Strong first half: broad-based growth, sustained demand from clients, transformation programme on track. 2022 growth guidance upgraded again

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

Key figures

£ million	H1 2022	+/(-) % reported¹	+/(-) % LFL²	H1 2021
Revenue	6,755	10.2	8.7	6,133
Revenue less pass-through costs	5,509	12.5	8.9	4,899

Reported:
Operating profit	539	11.4		484
Profit before tax	419	6.1	-	394
Diluted EPS (p)	22.7	10.2	-	20.6
Dividends per share (p)	15.0	20.0	-	12.5

Headline³:
Operating profit	639	8.2	-	590
Operating profit margin	11.6%	(0.5pt*)	-	12.1%
Profit before tax	562	12.0	-	502
Diluted EPS (p)	33.0	15.0	-	28.7

* Margin points

H1 and Q2 financial highlights

Client demand strong across most segments and regions
H1 reported revenue up 10.2%, LFL revenue 8.7% (Q2 9.3%)
H1 revenue less pass-through costs up 12.5%, LFL revenue less pass-through costs up 8.9% (up 9.4% on H1 2019)
Q2 LFL revenue less pass-through costs up 8.3%: US 10.4%, UK 6.2%, Germany 11.5%, China (6.1)% (affected by lockdowns), Australia 3.2%
Strong new business performance: $3.4 billion net new billings in H1
H1 headline operating profit margin 11.6%, down 0.5pt on prior year as expected, as a result of higher personnel costs and a return to business travel
Trade working capital cash outflow £232 million year-on-year; still expected to be around flat year-on-year at year-end
Adjusted net debt at 30 June 2022 £3.1 billion, up £1.6 billion year-on-year after £1.1 billion of share buybacks since June 2021

Strategic progress, shareholder returns and outlook

Continued recognition of extraordinary creativity: WPP awarded most creative company at Cannes Lions for second year running
Faster growth areas of experience, commerce and technology around 39% of revenue less pass-through costs in Global Integrated Agencies ex-GroupM in H1
Strong performance by industry sector: H1 LFL revenue less pass-through costs growth 12% in Technology, 7% in CPG and 7% in Healthcare
Investing for growth: enhancing our data capabilities through Choreograph and launch of Everymile, direct-to-consumer ecommerce offer
Focused M&A: acquisition of Village Marketing to accelerate creator economy growth and Bower House Digital, a leading marketing technology agency
Further simplification to enhance offer to clients: creation of EssenceMediacom and Design Bridge and Partners
Transformation programme on track to deliver expected £300 million of annual savings this year over a 2019 base
£637 million share buybacks in H1, total of £800 million to be completed in 2022; 15.0p 2022 interim dividend declared, +20%
Full year 2022 LFL revenue less pass-through costs growth now expected to be 6.0-7.0%; headline operating profit margin up around 50 bps

Mark Read, Chief Executive Officer of WPP, said:

"We have enjoyed a strong first half, with broad-based growth across our creative, media and public relations businesses. This reflects the improved competitive position of our creative businesses, with their growing capabilities in commerce, experience and technology, our continued strength in media and the resurgence in demand for strategic communications advice from our public relations agencies.

"Our services are business-critical – driving growth, building brands, innovating and helping clients navigate an increasingly complex marketing environment. As major advertisers increasingly look to integrate their marketing investments, we are well positioned to serve the world's largest companies, demonstrated by our success with Coca-Cola, which we are now onboarding at pace. The second quarter saw significant assignment wins from Audi, Audible, Danone and Nationwide.

"Our commitment to creativity was recognised at Cannes Lions in June where WPP was awarded the most creative company, recognising the quality of our work in all areas, spanning film, digital, media, commerce and creative business transformation. It's a testament to our investment in creativity and the talent of our people, and I am committed to making WPP the most creative company in the world.

"Our clients are continuing to invest in WPP's services, which reflects our attractive industry exposure in technology and healthcare, our broad global footprint, and the importance of what we do for their businesses. The actions we have taken over the last four years leave WPP much better positioned with a more uncertain economic environment ahead."

