 managers across five companies and four countries with a roadmap to becoming a more inclusive leader. Our long-term
goal is to make this learning experience available to everyone across WPP, starting with 40,000 managers globally in 2022.
•In 2021, we invested £29.7 million in learning and development opportunities for our people.
•We continue to focus on driving greater gender balance throughout the company. Half (52%) of our senior managers are women. In 2021, the proportion of women in executive leadership roles slightly decreased to 39% (2020: 40%), and within this we increased the proportion on the Executive Committee to 35%, compared with 29% in the previous year. In 2021 we were named an industry leader in the Bloomberg Gender-Equality Index for the fourth consecutive year.
Planet
•During
2021, we made an industry-leading commitment to reduce carbon emissions from our own operations (scope 1 and 2) to net zero by 2025 and across our supply chain (scope 3) by 2030, including media buying – an industry first. Supporting this we have committed to equally ambitious carbon emission reduction targets in line with climate science, and validated by the Science Based Targets initiative, to reduce our absolute Scope 1 and 2 emissions by at least 84% by 2025 and reduce Scope 3 emissions by at least 50% by 2030, both from a 2019 base year.
•WPP is a member of RE100 and has committed to sourcing 100% of its electricity from renewable sources by 2025. In 2021, we purchased 74% of our electricity from renewable sources.
•Our scope 1 and 2 market based emissions per full-time employee for 2021 were 0.32 tonnes of CO2e/head.
This represents a 38% reduction from 2020 of 0.52 tonnes of CO2e/head.
•The first step to limiting emissions is to reduce the total footprint of any product or service as far as possible. To ensure carbon credits purchased to offset remaining carbon emissions are of a sufficiently high quality, from 2022 WPP will introduce a new offsetting policy.
Clients
•This year we launched a Sustainability Playbook to showcase the diversity of our sustainability capability and innovative work. Our Inclusive Marketing Playbook and resource library embeds inclusive marketing
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principles
in everything we do, and our Diversity Review Panel provides a forum to escalate and address concerns around potentially offensive or culturally insensitive work.
•GroupM’s Media Inclusion Initiative, launched in 2021, aims to direct investment in, and create opportunities for, diverse media companies and content creators with an initial focus on Black-owned media.
•We continue to invest in virtual production to reduce emissions, partnering with Microsoft to launch Cloud Studio, an innovative cloud platform that allows creative teams from across WPP’s global network to produce campaigns for clients from any location around the world.
Communities
•In partnership with the WHO Foundation, we commenced
the pro bono $5 vaccine campaign to support access to Covid-19 vaccines in low-income countries. During the pandemic, WPP 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 partnered with the WHO and WHO Foundation on a pro bono basis, tailoring public health messages through made-for-market campaigns which reached tens of millions of people across 167 countries in more than 20 languages.
•Our pro bono work was worth £7.6 million in 2021 for clients including UN Women and World Health Organization. We also made cash donations to charities of £4.8 million. Our pro bono work, combined with cash donations, resulted in a total social investment worth £12.4 million, equivalent to 0.9% of headline profit before tax.
•WPP
media agencies negotiated free media space worth £17.3 million on behalf of pro bono clients.
Clients
The Group works with 317 of the Fortune Global 500, all 30 of the Dow Jones 30, and 62 of the FTSE 100.
The Company’s 10 largest clients accounted for 15% of the Company’s revenues in the year ended 31 December 2021. No client of the Company represented more than 5% of the Company’s aggregate revenues in 2021. The Group’s companies have maintained long-standing relationships with many of their clients, with
an average length of relationship for the top 10 clients of approximately 50 years.
Government Regulation
From time to time, governments, government agencies and industry self-regulatory bodies in the United States, European Union and other countries in which the Company operates have adopted statutes, regulations, and rulings that directly or indirectly affect the form, content, and scheduling of advertising, public relations and public affairs, and market research, or otherwise limit the scope of the activities of the Company and its clients. Some of the foregoing relate to privacy and data protection and general considerations such as truthfulness, substantiation and interpretation of claims made, comparative advertising,
relative responsibilities of clients and advertising, public relations and public affairs firms, and registration of public relations and public affairs firms’ representation of foreign governments.
There has been a trend towards expansion of specific rules, prohibitions, media restrictions, labeling disclosures and warning requirements with respect to advertising for certain products, such as over-the-counter drugs and pharmaceuticals, cigarettes, food and certain alcoholic beverages, and to certain groups, such as children. Though the Company does not expect any existing or proposed regulations to have a material adverse impact on the Company’s business, the Company is unable
to estimate the effect on its future operations of the application of existing statutes or regulations or the extent or nature of future regulatory action.
IT
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.
The WPP Risk 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 is pivotal in our approach to our own and our clients’ data, as well as contributing to our overall strategy. Co-chaired by WPP’s Chief Privacy Officer and Chief Information Officer, members represent the security,
technology and data leadership.
The WPP Data Privacy and Security 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). The Charter was updated in 2021 to include the WPP AI and Data Ethics policies.
11
All new and current employees, as well as consultants, are required to complete our Safer Data training, which covers data protection and privacy. The training is refreshed annually and is updated in line with privacy regulations. 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 (2020: 1.6), where five is the maximum score possible and indicates maximum risk.
C. Organizational Structure
The Company’s business comprises the provision of creative transformation services on a national, multinational and global basis.
It operates in 112 countries (including associates). For a list of the Company’s subsidiary undertakings and their country of incorporation see Exhibit 8.1 to this Form 20-F.
D. Property, Plant and Equipment
The majority of the Company’s properties are leased, although certain properties which are used mainly for office space are owned. Owned properties are in Latin America (principally in Argentina, Brazil, Chile, Mexico, Peru and Puerto Rico), Asia (India) and in Europe (Spain and UK). Principal leased properties, which
include office space at the following locations:
The Company considers its properties, owned or leased, to be in good
condition and generally suitable and adequate for the purposes for which they are used. At 31 December 2021, the fixed asset value (cost less depreciation) representing land, freehold buildings and leasehold buildings as reflected in the Company’s consolidated financial statements was £707.3 million.
Despite the constraints of Covid-19, we opened a further nine campuses in 2021, including sites in London, Milan, New York and Prague, taking the total to 31 and we continued to develop a further 10 sites. Under our simplification strategy, we expect to open more campuses, reaching at least 65, and accommodating more than 85,000 by 2025. Consolidating into fewer, larger buildings provides an opportunity to reduce our space requirements by about 15-20% on average.
See note 13 to the consolidated financial
statements for a schedule by years of lease payments as at 31 December 2021.
ITEM 4A.UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS
As introduced on page 6, certain Non-GAAP measures are included in the operating and financial review and prospects.
A. Operating Results
Overview
The
following discussion is based on the Company’s audited consolidated financial statements beginning on page F-1 of this report. The Group’s consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
WPP is a creative transformation company with a service offering that allows us to meet the present and future needs of our clients. Our business model is client-centric, and we leverage resources and skills across our internal structures to provide the best possible service. The Company offers services in three reportable segments:
•Global Integrated Agencies
•Public
Relations
•Specialist Agencies
In 2021, approximately 85% of the Company’s consolidated revenues from continuing operations were derived from Global Integrated Agencies, with the remaining 15% of its revenues being derived from the remaining two segments.
2021 was an exceptional year for WPP as we delivered growth ahead of pre-pandemic levels, built and extended our relationships with clients and continued to fulfil our purpose of using the power of creativity to build better futures for our people, planet, clients and communities.
We were named most creative company of the year at the Cannes Lions International Festival of Creativity for the first time since 2017, were appointed Global Marketing
Network Partner to The Coca-Cola Company after the largest review in the history of our industry and won and retained a series of other global client assignments including with Google and Unilever.
We led the global creative new business rankings by a wide margin, and each of the top three spots in the media rankings were held by GroupM agencies. We attracted and promoted some of the finest talent in the business, including Global Chief Creative Officer Rob Reilly and Global Chief People Officer Jennifer Remling at the WPP level, and made concrete progress towards our diversity, equity and inclusion (DE&I) goals.
We launched our industry-leading net zero commitment, becoming the only company in our sector to pledge to eliminate emissions not only from our own operations but across our supply chain by 2030. And, through our agencies, we created truly extraordinary work that pushed
back the boundaries of what our industry is able to achieve: from an audio system that transforms sports events for the visually impaired to an AI-driven predictive data model that supported more than 30 million Covid-19 vaccinations.
Three years ago, we set out a vision to make WPP the creative transformation company. 2021 was the year that really brought that vision to life, and showed what it could mean for all those with a stake in what we do.
The share price increased by 40% in 2021 as compared to 2020, closing at 1,119.5 pence at year end. Since then it has decreased to 1,039.5 pence, down 7%, at 25 March 2022. Dividends in respect of 2021 are 31.2 pence, an increase from 24.0 pence in respect of 2020.
13
2021
compared with 2020
The financial results are based on the Group’s continuing operations and the results of Kantar are presented separately as discontinued operations. 2020 figures have been restated as described in the accounting policies section of the consolidated financial statements.
Revenue
Revenue was up 6.7% at £12.801 billion in 2021 compared to £12.003 billion in 2020. Revenue on a constant currency basis was up 11.6% compared with last year. Net changes from acquisitions, disposals and other adjustments had a negative impact of 1.7% on growth. Like-for-like revenue growth for 2021, excluding the impact of currency, acquisitions and disposals, and other adjustments, was 13.3%, as compared to 2020. Billings were £50.657 billion in 2021, up 8.0% from £46.918 billion in 2020, and up 14.4% on a like-for-like basis compared to last year.
Costs
of services, general and administrative costs
Costs of services increased by 6.1% in 2021 to £10,597.5 million from £9,987.9 million in 2020.
General and administrative costs decreased by 77.3% in 2021 to £974.6 million from £4,293.0 million in 2020, principally in relation to a decrease in goodwill impairment, a decrease in investment write-downs, and a decrease in restructuring and transformation costs related to the Covid-19 pandemic.
Staff costs increased by 9.3% in 2021 to £7,166.7 million from £6,556.5 million in 2020. Staff costs, excluding incentives (short- and long-term incentives and cost of share-based incentives), increased by 3.2% but property costs fell 17.1% reflecting the campus roll-out and the continued impact of Covid-19. Incentive payments were £592 million compared to £185 million in 2020. IT costs were flat, and other
costs were down 13.2%, driven by lower office costs and bad debt.
The average number of people in the Group in 2021 was 104,808 compared to 102,822 in 2020. The total number of people at 31 December 2021 was 109,382 compared to 99,830 at 31 December 2020.
The Group incurred a net exceptional loss of £270 million in 2021. This comprises the Group’s share of associate company exceptional losses (£62 million), restructuring and transformation costs (£176 million) and other net exceptional losses (£32 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, investments in IT and ERP systems as part of our transformation programme, and our response to the Covid-19 situation. This compares with a net exceptional loss in 2020 of £477 million.
Operating
profit/loss
Operating profit was £1.229 billion in 2021 compared to a loss of £2.278 billion in 2020, reflecting principally the impairments of £3.119 billion (including £2.823 billion goodwill impairments and £0.296 billion of investment and other write-downs) that were recognized in 2020. Headline operating profit was up 18.5% to £1.494 billion in 2021 compared to £1.261 billion in 2020, and up 26.8% on a like-for-like basis compared to 2020. The significant growth in profitability year-on-year reflects the strong recovery from the impact of Covid-19 on revenue less pass-through costs, as well as improvement in our competitive performance and the progress on our transformation programme.
Profit/loss before interest and tax
Profit before interest and tax was £1.253 billion in 2021, compared to a loss of £2.414 billion in 2020. Headline PBIT
for 2021 was up 24.3% to £1.580 billion from £1.271 billion for 2020.
Finance and investment income, finance costs and revaluation and retranslation of financial instruments
Net finance costs, finance and investment income less finance costs (excluding the revaluation and retranslation of financial instruments), were £215 million compared with £230 million in 2020, a decrease of £15 million year-on-year, primarily as a result of the repayment of the $500 million 3.625% September 2022 bond in July 2021 and foreign exchange movements. Revaluation and retranslation of financial instruments resulted in a loss of £87.8 million in 2021, a decrease of £59.4 million from a loss of £147.2 million in 2020 primarily as a result of £22.9 million of retranslation gains for the year ended 31 December 2021.
Profit/loss before taxation
Profit
before tax was £0.951 billion in 2021, compared to a loss of £2.791 billion in 2020, reflecting principally the £3.119 billion of impairment charges and investment write-downs and £313 million of restructuring and transformation costs during the prior period. Headline PBT was up 31.1% to £1.365 billion in 2021 from £1.041 billion in 2020.
14
Taxation
Tax charges were £230.1 million in 2021 and £127.1 million in 2020. The Group’s effective tax rate on profit/(loss) before tax was 24.2% in 2021 against -4.6% in 2020.
The difference in the rate in 2021 was principally due to non-deductible goodwill impairment in 2020. Given the Group’s geographic mix of profits and the changing international
tax environment, the effective tax rate is expected to continue to increase over the next few years.
Profit/loss for the year
Profit after tax was £0.721 billion, compared to a loss of £2.901 billion in 2020. Profits attributable to shareholders was £0.638 billion, compared to a loss of £2.965 billion, again reflecting £3.119 billion of impairment charges and investment write-downs, £313 million of restructuring and transformation losses and £146 million of the Group’s share of associate company exceptional losses during the prior period. See note 4 to the consolidated financial statements for more details of share of associate company exceptional losses.
Diluted earnings per share was 52.5p, compared to loss per share of 243.0p in the prior period.
Segment performance
Performance
of the Group’s businesses is reviewed by management based on headline operating profit. A table showing these amounts by reportable segment and geographical area for each of the three years ended 31 December 2021, 2020 and 2019 is presented in note 2 to the consolidated financial statements. To supplement the reportable segment information presented in note 2 to the consolidated financial statements, the following tables give details of revenue change and revenue less pass-through costs change by geographical area and reportable segment on a reported and like-for-like basis. Headline operating profit and headline operating profit margin by reportable segment are also provided below.
Geographical area
Revenue
Analysis
Reported revenue change %+/(-)
Like-for-like revenue change %+/(-)
2021
2020
2021
2020
North America
0.7
(8.0)
9.4
(5.8)
United
Kingdom
14.0
(8.9)
15.0
(7.9)
Western Continental Europe
14.1
(7.1)
19.2
(8.1)
Asia Pacific,
Latin America, Africa & Middle East and Central & Eastern Europe
5.6
(12.5)
13.3
(8.1)
Total Group
6.7
(9.3)
13.3
(7.3)
Revenue
less pass-through costs analysis
Reported
revenue
less pass-
through costs1
change %+/(-)
Like-for-like
revenue
less pass-
through costs1
change %+/(-)
2021
2020
2021
2020
North
America
2.8
(7.2)
9.7
(5.8)
United Kingdom
14.6
(11.2)
15.0
(10.5)
Western Continental Europe
10.2
(7.2)
14.5
(8.1)
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
5.2
(14.8)
12.3
(10.3)
1Revenue less pass-through costs is revenue less media and other pass-through costs. 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. See note 3 to the consolidated financial statements for more details of the pass-through costs.
North America like-for-like
revenue less pass-through costs was up 9.7%. The United States and Canada performed strongly in the year, led by GroupM, VMLY&R and Hogarth.
United Kingdom like-for-like revenue less pass-through costs was up 15.0%. AKQA Group and VMLY&R were the strongest performers.
15
Western Continental Europe like-for-like revenue less pass-through costs was up 14.5%. The strongest performers in the year were Italy, the Netherlands and Germany.
In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, like-for-like revenue less pass-through costs was up 12.3%. Latin America was boosted by a very strong performance in Brazil, while Asia Pacific continued
to be negatively impacted by Covid-related restrictions in Australia.
Reportable Segments
During 2020, we announced that we would bring together Grey and AKQA under the AKQA Group, and we brought Geometry and GTB into VMLY&R, and International Healthcare into VMLY&R and Ogilvy. As a result, AKQA Group, Geometry, GTB and International Healthcare are now reported within Global Integrated Agencies, having previously been reported within Specialist Agencies. Prior year figures have been re-presented to reflect these changes.
Revenue
Analysis
Reported revenue change %+/(-)
Like-for-like revenue change %+/(-)
2021
2020
2021
2020
Global Integrated Agencies
5.6
(8.9)
12.6
(6.6)
Public
Relations
7.4
(6.6)
12.6
(5.8)
Specialist Agencies
19.1
(16.3)
22.5
(16.0)
Total Group
6.7
(9.3)
13.3
(7.3)
Revenue
less pass-through costs analysis
Reported
revenue
less pass-
through costs1
change %+/(-)
Like-for-like
revenue
less pass-
through costs1
change %+/(-)
2021
2020
2021
2020
Global
Integrated Agencies
5.4
(9.9)
11.3
(7.9)
Public Relations
6.5
(4.9)
11.5
(4.0)
Specialist
Agencies
19.0
(16.9)
21.8
(15.9)
1Revenue less pass-through costs is revenue less media and other pass-through costs. 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. See note 3 to the consolidated financial statements for more details of the pass-through costs.
Headline
operating profit analysis
2021
2020
2019
£m
Headline
operating
profit
margin1
%
£m
Headline
operating
profit
margin1
%
£m
Headline
operating
profit
margin1
%
Global
Integrated Agencies
1,215.5
14.1
1,059.9
12.9
1,358.6
14.9
Public Relations
143.1
15.7
141.3
16.5
140.6
15.7
Specialist
Agencies
134.9
15.9
59.3
8.3
61.4
7.2
Total Group
1,493.5
1,260.5
1,560.6
1Headline
operating profit margin is calculated as headline operating profit as a percentage of revenue less pass-through costs
Global Integrated Agencies like-for-like revenue less pass-through costs was up 11.3%. GroupM, which represented 37% of WPP's revenue less pass-through costs in the year, was up 16.1% like-for-like. VMLY&R also performed strongly with the other integrated agencies all recording broadly similar levels of growth. Headline operating profit was up £155.6 million to £1,215.5 million for the year ended 31 December 2021 from £1,059.9 million for the year ended 31 December 2020.
Public Relations like-for-like revenue less pass-through costs was up 11.5%. BCW and H+K Strategies grew strongly during the year. In October, we announced the merger of Finsbury Glover Hering with Sard Verbinnen to create a leading global strategic communications firm. Headline operating profit
was up £1.8 million to £143.1 million for the year ended 31 December 2021 from £141.3 million for the year ended 31 December 2020.
16
Specialist Agencies like-for-like revenue less pass-through costs was up 21.8%. We saw strong demand from clients across most of our businesses, although the overall growth rate slowed towards the end of the year as the contribution from the Covid-related contract in Germany eased. Headline operating profit was up £75.6 million to £134.9 million for the year ended 31 December 2021 from £59.3 million for the year ended 31 December 2020.
2020 compared with 2019
For a discussion
of the year ended 31 December 2020 compared to the year ended 31 December 2019, please refer to “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended 31 December 2020.
B. Liquidity and Capital Resources
General—The primary sources of funds for the Group's short-term and long-term cash requirements are cash generated from operations and funds available under its credit facilities. The primary uses of cash funds in recent years have been for debt service and repayment, capital expenditures, acquisitions, share repurchases and cancellations and dividends. For a breakdown of the Company’s sources and uses
of cash and for the Company’s liquidity risk management see the “Consolidated Cash Flow Statement” and note 25, which are included as part of the Company’s consolidated financial statements in Item 18 of this Annual Report on Form 20-F.
In 2021 the attractiveness of our investment proposition was demonstrated by our performance. Our top-line growth, driven by strong demand for our services in digital marketing, media, ecommerce and technology, resulted in our fastest organic growth for over 20 years. As a result, we are two years ahead of our plan, hitting our 2023 revenue target in 2021. We believe we are in a strong financial position with resilient revenue streams from a varied client base that covers all business sectors, and a predominantly variable
cost structure, which protects profitability during a downturn. We have an attractive margin with scope to improve through our transformation programme, and low adjusted net debt and ample liquidity after significant growth investments and shareholder returns, reflecting strong cash generation. As at 31 December 2021 we had cash and cash equivalents of £3.5 billion comprised of £3.9 billion of cash and short-term deposits and £0.4 billion of bank overdrafts. Total liquidity, including undrawn credit facilities, was £5.5 billion.
Funds returned to shareholders in 2021 totaled £1,133 million, including dividends and share buybacks. In 2021, 81.1 million shares, or 7.0% of the issued share capital, were purchased at a cost of £819 million. We expect a further £800 million of share buybacks during 2022.
The Group’s liquidity is affected primarily by the working capital flows associated
with its media buying activities on behalf of clients. The working capital movements relate primarily to the Group’s billings. Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the total of other fees earned. In 2021, billings were £50.7 billion, or 4.0 times the revenue of the Group. The inflows and outflows associated with media buying activity therefore represent significant cash flow within each month of the year and are forecast and re-forecast on a regular basis throughout the year by the Group’s treasury staff so as to ensure that there is continuing coverage of peak requirements through committed borrowing facilities from the Group’s bankers and other sources.
The Group typically experiences an outflow of working capital in the first half of the financial year and an inflow in the second half. This is primarily due to the seasonal nature of working capital
flows associated with its media buying activities on behalf of clients.
Liquidity risk management—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 debt less cash position are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group’s major operations. See additional discussion on liquidity risk in note 25 to the consolidated financial statements.
Debt
The Company’s borrowings consist of bonds and revolving credit facilities; details on
the Company’s borrowings are provided in note 10 to the consolidated financial statements.
The Group has a five-year Revolving Credit Facility of $2.5 billion due March 2026 (extended from March 2025 in February 2021). Borrowings under the Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of the Group, including requirements that (i) the interest coverage ratio for each financial period equal or exceed 5.0 to 1 and (ii) the ratio of borrowed funds to earnings before interest, taxes, depreciation and amortisation at 30 June and 31 December in each year shall not exceed 3.5 to 1, both covenants are defined in the relevant agreement. The Group is in compliance with both covenants. The Group had available undrawn committed credit facilities of £1.8 billion ($2.5 billion) at 31 December
2021.
17
In May 2020, we issued bonds of €750 million and £250 million due in May 2027 and May 2032, respectively. Our bond portfolio at 31 December 2021 had an average maturity of 7.0 years. In July 2021 we repaid the $500 million 3.625% September 2022 bond. A €250 million Eurobond at 3-month EURIBOR +0.45% matured in March 2022. The Company did not issue any bonds in 2021.
Hedging of financial instruments—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.
Cash flow and balance sheet
Net cash inflow from operating activities decreased to £2.033 billion in 2021 from £2.055 billion in 2020. Operating profit from continuing operations was £1.229 billion, depreciation and amortisation £542 million, non-cash share-based incentive charges £100 million, working capital and provisions inflow £702 million, earnout payments £57 million, net interest paid £126 million, tax paid £391 million, lease liabilities (including interest) paid £409 million, capital expenditure £293 million and other net cash outflows £32 million. Free cash flow was, therefore, an inflow of £1.265 billion.
Free cash flow
inflow was enhanced by £77 million disposal proceeds (of which £28 million was disposals of investments and subsidiaries net of cash disposed, £40 million was cash consideration received from non-controlling interests and £9 million was disposal of property, plant and equipment) and reduced by £464 million in net initial acquisition payments, £315 million in dividend payments and £819 million of share repurchases and buybacks, which resulted in a cash outflow of £0.3 billion compared to a cash inflow of £1.0 billion in 2020.
The main drivers of the cash flow performance year-on-year were the higher operating profit and continued improvements in working capital, offset by increased spend on acquisitions, growth in the dividend and the significant increase in the share buyback.
As at 31 December
2021 we had cash and cash equivalents of £3.5 billion and total liquidity, including undrawn credit facilities, of £5.5 billion. Debt financing was £4.8 billion at 31 December 2021, compared to £13.6 billion at 31 December 2020, a decrease of £8.8 billion. Average adjusted net debt in 2021 was £1.6 billion, compared to £2.3 billion in the prior year, at 2021 exchange rates. On 31 December 2021, adjusted net debt was £0.9 billion, against £0.7 billion on 31 December 2020, an increase of £0.2 billion at 2021 exchange rates. The slightly higher adjusted net debt figure reflects mainly the significant increase in share buybacks year-on-year.
During the year, we converted the majority of our cash pool arrangements to zero-balancing cash pools, whereby the cash and overdrafts within these cash pools are physically swept to the header accounts on a daily basis, resulting in a reduction of the large gross cash and overdraft positions
at 31 December 2020.
The Company has several material contractual obligations at 31 December 2021. The following table summarises the Company’s estimated contractual obligations at 31 December 2021, and the effect such obligations are expected to have on its liquidity and cash flows in the future periods. Certain obligations presented below held by one subsidiary of the Company may be guaranteed by another subsidiary in the ordinary course of business.
18
Payments
due in
£m
Total
2022
2023
2024
2025
2026
Beyond 2026
Debt financing under the Revolving Credit Facility and in relation to unsecured loan notes1
Eurobonds
3,026.9
210.2
630.6
—
420.4
630.6
1,135.1
Sterling
bonds
650.0
—
—
—
—
—
650.0
US$ bonds
785.3
—
—
554.2
—
—
231.1
Subtotal
4,462.2
210.2
630.6
554.2
420.4
630.6
2,016.2
Interest
payable
993.6
116.6
114.8
92.3
72.4
67.4
530.1
Total
5,455.8
326.8
745.4
646.5
492.8
698.0
2,546.3
Lease
liabilities2
2,620.6
369.7
321.9
273.7
229.1
199.1
1,227.1
Capital commitments3
107.3
103.7
3.5
0.1
—
—
—
Investment
commitments3
5.4
5.4
—
—
—
—
—
Financial derivatives
50.4
10.7
29.9
5.6
4.2
—
—
Estimated obligations under
acquisition earnouts and put option agreements
588.2
144.0
39.1
50.1
150.4
76.6
128.0
Total contractual obligations
8,827.7
960.3
1,139.8
976.0
876.5
973.7
3,901.4
1In
addition to debt financing under the Revolving Credit Facility and in relation to unsecured loan notes, the Company had short-term overdrafts at 31 December 2021 of £342.3 million. The Group’s adjusted net debt at 31 December 2021 was £901.1 million and is analysed above.
2In addition to the lease liabilities, the total committed future cash flow for leases not yet commenced at 31 December 2021 is £534.9 million. In 2021, variable lease expenses were £56.2 million which primarily include real estate taxes and insurance costs.
3Capital and investment commitments include commitments contracted, but not provided for in respect of property, plant and equipment and in respect of interests in associates and other investments, respectively.
The
Company has a large number of defined benefit 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 2021 amounted to £16.7 million. Employer contributions and benefit payments in 2022 are expected to be approximately £15 million. Projections for years after 2022 are subject to a number of factors, including future asset performance and changes in assumptions which mean the Company is unable to make sufficiently reliable estimates of future contributions.
Further to the above, the Company has short-term commitments to purchase media and other short-term
and long-term contractual commitments such as software and IT infrastructure service contracts as part of its day-to-day operations. In the ordinary course of business we incur costs in respect of these commitments, as disclosed in note 3 of the consolidated financial statements along with other costs expensed as incurred over the course of the year.
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 Operating Results on pages 13 to 17 and Risk Factors on pages 2 to 5. 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 2021, 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 impact of the Russian invasion of Ukraine and sanctions response from governments has been considered. The Company modelled a range of revenue less pass through cost declines up to 30% compared with the year ended 31 December 2021. 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 section is included in the 2021 WPP Annual Report posted on the Company’s website
at http://www.wpp.com/investors pursuant to UK requirements and is provided in this Form 20-F as supplemental information. The 2021 WPP Annual Report will be furnished to the SEC on Form 6-K.
19
Summarised financial information about Guarantors and Issuers of Guaranteed Securities
As at 31 December 2021, WPP Finance 2010 had in issue $93 million ($28 million was repaid in 2018 and $179 million was repaid in 2019 from the $300 million initially issued) of 5.125% bonds due September 2042 with WPP plc as parent guarantor and WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited and WPP Jubilee Limited as
subsidiary guarantors.
In the event that WPP Finance 2010 fails to pay the holders of the securities, thereby requiring WPP plc, WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited or WPP Jubilee Limited to make payment pursuant to the terms of their full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited or WPP Jubilee Limited obtaining reimbursement for any such payments from WPP Finance 2010.
For the year ended 31 December 2021, £m
WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
Continuing
operations
Revenue
—
Costs of services
—
Gross profit
—
Finance and investment income from non-guarantors
44.2
Finance costs to non-guarantors
(226.4)
Profit for the year from continuing operations
111.2
Profit
for the year
111.2
WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
Due from Non-Guarantors-long term
1,713.0
Non-current assets
1,896.0
Due from Non-Guarantors-short term
977.0
Current
assets
1,525.1
Due to Non-Guarantors-short term
(27,500.5)
Current Liabilities
(27,822.3)
Due to Non-Guarantors-long term
(1,543.5)
Non-current liabilities
(2,440.4)
As at 31 December 2021, WPP Finance 2010 had in issue $750 million of 3.750% bonds due September 2024 and $220 million ($50 million was repaid
in 2018 and $230 million was repaid in 2019 from the $500 million initially issued) of 5.625% bonds due November 2043, with WPP plc as parent guarantor and WPP Jubilee Limited and WPP 2005 Limited as subsidiary guarantors.
