Strong performance driven by growth across all key WPP agencies. Headline fully diluted EPS growth of over 25%. Expect LFL top-line growth of 3-5% and further progress on operating margin to around 15% in 2023

WPP (NYSE:WPP) today reported its 2022 Preliminary Results.

Key figures

£ million	2022	+/(-)% = reported¹	+/(-)% LFL²	2021
Revenue	14,429	12.7	6.7	12,801
Revenue less pass-through costs	11,799	13.5	6.9	10,397

Reported:
Operating profit	1,358	10.5	-	1,229
Profit before tax	1,160	22.0	-	951
Diluted EPS (p)	61.2	16.6	-	52.5
Dividends per share (p)	39.4	26.3	-	31.2

Headline³:
Operating profit	1,742	16.6	10.0	1,494
Operating profit margin	14.8%	0.4pt*	0.4pt*	14.4%
Profit before tax	1,602	17.3	-	1,365
Diluted EPS (p)	98.5	25.5	-	78.5

* Margin points

Full year and Q4 financial highlights

FY reported revenue +12.7%, LFL revenue +6.7%
FY LFL revenue less pass-through costs +6.9%; with good performance in Q4 +6.4%
Q4 LFL revenue less pass-through costs by major market: US +3.5%, UK +12.0%, Germany +4.9%, China -8.4%, India +8.5%
Three-year FY LFL revenue less pass-through costs +10.0%; Q4 +10.2%
FY headline operating margin 14.8%, up 0.4 points LFL with strong top-line growth and efficiency savings supporting investment and margin expansion
Reported diluted EPS 61.2 pence; headline diluted EPS up 25.5% to 98.5 pence
Adjusted net debt at 31 December 2022 £2.5 billion (2021: £0.9 billion) after investments and over £1.1 billion of cash returned to shareholders. Average adjusted net debt to EBITDA ratio of 1.46x, slightly below the 1.5-1.75 target range
Trade working capital adverse movement of £226 million⁴ at year-end driven by mix and timing factors. Average trade working capital across 2022 was flat year-on-year
Final dividend of 24.4 pence proposed, up 30.5%, for a proposed total dividend for 2022 of 39.4 pence, in line with our policy of approximately 40% of headline diluted EPS

Strategic progress, shareholder returns and 2023 guidance

Strong performance across major WPP agencies: continued strength in GroupM 2022 with FY LFL revenue less pass-through costs growth of +9.1%, with other Global Integrated Agencies delivering 5.0% LFL growth; Public Relations 8.2% and Specialist Agencies 5.6%
Breadth and depth of capabilities resonating well with clients: $5.9 billion⁵ of net new business won, including Audible, Danone, SC Johnson and Verizon
Recognised for creativity: most awarded company at the 2022 Cannes Lions Festival for the second year running
Transformation programme gross annual savings of around £375 million against a 2019 base are ahead of the planned £300 million, with savings in property, procurement and ways of working, enabling additional investment in talent for growth areas. On track to reach target of £600 million by 2025
Over £1.1 billion returned to shareholders in 2022 comprising £807 million of share buybacks completed and £365 million of dividends paid
2023 guidance: LFL revenue less pass-through costs growth of 3 to 5%, and further margin improvement reflecting continued operating leverage, to deliver a headline margin of around 15% (excluding the impact of FX)

Mark Read, Chief Executive Officer, WPP:

"WPP delivered strong growth in 2022, despite the macro challenges, reflecting the priority placed by our clients on investing in communications, customer experience, commerce, data and technology.

"The competitiveness of our offer drove net new business of $5.9 billion in 2022, including new assignments with Audible, SC Johnson, and Verizon among many others and the quality of our work was recognised at the Cannes Lions Festival of Creativity where WPP was named Creative Company of the Year.

"Our transformation is now delivering measurable results. Over the past three years, WPP has grown like-for-like net sales at a compound average rate of 3.2%, including 3.3% in North America, while improving our headline operating profit margin by 40 basis points. Our adjusted net debt has declined from over £4 billion at the end of 2018 to £2.5 billion, while over £3.4 billion has been returned to shareholders via share buybacks and dividends.

"We enter 2023 in a strong financial position with good momentum from new business and the many opportunities ahead of us. While there will no doubt be challenges, the continued need for major companies to build brands, sell products, reinvent and transform their business, understand their data, invest in technology and exploit the potential of AI remains, as does their need for modern partners who can help them navigate this new world."