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

First half overview

Market environment

The market has continued to be strong in the first half of the year, with many sectors seeing significant growth in advertising spend. GroupM now expects global advertising to grow by 8.4%⁴ in 2022, marginally lower than the 9.7% estimate in December 2021, mainly due to a softer outlook for China amid ongoing lockdowns.

GroupM expects 12% growth in digital advertising revenues in 2022, a deceleration from the 32% growth in 2021. Overall, digital advertising on pure-play platforms represents 67% of total advertising revenues. Retaining its critical brand-building role, spend on television advertising is forecast to grow at 4% in 2022.

By geography, the US advertising market is expected to remain robust, growing by 10.0%⁴ while the UK is expected to grow by 9.3%. Germany, Europe's second-largest advertising market, is forecast to grow at a similarly high pace in 2022 at 9.1%. China is expected to grow by 3.3% in 2022, a downgrade from the 10.2% forecast in December 2021, reflecting the impact of the lockdowns during much of the first half of 2022.

Performance and progress

Revenue in the first half was £6.8 billion, up 10.2% from £6.1 billion in the first half of 2021, and up 8.7% like-for-like. Revenue less pass-through costs was £5.5 billion, up 12.5% from £4.9 billion in the first half of 2021, and up 8.9% like-for-like.

We have seen good momentum in the first half of the year, with LFL growth in revenue less pass-through costs across most sectors and most major markets. On a three-year basis LFL revenue less pass-through costs is up 9.4% in the first half.

Client demand remains healthy across all services. Revenue less pass-through costs from higher-growth areas of our offer in experience, commerce and technology was 39% of our Global Integrated Agencies, excluding GroupM, compared to 35% in 2019. Our digital billings mix within GroupM increased to 46%, compared to 43% in the first half of 2021. In addition, we have seen strong demand for commerce services, with GroupM's commerce billings increasing 26% year-on-year in the first half.

Clients and partners

In terms of client sector performance, we have seen good growth in the technology, CPG and healthcare & pharma sectors, which together represent around 54% of our revenue less pass-through costs⁵ for designated clients. In the first half these sectors saw LFL revenue less pass-through costs growth of 12%, 7% and 7% respectively. Compared to 2019, their growth rates were 27%, 17% and 20%. Travel and leisure has continued to rebound, growing 23% in the first half, although the sector remains below 2019 levels. We saw some softness in the automotive sector due to ongoing chip shortages.

We have won $3.4 billion of net new business billings in the first half, compared to $2.9 billion in the first half of 2021. Key assignment wins include Audi, Audible, Danone, Mars and Nationwide. Following the unprecedented account win last year, Coca-Cola has been onboarded at pace. During the first half we unveiled the first consistent, global ad platform for Sprite, with the ‘Heat Happens' campaign which will be rolled out across 200 markets.

In addition, we have developed new, and expanded existing, partnerships with global technology companies. During the period we announced a partnership with Epic Games, the company behind Fortnite and Unreal Engine, to help WPP agencies develop digital experiences in the metaverse. We also unveiled 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.

Creativity and awards

While data and technology play an increasingly important role in modern marketing, creativity is still at the heart of our work, because clients understand that the most effective campaigns start with an insight or idea. We are committed to maintaining our differentiation through sustained investment in creative talent, and integrating creativity with our experience, commerce and technology expertise.

WPP won the prestigious title of most creative company of the year at the Cannes Lions International Festival of Creativity for the second year in a row. WPP agencies collected a total of 176 Lions, including a Titanium Lion, 4 Grand Prix and 36 Gold Lions. Ogilvy won global network of the year, recognised for its investment in diverse talent, scaled technology and digital capabilities, and thought leadership.

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. WPP agencies also made their mark at the 2022 Clio awards, where work from AKQA Group, Wunderman Thompson and Ogilvy was recognised with the most prestigious, Grand Clio award.

