WPP PLC (WPP) 2011 Q2 法說會逐字稿

Welcome to our presentation on the first half of 2011. It's rather like painting a ship. And now to paint the ship again in the second half.

You've got a long press release with a lot of detail in it, and we've deliberately laid out because there's a lot of focus on the likely revenue growth for the year. We've laid out in excruciating detail what our budgets Q1's and Q2's look like. We are on a live webcast, I think, at the same time, not just for the presentations but for the Q&A. It's a long presentation for which apologies, but we hope it's valuable. We should get through it probably in under an hour. And we will have a transcript afterwards, which will not be doctored. It will -- the transcript will follow precisely the presentation and the Q&A, and we will not alter it afterwards.

Paul?

Thank you, Martin. Okay, good morning, ladies and gentlemen. So there is a fairly lengthy presentation, so I'll speed through but draw your attention to the highlights.

So, for the first half 2011, billings are up 5% at GBP21.4 billion. Reported revenues were up 6.1% on a constant currency basis, which includes acquisitions. Revenues are up 8.1% for the half-year. Foreign exchange was minus 2% in the first half. So on a like-for-like basis, revenues are up 6.1%, and the gross margin, which is basically revenues less direct costs, were up 6.8%. Headline PBIT, Profits Before Interest and Tax, were up 13.7% to GBP518 million from GBP455 million last half-year. Headline operating margin was up 0.7 margin points to 11% from 10.3% last year, and up 0.8 margin points on a pre-incentive basis to 13.9%.

On a gross margin basis, headline operating margins were up 0.7 margin points as well to 11.9%. Diluted headline earnings per share were up 19.4% this half-year to 22.8p. The first interim ordinary dividend was up 25% to 7.46p per share. The average net debt on a constant currency basis was down GBP513 million to GBP2.6 billion for the first half, and the average net debt to headline EBITDA for the last 12 months ending June 2011 is now [below] 2 times ratio at 1.8 times.

So in terms of the summary highlights, on a reported basis, you can see here revenues were up 6.1% -- this is on a reported, not constant currency basis; gross margin was up 6.7%; staff costs were in line at 6.6%; other expenses were better than the rate of growth, only growing at 3.6%; and operating profits on a pre-bonus basis were up almost 13%; on a post-bonus basis were up almost 14%. Headline EBITDA at GBP620 million, was up 10.5% compared to the prior-year.

In terms of margins, as I mentioned, both on a revenue basis and a gross margin basis, they improved by 0.7 margin points. Diluted headline earnings per share was up 19.4%. The average net debt on a reported basis was an improvement of 19% and the coverage ratio is improved, as you see. On a like-for-like basis in the first half, we had approximately 4.5% more staff in the group to 107,000.

So, on the fully statutory reported basis, i.e., non-headline, the profits and other numbers are larger simply because the goodwill, intangibles and gains, foreign exchange gains and losses, are lower this year at minus GBP61.5 million versus minus GBP92 million. So if you walk down to the bottom of the P&L, you will see diluted headlines earnings per share on a reported [central] basis up over 50% at 18.1p per share compared to 12p.

In terms of the breakdown of the revenues, as I mentioned before, on a like-for-like basis, we grew at 6.1% from revenues; acquisitions added 2%, making constant currency rate of growth of 8.1%. The foreign exchange deducted 2% for the first half. It is likely to be in the minus 1% to minus 2% on a full-year basis if exchange rates stay at the current levels; giving reported sterling growth in the first half of 6.1%; headline profits up nearly 14%; and reportable sterling EPS up 19%.

If we were a dollar-reporting company, our revenues would have grown almost 13% and profits up 32% in EPS terms. If we were a euro-reported company, results would be similar, with revenues up 6% and EPS up 16%.

Versus consensus, we basically met or achieved ahead of consensus, although the numbers are fairly well flagged across the revenues and profits. Interests, as I have mentioned, obviously, fixed costs are on the borrowing line; deposits are earning very little. And so we were a little ahead or worse in consensus on the finance, because of the spot average net debt being significantly better in the first half. Earnings per share at 22.8% was pretty much in line, slightly ahead of the consensus [at] 22.6p per share. We were 0.2 margin points ahead of consensus because we had garnered a half margin point for both the half-year and the full year, and have achieved 0.7 and hope to achieve at least the same on a full-year basis, in terms of the margin improvement.

So in terms of full headline reported P&L, the only point I'd like to make here on slide 10 is the tax rate at the half-year came down to that which we achieved on the full year 2010 of 22%. It is probably the most likely guidance I can give you for the full year 2011 at around 22% tax rate. All the other numbers I've discussed at some length in the previous slides.

So in terms of revenue by discipline, Advertising and Media Investment Management, which represents 41% of the business, grew revenues on a like-for-like basis in the first half by 8.1%. I will give you the quarterly splits in both quarter one and quarter two, so you can get a feel for how the trends have gone. So in quarter one, Advertising and Media Investment Management revenues grew at 9.3% and at quarter two at 7%.

On Consumer Insight, as we mentioned in the footnote there, on a like-for-like basis, revenues grew at 2.3% in the first half; on a gross margin basis, they grew at 3.2%. Using gross margin, which is the most appropriate measure for a Consumer Insight business, the first quarter rate of growth margin growth is 3.8% and the second quarter growth was 2.7%. In the Public Relations and Public Affairs business, which represents 9% of our revenues, overall growth in the first half is 5% organically, growing at 5.2% in quarter one and 4.7% in quarter two.

The Branding and Identity, Healthcare, and Specialist Communications businesses representing 25% of group by revenues, grew at 7.3% in the first half, accelerating from the growth of 6.8% in quarter one to 7.9% in quarter two. So overall then, the revenues growing at 6.1% on a like-for-like basis; growing at 6.7% for the group in the first quarter; and 5.6% in the second quarter.

Turning now graphically to this, I think you can see quite clearly where the quarter two lines have ended. So you can see that the Specialist Communications businesses, which is the orange line, growing to 7.9% growth in the second quarter; the Advertising and Media Investment Management business ending up at 7% in quarter two; the public-relations business at 5% at the end of quarter two, quarterly growth; and the Market Research business at 2.7% GM growth at the end of the second quarter.

Likewise by geography, we have 35% of our business in North America, growing at 5.4% organically, like-for-like revenues in the first half; rates of growth for quarter one at 6.9%; and quarter two, 3.9%. The UK, which is 12% of our businesses, still remains very strong with organic like-for-like growth of 5.1%; the first quarter growing at 5.4%, and the second quarter at 4.9%.

Western continental Europe growing at 12% -- sorry, representing 25% of our business, growing at 2.9% in the first half; 1.8% in quarter one; and 3.9% in quarter two. The growth in second-quarter was really driven both by our media business; our strong business in Italy, which you will see was [almost] growing at 10%; there was a recovery in Spain in the second quarter from a relatively tough quarter one; France was marginally better; and Germany improving to another 4% to 5% organic growth quarter and half-year.

So if I look to it geographically, the strongest region in terms of growth is our Asia-Pacific, Latin America, Africa and Middle East region, representing 28% of the business. So you then have organic growth on a like-for-like basis of 10.5% in the first half; 11.5% in quarter one; and 9.6% in quarter two.

In terms of overall then, 6.1% for the Group. And looked at it geographically, you can see here how the strength of Asia-Pacific has come through in the numbers. In terms of the BRIC markets themselves, on a combined basis, they are up 15%, and the Latin American businesses are up 17%, so very strong. At the end of the second quarter, the UK was growing at 5%; the US and Western continental Europe were both growing around 4%.

So in terms of margins, all our businesses had improved margins in the first half. Overall, the group improved margins by 0.7% and profits by 14%. The two best performing disciplines were Advertising and Media Investment Management, which grew profits by 15% and a margin by 0.5 margin points to 12.3%. The Consumer Insight business had margin improvements on a revenue basis of 0.3% and a gross margin basis of 0.5% to 10.3%. Our Public Relations business grew margins again from 14.8% to 15.5%, i.e., 0.7% margin improvement in the first half. And our Branding and Identity, Healthcare businesses had a strong performance, with profits up overall over 20% and margin improvement from 9.4% to 10.7%, up 1.3 margin points.