To access WPP's 2022 preliminary results financial tables, please visit www.wpp.com/investors

Overview and strategic progress

Market environment

The global marketing and advertising industry has demonstrated great resilience as brands continue to invest in marketing despite turbulence in the global economy. According to GroupM estimates, global advertising spend⁶ grew by 6.5% in 2022, slightly lower than the 8.4% forecast in June 2022, a change primarily due to lower than expected growth in China.

Digital advertising has continued to grow. As the number of scaled advertising platforms increases the market is becoming more complex. GroupM estimates that global digital advertising spend grew by 9.3% in 2022, following unprecedented 31.9% growth in 2021. Digital advertising made up 67% of total advertising in 2022, up from 64% in 2021. Retail media is one of the fastest growing segments within digital advertising, reflecting the growth in ecommerce post the pandemic. GroupM estimates retail media spending will have reached $110.7 billion globally in 2022, around 20% of overall digital spend.

Spend on TV is recovering to pre-pandemic levels as advertisers value the medium's effectiveness in satisfying reach and frequency goals. GroupM estimates that TV advertising grew by 1.7% in 2022, a slowdown in growth from 11.7% in 2021. The robustness of TV spend has been supported by growth in connected TV inventory, which made up 12.7% of the market in 2022, up from 11.0% in 2021. GroupM expects connected TV to make up nearly a third of all US TV advertising by 2027.

Global out of home advertising saw modest growth in 2022, curtailed by lockdown restrictions in China – the largest market for out of home advertising. Audio saw low-single-digit growth, supported by growth in digital which represents nearly a quarter of total audio advertising revenue. Print continues to face pressure as publishers are diversifying their offerings and revenue streams.

By geography, 2022 saw healthy growth in most major markets. Based on GroupM findings, advertising spend in the US and UK grew by 7.1% and 8.9% respectively. China was the only major market to see declines in advertising spend in 2022 as lockdown restrictions impacted consumer spending.

For 2023, GroupM expects global advertising spend to grow 5.9% including a return to growth in China as the economy re-opens, which is expected to grow 6.3% after a decline of 0.6% in 2022.

Ukraine

Since the war in Ukraine began in February 2022, our colleagues in Ukraine have shown extraordinary resilience and bravery and we remain in regular contact with our leaders in the country to support our employees. This has included financial support packages and other forms of assistance, including access to medical advice, counselling, immigration and relocation support, language classes, schooling for children and other practical resources.

WPP partnered with the UN's Refugee Agency (UNHCR) to launch an emergency appeal for families forced to flee their homes in Ukraine. Our people donated $675,000 which WPP match-funded, bringing the total to $1.35 million. Through GroupM, we secured $1.5 million in pro bono media support for the wider public appeal through our partners.

We also supported the Ukrainian government through a pro bono initiative to encourage inward investment and help revitalise the country's economy. Advantage Ukraine launched in September 2022, when we arranged for President Zelensky to virtually ring the opening bell at the New York Stock Exchange.

In early March, the Board of WPP concluded that WPP's ongoing presence in Russia would be inconsistent with our values as a company and we have subsequently divested our businesses there. This led to a loss on disposal of £63 million. Russia represented approximately 0.8% of WPP's revenue and 0.6% of revenue less pass-through costs in 2021.

Performance and progress

Since 2019, WPP's LFL revenue less pass-through costs have grown 10%, headline operating profit is 15% higher and headline EPS has grown by 26%.

Revenue was £14.4 billion, up 12.7% from £12.8 billion in 2021, and up 6.7% like-for-like. Revenue less pass-through costs was £11.8 billion, up 13.5% from £10.4 billion in 2021, and up 6.9% like-for-like.

We delivered a strong performance in 2022, with LFL growth in revenue less pass-through costs across all our major creative, media, public relations and specialist agencies. Client demand has been strong, particularly for commerce services and in commerce media. GroupM's commerce billings increased 18% year-on-year in 2022 while the proportion of digital billings has grown to 48% in 2022, from 43% in 2021.

Revenue less pass-through costs from higher-growth areas of our offer in experience, commerce and technology remained around a quarter of the Group. Global revenue less pass-through costs from experience, commerce and technology grew high-single digits in line with expected market growth, but in 2022 this growth was matched by the rest of the portfolio, including a resurgent performance in broader creative, PR and other communications activities. For Global Integrated Agencies, excluding GroupM, experience, commerce and technology accounted for 39%, compared to 38% in 2021 and 35% in 2019.

Clients and partners

By sector, we have had continued momentum from clients in the technology, healthcare & pharma and consumer packaged goods sectors, which together represent 55% of our revenue less pass-through costs for designated clients. On a three-year basis, these sectors recorded like-for-like growth of 27.9%, 19.4% and 21.4% respectively. At the client level, we also saw a broad commitment to investing in marketing for growth, with 14 out of our top 30 clients in 2022 showing double-digit growth.