In the event that WPP Finance 2010 fails to pay the holders of the securities, thereby requiring WPP plc, WPP Jubilee Limited or WPP 2005 Limited to make payment pursuant to the terms of their full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Jubilee Limited or WPP 2005 Limited obtaining reimbursement for any such payments from WPP Finance 2010.
20
For the year ended 31 December 2021, £m
WPP
Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
Continuing operations
Revenue
—
Costs of services
—
Gross profit
—
Finance and investment income from non-guarantors
44.2
Finance costs to non-guarantors
(226.4)
Profit
for the year from continuing operations
111.2
Profit for the year
111.2
WPP Finance 2010 (issuer), WPP plc and Subsidiary Guarantors
Due from Non-Guarantors-long term
1,713.0
Non-current assets
1,896.0
Due
from Non-Guarantors-short term
1,146.1
Current assets
1,694.3
Due to Non-Guarantors-short term
(27,501.2)
Current Liabilities
(27,822.8)
Due to Non-Guarantors-long term
(1,543.5)
Non-current liabilities
(2,440.4)
The
issuer and guarantors of the bonds (issuer and subsidiary guarantors are 100% owned by WPP plc) are consolidated subsidiaries of WPP plc and are each subject to the reporting requirements under section 15(d) of the Securities Exchange Act of 1934. The summarized financial information for WPP Finance 2010 and the guarantors is presented on a combined basis with intercompany balances and transactions between the entities in the issuer and guarantors group eliminated. The summarised financial information is prepared in accordance with IFRS as issued by the IASB and is intended to provide investors with meaningful financial information, and is provided pursuant to the adoption of Rule 13-01 of Regulation S-X which allows for alternative financial disclosures or narrative disclosures in lieu of the separate financial statements of WPP Finance 2010 and the guarantors. The financial information
presented is that of the issuers and guarantors of the guaranteed security, and the financial information of non-issuer and non-guarantor subsidiaries has been excluded.
C. Research and Development, Patents and Licenses, etc.
Not applicable.
D. Trend Information
The discussion below and in the rest of this Item 5 in this Annual Report on Form 20-F includes forward-looking statements regarding plans, objectives, projections and anticipated future performance based on assumptions
that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the forward-looking statements. See “Forward-Looking Statements” preceding Item 1 in this Annual Report on Form 20-F.
For information regarding the trends in our business, see Item 5A Operating Results and Item 5B Liquidity and Capital Resources above.
21
E. Critical Accounting Estimates
Not applicable. The Company’s consolidated financial statements have been
prepared in accordance with IFRS as issued by the IASB. A summary of the Group’s principal accounting policies is provided in the Accounting Policies section of the consolidated financial statements.
Non-GAAP Information
As introduced on page 6, the following metrics are the Group’s Non-GAAP measures.
Constant currency
These consolidated financial statements are presented in pounds sterling. However, the Company’s significant international operations give rise to fluctuations in foreign exchange rates. To neutralize foreign exchange impact and illustrate the underlying change in revenue, profit and other relevant financial statement line items from one year to the next, the
Company 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.
The Group uses US dollar-based, constant currency models to measure performance. These are calculated by applying budgeted 2021 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.
Pro-forma (‘like-for-like’)
Management believes that discussing like-for-like contributes to the understanding of the Company’s performance and trends because it allows for meaningful comparisons of current year to that
of prior years.
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 reflect the results of acquisitions and disposals. The Group uses the terms ‘pro-forma’ and ‘like-for-like’ interchangeably.
The following table reconciles reported revenue growth for 2021 and 2020 to like-for-like revenue growth for the same period.
Continuing operations
Revenue
£m
2019
Reportable
13,234
Impact of exchange rate changes
(159)
(1.2
%)
Impact of acquisition
(106)
(0.8
%)
Like-for-like growth
(966)
(7.3
%)
2020
Reportable
12,003
(9.3
%)
Impact of exchange rate changes
(594)
(4.9
%)
Impact of acquisition
(204)
(1.7
%)
Like-for-like growth
1,596
13.3
%
2021
Reportable
12,801
6.7
%
Headline operating profit
Headline operating profit is one of the measures that management uses to assess the performance of the business.
Headline operating profit is calculated as operating profit before gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, 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 the sale of freehold property in New York and gains/losses on remeasurement of equity interests arising from a change in scope of ownership.
Adjustments to operating profit described above are included in costs of services and general administrative costs as provided in note 3 to the consolidated financial statements and are components of operating profit.
A tabular reconciliation of operating profit to headline operating profit is provided in note 31 to the consolidated financial statements.
Headline PBIT
Headline PBIT is one of the metrics that management uses to assess the performance of the business.
22
Headline
PBIT is calculated as profit before finance and investment income/costs and revaluation and retranslation of financial instruments, taxation, gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, 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.
A tabular reconciliation of profit before interest and taxation to headline PBIT is shown below.
Continuing
operations
Year ended 31 December
2021
2020
2019
£m
£m
£m
Profit/(loss) before interest and taxation
1,252.8
(2,414.1)
1,310.6
Amortisation
and impairment of acquired intangible assets
97.8
89.1
121.5
Goodwill impairment
1.8
2,822.9
47.7
Losses/(gains) on disposal of investments and subsidiaries
10.6
(7.8)
(40.4)
Gains
on remeasurement of equity interests arising from a change in scope of ownership
—
(0.6)
(0.4)
Investment and other impairment (reversals)/ charges
(42.4)
296.2
7.5
Restructuring and transformation costs
145.5
80.7
153.5
Restructuring
costs in relation to Covid-19
29.9
232.5
—
Share of exceptional losses of associates
62.3
146.1
47.8
Litigation settlement
21.3
25.6
(16.8)
Gain
on sale of freehold property in New York
—
—
(7.9)
Headline PBIT
1,579.6
1,270.6
1,623.1
Headline PBT
Headline PBT is one of the metrics that management uses to assess the performance
of the business.
Headline PBT is calculated as profit before taxation, gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, 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.
23
A
tabular reconciliation of profit before taxation to headline PBT is shown below.
Continuing operations
Year ended 31 December
2021
2020
2019
£m
£m
£m
Profit/(loss)
before taxation
950.8
(2,790.6)
1,214.3
Amortisation and impairment of acquired intangible assets
97.8
89.1
121.5
Goodwill impairment
1.8
2,822.9
47.7
Losses/(gains)
on disposal of investments and subsidiaries
10.6
(7.8)
(40.4)
Gains on remeasurement of equity interests arising from a change in scope of ownership
—
(0.6)
(0.4)
Investment and other impairment (reversals)/charges
(42.4)
296.2
7.5
Restructuring
and transformation costs
145.5
80.7
153.5
Restructuring costs in relation to Covid-19
29.9
232.5
—
Share of exceptional losses of associates
62.3
146.1
47.8
Litigation
settlement
21.3
25.6
(16.8)
Gain on sale of freehold property in New York
—
—
(7.9)
Revaluation and retranslation of financial instruments
87.8
147.2
(163.8)
Headline
PBT
1,365.4
1,041.3
1,363.0
Billings and estimated net new business/billings
Billings and estimated net new business/billings are metrics that management uses to assess the performance of the business.
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 business/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.
Free cash flow
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 Company’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). This computation may not be comparable to that of similarly titled measures presented by other companies.
Free cash flow is calculated as net cash inflow from operating activities plus payment on early settlement of bonds and proceeds from the issue of shares, less earnout payments, purchases of property, plant and equipment, purchases of other intangible assets, repayment of lease liabilities, and dividends paid to non-controlling interests in subsidiary undertakings.
24
A tabular reconciliation of net cash inflow from operating activities to free cash flow is shown below.
Year
ended 31 December
2021
2020
2019
£m
£m
£m
Net cash inflow from operating activities
2,032.8
2,054.8
1,850.5
Payment
on early settlement of bonds
13.0
—
63.4
Share option proceeds
4.4
—
0.6
Earnout payments
(57.0)
(115.2)
(130.2)
Purchases
of property, plant and equipment
(263.2)
(218.3)
(339.3)
Purchases of other intangible assets (including capitalised computer software)
(29.9)
(54.4)
(54.8)
Repayment of lease liabilities
(320.7)
(300.1)
(249.8)
Dividends
paid to non-controlling interests in subsidiary undertakings
(114.5)
(83.3)
(96.2)
Free cash flow
1,264.9
1,283.5
1,044.2
Adjusted net debt and average adjusted net debt
Management
believes that adjusted net debt and average adjusted net debt are appropriate and meaningful measures of the debt levels within the Group. This is because of the seasonal swings in our working capital generally, and those resulting from our media buying activities on behalf of our clients in particular.
Adjusted 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. Average adjusted net debt is calculated as the average daily net borrowings of the Group. Adjusted net debt excludes lease liabilities.
The following table is an analysis of adjusted net debt:
2021
2020
2019
£m
£m
£m
Cash
and short-term deposits
3,882.9
12,899.1
11,305.7
Bank overdraft, bonds and bank loans due within one year
(567.2)
(8,619.2)
(8,798.0)
Bonds and bank loans due after one year
(4,216.8)
(4,975.5)
(4,047.3)
Adjusted
net debt
(901.1)
(695.6)
(1,539.6)
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The Directors and Executive Officers of the Company are as follows:
Roberto
Quarta, Age 72: Chairman. Roberto Quarta was appointed as a Director on 1 January 2015 and became Chairman on 9 June 2015. 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.
Mark
Read, Age 55: Chief Executive Officer. Mark Read was appointed as an Executive Director and Chief Executive Officer on 3 September 2018. 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
25
Econsultancy’s Top 100 Digital Agencies
report and in 2021 he was recognised as a HERoes Champion of Women in Business for the fourth consecutive year.
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, Age 53: Chief Financial Officer.John Rogers was appointed as a Director on 3 February 2020 and became Chief Financial Officer from 1 May 2020. 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. John is also an Independent Non-Executive Director of Grab Holdings Limited, a technology company listed on the NASDAQ.
External appointments: Member, The Prince’s Advisory Council for Accounting for Sustainability; Member, Retail Sector Council; Independent Non-Executive Director, Grab Holdings Limited.
Nicole Seligman, Age 65: Senior Independent Director, Non-Executive Director. Nicole Seligman was appointed as a Director on 1 January 2014. 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.
Angela Ahrendts DBE, Age 61: Non-Executive Director. Angela Ahrendts DBE was appointed as a Director
on 1 July 2020. 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.
Jacques Aigrain, Age 67: Non-Executive Director. Jacques Aigrain was appointed as a Director on 13 May 2013. 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.
Sandrine Dufour, Age 55: Non-Executive Director. Sandrine Dufour was appointed as a Director on 3 February 2020. 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.
Sandrine succeeded Jacques as Audit Committee Chair on 1 April 2022.
26
Tarek Farahat, Age 57: Non-Executive Director. Tarek Farahat was appointed as a Director on 11 October 2016. 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, Fintech and healthcare sectors.
Tarek is a graduate of the American University in Cairo, Faculty of Commerce and Finance.
External appointments: Chairman and Co-Founder, GoPublic and Ponto-e.
Tom Ilube CBE, Age 58: Non-Executive Director. Tom Ilube CBE was appointed as a Director on 5 October 2020. Tom brings a wealth of expertise as a technology entrepreneur. He is Chair of the Rugby Football Union (RFU) 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 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; Chair, Iternal Limited; Founder and Chair, African Gifted Foundation; Chair, the Rugby Football Union (RFU).
Cindy Rose OBE, Age 56: Non-Executive Director. Cindy Rose was appointed as a Director on 1 April 2019. 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 and 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.
Sally Susman, Age 60: Non-Executive Director. Sally Susman was appointed as a Director
on 13 May 2013. 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.
Keith Weed CBE, Age 60: Non-Executive Director. Keith Weed was appointed as a Director on 1 November 2019. 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 Royal Horticultural Society; Board Trustee, Leverhulme Trust.
Jasmine Whitbread, Age 58: Non-Executive Director. Jasmine Whitbread was appointed as a Director on 1 September 2019. 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,
27
from
2010 to 2015, 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; Non-Executive Director, Standard Chartered plc; Non-Executive Director, Compagnie Financière Richemont SA; Visiting Fellow, Oxford University.
Dr. Ya-Qin Zhang, Age 56: Non-Executive Director. Ya-Qin was appointed as a Director on 1 January 2021. 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.
Simon Dingemans, Age 58: Non-Executive Director: Simon Dingemans was appointed as a Director on 31 January 2022. Simon
has extensive business, capital markets, corporate finance and governance experience and is currently a Senior Advisor at global investment firm, The Carlyle Group. Prior to joining Carlyle, Simon was Chief Financial Officer of GlaxoSmithKline plc and a member of the main board from 2011 to 2019. Prior to GSK, Simon worked in investment banking for 25 years at SG Warburg and then Goldman Sachs, where he was Managing Director and Partner for ten years as a leader of their European M&A business and Head of UK Investment Banking. Simon served as Non-Executive Chair of the Financial Reporting Council in 2019/2020 and previously also served as Chairman of the 100 Group. Simon has a master’s degree in Geography from Oxford University.
The independence of each Non-Executive Director is assessed annually by the Board under the UK Corporate Governance Code which applies in respect of WPP’s primary listing on the London Stock Exchange.
The Board has confirmed that all of the Non-Executive Directors standing for election and re-election at the 2022 Annual General Meeting (AGM) continue to demonstrate the characteristics of independence.
B. Compensation
Directors’ Compensation
For the fiscal year ended 31 December 2021 the aggregate compensation paid by WPP to key management personnel of WPP for services in all capacities was £43.5 million. Key management personnel comprises the Board and the Executive Committee. Such compensation was paid by WPP and its subsidiaries primarily in the form of salaries, performance-related bonuses, other benefits and deferred share awards.
The sum of £0.9 million was set aside and paid in the last fiscal year to provide pensions and other post-retirement benefits for key management personnel of WPP.
1Benefits
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. In addition to the allowance received, the values disclosed include the value of expenses related directly to attendance at Board meetings. The expenses for Mark Read and John Rogers were £2,431. These values include the grossed-up cost of UK income tax and national insurance paid by the Company on behalf of the Directors.
2Pension is provided by way of contribution to a defined contribution retirement arrangement, or as a cash allowance, determined as a percentage of base salary. Contributions/allowances are as follows (as % of base salary): CEO—12% (reducing to 10% over
the 2020-2022 Policy period) and CFO—10%. In line with the plan to reduce Mark Read's pension to ensure alignment with the wider workforce by the end of the policy period, his pension was reduced to 12% during 2021 and will reduce further to 10% by the end of 2022.
3In respect of the 2021 short-term incentive awards, 40% will be delivered in the form of shares as an Executive Share Award (ESA) with a two-year deferral period. Cash bonuses are subject to clawback provisions. ESAs are subject to malus provisions.
4With respect to Mark Read, this includes the value of the 2017 Executive Performance Share Plan (EPSP) awards which vested in 2021 assessed over a five-year period with a vesting value of £nil. John Rogers received buy-out awards to compensate for the
forfeiture of incentive awards from his previous employer. In 2021 this comprised an EPSP which vested in March 2022 based on a performance period of 1 Jan 2019 to 31 Dec 2021 with a final vesting value of £2,265,468.
28
Vesting of 2017 – 2021 EPSP awards
Vesting of the 2017 EPSP awards was dependent on performance against three measures, all assessed over a five-year period, which include relative Total Shareholder Returns (TSR), Earnings Per Share (EPS) growth and average annual Return On Equity (ROE). Performance against all three measures was below the threshold required for vesting.
Number of shares
awarded
Additional shares
in respect of dividend accrual
Number of shares vesting
Share price on vesting
Value of
vested
2017-2021
EPSP awards
000
Mark Read
106,498
—
—
n/a
£
—
Vesting
of buy-out awards
John Rogers received buy-out awards on appointment to compensate for the forfeiture of incentive awards from his previous employer. The second of the EPSP awards granted to John Rogers as part of his buy-out award has vested at 88.5% following performance in between threshold and maximum of the TSR performance measure. The Committee has the discretion to determine the extent to which the award will vest if an average ROIC (return on invested capital) of 7.5% over the performance period is not achieved. However, this was not required as the ROIC threshold was met.
1The
share price increased 72% between the grant and vest dates for this award. £948,482 of the total value of vested shares is attributable to share price appreciation.
Outstanding share-based awards
The table below shows outstanding shares at 31 December 2021. ESAs (Executive Share Awards) are granted under the WPP Stock Plan 2018. This is the stock component of the annual short-term incentive plan and granted subject to the achievement of performance measures prior to grant. EPSP awards (Executive Performance Share Plan) are subject to performance measures over the period stated below. Dividend shares will accrue on these awards.
1EPSP
awards made to Mark Read and John Rogers are in the form of nil-cost options and expire three months after the vesting date.
2The EPSP award made in May 2020 was made by way of a buy-out award. The terms of the award are consistent with those applicable to the 2019 EPSP awards other than the performance period which is shortened to three-years to mirror the time horizon of the award being bought out.
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Non-Executive Directors’ total compensation received
The single total figure of compensation table below details fee payments received by the Non-Executive
Directors while they held a position on the Board.
Fees £000
Benefits £000
Total £000
2021
2021
2021
Roberto
Quarta
525
33
558
Angela Ahrendts1
95
1
96
Jacques Aigrain
145
3
148
Sandrine
Dufour1
125
—
125
Tarek Farahat
105
—
105
Tom Ilube1
133
5
138
Cindy
Rose1
123
6
129
Nicole Seligman
147
—
147
Sally Susman2
107
—
107
Keith
Weed2
114
8
122
Jasmine Whitbread
135
6
141
Dr. Ya-Qin Zhang, appointed 1 January 2021
85
—
85
1Sandrine
Dufour and Cindy Rose were appointed to the Compensation Committee effective 1 January 2021 and 5 February 2021 respectively. Tom Ilube was appointed to the Audit Committee and the Nomination Committee effective 1 January 2021 and the Compensation Committee effective 5 February 2021. Angela Ahrendts was appointed to the Sustainability Committee effective 1 January 2021.
2Sally Susman stepped down as co-chair of the Sustainability Committee effective 8 June 2021, while remaining a member of that Committee. Prior to this date the Sustainability Committee was co-chaired by Sally Susman and Keith Weed.
Past Directors
No payments were made to past directors during the year.
The Board is responsible for setting the Company's purpose, values and culture, in addition to overseeing the Company's overall financial performance and execution of the strategy. 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 including on the transformation programme, progress on strategy, people updates and a deep dive into a particular ESG topic. The
list of matters reserved to the Board can be downloaded from http://www.wpp.com/investors/corporate-governance.
Re-election
The Chairman, 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 US standards, which is nine years. Jacques Aigrain and Sally Susman will not stand for re-election at the AGM in 2022. With the exception of Simon Dingemans, who is standing for election for the first time, all other 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.
The Company’s policy on Executive Directors’ service contracts is that they should be on a rolling basis without a specific end date. The effective dates and notice periods under the current Executive Directors’ service contracts are shown below:
The Executive Directors’ service contracts are available for inspection at the Company’s registered
office and head office.
Loss of office provisions
Fixed compensation elements
As noted above, the service contracts of the executives provide for notice to be given on termination.
The fixed compensation elements of the contract will continue to be paid in respect of any notice period. There are no provisions relating to payment in lieu of notice. If an Executive Director is placed on garden leave, the Compensation Committee retains the discretion to settle benefits in the form of cash. The Executive Directors are entitled to compensation for any accrued and unused holiday although, to the extent it is possible and in
shareholder interests, the Committee will encourage Executive Directors to use their leave entitlements prior to the end of their notice period. Except in respect of any remaining notice period, no aspect of any Executive Director’s fixed compensation is payable on termination of employment.
Short- and long-term compensation elements
If the Executive Director is dismissed for cause, there is not an entitlement to a STIP award, and any unvested share- based awards will lapse. Otherwise, the table below summarises the relevant provisions from the Directors’ service contracts (cash bonus) and the plan rules (ESA and EPSP), which apply in other leaverscenarios. The Compensation Committee has the authority to ensure that any awards that vest or lapse
are treated in accordance with the plan rules, which are more extensive than the summary set out in the table below.
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Cash bonus
The Executive Directors are entitled to receive their bonus for any particular year provided they are employed on the last date of the performance period.
ESA
Provided the Executive Director is a Good Leaver, unvested awards will be reduced on a time pro-rata basis and paid on the vesting date.
EPSP
•The
award will lapse if the Executive Director leaves during the first year of a performance period.
•Provided the Executive Director is a Good Leaver, awards will vest subject to performance at the end of the performance period and time pro-rating. Awards will be paid on the normal date.
•In exceptional circumstances, the Compensation Committee may determine that an award will vest on a different basis.
•Generally, in the event of death, the performance conditions are to be assessed as at the date of death. However, the Compensation Committee retains the discretion to deal with an award due to a deceased executive on any other basis that it considers appropriate.
•Awards will vest immediately on a
change of control subject to performance and time pro-rating will be applied unless it is agreed by the Compensation Committee and the relevant Executive Director that the outstanding awards are exchanged for equivalent new awards.
Other Compensation Committee discretions not set out above
Leaver status: the Compensation Committee has the discretion to determine an executive’s leaver classification considering the guidance set out within the relevant plan rules.
Settlement agreements: the Compensation Committee is authorised to reach settlement agreements with departing executives, informed by the default position set out above.
External appointments
Executive Directors are permitted to serve as non-executives on the boards of other
organisations. If the Company is a shareholder in that organisation, non-executive fees for those roles are waived. However, if the Company is not a shareholder in that organisation, any non-executive fees can be retained by the office holder.
Other chairman and non-executive director policies
Letters of appointment for the chairman and non-executive directors
Letters of appointment have a one- to two-month notice period and there are no payments due on loss of office.
Appointments to the Board
The Chairman and Non-Executive Directors are not eligible to receive any variable pay. Fees for
any new Non-Executive Directors will be consistent with the operating policy at their time of appointment. In respect of the appointment of a new Chairman, the Compensation Committee has the discretion to set fees considering a range of factors including the profile and prior experience of the candidate and external market data.
Payments in exceptional circumstances
In unforeseen and exceptional circumstances, the Compensation Committee retains the discretion to make emergency payments which might not otherwise be covered by this policy. The Committee will not use this power to exceed the recruitment policy limit, nor will awards be made in excess of the limits set out in the Directors’ Compensation Policy table. An example of such an exceptional circumstance could be the untimely death of a director, requiring another director to take on an interim role until a permanent replacement
is found.
Compensation Committee
During 2021, the Compensation Committee met five times on a formal basis, with additional informal meetings held as needed to deal with ad hoc matters. A table of Board and Committee attendance can be found on page 30.
The Committee members have no personal financial interest (other than as a shareholder as disclosed on page 41) in the matters to be decided by the Committee, potential conflicts of interest arising from cross-directorships, or day-to-day involvement in running the Group’s businesses. The terms of reference for the Compensation Committee are available on the Company’s website,http://www.wpp.com/investors/corporate-governance.
The Committee’s principal responsibilities under its terms of reference include:
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•To set, review and approve in respect of the Company’s Chairman, Chief Executive Officer, other Executive Directors, the Executive Committee and the Company Secretary:
•the remuneration policy;
•individual
remuneration arrangements;
•individual benefits, including pension;
•Individual fees and expenses;
•terms and conditions of employment;
•terms of any compensation package in the event of early termination of contract;
•participation in any cash or share based plans operated by the Company; and
•to set the targets and measures for any performance related cash or share based plans operated by the
Company for the Chief Executive Officer and other Executive Directors, and to have oversight of the performance measure and target setting for of such plans for the Executive Committee and the Company Secretary.
•To review remuneration and related policies across the general workforce and the alignment of incentives and rewards with culture, taking this into account when determining the remuneration policy for the Executive Directors.
•To use judgement to determine whether incentives that are due as a result of formulaic outcomes are truly representative of company and individual performance.
•To use discretion to make adjustments to incentives as appropriate.
•To
oversee the process for recovery and withholding (malus and clawback) and determine the resulting action to be taken.
•The remuneration and contractual terms of the Non-Executive Directors (NEDs) will be set by the Company’s Chairman and the Executive Directors.
•To approve new rules or amendments and the launch of any Company share or cash-based incentive plans and the grant, award, allocation or issue of shares or payments under such plan.
•To agree the policy for authorising claims for expenses from the Company’s Chairman, Chief Executive Officer and Executive Directors.
•To
establish the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants to advise the Committee.
•To consult with key shareowners in respect of new or substantial changes to the remuneration policy or existing elements of remuneration.
•To approve for submission to shareowners all new or substantial changes to existing elements of remuneration.
•Oversee the preparation of and recommend to the Board the approval of the annual report of the Committee in compliance with statutory disclosure requirements and all relevant Codes of Best Practice.
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 his 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 Company’s external advisors.
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
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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 2021, WTW received fees of £53,959 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.
Changes
in Executive Directors
There were no Executive Director changes during 2021.
Audit Committee
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 relevant 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.
Committee responsibilities and key areas of focus in 2021
The Committee’s principal responsibilities under its terms of reference include:
•monitoring the integrity of the Group’s financial statements and formal announcements relating to the Company’s financial performance, reviewing significant financial reporting judgements and disclosures;
•monitoring and reviewing the Group’s internal financial, operational and compliance controls and internal control system. Overseeing the Group’s compliance with Section 404 of SOX;
•reviewing
and monitoring the activities and effectiveness of the Group’s internal audit function;
•reviewing and monitoring the Company’s risk management system. Assisting the Board in carrying out a robust assessment of emerging and principal risks. Overseeing the Group’s risk exposure and risk strategy;
•reviewing the effectiveness of the external audit process, reviewing and monitoring the independence and objectivity of the external auditor. Reviewing and approving the external auditor’s terms of engagement and remuneration;
•monitoring compliance with relevant US and UK regulatory and legal requirements;
•reviewing the statements
to be made in the Annual Report on compliance with the corporate governance requirements of the UK Corporate Governance Code, the Disclosure and Transparency Rules, the NYSE listing rules and of the SEC, along with the verification undertaken, including that of the External Auditors, and advising the Board, accordingly;
•reviewing the Company’s systems and controls for ethical behaviour and the prevention of bribery and receiving reports on non-compliance;
•monitoring the external auditor's compliance with relevant ethical and professional guidance on the rotation of the audit partner; and
•approving significant acquisitions.
The key areas of
focus for 2021 included:
•continuing to provide oversight of the financial reporting process and integrity of the financial statements;
•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;
•monitoring the processes and progress to address the material weaknesses as disclosed in the 2020 annual report on Form 20-F, relating to goodwill impairment as well as net investment hedging and complex IFRS and accounting matters;
•leading the external audit tender process and recommending
to the Board, subject to shareholder approval, the appointment of PricewaterhouseCoopers LLP (PwC) as external auditor from the Company’s 2024 financial year onwards;
•being appraised of the investigation into FCPA violations by the SEC, as announced on 24 September 2021;
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•ongoing monitoring of the business integrity programme, including oversight of whistleblower reports;
•continuing to engage with the internal audit plan and monitoring progress;
•providing recommendations
to the Board to recommence and extend the share buyback programme; and
•Providing oversight for the restatement of historic tax asset and liability adjustments. For more details see the accounting policies section of the consolidated financial statements on page F-4.
Other reviews undertaken in 2021 by the Committee included:
•Group tax strategy, performance and drivers of the Group’s effective tax rate;
•reports on any actual or potential material litigation;
•Group Treasury performance and risk management;
•Group Finance team structure and reorganisation;
•the
Procurement supplier onboarding processes; and
•reports on data protection and data privacy.
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 provides the information necessary for shareholders to assess the Company’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.
The Committee therefore recommended to the Board (which the Board subsequently approved) that, taken as a whole, the 2021 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, which reports functionally, to the Audit Committee, 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 to discuss risk matters and the nature of internal audit findings in more depth. The Director of Internal Audit formally reports to each Committee meeting on the key findings of the function, together with the status of management’s implementation of recommendations. On a quarterly basis this includes key themes from internal audit’s work. Significant issues identified were discussed in detail by the Committee along with the remediation plans to resolve them.
The annual internal audit plan, which includes assurance over our transformation
activities, was approved by the Committee and progress against the plan was monitored throughout the year and changes to the plan noted. The team was able to continue to operate successfully during the Covid-19 pandemic despite the inability to travel. We are satisfied that the scope, extent, and effectiveness of internal audit work are appropriate for the Group and that there is an appropriate plan in place to sustain and continually improve this.
As noted in last year’s report, the Committee approved the appointment of Phil Gerrard as Director of Internal Audit in March 2021, in succession to Paul Stanley who retired later in the year.
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 2021, 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, identifies and 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
35
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 assessment of the principal risks and uncertainties facing the Company can be found on pages 2 – 5. In fulfilling its responsibilities, the Committee received reports throughout 2021 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.
As reported in our Annual Report on Form 20-F for the fiscal year ended 31 December 2020, material weaknesses were identified in our internal control over financial reporting, which related to:
•Impairment assessment of intangible assets and goodwill;
•Complex accounting matters and judgements and changes in accounting standards; and
•Net investment hedging relationships.
During 2021, and as described below, the
Committee finished implementing previously reported plans to remediate these material weaknesses, and management concluded that such material weaknesses were remediated as at 31 December 2021.