If I turn now geographically again, all regions improving margins. Good improvement there in North America of 0.5 margin points from 12.2 to 12.7. Excellent performance in the UK, with profits up overall 27%, and strong margin improvement across all our business lines, improving the margin from 11% to 13.1%, i.e., up 2.1 margin points. Western continental Europe, growth of 11% in the region and margins growing from 7.6% to 8%, i.e., up 0.4%. Asia-Pacific, Latin America, Africa and the Middle East, overall, the region growing profits by 21% and the margin improved by 0.8 to 10.8%. So overall then, the business is growing profits by 14% and the margins by 0.7%.

In terms of countries, I think it's pretty clear -- the BRIC markets, as I mentioned, are very strong. So that all they're bunched up at the top of the chart as are other Asian and Latin American markets. If I just break out the BRICs for you, just to give you some information -- so the BRICs combined represent 12% of the group. That is Brazil, which in the first half, grew at 16%; Russia in the first half growing at 17%; India in the first half growing 17%; and Greater China, including Taiwan, in this first half growing 13%. So very strong performances there in the BRIC markets.

And you can see there are some weaker markets, markets where we're still finding it relatively tough. And our top 20 include Belgian; France; Japan, obviously, for certain reasons that are well-known; and Sweden. Otherwise, all markets are growing, and some of those European markets are relatively strong compared to others -- Italy in particular, growing at nearly 10%; and Denmark also quite strong at around 8%.

In terms of categories, really all categories are relatively strong. Some of our major categories include Automotive, which has had about 15% growth organically. Financial Services has sprung back and been very strong. And Personal Care and Drugs are probably our largest individual sector, growing nicely in line with the averages for the group.

In terms of currency, they accounted for a 2% decrease in revenues, reflecting the strength of the pound against the US dollar. You can see here where the pound sterling is now -- or was, at the end of June -- [1.60, 1.69] on average the first half. Last year, the first half averages the [1.52], so the change is 6%. There has been numerous par comparison to the euros and a weakening against the yen. The headline profits before tax are GPB417 million reported, would have been GBP425 million had sterling remained at the same level as in 2010.

So in terms of new business wins, I think a pleasing record in the first half. I want to sort of highlight some of the more different or unusual aspects of the wins. Our biggest win, which is a major win of a mobile telecom business in Brazil [Claravoga], being very significant number there, 500 million in billings. Please need to see two wins in the partnership of TAXI -- their new acquisition [Kandor] and Y&R, both for Revlon and for Kraft. I'd also like to point out that a consolidation of the digital business by Kellogg's in the USA, a very significant win for VML in North America.

In terms of [losses] with our fair share in the first half -- one transfer on the T-Mobile business from MediaCom to MEC, for otherwise losses in the marketplace. In terms of new business run rate, I think if you've listened to what I've said before, we tend to track at about $1 billion a quarter, so we're slightly under, I think, our rates in the past at just under $1.9 billion. But pleasingly, we've had a very strong beginning to quarter three.

If you look here on the chart, you can see about $2 billion of wins coming through in the third quarter. Some large-scale wins for some top quality clients here, both at the agency level and at the media buying level. And the one announced last night, which is a combination of JWT and MediaCom, Hill & Knowlton and Brand Union, a $200 million win, which is this public/private partnership for the Corporation for travel promotion of America, strong at $200 million, just come in last night. So strong performance in terms of new business in the third quarter.

Turning now to cash flow, as you can see, our net cash generation remains strong. We've delivered GBP431 million operating profit; we've delivered GBP421 million in net cash generation. So consistent with last year in terms of the items that are going through. And how did we spend that in the first half? Capital expenditure costs GBP107 million, slightly up on last year, and we'll continue to be stronger in terms of the investments we're making in 2011, in terms of capital expenditure.

Acquisition payments in total GBP229 million; net initial payments in the first [half of] GBP175 million; and earnouts, GBP54 million. You will notice in the press release is a strong pipeline of small-to-medium-size acquisitions, and our expectation for new acquisition this year totals around GBP400 million. Share buybacks have been approximately 1% per share [of] capital in the first half, costing GBP98 million. So basically a flat or [minus 10 million] cash flow for the first half with the first half profits.

In terms of average net debt, very strong performance in the first half. So on a constant currency basis, an improvement of 17% or GBP530 million down to GBP2.558 billion. On a reported basis or an actuals basis, an improvement of GBP610 million, an improvement of 19% compared to last year of [3.168%].

At the end of June, we were GBP2.8 billion of net debt, which is a 5% improvement on the half-year. Finance costs, as I mentioned, are up 2% compared to a year ago, and interest cover remains strong at over five times. And as I mentioned earlier, the average net debt to headline EBITDA for the trailing 12 months ending June 2011 is at 1.8 times compared to a year ago, where it was 2.4 times.

This graphically illustrates on slide 27 the ratio of the average net debt to EBITDA. You can see they're falling at the first half is then down to 1.8%. The year-end number for reference is 2.1 times; the year-ago, as I just mentioned, was 2.4 times.

So in terms of the uses of free cash flow, here is a summary compared to the last prior first-half last year and full-year 2010. The changes really are the increased spend on acquisitions, as we mentioned in the first half and the expectations full-year. A full out allocation of share buybacks. We have continued to buy in the closed period, as we have been allowed to. And have [bought] another about 0.25% at just over GBP6 a share in the closed period.

And we continue to have a strong dividend, as it's mentioned again, clearly, in the press release -- growing dividends approximately 5% ahead of the growth in earnings. So with earnings growing at 19%, we felt justified in increasing the dividend proposal to 25%, which represents 3% -- 33% of headline earnings this half-year compared to 31% of headline earnings a year before.

A quick summary of the earnings per share from 2005 to 2010, and the strong performance in the first half this year from 19.1p on a headline basis a year ago to 22.8p the first half this year. In terms of share count, really very controlled. Overall, 1.7% increase in the weighted average number of shares in issue. And if I turn the page, this will give you the full details. After option dilution and other potentially issued shares, that reduces just [to] a 1% dilution.

Because the convertible is potentially dilutive, we had to include it in these numbers. And so the fully diluted number of shares includes a 6% of shares that the convertible would relate to; therefore, the dilution for the half year is up 7%, which wasn't applicable the first half last year. The interest costs, despite the full number of shares coming in, we only have to allow to add back to earnings a half year's of interest on the convertible. So that was a catch that some people didn't quite pick up. But otherwise, the share count fully under control, growing at only 1% on a diluted basis before the convertible.

And with that, I'll hand over to Martin.

Thanks, Paul. We're going to do our usual approach, priorities, objectives, and strategy. There is a dissonance or a difference, as we pointed out in the press release, between what we see at a macro level and what we see at a micro level. I mean, our results are backward-looking in the sense of the last six months. And the markets look forward 12 or 18 months. But these factors have been well-rehearsed.

We've certainly got increased momentum in markets outside the Western markets -- meaning the US and Western Europe. I was in India last week and they're arguing over GDP growth of 7% to 8.5%. And if we were arguing about that, we'd be in a different position. So there's that.

There's clearly the [fizz] of euro contagion which fluctuate, but are very strong at the moment, and has spread as far as not only Spain, all the Portugal Islands, Greece, Spain and even into countries like France, although the French government this morning taking similar moves to the UK coalition a year or so ago.

Concerns on the US deficit and the administration, government, Congress did take steps of sorts. But I still think what we said to you on many occasions holds true, that 2013 remains the key. The deficit deal, the debt ceiling deal, postpones the evil day, in a way. You have the committee in place and the committee can't agree. There are just no automatic triggers to the level of agreed deficit reduction. There is some noise about possibility of having more deficit reduction, but it doesn't look in front of an election that that is a politically likely thing. We may get some stuff out of Jackson Hole later this week that will be helpful, but from a market point of view, we have to see.

