WPP plc (WPP) on Q1 2023 Results - Earnings Call Transcript
Mark Read: Good morning, everybody. And welcome to our 2023 First Quarter Results Call. I'm here in Sea Containers with John Rogers, Tom Waldron and our Investor Relations team. And I'll just take you briefly through the highlights before John takes you through our financial performance. And we'll come back to close to the end and take your questions. On page 2, of the presentation you should note our cautionary statement, which is important. So turning to page 3, and then 4, are highlights of the first quarter. I think we had a positive start to the year, reflecting continued momentum in the business and continued investment in our offer. We delivered first quarter growth of 2.9%. I think, pretty much in line with our expectations, and maybe even very, very slightly ahead against probably the toughest comp of last year. We saw growth across the business at 3% Ii our Integrated Agencies, 2.2% in our Public Relations, Public Affairs firm, and 1.9% in our Specialist Agencies, I should just call out strong performance from GroupM at 6.1% and also strong performance from Ogilvy. We continue to improve our work. We topped the WARC, the World Advertising Research Council ratings in media, in creative and effectiveness in all three categories, and delivered $1.5 billion in net new business in Q1. I should also point out Ogilvy's won Agency of the Year, at Clio's two nights ago and reflects continued investment in our creative capability. That has been supported by acquisitions, particularly in influencer markets, as we made two acquisitions, we'll come on to later, and chose the partnerships. KKR took a minority interest in FGS Global, we will talk a little bit about that later on, and what that means for us. And then overall, after positive first quarter, we're leaving our guidance for the year unchanged, which remains at like-to-like revenue at 3% to 5%, and a headline operating margin of around 15%. So those are the highlights. John, you want to take us through their financial performance in more detail.
John Rogers : Thank you, Mark. So moving to the financials for the first quarter of 2023. So coming first to slide 6, revenue less pass-through costs. At a reported level we've seen an increase of 9.9% for the quarter. This is supported by 6.3% point tailwind in relation to FX, due to the weakness in Sterling relative to last year, and also our targeted M&A strategy that Mark has referred to, added 0.7 percentage points to reported growth. And actually stripping out the impact of the disposal of our business in Russia last year, the contribution was 1%. On a like-for-like basis, we saw 2.9% growth against 9.5% growth in the same quarter last year, very much in line with our expectations and slightly ahead of consensus forecasts. And looking forward as Mark just said, we reiterated our guidance at 3% to 5% growth for the full year 2023. So moving now on to Slide 7, and business sector performance. We continued to see broad-based growth across all of our business lines, starting with the integrated agencies at 3% on top of the very strong 8.6% growth this time last year. And as Mark just called out GroupM in particular, saw strong growth of 6.1% on the back of 12.8% growth in Q1 last year. And our Creative Agencies had a slightly slower start to the year at plus 0.7% compared to 5.6% a year ago. And within this we saw strong growth at Ogilvy driven by exposure to CPG clients that increased their spend by 15% across WPP in the quarter, and also driven by recent new business wins. However this was partially offset by a slower start to the year at Wunderman Thompson reflecting lower spend from some technology clients and a soft start the year at Grey. In our PR businesses we saw like-for-like growth of 2.2% compared with 14.1% a year ago. FGS Global performed particularly strongly but we saw a slightly softer performance at BCW and Hill+Knowlton. And finally Specialist Agencies saw growth of 1.9% versus 13% in the same quarter last year, with particularly strong growth in CMI, specialist healthcare media agency and strong growth at Landor & Fitch. So turning now to Slide 8 and our top five markets, representing two-thirds of our overall net sales. So growth in the U.S. at 2.3% was driven by growth in spending from clients in the consumer packaged goods and financial services sectors offset by weaker spend by clients in the technology and digital services and retail sectors. In the tech sector clients now have adjusted budgets post COVID levels of spending on some categories of hardware. And in retail we've seen an impact from recent consolidation in the U.S. supermarket sector. In the UK growth was 7.4% on top of 8.1% in Q1 of 2022, with particularly strong demand from CPG clients and Germany, our biggest European market was up 4% compared with 16% this time last year, with broad growth in Media and strength in the Travel and Leisure segment, partially offset by the run-off of a COVID-related government contract in Germany at one of our specialists agencies. As we take note of the prelims, China continues to be a challenging market, declining 13% in Q1, as we flagged. We face a tough comparison in China with 12% growth this time last year. Q1 also began with high levels of COVID infection as