We won $5.9 billion of net new billings in 2022. Key assignment wins include Audible, Danone, Migros, SC Johnson, Nationwide and Verizon. Key retentions included Sony Playstation, Tesco, Mars Wrigley and MasterKong. Account losses included L'Oréal (US media) and PepsiCo.

Following the Coca-Cola Company account win in 2021, this global partnership of unprecedented scale in the industry has been onboarded at pace, with expectations for further growth, as well as a strong new business pipeline, helping to underpin our overall guidance for 2023.

Our relationships with the world's largest brands continue to broaden, with 90% of WPP's top 50 clients working with five or more of our agencies, demonstrating the integrated nature of our offer.

We continue to develop new strategic partnerships with leading and emergent technology companies to build expertise, gain unique insights and develop our offering for clients.

We have recently announced several partnerships to enhance our commerce capabilities. These include a first-of-its-kind partnership with Instacart, the leading online grocery platform in North America, giving WPP early product insights, access to custom features and a co-developed certification programme; a partnership with financial infrastructure platform Stripe to enhance our digital commerce capabilities across the business; and a partnership with BigCommerce, a leading Open SaaS ecommerce platform, giving WPP priority access to new product tools and data sets that will enable WPP agencies to develop unique insights, maximise omnichannel sales and optimise spend for both B2C and B2B clients.

Agencies across WPP are using a broad range of generative artificial intelligence tools to automate workflows, speed the process of ideation and concepting, and produce innovative creative work for clients.

Creativity and awards

Our success in 2022 was again underpinned by the strength of our creative work. We were honoured to win the prestigious title of most creative company of the year at Cannes Lions International Festival of Creativity for the second year in a row. Ogilvy won global network of the year, regaining the top spot it last won in 2016.

In the 2022 WARC rankings, Ogilvy also topped the creativity ranking and placed second for effectiveness, becoming the only agency to secure top rankings in both categories and reflecting the breadth of its offer. WARC also named Mindshare the number one media agency network for the third consecutive year.

VMLY&R was recognised by Forrester as a leader in Marketing Creative and Content Services, AKQA secured two Grand Clio awards and Wunderman Thompson won the inaugural Creative B2B Grand Prix award at Cannes Lions.

Investments for growth

During the year we made a number of acquisitions investing net £237m, excluding earnout payments, to expand our presence in fast growing regions such as Latin America, and our global offer in experience, commerce and technology. Key acquisitions included: influencer marketing agency Village Marketing in North America; Bower House Digital a leading marketing technology services agency in Australia; Latin American ecommerce agency Corebiz; JeffreyGroup, one of the most respected independent corporate communications, public affairs, and marketing consulting firms in Latin America; Passport Brand Design in the US; Diff, a leading commerce agency based in Montreal; and New York-based digital transformation agency Fenom Digital.

We also continued to make organic investments to drive significant long-term growth opportunities, with a focus on unifying and accelerating our data capabilities and partnerships, embedding AI into our workflows through Satalia, and further building out our proprietary software portfolio.

Choreograph, our data company, continues to invest in its data products, allowing brands to predict relevance and drive deeper customer connections, with recent innovative work for Ford, Unilever and Bayer. Choreograph continues to play a central role in key client assignment wins, including Verizon in 2022.

In April 2022, we launched GroupM Nexus, bringing together 9,000 practitioners globally across addressable TV (Finecast), AI, retail media and commerce, programmatic (Xaxis), search and social to be the performance engine for GroupM's agencies and deliver transformational outcomes for clients across digital channels and platforms. We are continuing to see great potential for innovation and growth in this area, as brands increasingly focus more of their budgets on delivering cross-channel digital performance and as traditional TV budgets continue to follow audiences onto new platforms offering better addressability and measurement such as Connected TV. Finecast added 150 new clients in 2022 and grew strongly.

Transformation programme

Good progress has been made on our transformation programme, designed to simplify WPP, build greater collaboration, drive efficiency and free up funds for reinvestment in growth. By the end of 2022 we had delivered around £375 million of gross annual savings against a 2019 base, ahead of planned savings of £300 million, with savings across property, procurement and ways of working.

We remain comfortably on target to achieve our goal of £600 million annual cost efficiencies against a 2019 base by 2025.

Transformation cost saving enabled additional investment in talent in growth areas, allowing WPP to end 2022 with a better balance of freelance and salaried staff.