With respect to the material weakness relating to the control over the discount rate methodology used in impairment testing, management enhanced its risk assessment of the impairment assessment process and changed the approach to determining inputs with respect to the discount rates used in impairment assessments and established a more comprehensive review process over inputs and the overall discount rate methodology. Management 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. We also conducted a refreshed risk assessment of the goodwill impairment testing process; updated the
Company's
control framework to ensure each risk is mapped to a specific mitigating control; engaged valuation specialists to assist in ensuring the accuracy and integrity of the impairment testing model and determining recoverable amounts that require significant judgement; and implemented additional reviews of the selection of cash flow periods. With respect to our controls relating to the determination of the assumptions in respect of working capital cash flows included in the impairment calculation, additional validation controls and additional reviews of the net working capital assumptions were implemented.
Management also undertook a series of steps to complete a comprehensive review and remediation of the Company's controls and procedures and engaged outside advisors to assist in
remediating material weaknesses around complex accounting matters and judgement and changes in accounting standards. More broadly, the comprehensive retrospective review included identifying all critical accounting judgements with respect to financial statement line items, evaluating the application of the underlying accounting standards to those judgements and verifying the completeness, accuracy and reasonableness of those final judgements. As part of this effort, management significantly enhanced the staffing, capabilities and resources of our technical accounting function, which supported the retrospective review efforts and will continue to provide ongoing support in regards to complex accounting matters and judgement and changes in accounting standards. Under the direction of our Global Director of Risk and Controls, our new controls function that was established in 2020 implemented enhanced periodic controls, including controls to identify and evaluate changes
in the underlying business, 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 judgements, including those most likely to be impacted by amendments to, or clarifications of accounting standards we have adopted. Throughout 2021, our controls function continued to review and enhance controls across the Company.
With respect to our net investment hedging arrangements, management re-reviewed our hedging relationships and the associated documentation and analysed the application 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.
Business Integrity
During the year, the Committee reviewed the adherence to, and evolution of, the business integrity programme. The Company has established and in 2021 refreshed its procedures by which all employees may, in confidence (and, if they wish, anonymously) report any concerns. The Committee received regular updates on the Company’s systems and controls for ethical
36
behaviour, which included matters reported on the
Company’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 reviewed annually by the Committee and adopted by the Board, most recently on 20 January and 9 February 2022 respectively. A copy of the Committee’s terms of reference is available on the Company’s website
at http://www.wpp.com/investors/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.
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.
Audit Tender
Deloitte
LLP (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.
We advised shareholders in last year’s Annual Report that the Committee had initiated a competitive tender process for the external audit contract. The tender process was overseen by an audit tender committee (ATC), chaired by Jacques Aigrain.
Other members of the ATC were Sandrine Dufour, the CFO, the Group Chief Counsel, and the Group Finance Director.
Following
a detailed market assessment, a number of audit firms, including some firms outside the Big Four, were approached to participate in this process. The current external auditor, Deloitte, was not invited to participate in the tender due to the prevailing rules on audit firm rotation.
This enabled the Committee to recommend to the Board the appointment of PwC as the preferred new auditor from two shortlisted bidding firms, a recommendation which the Board subsequently endorsed in September 2021. The Committee’s judgement was that PwC was best placed to succeed Deloitte and deliver a high quality audit for the Company and in the best interests of its shareholders. Subject to shareholder approval, Deloitte will continue in office until 2023, at which point they will retire after completing the audit for the financial year ending
31 December 2023.
From the Company’s 2024 financial year onwards, PwC will be appointed in Deloitte’s place, subject to shareholder approval. We wish to thank each firm that participated in the tender for the professionalism and commitment they demonstrated through the process.
A transition governance group (Governance Group) has been established, led by the Group Finance Director. Ten workstream teams, consisting of members from both WPP and PwC, have been created to ensure all aspects of the transition are proactively managed. The workstreams provide regular updates to the Governance Group, which in turn provides quarterly updates to the Committee. This supports the Committee in overseeing the transition from Deloitte to PwC to ensure that:
•Deloitte
continues to discharge its auditing responsibilities effectively to the end of its time in office; and
•PwC takes the necessary steps to ensure that it is independent of the Company and fully mobilised by the time it begins audit planning activities (including shadowing Deloitte’s 2023 audit) to observe Deloitte at an appropriate juncture in 2023.
The Committee looks forward to reporting to shareholders on discharging the activities associated with this transition in the Company’s 2022 Annual Report.
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Effectiveness
and Independence of the External Auditor
In 2021, 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 Company’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 appointment of the lead audit partner for Deloitte in respect of the 2021 audit.
Deloitte
attended all Committee meetings in 2021 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 and appropriate scepticism where necessary to ensure balanced reporting and that the audit for the year ended 31 December 2021 was effective.
Appointment of External Auditor at General Meeting
The Committee has recommended to the Board, and the Board has approved that Deloitte should
be reappointed as auditor. Resolutions will be put to the 2022 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 £31.9 million in fees for work relating to the audit services it provides
the Company. Non-audit related work undertaken by Deloitte amounted to fees of £1.8 million this year, which amounted to 5.6% of the total audit fees paid.
Financial reporting and significant financial judgements
Key accounting judgements made by management were reported to and examined by the Committee and discussed with management. The Committee considered the following significant financial reporting judgements in relation to the financial statements:
Area of Focus
Critical Judgements and
Estimates
Actions Taken/Conclusion
Goodwill impairments
Estimates and judgements in relation to goodwill impairment testing.
The Committee assessed 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.
Remuneration
Accounting for elements of remuneration where estimates and judgements are required.
The Committee reviewed the assumptions applied by management in relation to judgemental
elements of remuneration, including pensions, bonus accruals and share-based payments, and agreed that these are reasonable.
Taxation
The estimates and judgements made in respect of tax.
The Group Tax Director presented to the Committee in December 2021. The Committee considered management’s assumptions, in particular in relation to the level of central tax provisions, and believed that the level of central tax provisions is reasonable. The Committee also considered the restatement of the previously reported corporate income tax recoverable, corporate income tax payable and tax charge and agreed that the restatement was appropriate.
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Other
Areas
Headline profit
Judgements relating to headline profit measures.
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. The Committee reviewed management’s judgements relating to restructuring and transformation costs, with particular focus on the continued rollout of the Group’s new ERP system and other ongoing transformation projects, including IT transformation projects, shared service centres and campus co-locations. The Committee was satisfied that excluding these amounts from headline profit measures was reasonable and that it had been disclosed appropriately.
Going
concern
The going concern assessment and viability statement.
The Committee reviewed the scenarios modelled by management and assessed management’s view that the likelihood of declines of over 30% of revenue less pass-through costs compared to 2021 was remote. The Committee has considered and concurs with management’s going concern, viability and forecasting assumptions. See page 19 for the discussion on going concern.
Revenue
The judgements made in respect of revenue.
The Committee reviewed the judgements made in the assessment of certain large, central revenue contracts
and was satisfied that they had been treated appropriately.
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 had been accounted for appropriately.
Investments
The valuations of non-controlled investments.
The
Committee examined management’s valuations, based on input from external advisors, forecasts, recent third-party investment, external transactions and/or other available information such as industry valuation multiples. The Committee agreed that the valuations were appropriate based on the information available to the Group.
Board Performance Evaluation
Each year, WPP completes a review of the Board and its Committees to monitor their effectiveness and identify improvement opportunities.
In accordance with the UK Corporate Governance Code requirements, it is the Board's policy to undertake an externally facilitated evaluation every three years. The 2021 evaluation was externally facilitated by Dr. Long of Boardroom Review Limited who has no other connection with the
Company. During the course of the review, Dr Long attended Board and Committee meetings as an observer and held one-on-one discussions with each Director, the Group Company Secretary, Group Chief Counsel and Chief Operating Officer. Discussions were based around a number of themes, including the Board’s leadership and contribution, the work of the Board (with a focus on strategy, ESG, risk and control, people and wider stakeholder engagement), and the use of time and information.
The output of the 2021 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 Directors. Good progress was also acknowledged to have been made in the year to further enhance the skills and experience on the Board and Committees, to align with the strategy and governance requirements. The Board continues
to be positively engaged with the strategic process and transformation programme.
D. Employees
The assets of communications services businesses are primarily their employees, and the Company is highly dependent on the talent, creative abilities and technical skills of its personnel and the relationships its personnel have with clients. The Company believes that its operating companies have established reputations in the industry that attract talented personnel. However, the Company, like all communications services
businesses, is vulnerable to adverse consequences from the loss of key employees due to the competition among these businesses for talented personnel. Excluding all employees of associated undertakings, the number of employees at the end of 2021 was 109,382 (2020: 99,830, 2019: 106,786). The average number of employees, including the Kantar disposal group up to the date of disposal, for the year ended 31 December 2021 was 104,808 compared to 104,163 and 132,823 in 2020 and 2019, respectively.
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Their geographical distribution was as follows:
2021
2020
2019
North
America
21,764
21,524
25,008
United Kingdom
10,995
10,670
14,192
Western Continental Europe
21,514
21,551
26,973
Asia Pacific, Latin America, Africa & Middle East
and Central & Eastern Europe
50,535
50,418
66,650
104,808
104,163
132,823
Their reportable segment distribution was as follows:
2021
20201
20191
Global
Integrated Agencies
89,701
88,406
90,582
Data Investment Management
—
1,341
26,325
Public Relations
7,121
6,810
6,890
Specialist
Agencies
7,986
7,606
9,026
104,808
104,163
132,823
1Prior year figures have been re-presented to reflect the changes to segments as described in note 2 of the consolidated financial statements.
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 2021, around 4% of our employees were either members of a trade union or covered by a collective bargaining agreement (2020: 4%). We held 268 consultations with works councils, mainly in Europe (2020: 185).
During 2021, we have made around 3,300 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 Programme which included 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.
E.
Share Ownership
Executive Directors’ interests
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
2021, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 5,803,641 shares in the Company (4,863,244 in 2020).
1For Mark Read, shares due pursuant to 2019 Executive Share awards. Additional dividend shares will be due on vesting.
2Maximum number of shares due on vesting pursuant to the outstanding EPSP awards, full details of which can be found on page 29. Additional dividend shares will be due on vesting.
3As
noted in footnote 2 above, less the maximum due under the 2017 EPSP award, and for John Rogers the remaining portion of his buy-out award, both of which lapsed/vested on 15 March 2021 (full details can be found on pages 28 and 29), plus the 2022 EPSP granted on 25 March 2022.
4Total beneficial interests calculated at last practicable date for this Annual Report on Form 20-F.
Share ownership 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
40
of
600% and 300% of base salary respectively. Both Directors have seven years from the date they were appointed to their respective roles in which to reach the required level.
As at 31 December 2021, the Chief Executive Officer held shares to the value of 538% of his base salary. At the same date, the Chief Financial Officer held shares to the value of 402% of his base salary. This was calculated based on the average share price for the last two months of the year.
Non-Executive Directors’ interests
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
Total interests at
31 December 2021
Total interests at
25 March 20221
Roberto Quarta
87,500
87,500
Angela
Ahrendts
12,571
12,571
Jacques Aigrain
34,000
34,000
Sandrine Dufour
15,000
15,000
Tarek Farahat
3,775
3,775
Tom
Ilube
4,335
5,335
Cindy Rose
8,000
8,000
Nicole Seligman
8,750
8,750
Sally Susman
5,000
5,000
Keith
Weed
8,424
8,424
Jasmine Whitbread
5,833
8,735
Dr. Ya-Qin Zhang
—
—
1Total beneficial interests calculated at last practicable date for this Annual Report on Form 20-F.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
As of the dates shown below, 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.
25
March 2022
23 April 2021
24 April 2020
MFS
*
*
*
*
3.96
%
48,563,373
Harris
Associates LP
*
*
3.75
%
45,764,463
5.88
%
72,109,256
BlackRock Inc.
7.49
%
84,105,596
8.04
%
98,039,240
7.60
%
93,169,630
Wellington
Management Group LLP
5.04
%
56,729,346
*
*
*
*
*The Company has not been notified of any interests in the issued ordinary capital of the Company in excess of 3.0%.
The
disclosed interests refer to the respective combined holdings of those entities and to interests associated with them. None of these shareholders have voting rights that are different from those of the holders of the Company’s ordinary shares generally. As far as WPP is aware, it is neither directly nor indirectly owned or controlled by one or more corporations or by any government, or by any other natural or legal persons severally or jointly.
The number of outstanding ordinary shares at 31 December 2021 was 1,153,969,597 which included at such date the underlying ordinary shares represented by 14,180,407 ADSs. 224 share owners of record of WPP ordinary shares were US residents at 31 December 2021.
The geographic distribution of our share ownership as at 31 December 2021 is presented below:
United
Kingdom
29.3
%
United States
37.9
%
Rest of world
32.8
%
Total
100.0
%
41
B.
Related Party Transactions
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.
In the year ended 31 December 2021, revenue of £117.2 million (2020: £90.6 million) was reported in relation to Compas, an associate in the USA. All other transactions in the periods presented were immaterial.
The Group invested a further £92.9 million in Kantar in 2021 to fund its 40% share in the Numerator acquisition.
The following amounts were outstanding at 31 December:
2021
2020
£m
£m
Amounts
owed by related parties
Kantar
30.3
39.0
Other
45.7
27.9
76.0
66.9
Amounts
owed to related parties
Kantar
(6.2)
(5.6)
Other
(51.4)
(36.0)
(57.6)
(41.6)
See Item 6C Board Practices of this Annual Report on Form 20-F
for a discussion of the service contracts between the Company and the Executive Directors.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8.FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
See
Item 18 of this Annual Report on Form 20-F.
Outstanding legal proceedings
The Company has claims against others and there are claims against the Company in a variety of matters arising from the conduct of its business. In the opinion of the management of the Company, the ultimate liability, if any, that is likely to result from these matters would not have a material impact on the Company’s financial position, or on the results of its operations. See note 22 to the consolidated financial statements for more details.
ADS 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 ADS holder on the payment date if ADSs are registered with WPP’s U.S. Depositary, Citibank N.A. Dividends on ADSs that are registered with brokers are sent to the brokers, who forward them to ADS holders.
Dollar amounts paid to ADS holders depend on the sterling/dollar exchange rate at the time of payment.
B.
Significant Changes
See note 32 to the consolidated financial statements in Item 18 of this Annual Report on Form 20-F.
ITEM 9.THE OFFER AND LISTING
A. Offer and Listing Details
The Company has ordinary shares (trading symbol: WPP) listed on the London Stock Exchange and ADSs for such ordinary shares (trading symbol: WPP) listed on the New York Stock Exchange.
42
The
Depositary held 70,902,035 ordinary shares as at 31 December 2021, approximately 6.14% of the outstanding ordinary shares, represented by 14,180,407 outstanding ADSs.
B. Plan of Distribution
Not applicable.
C. Markets
See the discussion in Item 9A of this Annual Report on Form 20-F.
The following is a summary of each contract (not being a contract entered into in the ordinary course of business) that has been entered into by any member of the WPP Group: (a) within the two years immediately preceding the date of this Form
20-F which are, or may be, material to the WPP Group; or (b) at any time which contain obligations or entitlements which is, or may be, material to the WPP Group as at the date of this Form 20-F:
(i) On 7 September 2012, WPP Finance 2010 issued US$500,000,000 3.625% guaranteed senior notes due September 2022 and $300,000,000 5.125% guaranteed senior notes due September 2042. These notes were issued under the Indenture dated as at 2 November 2011, described above, as supplemented by the Second Supplemental Indenture and the Third Supplemental Indenture, respectively, each dated as at 7 September 2012, among WPP Finance 2010 as issuer, WPP 2012 Limited (formerly known
as WPP plc), WPP Air 1, WPP 2008 Limited and WPP 2005 Limited as guarantors, Wilmington Trust, National Association as trustee, Citibank, N.A., as security registrar and Principal Paying Agent and Citibank, N.A., London Branch as Paying Agent. The indenture contains events of default provisions (including a cross-default provision). It also contains a restriction on the Issuer or any of the Guarantors referred to above consolidating or merging with any other person and conveying, transferring or leasing all or substantially all of their properties and assets to any person except where the entity resulting from such consolidation or merger or to whom such properties and assets are transferred becomes a primary obligor of the notes and gives certain certificates and indemnities. The covenants of the Indenture
also contain a negative pledge and a limitation on the sale and leaseback of any assets by the Guarantors referred to above and their principal subsidiaries. The Indenture allows for defeasance of these covenants subject to certain conditions. The holders of the notes have the right to require the Issuer to repurchase the notes at a price equal to 101% of the principal amount of the notes in the event that there is a Change of Control of WPP plc and the notes lose their investment grade rating. The Indenture also contains a joint and several indemnity from the Issuer and the Guarantors referred to above in favour of the Trustee. During 2018 WPP Finance 2010 repurchased and cancelled $28,422,000 5.125% guaranteed
senior notes due September 2042. In May 2019, WPP Finance 2010 repurchased and cancelled $178,744,000 5.125% guaranteed senior notes due September 2042. In July 2021, WPP Finance 2010 repurchased and cancelled $500,000,000 3.625% guaranteed notes due September 2022;
(ii) On 2 January 2013, WPP plc entered into a deposit agreement with Citibank, N.A., as US Depositary, and the holders and beneficial owners of ADSs that sets out the terms on which the US Depositary has agreed to
43
act as depositary with respect to WPP ADSs. The deposit agreement contains, amongst other things, customary provisions pertaining to the form of ADRs, the deposit and withdrawal of ordinary shares, distributions to holders of ADSs, voting of ordinary shares
underlying ADSs, obligations of the US Depositary and WPP plc, charges of the US Depositary, and compliance with U.S. securities laws;
(iii) On 12 November 2013, WPP Finance 2010 issued US$500,000,000 5.625% guaranteed senior notes due November 2043. These notes were issued under the Indenture dated as at 12 November 2013, as supplemented by the Supplemental Indenture dated as at 12 November 2013, among WPP Finance 2010 as issuer, WPP plc, WPP Jubilee Limited, and WPP 2005 Limited as guarantors, Wilmington Trust, National Association as trustee, Citibank, N.A., as security registrar and Principal Paying Agent and Citibank, N.A., London Branch as Paying Agent. The indenture
contains events of default provisions (including a cross-default provision). It also contains a restriction on the Issuer or any of the Guarantors referred to above consolidating or merging with any other person and conveying, transferring or leasing all or substantially all of their properties and assets to any person except where the entity resulting from such consolidation or merger or to whom such properties and assets are transferred becomes a primary obligor of the notes and gives certain certificates and indemnities. The covenants of the Indenture also contain a negative pledge and a limitation on the sale and leaseback of any assets by the Guarantors referred to above and their principal subsidiaries. The Indenture
allows for defeasance of these covenants subject to certain conditions. The holders of the notes have the right to require the Issuer to repurchase the notes at a price equal to 101% of the principal amount of the notes in the event that there is a Change of Control of WPP plc and the notes lose their investment grade rating. The Indenture also contains a joint and several indemnity from the Issuer and the Guarantors referred to above in favour of the Trustee. During 2018 WPP Finance 2010 repurchased and cancelled $49,690,000 5.625% guaranteed senior notes due November 2043. In May 2019, WPP Finance 2010 repurchased and cancelled $230,465,000 5.625% guaranteed senior notes due November 2043;
(iv) On 20 November 2013, WPP Finance 2013 issued EUR 750,000,000 3.000% guaranteed senior bonds due November 2023. The bonds are guaranteed by WPP
plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 11 November 2013 between WPP Finance 2013, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 December 2013 between WPP Finance 2013, the guarantors, and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange Market of the Irish Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision;
(v) On 19 September 2014, WPP Finance 2010 issued US$750,000,000 3.750% guaranteed senior notes due September 2024. These notes were issued under the Indenture
dated as at 19 September 2014, as supplemented by the Supplemental Indenture dated as at 19 September 2014, among WPP Finance 2010 as issuer, WPP plc, WPP Jubilee Limited, and WPP 2005 Limited as guarantors, Wilmington Trust, National Association as trustee, Citibank, N.A., as security registrar and Principal Paying Agent and Citibank, N.A., London Branch as Paying Agent. Aside from the coupon and repayment date, the terms and conditions of these notes are the same as those for the $500,000,000 5.625% notes due November 2043 described above;
(vi) On 22 September 2014, WPP Finance S.A. issued EUR 750,000,000 2.250% guaranteed senior bonds due September 2026. The bonds are guaranteed by WPP plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 11 November 2013 between WPP Finance S.A., the guarantors,
and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 November 2013 between WPP Finance S.A., the guarantors, and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange Market of the Irish Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision;
(vii) On 23 March 2015, WPP Finance Deutschland GmbH issued EUR 600,000,000 1.625% guaranteed senior bonds due March 2030. The bonds are guaranteed by WPP plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 11 November 2013 as supplemented by a First Supplemental Trust Deed dated 14 November 2014 between, inter alia,
WPP Finance Deutschland GmbH, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 November 2013 between, inter alia, WPP Finance Deutschland GmbH, the guarantors and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange Market of the Irish Stock Exchange and the terms and conditions contain a redemption provision at
44
the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision;
(viii) On 14 September 2016, WPP Finance 2013 issued GBP 400,000,000 2.875%
fixed rate guaranteed senior bonds due 14 September 2046 under the EUR 4,000,000,000 Euro Medium Term Note Programme. The bonds are guaranteed by WPP plc, WPP 2005 Limited and WPP Jubilee Limited, and are constituted by a Trust Deed dated 14 November 2014 between, inter alia, WPP Finance 2013, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 November 2013 between, inter alia, WPP Finance 2013, the guarantors and Citibank, N.A., London Branch. The bonds are admitted to the Official List of the Irish Stock Exchange and to trading on the Global Exchange Market. The terms and conditions of the bonds contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and a cross-default event of default provision;
(ix)
On 20 March 2018, WPP Finance 2016 issued EUR 500,000,000 1.375% guaranteed senior bonds due March 2025. The bonds are guaranteed by WPP plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 8 November 2016 between, inter alia, WPP Finance 2016, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 8 November 2016 between, inter alia, WPP Finance 2016, the guarantors and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange Market of the Irish Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision;
(x)
On 15 March 2019, WPP CP LLC, WPP Finance Co. Limited and WPP CP Finance plc (as borrowers), guaranteed by WPP plc, WPP 2005 Limited and WPP Jubilee Limited entered into an agreement for a five-year multi-currency revolving credit facility (with a US Dollar swingline option) for US$2.5 billion with a syndicate of banks and Citibank International plc as facility agent due March 2024. On 14 February 2020, the lending banks approved extending the maturity for a further year to 15 March 2025. On 26 February 2021, the lending banks approved extending the maturity for a further year to 15 March 2026. On 12 November 2021, the lending banks approved changes to the lending reference rates as LIBOR is being replaced. The lending banks also approved certain environmental, social and governance (ESG) related KPI's which have the impact of adjusting margin by up to 0.03% up or down with effect from January 2023. The facility is available for drawing by way of multi-currency cash
advances on a revolving basis, with an option to draw US Dollar swingline advances up to a sub-limit of US$1.2 billion. The rate of margin for the facility is, if the long-term unsecured and non-credit enhanced debt rating of WPP published by Moody’s and Standard & Poor’s (the Credit Rating) is A-/A3 or higher, 0.25% per annum. If the Credit Rating is BBB+ or Baa1, the rate of margin for the facility is 0.30% per annum. If the Credit Rating is BBB or Baa2, the rate of margin for the facility is 0.40% per annum. If the Credit Rating is BBB- or Baa3, the rate of margin for the facility is 0.50% per annum. If the Credit Rating is BB+ or Ba1 or lower, the rate of margin for the facility is 0.80% per annum. All margins above are subject to a credit adjustment spread which varies by both currency of drawing and period of drawdown. If Moody’s and Standard & Poor’s assign different Credit Ratings, the margin shall be the average of the margins determined by each of Moody’s
and Standard & Poor’s. The commitment fee payable on undrawn commitments is equal to 35% of the then applicable margin. A utilisation fee of 0.075% per annum is payable on outstandings on any day on which the amount of outstandings exceeds 0% of the total facility commitments but is less than or equal to 33% of the total facility commitments. A utilisation fee of 0.15% per annum is payable on outstandings on any day on which the amount of outstandings exceeds 33% of the total facility commitments but is less than or equal to 66% of the total facility commitments. A utilisation fee of 0.30% per annum is payable on outstandings on any day on which the amount of outstandings exceeds 66% of the total facility commitments. The facility agreement contains customary representations, covenants and events of default. The interest rate for swingline advances is the higher of the US prime commercial lending rate and 0.50% per annum above the federal funds rate;
(xi)
On 12 July 2019 WPP entered into an agreement to sell 60% of Kantar, its global data, research, consulting and analytics business, to Bain Capital (the “Transaction”). The Transaction valued 100% of Kantar at c.$4.0 billion, equivalent to a calendar 2018 EV/EBITDA multiple of 8.2x based on Kantar’s headline EBITDA (excluding WPP overhead) of £386 million. The equity value after expected completion adjustments was c.$3.7 billion (c.£3.0 billion). WPP may also receive additional consideration in respect of certain contingent liabilities, in the event that such liabilities are lower than estimated. Additionally, WPP may receive certain other payments during the life of its partnership with Bain Capital. The amounts of these payments are dependent on future events and outcomes which are too uncertain to allow meaningful
45
estimation
today. Under no circumstances can such contingent liabilities, events and outcomes lead to any reduction or repayment of the consideration to be received by WPP on completion. On 5 December 2019, WPP completed the Transaction, with respect to approximately 90% of the Kantar business, and proportionate transaction proceeds were received at that time. In 2020, the outstanding completion steps were completed and the remaining transaction proceeds were received. As part of the Transaction, WPP entered into transitional services agreements which govern the provision of IT services and other operational services between WPP and Kantar for a transitional period. A shareholders’ agreement is also in place to govern the relationship between WPP and Bain Capital, and ensures consistent governance rights for the parties. The boards of the Kantar joint venture companies formed by WPP and Bain Capital have up to six Bain Capital nominated directors and up to two WPP nominated directors.
In certain circumstances, in the event of a disposal by Bain Capital of a majority of its interest in Kantar to a third party, it will have the right to require WPP also to transfer all of its securities in Kantar to that third party at the same price;
(xii) On 19 May 2020, WPP Finance S.A. issued EUR 750,000,000 2.375% guaranteed senior bonds due May 2027. The bonds are guaranteed by WPP plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 5 November 2018 between, inter alia, WPP Finance S.A., the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 5 November 2018 between, inter alia, WPP Finance S.A., the guarantors and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange Market of
the Irish Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision; and
(xiii) On 19 May 2020, WPP Finance 2017 issued £250,000,000 3.75% guaranteed senior bonds due May 2032. The bonds are guaranteed by WPP plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 5 November 2018 between, inter alia, WPP Finance 2017, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 5 November 2018 between, inter alia, WPP Finance 2017, the guarantors and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange
Market of the Irish Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision.
D. Exchange Controls
There are currently no Jersey foreign exchange control restrictions on remittances of dividends on the ordinary shares or on the conduct of the Registrant’s operations.
E. Taxation
The
taxation discussion set forth below is intended only as a descriptive summary and does not purport to be a complete technical analysis or listing of all potential tax effects relevant to a decision to purchase, hold or in any way transfer ordinary shares or ADSs. Each investor should seek advice based on their individual particular circumstances from an independent tax adviser. The following summary of the Jersey, UK and the United States tax consequences is not exhaustive of all possible tax considerations and should not be considered legal or tax advice. In addition, this summary does not represent a detailed description of the tax consequences applicable to persons subject to special treatment under Jersey and United States tax laws. Prospective purchasers of ADSs are advised to satisfy themselves as to the overall tax consequences of their ownership of ADSs and the ordinary shares represented thereby by consulting their own tax advisors. In addition, this summary
only addresses holders that hold ordinary shares or ADSs as capital assets, and it does not address the taxation of a United States shareholder (either corporate or individual) where that shareholder controls, or is deemed to control, 10% or more of the voting stock of the Company.
References in this discussion to WPP Shares include references to WPP ADSs and corresponding references to WPP Share Owners (or holders of WPP ADSs) include references to holders of WPP ADSs, unless indicated otherwise.
United Kingdom, Jersey and the United States taxation
United Kingdom taxation
Tax on dividends
The
Company will not be required to withhold UK tax at source from dividend payments it makes.
46
A WPP Share Owner resident outside the UK may be subject to taxation on dividend income under local law. A WPP Share Owner who is not solely resident in the UK for tax purposes should consult their own tax advisers concerning their tax liabilities (in the UK and any other country) on dividends received from WPP. UK tax 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.
Taxation of disposals
An individual WPP Share Owner who has ceased to be resident or ordinarily resident for tax purposes in the UK for
a period of less than five tax years and who disposes of all or part of his WPP Shares during that period may be liable to capital gains tax in respect of any chargeable gain arising from such a disposal on his return to the UK, subject to any available exemptions or reliefs.
Stamp duty and stamp duty reserve tax (SDRT)
No UK stamp duty or SDRT will be payable on the issue of WPP Shares. UK stamp duty should generally not need to be paid on a transfer of the WPP Shares. No UK SDRT will be payable in respect of any agreement to transfer WPP Shares unless they are registered in a register kept in the UK by or on behalf of WPP. It is not intended that such a register will be kept in the UK.