restrictions were lifted late last year. Towards the end of the period we're encouraged by initial signs of recovery in the Media market in China, and economic indicators are actually positive. So we expect a bounce back in Q2 against easier comparatives. Actually excluding China, from our overall like-to-like growth would have delivered like-for-like growth for the quarter of 3.6%. India was also a little bit more challenging, down 1.4% in the first quarter, reflecting a tough comparison against Q1 2022, which grew at 25%. And there was some macro uncertainty at the beginning of the year. We expect a recovery to happen through the rest of the year, particularly around events such as the Cricket World Cup, and against easy comparisons in the second half. Coming on now to Slide 9 and looking at the main movements in our net debt through the quarter. So net debt at 31 of March, 2023 was £3.9 billion, representing an increase of £1.4 billion from the year end, driven by the usual networking capital movements, CapEx consistent with our full year guidance, the investment in the three M&A transactions that Mark's already mentioned, and a slight strengthening of Sterling year-to-date. The typical seasonal outflow of working capital since the year end reflects a small underlying improvement actually, versus the same period last year, benefiting from operational improvements and some reversal of the timing and mix factors that impacted our yearend position, and we discussed in detail at the prelims. And we remain confident that we can deliver a flat trade working capital performance in 2023. That combined with a small outflow on non-trade working capital of around £150 million or so, again, as I guided to on the prelims call, will result in a significant improvement in cash generation in 2023 over 2022. So moving to other items in the Bridge, on CapEx, we maintained our focus on organic investment, including our campus program, opening new sites in China and Manchester. And as I said before we continue to make bolt-on acquisitions of Goat, Obviously and 3K to strengthen our offer in the growth areas, with influencer marketing and healthcare. And with that, I'll hand it back to Mark.
Mark Read: Thank you, John. I'll just touch on a few of the sort of business drivers at the moment. So on page 10, I think we call out we had a strong start to the year in terms of new business, and in terms recognition of the quality of our work. I highlight a few of the new business wins. The Adobe Media win in the Americas; win of production work alongside another partner at Mondelez. And then particularly the Maruti Suzuki win in India, actually India's second largest advertiser. I point out that India is now the world's most populous market. We now work with 45 out of the top 50 clients in India. Our business was recognized by WARC in all six categories in media, in effectiveness, and in creative as were our agencies, actually Ogilvy, EssenceMediacom and Wavemaker. And I mentioned earlier, Ogilvy's topped the Clio's network of the year, at the Clio's two nights ago in New York. On top of the organic investment to businesses on page 11, we did make three acquisitions in the quarter, and one subsequent to the quarter we acquired two businesses in the influencer marketing space. Given the amount of time consumers are spending on the social media platforms, our clients are increasingly looking for ways to reach them. Many of those ways do involve influencers both of these businesses, enable clients to invest more money behind influencer marketing, has probably been the biggest challenge that they face, through maintaining relationships with several hundreds of thousands of influencers, understanding their performance, their relevance and helping clients use them in their marketing. We also acquired a small healthcare specialist PR business in Germany to further invest behind that fast growing sector. And then in April, Landor & Fitch acquired amp, a really interesting creative sonic branding agency based in Germany, but with some operations around the world. And those acquisitions are supported by strategic partnerships. We continue to develop our relationships with technology partners in a positive direction. I think I'd highlight that we span primarily the areas of CRM through Braze and Ecommerce but also both global in nature, and then a very interesting partnership in Japan with KDDI. And that represents Kyoko Matsushito san, our new Japanese country managers, a first major partnership in that market. It shows how we can sort of bring the strength of our global offer to bear in that country. On page 12 is worth briefly touching on the FGS Global transaction. KKR took a strategic investment in the company in March, and maybe just go back in history to the creation of FGS global and what this means for us strategically, back in January 2021, we put together Finsbury, Glover Park and Hering Schuppener, they were three public relations and financial PR firms operated totally independently within WPP, based in the UK, the U.S. and Germany, respectively. And one of the businesses had a minority employee investment. We brought those businesses together on a transaction with management heading towards an IPO with WPP as the majority owner. In October 2021, we saw the opportunity to bring