The transformation of our property estate continues, with a further five campuses opened in 2022 (Brussels, Düsseldorf, Santiago, Tokyo, Toronto), taking the total to 36, accommodating around half our people. In January we opened a new office in Guangzhou, China, and we plan to open additional offices including Atlanta, Paris and Manchester, in 2023. The programme has driven significant savings to date and our goal remains to complete at least 65 campuses, housing more than 85,000 people, by 2025.

As part of our transformation, we are consolidating and modernising our Enterprise Resource Planning and Human Capital Management tools by deploying Workday and Maconomy. We have also established 24x7 IT services capabilities for the Group, moving over 1,000 people from agency roles into WPP and establishing global hubs in Chennai, Mexico, Bucharest and Kuala Lumpur.

We continue to implement a new procurement operating model leveraging our global scale, aligned around categories and consolidating suppliers. As part of this programme, we launched an initiative in 2022 to optimise our use of flexible talent across the Group.

We have also merged more of our businesses to simplify our organisation and respond to our clients' needs for integrated solutions. Within GroupM we announced the merger of Essence and MediaCom to form EssenceMediacom and the formation of GroupM Nexus. In our specialist design agencies, we announced the merger of Design Bridge and Superunion to create a single leading design company, Design Bridge and Partners.

Purpose

WPP's purpose is to use the power of creativity to build better futures for our people, our planet, our clients and our communities. We outlined our sustainability strategy at an ESG event for stakeholders in June 2021. Since then, we have continued to make good progress in our commitments across each pillar of our purpose.

People

Throughout the year we have launched and expanded programmes across our agencies to attract, engage and develop top talent, including the Future Readiness Academies programme, a unique global learning programme, based on the four elements of WPP's offer: communications, experience, commerce and technology; to help everyone across the company gain the skills and knowledge needed for success in a growing digital world.

WPP is committed to improving diversity, equity and inclusion across the company. During the year we were pleased to appoint a new Chief Talent and Inclusion Officer, LJ Louis, who will oversee global initiatives and we continue to link our leaders' compensation and performance reviews to our DE&I goals and achievements.

Our Mental Health Allies programme has been rolled out in Singapore, following the success of the UK initiative and its extension to the United States, aimed at supporting our people and reducing stigmas around mental health. So far, we have trained over 550 Mental Health Allies and aim to continue to expand into more markets in 2023.

Recognising our commitment to building an inclusive culture, WPP achieved a top score on the Corporate Equality Index and has been named among the Best Places to Work for LGBTQ+ equality. In partnership with Choreograph, WPP Unite our company-wide LGBTQ+ community published Beyond the Rainbow, a survey of over 7,500 people in the United States, UK and Canada to better understand their perceptions and experiences of viewing LGBTQ+ identities in media and advertising.

We continue to invest in programmes to drive greater gender balance across the business. WPP's women's network, Stella, has been expanded across EMEA aiming to connect, inspire and support women across WPP to maximise their potential.

In June 2020, as part of a wider set of commitments to help combat racial injustice, WPP pledged to invest $30 million over a three-year period to fund inclusion programmes and support external organisations. WPP agencies globally are invited to apply to receive resources to create and run impactful programmes to advance racial equity. Successful third-round proposals include: Mindshare's Impact Index, an AI Human safety tool that examines the social impact of editorial content on historically underrepresented communities; WPP Belgium's Surboum from a WPP team in Belgium, a platform for companies, organisations and creatives dedicated to make the creative scene in Belgium more diverse; and Set Creative's Pathways Network, an industry-wide coalition to power diversity, equity and inclusion in suppliers across the experiential event marketing industry.

Planet

WPP has committed to reach net zero carbon emissions across its direct operations by 2025 and across its supply chain by 2030. Our net zero pledges are backed by science-based reduction targets, which have been verified by the Science-Based Targets initiative. We have committed to reducing 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 the only marketing communications company to include the emissions from media placement in our emissions reduction target. Currently, media accounts for more than half of WPP's supply chain emissions. GroupM has launched a media decarbonisation framework for measuring and reducing ad-based carbon emissions. Supporting this, GroupM has created a client coalition uniting leading advertisers, collectively representing $10 billion in global advertising investment, with a shared commitment to accelerate the decarbonisation of the world's media supply chain.

During the year, WPP was awarded a ‘Prime' ESG rating by ISS, one of the world's leading rating agencies for sustainable investment. WPP received an ‘A-‘ rating in CDP's 2022 climate change assessment for the second year in a row.

Clients

Purpose is at the heart of our offer, and we continue to support our clients on their own diversity, equity and inclusion goals. For example, Mindshare Inclusive Innovation hosted a panel with key clients and Mindshare leaders for TikTok's NextGen Diverse Creator Cohort. The goal of the panel was empower diverse creators and provide insight on the role of influencer marketing for brands, how media agencies work, on how to land a brand partnership.