The statements in this paragraph summarise the current position on stamp duty and SDRT and are intended as a general guide only. Special rules apply to agreements
made by, amongst others, intermediaries and certain categories of person may be liable to stamp duty or SDRT at higher rates.
Jersey taxation
General
The following summary of the anticipated tax treatment in Jersey of WPP and WPP Share Owners and holders of WPP ADSs (other than residents of Jersey) is based on Jersey taxation law as it is understood to apply at the date of this Form 20-F. It does not constitute legal or tax advice. WPP Share Owners or holders of WPP ADSs should consult their professional advisers on the implications of acquiring, buying, holding, selling or otherwise disposing of WPP Shares or WPP ADSs under the laws of the jurisdictions in which they may be liable to taxation. WPP Share Owners or holders of WPP ADSs should be aware that tax rules and practice and their interpretation may change.
Income
Tax
(a) WPP
Under the Jersey Income Tax Law, WPP will be regarded as either:
(i) not resident in Jersey under Article 123(1) of the Jersey Income Tax Law provided that (and for so long as) it satisfies the conditions set out in that provision, in which case WPP will not (except as noted below) be liable to Jersey income tax; or
(ii) resident in Jersey and will fall under Article 123C of the Jersey Income Tax Law, in which case WPP (being neither a financial services company nor a specified utility company under the Jersey Income Tax Law at the date hereof) will (except as noted below) be subject to Jersey income tax at a rate of 0 percent.
WPP is tax resident in the United Kingdom and therefore should not be regarded as resident in Jersey.
(b)
Holders of WPP Shares
WPP will be entitled to pay dividends to holders of WPP Shares without any withholding or deduction for or on account of Jersey tax. Holders of WPP Shares (other than residents of Jersey) will not be subject to any tax in Jersey in respect of the holding, sale or other disposition of such WPP Shares.
(c) Holders of WPP ADSs
Under Jersey law and the WPP Articles, WPP is only permitted to pay a dividend to a person who is recorded in its register of members as the holder of a WPP Share. The US Depositary will be recorded in WPP’s register of members as the holder of each WPP Share represented by a WPP ADS. Accordingly, WPP will pay all dividends in respect of each WPP Share represented by a WPP ADS to the US Depositary (as the registered holder of each such WPP Share) rather than to the holder of the ADS.
The
US Depositary will not be subject to any tax in Jersey in respect of the holding, sale or other disposition of the WPP Shares held by it. In addition, holders of the WPP ADSs (other than residents of Jersey) should not be subject to any tax in Jersey in respect of the holding, sale or other disposition of such WPP ADSs.
47
Goods and services tax
WPP is an “international services entity” for the purposes of the Goods and Services Tax (Jersey) Law 2007 (the “GST Law”). Consequently, WPP is not required to:
(a) register as a taxable person pursuant to the GST Law;
(b) charge goods and services tax
in Jersey in respect of any supply made by it; or
(c) subject to limited exceptions that are not expected to apply to WPP, pay goods and services tax in Jersey in respect of any supply made to it.
Stamp duty
No stamp duty is payable in Jersey on the issue or inter vivos transfer of WPP Shares or WPP ADSs.
Upon the death of a WPP Share Owner, a grant of probate or letters of administration will be required to transfer the WPP Shares of the deceased person. However, WPP may (at its discretion) dispense with this requirement where: (a) the deceased person was domiciled outside of Jersey at the time of death; and (b) the value of the deceased’s movable estate in Jersey (including any WPP Shares) does not exceed £10,000.
Upon
the death of a WPP Share Owner, where the deceased person was domiciled outside of Jersey at the time of death, Jersey stamp duty will be payable on the registration in Jersey of a grant of probate or letters of administration, which will be required in order to transfer or otherwise deal with the deceased person’s personal estate situated in Jersey (including any WPP Shares) if the net value of such personal estate exceeds £10,000.
The rate of stamp duty payable is:
(i)(where the net value of the deceased person’s relevant personal estate is more than £10,000 but does not exceed £100,000) 0.50 percent of the net value of the deceased person’s relevant personal estate; or
(ii)(where the net value of the deceased person’s relevant personal estate exceeds £100,000) £500 for the first £100,000
plus 0.75 percent of the net value of the deceased person’s relevant personal estate which exceeds £100,000.
In addition, application and other fees may be payable.
US federal income taxation
Introduction
The following is a summary of certain material US federal income tax consequences of the ownership and disposition of WPP Shares or WPP ADSs by a US Holder (as defined below). This summary deals only with initial acquirers of WPP Shares or WPP ADSs that are US Holders and that will hold the WPP Shares or WPP ADSs as capital assets. The discussion does not cover all aspects of US federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of WPP Shares or WPP ADSs by particular investors,
and does not address state, local, foreign or other tax laws. In particular, this summary does not address all of the tax considerations that may be relevant to investors subject to special treatment under the US federal income tax laws (such as financial institutions, insurance companies, investors liable for the alternative minimum tax, investors that own (directly or indirectly) 10% or more of the voting stock of WPP, investors that hold WPP Shares or WPP ADSs through a permanent establishment, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations, dealers in securities or currencies, traders that elect to mark to market, investors that will hold the WPP Shares or WPP ADSs as part of straddles, hedging transactions or conversion transactions for US federal income tax purposes, investors whose functional currency is not the US dollar or persons who received their WPP Shares or WPP ADSs in connection with the performance of services
or on exercise of options received as compensation in connection with the performance of services).
As used herein, the term “US Holder” means a beneficial owner of WPP Shares or WPP ADSs that is, for US federal income tax purposes: (i) a citizen or individual resident of the United States; (ii) a corporation, or other entity treated as a corporation for US federal tax purposes, created or organised in or under the laws of the United States or any State thereof; (iii) an estate the income of which is subject to US federal income tax without regard to its source; or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust, or the trust has elected to be treated as a domestic trust for US federal income tax purposes.
This
discussion does not address any tax consequences applicable to holders of equity interests in a holder of WPP Shares or WPP ADSs. The US federal income tax treatment of a partner in a partnership that holds WPP Shares or WPP ADSs will
48
depend on the status of the partner and the activities of the partnership. Holders of WPP Shares or WPP ADSs that are partnerships should consult their tax advisers concerning the US federal income tax consequences to their partners of the acquisition, ownership and disposition of WPP Shares or WPP ADSs.
WPP does not expect to become a passive foreign investment company (a “PFIC”) for US federal income tax purposes and this summary assumes the correctness of this position. WPP’s possible status
as a PFIC must be determined annually and therefore may be subject to change. If WPP were to be a PFIC in any year, materially adverse consequences could result for US Holders.
The summary is based on the US federal income tax laws, including the US Internal Revenue Code of 1986 as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as currently in effect, and all of which are subject to change, perhaps with retroactive effect.
The summary of US federal income tax consequences set out below is for general information only. US Holders are urged to consult with their own tax advisers as to the particular tax consequences to them of owning the WPP Shares or WPP ADSs, including the applicability and effect of state, local, foreign and other tax laws and possible changes in tax law.
Classification
of the WPP ADSs
US Holders of WPP ADSs should be treated for US federal income tax purposes as owners of the WPP Shares represented by the WPP ADSs. Accordingly, the US federal income tax consequences discussed below apply equally to US Holders of WPP ADSs.
Tax on dividends
Distributions paid by WPP out of current or accumulated earnings and profits (as determined for US federal income tax purposes) will generally be taxable to a US Holder as foreign source dividend income, and will not be eligible for the dividends received deduction generally allowed to US corporations. A US Holder of WPP ADSs generally will include dividends in gross income in the taxable year in which such holder actually or constructively receives the dividend. US Holders that surrender their WPP ADSs in exchange for the underlying WPP Shares should consult their tax advisers
regarding the proper timing for including dividends in gross income.
Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the US Holder’s basis in the WPP Shares or WPP ADSs and thereafter as capital gains. However, WPP will not maintain calculations of its earnings and profits in accordance with US federal income tax accounting principles. US Holders should, therefore, assume that any distribution by WPP with respect to the WPP Shares or WPP ADSs will constitute ordinary dividend income. US Holders should consult their tax advisers with respect to the appropriate US federal income tax treatment of any distribution received from WPP.
Under current federal income tax law, dividends paid by a foreign corporation to a non-corporate US Holder as “qualified dividend income” are taxable at the special
reduced rate normally applicable to capital gains provided the foreign corporation qualifies for the benefits of the income tax treaty between the United States and the corporation’s country of residence. In such case, the non-corporate US Holder is eligible for the reduced rate only if the US Holder has held the shares or ADSs for more than 60 days during the 121 day-period beginning 60 days before the ex-dividend date. WPP believes it will qualify for the benefits of the income tax treaty between the United States and the United Kingdom (the “Treaty”).
US Holders of WPP Shares or WPP ADSs who receive distributions from WPP will need to consult their own tax advisors regarding the continued applicability of this special reduced rate to such distributions. Dividends paid in pounds sterling will be included in income in a US dollar amount calculated by reference to the exchange rate in effect on the day the dividends are
received by the US Holder in the case of WPP Shares or the US Depositary (in case of WPP ADSs), regardless of whether the pounds sterling are converted into US dollars at that time. If dividends received in pounds sterling are converted into US dollars on the day they are received, the US Holder generally will not be required to recognise a foreign currency gain or loss in respect of the dividend income. Generally, a gain or loss realised on a subsequent conversion of pounds sterling to US dollars or other disposition will be treated as US source ordinary income or loss.
Sale or other disposition
Upon a sale or other disposition of WPP Shares or WPP ADSs (other than an exchange of WPP ADSs for WPP Shares), a US Holder generally will recognise a capital gain or loss equal to the difference, if any, between the amount realised on the sale or other disposition and the US Holder’s adjusted
tax basis in the WPP Shares or WPP ADSs. This capital gain or loss will generally be US source and will be a long-term capital gain or loss if the US Holder’s holding period in the WPP Shares or WPP ADSs exceeds one year. However, regardless of a US Holder’s actual holding period, any loss may be a long-term capital loss if the US Holder receives a dividend that exceeds 10% of the US Holder’s tax basis in its WPP Shares or WPP ADSs and to the extent such dividend qualifies for the reduced rate described above under the section entitled “Tax on Dividends”. Deductibility of capital losses is subject to limitations.
49
A US Holder’s tax basis in a WPP Share or a WPP ADS will generally be its US dollar cost. The US dollar cost of a WPP Share or a WPP ADS purchased with
foreign currency will generally be the US dollar value of the purchase price on the date of purchase or, in the case of WPP Shares or WPP ADSs traded on an established securities market, as defined in the applicable Treasury Regulations, that are purchased by a cash basis US Holder (or an accrual basis US Holder that so elects), on the settlement date for the purchase. Such an election by an accrual basis US Holder must be applied consistently from year to year and cannot be revoked without the consent of the Internal Revenue Service (the “IRS”).
The surrender of WPP ADSs in exchange for WPP Shares (or vice versa) should not be a taxable event for US federal income tax purposes and US Holders should not recognise any gain or loss upon such a surrender. A US Holder’s tax basis in the withdrawn WPP Shares will be the same as the US Holder’s tax basis in the WPP ADSs surrendered, and the holding period of the WPP Shares
will include the holding period of the WPP ADSs.
The amount realised on a sale or other disposition of WPP Shares or WPP ADSs for an amount in foreign currency will be the US dollar value of this amount on the date of sale or disposition. On the settlement date, the US Holder will recognise US source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the US dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date. However, in the case of WPP Shares or WPP ADSs traded on an established securities market that are sold by a cash basis US Holder (or an accrual basis US Holder that so elects), the amount realised will be determined using the exchange rate in effect on the settlement date for the sale, and no exchange gain or loss will be recognised at that time.
Foreign
currency received on the sale or other disposition of a WPP Share or a WPP ADS will have a tax basis equal to its US dollar value on the settlement date. Any gain or loss recognised on a sale or other disposition of a foreign currency (including upon exchange for US dollars) will be US source ordinary income or loss.
Net Investment Tax
In addition, the net investment income of individuals and certain trusts (including income realised through certain pass-through entities), subject to certain thresholds, will be subject to an additional net investment tax of 3.8%. “Net investment income” is the excess of certain types of passive income, including dividends on and capital gains from distributions on or dispositions of a WPP Share or a WPP ADS, over certain related investment expenses. Thus, both dividends and capital gains realised directly or indirectly by an individual or trust
will generally be added in computing the net investment income of such individual or trust subject to this additional tax. Taxpayers are urged to consult their own tax advisors with respect to the applicability of this tax.
Backup withholding and information reporting
Payments of dividends and other proceeds with respect to WPP Shares or WPP ADSs by a US paying agent or other US intermediary will be reported to the IRS and to the US Holder unless the holder is a corporation or otherwise establishes a basis for exemption. Backup withholding may apply to reportable payments if the US Holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to report all interest and dividends required to be shown on its US federal income tax returns. Any backup withholding tax will be refunded or allowed as a credit against the US Holder’s US federal
income tax liability if the US Holder timely gives the appropriate information to the IRS. US Holders should consult their tax advisers as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.
F. Dividends and Paying Agents
Not applicable.
G. Statements by Experts
Not applicable.
H. Documents on Display
The
Company is subject to the informational requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information with the United States Securities and Exchange Commission. You may read and copy any materials filed with the SEC at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC. The Company’s Form 20-F is also available on the Company’s website, http://www.wpp.com.
I. Subsidiary Information
Not applicable.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s principal market risks are changes in interest rates and currency exchange rates. Following evaluation of these positions, the
Company selectively enters into derivative financial instruments to manage its risk exposure. The fair value of derivatives held by the Company at 31 December 2021 is estimated to be a net liability of £50.6 million (£3.0 million with respect to derivative assets and £53.6 million for derivative liabilities). These amounts are based on market values of equivalent instruments at the balance sheet date.
Interest rate and foreign currency risks
The Company’s interest rate and foreign currency risks management policies are discussed in note 25 to the consolidated financial statements.
Currency derivatives utilised by the Group are discussed in note 26 to the consolidated financial
statements.
Analysis of fixed and floating rate debt by currency, including the effect of interest rate and cross currency swaps, as at the balance sheet date is provided in note 10 to the consolidated financial statements.
Sensitivity analyses that address the effect of interest rate and currency risks on the Group’s financial instruments is provided in note 25 to the consolidated financial statements.
Credit risk
Our credit risk exposure and management policies are discussed in note 25 to the consolidated financial statements.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
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D. American Depositary Shares
Fees and Charges
Holders
of ADSs and persons depositing ordinary shares or surrendering ADSs for cancellation are currently required to pay the following service fees to the Depositary:
Service
Rate
By Whom Paid
(1) Issuance of ADSs upon deposit of ordinary shares (excluding issuances as a result of distributions described in paragraph (4) below).
Up
to U.S.$5.00 per 100 ADSs (or fraction thereof) issued.
Person depositing ordinary shares or person receiving ADSs.
(2) Delivery of deposited securities against surrender of ADSs.
Up to U.S.$5.00 per 100 ADSs (or fraction thereof) surrendered.
Person surrendering ADSs for purpose of withdrawal of deposited securities or person to whom deposited securities are delivered.
(3) Distribution
of cash dividends or other cash distributions (i.e., sale of rights and other entitlements).
Up to U.S.$2.00 per 100 ADSs (or fraction thereof) held, unless prohibited by the exchange upon which the ADSs are listed.
Person to whom distribution is made.
(4) Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs.
Up to U.S.$5.00 per 100 ADSs (or fraction thereof) issued, unless prohibited by the exchange
upon which the ADSs are listed.
Person to whom distribution is made.
(5) Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares).
Up to U.S.$5.00 per unit of 100 securities (or fraction thereof) distributed.
Person to whom distribution is made.
(6) Depositary
Services.
Up to U.S.$2.00 per 100 ADSs (or fraction thereof) held as of the last day of each calendar year, except to the extent of any cash dividend fee(s) charged under paragraph (3) above during the applicable calendar year.
Person of record on last day of any calendar year.
(7) Transfer of ADRs.
U.S.$1.50 per certificate presented for transfer.
Person presenting certificate for transfer.
Holders of ADSs and persons
depositing ordinary shares or surrendering ADSs for cancellation and for the purpose of withdrawing deposited securities are also responsible for the payment of certain fees and expenses incurred by the Depositary, and certain taxes and governmental charges, such as:
(i)Taxes (including applicable interest and penalties) and other governmental charges;
(ii)Such registration fees as may from time to time be in effect for the registration of ordinary shares on the share register and applicable to transfers of ordinary shares or other securities on deposit to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;
(iii)Such cable, telex and facsimile transmission and delivery expenses as are expressly
provided in the deposit agreement to be at the expense of the person depositing or withdrawing ordinary shares or holders of ADSs;
(iv)The expenses and charges incurred by the Depositary in the conversion of foreign currency;
(v)Such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to ordinary shares, ordinary shares on deposit, ADSs and ADRs; and
52
(vi)The fees and expenses incurred by the Depositary, the Custodian or any nominee in connection with the servicing or delivery of ordinary shares on deposit.
WPP
has agreed to pay various other charges and expenses of the Depositary. Please note that the fees and charges that holders of ADSs may be required to pay may vary over time and may be changed by WPP and by the Depositary. Holders of ADSs will receive prior notice of such changes.
Depositary Payments—Fiscal Year 2021
WPP did not receive any payments from Citibank, N.A., the Depositary for its American Depositary Receipt program, in 2021.
53
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
As part of the 2021 Annual General Meeting business, the Company proposed to adopt new articles of association, which proposed amendments were adopted by Special Resolution passed on 9 June 2021. The principal changes to the Articles of Association included a number of modernization updates to reflect current Jersey and UK law
and involved arrangements concerning general meetings, appointment of multiple corporate representatives or proxies for voting purposes at general meetings, rights attaching to shares held by members incapable of managing their affairs or where sums are overdue, directors’ interests and voting, and dividends. The Articles of Association, as amended, are attached as Exhibit 1.1 to this Annual Report on Form 20-F. See Item 10B Memorandum and Articles of Association.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
We performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as at 31 December 2021. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. Following the evaluation described above, our management, including the Chief Executive Officer and Chief Financial Officer,
concluded that our disclosure controls and procedures were effective as at 31 December 2021.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an assessment of the effectiveness of our internal control over financial reporting as at 31 December 2021. The assessment was performed using the criteria for effective internal control reflected in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment of the system of internal control, management concluded that as at 31 December
2021, our internal control over financial reporting was effective.
The Company's internal control over financial reporting as at 31 December 2021 has been audited by Deloitte LLP, an independent registered public accounting firm, who also audited the Company's consolidated financial statements. Their audit report is presented below.
Remediation of Material Weaknesses
As reported in our Annual Report on Form 20-F for the fiscal year ended 31 December 2020, we previously identified material weaknesses in our internal control over financial reporting, which related to:
•Impairment
Assessment of Intangible Assets and Goodwill;
•Complex Accounting Matters and Judgements and Changes in Accounting Standards; and
•Net Investment Hedging Relationships.
During 2021, and as described below, we finished implementing our previously reported plans to remediate these material weaknesses, and have concluded that as at 31 December 2021, such material weaknesses have been remediated.
Impairment Assessment of Intangible Assets and Goodwill. We previously identified a material weakness in our internal control over financial reporting that existed as at 31 December 2019 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 and the appropriateness of the cash flow periods and associated discounting. As at 31 December 2020, in addition to the material weakness above, we identified a further material weakness relating to the determination of the assumptions in respect of working capital cash flows included in the impairment calculation.
As a result of such material weaknesses, we have undertaken remediation activities which resulted in changing our approach to determining certain inputs with respect to the discount rates used in the impairment assessment, particularly those inputs that are subject to significant levels of judgement, and established a more comprehensive review process over such inputs, the
54
discount
rate methodology and the determination of the appropriateness of the cash flow periods and associated discounting in the impairment calculation. Additionally, we have enhanced our process for the determination of working capital cash flows included in the impairment calculation. To assist us in these activities, we have engaged an independent valuation specialist to assist us in determining discount rates on an on-going basis with oversight by management and updated our discount rate determination methodology for a current market participant approach.
With respect to remediating control deficiencies, we have i) conducted a refreshed risk assessment of the goodwill impairment testing process; ii) updated our control framework to ensure each risk is mapped to a specific internal control; iii) engaged valuation specialists to assist in ensuring the accuracy and integrity of the impairment testing model and determining recoverable
amounts that require significant judgement; iv) designed enhanced level of review of and controls related to the selection of the variables underpinning the discount rate calculation; v) designed and implemented additional validation controls and additional reviews of the net working capital assumptions; and vi) implemented additional reviews of the selection of cash flow periods. Based on the actions taken, as well as the evaluation of the design, implementation and operating effectiveness of enhanced and newly designed controls, we determined that the previously reported material weaknesses have been remediated as at 31 December 2021.
Complex Accounting Matters and Judgements and Changes in Accounting Standards. As at 31 December 2019 and 2020, we identified a material weakness in our internal control over financial reporting with respect to the design and implementation of effective controls to ensure
the appropriate application of IFRS for complex accounting matters and judgements, and to reflect changes in applicable accounting standards and interpretations or changes in the underlying business on a timely basis. This material weakness related to our previous restatement of our notional cash pooling arrangements, net investment hedging arrangements and the fair value of liabilities in respect of put option agreements and payments due to vendors.
As a result of such material weakness, we have undertaken remediation activities which resulted in us performing a comprehensive retrospective review to identify all critical accounting judgements with respect to financial statement line items, evaluating the application of the underlying accounting standards to those judgements and verifying the completeness, accuracy and reasonableness of those final judgements. We engaged outside advisors with specialist expertise in the respective
subject matter areas to assist with the performance of the comprehensive retrospective review. As part of this effort, we enhanced the staffing, capabilities and resources of our technical accounting function, which supported the retrospective review efforts. Enhancements included hiring accounting personnel with prior work experience in finance and accounting departments of public companies and with technical accounting experience, including hiring a Group Technical Accounting Director in September 2021. These incremental resources will continue to provide ongoing support in regards to complex accounting matters and judgement and changes in accounting standards, including through the execution of enhanced periodic controls relating to complex accounting and changes in accounting standards.
To further address the appropriate determination of the fair value of liabilities in respect of put option agreements and payments due to
vendors we also engaged an independent valuation specialist to assist us as an integral part of the discount rate determination process on an ongoing basis, with oversight by management, to ensure we utilize the appropriate discount rate in connection with our determination of the fair value of liabilities in respect of put option agreements and payments due to vendors.
Under the direction of our Global Director of Risk and Controls, our new controls function that was established in 2020 performed a comprehensive retrospective review of our controls and procedures and implemented enhanced periodic controls into our controls framework. With respect to remediating control deficiencies, we have designed and implemented controls to identify and evaluate amended or clarified accounting standards, or new guidance with respect to accounting standards, or changes to the business. Additionally, we enhanced the design of our controls
to address the appropriate application of IFRS, including complex accounting matters and changes to the accounting standards and business as outlined above.
Based on the actions taken, as well as the evaluation of the design, implementation and operating effectiveness of enhanced and newly designed controls, we determined that the previously reported material weakness has been remediated as at 31 December 2021.
Net Investment Hedging Relationships. As at 31 December 2019 and 2020, we identified a material weakness in our internal control over financial reporting with respect to the design and implementation of effective controls to ensure the eligibility of net investment hedging relationships under IFRS, the adequacy and maintenance of contemporaneous documentation of the application of hedge accounting, and management’s review of the impact of changes in
internal financing structures on such hedging relationships.
As a result of such material weakness, we have undertaken remediation activities which resulted in us performing a comprehensive retrospective re-review of our hedging relationships and the associated documentation and analysis of the application of hedge accounting to all other financial instruments to which such accounting treatment is being applied.
55
With respect to remediating control deficiencies, we have updated the design of our controls to verify the nature and existence of contemporaneous hedge documentation in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
Based
on the actions taken, as well as the evaluation of the design, implementation and operating effectiveness of enhanced controls, we determined that the previously reported material weakness has been remediated as at 31 December 2021.
Changes in Internal Control Over Financial Reporting
Except for the remediation efforts undertaken to address the previously reported material weaknesses described above, there has been no other change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during 2021, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
56
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of WPP plc
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of WPP plc and subsidiaries (the “Company”) as of 31 December 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 31 December 2021, based on criteria established
in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended 31 December 2021, of the Company and our report dated 6 April 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The audit committee consisted of Jacques Aigrain, Sandrine Dufour, Tarek Farahat, Tom Ilube, and Cindy Rose at 31 December 2021. The Board has determined that Jacques Aigrain and Sandrine Dufour are audit committee financial experts as defined by the Sarbanes-Oxley Act 2002 and, together with Tarek
Farahat, have recent and relevant financial experience for the purposes of the 2018 UK Corporate Governance Code. As announced on 29 March 2022, Sandrine Dufour succeeded Jacques Aigrain as Chair of the Audit Committee effective 1 April 2022. As announced on 31 January 2022, Simon Dingemans was appointed as a Director and member of the Committee effective from 31 January 2022 and is considered to have recent and relevant financial experience. The members of the Committee have been determined to be independent within the meaning of the applicable NYSE listing standards and rules of the Securities Exchange Act 1934, as amended.
See the biographies of Jacques Aigrain, Simon Dingemans, Sandrine Dufour, and Tarek Farahat in Item 6A of this Annual Report on Form 20-F.
ITEM 16B.
CODE OF ETHICS
WPP has in place a Code of Business Conduct that constitutes a “code of ethics” as defined in applicable regulations of the Securities and Exchange Commission. The Code of Business Conduct, which is regularly reviewed by the Audit Committee and the Board and was last updated in 2016, sets out the principal obligations of all directors, officers and employees. Directors and senior executives throughout the Group are required each year to sign this Code. The WPP Code of Business Conduct is available on the Company’s website, http://www.wpp.com/investors/corporate-governance.
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
2021
2020
£m
£m
Audit fees
31.9
29.3
Audit-related
fees1
0.4
0.4
Other fees2
1.4
0.7
Tax fees3
—
0.1
33.7
30.5
1 Audit-related
fees are in respect of the review of the interim financial information. All audit-related fees were approved by the Audit Committee.
2 Other fees include audits for earnout purposes and were approved by the Audit Committee.
3 Tax fees comprise tax advisory, planning and compliance services. All tax fees were approved by the Audit Committee.
See note 3 to the consolidated financial statements for more details of auditors’ remuneration for the years ended 31 December 2021, 2020 and 2019.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has a pre-approval policy for the engagement of the external auditors in relation to the supply of permissible non-audit services, taking into account
relevant ethical and regulatory requirements. WPP’s policy regarding non-audit services that may be provided by the Group’s auditors, Deloitte, prohibits certain categories of work in line with relevant guidance on independence, such as ethical standards issued by the Auditing Practices Board and independence rules of the Public Company Accounting Oversight Board (United States) and the SEC. Other categories of work may be undertaken by Deloitte subject to an approvals process that is designed appropriately for different categories and values of proposed work. All of the audit and non-audit services carried out in the years ended 31 December 2021 and 2020 were pre-approved under the policies and procedures summarised above.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not
applicable.
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ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
At the Annual General Meeting of WPP plc on 10 June 2020 a special resolution was passed authorising WPP plc to make market purchases of its own shares up to a maximum number of 122,532,907 ordinary shares. This authority expired at the Annual General Meeting of WPP plc on 9 June 2021 and was replaced by a new authority to purchase up to a maximum number of 121,258,871 ordinary shares until the earlier of the conclusion of the Annual General Meeting of WPP plc in 2022 and 1 September 2022.
Total number of shares purchased
Average price (£)
Total number of shares purchased as part of
publicly announced plan
Maximum number of shares that may yet be purchased under plan
1/1/21 – 31/1/21
—
—
—
121,882,907
1/2/21 – 28/2/21
969
7.54
969
121,881,938
1/3/21
– 31/3/21
8,898,884
9.10
8,898,884
112,983,054
1/4/21 – 30/4/21
7,462,500
9.46
7,462,500
105,520,554
1/5/21
– 31/5/21
6,924,689
9.69
6,924,689
98,595,865
1/6/21 – 30/6/21
7,938,442
9.95
7,938,442
116,167,979
1/7/21
– 31/7/21
—
—
—
116,167,979
1/8/21 – 31/8/21
6,546,689
9.76
6,546,689
109,621,290
1/9/21
– 30/9/21
9,274,350
9.79
9,274,350
100,346,940
1/10/21 – 31/10/21
4,560,800
9.82
4,560,800
95,786,140
1/11/21
– 30/11/21
15,297,840
10.93
15,297,840
80,488,300
1/12/21 – 31/12/21
14,186,115
10.87
14,186,115
66,302,185
Total
81,091,278
10.09
81,091,278
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
The Company’s ADSs are listed on the NYSE. In general, under Section 303A.11 of the NYSE’s Listed Company Manual, foreign private issuers such as WPP listed on the NYSE are permitted to follow home country corporate governance practices instead of certain of the corporate governance requirements of Section 303A of the Listed Company Manual.
The following discussion identifies the principal ways that WPP’s corporate governance practices differ from the requirements of Section 303A of the Listed Company Manual:
•Section 303A.03
requires that non-management directors hold regular executive sessions and that the listed company disclose on its website or in its annual report the name of the director presiding at such sessions. The Company complies with the equivalent domestic requirements set out in the UK Corporate Governance Code (the “Code”), which requires the Chairman of the Company to hold meetings with the Non-Executive Directors without executives present (Provision 13 of the Code). The Non-Executive Directors, led by the Senior Independent Director, also meet at least annually without the Chairman present to appraise the Chairman’s performance, and on other occasions as necessary (Provision 12 of
the Code).