Commodity prices -- certainly, there was concern about the impact those have alleviated, the prices have alleviated. And in fact, several FMCG companies in the last few weeks have said that they are getting pricing increases. And I've certainly heard this from several of our clients -- they are getting pricing increases in response to commodity price input increases.

There is a [building] instability in the Middle East since we've last met, and Africa since we last met. I think the uncertainty has increased. Libya, clearly, there's more uncertainty about the vacuum and what will happen. Egypt, there is still a vacuum; there are concerns, obviously, about Syria and elsewhere.

There's impact of the tragic impacts in Japan. Interestingly, we did see in our Associates' results, the Asatsu. And indeed, probably lesser actually in the case of Dentsu, but certainly [Hackerhead] as well. But Japan is coming back. It's still negative, but it's coming back faster than people had anticipated, as the impacts of positive renewal, restructuring, expenditure come through.

And then I think the thing that triggered the mid-year crisis in the markets was the removal -- the realization that we had to come off the drugs -- the stimulus drugs -- the 12 trillion stimulus drugs. And that sort of seemed to seep through. We had a Board meeting in Washington sort of coincidentally right in the middle, in the teeth of the crisis. And it was quite extraordinary to see what was happening and what was not happening in Washington on that Thursday night, which was the Thursday night -- or Thursday and the Friday before the so-called deal got done.

But I think that was the thing that really got people going and focus. And interestingly, the Jackson Hole thing response is if we get [QE3] or some form of further quantitative easing, that might ease the market's fears. It may drive it the other way, we'll have to see what happens.

On 2012, and just talking to journalists and analysts this morning, if you think about the G&P for 2012, I saw that Goldman took down its forecasts from about [4.1] to [4.0], I think, and Deutsche Bank [4.0 to 3.8] -- this is for worldwide GMP -- GDP.

If you think about the three things that are happening next year, the three events, is a maxi-quadrennial, as we call it. So the London Olympics, and despite the riots in London, which are obviously not good for brand Britain or brand UK, but everything that we see in relation to the London Olympics is positive. We've got a large number of client activities with some incremental spending. It's not just diversion of money from pre-ordained budgets. You've got the euro championships or world championships, which are the smallest of the three events, I guess, but it's helpful. And then you've got political spending, which has already kicked off, which probably is about $4 billion as best as we can anticipate. And the Supreme Court decision recently on lobbying and funding of lobbying pushes it further.

So the 4 billion plays against 500 billion for worldwide spending on, say, traditional media or related areas. And there is another 500 billion, making it [1 trillion] for the industry and the other stuff that we do in research and public relations, et cetera.

It seems that you would certainly get that -- if advertising follows GMP next year and you have those three events, just theoretically for a minute, again from a macro basis, it doesn't look an appalling prospect. And we are seeing analysts forecast for next year -- and this is not a prediction about next year. I'm not talking about this -- we've sat down and done our budgets through it. But as we get into our three-year planning cycle -- we've got our strategy meeting coming up at the end of September in New York -- and we start to think about revising our three-year plans and looking at next year, when you start to look at those numbers, quite why the market has panicked to the degree it has is, to my mind, a little bit of a mystery.

I was talking to the head of a major bank in New York last night, and it may be that because the markets were up 300 points he was being a little bit more positive, but he did say that if you pushed him against the wall sort of thing, he did think the markets perhaps were being -- that it was more likely that things will get better than they would get worse, from a market point of view.

So maybe the holiday season, low volumes, hedge fund activity have over-depressed. I don't want to be labeled a bull, because there's enough stuff in the press release that if you're a bull, you can draw some comfort. And there's enough stuff in the press release if you're a bear, you can draw some comfort. And as I said I want to do this morning, honestly, we just don't know. And I'd reiterate that.

But I think if you pushed me against the wall again, I would feel that it's been a little bit overdone. So the micro client comments -- there's more A than P. If you look at the first half-year, certainly spending by clients has been, on advertising, has been rising. And has not been unfair. I think of our top 20 -- Chris, I was going through it this morning, is it [four], [four] of Dow of our top 20 on the pro forma? So we certainly -- so 16 out of the top 20. And they grew at just over 6% so about the average, certainly if you look at the gross margin.

Efficiency and effectiveness is still the key. There are major moves. I mean, last night, you had a pretty shattering move by GM to put its media into review -- that's 3.5 billion. That's probably the biggest media pitch that we've seen so far. And so that's indicative of the sort of activity that is going on. But efficiency and effectiveness are still important.

Client consolidation -- this means client account consolidation. And [usually] we are getting some client consolidation do in terms of deals. Although the Kraft thing is interesting in the sense that it goes the other way and splits the Company into a low growth grocery business in the US, largely, and a snack's/beverage business outside. Then last -- snacks and confectionery business outside -- and last but not least, this drive for BRICs in the next 11 concentration.

Now we were in India last week and it doesn't matter who it was, but one of the -- let's call it an Indian oligarch, if there is -- if that's the right description -- said a very interesting thing. It was actually on Tuesday morning, so Independence Day was Monday and we saw him on Tuesday morning. And he said that he had his key strategy group together and they were sort of just doing blue sky scenario planning. And that they were thinking that it's possible the US -- you know you could -- there is a scenario that the US and the UK markets will come under really greater and greater pressure and will have a severe dislocation. And he actually was talking about pulling out of those markets and going to where? -- Brazil, Turkey, Indonesia, obviously, China, and of course, India.

So I guess BRIC's next-11 strategy I think for our clients -- obviously, we had to respond to this -- is becoming more and more important. And the thing that I think that we find very uncomfortable in the West, getting our minds around it.

The other thing I would just mention -- which we said in the press release; we haven't referred to specifically -- there is more depression here amongst you lot than there is in the US lot about our segment. And I don't know quite -- but I think we can understand the reasons. The UK and Western European media companies obviously have been more depressed because the economy is more depressed. The US is still stronger than we anticipated would be post-Lehman; it was certainly much stronger last year. It has slowed this year, but it's still doing pretty well.

Now I know that the US media CEOs tend to be quite optimistic, but either you look at the market dynamics, there have been [yet]. So you've got a little bit of a dissonance also, not just between the micro and the macro, but also between what's happening in the US to P's and valuations and on this side. So in terms of our priorities, for us, the growth markets -- our objective is a third, [rate] getting up to 30%. We revise that to 35% to 40% over the next few years.

New media, similar, almost 30%. We want it to be one-third, we now upped it to 35% to 40%. And marketing services, that's non-traditional advertising, really want to be two-thirds of the business, it's about 60%, 59%. And the quantitative disciplines to find this digital and Consumer Insight to be one-half of the group.

And if you look at the pie charts, if you include Associates -- so this is including 100% of our Associates, which would take our revenues, if I remember right, to [about] GBP19 billion? Right? So people looking for about GBP16 billion, be about GBP19 billion. You can see that if you included all our Associates, we'd be pretty much in the territory. The Asia-Pacific, Latin America, Africa and the Middle East essentially would be about 35%. And that's not far off where we would want to be, which is around 38%.

And if you look at us via the competition in terms of revenues and growth in these growing markets, the gap widens. I mean, the remarkable thing is, despite all the noise, the gap has widened consistently over the last five or six years. And I'll come onto the BRICs and Next Eleven in more detail here.

China, I think we said to you that it would be about $1 billion including Associates in 2011. I think that number may be closer to about $1.1 billion. One point on China -- certainly the rail crash has added a dynamic, a different dynamic. The rail crash affected the middle class -- the people on the train, the people affected by the approach on social media and PR were the middle class. And this has heightened this issue about, is China growing too fast?