In our annual survey of our client satisfaction, our key Likelihood to recommend score was 8 out of a possible 10, with Quality of work scored at 8.1 and Diversity, Equity and Inclusion scored at 8.2, maintaining the high levels achieved in the 2021 survey and showing a significant improvement over 2018-2020.

Communities

WPP is committed to making a positive contribution to the communities in which we operate. Earlier this year, WPP launched Creative Data School a learning programme for 6,000 young people aged 10-25 across the UK, designed by WPP's data and AI team, aiming to inspire young people and build their confidence in Data and AI.

In November, WPP published The Consumer Equality Equation report, a study into the relationship between ethnicity and the consumer experience in the UK, urging brands to rethink assumptions and address inequality. The report, supported by the WPP Racial Equity Programme, is an important milestone in our commitment to be a catalyst towards greater consumer equality.

Outlook for 2023

WPP is entering 2023 with a compelling client offer, good momentum from new business wins, and a robust balance sheet.

Our guidance for 2023 is as follows:

Like-for-like revenue less pass-through costs growth of 3-5%;

further margin improvement reflecting continued operating leverage to deliver a

headline margin of around 15% (excluding the impact of FX)

Other 2023 financial guidance:

We also anticipate mergers and acquisitions will add 0.5-1.0% to revenue less pass-through costs growth
Headline income from associates is expected to be around £40 million*
Effective tax rate (measured as headline tax as a % of headline profit before tax) of around 27.0%
Capex £300 million
Restructuring costs of around £180 million
Trade working capital expected to be broadly flat year-on-year with operational improvement offsetting increased client focus on cash management
Average net debt/EBITDA within the range of 1.5x-1.75x

*Kantar associate income

In accordance with IAS 28: Investments in Associates and Joint Ventures once an investment in an associate reaches zero carrying value, the Group does not recognise any further losses, nor income, until the cumulative share of income returns the carrying value to above zero. At the end of 2022 WPP's cumulative reported share of losses in Kantar has reduced the carrying value of the investment to zero. This means that we expect that around £40-50 million of Kantar headline income will not be recognised in our headline income from associates during 2023.

Medium-term guidance

We remain confident in our ability to deliver annual revenue less pass-through costs growth of 3-4% and headline operating profit margin of 15.5-16%, as a result of the actions we have taken to broaden and strengthen our services, to increase our exposure to attractive industry segments and to leverage our global scale.

Financial results

Unaudited headline income statement⁷:

£ million	2022	2021	+/(-) % reported	+/(-) % LFL
Revenue	14,429	12,801	12.7	6.7
Revenue less pass-through costs	11,799	10,397	13.5	6.9
Operating profit	1,742	1,494	16.6	10.0
Operating profit margin %	14.8%	14.4%	0.4pt	0.4pt
Income from associates	74	86	(14.2)
PBIT	1,816	1,580	14.9
Net finance costs	(214)	(215)	0.1
Profit before tax	1,602	1,365	17.3
Tax	(409)	(328)	(24.7)
Profit after tax	1,193	1,037	15.0
Non-controlling interests	(93)	(83)	(11.7)
Profit attributable to shareholders	1,100	954	15.3
Diluted EPS	98.5p	78.5p	25.5

Reconciliation of profit before taxation to headline operating profit:

£ million	2022	2021
Profit before taxation	1,160	951
Finance and investment income	145	70
Finance costs	(359)	(284)
Revaluation and retranslation of financial instruments	76	(88)
Profit before interest and taxation	1,298	1,253
Earnings from associates – after interest and tax	60	(24)
Operating profit	1,358	1,229
Goodwill impairment	38	2
Amortisation and impairment of acquired intangible assets	62	98
Investment and other impairment charges/(reversals)	48	(42)
Intangible asset impairment	29	-
Restructuring and transformation costs	204	146
Restructuring costs in relation to COVID-19	15	30
Property related costs	18	-
Losses on disposal of investments and subsidiaries	36	10
Gains on remeasurement of equity interests arising from a change in scope of ownership	(66)	-
Litigation settlement	-	21
Headline operating profit	1,742	1,494

Reported revenue was up 12.7% at £14.4 billion. Reported revenue on a constant currency basis was up 7.0% compared with last year. Net changes from acquisitions, disposals had a negative impact of 0.3% on growth.

Like-for-like revenue growth for 2022 excluding the impact of currency, acquisitions and disposals, and the other adjustments, was 6.7%.