Our media business, GroupM, retained its ranking as the world's largest media agency group, as calculated by COMvergence in their 2021 full year report. Once again, GroupM ranked number one in APAC and EMEA and improved to joint second place in North America.

Investment for growth

During the first half we have invested in strategically important capabilities, continuing our focused approach to acquisitions. We announced the acquisitions of Village Marketing, the industry leader in influencer marketing in North America and Bower House Digital, a leading Australian marketing technology services agency. In July we announced the acquisition of Corebiz, a leading Latin American ecommerce agency specialising in VTEX implementation, one of the largest enterprise digital commerce platforms in the region.

We have invested organically in new platforms to provide a future-facing offer to clients and innovate for the long term. The main areas of our investment are Choreograph, to accelerate our data capabilities; the launch of Everymile, our commerce-as-a-service platform; and our market-leading programmatic and connected TV businesses within GroupM Nexus. In addition, we launched GroupM Premium Marketplace, a unified programmatic marketplace supported by global partnerships.

Transformation programme

We continue to make good progress on our transformation plan, designed to achieve £600 million in annual cost efficiencies by 2025. We are on target to achieve our annual runrate of £300 million in efficiencies this year, against a 2019 baseline.

In property, we now have around 50,000 people occupying 34 campuses, having opened new campuses in Santiago, Tokyo and Toronto in 2022. By the end of the year, we aim to have 4 further campuses opened and around half of our people working from a campus building.

We are continuing to consolidate and modernise the tools used by our people, predominantly through the roll-out of ERP systems Workday and Maconomy. We are live with Workday in Wunderman Thompson North America. On Maconomy, we now have around 18,500 users on a common technology platform, which is an important stepping-stone for further process optimisation and finance shared services deployment.

In our broader IT transformation, we have moved nearly 1,000 people from agency roles into WPP and established global hubs in Chennai and Mexico. We have begun to realise opportunities identified from a zero-based budgeting review across Corporate IT and Ogilvy, and are commencing work on rolling out this approach across the remaining IT spend in WPP.

In procurement, we hosted a supplier day for 30 key suppliers to communicate our procurement strategy and align incentives, driving incremental savings. We are implementing a new procurement operating model leveraging our global scale, aligned around categories and consolidating suppliers.

We have also merged more of our businesses to simplify our organisation and respond to our clients' needs. Within GroupM we announced the merger of Essence and MediaCom to form EssenceMediacom and the formation of Nexus which brings together Finecast, Xaxis and GroupM Services to form one of the world's leading media performance organisations. Last month we announced the merger of our specialist design agencies, Design Bridge and Superunion to create a single leading design company, Design Bridge and Partners.

Finally, we have made progress in streamlining our operating model, reducing statutory entities by approximately a further 150 in the first half of the year.

Purpose and ESG

People

We have continued to invest in our people strategy in order to attract, retain and grow top talent and ensure that we are an employer of choice for all. We recently launched the Making Space initiative, giving our people a company-wide break along with a series of events across our campuses and offices to inspire and reconnect. To support access to women's healthcare across the United States, we have updated our benefits plan to providing funding for travel that allows consistent access to healthcare and resources, including abortion care, across all regions.

WPP is working to accelerate change in diversity, equity, and inclusion. We continue to link our DE&I goals to leaders' compensation and performance reviews. WPP was named among the best places to work for LGBTQ+ equality by the Human Rights Campaign; and WPP Unite, our LGBTQ+ community, won Outstanding Employee Network of the Year at the Burberry British Diversity Awards.

We are committed to our $30 million pledge to fund inclusion programmes within WPP and to support external organisations, as part of our Racial Equity Programme. During the period we invited our global agencies to apply for the second round of funding for resources to run impactful programmes to advance racial equity. Successful second-round grants include GroupM GradX Africa Academy, a 12-month media programme for people of colour in South Africa; RGBlack project, an educational platform that helps to mitigate the impacts of coded bias in AI-powered tools, originating from Brazil; and GIZMOLOGY, a hands-on creative technology apprenticeship programme for Black and historically marginalised communities operating out of WPP's Deeplocal's studio in Pittsburgh.