that business together, to start a business with a leading US investor relations financial communications company in the U.S. So we formed FGS Global back in October 2021. That business has really performed extremely well. If you look at the emerging market tables for last year, they were number one by some region -- by some measure, in each region of the world in terms of deal volume, deal values for M&A transactions. That was recognized by KKR, who have come in to take out, in part. Golden Gate Capital was one of the investors at start the business and provide some liquidity to the management of the company, which is naturally changing somewhat. And we remain in a partnership with WPP owning a majority stake with the management of that business, and with KKR now as strategic investor online to develop that company over the next few years. It really highlights the value inside that company and accelerates the progress that we're making. Touch briefly on AI on page 13. I know this topic of a lot of interest to people, I think that at WPP, we're using AI extensively in our business for a number of years, primarily in our Media business in GroupM, through its access in other parts of the company. We use it to target media, to optimize campaigns to create audiences. And in the production part of this Hogarth, we use AI extensively to create -- to produce work for all of the channels that consumers need. I think what's changed over the last six months is the application of AI through generative AI into the creative process is the production of language, video, image really through AI, and that's really allowed us the opportunity to use it much more creatively in the company. There are many examples of the work we've done. It goes -- actually goes back to 2016 a campaign at Thompson then did for ING in Holland, or the work we did last year in India for Cadbury's Mondelez on Diwali. So I think we highlight three examples, the work that Ogilvy did Mondelez, I'll show in a second. AKQA Bloom have been using it to promote, NotCo a plant based meat company from Chile actually. And they used it to show what would happen if animals ate . A great work from AKQA Bloom. And then Wunderman Thompson had been doing some work with Iranian Democracy Council to highlight the future of women in Iran. And you can look at each of those pieces of work offline. But before we go on, I think we should show the work that Ogilvy did for the Mondelez brand Lacta in Greece. So could you play the film please, operator
Mark Read: Thank you Shahid. There's something useful in that for everyone on the call. So in summary, I think we had a positive start to the year, very much in line with our expectations. And we saw a strong demand for our services from clients. We made good progress against our strategic plan, in the areas of creativity, AI, acquisitions, and we choose to invest both organically and through acquisitions in those areas. FGS Global transaction with KKR does highlight the value and growth potential of that company within WPP. So net-net I'm sure we'll get on to this question we made on-track deliver our guidance. And looking forward longer term, we're well placed in advance of increasing complexity, as AI changes our industry in a fundamental way, as a trusted partner to our clients, and a more modern and future facing offer to prosper. Thank you very much. Now before we take questions there's one topic, one person we would like to thank. And that's John Rogers. This is John's last call with us. John joined back in January 2020, just think, eight weeks before COVID struck, and we were locked up. And I have to say he steered us through COVID extremely well, and up to speed with a very complex business, I'd say in record time, and helping us really to navigate that very successfully financially. We had the same later with the challenge we faced following the Russian invasion in Ukraine. So as he moves on. I'd say he leaves us in better shape financially and better shape strategically. John, thank you very much. Thank you for your contribution. I wish you all the best in your next endeavors. So thank you, John. And I think we'll now open the line up to questions.
Operator: Thank you, sir. And our first question of the day is from the line of Lena Gainer of BNP Paribas. Lena, please go ahead, your line is open.
Lena Gainer : Hi, hi, everybody, Mark, John.
Mark Read : Hi, Lena.
Lena Gainer : Congratulations on my results. And John, well, all the best for what's next for you.
John Rogers : Thank you very much.
Lena Gainer : I have three questions. The first one is obviously on the guidance. Sorry, not very original, but could you perhaps give a bit of color around Q2 and . And more importantly, how we should think about the trajectory of growth throughout the year? The second question is some kind of a follow-up to that, where it would be useful for us to understand the visibility and how much of the year is already known or guaranteed. I know it's never really guaranteed, but some idea, if you could quantify how many months you have known, for example? And my third question is on margins. I know this goal is not about the margins, but could you give us some elements around where you stood in your equipment in Q1 and your headcount plans for next coming months? Thank you.
