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Philip Lader. Chairman. Sir Martin Sorrell. CEO, WPP. Strategic Priorities. Short term: to capitalise on the 2004 to 2006 up-turn Medium term: to continue to successfully integrate acquired companies

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philip lader

Philip Lader

Chairman

strategic priorities
Strategic Priorities
  • Short term: to capitalise on the 2004 to 2006 up-turn
  • Medium term: to continue to successfully integrate acquired companies
  • Long term: to continue to develop our businesses in the faster-growing geographic areas of Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe

to continue to develop our business in the faster-growing functional areas of marketing services, particularly direct, internet, interactive and market research

key priorities objectives and strategy
Key Priorities, Objectives and Strategy
  • Faster growing markets to be one third of total group
  • Marketing services to be two thirds of total group
  • Quantitative disciplines to be one half of total group
strategy structure and competitive position
Strategy, Structure and Competitive Position

Faster Growing Markets To Be One Third of Total Group

WPPToday1

WPP Today incl. associates1

WPPTomorrow

Faster GrowingMarkets2

Faster GrowingMarkets2

Faster GrowingMarkets2

NorthAmerica

NorthAmerica

NorthAmerica

24%

29%

33%

34%

34%

39%

37%

37%

33%

Europe

Europe

Europe

¹ Based on full year 2006 revenue

² Asia Pacific, Latin America, Africa & Middle East, Central and Eastern Europe

strategy structure and competitive position1
Strategy, Structure and Competitive Position
  • Brazil, Russia, India and Greater China (BRICs) account for approximately 10% of WPP revenue today
  • According to Goldman Sachs research, Dreaming with BRICs*, these countries will grow at 10.4% CAGR through 2015
  • According to Zenith, ad spending as a % of GDP for BRIC was 0.5% in 2001 compared to mature markets where it is 1.5% to 2%
  • If GDP grows in line with Goldman Sachs estimates, and advertising spending as a proportion of GDP equals that of mature markets, BRICs alone would represent approximately 25% of WPP revenue by 2015

Wilson, Dominic and Purushothaman, Roopa. 1 October 2003. “Dreaming with BRICs: The Path to

2050.” Goldman Sachs Global Economics Paper No: 99: page 9

strategy structure and competitive position2

12%

14%

37%

25%

12%

Strategy, Structure and Competitive Position

Today

2015

Faster GrowingMarkets2

Faster GrowingMarkets2

NorthAmerica

NorthAmerica

15%

Europe*

39%

24%

Europe1

8%

14%

BRIC

BRIC

UK

UK

1 Europe excludes Central and Eastern Europe

² Asia Pacific, Latin America, Africa & Middle East, Central and Eastern Europe

Assumes Brazil, Russia, India and China GDP growth of 10.4% CAGR according to Goldman Sachs Research and Advertising spend as % of GDP equals that of mature markets through 2015. Illustrative purposes only intended to isolate the effect of BRIC GDP growing faster than rest of world

strategic priorities1
Strategic Priorities

Marketing Services To Be Two Thirds of Total Group

Today1

Today including associates1

Tomorrow

33%

48%

48%

52%

52%

67%

Marketing Services

Advertising & Media Investment Management

¹ Based on full year 2006 revenue

strategic priorities2

34%

66%

50%

50%

33%

67%

Strategic Priorities

Quantitative Disciplines To Be One Half of Total Group

Today1

Today including associates1

Tomorrow

Information, Insight & Consultancy and Direct, Internet & Interactive

Advertising, Media Investment Management & Other Marketing Services

¹ Based on full year 2006 revenue

strategic objectives
Strategic Objectives

We continue to focus on our key objectives

  • Improving operating margins
  • Increasing flexibility in cost base
  • Using free cash flow to enhance share owner value, and improve return on capital employed
  • Developing role of parent company
  • Emphasising revenue growth more as margins improve
  • Further improving creative capabilities and reputation of all our businesses
historic headline pbit and margins
Historic Headline PBIT¹ and Margins

PBIT1 £’m

PBIT1 margin %

Long-term target 19%

20%

1000

14.5%

14.0%

16%

859

800

14.1%

14.0%

13.0%

Objectives:

12.0%

14.5%

755

13.0%

12%

600

2009

16.0%

561

560

534

2008

15.5%

468

8%

400

433

2007

15.0%

4%

200

0%

0

2000

2001

2002

2003

2004

2005

2006

PBIT

Margin - Full Year IFRS

Margin - Full Year 2004 UK GAAP

Headline PBIT excludes finance income/ costs, taxation, goodwill and intangibles charges, investment gains, and share of

exceptional gains of associates. For 2004 onwards, Headline PBIT has been prepared under IFRS. 2003 and prior periods are in

accordance with previous UK GAAP.

financial model
Financial Model
  • Organic revenue growth 0-5%
  • Margin growth in line with objectives
  • Operating profit growth of 5-10%
  • Incremental revenue and profit growth from acquisitions of up to 5%
  • Overall growth in EPS of 10-15%
earnings and eps
Earnings and EPS¹

Earnings (£m)

42.0p

17%

500

36.0p

29%

32.3p

400

30.9p

27.9p

29.0p

23.8p

300

200

100

0

2001

2002

2003

2004

2005

2006

2004 UK GAAP

IFRS

¹ Diluted Headline Earnings and Diluted Headline EPS

increasing flexibility in the cost base
Increasing Flexibility in the Cost Base
  • We continue to focus on a more flexible cost structure in three key areas:
    • Staff c. 50% of revenue
    • Property c. 7% of revenue
    • Bought in services c. 30% of revenue
  • Increased flexibility in all areas important to combat any future economic slowdown
increasing flexibility in the cost base1
Increasing Flexibility in the Cost Base

Change In Variable Costs

14

2001

2005

2006

12

10

8

%

8.2

12.8

13.0

6

4

4.6

7.6

7.7

2

0

Variable Staff costs as % of Staff costs

Variable Staff costs as % of Revenue

using free cash flow to enhance share owner value acquisitions
Using Free Cash Flow to Enhance Share Owner Value - Acquisitions
  • Tender offer for 24/7 Real Media
  • Continued focus on small and mid-size strategic acquisitions – a number completed during first five months
  • Major focus continues to be on information, insight & consultancy and faster growing sectors within branding & identity, healthcare and specialist communications and faster growing geographies
  • Acquisitions in advertising used to address specific client or local agency needs
  • Continue to find opportunities, particularly outside the US
using free cash flow to enhance share owner value dividends and share purchases
Using Free Cash Flow to Enhance Share Owner Value - Dividends and Share Purchases

Share Repurchases

  • 2006 dividend raised by 20% to 11.21p per share
  • Distributions to share owners:

% of Share Base

Dividends per share

Annual increase

Dividends

Amount

The Company increased the target for the rolling share buy-backs from 2-3% of its share base, equivalent to £200-300m to 4-5% or £400-500m in 2007 and 2008 in the open market when market conditions are appropriate

1 23.256million shares purchased to date at a cost of £175.4m (average of £7.54 per share)

emphasise revenue growth more as margins improve
Emphasise Revenue Growth More as Margins Improve
  • Continue to focus on delivering above-average revenue growth by:
    • Expanding networks to take advantage of faster growing geographical markets
    • Re-enforcing competitive advantage in segments where growth is expected to remain higher, eg, Market Research, Direct, Internet, Interactive, Technologies, Retail, Healthcare, etc.
    • Taking advantage of consolidation trends to gain market share
improving the creative capability and reputation of all our businesses
Improving the creative capability and reputation of all our businesses
  • By placing greater emphasis on recruitment
  • By recognizing creative success tangibly and intangibly
  • By acquiring highly regarded creative businesses
  • By placing greater emphasis on awards
wpp today
WPP Today