Those of you who have read the 12 five-year plan will see that it's lowered the growth rate -- lowered it from actually from 7.5 in the 11 five-year plan to 7% compound growth over the 12 five-year plan. More balance to consumption versus investment; more balance to the healthcare network. And interestingly, it's almost the charter for WPP or services emphasizing the service sector. So despite this issue about the balance growth, I would remain extremely bullish about our prospects in China. And as I say, I think whilst we thought we would get to the [1.0], I think we probably will get to 1.1 this year.

Brazil similarly is literally, I mean, growing extremely fast. The real is extremely strong, I think too strong. I think it's over-cooking, but we have the events -- we have the World Cup coming up in 2014. We formed this joint venture with Ronaldo, which has had incredible success not just help from Claro, but has help with other FMCGs there in terms of the sports sponsorship in front of the World Cup. And we're up to about including about 700 million this year.

India, where I was last week, as I said, 450 million. We will cross 500 million next year. And Russia, smaller, but also growing very fast as you know from core statistics, at about 200 million. Similar picture -- I mean, Middle East is more challenged, obviously. And you can see that. The first half is really sort of flat to last year; the black line is the figure for last year, including Associates.

Central and eastern Europe continues to grow strongly. We do believe that despite the disappointing Q2, GMP figure in Germany, that Germany, Poland, Russia, that axis is an extremely strong one that will grow, driven primarily by oil and energy. And other markets such as Indonesia and Japan -- or Vietnam are extremely strong, too.

Again, the comparison, we've been through this before, but the green block here -- which is the Asia, Latin America, Africa and the Middle East -- you can see us in relation to the competition. And then this by media and media billings -- these are the latest ReCNA figures. And on a worldwide basis, we have an immensely strong position with, I think, billings of [Gordon Recmira] of about $75 billion.

And this is further just a statistical evidence of the strength that we have in the Asian, Latin American markets. We will have a WPP Board meeting in Cape Town shortly, which is reviewing our progress in Africa and the Middle East. Obviously, Africa is extremely strong; Middle East, quite challenged at the moment, but I think in the long run, there will be strong opportunities.

By discipline, we are the only business which has Consumer Insight to any significant degree, although buried in the Omnicom $6.8 billion of so-called marketing services -- fast businesses. And I think in others, there is a research business, too, but on a much smaller scale. But this shows again the strength that we have in the non-advertising. And again, if you broke the pie charts out for the quantitative disciplines, you can see that including Associates, it's running about 55%, 45% in favor of advertising. Today we are running about 53%, 47% excluding Associates. In the future, we want to be half-and-half.

Now I just wanted to dwell a little bit on digital, because I mean, there are twin pillars that are driving the growth. The digital, I think, probably gets a little bit of a lower play to some extent in press comments and even analytical comments. And just emphasize again the digital worldwide, it's about currently running about 17% of spend -- of client spend. And remember that we spend 25% of our time or thereabouts on it. So it is under-weighted. It's rather like Afro-American spending in America or Hispanic spending in America. The market does take considerable time to adjust.

The growth rates over the last year, 18 months, 2010/2011 are markedly different if you're talking about traditional. If you're talking about digital and we're talking about growth rates that are considerably. So this is not dissimilar to what you -- if you are comparing the growth rates of the BRICs, 15% for us in the first six months of the year versus 6% for the group as a whole, it is sort of a similar thing.

The key areas of client focus are obviously search and display, mobile, social media, and last but not least, eCommerce, which is the reason why the UK is such a sophisticated market -- the reason why it's sort of 20% of the total spending is Internet spending, is because eCommerce plays such a heavy role.

Now we just tracked digital revenue as a proportion of our total revenue since 2000, it's gone from 12% to around 30% in 2011. That's where we think it will be by the end of the year. And our target is 35% to 40%. And people have become quite -- from the timelines in this area, so we sort of felt we would go back and have a look at the timelines. And if you look at it, it's quite -- it's sort of quite interesting. We started in '96 with WPP.com being established.

OgilvyOne and Wunderman, which are the two strongest global businesses today have started really -- well, they'd already developed their digital businesses and direct businesses and started -- we made the acquisitions of VML and Bridge and Studiocom, and Good Technology and Outrider are in that period, too, 1996 to 2005. As we made our investment in Syzygy, a separately quoted company based in Germany at that time, too. 2006 to '08, we launched WPP Digital, which Mark Read runs. We made our acquisition of 24/7 Real Media, which we still think was an absolutely pivotal move because it gave us the independent platform.

One client this week, very interestingly, he said to me -- he took the view about the independents being important, of having an independent platform. And accepted the proposition that Google is really a new media company -- new media owner masquerading as a technology company. We formed the mid-group, Media Innovation Group. We acquired Actis and Aqua and Agenda, and several other companies mentioned there, in 2006 to 2008. We launched Deliver, which is our digital production operation. And we established partnerships with Google, with the Yahoo!, with Microsoft and indeed, others.

From 2009 to '11, we launched Possible Worldwide, which was a consolidation of four businesses within WPP Digital. We launched Xaxis, which is our platform which I'll come on to in a minute. And then we launched tenthavenue, which is our out-of-home business. Made acquisitions of companies like Blue State Digital, [Ref] is in Brazil; Rockfish, which is based in Bentonville and with a strong relationship, obviously, with Wal-Mart and Sam's Club, Gringo and others too.

Made investments in Buddy Media, which is the major platform for Facebook -- eight of the top 10 advertisers use Buddy Media. And of course, we made our investment in Omniture, which was taken out eventually by Adobe. And then established partners with Apple, Facebook, and Twitter. So that's the timeline. In terms of global scale, we are considerably ahead of the competition, about twice the scale, as you can see. And that gap also does not seem to diminish much over time.

What's our strategy? Well, it's firstly digital everywhere. I think we agree with the proposition that you can't separate digital from others. It has to be an all our businesses. We have to expand and develop our existing networks like G2, like GroupM search, like OgilvyOne, like Possible Worldwide, Wunderman and VML.

We have to create new businesses like Possible Worldwide, which was really an amalgamation, as I said, of four businesses. We launched that in February 2011. We launched Xaxis, which is the most global audience buying business for digital media, and then launched -- we split out tenthavenue really out of GroupM with a focus of out-of-home media.

In terms of beta and technology, we have a $1 billion-plus digital spend on proprietary platforms. And I have to emphasize, although this is a difficult area, because you are going head-to-head with some pretty big companies and pretty sophisticated companies, we think this is actually critical. We think being the middleman really gives us an opportunity to prove independence and not be swayed for commercial reasons for recommending one media channel or another.

We've got both internal and third-party technologies integrated by 24/7 Real Media, and we've got greater flexibility to use data across clients and media and research. And this has allowed us to launch these platforms such as Xaxis. And then in the innovation areas, there's mobile, social, and eCommerce.

In terms of our digital networks, Wunderman and OgilvyOne are actually a long way ahead. I mean, these are the only two real digital operations. And Wunderman will hopefully cross $1 billion shortly; OgilvyOne will be $900 million this year. G2 is $300 million; 24/7, GroupM Search and Xaxis, which really are -- GroupM and Xaxis really came out of the GroupM Search operations and Xaxis came out of 24/7 Real Media, revenues are now about $330 million; Possible is $100 million; and VML, $125 million.

VML resides inside Y&R; has given Y&R some really good opportunities to get into some major packages with clients. There have two situations, one of which is referred to in our new business list, one isn't, where they've really defeated the traditional agencies and got in on major package goods opportunities.

Technology -- there is lap-over between technology and BRICs. I mean, the digital does not -- looking at some stuff that you see put out by our industry, you'd almost think that digital is only inside the Western markets of the US and Western Europe -- that is not true. There is lap-over. You can't add the two together and say, my digital and BRICs revenues are half of the business because there is lap-over.

And to give you an idea of what's happening and you go to a country like Brazil, Sao Paulo is a center of new media on a global scale. And the quality of the work that you're seeing there is phenomenal. So what we did on this slide is just piece together what our digital revenues are in the four major -- the four Britain markets. And in Brazil, where we have these businesses, revenue is about $54 million; in India, about $20 million, a smaller scale; revenue $25 million in Russia; and China, $80 million. Just to remind you, the overall scale of Brazil is about [700] including associates.