Reported revenue less pass-through costs was up 13.5%, and up 7.6% on a constant currency basis. Excluding the impact of acquisitions and disposals and the other adjustments, like-for-like growth was 6.9%. In the fourth quarter, like-for-like revenue less pass-through costs was up 6.4%.

Business sector review

Revenue analysis

£ million	2022	2021	+/(-) % reported	+/(-) % LFL
Global Integrated Agencies	12,191	10,890	11.9	6.9
Public Relations	1,228	959	28.1	9.4
Specialist Agencies	1,010	952	6.1	1.9
Total Group	14,429	12,801	12.7	6.7

Prior year figures have been re-presented to reflect the reallocation of a number of businesses between Global Integrated Agencies and Specialist Agencies. This increases Global Integrated Agencies' Q4 and FY 2021 revenue by £13 million and £54 million respectively and reduces Specialist Agencies' by the same amount.

Revenue less pass-through costs analysis

£ million

2022

2021

+/(-) %

reported

+/(-) %

LFL

Global Integrated Agencies

9,742

8,683

12.2

6.9

Public Relations

1,157

910

27.1

8.2

Specialist Agencies

900

804

11.9

5.6

Total Group

11,799

10,397

13.5

6.9

Prior year figures have been re-presented to reflect the reallocation of a number of businesses between Global Integrated Agencies and Specialist Agencies. This increases Global Integrated Agencies' Q4 and FY 2021 revenue less pass-through costs by £11 million and £44 million respectively and reduces Specialist Agencies' by the same amount.

Headline operating profit analysis

£ million	2022	% margin*	2021	% margin*
Global Int. Agencies	1,432	14.7	1,222	14.1
Public Relations	191	16.5	143	15.7
Specialist Agencies	119	13.2	129	16.0
Total Group	1,742	14.8	1,494	14.4

* Headline operating profit as a percentage of revenue less pass-through costs

Prior year figures have been re-presented to reflect the reallocation of a number of businesses between Global Integrated Agencies and Specialist Agencies. This increases Global Integrated Agencies' 2021 headline operating profit by £6 million and reduces Specialist Agencies' by the same amount.

Global Integrated Agencies reported revenue was up 18.7% in the final quarter. Like-for-like revenue less pass-through costs was up 6.6% in the final quarter, and up 9.8% on a three-year basis. GroupM, which represented 37% of WPP's revenue less pass-through costs in the fourth quarter, was up 8.8% like-for-like. The other integrated agencies all recorded broadly similar levels of growth. For the full year, like-for-like revenue less pass-through costs for the segment was up 6.9%, and up 9.5% over three years.

Public Relations reported revenue was up 30.1% in the final quarter. Like-for-like revenue less pass-through costs was up 6.5% in the final quarter, and up 17.5% on a three-year basis. All agencies continued to grow well, with Hill + Knowlton Strategies growing strongly. During the period we launched FGS Global, the new name and branding for the merger of Finsbury Glover Hering and Sard Verbinnen. For the full year, like-for-like revenue less pass-through costs for the segment was up 8.2%, and up 15.9% over three years.

Specialist Agencies reported revenue was up 19.3% in the final quarter. Like-for-like revenue less pass-through costs was up 4.4% in the final quarter, and up 8.7% on a three-year basis. For the full year, like-for-like revenue less pass-through costs for the segment was up 5.6%, and up 13.8% over three years.

Regional review

Revenue analysis

£ million	2022	2021	+/(-) % reported	+/(-) % LFL
N. America	5,550	4,494	23.5	7.8
United Kingdom	2,004	1,867	7.3	6.3
W. Cont Europe	2,876	2,786	3.2	4.8
AP, LA, AME, CEE⁸	3,999	3,654	9.5	7.0
Total Group	14,429	12,801	12.7	6.7

Revenue less pass-through costs analysis

£ million	2022	2021	+/(-) % reported	+/(-) % LFL
N. America	4,688	3,849	21.8	6.6
United Kingdom	1,537	1,414	8.7	7.6
W. Cont Europe	2,319	2,226	4.2	5.5
AP, LA, AME, CEE	3,255	2,908	11.9	8.0
Total Group	11,799	10,397	13.5	6.9

Headline operating profit analysis

£ million	2022	% margin*	2021	% margin*
N. America	771	16.4	656	17.0
United Kingdom	187	12.3	181	12.8
W Cont. Europe	301	13.0	289	13.0
AP, LA, AME, CEE	483	14.8	368	12.7
Total Group	1,742	14.8	1,494	14.4

* Headline operating profit as a percentage of revenue less pass-through costs

North America reported revenue was up 30.6% in the final quarter. Like-for-like revenue less pass-through costs was up 3.4% in the final quarter, and up 8.6% on a three-year basis. The US continued to grow at a high-single-digit rate, led by Ogilvy, Hogarth and GroupM. On a full year basis, like-for-like revenue less pass-through costs in North America was up 6.6%, and up 10.2% over three years.