•Section 303A.04 requires that the written charter of the nominating/corporate governance committee and the compensation committee each require that the committee consist entirely of independent directors. While all current members of the Company’s Nomination and Governance Committee are independent, the terms of reference of the committee require, consistent with the Code, that only a majority of the members of the committee be independent (Provision 17 of the Code).
•Section 303A.05 requires that compensation committees have authority to retain compensation consultants, legal counsel and other advisers at the issuer’s expense, and that they consider specific factors before doing so. Section 303A.05 also requires that a compensation committee’s
written charter cover the preparation of disclosure required of domestic issuers by Item 407(e)(5) of Regulation S-K and delegation of the committee’s duties to one or more subcommittees. The terms of reference of the Company’s Compensation Committee are written in compliance with the Code and give the committee the authority to obtain outside legal assistance and any professional advice, at the Company’s expense, as the committee considers necessary for the discharge of its responsibilities, but do not specifically require the committee to consider the factors listed in Section 303A.05. The committee’s terms of reference also do not cover the preparation of the Item
59
407(e)(5)
disclosure or delegation of the committee’s duties to subcommittees. The Company complies instead with the requirements of the Code in this regard.
•Section 303A.07 requires that terms of reference of a listed company’s audit committee cover the preparation of disclosure required of domestic issuer by Item 407(d)(3) of Regulation S-K and require that the committee meet separately with management. The Company’s Audit Committee has written terms of reference in accordance with the Code, which do not cover these matters, although they do require that the committee meet separately with and monitor the effectiveness of the auditors and the head of the Company’s
internal audit function.
•Section 303A.08 requires that listed companies obtain shareholder approval before a stock option or purchase plan is established or materially revised or other equity compensation arrangement is made or materially revised pursuant to which stock may be acquired by directors, employees or other service providers of the listed company, subject to certain exceptions. The Company seeks shareholder approval for the adoption or amendment of stock plans or stock purchase plans as required by the Articles of Association of the Company, the Listing Rules of the UK Listing Authority (the Listing Rules) and the laws of Jersey.
•Subject
to the exceptions permitted in the Listing Rules, this involves seeking share owner approval to any such plan that falls into either of the following categories (as defined in the Listing Rule 9.4):
(a)an employees’ share scheme if the scheme involves or may involve the issue of new shares or the transfer of treasury shares; and
(b)a long-term incentive plan in which one or more directors of the Company is eligible to participate and to material amendments of that plan to the extent required by the plan’s rules. In this context, it should be noted that the provisions of the rules relating to whether amendments to the plan rules must be approved by share owners must themselves be drafted to ensure compliance with the Listing Rules.
•Section 303A.09
requires that listed companies adopt corporate governance guidelines that cover certain specified matters. The Company follows the Code, which covers all of the matters specified in Section 303A.09 (and more). As is customary for UK companies, the Company states how it complies with the principles of the Code and a confirmation that it complies with the Code’s provisions or, where it does not, provide an explanation of how and why it does not comply (Listing Rule 9.8.6). In addition, the Company is required to make certain mandatory corporate governance statements in the Directors’ Report in accordance with the UK Listing Authority’s Disclosure Guidance and Transparency Rules, DTR 7. The
Company will comply with these requirements in its 2021 Annual Report. The Company therefore does not adopt the elements of the Code as a separate written policy.
•Section 303A.12 requires that each listed company must provide certain certifications of compliance with the NYSE corporate governance rules annually, although foreign private issuers are only required to comply with a subset of these requirements. The Company complies instead with the requirements of the Code in this regard.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
60
PART III
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements
of WPP plc at 31 December 2021, 2020 and 2019 and for the years ending 31 December 2021, 2020 and 2019 are included in this Annual Report on Form 20-F beginning on page F-1.
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of WPP plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of WPP plc and its subsidiaries (the “Company”) as of 31 December 2021 and 2020, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements, for each of the three years in the period ended 31 December 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of 31 December 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended 31 December 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of 31 December 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 6 April 2022, expressed an unqualified opinion on the
Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill — Refer to the Accounting Policies and Note 14 (Intangible assets) to the financial statements
Critical Audit Matter Description
The Company’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 Company 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 £7,612.3 million as of 31 December 2021.
We identified goodwill valuation as a critical audit matter because of the significant judgements made by management to estimate the recoverable amount of goodwill and the increased auditor judgement and level of audit effort required to obtain evidence to test these significant judgements,
including the use of specialists. This included consideration of the short-term cash flow forecasts of the Company's various businesses, and the sensitivity of certain other inputs to the value in use calculations for certain groups of cash generating units. Estimates of future performance and market conditions used to arrive at the net
F-1
present value of future cash flows at the relevant assessment date, which is used within the goodwill impairment analysis, are subjective in nature. 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 focus on those estimates that are either complex, including the discount rate calculations, or subjective in nature, including the short-term forecasts and long-term growth rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures focused on challenging and evaluating 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 short-term cash flow forecasts, discount rates and 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 to external economic data, including peers, market data and wider economic forecasts.
•We evaluated management’s ability to accurately forecast future revenues and growth rates by comparing actual results to management’s historical forecasts.
•With the assistance of our valuation specialists, 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 independent market data and an independently derived weighted average rate for each country, based on their GDP forecasts.
•We evaluated the Company’s disclosures on goodwill against the requirements of IFRS.
The consolidated financial statements of WPP plc and its subsidiaries (the Group) for the year ended 31 December 2021 have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as they apply to the financial statements of the Group for the year ended 31 December 2021.
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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.
The financial statements were approved by the Board of Directors and authorized for issue on 6 April 2022.
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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.
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New IFRS
accounting pronouncements
In the current year, the following Standards and Interpretations became effective:
– Covid-19 Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16); and
–IFRIC Agenda Decision on Accounting Treatment for Configuration and Customisation Costs in a Cloud Computing Arrangement.
The Group does not consider that other standards or amendments to standards adopted during the year have a significant impact on the financial statements.
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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 were effective from 1 January 2021. They provide relief on certain existing requirements in IFRS Standards, relating to modifications of financial instruments and lease contracts or hedging relationships triggered by a replacement of a benchmark interest rate in a contract with a new alternative benchmark rate, as a result of Interest Rate Benchmark Reform. The Group does not consider that these amendments had 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 beyond 30 June 2021
The amendment to IFRS 16, Covid-19-Related Rent Concessions beyond 30 June 2021, was issued by the IASB in March 2021 and was effective from 1 April 2021. It provides an extension to the period under which practical relief to lessees could be applied in accounting for rent concessions occurring as a direct consequence of Covid-19, as introduced in the original amendment, Covid-19-Related Concessions (Amendment to IFRS 16). There has been no material impact to our financial statements as a result of the application of this amendment.
Impact of IFRIC Agenda Decision on Accounting Treatment for Configuration and Customisation Costs in a Cloud Computing Arrangement
In April 2021, an IFRIC agenda decision was issued in relation to the accounting treatment for configuration and customisation costs in a cloud
computing arrangement. This guidance clarified that in order for an intangible asset to be capitalised in relation to customisation and configuration costs in a software-as-a service (SaaS) arrangement, it is necessary for there to be control of the underlying software asset or for there to be a separate intangible asset which meets the definition in IAS 38 Intangible Assets.
In
2020, as part of the Group's transformation plan, the Group commenced a multi-year implementation of a cloud-based ERP and human capital management tool. The Group has completed its assessment of the financial reporting impact of this agenda decision on this implementation and has changed the accounting policy in the financial statements to align with the clarified guidance within the IFRIC agenda decision. As a result, the Group has expensed all costs associated with this implementation, which amount to £i62.2 million
as at 31 December 2021. This balance includes costs that were previously capitalised as at 31 December 2020 of £i14.0 million.
At the date of authorisation of these financial statements, there were a number of standards or amendments to standards, which have not been applied in these financial statements, that were in issue but not yet effective. The Group does not consider that any of these standards or amendments to standards in issue but not yet effective will have
a significant impact on the financial statements.
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Restatement
During 2021, the Group determined that the financial statements for the prior periods contained errors relating to historic tax asset and liability adjustments that had accumulated over a number of years in the Group consolidation. As a result, previously reported corporate income tax recoverable, corporate income tax payable and tax charge were incorrect. The cumulative impact resulted in an overstatement of equity as at 31 December
2018 of £i106.3 million, which has been corrected by reducing the 2019 opening retained earnings by £i101.5 million and other reserves by £i4.8
million. Corporate income tax recoverable has reduced by £i22.8 million (2019: £i22.8 million) and corporate income tax payable increased by £i93.5
million (2019: £i95.7 million) on the consolidated balance sheet at 31 December 2020. These changes also decreased the tax charge in the year ended 31 December 2020 by £i2.2
million (2019: increase of £i12.2 million). The restatement resulted in an increase in the basic and diluted earnings per share from continuing and discontinued operations of i0.2p
and i0.2p, respectively, for the year ended 31 December 2020 (2019: decrease of i1.0p and i0.9p
respectively).
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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.
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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:
•other (including capitalised computer software) – i3-i5 years.
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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 ifive-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.
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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 – i50
years;
•leasehold land and buildings – iover the term of the lease or life of the asset, if shorter;
•fixtures, fittings and equipment – i3-i10
years;
•computer equipment – i3-i5 years.
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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.
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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 and retranslation 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.
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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.
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.
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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.
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Trade
receivables and work in progress
Trade receivables are stated net of loss allowances.
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.
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Expected credit losses
The
Group has applied the simplified approach to measuring expected credit losses, as permitted by IFRS 9 Financial Instruments. This has been applied to trade receivables, contract assets and lease receivables. 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. 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. For all other assets, the general approach has been applied and a loss allowance for 12-month expected credit losses is recognised.
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.
Further details on expected credit losses are provided in note 18.
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Foreign
currency and interest rate hedging
The Group’s policy on interest rate and foreign exchange rate management sets out the instruments and methods available to hedge interest and currency risk exposures and the control procedures in place to ensure effectiveness.
The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective
as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
At the inception of the hedge relationship, the 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 items that are 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.
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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 the Group's own 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. On initial recognition, the corresponding amount is recognised against the equity reserve, which is subsequently reversed on derecognition, either through exercise or non-exercise of the option agreement. 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.
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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.
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Debt
Interest-bearing debt is recorded at the proceeds received, net of direct issue costs.
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Cash
and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, including bank deposits and money market funds. The Group’s 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.
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Borrowing
costs
Finance costs of borrowing are recognised in the consolidated income statement over the term of those borrowings.
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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 is broad and generally 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.
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.
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.
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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.
i
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 other 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.
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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 such as onerous contracts and dilapidations. Also included are other provisions, primarily long-term employee benefits such as deferred compensation plans, and legal claims, where the likelihood of settlement is considered probable.
i
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.
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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.
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Hyperinflation
in Argentina
During 2021, 2020 and 2019, 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 2021, this resulted in an increase in goodwill of £i23.9 million
(2020: £i22.6 million, 2019: £i41.0 million), an increase in other intangibles of £i7.6 million
(2020: £i5.3 million, 2019: £i7.1 million), and an increase in property, plant and equipment of £i20.3 million
(2020: £i19.3 million, 2019: £i10.7 million). A consumer price index (CPI)
of i582.5 was used at 31 December 2021 (2020: i385.9, 2019: i283.4).
The impact on other non-monetary assets and liabilities and the impact on the Group’s income statement in the year were immaterial.
/i
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.
i
Non-controlling
interests
Non-controlling interests in acquired companies are measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The acquisition of a non-controlling interest in a subsidiary, and the sale of an interest while retaining control, is accounted for within equity, and the cash cost of such purchases is included within “financing activities” in the cash flow statement.
i
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 sensitivities to these estimates are set out in note 14;
•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;
•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.
Revaluation
and retranslation of financial instruments
6
(i87.8)
(i147.2)
i163.8
Profit/(loss)
before taxation
i950.8
(i2,790.6)
i1,214.3
Taxation
7
(i230.1)
(i127.1)
(i287.2)
Profit/(loss)
for the year from continuing operations
i720.7
(i2,917.7)
i927.1
Discontinued
operations
Profit for the year from discontinued operations
12
i—
i16.4
i10.8
Profit/(loss)
for the year
i720.7
(i2,901.3)
i937.9
Attributable
to
Equity holders of the parent:
Continuing operations
i637.7
(i2,971.6)
i847.9
Discontinued
operations
i—
i6.5
(i3.8)
i637.7
(i2,965.1)
i844.1
Non-controlling
interests:
Continuing operations
i83.0
i53.9
i79.2
Discontinued
operations
i—
i9.9
i14.6
i83.0
i63.8
i93.8
i720.7
(i2,901.3)
i937.9
Earnings
per share from continuing and discontinued operations
Basic earnings per ordinary share
9
i53.4
p
(i242.5
p)
i67.5
p
Diluted
earnings per ordinary share
9
i52.5
p
(i242.5
p)
i67.0
p
Earnings
per share from continuing operations
Basic earnings per ordinary share
9
i53.4
p
(i243.0
p)
i67.8
p
Diluted
earnings per ordinary share
9
i52.5
p
(i243.0
p)
i67.3
p
Notes
The
accounting policies on pages F-3 to F-11 and the accompanying notes on pages F-17 to F-65 form an integral part of this consolidated income statement.
1Figures have been restated as described in the accounting policies.
Items
that may be reclassified subsequently to profit or loss
Exchange adjustments on foreign currency net investments
(i105.0)
i81.3
(i625.1)
Gain
on net investment hedges
i45.5
i9.7
i—
Loss
on cash flow hedges
(i38.0)
(i5.9)
i—
Share
of other comprehensive income/(loss) of associate undertakings
i13.5
(i61.5)
i—
Exchange
adjustments recycled to the income statement on disposal of discontinued operations
i—
(i20.6)
(i284.0)
(i84.0)
i3.0
(i909.1)
Items
that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit pension plans
i14.3
i2.0
(i36.6)
Deferred
tax on defined benefit pension plans
(i3.0)
i7.4
i6.4
Movements
on equity investments held at fair value through other comprehensive income
(i35.5)
(i127.7)
(i141.4)
(i24.2)
(i118.3)
(i171.6)
Other
comprehensive loss for the year
(i108.2)
(i115.3)
(i1,080.7)
Total
comprehensive income/(loss) for the year
i612.5
(i3,016.6)
(i142.8)
Attributable
to
Equity holders of the parent:
Continuing operations
i539.8
(i3,063.9)
i167.8
Discontinued
operations
i—
(i12.6)
(i386.4)
i539.8
(i3,076.5)
(i218.6)
Non-controlling
interests:
Continuing operations
i72.7
i50.5
i61.9
Discontinued
operations
i—
i9.4
i13.9
i72.7
i59.9
i75.8
i612.5
(i3,016.6)
(i142.8)
Notes
The
accounting policies on pages F-3 to F-11 and the accompanying notes on pages F-17 to F-65 form an integral part of this consolidated statement of comprehensive income.
1Figures have been restated as described in the accounting policies.
Purchases
of other intangible assets (including capitalised computer software)
(i29.9)
(i54.4)
(i54.8)
Proceeds
on disposal of property, plant and equipment
i8.7
i11.2
i174.0
Net
cash (outflow)/inflow from investing activities
(i642.2)
(i167.6)
i1,759.6
Financing
activities
Repayment of lease liabilities
(i320.7)
(i300.1)
(i249.8)
Share
option proceeds
i4.4
i—
i0.6
Cash
consideration received from non-controlling interests
11
i39.5
i—
i—
Cash
consideration for purchase of non-controlling interests
11
(i135.0)
(i80.6)
(i62.7)
Share
repurchases and buybacks
11
(i818.5)
(i290.2)
(i43.8)
Proceeds
from issue of bonds
11
i—
i915.5
i—
Repayment
of borrowings
11
(i397.1)
(i282.7)
(i1,713.2)
Financing
and share issue costs
(i0.4)
(i7.1)
(i6.4)
Equity
dividends paid
(i314.7)
(i122.0)
(i750.5)
Dividends
paid to non-controlling interests in subsidiary undertakings
(i114.5)
(i83.3)
(i96.2)
Net
cash outflow from financing activities
(i2,057.0)
(i250.5)
(i2,922.0)
Net
(decrease)/increase in cash and cash equivalents
(i666.4)
i1,636.7
i688.1
Translation
of cash and cash equivalents
(i130.1)
(i99.2)
(i89.7)
Cash
and cash equivalents at beginning of year
i4,337.1
i2,799.6
i2,201.2
Cash
and cash equivalents including cash held in disposal group at end of year
i3,540.6
i4,337.1
i2,799.6
Cash
and cash equivalents held in disposal group presented as held for sale
i—
i—
(i66.3)
Cash
and cash equivalents at end of year
11
i3,540.6
i4,337.1
i2,733.3
Note
The
accounting policies on pages F-3 to F-11 and the accompanying notes on pages F-17 to F-65 form an integral part of this consolidated cash flow statement.
Liabilities
associated with assets classified as held for sale
i—
i—
(i170.4)
(i16,485.4)
(i23,227.1)
(i24,054.3)
Net
current (liabilities)/assets
(i1,149.8)
i754.6
(i298.4)
Total
assets less current liabilities
i11,385.4
i12,940.0
i15,528.3
Non-current
liabilities
Bonds and bank loans
21
(i4,216.8)
(i4,975.5)
(i4,047.3)
Trade
and other payables
20
(i619.9)
(i313.5)
(i449.6)
Corporate
income tax payable
i-
(i1.3)
i—
Deferred
tax liabilities
17
(i312.5)
(i304.1)
(i379.8)
Provision
for post-employment benefits
24
(i136.6)
(i156.7)
(i159.0)
Provisions
for liabilities and charges
22
(i268.5)
(i306.3)
(i247.8)
Long-term
lease liabilities
13
(i1,762.1)
(i1,832.5)
(i1,947.5)
(i7,316.4)
(i7,889.9)
(i7,231.0)
Net
assets
i4,069.0
i5,050.1
i8,297.3
Equity
Called-up
share capital
27
i122.4
i129.6
i132.8
Share
premium account
i574.7
i570.3
i570.3
Other
reserves
28
(i335.9)
i191.2
(i174.7)
Own
shares
(i1,112.1)
(i1,118.3)
(i1,178.7)
Retained
earnings
i4,367.3
i4,959.2
i8,576.2
Equity
shareholders’ funds
i3,616.4
i4,732.0
i7,925.9
Non-controlling
interests
i452.6
i318.1
i371.4
Total
equity
i4,069.0
i5,050.1
i8,297.3
Notes
The
accounting policies on pages F-3 to F-11 and the accompanying notes on pages F-17 to F-65 form an integral part of this consolidated balance sheet.
1Figures have been restated as described in the accounting policies.
The
accounting policies on pages F-3 to F-11 and the accompanying notes on pages F-17 to F-65 form an integral part of this consolidated statement of changes in equity.
1Figures have been restated as described in the accounting policies.
2Accumulated losses on existing equity investments held at fair value through other comprehensive income are £i309.1
million at 31 December 2021 (2020: £i273.6 million, 2019: £i145.9
million).
3During 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 constituted a liability at 31 December 2019 and was recognised as a movement in other reserves in the year ended 31 December 2019. As the close period ended on 27 February 2020 the movement in other reserves has been reversed in the year ended 31 December 2020.
4Acquisition 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.
5During the year, the Group merged Finsbury Glover Hering and Sard Verbinnen & Co to form a leading global communications firm. As a part of this transaction, certain management acquired shares in the Company and a put option was granted which allows the equity partners to require the Group to purchase these shares. This resulted in a movement in other reserves in the year of £i219.6 million.
6During
2021, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 16 December 2021 and ending on 18 February 2022, in accordance with UK listing rules. The commitment resulting from this agreement constituted a liability at 31 December 2021 and was recognised as a movement in other reserves in the year ended 31 December 2021.
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.
i
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
The Group is organised into ithree reportable
segments – Global Integrated Agencies, Public Relations and Specialist Agencies.
IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Group’s Chief Executive Officer (the Chief Operating Decision Maker). Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 permits aggregation of these components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable segments, the Directors have had regard to the similar economic characteristics of certain operating segments, their shared client bases, the similar nature of their products or services and their long-term margins, amongst other factors.
During 2020, the Group announced the intention
to combine Grey and AKQA into AKQA Group, to bring Geometry and GTB into VMLY&R and International Healthcare into VMLY&R and Ogilvy. As a result AKQA, Geometry, GTB and International Healthcare are now reported within Global Integrated Agencies, having previously been reported within Specialist Agencies. Prior year figures have been re-presented to reflect these changes.
i
Reported contributions were as follows:
Continuing
operations – Income statement
Revenue1
Revenue
less
pass-through
costs2
Headline
operating
profit3
£m
£m
£m
2021
Global
Integrated Agencies
i10,836.3
i8,638.7
i1,215.5
Public
Relations
i959.0
i909.7
i143.1
Specialist
Agencies
i1,005.8
i848.8
i134.9
i12,801.1
i1,493.5
20204
Global
Integrated Agencies
i10,265.5
i8,194.2
i1,059.9
Public
Relations
i892.9
i854.4
i141.3
Specialist
Agencies
i844.4
i713.4
i59.3
i12,002.8
i1,260.5
20194
Global
Integrated Agencies
i11,269.2
i9,090.4
i1,358.6
Public
Relations
i956.5
i898.0
i140.6
Specialist
Agencies
i1,008.4
i858.1
i61.4
i13,234.1
i1,560.6
Notes
1Intersegment
sales have not been separately disclosed as they are not material.
2Revenue less pass-through costs is revenue less media and other pass-through costs. 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 costs. See note 3 to the consolidated financial statements for more details of the pass-through costs.
3A reconciliation from operating profit to headline operating profit is provided in note 31.
4Prior year figures have been re-presented to reflect the changes to segments described above.
Notes to the consolidated financial statements (continued)
2. Segment information (continued)
Continuing
operations – Other information
Share-based payments
Capital
additions1
Depreciation
and
amortisation2
Goodwill impairment
Share of results of associates
Interests in associates and joint ventures
£m
£m
£m
£m
£m
£m
2021
Global
Integrated Agencies
i92.3
i252.7
i372.8
i—
i22.7
i115.2
Public
Relations
i4.8
i17.9
i28.1
i—
i1.7
i8.0
Specialist
Agencies3
i2.5
i22.5
i43.1
i1.8
(i0.6)
i289.7
i99.6
i293.1
i444.0
i1.8
i23.8
i412.9
20204
Global
Integrated Agencies
i61.3
i234.2
i449.7
i2,355.1
i19.0
i158.4
Public
Relations
i8.0
i15.5
i32.8
i161.5
i1.3
i6.4
Specialist
Agencies3
i5.1
i22.9
i59.4
i306.3
(i156.3)
i165.9
i74.4
i272.6
i541.9
i2,822.9
(i136.0)
i330.7
20194
Global
Integrated Agencies
i57.2
i284.5
i424.6
i4.8
i16.8
i164.6
Public
Relations
i4.6
i17.5
i31.5
i—
(i0.3)
i5.5
Specialist
Agencies3
i4.2
i27.8
i52.2
i42.9
(i1.8)
i642.9
i66.0
i329.8
i508.3
i47.7
i14.7
i813.0
Notes
1Capital
additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software).
2Depreciation of property, plant and equipment, depreciation of right-of-use assets and amortisation of other intangible assets.
3Specialist Agencies includes the Kantar associates and amounts previously reported under the Data Investment Management segment.
4Prior year figures have been re-presented to reflect the changes to segments described above.
i
Contributions
by geographical area were as follows:
2021
2020
2019
Continuing operations
£m
£m
£m
Revenue1
North
America2
i4,494.2
i4,464.9
i4,854.7
United
Kingdom
i1,866.9
i1,637.0
i1,797.1
Western
Continental Europe
i2,786.3
i2,441.6
i2,628.8
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
i3,653.7
i3,459.3
i3,953.5
i12,801.1
i12,002.8
i13,234.1
Revenue
less pass-through costs3
North America2
i3,849.2
i3,743.4
i4,034.3
United
Kingdom
i1,414.3
i1,233.8
i1,390.1
Western
Continental Europe
i2,225.4
i2,019.4
i2,176.4
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
i2,908.3
i2,765.4
i3,245.7
Headline
operating profit4
North America2
i655.7
i611.9
i662.0
United
Kingdom
i180.9
i137.7
i188.5
Western
Continental Europe
i288.6
i198.7
i261.5
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
i368.3
i312.2
i448.6
i1,493.5
i1,260.5
i1,560.6
Notes
1Intersegment
sales have not been separately disclosed as they are not material.
2North America includes the United States with revenue of £i4,220.8 million (2020: £i4,216.1 million, 2019:
£i4,576.5 million), revenue less pass-through costs of £i3,597.4 million (2020: £i3,524.8
million, 2019: £i3,806.3 million) and headline operating profit of £i615.2 million (2020: £i563.7
million, 2019: £i620.6 million).
3Revenue less pass-through costs is revenue less media and other pass-through costs. 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 costs. See note 3 to the consolidated financial statements for more details of the pass-through costs.
4A reconciliation from operating
profit to headline operating profit is provided in note 31.
Notes to the consolidated financial statements (continued)
2. Segment information (continued)
2021
2020
Continuing
operations
£m
£m
Non-current assets1
North America2
i5,075.4
i4,962.1
United
Kingdom
i1,565.4
i1,488.7
Western
Continental Europe
i2,618.8
i2,745.0
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
i2,933.6
i2,767.1
i12,193.2
i11,962.9
Notes
1Non-current
assets excluding financial instruments and deferred tax.
2North America includes the United States with non-current assets of £i4,730.1 million (2020: £i4,609.0
million).
i
3. Costs of services and general and administrative costs
i
2021
2020
2019
Continuing
operations
£m
£m
£m
Costs of services
i10,597.5
i9,987.9
i10,825.1
General
and administrative costs
i974.6
i4,293.0
i1,113.1
i11,572.1
i14,280.9
i11,938.2
Costs
of services and general and administrative costs include:
2021
2020
2019
Continuing operations
£m
£m
£m
Staff
costs (note 5)
i7,166.7
i6,556.5
i7,090.6
Establishment
costs
i529.0
i638.5
i672.9
Media
pass-through costs
i1,865.3
i1,555.2
i1,656.2
Other
costs of services and general and administrative costs1
i2,011.1
i5,530.7
i2,518.5
i11,572.1
i14,280.9
i11,938.2
Included
within costs of services and general administrative costs are the following:
2021
2020
2019
Continuing operations
£m
£m
£m
Goodwill
impairment (note 14)
i1.8
i2,822.9
i47.7
Investment
and other impairment (reversals)/charges
(i42.4)
i296.2
i7.5
Restructuring
and transformation costs
i145.5
i80.7
i153.5
Restructuring
costs in relation to Covid-19
i29.9
i232.5
i—
Litigation
settlement
i21.3
i25.6
(i16.8)
Gain
on sale of freehold property in New York
i—
i—
(i7.9)
Amortisation
and impairment of acquired intangible assets
i97.8
i89.1
i121.5
Amortisation
of other intangible assets
i19.9
i35.2
i21.2
Depreciation
of property, plant and equipment
i151.2
i174.8
i185.5
Depreciation
of right-of-use assets
i272.9
i331.9
i301.6
(Gains)/losses
on sale of property, plant and equipment
(i1.3)
i0.3
i3.2
Losses/(gains)
on disposal of investments and subsidiaries
i10.6
(i7.8)
(i40.4)
Gains
on remeasurement of equity interests arising from a change in scope of ownership
i—
(i0.6)
(i0.4)
Net
foreign exchange losses
i4.4
i5.9
i6.1
Short-term
lease expense
i18.0
i36.7
i83.8
Low-value
lease expense
i2.3
i2.3
i2.9
Note
1Other
costs of services and general and administrative costs include £i538.6 million (2020: £i685.6 million, 2019: £i731.4
million) of other pass-through costs.
/
In 2021, operating profit includes credits totalling £i19.3 million (2020: £i46.3
million, 2019: £i26.9 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2020. Further details of the Group’s approach to acquisition reserves, as required by IFRS 3 Business Combinations, are given in note 29.
Notes to the consolidated financial statements (continued)
3. Costs of services and general and administrative costs (continued)
Amortisation and impairment of acquired intangible assets of £i97.8 million (2020: £i89.1
million, 2019: £i121.5 million) includes an impairment charge in the year of £i47.9
million (2020: £i21.6 million, 2019: £i26.5
million) in regard to certain brand names that are no longer in use, including £i43.8 million for brands with an indefinite life.
Investment and other impairment reversals of £i42.4
million primarily relates to the partial reversal of a £i255.6 million impairment taken in 2020 relating to Imagina, an associate in Spain.
Losses on disposal of investments and subsidiaries of £i10.6
million in 2021 includes a loss of £i4.9 million on the disposal of XMKT in China, which completed in September 2021. Gains on disposal of investments and subsidiaries of £i40.4
million in 2019 include a gain of £i28.6 million on the disposal of the Group's interest in Chime.