Mark Read: Okay, well, why don't I give you some color in terms of the guidance overall and what we're hearing from clients? And John could talk about sort of specifics on the phasing. I think we'll take the first two questions within one question, and then we'll go on to talk to you about the margin. Look I think overall, we're three months into the year. We're six weeks away from giving you the guidance. I think we remain confident of being within the range of 3% to 5%. I don't think at this point, we'd say, no, that's changed really in any way from the last -- from six months ago, despite some of the turbulence in the financial system. When we gave the guidance, we knew that Q1 would be the toughest comp, because of the strong comparative last year. I think we flagged that at the time. I don't think anything's really changed. We've come in, I'd said in Q1, I'd say very, very marginally ahead of our expectations, which gives us confidence to make the numbers for the year. I think, overall, in my discussions with clients, I didn't see any major change in client sentiment, or client spending, any of those, those areas of the business that we knew would be slightly more challenged this year, like technology has continued to be very slightly more challenged than the physical phase. They've come more positive or more negative over the period, perhaps, in the stronger earnings from Google and Meta in Q1 than expected, gives us some confidence that they're not going to deteriorate further. So I think things are really very much as we thought Lena. And John can talk more about what that means for you to understand the sort of Q1 and the second half. And we understand the challenges of looking at an acceleration during the year as well.
John Rogers : Yes. Hi, Lena. Thanks, Mark. So just in terms of phasing, I mean, I think the key message is no new news. It's only six weeks since we last gave the guidance. And we were very clear on the prelims call that we thought Q1 would be a little bit softer. And so hence, mathematically, we expect the second half to be a little bit stronger than the first half. I mean, I think it's as simple as that. And as Mark just said, we've delivered Q1, pretty much in line with expectations, maybe a little bit better than we thought, but not significantly. And I think if you think about the sort of the range that we've given, if you looked at the two year rack, which is about 11% to 12% or so, and if you maintain that through the year, then you'd end up at the top end of our range. That would give us a turn of about 5%. And if we were to maintain Q1's performance through the rest of the year that would obviously put us at the bottom end of our range at 3%. So that, I guess, gives you one way at least of bounding the range, but 3% to 5%, I think we are very comfortable with, albeit we expect second half to be a little bit stronger than the first. In terms of visibility, again, I don't think any new news here. Typically, we have visibility of 80% to 90% of our spend looking forward 12 months. It very much varies business by business. While PR agencies typically have good visibility going out three months or so, our creative agencies will have visibility going out a little bit longer. But there's no material changes in our visibility from, for example, this time last year. And in terms of margin, I would say one way to think about that, well, I think partly because of the phasing of our investment in IT, which I talked about at the prelims, which is largely front end loaded, and also because we expect the second half on a net sales basis to be slightly stronger than the first, then I think we'd expect directionally in the first half margin to be flat, maybe a little bit negative year-on-year in the first half. And we'd expect to outperform in the second half. But all of which would net out to a margin of around 15% on a constant currency basis at the year end. So entirely consistent with the guidance that we gave at the prelims. And I would say by and large in all aspects, actually, nothing unfortunately, much has changed since the prelims, in terms of the underlying dynamics of the business. We're pretty much in line with where we thought we'd be. One thing I'd say on headcount, just as you asked a detailed questions there, we're actually I think in the quarter itself, where we've got 1,000 fewer people at the end of the quarter than we had at the beginning of the quarter, that I think shows good discipline about keeping control over our cost base, actually 800 fewer permanent people and about 200 fewer freelance people. So good control over our costs. And actually if you look at the year-on-year position, in terms our total headcount we're probably up at around 3%. So quarter-on-quarter we're up at around 3%. And on a freelance basis we're down at around 15%. So if you remember this time last year, we had to employ quite a loss of additional freelancers, because net sales was ahead of expectations. And so we had to support that client work with relights resources. And this year, we've kept very good control over our freelance spend. So in terms of our numbers we're down about 15% year on year in terms of the number of freelancers. When you aggregate those two together, so the 3% increase in our permanent and 15% reduction in our freelancers, we're up roughly 1% -- just over 1% year on year in terms of number of people, which again, is entirely consistent with the guidance that I gave on the prelims call only six weeks ago.
Lena Gainer : Understood, thank you very much.
Mark Read: Thank you.
Operator: Great. Our next question is from the line of Tom Singlehurst from Citi. Tom, your line is now open.
Mark Read: Hi, Tom.