Planet

Last year we announced our new commitments to reduce carbon emissions from our own operations to net zero by 2025 and across our supply chain by 2030. Our net zero pledges are backed by equally ambitious 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.

During the half, WPP was awarded a ‘Prime' ESG rating by ISS, one of the world's leading rating agencies for sustainable investment. We are also proud to be rated A- by the Carbon Disclosure Project (CDP) in 2021 and look forward to continuing to take action in 2022.

Media accounts for more than half of WPP's supply chain emissions. In July GroupM launched a framework to measure and reduce ad-based carbon emissions, an important first step to standardise and accelerate carbon reduction across different media channels.

Clients

Our clients are bringing purpose and sustainability to the forefront of their brand strategies. Many of our successes at the Cannes Lions International Festival of Creativity were in recognition of purpose-driven work, including a Titanium Grand Prix for Cadbury work by Ogilvy and Wavemaker, which uses personalised adverts for local businesses hit by COVID-19; and a Grand Prix for the I Will Always Be Me campaign on behalf of Dell and Intel by VMLY&R to make life easier for people with motor neurone disease. VMLY&R also won a Grand Prix for Maxx Flash's The Killer Pack, which helps combat, through biodegradable packaging, deadly diseases like malaria and dengue caught outdoors in India.

Communities

Our colleagues in Ukraine continue to show extraordinary resilience and bravery and we remain in regular contact with our leaders to support our employees. 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 £65 million. Russia represented approximately 0.6% of WPP's revenue less pass-through costs in 2021.

WPP partnered with the UNHCR, the UN refugee agency, to support an emergency fundraising appeal to help people forced to flee their homes in Ukraine, raising over $150 million, including more than $1.3 million from WPP's employee match-funding programme. We are also working in partnership with the Ukrainian Government on a new campaign to support the country's economic recovery. WPP agencies from Ukraine, Poland and Czech Republic will work pro bono on ‘Advantage Ukraine' to demonstrate that Ukraine is open for business. The initiative will target business leaders within the region and across the world to encourage inward investment to support the economic recovery of the country.

2022 guidance

Performance in the first half of 2022 has been strong, and we expect continued growth in the second half. As a result, we are updating our guidance for 2022 as follows:

Organic growth (defined as like-for-like revenue less pass-through costs growth) of 6.0-7.0% (previously 5.5-6.5%)
Headline operating profit margin up around 50 bps, reflecting greater top-line momentum offset by inflationary cost pressures, the impact of Chinese lockdowns and investment in growth areas including Choreograph and Everymile
Effective tax rate (measured as headline tax as a % of headline profit before tax) of around 25.5%
Capex £350-400 million with around £100 million relating to ERP system deployment previously included in capex guidance now included in restructuring costs
Trade working capital expected to be flat year-on-year
Current foreign exchange rates imply around a 4.5% tailwind to reported revenue less pass-through costs from the movement in sterling year-on-year
We also anticipate mergers and acquisitions will add around 0.3% to revenue less pass-through costs growth, net of the divestment of our Russian operations
We expect to execute around £800 million of share buybacks in 2022, of which £637 million has already been completed

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.

We will provide guidance for the 2023 year at our 2022 preliminary results announcement in February 2023.

Financial results

Unaudited headline income statement:

Six months ended (£ million)	30 June 2022	30 June 2021	+/(-) % reported	+/(-) % LFL

Revenue	6,755	6,133	10.2	8.7
Revenue less pass-through costs	5,509	4,899	12.5	8.9
Operating profit	639	590	8.2
Operating profit margin %	11.6%	12.1%	(0.5)pt
Income from associates	12	29	(56.5)
PBIT	651	619	5.3
Net finance costs	(89)	(117)	23.7
Profit before tax	562	502	12.0
Tax	(143)	(115)	(25.2)
Profit after tax	419	387	8.2
Non-controlling interests	(43)	(34)	(24.9)
Profit attributable to shareholders	376	353	6.5
Diluted EPS	33.0p	28.7p	15.0