Restructuring and transformation costs of £i145.5
million (2020: £i80.7 million, 2019: £i153.5 million) include £i94.2
million in relation to the Group’s IT transformation programme. This programme will allow technology to become a competitive advantage in the market as our clients, and their clients, move to an ever-increasing digital world. It includes costs of £i62.2 million (including £i14.0
million that was previously capitalised at 31 December 2020) in relation to the rollout of a new ERP system in order to drive efficiency and collaboration throughout the Group. The remaining £i51.3 million relates 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.
Restructuring costs in relation to Covid-19 of £i29.9 million (2020: £i232.5
million, 2019: £inil) primarily relate to 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. We note that there are other Covid-19 related amounts, including credits, which have not been reflected on the grounds that they cannot effectively be distinguished from the day-to-day activities of the business.
In
2021, the Group received £i5.3 million (2020: £i77.1 million, 2019: £inil)
of aid from governments around the world in relation to the Covid-19 pandemic, which is included as a credit in other staff costs.
Total impairment charges included in restructuring costs of £i39.2 million (2020: £i196.7
million) consist of £i17.6 million (2020: £i147.6 million) within restructuring costs in relation to Covid-19 and £i21.6
million (2020: £i49.1 million) within restructuring and transformation costs. These impairment charges include £i19.3 million (2020: £i117.0
million) in relation to right-of-use assets, £i9.8 million (2020: £i79.7
million) of related property, plant and equipment and £i10.1 million (2020: £inil) of other intangibles, arising from the Group’s
reassessment of its property requirements as a result of effective remote working practices during the Covid-19 pandemic and continued focus on campuses. There were no impairment charges included in restructuring costs in 2019.
The goodwill impairment charge of £i2,822.9 million in 2020 reflects the adverse impacts of Covid-19 on a number of businesses in the Group at that time.
Fees
payable to the auditors pursuant to legislation
i31.9
i29.3
i34.5
Audit-related
services1
i0.4
i0.4
i0.4
Other
services2
i1.4
i0.7
i7.8
Tax
compliance services
i—
i0.1
i—
Total
other fees
i1.8
i1.2
i8.2
Total
fees
i33.7
i30.5
i42.7
Notes
1Audit-related
assurance services are in respect of the review of the interim financial information.
2Other services include audits for earnout purposes.
/
i
4.
Share of results of associates
i
Share of results of associates includes:
2021
2020
2019
Continuing
operations
£m
£m
£m
Share of profit before interest and taxation
i208.5
i142.5
i99.2
Share
of exceptional losses
(i62.3)
(i146.1)
(i47.8)
Share
of interest and non-controlling interests
(i83.9)
(i91.4)
(i19.4)
Share
of taxation
(i38.5)
(i41.0)
(i17.3)
i23.8
(i136.0)
i14.7
/
Share
of exceptional losses of £i62.3 million (2020: £i146.1 million, 2019:
£i47.8 million) primarily comprise £i38.8
million (2020: £i54.3 million, 2019 £i5.3
million) of amortisation and impairment of acquired intangible assets as well as restructuring and one-off transaction costs of £i18.8 million (2020: £i89.3
million, 2019: £i20.3 million) within Kantar.
Notes to the consolidated financial statements (continued)
i
5. Our people
i
Our
staff numbers averaged i104,808 for the year ended 31 December 2021 against i104,163 in 2020 and i132,823
in 2019. Their geographical distribution was as follows:
2021
2020
2019
North America
i21,764
i21,524
i25,008
United
Kingdom
i10,995
i10,670
i14,192
Western
Continental Europe
i21,514
i21,551
i26,973
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
i50,535
i50,418
i66,650
i104,808
i104,163
i132,823
/i
Their
reportable segment distribution was as follows:
2021
2020 1
2019 1
Global Integrated Agencies
i89,701
i88,406
i90,582
Data
Investment Management
i—
i1,341
i26,325
Public
Relations
i7,121
i6,810
i6,890
Specialist
Agencies
i7,986
i7,606
i9,026
i104,808
i104,163
i132,823
Note
1Prior
year figures have been re-presented to reflect the changes to segments described in note 2.
/
At the end of 2021, staff numbers were i109,382 (2020: i99,830,
2019: i106,786).
i
Staff costs include:
2021
2020
2019
Continuing
operations
£m
£m
£m
Wages and salaries
i4,797.2
i4,781.0
i4,946.2
Cash-based
incentive plans
i455.2
i110.7
i227.6
Share-based
incentive plans
i99.6
i74.4
i66.0
Social
security costs
i630.1
i570.9
i591.7
Pension
costs
i177.7
i171.7
i169.7
Severance
i41.8
i68.2
i42.6
Other
staff costs1
i965.1
i779.6
i1,046.8
i7,166.7
i6,556.5
i7,090.6
Note
1Freelance
and temporary staff costs are included in other staff costs.
/i
Compensation for key management personnel includes:
2021
2020
2019
£m
£m
£m
Short-term
employee benefits
i28.0
i17.9
i18.3
Pensions
and other post-retirement benefits
i0.9
i1.0
i1.0
Share-based
payments
i14.6
i10.3
i10.8
i43.5
i29.2
i30.1
//
Key
management personnel comprises the Board and the Executive Committee.
Notes to the consolidated financial statements (continued)
i
6.
Finance and investment income, finance costs and revaluation and retranslation of financial instruments
i
Finance and investment income includes:
2021
2020
2019
Continuing
operations
£m
£m
£m
Income from equity investments
i17.9
i8.7
i18.3
Interest
income
i51.5
i74.0
i80.7
i69.4
i82.7
i99.0
Finance
costs include:
2021
2020
2019
Continuing operations
£m
£m
£m
Net
interest expense on pension plans
i1.8
i2.9
i3.5
Interest
on other long-term employee benefits
i2.4
i3.1
i3.9
Interest
expense and similar charges1
i188.5
i205.0
i252.0
Interest
expense related to lease liabilities
i90.9
i101.0
i99.7
i283.6
i312.0
i359.1
Revaluation
and retranslation of financial instruments include:
2021
2020
2019
Continuing operations
£m
£m
£m
Movements
in fair value of treasury instruments
i9.1
i15.4
i0.4
Premium
on the early repayment of bonds
(i13.0)
i—
(i63.4)
Revaluation
of investments held at fair value through profit or loss
(i7.5)
i8.0
i9.1
Revaluation
of put options over non-controlling interests
(i40.6)
i12.3
(i24.3)
Revaluation
of payments due to vendors (earnout agreements)
(i58.7)
i13.4
(i3.7)
Retranslation
of financial instruments
i22.9
(i196.3)
i245.7
(i87.8)
(i147.2)
i163.8
Note
1Interest
expense and similar charges are payable on bank overdrafts, bonds and bank loans held at amortised cost.
/
The majority of the Group’s long-term debt is represented by $i1,063 million of US dollar bonds at an average interest rate of i4.26%,€i3,600 million of Eurobonds at an average interest rate of i1.94% and £i650
million of Sterling bonds at an average interest rate of i3.21%.
Average borrowings under the US Dollar Revolving Credit Facilities (note 10) amounted to inil (2020: inil).
Average
borrowings under the Australian Dollar Revolving Credit Facilities amounted to A$i52 million at an average rate of i1.89% (2020: A$i151
million at an average rate of i2.06%).
Average borrowings under the US Commercial Paper Programme for 2021 amounted to inil (2020: $i2
million at an average interest rate of i1.66% inclusive of margin).
Average borrowings under the Euro Commercial Paper Programme for 2021 amounted to inil (2020: inil).
Notes to the consolidated financial statements (continued)
i
7. Taxation
In 2021, the effective tax rate on profit/(loss) before taxation was i24.2%
(2020: -i4.6%, 2019: i23.7%)
i
The
tax charge comprises:
2021
20201
20191
Continuing operations
£m
£m
£m
Corporation
tax
Current year
i404.0
i307.8
i435.2
Prior
years
(i41.4)
(i83.2)
(i63.4)
i362.6
i224.6
i371.8
Deferred
tax
Current year
(i131.0)
(i80.2)
(i78.3)
Prior
years
(i1.5)
(i17.3)
(i6.3)
(i132.5)
(i97.5)
(i84.6)
Tax
charge
i230.1
i127.1
i287.2
Note
1Figures
have been restated as described in the accounting policies.
/
The corporation tax credit for prior years in 2021, 2020, and 2019 primarily comprises the release of a number of provisions following the resolution of tax matters in various countries.
i
The tax charge for the year can be reconciled to profit/(loss) before taxation in the consolidated income
statement as follows:
2021
20201
20191
Continuing operations
£m
£m
£m
Profit/(loss)
before taxation
i950.8
(i2,790.6)
i1,214.3
Tax
at the corporation tax rate of 19.0%2
i180.7
(i530.2)
i230.7
Tax
effect of share of results of associates
(i13.3)
i16.2
(i2.7)
Irrecoverable
withholding taxes
i52.3
i49.4
i44.7
Items
that are not deductible in determining taxable profit
i29.3
i67.0
i53.7
Goodwill
impairment
i0.6
i542.4
i10.4
Effect
of different tax rates in subsidiaries operating in other jurisdictions
i81.2
i92.7
i77.1
Origination
and reversal on unrecognised temporary differences
(i36.3)
(i29.3)
(i3.4)
Tax
losses not recognised or utilised in the year
i7.4
i21.1
i13.2
Utilisation
of tax losses not previously recognised
(i5.1)
(i1.7)
(i42.7)
Recognition
of temporary differences not previously recognised
i—
i—
(i24.1)
Net
release of prior year provisions in relation to acquired businesses
(i1.1)
(i1.7)
(i19.9)
Other
prior year adjustments
(i41.8)
(i98.8)
(i49.8)
Impact
of deferred tax rate change
(i23.8)
i—
i—
Tax
charge
i230.1
i127.1
i287.2
Effective
tax rate on profit/(loss) before tax
i24.2
%
(i4.6)
%
i23.7
%
Notes
1Figures
have been restated as described in the accounting policies.
2As 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 i19.0% (2020: i19.0%,
2019: i19.0%).
/
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, increasing tax rates as a consequence of the financial
support programmes implemented by governments during the Covid-19 pandemic, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, and 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
Notes to the consolidated financial statements (continued)
7. Taxation (continued)
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 enacted at the balance sheet date, and the Group has remeasured UK deferred tax balances accordingly and recognised a tax credit of £i23.8 million
in current period tax expense.
Tax risk management
We look to maintain open and transparent relationships with the tax authorities in the jurisdictions in which we operate and relevant government representatives. We maintain 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 significant 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.
i
8. Ordinary dividends
i
Amounts
recognised as distributions to equity holders in the year:
2021
2020
2019
2021
2020
2019
Per
share
Pence per share
£m
£m
£m
2020 Final dividend
i14.00
p
i—
i37.30
p
i167.7
i—
i466.4
2021
Interim dividend
i12.50
p
i10.00
p
i22.70
p
i147.0
i122.0
i284.1
i26.50
p
i10.00
p
i60.00
p
i314.7
i122.0
i750.5
/i
Proposed
final dividend for the year ended 31 December 2021:
2021
2020
2019
Per share
Pence per share
Final dividend
i18.70
p
i14.00
p
i—
/
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.
/
i
9.
Earnings per share
i
Basic EPS
The calculation of basic EPS is as follows:
Continuing
operations
2021
20201
20191
Earnings2 (£m)
i637.7
(i2,971.6)
i847.9
Weighted
average shares used in basic EPS calculation (m)
i1,194.1
i1,223.0
i1,250.0
EPS
i53.4p
(i243.0p)
i67.8p
Discontinued
operations
2021
2020
2019
Earnings2 (£m)
i—
i6.5
(i3.8)
Weighted
average shares used in basic EPS calculation (m)
i—
i1,223.0
i1,250.0
EPS
i—
i0.5p
(i0.3p)
Continuing
and discontinued operations
2021
20201
20191
Earnings2 (£m)
i637.7
(i2,965.1)
i844.1
Weighted
average shares used in basic EPS calculation (m)
i1,194.1
i1,223.0
i1,250.0
EPS
i53.4p
(i242.5p)
i67.5p
Notes
1Figures
have been restated as described in the accounting policies.
2Earnings is equivalent to profit/(loss) for the year attributable to equity holders of the parent.
Notes to the consolidated financial statements (continued)
9. Earnings per share (continued)
Diluted
EPS
The calculation of diluted EPS is as follows:
Continuing operations
2021
20201
20191
Diluted earnings
(£m)
i637.7
(i2,971.6)
i847.9
Weighted
average shares used in diluted EPS calculation (m)2
i1,215.3
i1,223.0
i1,260.6
Diluted
EPS
i52.5
p
(i243.0
p)
i67.3
p
Discontinued
operations
2021
2020
2019
Diluted earnings (£m)
i—
i6.5
(i3.8)
Weighted
average shares used in diluted EPS calculation (m)2
i—
i1,223.0
i1,260.6
Diluted
EPS
i—
i0.5
p
(i0.3
p)
Continuing
and discontinued operations
2021
20201
20191
Diluted earnings (£m)
i637.7
(i2,965.1)
i844.1
Weighted
average shares used in diluted EPS calculation (m)2
i1,215.3
i1,223.0
i1,260.6
Diluted
EPS
i52.5
p
(i242.5
p)
i67.0
p
Notes
1Figures
have been restated as described in the accounting policies.
2The weighted average shares used in the basic EPS calculation for 2020 have also been used for diluted EPS due to the anti-dilutive effect of the weighted average shares calculated for the diluted EPS calculation.
Diluted EPS has been calculated based on the diluted earnings amounts above. At 31 December 2021, options to purchase i7.2
million ordinary shares (2020: i14.2 million, 2019: i19.3
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.
iA reconciliation between the shares used in calculating basic and diluted EPS is as follows:
2021
2020
2019
m
m
m
Weighted
average shares used in basic EPS calculation
i1,194.1
i1,223.0
i1,250.0
Dilutive
share options outstanding
i1.3
i—
i0.3
Other
potentially issuable shares
i19.9
i13.0
i10.3
Weighted
average shares used in diluted EPS calculation
i1,215.3
i1,236.0
i1,260.6
At
31 December 2021 there were i1,224,459,550 (2020: i1,296,080,242, 2019: i1,328,167,813)
ordinary shares in issue, including i70,489,953 treasury shares (2020: i70,748,100, 2019: i70,787,730).
i
10.
Sources of finance
i
The following table summarises the equity and debt financing of the Group, and changes during the year:
Shares
Debt
2021
2020
2021
2020
Analysis
of changes in financing
£m
£m
£m
£m
Beginning of year
i699.9
i703.1
i5,032.7
i4,272.9
Ordinary
shares issued
i4.4
i—
—
—
Share
cancellations
(i7.2)
(i3.2)
—
—
Net
(decrease)/increase in drawings on bank loans and corporate bonds
—
—
(i397.1)
i632.8
Amortisation
of financing costs included in debt
—
—
i8.1
i7.5
Changes
in fair value due to hedging arrangements
—
—
(i2.5)
(i1.4)
Other
movements
—
—
(i0.4)
(i7.1)
Exchange
adjustments
—
—
(i199.1)
i128.0
End
of year
i697.1
i699.9
i4,441.7
i5,032.7
/
The
table above excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash flow statement. Other liabilities from financing activities including lease liabilities and derivatives used for hedging debts are disclosed in note 13 and note 26, respectively.
Shares
At 31 December 2021, the Company’s share base was entirely composed of ordinary equity share capital and share premium of £i697.1
million (2020: £i699.9 million), further details of which are disclosed in note 27.
Notes to the consolidated financial statements (continued)
10.
Sources of finance (continued)
Debt
US$ bonds The Group has in issue $i750 million of i3.75% bonds due September 2024, $i93
million of i5.125% bonds due September 2042 and $i220 million of i5.625%
bonds due November 2043.
Eurobonds The Group has in issue €i750 million of i3.0% bonds due November 2023, €i500
million of i1.375% bonds due March 2025, €i750 million of i2.25%
bonds due September 2026, €i750 million of i2.375% bonds due May 2027, €i600
million of i1.625% bonds due March 2030, and €i250 million of Floating Rate Notes carrying a coupon of i3m
EURIBOR +i0.45% due March 2022.
Sterling bonds The Group has in issue £i250 million of i3.750%
bonds due May 2032 and £i400 million of i2.875% bonds due September 2046.
Revolving Credit Facility The Group has a ifive-year
Revolving Credit Facility of $i2.5 billion due March 2026, signed in November 2021. The Group’s borrowings under these facilities, which are drawn down predominantly in pounds sterling, averaged inil
in 2021 (2020: inil).
In May 2021, the Group’s subsidiary, WPP AUNZ, repaid in full its A$i150 million Revolving Credit Facility due August 2021, and
its A$i270 million Revolving Credit Facility due August 2023. The Group’s borrowings under the Australian dollar facilities which were drawn down in Australian dollars and New Zealand dollars, averaged the equivalent of A$i52
million in 2021 (2020: A$i151 million).
The Group had available undrawn committed credit facilities of £i1,847.5 million
at 31 December 2021 (2020: £i2,023.2 million).
Borrowings under the $i2.5 billion Revolving Credit Facility are governed by certain financial covenants based
on the results and financial position of the Group.
The $i2.5 billion Revolving Credit Facility, due March 2026, 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.
Commercial paper programmes
The Group operates commercial paper programmes using its Revolving Credit
Facility as a backstop. The average US commercial paper outstanding in 2021 was inil (2020: $i2 million). The average Euro commercial paper outstanding in 2021 was inil
(2020: inil) inclusive of the effect of currency swaps. There was iino/
US or Euro commercial paper outstanding at 31 December 2021.
i
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:
2021
2020
£m
£m
Within
one year
(i326.8)
(i182.2)
Between
one and two years
(i745.4)
(i725.6)
Between
two and three years
(i646.5)
(i795.7)
Between
three and four years
(i492.8)
(i649.1)
Between
four and five years
(i698.0)
(i528.2)
Over
five years
(i2,546.3)
(i3,387.1)
Debt
financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes
Notes to the consolidated financial statements (continued)
10. Sources of finance (continued)
i
Analysis of fixed and floating rate debt by currency including the effect of cross-currency swaps:
2021
£m
Fixed
rate1
Floating basis
Period
(months)1
Currency
$
–
fixed
i1,231.8
i4.18
n/a
i72
£
–
fixed
i1,094.1
i2.97
n/a
i155
€
–
fixed
i1,976.0
i2.04
n/a
i69
–
floating
i210.2
n/a
iEURIBOR
i3
Other
(i70.4)
n/a
n/a
n/a
i4,441.7
2020
£m
Fixed
rate1
Floating basis
Period
(months)1
Currency
$
–
fixed
i1,585.1
i4.06
n/a
i70
£
–
fixed
i1,094.1
i3.21
n/a
i167
€
–
fixed
i2,104.6
i2.20
n/a
i79
– floating
i223.9
n/a
iEURIBOR
i15
Other
i25.0
n/a
n/a
n/a
i5,032.7
Note
/
1Weighted
average.
i
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:
Notes to the consolidated financial statements (continued)
11. Analysis of cash flows (continued)
Cash and cash equivalents:
2021
2020
2019
£m
£m
£m
Cash
at bank and in hand
i2,776.6
i10,075.0
i10,442.1
Short-term
bank deposits
i1,106.3
i2,824.1
i863.6
Overdrafts1
(i342.3)
(i8,562.0)
(i8,572.4)
i3,540.6
i4,337.1
i2,733.3
Note
1Bank
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.
i
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 i90% of the Kantar group, with consideration of £i2,140.2
million after tax and disposal costs. The sale involved the Group disposing of the Kantar business and holding i40% equity stakes post-transaction which are treated as associates. This generated a pre-tax gain of £i73.8
million, tax charge of £i157.4 million and goodwill impairment of £i94.5
million for the Group. In 2020, the remaining stages of the transaction completed with total consideration of £i236.1 million after tax and disposal costs. This generated a pre-tax gain of £i10.0
million and a tax charge of £i1.9 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.
i
Results of the discontinued operations, which have been included in profit for the year, were as follows:
2020
2019
£m
£m
Revenue
i107.4
i2,387.5
Costs
of services
(i92.3)
(i1,951.5)
Gross
profit
i15.1
i436.0
General
and administrative costs
(i4.4)
(i151.7)
Operating
profit
i10.7
i284.3
Share
of results of associates
i—
i6.5
Profit
before interest and taxation
i10.7
i290.8
Finance
and investment income
i0.1
i3.6
Finance
costs
(i0.3)
(i17.3)
Revaluation
and retranslation of financial instruments
i—
(i9.4)
Profit
before taxation
i10.5
i267.7
Attributable
tax expense
(i2.2)
(i78.8)
Profit
after taxation
i8.3
i188.9
Goodwill
impairment on classification as held for sale1
i—
(i94.5)
Gain
on sale of discontinued operations
i10.0
i73.8
Attributable
tax expense on sale of discontinued operations
(i1.9)
(i157.4)
Net
gain attributable to discontinued operations
i16.4
i10.8
Attributable
to
Equity holders of the parent
i6.5
(i3.8)
Non-controlling
interests2;
i9.9
i14.6
i16.4
i10.8
Notes
1In
2019, goodwill impairment of £i94.5 million arose from the assessment of fair value less costs to sell under IFRS 5.
/
2In 2020, non-controlling interests includes £i9.3
million recognised on the disposal of Kantar within WPP Scangroup, a i56% owned subsidiary of the Group.
Notes
to the consolidated financial statements (continued)
12. Assets held for sale and discontinued operations (continued)
For the year ended 31 December 2020, the Kantar group contributed £i30.8 million (2019: £i322.9
million) to the Group’s net operating cash flows, paid £i0.9 million (2019: £i53.2
million) in respect of investing activities and paid £i0.7 million (2019: £i27.2
million) in respect of financing activities.
i
The gain on sale of discontinued operations disposed by 31 December 2020 is calculated as follows:
2020
2019
£m
£m
Intangible
assets (including goodwill)
i162.5
i2,410.0
Property,
plant and equipment
i15.1
i115.7
Right-of-use
assets
i27.2
i103.5
Interests in
associates and joint ventures
i4.6
i92.3
Other
investments
i—
i11.5
Deferred
tax assets
i6.1
i44.1
Corporate
income tax recoverable
i16.9
i49.8
Trade
and other receivables
i170.3
i748.8
Cash
and cash equivalents
i32.2
i324.9
Trade
and other payables
(i141.6)
(i839.8)
Corporate
income tax payable
(i5.6)
(i48.2)
Lease
liabilities
(i23.2)
(i106.3)
Deferred tax liabilities
(i1.3)
(i98.6)
Provisions
for post-employment benefits
(i7.9)
(i26.7)
Provisions
for liabilities and charges
(i0.6)
(i22.4)
Net
assets
i254.7
i2,758.6
Non-controlling
interests
(i6.1)
(i19.1)
Net
assets excluding non-controlling interests
i248.6
i2,739.5
Consideration
received in cash and cash equivalents
i240.9
i2,352.1
Re-investment
in equity stake1
i—
i231.7
Transaction
costs
(i4.5)
(i56.1)
Deferred consideration2
i1.6
i1.6
Total
consideration received
i238.0
i2,529.3
Loss
on sale before exchange adjustments
(i10.6)
(i210.2)
Exchange
adjustments recycled to the income statement
i20.6
i284.0
Gain
on sale of discontinued operation
i10.0
i73.8
Notes
1Re-investment
in equity stake represents the value of the Group’s i40% stake in the new Kantar group as part of the disposal.
2Deferred consideration in 2019 is made up of £i79.6
million expected to be received in future periods on the satisfaction of certain conditions and the deferral of £i78.0 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 ifour 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.
Notes to the consolidated financial statements (continued)
i
13. Leases
i
The
movements in 2021 and 2020 were as follows:
Right-of-use assets
Land and
buildings1
£m
Plant and machinery £m
Total £m
1
January 2020
i1,706.1
i28.4
i1,734.5
Additions
i233.0
i35.0
i268.0
Disposals
(i40.5)
(i1.9)
(i42.4)
Depreciation
of right-of-use assets
(i312.1)
(i19.8)
(i331.9)
Impairment
charges included within restructuring costs
(i117.0)
i—
(i117.0)
Other
write-downs
(i8.1)
—
(i8.1)
Exchange
adjustments
i0.4
i1.0
i1.4
31
December 2020
i1,461.8
i42.7
i1,504.5
Additions
i264.6
i17.2
i281.8
Transfers
to net investment in subleases
(i26.9)
i—
(i26.9)
Disposals
(i53.6)
(i1.3)
(i54.9)
Depreciation
of right-of-use assets
(i254.7)
(i18.2)
(i272.9)
Impairment
charges included within restructuring costs
(i18.9)
(i0.4)
(i19.3)
Other
reversals
i6.8
—
i6.8
Exchange
adjustments
(i22.1)
(i1.9)
(i24.0)
31
December 2021
i1,357.0
i38.1
i1,395.1
Note
1For
the years ended 31 December 2021 and 2020, the Company has £i38.5 million and £i67.9
million of right-of-use assets that are classified as investment property, respectively.
Lease liabilities
Land and buildings £m
Plant and machinery £m
Total £m
1 January 2020
i2,223.4
i26.3
i2,249.7
Additions
i226.9
i37.1
i264.0
Interest
expense related to lease liabilities
i96.8
i1.7
i98.5
Disposals
(i49.4)
(i1.7)
(i51.1)
Repayment
of lease liabilities (including interest)
(i379.1)
(i19.5)
(i398.6)
Exchange
adjustments
(i6.8)
i0.6
(i6.2)
31
December 2020
i2,111.8
i44.5
i2,156.3
Additions
i277.0
i16.1
i293.1
Interest
expense related to lease liabilities
i89.7
i1.2
i90.9
Disposals
(i64.2)
(i1.9)
(i66.1)
Repayment
of lease liabilities (including interest)
Notes to the consolidated financial statements (continued)
i
14. Intangible Assets
Goodwill
i
The
movements in 2021 and 2020 were as follows:
£m
Cost
1 January 2020
i10,888.6
Additions1
i37.3
Disposals
(i24.6)
Exchange
adjustments
(i94.0)
31 December 2020
i10,807.3
Additions1
i335.8
Disposals
(i5.4)
Exchange
adjustments
(i146.7)
31 December 2021
i10,991.0
Accumulated
impairment losses and write-downs
1 January 2020
i778.0
Impairment losses for the year
i2,822.9
Exchange
adjustments
(i182.4)
31 December 2020
i3,418.5
Impairment
losses for the year
i1.8
Exchange adjustments
(i41.6)
31
December 2021
i3,378.7
Net book value
31 December 2021
i7,612.3
31
December 2020
i7,388.8
1 January 2020
i10,110.6
Note
1Additions
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.
Notes
to the consolidated financial statements (continued)
14. Intangible assets (continued)
Other intangible assets
i
The movements in 2021 and 2020 were as follows:
Brands with
an indefinite useful life
Acquired intangibles
Other
Total
£m
£m
£m
£m
Cost
1
January 2020
i1,091.4
i1,602.9
i312.3
i3,006.6
Additions
i—
i—
i54.3
i54.3
Disposals
i—
(i21.5)
(i74.8)
(i96.3)
New
acquisitions
i—
i4.8
i0.2
i5.0
Other
movements1
i—
i5.7
i13.1
i18.8
Exchange
adjustments
(i19.5)
(i22.2)
(i4.8)
(i46.5)
31
December 2020
i1,071.9
i1,569.7
i300.3
i2,941.9
Additions
i—
i—
i29.9
i29.9
Disposals
i—
(i7.3)
(i44.6)
(i51.9)
New
acquisitions
i—
i97.7
i—
i97.7
Other
movements1
i—
i—
i3.9
i3.9
Exchange
adjustments
(i4.6)
(i15.7)
(i1.4)
(i21.7)
31
December 2021
i1,067.3
i1,644.4
i288.1
i2,999.8
Amortisation
and impairment
1 January 2020
i13.2
i1,279.3
i245.3
i1,537.8
Charge
for the year
i—
i88.5
i35.2
i123.7
Disposals
i—
(i17.4)
(i72.0)
(i89.4)
Other
movements
i—
i5.7
i5.4
i11.1
Exchange
adjustments
(i0.4)
(i26.9)
(i3.3)
(i30.6)
31
December 2020
i12.8
i1,329.2
i210.6
i1,552.6
Charge
for the year
i43.8
i53.5
i19.9
i117.2
Impairment
charges included within restructuring costs
i—
i—
i10.1
i10.1
Disposals
i—
(i3.5)
(i24.5)
(i28.0)
Other
movements
i—
i—
(i1.5)
(i1.5)
Exchange
adjustments
i0.2
(i8.2)
(i2.1)
(i10.1)
31
December 2021
i56.8
i1,371.0
i212.5
i1,640.3
Net
book value
31 December 2021
i1,010.5
i273.4
i75.6
i1,359.5
31
December 2020
i1,059.1
i240.5
i89.7
i1,389.3
1
January 2020
i1,078.2
i323.6
i67.0
i1,468.8
Note
1Other
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.