Thomas Singlehurst: Yeah, good morning. Thank you very much. And yeah, a big thank you to John. The level of transparency on communications disclosure has come on leaps and bounds. So it's very much appreciated, and all the best for what comes next. But three questions to keep you busy in the meanwhile. First one, China, heavily negative in the first quarter, but going into the second quarter, the comps is I think something like 18 percentage points easier. I suppose the question is, does this all work through in the second quarter? And does that mean -- I know you specifically said the second half just then in terms of the growth profile, because that growth profile kicked off immediately in the second quarter. I suppose in contrast to that, the India comp gets a lot, lot harder. And so the question there is, when you did your deep dive on India and Brazil, I think at that point, Mark, -- or maybe even you John mentioned that you had aspirations for India and Brazil, both to grow. So the question is, do we think overall, that's still on track? And then the third question is on the FGS Global stake sale. I mean, I know you mentioned some of the mechanics of the deal. I just wondered whether that actually means anything concrete will change in how that business is run. And I suppose whether it presages scope for more minority stake sales in sort of discrete business units elsewhere in the organization, because the multiple is off the charts relative to the multiple that you yourself are trading at. So those are the three questions. Thank you.
Mark Read: Well, let's start with the FGS question. So I think the answer is it doesn't presage anymore stake sales. I mean, it was a unique situation in that we put together three businesses and I highlighted that there was already an employee investment -- management investment in that. And we did a transaction with , which brought a financial partner and an equity -- management equity stake, who's got management equity stake in the partners, into the OpCo structure. So I think from a structural perspective, it's the same post this transaction versus prior to this transaction, perhaps with changes in the percentages. WPP is the majority investor. There's a significant financial partner. And there's a significant management investment in the company. So I don't think anything in reality has changed apart from the fact that it's showing, being, as you say, a multiple disparity on the overall value of WPP versus the private market and the growth potential of the business. And I don't think we expect and we have no plans, and I don't see any plans to do a similar transaction in other parts of the business. It's really a unique situation giving the starting point, and the opportunities ahead of us which have been significant really bringing, the cyber business is a fantastic business. We're not might not know it well, in the UK. It's a very, very strong business in the U.S. and we've created with Roland Rudd and Alex Guise and the team there, a very strong and effective partnership that's going to attract some of the best people from that industry into the company. On China, I think our broad expectation is China will go from being a drag in Q1 to a positive impact, having a positive impact on WPP growth in the rest of the year. The situation is complicated by a strong comparative last year, and by lockdowns in China in January, which obviously has eased and we are starting to see an improvement in the media market in March and April that we expect to flow through into our business in the rest of the year. And in India, I'd say that we did a deep dive. You saw the strength of that business, but we do expect it to grow on the balance of the year despite the comparatives.
John Rogers : Yeah, just to build on Mark's comments. I think across India, China and Brazil for the full year, we expect all of those markets to be good growth opportunities for WPP, as they have been in the past. To your point, you've highlighted issues of phasing. And if we've covered China, I think already but the comp gets a lot easier in Q2, and then even easier in Q3, and Q4. So we'd expect to return to growth in Q2. And indeed in Q3 and Q4, maybe step up a little bit more, because the comps get comparatively easier. In India, I think you raised the point that Q2 comp is pretty tough. I think we were up about 45% to last year. So that was -- so we are seeing pretty strong growth in Q2. But we really would expect to return to growth in India in the second half, when the comps do get somewhat easier. And on Brazil, I think we'd get some small growth in Q2 and again, stepping up again, growth higher in half on the back of slightly easier comps. But overall good growth across all of those markets for the full year. They've been and continue to be good growth engines for our overall business.
Thomas Singlehurst: Super, thank you very much.
Mark Read: Thanks, Tom.
Operator: Our next question today is from the line of Julien Roch from Barclays. Julien, please go ahead.
Julien Roch: Yes, good morning, Mark, John and Tom and Caitlin and Anthony. Thank you, John for being so transparent on numbers. The bar is very high for your successor. So first question, coming back on FGS, can you give us some numbers because I calculate that KKR paid 70 times P when you trade online. So is it because FGS is expected to grow well above the BP going forward? What have they grown out annually on an organic basis and pro forma since 2019, for instance? You told us 18% in 21. But what about '20 and '22? That's my first question. The second one, sorry to come back on China again. So you say we turn around in Q2, but are we talking zero to 5, 5 to 10, more than 10, some numbers there? And then the last one on AI. A long question, sorry. So you win a content creative budget where a client will spend 100. Historically, you run your business on a cost plus basis. So you take your 15% margin spent 85 on delivering what the client want, thanks to AI will cost you far less. So let's say you only spend 40. Don't think the client will let you get a 60 margin rather than 15. So they're going to say why don't we share the spoil and we're going to pay you 60 to 70 and your margin is higher. So what do you think about this specific point, i.e. AI could lead to higher margin, but lower revenue for content and creative budget? Thank you.