India is about [450]; Russia is about [200]; and China is 1 billion, probably 1.1 billion this year. We have three digital leaders as defined by Forrester -- Wunderman, OgilvyOne, and VML. No other holding company has more than one.

And talking of firsts, I think it is important -- and maybe a little bit boastful -- but I think it is important to highlight the achievements that the digital operations have -- what we have done over the years from 2007 to 2010. It is a history of firsts -- first, we are the recognized leader in audience buying. We -- in 2007, we acquired 24/7 Real Media. We developed the technology and focused on audience targeting and optimization through the MIG Group, the Media Integration Group, again in 2007.

In 2008, we developed the ZAP platform, which is the user-level data management platform; established an agency trading desk. And the first agency-owned demand side targeting optimization technology, which was B3, z-a-p, ZAP -- which we've highlighted in our digital [dais] for you. I mean, what we didn't do was take media planning and buying, digital, and slam them together. That we didn't do. What we did was try and develop technologies using those companies in the most effective way.

In 2009, we developed Targ.ad, which is a decision platform in Europe, and we developed in the same year, video exchange and proprietary products. And then in 2010, we developed the agency-owned, demand side platform, the ZAP Trader, and that demand side platform in Asia-Pacific.

So these are some significant achievements. And this culminated in the launch of Xaxis a few weeks ago, which is, again, is the recognized leader in audience buying. It's the only global audience buying solution and it's currently being launched in 13 markets. It's the first agency trading desk to offer clients a complete data warehousing solution. It has proprietary technology that protects client data and objectively measures results.

It's the world's largest team of experienced trading professionals, recruited from all sources like DSPs and networks and publishers. It has more direct relationships with premium publishers than any other trading desk and -- buying from Google and Microsoft and Yahoo!. It's not just an exchange. It has access to media, from publishers, from networks and supply-side platforms. And we believe it seamlessly reaches audiences across display and search and video and mobile and social media. So a very different approach to any of our competitors in that narrow competitive set.

Innovation for the future -- mobile marketing is one of the things I highlighted at the beginning. Iconmobile, Joule, and then we have key partnerships who are running Android competitions to promote mobile to clients. Mobile is now a very important part of clients' plans. It's small, but it's growing. We've developed, with Apple, iAd media deals, and deals for the European launch of iAd.

In terms of social, we have specialist resources. Blue State Digital is the company that did Obama's first campaign and is working on his second campaign -- 160 professionals there. Cymfony, which analyzes social media and the blogosphere, measures what's going on. And Buddy Media I've mentioned before. Key partnerships with Facebook and Twitter in terms of client development and programs.

In terms of acquisitions, we've made a significant number of very aggressive, well-run smaller companies. F.Biz in Brazil, Rockfish, the latest one in the US with particular relationships, as I mentioned, with Wal-Mart, Sam's Club, and Cisco. Gringo, again in Brazil -- I mentioned Sao Paulo -- both F.biz and Gringo are based in Brazil and in Sao Paulo. WHO Digital in Vietnam and Lunchbox, again, a digital operation in the United States with very strong package goods experience.

Now that all adds up to our total first-half pro forma revenues of around $2 billion or about 28% of our business with our networks. And of course, on this slide what we've done is not just take OgilvyOne, Wunderman, and G2 and WPP Digital, but we've taken our other digital operations.

Now, just turning more generally to our objectives, it's about improving margins, flexibility and the cost base, cash flow, investing in the most productive way, developing the role of the parent company, revenue growth as margins improve, and creative capabilities. This is the margin progression with what's happened in the first half. We're pleased with the results in the first half. We've got margin expansion, and the wheels have come off the truck in a couple of examples, competitive examples in the first half. People ask why and we've tried to point out in the release, there are -- I remember asking several of our clients, what worries you most? And many of the CEOs would respond, irrational competition -- usually the most desperate competitor.

And I think there are some signs of that, confined probably to two companies and one in particular. But we have seen some dumping going on. And I think that's reflected in the margin performance of -- for one. And we have seen some nicking -- forgive the crude word, but when people, when they're desperate, there are some totally unrealistic hiring decisions being made -- totally unrealistic. You just can't run an agency on the basis of those hiring decisions. And it's irrational behavior by a stressed competitor. And probably likely to get worse rather than better -- but it just doesn't work. One doesn't mind modest increments but there are some -- in the financial services industry, you do see some things like that or you have historically seen it, but it's something that we think just will not work.

In terms of flexibility and because we're back to where we were, if you think about the structure, I think if you take the forecast for our EBITDA for this year in dollars, it's probably around about 2.5 billion, maybe actually a little bit more than that, maybe 2.6 billion, 2.7 billion. We've got in our Q2 [RF] about 500 million of incentives. So our EBITDA pre-incentives is around about 3.2 billion. And so we've got flexibility in the cost structure now of about 7%.

If I -- we pointed in the release to the fact that we're doing better now that we were pre-Lehman. The one thing that I think we did do was we invested in incentives. Because the incentive pools did get drained pretty severely in the recession around Lehman and Bear Stearns, and in the monoline and subprime crisis. And we've now fully invested that back. It's running at about 23%, I think, in the first half of the year, which is probably a little bit above target -- oh, sorry, above maximum -- just intervals. So we're sort of quite pleased that -- I mean, the flexibility is not just incentives, it's freelance and consultants as well.

In terms of using free cash flow, obviously, with buybacks and increases and the dividend, that's going to improve. We just laid out here the mix of buybacks, dividends declared, and dividends paid. We've shifted the emphasis in the last year away from share buybacks to increases in the dividend. We've talked with a number of you about what's better. And I think the theoretical and indeed the practical view is that increasing the dividend, although it is an incremental fixed cost, is probably the best way to do a more impactful long share price. And obviously, with yields becoming more important, I think our yield on the current -- if you make some assumptions, will be around about just under 4%, around 3.7%, if you make some assumptions about what the dividend is likely to be for the second half of the year.

So we're very focused on that. And the dividend payout ratio -- it's moved from 31% in the first half last year to 33%. So we've not really seen much of a movement, but the objective is to get it up to 40%.

Acquisitions in terms of use of capital obviously are important. We limited ourselves after TNS in 2008 to GBP100 million. We limited ourselves to that until the EBITDA ratio to -- or debt to EBITDA ratio was 2. And we've taken that cap off. We originally reduced -- raised the cap to GBP200 million. And we've now raised it to GBP400 million. The free cash flow is about GBP900 million, as you have seen from the trailing -- see from the release. So there's continual considerable flexibility there.

There is a very significant pipeline of small and medium-sized acquisitions. And with the exception of the Internet in the US and Brazil, they're probably reasonably priced. I mean, there is increasing competition in India and China; less so, Russia; but generally, I would say the two areas where we continue to see price expansion or over-price expansion, is Brazil and the Internet. We made a number here, actually 22 in the first half year, but they are very focused on new markets, new media, and indeed, Consumer Insight. And there is the [VIN] diagram just to show how those fit in with our objectives.

One or two outside those three objectives, such as Scholz & Friends. The reason for Scholz & Friends, a $200 million agency based in Germany with operations in Eastern Europe -- very much in line with the strategy of the expanding eastern European operations and the importance of Russia and Poland and Germany.

In terms of improving creative capabilities or reputation, we've talked about this before -- it's about recruitment; it's about recognizing creative success; acquiring good businesses in that area; and placing greatest emphasis on rewards -- on awards as well as rewards. We have delighted to finish first at Cannes this year -- it's the first time they've ever awarded a line for the holding company of the year and there are the points.

Just on this, interestingly, research is about $4.5 billion of revenue. You strip that out, the actual revenue base that we have competing for Cannes is the smallest of those top three. We have less allowable revenue for Cannes than either of the other two.