United Kingdom reported revenue was up 24.3% in the final quarter. Like-for-like revenue less pass-through costs was up 12.0% in the final quarter, and up 14.0% on a three-year basis. GroupM and Hogarth were the strongest performers. On a full year basis, like-for-like revenue less pass-through costs was up 7.6%, and up 10.8% over three years.

Western Continental Europe reported revenue was up 12.7% in the final quarter. Like-for-like revenue less pass-through costs was up 8.7% in the final quarter, and up 12.7% on a three-year basis. Spain was the strongest performer in the quarter, up 38.6% driven by good growth Ogilvy and Wunderman Thompson. France declined 12.2% in the quarter and 18.7% over three years reflecting the full year impact of client losses in 2021. On a full year basis, like-for-like revenue less pass-through costs in the region was up 5.5%, and up 11.0% over three years.

In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, reported revenue was up 10.4% in the final quarter. Like-for-like revenue less pass-through costs was up 5.9% in the final quarter, and up 8.7% on a three-year basis. In Latin America growth benefited from a strong performance in Brazil and very strong growth in Argentina, while Asia Pacific continued to be negatively impacted by COVID-related restrictions in China. On a full year basis, like-for-like revenue less pass-through costs was up 8.0%, and up 8.8% over three years.

The decline of like-for-like revenue less pass-through costs in China in Q4 reflected widespread COVID-related lockdowns during the quarter. Policy changes and the subsequent re-opening late in the quarter is expected to benefit WPP later in 2023 with media and programmatic business recovering first, followed by creative activities.

Operating profitability

Reported profit before tax was £1.2 billion, compared to a profit of £1.0 billion in 2021, reflecting the strong operating performance.

Reported profit after tax was £0.8 billion compared to a profit in 2021 of £0.7 billion.

Headline EBITDA (including IFRS 16 depreciation) for 2022 was up 14.5% to £2.0 billion, compared to £1.8 billion the previous year. Headline operating profit was up 16.6% to £1.7 billion. The significant growth in profitability year-on-year reflects revenue growth and the progress on our transformation programme, with £375 million of gross savings towards our 2025 annual run rate target of £600 million.

Headline operating profit margin was up 40 basis points to 14.8%, and up 40 basis points like-for-like. Staff costs pre-incentives were a 240 basis points drag on margin, reflecting the tight labour market and inflationary backdrop. Personal costs were a 50 basis points drag as travel and in-person meetings recommenced. Offsetting tailwinds were staff incentives (210 basis points), establishment costs (50 basis points), IT costs (30 basis points) and other operating costs (40 basis points).

The Group's headline operating profit margin is after charging £44 million of severance costs, compared with £42 million in 2021 and £424 million of incentive payments, compared to £592 million in 2021.

The average number of people in the Group in 2022 was 114,129 compared to 104,808 in 2021. The total number of people at 31 December 2022 was 115,473 compared to 109,382 at 31 December 2021.

Adjusting items

The Group incurred a net loss from adjusting items of £341 million in 2022. This comprises the Group's share of adjusting items from associates (£134 million), restructuring and transformation costs (£219 million) and other net gains from adjusting items (£12 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. This compares with a net loss from adjusting items in 2021 of £270 million.

Interest and taxes

Net finance costs (excluding the revaluation and retranslation of financial instruments) were £214 million, a decrease of £1 million year-on-year.

The reported tax charge was £384 million (2021: £230 million). The headline tax rate (measured on headline profit before tax, including associate income) was 25.5% (2021: 24.0%). Given the Group's geographic mix of profits and the changing international tax environment, the tax rate is expected to be around 27.0% in 2023, and to continue to increase in the next few years.

Earnings and dividend

Reported profit before tax was up 22.0% to £1.2 billion. Headline profit before tax was up 17.3% to £1.6 billion, and headline profits attributable to share owners were £1.1 billion.

Reported diluted earnings per share were 61.2 pence, compared to 52.5 pence in the prior period. Headline diluted earnings per share were up 25.5% to 98.5 pence.

The Board is proposing a final dividend for 2022 of 24.4 pence per share, which together with the interim dividend paid in November 2022 gives a full-year dividend of 39.4 pence per share. The record date for the final dividend is 9 June 2023, and the dividend will be payable on 7 July 2023.