Mark Read: Okay. So on FGS, I think we have given you the VA disclosure that we're going to give you at this point, I wouldn't want to be drawn into further details of that performance. And I think we'll have to see how that -- we'll see how the business continues. But I just agree with your point about the comparative valuations. On AI I saw you ask the question before. I don't -- sort of at one level I hate to disagree with you Julien. But I don't totally follow the point. I mean, there's -- if you think about how we do work, there's creativity, there's creative process. There's the production process. And there's the media process, if you're sort of thinking about it, simplistically, all underpinned by data and technology. I think as it relates to the creative process, distinctly from the production process, I don't think AI is going to make people suddenly more creative, or shorten that process. I think, the amount of work, we get paid -- the amount of money we get paid for ideation, the strategy for account management, all those things are substantially, I think going to be unchanged. If anything might be increased by the application of AI because it's going to demand greater volume of assets. I think on the production process, there is a question there around volume versus price. We need a greater volume of creative assets to be produced, a much greater volume by the way as the number of channels explode and the formats implode. And by the way when you can create -- when you can combine media and creative we're going to be using millions of different types of creative assets in relation to the data signals that we get from our technology and media. Much of that work is -- some of that work is done on an hourly basis, but much of that work is done on a fixed price basis. And so it's not going to be directly comparable. And I think the jury's out on whether the explosion in volume offsets the sort of reduction in price. In all of our experience with technology to-date in WPP's businesses, it's tended to create more jobs than its destroyed. And so I don't think net-net one can come to the conclusion you've come to. Also, by the way, the opportunity for us to gain market share by investing more and being more competitive. And I think some of what you're seeing in terms of clients looking to streamline their partners, and work with partners that have the wherewithal to invest in this indicates opportunity for us to gain market share, by better applying AI through our work.
Julien Roch: Okay, thank you. Clear.
Mark Read: Sorry, John's going to answer your question on…
John Rogers : Yeah, just on China. I mean, obviously, we've given quite a lot of guidance, and I really want to try and avoid getting drawn into guidance on a quarterly basis. But I guess mathematically, if you looked at the two year wrap, and you have that consistent, Q2 versus Q1, then you'd be much more likely to be in the range of 5 to 10 then in the range of zero to 5, which were the two that you sort of suggested on in your question. So that may be one way of looking at it.
Julien Roch: Okay. Thank you.
Operator: Thank you. Our next question of the day is from the line of Lisa Yang of Goldman Sachs. Lisa, tour line is now open.
Lisa Yang : Good morning. And yeah, all the best, John. for you or your input. A couple of questions, please. So firstly, on the full year guide, I think you said that the full year results on the three to five pricing will probably be three to four and rest is volume. Could you talk about the evolution of that mix in the first quarter? I guess you probably didn't have the three to four. So how'd you do -- why would you expect this -- the pricing contribution to accelerate for the year? So that's the first question. Secondly, on the performance in Q1, I mean, UK was very strong. So just wondering, like what's going on there. I think, obviously UK numbers also very strong. And I think that's going to be sort of stable for the rest of the year. And third question is on the restructuring, I think you said the 180 million obviously doesn't include any potential or additional restructuring coming from the property review. When should we expect to hear on that property review? Or can you maybe give us any sense of like the size of potential additional restructuring that could be coming this year related to that? Thank you.
Mark Read: John, why don't you that -- I think before just on the UK, to make the sort of qualitative point, I think we have a very strong business here in the UK. I think that the growth reflects the breadth of our business beyond sort of traditional media advertising, certainly outperforming the kind of classic advertising market. And I think it also reflects sort of the importance of the UK as a creative, and a media hub. But John, why you take this specifics on pricing in the UK, then?