Reconciliation of operating profit to headline operating profit:

Six months ended (£ million)	30 June 2022	30 June 2021

Operating profit	539	484
Amortisation and impairment of acquired intangible assets	31	30
Losses on disposal of investments and subsidiaries	48	1
Gains on remeasurement of equity interests arising from a change in scope of ownership	(60)	-
Litigation settlement	-	22
Restructuring and transformation costs	75	34
Restructuring costs in relation to COVID-19	6	19
Headline operating profit	639	590

Reported billings were £24.6 billion, up 5.1%, and up 3.9% like-for-like.

Reported revenue from continuing operations was up 10.2% at £6.8 billion. Revenue on a constant currency basis was up 7.2% compared with last year. Net changes from acquisitions and disposals had a negative impact of 1.5% on growth, leading to a like-for-like performance, excluding the impact of currency and acquisitions, of 8.7%.

Reported revenue less pass-through costs was up 12.5%, and up 9.2% on a constant currency basis. Excluding the impact of acquisitions and disposals, like-for-like growth was 8.9%. In the second quarter, like-for-like revenue less pass-through costs was up 8.3%.

Business sector review

Revenue analysis

	Q2			H1
	£m	+/(-) % reported	+/(-) % LFL	£m	+/(-) % reported	+/(-) % LFL
Global Int. Agencies	3,111	13.0	10.2	5,701	9.6	9.3
Public Relations	302	28.0	9.0	572	27.2	11.2
Specialist Agencies	251	1.5	(0.3)	482	0.5	0.2
Total Group	3,664	13.3	9.3	6,755	10.2	8.7

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' Q2 and H1 2021 revenue by £18 million and £33 million respectively and reduces Specialist Agencies' by the same amount.

Revenue less pass-through costs analysis

	Q2			H1
	£m	+/(-) % reported	+/(-) % LFL	£m	+/(-) % reported	+/(-) % LFL
Global Int. Agencies	2,432	13.1	8.2	4,538	10.8	8.4
Public Relations	283	26.7	7.3	545	27.0	10.5
Specialist Agencies	220	14.6	10.9	426	14.3	11.9
Total Group	2,935	14.4	8.3	5,509	12.5	8.9

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' Q2 and H1 2021 revenue less pass-through costs by £15 million and £28 million respectively and reduces Specialist Agencies' by the same amount.

Headline operating profit analysis

£ million	2022	% margin*	2021	% margin*
Global Int. Agencies	507	11.2	489	11.9
Public Relations	83	15.2	63	14.8
Specialist Agencies	49	11.4	38	10.3
Total Group	639	11.6	590	12.1

* 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' H1 2021 headline operating profit by £6 million and reduces Specialist Agencies' by the same amount.

Global Integrated Agencies like-for-like revenue less pass-through costs was up 8.4% in the first half and up 8.2% in the second quarter. All of our integrated agencies were in growth in the first half. GroupM, representing 37% of WPP revenue less pass-through costs saw 11.8% like-for-like growth in the half and 10.9% growth in the second quarter. VMLY&R and AKQA Group are showing an improving growth trend year-on-year in the second quarter. Wunderman Thompson and Ogilvy recorded encouraging growth.

Public Relations like-for-like revenue less pass-through costs was up 10.5% in the first half and up 7.3% in the second quarter. All parts of the business grew in the second quarter, with H+K being a particularly strong performer. Purpose-related communications and ESG advisory remain a key growth driver. During the period we launched FGS Global, the new name and branding for the merger of Finsbury Glover Hering and Sard Verbinnen.

Specialist Agencies like-for-like revenue less pass-through costs was up 11.9% in the first half and up 10.9% in the second quarter. CMI and Landor & Fitch, the two largest businesses within Specialist Agencies, continued to be stand-out performers.