Further details of WPP's financial performance are provided in Appendix 1.

Cash flow highlights

Twelve months ended (£ million)	31 December 2022		31 December 2021
Operating profit		1,358	1,229
Depreciation and amortisation		513	542
Investment and other impairment charges/(reversals)		158	(1)
Lease payments (inc interest)		(402)	(409)
Non-cash compensation		122	100
Net interest paid		(121)	(126)
Tax paid		(391)	(391)
Capex		(223)	(293)
Earnout payments		(71)	(57)
Other		(43)	(31)
Trade working capital		(328)	319
Other receivables, payables and provisions		(519)	383
Adjusted free cash flow⁹		53	1,265
Disposal proceeds		51	77
Net initial acquisition payments		(274)	(464)
Dividends		(365)	(315)
Share repurchases and buybacks		(863)	(819)
Net cash flow		(1,398)	(256)

In 2022, net cash outflow was £1,398 million, compared to a £256 million outflow in 2021. The main driver of the cash flow performance year-on-year was the £328 million adverse movement in trade working capital lapping positive movement in the prior year, driven by year-end mix and timing factors, the £519 million adverse movement in other receivables, payables and provisions was driven by a reduction in staff incentives payable, prepayments and year-end mix and timing factors associated with VAT, growth in the dividend and the increase in the share buyback. A summary of the Group's unaudited cash flow statement and notes for the twelve months to 31 December 2022 is provided in Appendix 1.

Balance sheet highlights

As at 31 December 2022 we had cash and cash equivalents of £2.1 billion and total liquidity, including undrawn credit facilities, of £4.1 billion. Average adjusted net debt in 2022 was £2.9 billion, compared to £1.6 billion in the prior period, at 2022 exchange rates. On 31 December 2022 adjusted net debt was £2.5 billion, against £0.9 billion on 31 December 2021, an increase of £1.4 billion at 2022 exchange rates. The higher adjusted net debt figure mainly reflects the £1,172 million returned to shareholders in 2022 comprising £807 million of share buybacks completed and £365 million of dividends paid.

We spent £863 million on share purchases during the year, of which £807 million related to share buybacks.

Around £50 million of share repurchases planned for 2023 continuing to offset dilution from share-based payments.

Our bond portfolio at 31 December 2022 had an average maturity of 6.4 years.

The average adjusted net debt to EBITDA ratio in the 12 months to 31 December 2022 is 1.46x, which excludes the impact of IFRS 16. This is slightly below our target range of 1.5 – 1.75x average adjusted net debt to EBITDA.

A summary of the Group's unaudited balance sheet and notes as at 31 December 2022 is provided in Appendix 1.

Foreign exchange sensitivity

Foreign exchange rates at 22nd February 2023 imply around a 1% tailwind to reported revenue less pass-through costs in 2023 from the movement in sterling year-on-year.

Management change

In November, we announced that Chief Financial Officer John Rogers has decided to step down from the company. The Board has appointed Joanne Wilson to succeed John as Chief Financial Officer. Joanne is currently Chief Financial Officer at Britvic plc (LSE:BVIC), the UK-listed international soft drinks company. It is expected that Joanne will join WPP in the first half of 2023. To ensure a smooth transition, John will remain available until later in 2023.

Cautionary statement regarding forward-looking statements

This document contains statements that are, or may be deemed to be, "forward-looking statements". Forward-looking statements give the Group's current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts.

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; 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 conflict in 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 under Item 3D ‘Risk Factors' in the Group's Annual Report on Form 20-F for 2021, which could also cause actual results to differ from forward-looking information. 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. Accordingly, no assurance can be given that any particular expectation will be met and investors are cautioned not to place undue reliance on the forward-looking statements.

Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation, the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority), 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.

Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made and are based upon the knowledge and information available to the Directors on the date of this document.

_______________________________
¹ Percentage change in reported sterling.
² Like-for-like. LFL 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.
³ In this press release not all of the figures and ratios used are readily available from the unaudited preliminary results included in Appendix 1. Management believes these non-GAAP measures, including constant currency and like-for-like growth, revenue less pass-through costs and headline profit measures, are both useful and necessary to better understand the Group's results. Where required, details of how these have been arrived at are shown in Appendix 2.
⁴ Includes a benefit of £102 million due to more favourable FX rates at year end compared to the prior year
⁵ Billings, as defined in the glossary.
⁶ All references to estimates and forecasts for advertising spend exclude US political advertising.
⁷ Non-GAAP measures in this table are reconciled in Appendix 2.
⁸Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.
⁹ Adjusted free cash flow is reconciled to cash generated by operations in Appendix 2.

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