John Rogers : Sure. Okay, well just Lisa in terms of your question on pricing, we said at the prelims that we expected price increases to be roughly 3% for 2023. And we maintain that guidance. That still holds, I would say in terms of Q1, the benefit of pricing, in our number would be 1.5% to 2%. So we are seeing volume growth in our Q1 and probably pricing around 1% or 2%. Why is that different? Well, because it's largely down to the timing of price negotiations with clients. That impacts that when we put price increases through. So that's why you'll see it slightly differ through the year. But we're very comfortable with the guidance we gave around 3% or so. In terms of restructuring from our property review, again, which we discussed in our prelims which was largely focused on the US, a market where we hold a lot of property, we would expect to update the market at our interims, on that, in terms of some of the details there. I don't want to be drawn at the moment in terms of quantum. I think we need to do the full review first and then we'll update in detail at the interim.
Lisa Yang : May I ask a follow up question?
Mark Read: Yeah.
Lisa Yang : So I think, clearly market finding you very confident onto this call in terms of business changes versus the pre-results. It does look like Publicis, Omnicom was slightly more cautious in tone. So just curious, like any maybe reason why, I don't know, you're maybe not seeing what they're seeing, it may be some difference in geographic mix. And specifically on Omnicon said, it will be a stretch to reach to the top of their guide, which is 5%. Do you think the same would apply to WPP? Would you say you're as comfortable with 5% as you are with 4% or 3% at this point?
Mark Read: I don't know that our tone is necessarily different from theirs. I mean, we just we're saying it as we see it, which is there's no real change from the last six weeks ago. And they've always been challenges in the economy for the year. And so the things that we knew about -- many of the things that we knew about, we knew technology would be a little bit softer. We knew China would improve a little bit over the years, I don't think anything's really changed. But one way, to think about that might help you Lisa is we did 9% last year in Q1 and 3% in Q1 this year. So that's sort of simplistically 12%. And we just 7% for the year. If we continue to deliver 12% on this base that would take us to 5%. And I think we're confident of being in that range of 3% to 5%. And that's sort of a sort of a simple, maybe too simple a way of looking at it. But I think that that's why we will be in that range.
Lisa Yang : Okay, thank you.
Operator: Our next question today is from the line of Adrien de Saint Hilaire of Bank of America. Adrien, please go ahead now.
Adrien de Saint Hilaire : Thank you very much. And indeed Godspeed, John for the future. Thanks for your help. A few questions then. I'm a little confused with trends in the ad market right now. We've heard some of the digital guys talk about an improvement and some acceleration into Q2, but then we're also seeing weakness elsewhere and caution elsewhere. So what do you observe on your end? And how do you think this plays out for GroupM and the broader WPP? That's the first question. Then secondly, you give us some interesting color about what you expect for Brazil, India, China for the rest of the year. Could we do the same exercise with some of the bigger markets like U.S., UK, Germany? Thank you.
Mark Read: Okay. I mean, look, I'll take the first question and maybe John can take the second question. I think the GroupM expects media advertising to be -- ad spend to be around 6% in 2023, very, very slightly down on 2022. And they grew GroupM at around 6% in Q1. So I'd say that the tech companies have very tough comparisons. I think Google, if you say we're up 3%, Google and Meta grew 3% in Q1, but Google's comparative, I believe was 23% last year. So they're facing sort of somewhat different situation, comparatively. And our comparatives, get slightly easy as the year go on. But not significantly. So I think if you look at the overall as being a little bit softer than last year, maybe the comparisons driving the 4Q year trends, but to come back to where John started, you know, we're in the range of 3% to 5%. I wouldn't say that 5% is -- 5% is better than 3%, but not necessarily tougher than 3%, except by definition. And we're sort of confident, that's where we'll be really. John?
John Rogers : Yeah. So Adrien on your -- again, not wanting to get drawn into reporting market by market analysis, country by country, quarter by quarter, look I think what I would say is that if you look at the numbers for the U.S. market in Q1, for the UK at just north of 2%, and then the UK strong at 7%, and then Germany at 4%. As it happens, they are all I would say pretty good indicators in terms of our full forecast for the year. Now there is some phasing in there and etcetera through the quarters, which I won't go through in detail, but they're not bad indicators of the direction of travel for the full year out for those specific markets.