Regional review

Revenue analysis

	Q2			H1
	£m	% reported	% LFL	£m	% reported	% LFL
N. America	1,399	24.9	12.4	2,586	18.4	10.9
United Kingdom	495	0.3	1.0	956	3.1	3.2
W Cont. Europe	731	0.4	3.7	1,352	0.9	5.3
AP, LA, AME, CEE⁶	1,039	16.3	14.8	1,861	10.7	11.8
Total Group	3,664	13.3	9.3	6,755	10.2	8.7

Revenue less pass-through costs analysis

	Q2			H1
	£m	% reported	% LFL	£m	% reported	% LFL
N. America	1,173	26.0	10.2	2,189	20.4	9.5
United Kingdom	385	7.2	6.2	737	8.4	7.1
W Cont. Europe	579	3.6	6.6	1,086	3.4	7.7
AP, LA, AME, CEE	798	11.4	8.0	1,497	10.8	9.8
Total Group	2,935	14.4	8.3	5,509	12.5	8.9

Headline operating profit analysis

£ million	2022	% margin*	2021	% margin*
N. America	300	13.7	271	14.9
United Kingdom	67	9.1	83	12.3
W Cont. Europe	99	9.1	104	9.9
AP, LA, AME, CEE	173	11.6	132	9.7
Total Group	639	11.6	590	12.1

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

North America like-for-like revenue less pass-through costs was up 9.5% in the first half and up 10.2% in the second quarter. On a three-year basis, North America was up 10.5% like-for-like for the first half, with an improving trend in the second quarter. Growth was driven predominantly by GroupM, along with strong growth in Hogarth, Superunion and H+K.

United Kingdom like-for-like revenue less pass-through costs was up 7.1% in the first half and up 6.2% in the second quarter. On a three-year basis, the UK was up 7.4% like-for-like for the first half. Of our major agencies, AKQA Group, H+K and Landor & Fitch all grew double digits in the first half. VMLY&R and GroupM saw slower growth as a result of very strong performances in the prior period.

Western Continental Europe like-for-like revenue less pass-through costs was up 7.7% in the first half and up 6.6% in the second quarter. We saw a strong performance in Germany, mainly driven by GroupM, and Spain, while France continued to be impacted by assignment losses from 2021.

In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, like-for-like revenue less pass-through costs was up 9.8% in the first half and up 8.0% in the second quarter. Latin America was the strongest region, with continued double-digit growth led by Brazil. Asia Pacific also grew, with sustained momentum in India offsetting a weak China performance, which has been impacted by ongoing lockdowns.

Operating profitability

Reported profit before tax was £419 million, compared to £394 million in the prior period, principally reflecting stronger business performance year-on-year gains on the remeasurement of equity interests arising from changes in ownership, partly offset by the loss on the divestment of our Russian operations and higher restructuring and transformation costs (see table on page 9).

Reported profit after tax was £301 million compared to £287 million in the prior period.

Headline EBITDA (including IFRS 16 depreciation) for the first half was up 6.5% to £745 million. Headline operating profit was up 8.2% to £639 million.

Headline operating profit margin was down 50 basis points to 11.6%. Total operating costs were up 13.0% to £4.9 billion. Staff costs, excluding incentives, were up 16.7% year-on-year to £3.8 billion, reflecting higher headcount and the full year impact of the salary reviews that took place in June 2021. Establishment costs were down 0.8% at £263 million as we continued to benefit from our campus roll-out. IT costs were up 11.3% at £308 million, reflecting investment in products and services, and other operating expenses were up 12.7% at £272 million. Personal costs rose 84.6% to £96 million, reflecting the return of business travel, as expected. Excluding incentive payments as outlined below, operating costs were up 15.8% year-on-year.

The Group's headline operating profit is net of £17 million of severance costs, compared with £15 million in the first half of 2021 and £164 million of incentive payments, compared to £244 million in the first half of 2021.

On a like-for-like basis, the average number of people in the Group in the first half was 113,000 compared to 102,000 in the first half of 2021. The total number of people as at 30 June 2022 was 115,000 compared to 104,000 as at 30 June 2021.