Revenue £5.9bn

PBIT £859m

Advertising

Media

Investment

Management

Information,

Insight &

Consultancy

Public Relations

&

Public Affairs

Branding & Identity,

Healthcare and

Specialist

Communications

Revenue

Wide £2.3bn

Narrow £1.03bn

Revenue £2.8bn

PBIT £443m

Revenue £893m

PBIT £99m

Revenue £596m

PBIT £90m

Revenue £1.6bn

PBIT £227m

Revenue and PBIT figures are 2006 reported sterling actuals

PBIT isstated before goodwill and impairment, fixed asset gains and investment write-downs

wpp opportunities
WPP Opportunities
  • Geographic
  • Technological
wpp today1
WPP Today

Media

Investment

Management:

GroupM

Irwin GotliebCEO

KR Media

(25%)

MediaCom

MindShare

Mediaedge:cia

MAXUS

Dominic ProctorCEO

Charles CourtierCEO

Alex Schmidt-VogelCEO

Nick Daly COO

Bruno KemounEryck RebbouhJoint CEOs

Kinetic

irwin gotlieb ceo groupm
Irwin GotliebCEO, GroupM
  • 2003 appointed Global CEO, GroupM, world's leading full service media investment management company
  • Launched MindShare North America, consolidating media resources of JWT/Ogilvy, to create global entity
  • Joined WPP 1999 as Chairman/CEO MindShare Worldwide
  • Prior to WPP, founder and President/CEO of MediaVest Worldwide, part ofMacManus Group
  • 22 years in Broadcast Programming with DMB&B, ultimately Worldwide Director of Broadcast & Programming
  • Multiple media recognitions eg Media Player of the Year by AdAge in 2000, inducted into Broadcast & Cable Hall of Fame
  • Member of Board and Executive Council of the Ad Council and member of 4As CEO Committee
rob norman ceo groupm interaction worldwide
Rob NormanCEO GroupM Interaction Worldwide
  • Member of GroupM Global Executive Committee
  • Prior to GroupM, founded and led digital media arm of Tempus Group (acquired by WPP in 2001)
  • Responsible for digital practices of MAXUS, MediaCom, Mediaedge:cia, MindShare
  • Largest buyer of online media in world
  • GroupM – among top 3 largest agency clients of Google, MSN and Yahoo!
  • 1,300 people worldwide
irwin gotlieb

Irwin Gotlieb

CEO, GroupM

the leading global media investment management operation
The Leading Global Media Investment Management Operation
  • GroupM is the parent company to WPP media agencies
    • MAXUS, MediaCom, Mediaedge:cia, MindShare
  • Represents over 31% of the worldwide media market (RECMA)
  • The intelligent application of physical and intellectual scale to benefit our clients and our companies
groupm market strength
GroupM Market Strength

Rank 1

$60.5bn

31%

Rank 1

$26.0 bn

32.2%

Rank 1

$27.0 bn

29.1%

Rank 1

$6.3 bn

22.9%

Rank 1$1.2bn

25.2%

Source: RECMA

vitality
Vitality
  • GroupM ranked number 1 in Vitality and Momentum by RECMA for 2006
  • GroupM agencies won 3 out of 4 “Agency of the Year” awards in the US
    • Mediaedge:cia - Global Agency of the Year - Ad Age
    • Mediaedge:cia - Global Agency of the Year - Adweek
    • MindShare - Agency of the Year - Adweek
role of groupm
Role of GroupM
  • Maximize the performance of our media communications agencies
    • Ensure that each of our agencies is smarter and stronger in the service of its clients
  • Operate as parent and collaborator in performance enhancing areas
    • Develop synergies and leadership among the agencies in trading, content creation, sports, digital, finance, proprietary tools
    • Diversify our business to meet the future needs of the changing marketplace
    • Help our agencies create the most stimulating and rewarding work environment for our people
    • Increase WPP’s market share in this sector
the evolution of media
The Evolution of Media
  • Communications Planning
  • Exploiting opportunities in Digital
what is communication planning
What is Communication Planning?
  • The effective allocation of marketing investments across all channels to meet a client’s business objective
  • Uses a combination of rigour and imagination to deliver a holistic platform and architecture for a brand or corporate marketing spend
    • It defines how a brand will communicate with consumers
a new ip and data centric context
A New IP and Data Centric Context
  • Communications strategists will be the key advisors for clients within the GroupM agencies
  • They will marshall and package the full range of GroupM services – Business Science, Entertainment, Sports, and Cause to navigate the complexities of modern media world
rob norman