Conclusion -- we're delighted with the start of 2011 but again, as I said, it's like painting a ship. And that's over; we've done that; we have the T-shirt. We saw like-for-like revenue growth which was greater than last year. Last year, I remind you, it was 5.3%. And I just want to underline the real measure of revenue growth is the gross margin growth.

And that is above 6% -- well above 6%, actually, for the first six months or seven months of the year. Western continental Europe delivered 3% like-for-like growth despite a difficult environment. We are seeing some life there, but it is from very low modest beginnings. So it's because the comparators are relatively easy. We are seeing growth, obviously, in the fast growth markets, particularly in Asia-Pacific and Latin America. The Middle East is an issue because of the uncertainty. Africa is good. And we're reaching 12% like-for-like revenue growth in Q2 as the US slows down.

We think we have done well on the cost control market. Headline margins are up 0.8%, 0.8 of a margin point, 80 basis points before bonus and 70 basis points post bonus.

Just to remind you that we laid out for you what happened in budgets. So budget was 5% growth and 0.5 margin point. Q1 we did -- we had better than 6 on revenue growth. We didn't say anything about margins, but in the first half, you have seen we have delivered 70 basis point 0.7.

We said in the Q2 that the Q2 revenue forecast and gross margin forecast was very similar was the words we used to the first seven months. And we also said that the margin forecast in the Q2 was better than the 0.7. We're not saying how much better, but no doubt somebody will ask us. We'll see whether we are prepared to go any further.

Cash flow is very strong in the first half, a $0.5 billion improvement. So outlook, expectation is for the US to continue to slow but that is compensated not totally but mostly by Western Continental Europe which starts from a low rate of growth and by Asia-Pacific plus Latin America and Central and Eastern Europe.

The situation in Japan I think has got a little bit better. Australia for us is strong as you've seen from the country operations. Middle East is the issue.

I mentioned what the Q2 revised forecast looked like, very similar revenue growth for the first seven months and the potential for margin improvement beyond 0.7. We're going to continue to use the strong cash flow to take advantage of acquisition opportunities.

They will be small and medium-size. And before anybody asks the question, we are not in control of the Aegis situation. It's Monsieur Bollore who is still in control of it and the fact he's got a special dividend probably makes him more in control of it I think and probably more relaxed.

He's a relaxed gentleman anyway and he's probably more relaxed as a result of it. But we will continue to focus on small and medium sized acquisitions. Share buybacks will continue but we're really focusing more in a way on dividends.

But we will use share buybacks when we think there are anomalies in terms of value which we think there have been over the last few weeks. We're valued now at five times trailing EBITDA. [GBP1.5 billion] is the EBITDA which valued, [GBP7.5 billion].

As [David Tucker at M&G] told me many years ago, don't comment on your share price, so I won't comment on the share price. I will just say that's what it all means.

Group's well-placed region and by region discipline to benefit from the trends, we're going to continue to invest in digital tools and infrastructure to show independence in coming to client decisions. Very strong digital networks, Wunderman and OgilvyOne.

Our ambition for 2011 is to exceed our financial model. Remember our financial model is 10% to 15% growth in profitability, EPS; 5% to 10% coming from organic growth, 0% to 5% from acquisitions. And we will maintain our average net debt to EBITDA ratio at around two times while investing further to support those goals.

As clients focus -- and I can't emphasize this enough. We see this continuously.

I look -- again just using India as an example, last week Mahindra, Airtel, Hero all running campaigns which are not just about India, they are about growth outside India, not so much in the Western markets, but in the BRICs and Next Eleven, and the focus on new media is also critical as well as the focus on data and analytics and technology through consumer insight.

So that's it. We did an hour. Questions? Yes, we will start here and then we will move backwards.

Thank you. It's Paul Gooden from RBS. Two questions, firstly on the current advertising environments. As CEOs come back from their summer holidays, it wouldn't be surprising if they were tapping CMOs on the shoulder saying given the macro uncertainty, pull back on advertising a little bit. Is that a concern that you have? Is it something that anecdotally you're beginning to see?

And the second question is just on your margin guidance. To the extent that the sort of modest slowdown you're seeing in growth continues in the second half and if you undershoot your revenue guidance, do you feel you've got the cost flexibility to hit the margin guidance? Might you perhaps slow down on the margin accruals? And how confident should we be in that 70 basis points?

Well on the second and first, I think the answer is that the Q2 was done -- when, David, will the companies have done the Q2, the operating (multiple speakers) sorry? (multiple speakers) mid-July.

We spent the first two weeks of August in New York going through the [Q2 RFs] with the operating companies. So actually it was interesting, the first week was sort of pre the market wobbles and the second week was -- so we were sort of half in, half out in the market wobbles.

To be honest with you, it was a different psychologic -- there was a difference psychologically in the first week as opposed to the second week. But the answer to your question is that we adjusted the forecast.

I mean actually in the original draft of the press release, we were sort of going -- even going as far as to sort of say to you that we sort of made adjustments. We went through it in that period.

I mean subsequent to those two weeks of August probably, there's been continued market wobbles or they've sort of heightened. So, the answer is yes, I think we have enough flexibility in there on the margin.

Now we haven't said how far we will go beyond 0.7 and that could be 0.75, it could be 0.8. And I don't think that you will extract from us what that figure might be but other than to give you indications that we think there's opportunity to do it.

But I would say given what we know about the revenues now, there's enough flexibility there. Remember there's a big buffer in there now. When I refer to the 0.5 billion, the 500 million in incentives, that excludes freelance and consultants.

On the first, it's too early to say because they haven't come back from holiday and the Americans haven't come back from Labor Day which is a fraction there. If you look at the historical precedents which may make you less happy actually, post Lehman because Lehman was what? September 13, 14; 12, 13? We didn't see -- I mean we were flat in the fourth quarter of '08.

Where we got hit was the first two quarters of 2009 which was what? 8 and 11, I think; minus 8, minus 11, we budgeted minus 2 and we ended up the year at minus 7 to 8. Most of our clients work on a calendar year basis.

I think if you just think about it logically for a minute, I doubt whether they'll come back and say you've got to take emergency action. I think they might say let's look very closely at 2012 and however they do their planning and you might see some impact then.

But the answer to your question is we've seen nothing as yet. But it's too early. Life doesn't work -- the market drops by 300 points and then instantly our clients make adjustments. It's not realistic to do that.

So -- but again I come back to what I said and it was this morning that made me sort of think about it. I hadn't thought about it before.

If GNP is up 3.5, 4% and that's the sort of latest worldwide -- and we're heavily influenced by that -- if advertising stays constant and we have the events -- it's not -- 2012 is still not in my mind is not the real issue.

Now the markets may be looking beyond 2012 at 2013 and I still do think there's a worry about 2013. President Obama is more likely than not still to become the President for a second term.

He's a brilliant candidate and he runs a brilliant campaign. And who are the candidates that can defeat him?

Obviously depends on unemployment going above 9% and the state of the economy. But you probably are going to have the Republicans controlling the House and the Senate and therefore you will have gridlock or deadlock again maybe. So I think that's sort of longer-term worry. So I still -- that's where we are. But no evidence to date or change in attitude.

Richard Menzies-Gow from Merrill Lynch. Two questions please.

One just to follow up on the margin. Can you just give us a sense of -- I mean if we take into account -- this year you do 70 or 80 basis points or so, but if next year was to be a lower growth year if instead of 4 to 5 organic it's a 2 to 3 or something like that, how does the margin model stack up on that sort of basis? Do we assume flat, do we think you can get expansions still on that sort of basis?

I think there is a line in the release that we would love to get back to 14.3, and 14.3 was the pre-Lehman, post-TNS adjusted margin. That's 15 which is where we sort of got to adjusted for a 0.7 dimunition because of TNS having lower margins. And that's where we would like to get to. Obviously 0.7, 0.8 this year does not take us there. It takes us to 13.9 or 14.

I don't think even if you add 2 to 3 coming -- with this sort of -- on the assumption you know that we do our Q2 this year and it has built into it the incentives that we have -- and I think the one element on our P&L which is we've not got back to sort of pre-Lehman days is the incentives. And when -- we have invested in incentives to get us back up again to some extent.