Notes to the consolidated financial statements (continued)
14. Intangible assets (continued)
i
Cash-generating
units (CGUs) with significant goodwill and brands with an indefinite useful life as at 31 December are:
Goodwill
Brands with an indefinite useful life
2021
2020
2021
2020
£m
£m
£m
£m
GroupM
i2,982.5
i2,953.7
i—
i—
Wunderman
Thompson
i997.3
i949.4
i405.1
i403.9
VMLY&R
i675.6
i411.9
i189.8
i193.4
Ogilvy
i784.4
i782.0
i205.0
i206.5
Burson
Cohn & Wolfe
i585.7
i591.1
i128.4
i128.8
AKQA
Group
i570.2
i585.2
i—
i—
Finsbury
Glover Hering + Sard Verbinnen & Co
i393.2
i220.7
i—
i—
Other
i623.4
i894.8
i82.2
i126.5
i7,612.3
i7,388.8
i1,010.5
i1,059.1
/
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 useful 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 2021 include brand names of £i137.4
million (2020: £i172.8 million), customer-related intangibles of £i110.4 million (2020: £i67.1
million), and other assets (including proprietary tools) of £i25.6 million (2020: £i0.6 million).
The
total amortisation and impairment of acquired intangible assets of £i97.8 million (2020: £i89.1
million) includes an impairment charge in the year of £i47.9 million (2020: £i21.6
million) in regards to certain brand names that are no longer in use, including £i43.8 million for brands with an indefinite useful life. £i45.1
million of the impairment charge relates to the Global Integrated Agencies segment, and £i2.8 million relates to the Specialist Agencies segment. In addition, the total amortisation and impairment of acquired intangible assets includes £i0.5
million (2020: £i0.6 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. A goodwill impairment charge of £i1.8
million relating to Specialist Agencies was recognised during the year due to a number of under-performing businesses in the Group. In certain markets, the impact of local economic conditions and trading circumstances on these businesses was sufficiently severe to indicate impairment to the carrying value of goodwill.
Under IFRS, an impairment charge is required for both goodwill and other indefinite-lived assets when the carrying amount exceeds the “recoverable amount”, defined as the higher of fair value less costs to sell and value in use. 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.
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 2021 and/or 2022, inil growth rate thereafter (2020: inil)
and a conservative pre-tax discount rate of i13.5% (2020: i13.5%). The pre-tax discount rate of i13.5%
was above the rate calculated for the global networks of i12.5% (2020: i12.5%). For smaller CGUs that operate
primarily in a particular region subject to higher risk, the higher of i13.5% or i100 basis points above the
regional discount rate was used in the first step.
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 ifive
years, followed by an assumed long-term growth rate of i2.0% (2020: i2.0%). If
the recoverable amount using the more specific assumptions did not exceed the carrying value of a CGU, an impairment charge was recorded.
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 2021, 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 i2.0%
(2020: i2.0%). 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.
The pre-tax discount rate applied to the cash flow projections for the CGUs that operate globally was i12.5%.
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 i11.3% to i18.4%.
Notes to the consolidated financial statements (continued)
14. Intangible assets (continued)
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’s 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. Changes in our business activities or structure may also result in additional changes to the level of testing in future periods. Further, future events could cause the Group to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired.
As part of the overall effort to simplify operations and provide clients with integrated offerings, certain operations
have been realigned between the various networks. These realignments have been reflected in the CGUs being tested. This includes the combination of AKQA and Grey, bringing Geometry and GTB into VMLY&R, and moving International Healthcare into VMLY&R and Ogilvy.
Historically our impairment losses have resulted from a specific event, condition or circumstance in one or more of our companies, such as the impact of Covid-19 or the loss of a significant client. As a result, changes in the assumptions used in our impairment model have generally not had a significant effect on the impairment charges recognised. Given the significant recoveries achieved by CGUs in 2021, a reasonably possible change in assumptions would not lead to a significant impairment. The carrying value of goodwill and other intangible assets will continue to be reviewed at least annually for impairment and adjusted down to the recoverable amount if required.
Impairments
in 2020
In 2020, £i2,822.9 million of impairment charges were incurred. The impairments related to historical acquisitions whose carrying values were reassessed in light of the impact of Covid-19. The impairments were 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. By operating sector, £i2,355.1
million of the impairment charge related to Global Integrated Agencies, £i161.5 million related to Public Relations and £i306.3
million related to Specialist Agencies. This reflects the changes to segments described in Note 2 - Segment Information.
As noted above, 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 also 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.
In developing the cash flows for the 2020 impairment tests, 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 pre-tax discount rate applied to the cash flow projections for the CGUs that operate globally was i12.5%. The
pre-tax discount rates applied to the CGUs that have more regional specific operations ranged from i10.8% to i18.6%
for the 30 June 2020 test, i11.3% to i14.4% for the 30 September 2020 test, and i11.2%
to i13.6% for the 31 December 2020 test.
As part of the overall effort to simplify operations and become more client-centric, certain operations were realigned between the various networks. These realignments were 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.
i
The
transfers of carrying value between CGUs were determined on a relative value basis. These realignments did not have a significant impact on the impairment figures recognised. The CGUs with significant impairments of goodwill as at 31 December 2020 are set out in the below table with the recoverable amount determined as of the December 2020 test.
Operating Sector
Recoverable amount 2020
£m
Goodwill
impairment charge
2020
£m
Wunderman Thompson
Global Integrated Agencies
i1,956.8
i1,207.5
VMLY&R
Global
Integrated Agencies
i1,075.7
i516.9
Burson
Cohn & Wolfe
Public Relations
i790.2
i144.8
Geometry
Global
Global Integrated Agencies1
i164.4
i305.8
Landor
& Fitch
Specialist Agencies
i177.6
i185.4
Other
i1,409.5
i462.5
i5,574.2
i2,822.9
Note
1 Prior
year figures have been re-presented to reflect the changes to segments described in Note 2 - Segment Information.
At
31 December 2021, capital commitments contracted, but not provided for in respect of property, plant and equipment, were £i107.3 million (2020: £i132.5 million).
Revaluation of other investments through profit or loss
—
(i7.5)
Revaluation
of other investments through other comprehensive income
—
(i35.5)
Amortisation of other intangible assets
(i0.5)
—
Reversal
of write-downs
i28.5
—
31 December 2021
i412.9
i318.3
/
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.
Notes to the consolidated financial statements (continued)
16. Interests in associates, joint ventures and other investments (continued)
i
The Group’s principal associates and joint ventures at 31 December 2021 included:
Country
of incorporation
% owned
Advantage Smollan Ltd
iUK
i25.1
Barrows
Design and Manufacturing (Pty) Limited
iSouth Africa
i35.0
Dat
Viet VAC Media Corporation
iVietnam
i30.0
GIIR
Inc.
iKorea
i30.0
Haworth Marketing &
Media Company
iUSA
i49.0
High Co SA
iFrance
i34.1
Imagina
Spain
iSpain
i22.5
Nanjing Yindu Ogilvy
Advertising Co. Ltd
iChina
i49.0
Smollan
Holdings (Pty) Ltd
iSouth Africa
i24.8
Summer
(BC) JVCo S.a.r.l.1
iLuxembourg
i40.0
Note
1Representing
the Group’s interest in Kantar in the Rest of World chain.
/
The market value of the Group’s shares in its principal listed associate undertakings at 31 December 2021 was as follows: GIIR Inc: £i21.7 million, and High Co SA: £i32.2
million (2020: GIIR Inc: £i19.0 million and High Co SA: £i32.8
million). The carrying value (including goodwill and other intangibles) of these equity interests in the Group’s consolidated balance sheet at 31 December 2021 was as follows: GIIR Inc: £i40.0 million and High Co SA: £i37.7
million (2020: GIIR Inc: £i41.2 million and High Co SA: £i38.9 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
i
The following table presents a summary
of the aggregate financial performance of the Group’s associate undertakings and joint ventures.
2021
2020
2019
£m
£m
£m
Share
of results of associate undertakings (note 4)
i23.8
(i136.0)
i14.7
Share
of other comprehensive income/(loss) of associate undertakings
i13.5
(i61.5)
i—
Share
of total comprehensive income/(loss) of associate undertakings
i37.3
(i197.5)
i14.7
/
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 £i62.9 million were not recognised in relation to Imagina, an associate in Spain, as the investment was reduced to zero. As at 31 December 2021, the
cumulative share of unrecognised losses relating to Imagina is £i23.0 million.
At 31 December 2021, capital commitments contracted, but not provided for, in respect of interests in associates and other investments were £i5.4
million (2020: £i7.5 million).
i
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.
Notes to the consolidated financial statements (continued)
17. Deferred tax (continued)
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. iThe
following is the analysis of the deferred tax balances for financial reporting purposes:
Gross 2021
Offset
2021
As reported 2021
As reported 2020
Offset 2020
As reported 2020
£m
£m
£m
£m
£m
£m
Deferred
tax assets
i565.0
(i223.5)
i341.5
i477.5
(i264.6)
i212.9
Deferred
tax liabilities
(i536.0)
i223.5
(i312.5)
(i568.7)
i264.6
(i304.1)
i29.0
—
i29.0
(i91.2)
—
(i91.2)
i
The
following are the major gross deferred tax assets recognised by the Group and movements thereon in 2021 and 2020:
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 2021 the balance related to temporary differences in relation to revenue adjustments, tax deductible goodwill, fair value adjustments and other temporary differences.
i
In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2021 and 2020:
At
the balance sheet date, the Group has gross tax losses and other temporary differences of £i6,961.4 million (2020: £i6,895.2
million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £i2,259.2 million (2020: £i2,041.3
million) of such tax losses and
Notes to the consolidated financial statements (continued)
17. Deferred tax (continued)
other temporary differences. No deferred tax asset has been recognised in respect of the remaining £i4,702.2
million (2020: £i4,853.9 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 £i63.8
million (2020: £i65.4 million) that will expire within one to iten years, and £i4,457.3
million (2020: £i4,594.9 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 £i1,385.3
million (2020: £i1,655.3 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.
i
18.
Trade and other receivables
i
The following are included in trade and other receivables:
2021
2020
Amounts
falling due within one year
£m
£m
Trade receivables (net of loss allowance)
i6,600.5
i6,572.2
Work
in progress
i254.0
i264.1
VAT
and sales taxes recoverable
i350.3
i236.6
Prepayments
i215.3
i248.1
Accrued
income
i3,435.7
i3,150.1
Fair
value of derivatives
i2.5
i0.2
Other
debtors
i504.0
i501.0
i11,362.3
i10,972.3
/i
The
ageing of trade receivables and other financial assets by due date is as follows:
Carrying
amount at 31 December 2021
Not past due
Days past due
0-30 days
31-90 days
91-180 days
181 days- 1 year
Greater than 1 year
2021
£m
£m
£m
£m
£m
£m
£m
Gross
trade receivables
i6,671.0
i5,755.6
i589.8
i194.4
i64.0
i10.6
i56.6
Loss
allowance
(i70.5)
(i2.3)
(i0.2)
(i1.9)
(i7.5)
(i4.9)
(i53.7)
i6,600.5
i5,753.3
i589.6
i192.5
i56.5
i5.7
i2.9
Other
financial assets
i496.3
i422.1
i15.2
i2.7
i3.0
i2.7
i50.6
i7,096.8
i6,175.4
i604.8
i195.2
i59.5
i8.4
i53.5
Carrying
amount at 31 December 2020
Not past due
Days past due
0-30 days
31-90 days
91-180 days
181 days- 1 year
Greater than 1 year
2020
£m
£m
£m
£m
£m
£m
£m
Gross
trade receivables
i6,684.7
i5,696.8
i661.2
i169.2
i55.6
i32.7
i69.2
Loss
allowance
(i112.5)
(i4.4)
(i1.2)
(i1.9)
(i15.2)
(i25.2)
(i64.6)
i6,572.2
i5,692.4
i660.0
i167.3
i40.4
i7.5
i4.6
Other
financial assets
i527.2
i451.8
i32.5
i8.6
i11.8
i4.3
i18.2
i7,099.4
i6,144.2
i692.5
i175.9
i52.2
i11.8
i22.8
/
Other
financial assets are included in other debtors.
Past due amounts are not impaired where collection is considered likely.
Notes to the consolidated financial statements (continued)
18. Trade and other receivables (continued)
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.
i
2021
2020
2019
£m
£m
£m
Loss
allowance
At beginning of year
i112.5
i111.7
i116.6
New
acquisitions
i3.7
i3.5
i5.0
Charged
to the income statement
i17.2
i50.6
i45.4
Released
to the income statement
(i27.9)
(i9.8)
(i19.0)
Exchange
adjustments
(i1.7)
(i2.8)
(i4.1)
Transfer
to disposal group classified as held for sale
i—
i—
(i8.9)
Utilisations
and other movements
(i33.3)
(i40.7)
(i23.3)
At
end of year
i70.5
i112.5
i111.7
/
The
loss allowance is equivalent to i1.1% (2020: i1.7%, 2019: i1.6%)
of gross trade accounts receivables.
Impairment losses on work in progress, accrued income and other debtors were immaterial for the years presented.
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 Financial Instruments. This has been applied to trade receivables, contract assets and lease receivables. 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. 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. For all other assets, the general approach has been applied and a loss allowance for itwelve months expected credit losses is recognised.
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 over one year where sufficient evidence of recoverability is not evident.
As a result of the ongoing Covid-19 pandemic, the Group also performed a detailed review of trade receivables, work in progress and accrued income aged less than one year, 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 continued risk due to the pandemic.
i
19.
Trade and other payables: amounts falling due within one year
i
The following are included in trade and other payables falling due within one year:
2021
2020
£m
£m
Trade
payables
i10,596.9
i10,206.5
Deferred
income
i1,334.0
i1,153.7
Payments
due to vendors (earnout agreements)
i85.6
i57.8
Liabilities
in respect of put option agreements with vendors
i58.4
i9.3
Fair
value of derivatives
i6.4
i1.8
Share
repurchases - close period commitments1
i211.7
i—
Other
creditors and accruals
i2,959.3
i2,430.6
i15,252.3
i13,859.7
Note
1During
2021, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 16 December 2021 and ending on 18 February 2022, in accordance with UK listing rules. The commitment resulting from this agreement constitutes a liability at 31 December 2021, 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.
Notes to the consolidated financial statements (continued)
i
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:
2021
2020
£m
£m
Payments
due to vendors (earnout agreements)
i111.1
i56.5
Liabilities
in respect of put option agreements with vendors
i333.1
i101.4
Fair
value of derivatives
i47.2
i11.2
Other
creditors and accruals
i128.5
i144.4
i619.9
i313.5
The
Group considers that the carrying amount of trade and other payables approximates their fair value.
i
The following table sets out payments due to vendors, comprising contingent consideration and the Directors’ best estimates of future earnout-related obligations:
2021
2020
£m
£m
Within
one year
i85.6
i57.8
Between
one and two years
i24.0
i17.2
Between
two and three years
i35.7
i6.0
Between
three and four years
i51.4
i30.5
Between
four and five years
i—
i2.8
Over
five years
i—
i—
i196.7
i114.3
/i
The
following table is an analysis of future anticipated cash flows in relation to liabilities in respect of put option agreements with vendors at 31 December:
2021
2020
£m
£m
Within one year
i58.4
i9.3
Between
one and two years
i15.1
i51.0
Between
two and three years
i14.4
i10.0
Between
three and four years
i99.0
i26.2
Between
four and five years
i76.6
i9.0
Over
five years
i128.0
i5.2
i391.5
i110.7
//
i
21.
Bank overdrafts, bonds and bank loans
i
Amounts falling due within one year:
2021
2020
£m
£m
Bank
overdrafts
i342.3
i8,562.0
Corporate
bonds and bank loans
i224.9
i57.2
i567.2
i8,619.2
/
During
the year, the Group converted the majority of its cash pool arrangements to zero-balancing cash pools, whereby the cash and overdrafts within these cash pools are physically swept to the header accounts on a daily basis, resulting in a reduction of the large gross cash and overdraft positions at 31 December 2020.
The Group considers that the carrying amount of bank overdrafts approximates their fair value.
Notes
to the consolidated financial statements (continued)
21. Bank overdrafts, bonds and bank loans (continued)
i
Amounts falling due after more than one year:
2021
2020
£m
£m
Corporate
bonds and bank loans
i4,216.8
i4,975.5
/
The
Group estimates that the fair value of corporate bonds is £i4,790.3 million at 31 December 2021 (2020: £i5,509.1 million). The fair values of the corporate
bonds are based on quoted market prices.
The Group considers that the carrying amount of bank loans of £i14.7 million (2020: £i57.2 million) approximates
their fair value.
i
The corporate bonds, bank loans and overdrafts included within liabilities fall due for repayment as follows:
2021
2020
£m
£m
Within
one year
i567.2
i8,619.2
Between
one and two years
i629.2
i590.9
Between
two and three years
i550.4
i669.4
Between
three and four years
i418.8
i540.2
Between
four and five years
i623.6
i445.6
Over
five years
i1,994.8
i2,729.4
i4,784.0
i13,594.7
/
i
22.
Provisions for liabilities and charges
i
The movements in 2021 and 2020 were as follows:
Property £m
Other £m
Total £m
1
January 2020
i81.5
i166.3
i247.8
Charged
to the income statement
i14.8
i50.4
i65.2
Acquisitions1
i—
i0.7
i0.7
Utilised
(i1.6)
(i17.0)
(i18.6)
Released
to the income statement
(i1.5)
(i15.0)
(i16.5)
Other
movements
(i15.0)
i48.7
i33.7
Exchange
adjustments
(i1.5)
(i4.5)
(i6.0)
31
December 2020
i76.7
i229.6
i306.3
Charged
to the income statement
i25.2
i35.8
i61.0
Acquisitions1
i—
i7.3
i7.3
Utilised
(i7.0)
(i69.9)
(i76.9)
Released
to the income statement
(i18.3)
(i25.0)
(i43.3)
Other
movements
(i5.2)
i18.9
i13.7
Exchange
adjustments
(i0.8)
i1.2
i0.4
31
December 2021
i70.6
i197.9
i268.5
Note
1Acquisitions
include £i7.3 million (2020: £i0.4 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.
/
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.
The utilisation
of "Other" provisions during the year is primarily driven by litigation settlements.
Notes to the consolidated financial statements (continued)
i
23.
Share-based payments
i
Charges for share-based incentive plans were as follows:
2021
2020
2019
Continuing
operations
£m
£m
£m
Share-based payments
i99.6
i74.4
i66.0
/
Share-based
payments comprise charges for stock options and restricted stock awards to employees of the Group.
As of 31 December 2021, there was £i203.4 million (2020: £i134.9
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 itwo 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 and 2021 EPSP awards are subject to ithree
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 i20% for that element. The vesting opportunity will increase on a straight-line basis to i100%
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 i15% and i100%.
The awards will vest subject to a ROIC underpin of an average of i7.5% 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 2014 and 2018 there are ithree
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 i20% vesting of the part of the award dependent on TSR. The maximum vest of i100%
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 (i7% compound annual growth) will again result in a i20%
vest. Maximum performance of i14% compound annual growth will give rise to a i100% 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 i10-i14% average annual ROE and maximum performance
ranges between i14-i18%. Threshold again gives rise to a i20%
vest, i100% 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 itwo
years after grant date provided the individual concerned is continually employed by the Group throughout this time.
Leaders, Partners and High Potential Group
The WPP Leader programme makes conditional stock awards to around i1,800 of our key executives. Awards vest ithree
years after grant, provided the participant is still employed within the Group.
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.
Notes to the consolidated financial statements (continued)
23. Share-based payments (continued)
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.
i
Movement on ordinary shares
granted for significant restricted stock plans:
Non-vested
1 January 2021
number
m
Granted number m
Forfeited number m
Vested number m
Non-vested
31 December
2021
number
m
Executive Performance Share Plan (EPSP)
i13.0
i6.1
(i2.2)
(i0.2)
i16.7
Performance
Share Awards (PSA)
i4.3
i0.4
(i0.2)
(i1.4)
i3.1
Leaders,
Partners and High Potential Group
i11.0
i3.6
(i1.1)
(i3.1)
i10.4
Weighted
average fair value (pence per share)
Executive Performance Share Plan (EPSP)
i943
p
i951
p
i1,289
p
i833
p
i900
p
Performance
Share Awards (PSA)
i675
p
i666
p
i534
p
i859
p
i604
p
Leaders,
Partners and High Potential Group
i831
p
i990
p
i853
p
i709
p
i922
p
/
The
total fair value of shares vested for all the Group’s restricted stock plans during the year ended 31 December 2021 was £i64.1 million (2020: £i71.6
million, 2019: £i90.8 million).
i
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. iThe Group’s pension costs are analysed as follows:
2021
2020
2019
Continuing
operations
£m
£m
£m
Defined contribution plans
i162.8
i157.8
i154.9
Defined
benefit plans charge to operating profit
i14.9
i13.9
i14.8
Pension
costs (note 5)
i177.7
i171.7
i169.7
Net
interest expense on pension plans (note 6)
i1.8
i2.9
i3.5
i179.5
i174.6
i173.2
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 2021.
The majority of plans provide final salary benefits, with plan benefits typically based either on mandatory plans under local legislation, 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.
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 2021 amounted to £i16.7 million (2020: £i20.3
million, 2019: £i37.1 million). Employer contributions and benefit payments in 2022 are expected to be approximately £i15
million.
Notes to the consolidated financial statements (continued)
24. Provision for post-employment benefits (continued)
(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. iThe main weighted average assumptions used for the actuarial valuations at 31 December are shown in the following table:
2021
2020
2019
2018
%
pa
% pa
% pa
% pa
UK
Discount rate1
i1.8
i1.3
i2.0
i2.8
Rate
of increase in pensions in payment
i4.5
i4.4
i4.4
i4.3
Inflation
i3.2
i2.8
i2.6
i2.8
North
America
Discount rate1
i2.6
i2.0
i3.0
i4.1
Rate
of increase in salaries2
n/a
i3.0
i3.0
i3.0
Western
Continental Europe
Discount rate1
i1.2
i0.9
i1.2
i2.0
Rate
of increase in salaries
i2.3
i2.2
i2.2
i2.3
Rate
of increase in pensions in payment
i1.8
i1.8
i1.8
i1.2
Inflation
i1.7
i1.7
i1.7
i1.7
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
Discount rate1
i5.3
i4.2
i4.6
i5.0
Rate
of increase in salaries
i5.6
i5.2
i6.1
i5.8
Inflation
i3.7
i3.7
i3.7
i3.6
Notes
1Discount
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.
2The salary assumptions are no longer applicable to the US as all plans were frozen. Active participants will not accrue additional benefits for future services under these plans.
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.
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.
i
At 31 December 2021, 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
All plans
North America
UK
Western Continental Europe
Other1
Current pensioners (at age 65) – male
i22.3
i21.8
i23.5
i20.9
i13.3
Current
pensioners (at age 65) – female
i24.0
i23.3
i25.0
i23.9
i16.4
Future
pensioners (current age 45) – male
i24.1
i23.2
i25.5
i23.1
i13.3
Future
pensioners (current age 45) – female
i25.8
i24.6
i27.1
i25.9
i16.4
Note
1Includes
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
Notes to the consolidated financial statements (continued)
24. Provision for post-employment benefits (continued)
The life expectancies after age 65 at 31 December 2020 were i22.1
years and i23.6 years for male and female current pensioners (at age 65) respectively, and i23.7 years and i25.2
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.
i
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.
All plans
North America
UK
Western Continental Europe
Other1
Weighted
average duration of the defined benefit obligation (years)
i11.2
i9.3
i13.6
i12.4
i6.3
Expected
benefit payments over the next ten years (£m)
Benefits expected to be paid within 12 months
i47.4
i22.8
i13.5
i5.6
i5.5
Benefits
expected to be paid
in 2023
i42.6
i20.8
i12.2
i5.5
i4.1
Benefits
expected to be paid
in 2024
i41.7
i20.2
i12.6
i5.4
i3.5
Benefits
expected to be paid
in 2025
i42.0
i18.9
i13.3
i5.7
i4.1
Benefits
expected to be paid
in 2026
i43.9
i19.9
i13.3
i5.8
i4.9
Benefits
expected to be paid in the next five years
i215.1
i85.8
i71.4
i31.8
i26.1
Note
1Includes
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
/
The following table presents a sensitivity analysis for each significant actuarial assumption showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at the balance sheet date. This sensitivity analysis applies to the defined benefit obligation only and not to the net defined benefit pension liability in its entirety, the measurement of which is driven by a number of factors including, in addition to the assumptions below, the fair value of plan assets.
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
Notes to the consolidated financial statements (continued)
24. Provision for post-employment benefits (continued)
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.
i
(Decrease)/increase in benefit obligation
2021
2020
Sensitivity
analysis of significant actuarial assumptions
£m
£m
Discount rate
Increase by ii25/
basis points:
UK
(i7.6)
(i8.8)
North
America
(i6.4)
(i7.6)
Western
Continental Europe
(i3.4)
(i4.0)
Other1
(i0.6)
(i0.6)
Decrease
by ii25/
basis points:
UK
i8.0
i9.1
North
America
i6.6
i7.8
Western
Continental Europe
i3.6
i4.3
Other1
i0.6
i0.6
Rate
of increase in salaries
Increase by ii25/
basis points:
Western Continental Europe
i0.8
i0.9
Other1
i0.5
i0.6
Decrease
by ii25/
basis points:
Western Continental Europe
(i0.8)
(i0.9)
Other1
(i0.5)
(i0.5)
Rate
of increase in pensions in payment
Increase by ii25/
basis points:
UK
i0.9
i1.1
Western
Continental Europe
i1.7
i2.1
Decrease
by ii25/
basis points:
UK
(i0.9)
(i0.7)
Western
Continental Europe
(i1.7)
(i2.0)
Life
expectancy
Increase in longevity by one additional year:
UK
i13.3
i14.0
North
America
i5.3
i5.9
Western
Continental Europe
i4.2
i4.8
Note
1Includes
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
Notes to the consolidated financial statements (continued)
24. Provision for post-employment benefits (continued)
(b) Assets and liabilities
i
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:
2021
2020
2019
£m
%
£m
%
£m
%
Equities
i31.8
i5.8
i41.6
i6.7
i55.5
i9.1
Bonds
i259.7
i47.0
i284.2
i46.1
i272.5
i44.8
Insured
annuities
i222.5
i40.3
i252.8
i41.0
i239.1
i39.3
Property
i1.0
i0.2
i0.7
i0.1
i0.7
i0.1
Cash
i15.3
i2.8
i14.7
i2.4
i17.7
i2.9
Other
i21.8
i3.9
i22.6
i3.7
i23.0
i3.8
Total
fair value of assets
i552.1
i100.0
i616.6
i100.0
i608.5
i100.0
Present
value of liabilities
(i688.5)
(i772.7)
(i767.5)
Deficit
in the plans
(i136.4)
(i156.1)
(i159.0)
Irrecoverable
surplus
(i0.2)
(i0.6)
i—
Net
liability1
(i136.6)
(i156.7)
(i159.0)
Plans
in surplus
i30.1
i27.2
i20.6
Plans
in deficit
(i166.7)
(i183.9)
(i179.6)
Note
1 The
related deferred tax asset is discussed in note 17.
/i
All plan assets have quoted prices in active markets with the exception of insured annuities and other assets. The value of insured annuities is equal to the value of the pension benefits covered by the annuities.
2021
2020
2019
Surplus/(deficit)
in plans by region
£m
£m
£m
UK
i0.4
i0.7
i0.3
North
America
(i28.1)
(i37.9)
(i45.2)
Western
Continental Europe
(i74.0)
(i85.9)
(i79.4)
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
(i34.7)
(i33.0)
(i34.7)
Deficit
in the plans
(i136.4)
(i156.1)
(i159.0)
/
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.
i
The following table shows the split of the deficit at 31 December between funded and unfunded pension plans.
2021
Surplus/
(deficit)
£m
2021
Present
value
of
liabilities
£m
2020
Surplus/
(deficit)
£m
2020
Present
value of
liabilities
£m
2019
Surplus/
(deficit)
£m
2019
Present
value
of
liabilities
£m
Funded plans by region
UK
i0.4
(i231.9)
i0.7
(i262.7)
i0.3
(i247.6)
North
America
i20.1
(i237.9)
i17.4
(i271.8)
i12.8
(i286.2)
Western
Continental Europe
(i45.1)
(i87.6)
(i38.6)
(i84.3)
(i33.3)
(i77.6)
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
(i6.4)
(i25.7)
(i5.8)
(i24.1)
(i3.6)
(i20.9)
Deficit/liabilities
in the funded plans
(i31.0)
(i583.1)
(i26.3)
(i642.9)
(i23.8)
(i632.3)
Unfunded
plans by region
North America
(i48.2)
(i48.2)
(i55.3)
(i55.3)
(i58.0)
(i58.0)
Western
Continental Europe
(i28.9)
(i28.9)
(i47.3)
(i47.3)
(i46.1)
(i46.1)
Asia
Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
(i28.3)
(i28.3)
(i27.2)
(i27.2)
(i31.1)
(i31.1)
Deficit/liabilities
in the unfunded plans
(i105.4)
(i105.4)
(i129.8)
(i129.8)
(i135.2)
(i135.2)
Deficit/liabilities
in the plans
(i136.4)
(i688.5)
(i156.1)
(i772.7)
(i159.0)
(i767.5)
/
In
accordance with IAS 19, plans that are wholly or partially funded are considered funded plans.