Adrien de Saint Hilaire : Okay. And if I can just squeeze one more in, last question for you, John. On the working capital stuff, it seems that you're highlighting in the release that clients are now demanding maybe longer payment terms. Is that something which you've seen change in the last few weeks, maybe a few months?
John Rogers : No, we're always under pressure. It's always a big part of our negotiation with clients. We've always been actually pretty robust in terms of holding our trading terms. So it's -- there's been no material changes, I would say, in the nature of that negotiation over the last six months or so. And probably actually, in the last year or so. It's always been a hot topic for debate and been a lot hotter over the last 10 years. And the pressure there today that was to Mark's point 5, 10 years ago.
Adrien de Saint Hilaire : Okay, thank you.
Operator: Our next question today is from the line of Omar Sheikh of Morgan Stanley. Omar, please go ahead. Your line is open.
Omar Sheikh: Yeah, great. Thanks. So good morning, everyone. Just got a couple. Maybe if I could start on the creative business. It looks like that slowed quite a bit in the quarter. I mean, despite the fact the comps are actually a bit easier. So I just wonder whether you could give us a bit of color on what's going on there. Is that you called out the one's in Thompson and Grey? Is it kind of tight losses? Is there something competitively going on? Is it just the client mix, just some help there will be helpful. And then secondly, just looking at your organic growth over the last three or four quarters, there is a bit of a kind of a gap opening up between your peers, the big five holding companies are slightly underperforming. So can you -- how would you explain that gap? Is it this is mix, is it bit less exposure to consulting, data analytics? Is it geographic mix? Just some help there would be good. Thank you.
Mark Read: Okay, I think look on the first question, media versus creative, I think the GroupM's business, we've always been clear our media business is a fantastic business. And I think particularly in times of sort of normal advertising growth GroupM's top line is probably more driven by ad spend. If the market is growing at 6%, this year, GroupM did 6% in Q1. I don't think that could surprise us. Our creative businesses have somewhat different dynamics. And so I think have been a little bit softer in Q1. And as you correctly pointed out, we've had some business like Ogilvy do well, some business like Wunderman Thompson and Grey have a slightly slower start to the year. But if you look at the account wins that we've had, we've had a good performance there. In terms of the organic gap, I'd encourage you, one to wait till all the companies have reported. And secondly, to be careful in comparing revenue and net sales. And I'd point out that our revenue performance is similar to one, and our net sales performance slightly lower than another. So, I think we're not yet through the reporting system. And I'd say we feel good about our top line performance, and we'd like it to be stronger. But I think we feel good about our top line performance.
Omar Sheikh: Okay, thanks a lot.
Mark Read: Thanks.
Operator: Our last question today is from the line of Silvia Cuneo from Deutsche Bank. Silvia, please go ahead.
Silvia Cuneo: Thank you. Good morning, everyone. And thank you to John. Best of luck in your next phase.
John Rogers : Thank you.
Silvia Cuneo: My first question is also on the creative agency that and the follow up to the prior one. You talked about some areas of slowdown already. But I was wondering if you could talk a bit more about net sales from areas like Experience, Commerce and technology within that mix? Is that still close to 40% of that segment ex GroupM? And then the second question on the FX impact to-date. So if we take the current FX rates for the rest of the year, what sort of impact should we expect for revenue and margin? Thank you.
Mark Read: Hey, John, do you want to tackle those?
John Rogers : Yes. So on the FX, I would say we saw in the first quarter, effectively a tailwind at 6%. And we'd expect if you translate the current rate through to the full year, with the sort of head headwind of well, flat to 1%, something of that nature, on the FX. And in terms of your question on the split between Experience and Commerce, and technology, we don't actually report on that on a quarterly basis. We'll give you a further update on that split at the interims, but I wouldn't expect any of those trends in the growth of those areas to differ markedly from what we reported at the prelims six weeks ago.
Silvia Cuneo: Thank you.
Operator: There are no further questions at this time. So I'd hand call back over to Mr. Mark Read for closing remarks.
Mark Read: All right. Well, thank you all for joining. As we said, we had a good start to the year and remain on track to meet our guidance. I'd like to thank John for his contribution and say that Joanne started last week. She's here listening to the call, and she'll be on the next call at the half year. So thanks to everybody. And we'll all be here to answer any of your questions in more detail offline. Thank you.
John Rogers : Thanks, everyone.