Exceptional items

The Group incurred a net exceptional loss of £100 million in the first half of 2022, mainly relating to restructuring and transformation costs, the loss on disposal from the divestment of our Russian interests, and the amortisation and impairment of acquired intangibles, partially offset by gains on remeasurement of equity interests arising from a change in scope of ownership. This compares with a net exceptional loss in the first half of 2021 of £106 million.

Interest and taxes

Net finance costs (excluding the revaluation of financial instruments) were £89 million, a decrease of £28 million year-on-year, due to higher investment income, lower bond debt and higher interest earned on cash.

The headline tax rate (based on headline profit before tax) was 25.5% (2021: 22.8%) and on reported profit before tax was 28.1% (2021: 27.2%). Given the Group's geographic mix of profits and the changing international tax environment, the tax rate is expected to increase over the next few years.

Earnings and dividend

Headline profit before tax was up 12.0% to £562 million.

Profits attributable to share owners were £258 million, compared to a profit of £253 million in the prior period.

Headline diluted earnings per share from continuing operations rose by 15.0% to 33.0p. Reported diluted earnings per share, on the same basis, was 22.7p, compared to 20.6p in the prior period.

For 2022, the Board is declaring an interim dividend of 15.0p, an increase of 20% year-on-year. The record date for the interim dividend is 14 October 2022, and the dividend will be payable on 1 November 2022.

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

Cash flow highlights

Six months ended (£ million)	30 June 2022	30 June 2021
Operating profit	539	484
Depreciation and amortisation	255	250
Impairments and investment write-downs	8	8
Lease payments (inc interest)	(190)	(202)
Non-cash compensation	67	44
Net interest paid	(60)	(65)
Tax paid	(163)	(163)
Capex	(117)	(138)
Earnout payments	(63)	(14)
Other	(9)	(44)
Trade working capital	(1,015)	(464)
Other receivables, payables and provisions	(726)	(41)
Free cash flow	(1,474)	(345)
Disposal proceeds	34	43
Net initial acquisition payments	(46)	(252)
Share purchases	(681)	(298)
Net cash flow	(2,167)	(852)

Net cash outflow for the first half was £2.2 billion, compared to £852 million in the first half of 2021. The main drivers of the cash flow performance year-on-year were a partial reversal of the strong working capital position at December 2021, the significant increase in share purchases, the payment of bonuses in April 2022 that were accrued in the 2021 financial year, and specific temporary collection issues caused by the lockdowns in China. A summary of the Group's unaudited cash flow statement and notes for the six months to 30 June 2022 is provided in Appendix 1.

Balance sheet highlights

As at 30 June 2022 we had cash and cash equivalents of £1.5 billion and total liquidity, including undrawn credit facilities, of £3.4 billion. Average adjusted net debt in the first half was £2.4 billion, compared to £1.4 billion in the prior period, at 2022 exchange rates. On 30 June 2022 adjusted net debt was £3.1 billion, against £1.5 billion on 30 June 2021, an increase of £1.6 billion at reported and at 2022 exchange rates.

We spent £681 million on share purchases in the first half of the year, of which £637 million related to share buybacks. Since June 2021 we have completed £1.1 billion of share buybacks.

Our bond portfolio at 30 June 2022 had an average maturity of 6.8 years.

The average adjusted net debt to EBITDA ratio in the 12 months to 30 June 2022 is 1.2x, which excludes the impact of IFRS 16. We also expect to end the year slightly below our target leverage range of average adjusted net debt/EBITDA of 1.5-1.75x.

A summary of the Group's unaudited balance sheet and notes as at 30 June 2022 is provided in Appendix 1.

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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 from continuing operations, adjusted to include the results of acquisitions and disposals for the commensurate period in the prior year. Both periods exclude results from Russia.
³	In this press release not all of the figures and ratios used are readily available from the unaudited interim 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	Excluding the impact of US political advertising
⁵	For designated clients, representing approximately 76% of total revenue less pass-through costs
⁶	Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

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