Rob Norman

CEO,GroupM Interaction Worldwide

marketing s perfect storm
Marketing’s Perfect Storm

Massproduction

Massmedia

Bigretail

the consumer strikes back
The Consumer Strikes Back

Personalization

and speed

Fragmentation

and interaction

Multi-channel

distribution and

conflict

A new world order

slide40

Communication space

Sample

Prediction

Context

Brand as publisher

Audience

Buyers

Interrupters

Shelf space

Census

Intention

Behavior

Community as publisher

Hive

Arbitrageurs

Integrators

a new kind of integration for success
A New Kind of Integration for Success

Context

Content

DATA

CENTER

Currency

our mission remains unchanged
Our Mission Remains Unchanged

Increase the efficiency of changing minds

Reduce the costs of selling goods

we were
We Were

The world’s largest vertically

and regionally integrated

commercial message

distribution business

we have become
We Have Become

The world’s largest vertically

and regionally integrated

commercial message

distribution business

A major data management

center

A major producer and

distributor of branded

and entertainment content

across all analog and digital channels

A significant component of the distribution chain

complexity increases demand
Complexity Increases Demand

GroupM

Across WPP

More channels

More optimization

More transactions

More flexible value

chain

More distribution

opportunities

More channels

More messages

More formats to

develop

More content

required

More research

our challenge
Our Challenge

To continue to leverage our physical and intellectual scale to consolidate opportunity in fragmented markets

wpp today2
WPP Today

Long Tail and

Targeted Advertising

SocialMedia

Mobile

Online Video

In-Game Advertising

Interactive Agencies

mark read director of strategy wpp ceo wpp digital
Mark ReadDirector of Strategy, WPPCEO, WPP Digital
  • First worked at WPP parent company and then at Ogilvy and Hill & Knowlton (1989 – 1994)
  • Founder of WebRewards in UK
  • Principal at Booz-Allen & Hamilton
  • Rejoined WPP in 2002 as Director of Strategy and CEO WPP Digital
  • Joined WPP Board in 2005
mark read

Mark Read

Director of Strategy, WPPCEO, WPP Digital

slide54

Role of WPP Digital to act as a catalyst for the Group to take advantage of the digital opportunity

  • Develop a leadership position on the digital opportunity for our people, clients and the industry
  • Identify and make acquisitions, strategic partnership and investments in the digital area
  • Develop and coordinate group-wide technology investments
  • Explore and fund new businesses within WPP
our digital revenues
Our Digital Revenues

US$m

Digital Revenues (US$m) – Pre-24/7 Real Media

$2317m

2500

2000

$1746m

1500

$974m

+32%

1000

$693m

500

+41%

0

2005

2006

2005

2006

“Narrow” or Pure DigitalRevenues

“Broad” Definition

slide57

Long Tail and

Targeted Advertising

SocialMedia

Mobile

Online Video

In-Game Advertising

Interactive Agencies

slide58

In-video advertising, focusing on social networks

  • Targetted TV advertising
  • Search and blog reputation management
  • In-game advertising
  • Social networks
  • Online advertising agency for local businesses
slide60

In-video advertising, focusing on social networks

  • Targetted TV advertising
  • Search and blog reputation management
  • In-game advertising
  • Social networks
  • Online advertising agency for local businesses
slide61
Leading global digital marketing company, founded in 1995. In 2006:
    • $200 million revenue (43% organic revenue growth)
    • $19.6 million EBITDA1 (101% growth) before stock compensation
  • 400 employees across 20 offices in 12 countries with 61% outside US
  • Three core businesses
    • Search Solutions: Provides Search Engine Management to clients, managing more than $200 million in search billings on Google, Yahoo, MSN
    • Media Solutions: Offers a media network with inventory drawn from over 950 sites reaching more than 115 million unique visitors each month
    • Technology Solutions: Manages, optimises and delivers online advertising for more than 400 web publishers powering more than 1,000 websites
  • Comprehensive search JV with Dentsu in Asia