And so I think we've got added flexibility in a way. So I would feel if it was 2 to 3% and we planned on that, that we didn't make the same budget snafu that we made in 2009 which is budget minus 2 and come in at minus 8 that what we budgeted came in, I think it's manageable. So I would feel okay with that.

But again if you are forecasting worldwide GNP at 3.5% to 4%, that has implications for us, I mean positive implications. There's advertising [world track].

The other thing is -- which in relation to the first couple of questions well -- Greenspan has this thing which he -- when we were in Washington, he came to the dinner we had and he repeated it again. He has this -- he may not be still regarded with the reverence that he was regarded in the 1990s but he has a lot of knowledge and experience.

He refers to this statistical series that he watches which is if I get it right, non-financial companies in America who have overseas earnings, because 40% of the Fortune 500 earnings coe from the outside, it's fixed capital formation for non-financial companies with a heavy component, almost half -- and he said that has shown no life since Lehman. He actually wrote an article for the Council of Foreign Affairs on it. There's an article that describes what it is.

And I think that's very interesting for us. Because what that indicates is people are afraid. They're going to come back from Labor Day more frightened, coming back to the question about are they going to tap somebody on the shoulder.

They may say I am more concerned, watch it more carefully. And I think they're not going to invest in plant, they're not going to invest in plant and equipment in the West.

China, India, Brazil, Russia, yes. And they invest in brand. It is a cheaper way of maintaining your position or increasing your position. This is not a bullish argument. I'm just saying it's a perverse argument in a way. I just think it works.

Great and just the second question was just on consumer insight. Just give us a bit more flavor on that because obviously first half growth is still a bit disappointing. Sort of what is behind that? Is it TNS related? Is it regional? Is it -- you know.

Well it's what we've said before. And we are disappointed with that.

I mean if you said to me what is the one disappointment there, I think in the whole shooting match, it would be that. Digital has done well, BRICs have done well, media has done well, advertising has done well. US has done better than we expected, although obviously it is slowing down.

I would say -- and again just to -- the analysis we've given you before, we have half a custom business and half a syndicated business. And it's the custom piece not so much in the faster growth markets, but it's the custom piece in the mature markets, so the US and Western Europe where the pressure has been which is understandable.

But we still haven't fixed it. And Eric Salama who runs Kantar has gotten more heavily involved in TNS as I think we indicated at the last quarterly review and we expect to see some improvement there. But I think one disappointment I think we would admit to is the growth in the custom piece of the market.

Now having said that, in that custom piece or in that custom industry, you've got a consolidation taking place at the moment. Ipsos has to consume Synovate and there may be some interesting opportunities as a result of that.

But I agree with the thrust of the question. That's where we have to spend effort and time getting that growth rate up. Just at one point, the gross margin is better than the revenue, but it's still not good enough.

Thanks very much. It's Richard Jones at Goldman.

Can I firstly just follow up on the kind of the general outlook comments? Sorry to belabor the point, so your guidance for the full year is similar growth as in the first seven months. The comparisons obviously get tougher over the next few months as we go through the rest of the year. But you would still need to have (multiple speakers)

How can you possibly say that (multiple speakers)

I'm just wondering on your perspective on achieving a similar type of growth of 5.5% to 6-ish just seeing July is 4.3 and the comparisons do get tougher over the next few months. so just your perspectives on that would be very helpful.

Again, you do yourselves a disservice and I think us a disservice by focusing on -- the gross margin is the key issue. Right?

And that's what actually flows down as the P&L in terms of revenue growth. I would just go back to what I said before.

We sat down first two weeks in August, took the forecast, tried to turn them upside down and inside out. If we showed you the numbers -- we have these sort of strange charts that show -- the only person who understands them is David Barker, he can understand them -- but every month does the year-to-year comparison.

Despite all that we have gone through -- and it's not all the companies by the way -- when you look at Q4 -- I think I mentioned this before -- as we go through the year and if we do better than the budget, so the budget was 5 and we're tracking let's say 6%, and so we do better and the first few months are better than the budget and it pushes the numbers back.

So when they reforecast instead of raising the back end of the year, the fourth quarter of the year, particularly December or October, November, December but particularly December; they take it -- they push it back, so December gets smaller and smaller as the front-end gets better and better. It doesn't -- there is some innate -- it's not everybody. There are some people that go the other way.

There's still a little bit of innate conservatism there in some of the companies because people want to look good against their budgets or look good against their forecasts. So the simple answer to the question is we've gone through it and we've told you exactly where we are.

And I don't think we're passing any other judgment than saying that's what we were given. We went through and we do what is it? Do a careful inquiry, okay? After doing careful inquiry, that's our conclusion.

Thanks. The second was on uses of cash. So there's obviously a certain amount of buybacks in the first half. Would you think of stepping up the rate of that in the second half (multiple speakers)

Depends on where the price is. Five times EBITDA, yes. But it depends on where the price is.

I don't know whether I'm going to far, but we can't because of close periods, we have to sort of put in a program, a pre-ordained program before we go into the close period. And we -- Paul, Chris and I sat down and we said -- well actually it was Paul more than any of the three of us -- said you know, we won't buy stock above GBP750. And it's a program trade after that because the rules mean we can't do anything else.

And we said 200,000 -- you've seen it -- 200,000 shares a day if the share price is under GBP750. When we did that, the share price was GBP750. I don't think any of us -- Paul said last night he had a feeling it might happen like that and we said yes, yes, yes. We didn't think it would get down there. I didn't think it would.

So, I think the answer is we feel better about dividend payout expansion. But if the share price is what we consider to be low, we may be more aggressive.

I think one analyst this morning figures we can be more aggressive, I think referred to 50 million shares or something like that. But whether that's right or wrong or not -- but at this level, the way we feel about it --

I think [the first thing you saw] keeping the debt ratio two times or below, [you saw me at] 1.8 at the half year and I think that's important.

We are doing everything a little bit more. I kind of said with the program, there's more spend on acquisitions, there's higher dividend and share prices wherever they are, obviously we will keep the share buybacks going. So I think we can fulfill it all so long as we remain with under a two times net debt to EBITDA ratio, which is our key.

(inaudible) power ratio.

I've got no idea.

It's gone from 31 to 33 which is pretty measly. I mean because we sort of almost implied we started from 33. And in fact the last year was -- if you assumed for a minute -- and this is not a commitment -- but of the sort of way we've been looking at it is what Paul indicated, we said 5 points above the diluted EPS. So if that grows at 20 or 15, we would do 25 or 20. So do your math and figure out that.

It's Patrick Kirby at Deutsche. Two questions, firstly Young & Rubicam. Can you talk about the situation there? It's quite high on the list of account losses in the first half. You had some management change.

To be fair, that's a little bit unfair. It's quite hard when the account wins actually, Vodafone, Beeline as well. So I think that's a little bit unfair.

They won a piece of -- a good piece of global Microsoft business which I don't think has been announced. Hamish McLennan had to go back to Australia for family reasons, genuine family reasons, not bogus ones. And David took over and has been extremely well received.

David was effectively the number two at Wunderman. So it works very well. So I feel very good about Y&R actually, very good, and VML which is a part of Y&R.

When you look at the numbers, VML is part of it. So when you see Kelloggs for VML or Gatorade for VML, you really should be lumping that in. So I take issue with that.

Okay, so turning the corner --

Well, I don't think there was a corner to turn.

Okay, second question just on staff and headcount. Could you talk a little bit about what you've been doing to shift between freelance and full-time employees in the first half and how that has come through in the numbers and is that a positive or negative for margin?

Well, it's all in there. I mean it's in the staff costs. I think we showed the staff costs. Did we show pre-severance? I can't remember whether we did or not. Did we or we didn't. Nope?

So that's not going to make any difference to the numbers. Our margin improvement came primarily from non-staff costs.