Notes to the consolidated financial statements (continued)
24. Provision for post-employment benefits (continued)
(c) Pension expense
i
The
following tables show the breakdown of the pension expense between amounts charged to operating profit and amounts charged to finance costs:
2021
2020
2019
Continuing operations
£m
£m
£m
Service
cost1
i12.6
i12.0
i12.9
Administrative
expenses
i2.3
i1.9
i1.9
Charge
to operating profit
i14.9
i13.9
i14.8
Net
interest expense on pension plans
i1.8
i2.9
i3.5
Charge
to profit before taxation for defined benefit plans
i16.7
i16.8
i18.3
Note
1Includes
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 other comprehensive income (OCI):
2021
2020
2019
£m
£m
£m
Return
on plan assets (excluding interest income)
(i29.3)
i57.2
i16.7
Changes
in demographic assumptions underlying the present value of the plan liabilities
(i3.6)
i3.8
i5.9
Changes
in financial assumptions underlying the present value of the plan liabilities
i31.1
(i54.0)
(i64.3)
Experience
gain/(loss) arising on the plan liabilities
i15.7
(i4.4)
i5.1
Change
in irrecoverable surplus
i0.4
(i0.6)
i—
Actuarial
gain/(loss) recognised in OCI
i14.3
i2.0
(i36.6)
/
(d)
Movement in plan liabilities
i
The following table shows an analysis of the movement in the pension plan liabilities for each accounting period:
2021
2020
2019
£m
£m
£m
Plan
liabilities at beginning of year
i772.7
i767.5
i1,024.0
Service
cost1
i12.6
i12.0
i14.9
Interest
cost
i12.0
i17.0
i26.2
Actuarial
(gain)/loss:
Effect of changes in demographic assumptions
i3.6
(i3.8)
(i5.9)
Effect
of changes in financial assumptions
(i31.1)
i54.0
i64.3
Effect
of experience adjustments
(i15.7)
i4.4
(i5.1)
Benefits
paid2
(i59.5)
(i59.6)
(i140.8)
Gain
due to exchange rate movements
(i6.1)
(i4.2)
(i22.7)
Settlement
payments3
(i0.3)
(i17.0)
(i47.4)
Transfer
to disposal group classified as held for sale
i—
i—
(i148.0)
Other4
i0.3
i2.4
i8.0
Plan
liabilities at end of year
i688.5
i772.7
i767.5
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 £i69.7 million.
3 In 2019, the Group completed the transfer of the defined benefit obligations for certain UK plans to an insurer resulting
in £i47.1 million 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.
Notes to the consolidated financial statements (continued)
24. Provision for post-employment benefits (continued)
(e) Movement in plan assets
The following table shows an analysis of the movement in the pension plan assets for each accounting period:
2021
2020
2019
£m
£m
£m
Fair
value of plan assets at beginning of year
i616.6
i608.5
i840.6
Interest
income on plan assets
i10.2
i14.1
i22.4
Return
on plan assets (excluding interest income)
(i29.3)
i57.2
i16.7
Employer
contributions
i16.7
i20.3
i37.1
Benefits
paid1
(i59.5)
(i59.6)
(i140.8)
Loss
due to exchange rate movements
(i0.6)
(i6.8)
(i15.7)
Settlement
payments2
(i0.3)
(i17.0)
(i47.4)
Administrative
expenses
(i1.8)
(i1.9)
(i2.1)
Transfer
to disposal group classified as held for sale
i—
i—
(i111.1)
Other3
i0.1
i1.8
i8.8
Fair
value of plan assets at end of year
i552.1
i616.6
i608.5
Actual
return on plan assets
(i19.1)
i71.3
i39.1
Notes
1In
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 £i69.7 million.
2In 2019, the Group completed the transfer of the defined benefit obligations for certain UK plans to an insurer resulting in £i47.1
million in settlement payments.
3Other 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.
Notes to the consolidated financial statements (continued)
i
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 2021 were primarily made up of $i1,667
million, £i1,094 million and €i2,600 million (2020: $i2,167
million, £i1,094 million and €i2,600 million). The Group’s average gross debt during the course of 2021 was $i1,934
million, £i1,094 million and €i2,600 million (2020: $i2,311
million, £i999 million and €i2,409 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, i100%
of the year-end US dollar debt is at fixed rates averaging i4.18% for an average period of i72 months; i100%
of the sterling debt is at a fixed rate of i2.97% for an average period of i155 months; i90.4%
of the euro debt is at fixed rates averaging i2.04% for an average period of i69 months; and i9.6%
of the euro debt is at floating rates averaging i0% for an average of i3 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 impact of the Russian invasion of Ukraine and sanctions response from governments has been considered. The Company modelled a range of revenue less pass-through costs compared with the year ended 31 December 2021 and a number of mitigating cost actions that are available to the Company. Considering the Group's bank covenant and liquidity headroom and cost mitigation actions which could be implemented, 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 with a decline in revenue less pass-through costs up to i30% in 2022. The likelihood of such a decline is considered remote as compared to Company expectations and external benchmarks, including previously witnessed declines in times of economic stress or external forces such as the pandemic. The modelling in this extreme scenario includes cost mitigations of i70%
of the decline in net sales and the suspension of the share buyback programme and dividend. Further measures that were not included in the modelling, should the Company face such an extreme scenario, include the reduction of capital expenditure and acquisitions. Therefore, 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 give rise to a significant going concern risk.
i
At
31 December 2021, the Group has access to £i6.3 billion of committed facilities with maturity dates spread over the years 2022 to 2046 as illustrated below:
2022
2023
2024
2025
2026
+
£m
£m
£m
£m
£m
£
bonds £i400m (i2.875% 2046)
i400.0
i400.0
US
bond $i220m (i5.625% 2043)
i162.5
i162.5
US
bond $i93m (i5.125% 2042)
i68.6
i68.6
£
bonds £i250m (i3.75% 2032)
i250.0
i250.0
Eurobonds
€i600m (i1.625% 2030)
i504.5
i504.5
Eurobonds
€i750m (i2.375% 2027)
i630.6
i630.6
Eurobonds
€i750m (i2.25% 2026)
i630.6
i630.6
Bank
revolver ($i2,500m 2026)
i1,847.5
i1,847.5
Eurobonds
€i500m (i1.375% 2025)
i420.4
i420.4
US
bond $i750m (i3.75% 2024)
i554.2
i554.2
Eurobonds
€i750m (i3.0% 2023)
i630.6
i630.6
Eurobonds
€i250m (3m EURIBOR + i0.45% 2022)
i210.2
i210.2
Total
committed facilities available
i6,309.7
i210.2
i630.6
i554.2
i420.4
i4,494.3
Drawn
down facilities at 31 December 2021
i4,462.2
i210.2
i630.6
i554.2
i420.4
i2,646.8
Undrawn
committed credit facilities
i1,847.5
/
Given
the strong cash generation of the business, its debt maturity profile and available facilities, the Directors believe the Group has sufficient liquidity to match its requirements for the foreseeable future.
Notes to the consolidated financial statements (continued)
25. Risk management policies (continued)
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 debt less cash position 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 loss allowances, 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 i5% of total trade receivables as at
31 December 2021 or 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 i10% weakening of sterling
against the Group’s major currencies would result in the following losses being recognised in the income statement, which would arise on the retranslation of foreign currency denominated borrowings and derivatives. A i10% strengthening of sterling would have an equal and opposite effect.
i
2021
2020
£m
£m
US
dollar
i0.7
i159.1
Euro
i17.4
i167.2
/
Interest
rate risk
A ione percentage point increase in market interest rates for all currencies in which the Group had cash and borrowings at 31 December 2021 would increase profit before tax by approximately £i33.3
million (2020: £i40.9 million). A ione percentage point 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.
Notes to the consolidated financial statements (continued)
i
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 designates foreign currency denominated
debt as hedging instruments against the currency risk associated with the translation of its foreign operations.
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 €i500.0 million and payments of $i604.2 million. Contracts
due in March 2025 have receipts of €i500.0 million and payments of £i444.1 million.
At 31 December 2021, the fair value of
the Group’s currency derivatives is estimated to be a net liability of approximately £i46.7 million (2020: £i1.6
million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £i0.5 million (2020: £i9.6 million) assets included in trade and
other receivables and £i47.2 million (2020: £i11.2 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 £i45.5 million (2020: £i9.7 million) for net investment hedges and
a debit of £i38.0 million (2020: £i5.9 million) for cash flow hedges.
Changes
in the fair value relating to the ineffective portion of the currency derivatives that are designated hedges amounted to £i2.5 million (2020: £inil)
which is included within revaluation and retranslation of financial instruments in the income statement. At the balance sheet date, the total nominal amount of outstanding forward foreign exchange contracts not designated as hedges was £i764.8 million (2020: £i304.6
million). The Group estimates the fair value of these contracts to be a net liability of £i3.9 million (2020: £i1.6
million).
As at 31 December 2021, the Group had designated its $i93 million bond, $i750 million
bond, $i220 million bond, and $i604 million leg of its cross currency swap, as the hedging instruments in a net investment hedge relationship.
Possible sources of ineffectiveness include any impairments to the Group's net investment in US dollars. The hedges are documented and are assessed for effectiveness on an ongoing basis.
These arrangements are designed to address significant exchange exposure and are renewed on a revolving basis as required.
i
An analysis of the Group’s financial assets and liabilities by accounting classification is set out below:
Derivatives in designated hedge relationships
Held
at fair value through profit or loss
Held at fair value through other comprehensive income
Amortised cost
Carrying value
£m
£m
£m
£m
£m
2021
Other
investments
—
i228.3
i90.0
—
i318.3
Cash
and short-term deposits
—
—
—
i3,882.9
i3,882.9
Bank
overdrafts, bonds and bank loans
—
—
—
(i567.2)
(i567.2)
Bonds
and bank loans
—
—
—
(i4,216.8)
(i4,216.8)
Trade
and other receivables: amounts falling due within one year
—
—
—
i7,012.3
i7,012.3
Trade
and other receivables: amounts falling due after more than one year
—
—
—
i84.5
i84.5
Trade
and other payables: amounts falling due within one year
—
—
—
(i10,674.8)
(i10,674.8)
Trade
and other payables: amounts falling due after more than one year
Notes to the consolidated financial statements (continued)
26. Financial Instruments (continued)
Derivatives in designated hedge relationships
Held
at fair value through profit or loss
Held at fair value through other comprehensive income
Amortised cost
Carrying value
£m
£m
£m
£m
£m
2020
Other
investments
—
i263.3
i124.0
—
i387.3
Cash
and short-term deposits
—
—
—
i12,899.1
i12,899.1
Bank
overdrafts, bonds and bank loans
—
—
—
(i8,619.2)
(i8,619.2)
Bonds
and bank loans
—
—
—
(i4,975.5)
(i4,975.5)
Trade
and other receivables: amounts falling due within one year
—
—
—
i6,989.3
i6,989.3
Trade
and other receivables: amounts falling due after more than one year
—
—
—
i110.1
i110.1
Trade
and other payables: amounts falling due within one year
—
—
—
(i10,268.0)
(i10,268.0)
Trade
and other payables: amounts falling due after more than one year
—
—
—
(i0.9)
(i0.9)
Derivative
assets
i9.6
i0.2
—
—
i9.8
Derivative
liabilities
(i6.3)
(i6.7)
—
—
(i13.0)
Payments
due to vendors (earnout agreements)
—
(i114.3)
—
—
(i114.3)
Liabilities
in respect of put options
—
(i110.7)
—
—
(i110.7)
i3.3
i31.8
i124.0
(i3,865.1)
(i3,706.0)
i
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).
Level 1
Level 2
Level 3
£m
£m
£m
2021
Derivatives
in designated hedge relationships
Derivative assets
i—
i0.5
i—
Derivative
liabilities
i—
(i47.2)
i—
Held
at fair value through profit or loss
Other investments
i0.4
i—
i227.9
Derivative
assets
i—
i2.5
i—
Derivative
liabilities
i—
(i6.4)
i—
Payments
due to vendors (earnout agreements)
i—
i—
(i196.7)
Liabilities
in respect of put options
i—
i—
(i391.5)
Held
at fair value through other comprehensive income
Notes to the consolidated financial statements (continued)
26. Financial Instruments (continued)
Level 1
Level 2
Level 3
£m
£m
£m
2020
Derivatives
in designated hedge relationships
Derivative assets
i—
i9.6
i—
Derivative
liabilities
i—
(i6.3)
i—
Held
at fair value through profit or loss
Other investments
i0.1
i—
i263.2
Derivative
assets
i—
i0.2
i—
Derivative
liabilities
i—
(i6.7)
i—
Payments
due to vendors (earnout agreements)
i—
i—
(i114.3)
Liabilities
in respect of put options
i—
i—
(i110.7)
Held
at fair value through other comprehensive income
Other investments
i20.6
i—
i103.4
There
have been no transfers between these levels in the years presented.
Reconciliation of level 3 fair value measurements:
Payments due to vendors (earnout agreements)
Liabilities in respect of put options
Other investments
£m
£m
£m
1
January 2020
(i243.7)
(i204.5)
i456.1
Gains
recognised in the income statement
i13.4
i12.3
i7.9
Losses
recognised in other comprehensive income
i—
i—
(i106.1)
Exchange
adjustments
i5.3
i2.3
i—
Additions
(i4.5)
(i4.2)
i15.9
Disposals
i—
i—
(i7.0)
Reclassification
from other investments to interests in associates
i—
i—
(i0.2)
Cancellations
i—
i30.5
i—
Settlements
i115.2
i52.9
i—
31
December 2020
(i114.3)
(i110.7)
i366.6
Losses
recognised in the income statement
(i58.7)
(i40.6)
(i7.7)
Losses
recognised in other comprehensive income
i—
i—
(i42.8)
Exchange
adjustments
i1.0
i1.3
i—
Additions
(i81.7)
(i247.7)
1
i5.9
Disposals
i—
i—
(i32.0)
Cancellations
i—
i0.8
i—
Settlements
i57.0
i5.4
i—
31
December 2021
(i196.7)
(i391.5)
i290.0
Note
1During
the year, the Group merged Finsbury Glover Hering and Sard Verbinnen & Co to form a leading global strategic communications firm. As a part of this transaction, certain management acquired shares in the Company and a put option was granted which allows the equity partners to require the Group to purchase these shares. This resulted in additions to liabilities in respect of put options in the year of £i219.6 million.
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 and subsequently measured at fair value in accordance with IFRS 9. 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.
As of 31 December 2021, 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 £inil to £i124
million (2020: £inil to £i41
million) and £inil to £i595
million (2020: £inil to £i808
million), respectively. The decrease in the maximum potential undiscounted amount of future payments for all earnout agreements is due to earnout
Notes to the consolidated financial statements (continued)
26. Financial Instruments (continued)
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.
At 31 December 2021, the weighted average growth rate in estimating future financial performance
was i16.7% (2020: i14.8%), which reflects the prevalence of recent acquisitions in the faster-growing markets and new media sectors. The weighted average of the risk-adjusted discount rate applied to these obligations at 31 December 2021 was i6.5%
(2020: i4.0%).
A ione 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 £i6.0 million (2020: £i1.5
million) and £i6.6 million (2020: £i1.4
million), respectively.
A i0.5 percentage point increase or decrease in the risk-adjusted discount rate would decrease or increase the combined liabilities by approximately £i8.6
million (2020: £i2.0 million) and £i8.9
million (2020: £i2.0 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 i0.5 times revenue would result in an increase or decrease in the value of investments and a corresponding credit or charge to equity of £i3.8
million. The sensitivity to changes in unobservable inputs is specific to each individual investment.
There are no individually material investments designated as fair value through other comprehensive income.
i
27.
Authorised and issued share capital
i
Equity Ordinary Shares
Nominal Value £m
Authorised
At
1 January 2019
i1,750,000,000
i175.0
At
31 December 2019
i1,750,000,000
i175.0
At
31 December 2020
i1,750,000,000
i175.0
At
31 December 2021
i1,750,000,000
i175.0
Issued
and fully paid
At 1 January 2019
i1,332,678,227
i133.3
Exercise
of share options
i75,625
—
Share cancellations
(i4,586,039)
(i0.5)
At
31 December 2019
i1,328,167,813
i132.8
Exercise
of share options
i1,000
—
Share cancellations
(i32,088,571)
(i3.2)
At
31 December 2020
i1,296,080,242
i129.6
Exercise
of share options
i534,800
—
Share cancellations
(i72,155,492)
(i7.2)
At
31 December 2021
i1,224,459,550
i122.4
/
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.
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 2021 was i5,803,641 (2020: i4,863,244,
2019: i9,219,837), and £i65.0 million (2020: £i38.9
million, 2019: £i98.3 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2021 was i70,489,953
(2020: i70,748,100, 2019: i70,787,730) and £i789.1
million (2020: £i566.0 million, 2019: £i755.0 million) respectively.
Notes to the consolidated financial statements (continued)
27. Authorised and issued share capital (continued)
Share options
WPP Executive Share Option Scheme (WPP)
i
As at 31 December 2021, unexercised options over ordinary shares of
i6,741 have been granted under the WPP Executive Share Option Scheme as follows:
Number
of ordinary shares under option
Exercise price per share (£)
Exercise dates
i3,696
i8.333
i2015 - 2022
i3,045
i10.595
i2016 - 2023
/
WPP
Worldwide Share Ownership Programme (WWOP)
As at 31 December 2021, unexercised options over ordinary shares of i1,090,954 and unexercised options over ADRs of i191,669
have been granted under the WPP Worldwide Share Ownership Programme as follows:
Number of ordinary shares under option
Exercise price per share (£)
Exercise dates
i69,004
i8.458
i2015
- 2022
i792,200
i13.145
i2017
- 2024
i3,625
i13.145
i2018
- 2024
i225,500
i13.505
i2016
- 2023
i625
i13.505
i2017
- 2023
Number of ADRs under option
Exercise price per ADR ($)
Exercise dates
i23,024
i67.490
i2015
- 2022
i91,660
i102.670
i2017
- 2024
i76,985
i110.760
i2016
- 2023
WPP Share Option Plan 2015 (WSOP)
As at 31 December 2021, unexercised options over ordinary shares of i12,396,275 and unexercised options over ADRs of i1,442,375
have been granted under the WPP Share Option Plan as follows:
Notes to the consolidated financial statements (continued)
27. Authorised and issued share capital (continued)
Number of ADRs under option
Exercise price per ADR ($)
Exercise dates
i279,970
i48.950
i2023 - 2030
i167,410
i53.140
i2021 - 2028
i228,630
i62.590
i2022 - 2029
i378,030
i73.780
i2023
- 2030
i154,820
i88.260
i2020 - 2027
i130,170
i105.490
i2020 - 2026
i103,345
i115.940
i2018 - 2025
The
aggregate status of the WPP Share Option Plans during 2021 was as follows:
i
Movements on options granted (represented in ordinary shares)
1
January 2021
Granted
Exercised
Forfeited
Outstanding 31 December 2021
Exercisable 31 December 2021
WPP
i6,741
i—
i—
i—
i6,741
i6,741
WWOP
i2,499,674
i—
(i54,050)
(i396,325)
i2,049,299
i184,124
WSOP
i17,940,725
i5,155,800
(i480,750)
(i3,007,625)
i19,608,150
i14,287,525
i20,447,140
i5,155,800
(i534,800)
(i3,403,950)
i21,664,190
i14,478,390
Weighted
average exercise price for options over
1 January 2021
Granted
Exercised
Forfeited
Outstanding
31 December 2021
Exercisable 31 December 2021
Ordinary shares (£)
WPP
i9.355
i—
i—
i—
i9.355
i9.355
WWOP
i12.631
i—
i7.304
i11.803
i12.923
i8.458
WSOP
i10.596
i11.065
i8.372
i10.116
i10.854
i9.322
ADRs
($)
WWOP
i98.509
i—
i49.313
i89.225
i101.693
i67.490
WSOP
i70.363
i73.780
i53.248
i66.257
i72.228
i61.479
/i
Options
over ordinary shares
Outstanding
Range of exercise prices £
Weighted average exercise price £
Weighted average contractual life Months
i7.344-i17.055
i11.021
i86
Options
over ADRs
Outstanding
Range of exercise prices $
Weighted average exercise price $
Weighted average contractual life Months
i48.950-i115.940
i75.684
i83
/
As
at 31 December 2021 there was £i10.2 million (2020: £i7.2 million) of total unrecognised compensation
costs related to share options. The cost is expected to be recognised over a weighted average period of i21 months (2020: i20 months).
Share
options are satisfied out of newly issued shares.
Notes to the consolidated financial statements (continued)
27. Authorised and issued share capital (continued)
i
The
weighted average fair value of options granted in the year calculated using the Black-Scholes model was as follows:
2021
2020
2019
Fair value of UK options (shares)
i220.0
p
i128.0
p
i117.0
p
Fair
value of US options (ADRs)
$i14.89
$i8.95
$i8.49
Weighted
average assumptions
UK risk-free interest rate
i0.63
%
-i0.02
%
i0.57
%
US
risk-free interest rate
i1.16
%
i0.31
%
i1.61
%
Expected
life (months)
i48
i48
i48
Expected
volatility
i34
%
i34
%
i24
%
Dividend
yield
i3.4
%
i4.2
%
i3.8
%
/
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 2021 was £i9.64 (2020: £i6.96,
2019: £i9.39) and the average ADR price for the same period was $i66.44 (2020: $i44.56,
2019: $i59.93).
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.
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 itwo 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 itwo 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 ithree
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 ithree 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 iten years, including the vesting period.
Notes to the consolidated financial statements (continued)
i
28. Other reserves
i
Other
reserves comprise the following:
Capital redemption reserve £m
Equity reserve £m
Hedging
reserve1
£m
Translation
reserve1
£m
Total other reserves £m
Balance at 1 January 2019
i2.7
(i236.4)
i—
i1,196.1
i962.4
Restatement2
—
—
—
(i4.8)
(i4.8)
Restated
balance at 1 January 2019
i2.7
(i236.4)
i—
i1,191.3
i957.6
Exchange
adjustments on foreign currency net investments
—
—
—
(i607.1)
(i607.1)
Exchange
adjustments recycled to the income statement on disposal of discontinued operations
—
—
—
(i284.0)
(i284.0)
Share
cancellations
i0.5
—
—
—
i0.5
Recognition
and remeasurement of financial instruments
—
i10.6
—
—
i10.6
Share
purchases – close period commitments
—
(i252.3)
—
—
(i252.3)
Balance
at 31 December 2019
i3.2
(i478.1)
i—
i300.2
(i174.7)
Exchange
adjustments on foreign currency net investments
—
—
—
i85.2
i85.2
Gain
on net investment hedges
—
—
—
i9.7
i9.7
Loss
on cash flow hedges
—
—
(i5.9)
—
(i5.9)
Share
of other comprehensive loss of associate undertakings
—
—
—
(i61.5)
(i61.5)
Exchange
adjustments recycled to the income statement on disposal of discontinued operations
—
—
—
(i20.6)
(i20.6)
Share
cancellations
i3.2
—
—
—
i3.2
Recognition/derecognition
of liabilities in respect of put options
—
i103.5
—
—
i103.5
Share
purchases – close period commitments
—
i252.3
—
—
i252.3
Balance
at 31 December 2020
i6.4
(i122.3)
(i5.9)
i313.0
i191.2
Exchange
adjustments on foreign currency net investments
—
—
—
(i94.7)
(i94.7)
Gain
on net investment hedges
—
—
—
i45.5
i45.5
Loss
on cash flow hedges
—
—
(i38.0)
—
(i38.0)
Share
of other comprehensive income of associate undertakings
—
—
—
i7.3
i7.3
Share
cancellations
i7.2
—
—
—
i7.2
Recognition/derecognition
of liabilities in respect of put options
—
(i242.7)
—
—
(i242.7)
Share
purchases – close period commitments
—
(i211.7)
—
—
(i211.7)
Balance
at 31 December 2021
i13.6
(i576.7)
(i43.9)
i271.1
(i335.9)
Notes
1Prior
year figures have been re-presented to separately disclose the hedging reserve included previously within the translation reserve.
2Other reserves and retained earnings have been restated for the impact of a tax restatement, as described in the accounting policies.
/
The equity reserve primarily relates to the recognition of liabilities in respect of put options agreements entered into by the Group as part of a business combination that allows non-controlling shareholders to sell their shares to the Group in the future. During 2021, the Company entered into an agreement with a third party to conduct share buybacks on
its behalf in the close period commencing on 16 December 2021 and ending on 18 February 2022, in accordance with UK listing rules. The commitment resulting from this agreement constituted a liability at 31 December 2021 and was also recognised as a movement in the equity reserve in the year ended 31 December 2021.
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedges.
The translation reserve contains the accumulated gains/(losses) on currency translation of foreign operations arising on consolidation and fair value gains/(losses) on net investment hedges.
i
The
translation reserve comprises:
2021
£m
2020
£m
2019
£m
Balance relating to continuing net investment hedges
(i2.3)
i9.7
i—
Balance
relating to discontinued net investment hedges
(i85.0)
(i142.5)
(i142.5)
Balance
related to retranslation of foreign currency net investments
Notes to the consolidated financial statements (continued)
i
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.
i
The
Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date.
Book value at acquisition £m
Fair value adjustments £m
Fair value to
Group £m
Intangible assets
i—
i97.7
i97.7
Right-of-use
assets
i36.6
(i3.4)
i33.2
Property,
plant and equipment
i4.0
i—
i4.0
Cash
and cash equivalents
(i2.3)
i—
(i2.3)
Trade
receivables due within one year
i40.0
i—
i40.0
Other
current assets
i5.9
i0.9
i6.8
Total
assets
i84.2
i95.2
i179.4
Current
liabilities
(i28.5)
(i0.3)
(i28.8)
Trade
and other payables due after one year
(i2.3)
(i5.8)
(i8.1)
Deferred
tax liabilities
i—
(i22.5)
(i22.5)
Long-term
lease liabilities
(i34.2)
i—
(i34.2)
Total
liabilities
(i65.0)
(i28.6)
(i93.6)
Net
assets
i19.2
i66.6
i85.8
Non-controlling
interests
(i3.0)
Goodwill
i331.9
Consideration
i414.7
Consideration
satisfied by:
Cash
i225.9
Equity instruments of subsidiary company
i110.8
Payments
due to vendors
i78.0
/
Equity instruments of the subsidiary company relate to shares issued by FGH SVC Holdco Inc. and represent i16.5%
ownership of this subsidiary company. WPP retains a i57.9% stake in FGH SVC Holdco Inc. following this transaction.
Increases in non-controlling interests in the period arising from the acquisition of subsidiaries are due to changes in ownership of existing subsidiaries and both increases in the non-controlling interests that arise on acquisition
of a new subsidiary, as noted in the table above, along with the impact of share issuances in subsidiaries that contain non-controlling interests as a part of the overall acquisition arrangement, but occurring immediately prior to the acquisition of a new subsidiary.
Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients. Goodwill that is expected to be deductible for tax purposes is £i83.9
million.
Non-controlling interests in acquired companies are measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. There continues to be no subsidiaries with non-controlling interests that are individually material to the Group.
The contribution to revenue and operating profit of acquisitions completed in the year was not material. There were no material acquisitions completed between 31 December 2021 and the date the financial statements have been authorised for issue. There were no material acquisitions completed in the years ended 31 December 2020 and 2019.
/
i
30.
Related party transactions
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.
In the year ended 31 December 2021, revenue of £i117.2 million (2020: £i90.6
million) was reported in relation to Compas, an associate in the USA. All other transactions in the years presented were immaterial.
Notes to the consolidated financial statements (continued)
30. Related party transactions (continued)
The Group invested a further £i92.9
million in Kantar in 2021 to fund its i40% share of the Numerator acquisition.
iThe following amounts were outstanding at 31 December:
2021
2020
£m
£m
Amounts
owed by related parties
Kantar
i30.3
i39.0
Other
i45.7
i27.9
i76.0
i66.9
Amounts
owed to related parties
Kantar
(i6.2)
(i5.6)
Other
(i51.4)
(i36.0)
(i57.6)
(i41.6)
/
i
31.
Reconciliation of operating profit/(loss) to headline operating profit
i
Reconciliation of operating profit/(loss) to headline operating profit:
2021
2020
2019
Continuing
operations
£m
£m
£m
Operating profit/(loss)
i1,229.0
(i2,278.1)
i1,295.9
Amortisation
and impairment of acquired intangible assets
i97.8
i89.1
i121.5
Goodwill
impairment
i1.8
i2,822.9
i47.7
Losses/(gains)
on disposal of investments and subsidiaries
i10.6
(i7.8)
(i40.4)
Gains
on remeasurement of equity interests arising from a change in scope of ownership
i—
(i0.6)
(i0.4)
Investment
and other impairment (reversals)/charges
(i42.4)
i296.2
i7.5
Litigation
settlement
i21.3
i25.6
(i16.8)
Gain
on sale of freehold property in New York
i—
i—
(i7.9)
Restructuring
and transformation costs
i145.5
i80.7
i153.5
Restructuring
costs in relation to Covid-19
i29.9
i232.5
i—
Headline
operating profit
i1,493.5
i1,260.5
i1,560.6
/
Headline
operating profit is one of the metrics that management uses to assess the performance of the business. Reconciling items in the above table are components of operating profit/(loss), which are included in Note 3: Costs of Services and General Administrative Costs.
/
i
32.
Events after the reporting period
On 4 March 2022, due to the Russian invasion of Ukraine, the Board of WPP announced its intention to discontinue operations in Russia. In 2021, Russia represented i0.8% of the Group's revenue.
/
F-65
Dates Referenced Herein and Documents Incorporated by Reference