It came from property effectively and other SG&A in essence and actually a fall in severance as well in the first half of this year versus last year, the severance cost was lower. Our headcount went up about 4.5%.

But we didn't -- our staff cost to revenue ratio is really -- were either constant depending on whether you're looking at revenues or gross margin or rose a little bit. So we didn't get the margin improvement really by rigid control of staff costs.

Now when you think about what we did, this time last year we were probably a bit concerned that we put too much pressure on the business. 2009 was the brutal year and then we sort of got our act together in the back end of 2009 and into the front end of 2010 when we were flat in the first quarter, and then we started to see some growth as we projected in the second quarter of 2010.

So I think we certainly started to hire people. I think there's a comment that in Q2, sort of 85% of the increase in headcount came from the UK and the BRICs or the fast growth markets.

So we've invested in talent there. And that's not because of the [nicking] comment, because we had to or match. It has to do with sort of a planned expansion in our business.

Is there pressure on salaries? A little bit but I don't feel -- you know it's the growth markets where you get the pressure.

So the turnover rate, I think I have said this in the first quarter, if you said to me what worries us or keeps us awake at night, it's the labor turnover rate this year as opposed to last year and particularly in the fast growth markets. But most people you talk about -- we went to a conference -- I asked Scott who is our chief strategy officer who's based in Shanghai went to a conference and where the leading consultants in the investment banks were, their turnover rates in China for example are higher than ours.

We came away from that feeling a bit better about life. But these are still high levels and I think the people who run our businesses have now become philosophical about it. That's what we have to live with.

So we've invested a bit in the staff costs in the last year. We haven't gone as far as others who seem to have gone I think too far that and way either margins have been eroded as a result or they're being I think overly aggressive. But that [starts the fun].

Anybody else? We're just down here, we can go down this route and then we'll go down and move to the right in a minute.

Claudio Aspesi for Bernstein. Google acquiring Motorola is acquiring also a cable set-top business in the United States. Is there a point at which Google will have so much data by the US consumers that media centers will be threatened regardless of their independence and objectivity?

It is a worry. I mean I don't think you can dismiss that on the one hand.

On the other hand they have a lot to do. The Motorola Mobility -- which is a client of ours -- acquisition seems to be not about handsets but about patents.

I don't know whether that is 100% of the objective or there is some other objectives there. But it certainly raises big issues not just in the data area, but in the handset area and what does a Samsung do in response or an LG do in response particularly if you're running the Android system.

I don't know the answer to your question but I think it's a good one. It could be that they will continue to amass data which gives us -- either it could be a threat or it could be an opportunity if you work with them.

I mean we're working -- our research companies are working very closely with Google on developing their approach in Western Europe and elsewhere. Maybe that's Kantar.

So it's very difficult thing, but it's a good question and I think it's a potential competitive threat that affects -- it would affect a Nielsen, an Arbitron and all sorts of other businesses as well. But I think if you contemplate [enable] all the time and worry about those things, you wouldn't do anything and you have to react in the most effective way you can. But I think it is a possibility. But you know they have got a lot to manage, a lot to manage.

Simon Wallis from ING. Two questions related to market share which I know you're pretty focused on.

The first is you've given a very clear explanation of your digital strategy and how independence is important. Can you link that to some of the net new business movements that you have seen over the past couple of years?

And the second question, the presentation also makes reference to account consolidation continuing. If I look at the recent list, most of the account activity seems to be switches from other large agencies. So is consolidation continuing in smaller accounts or is it really just a zero-sum game between the big agencies?

Well, our list concentrates on the big. So in a way if we went down to 10 million or 5 million, it might show a different picture. I mean again to use the Indian example, there are several small agencies in India, but at the end of the day, there's a healthy Darwinian process that takes place inside the industry and people break off, start agencies, run out of resources or are worried about their resources, need somebody to help.

One agency had -- what you would call a small agency had called me -- $30 million agency called me and said we need a strategic partner to grow. Taxi we did our deal with. There's another agency that let's just say look at the moment $65 million revenue has the same problem.

So my -- [campaign] would have a different view, [Clearview] would have a different view. Ad Age might have a different view because the store -- it's better for David to beat Goliath than Goliath to beat David.

So they would tend to build it up. My sense is that the bigger are becoming bigger and the market share of the four or the six is getting greater. That's my sense.

And I think the GM thing yesterday was really interesting. In fact it happened last night or yesterday afternoon [as quite did].

But that is big. And I -- it's sort of interesting what's happening there and I think obviously it has to be played out over a few months.

But I think that is indicative of more to come and clients -- the efficiency and effectiveness thing becoming more and more important. The independence thing, it's very difficult to track that.

I just think it's -- we think it's the right thing to do. And we think that in the long run if you can prove independence -- the Holy Grail is you should spend X dollars - this is to the client -- and you should spend it in channels A-Z in these proportions.

And we don't see how you can do that if you have a vested interest in a platform or if you have a deal with a platform owner that pays you a commission to recommend that platform. And people say they've got great partnerships because they haven't spent their time trying to build the technology or the application or apply the technology is probably the better way of putting it, and they end up without an offer.

So I think if it hasn't happened already, it's helpful to us and it looks as though -- it looks and is so that we are actually making a bigger effort. It would be exactly the same if Sumner Redstone or Philip Delmar or Les Moonves or Rupert Murdoch went to our clients and said put all of your spend into Viacom, put all of your spend into CVS, put all of your spend into News Corp.

We should be in the position where we go to those media vendors and we say on what basis are we going to do that and then make the recommendation. So I think if it hasn't had an impact -- and there are some situations where it has had an impact -- it will do.

James Dix, Wedbush. Two questions on growth.

First for 2012, you mentioned the maxi-quadrennial effect of a point or two on global growth. I mean does that revenue typically help agencies spending as much as the overall market? And if so, is that revenue typically of a similar margin or dilutive to margin?

(multiple speakers) helps us which is the Olympics and the European Cup. One helps the market which is political spend.

And does that political spending help == doesn't really help the agencies?

No, but it really buoys the market and makes it more interesting, more competitive. So it's the first two that there's either incremental spending. I mean there's some diversion of existing spending but there's incremental spending.

Is that similar margin to the rest of the business (multiple speakers) setting aside the political, the other piece.

Yes.

And then a longer-term question just following on your Greenspan observation, should we be thinking about upwardly revising our expectations for agency growth relative to GDP over the longer term if there is going to be an extended period in which marketers are going to want to favor brand investment over things like CapEx and M&A?

Well, I mean the reverse of what we said is if people have less fear, they'll spend more money on investing in capital equipment. And therefore by extension, you make the argument they'll spend less on us.

I would be as we are in the advertising business, I would say if they expand, they may actually spend more behind it. So what we're seeing in the BRICs and Next Eleven -- I mean I think the argument is a better argument around the BRICs and Next Eleven.

Remember [Steve Belmar at Cannes] about three or four years ago said advertising in proportion to GNP would fall. And what he was referring to was the US, not the BRICs and Next Eleven.

India is underbranded quite clearly. They are undermarketed.

The Indian firms that are expanding around the world will be spending more whether it's Tata, the [Ambanas], Mahindra, Airtel, Sigmatel. whoever it happens to be. Same thing applies to China, same thing applies to Brazil and the same thing applies to Russia.

So you might adjust it. The more one thinks about it, the more I think people have probably panicked a little bit too much in the last four or five weeks.

Filippo Lo Franco with JPMorgan. So I had three questions. The first -- I apologize really to come back on the operating margin guidance.

I'm not really interested in if you're going to 70 to 80 but it's really in the rationale. Because it's still unclear to me how you're going to achieve this. And at least could you give us any idea of where it's coming from?

Why do you feel it is irrational?

No, no, I didn't -- sorry, it's my -- I still have a strong Italian accent after living 10 years in the UK.

My wife is Italian and I should be able to understand what you're talking about.

No, because I -- I have to understand things. It's coming more from a geographical area or thinking more about discipline, about a particular segment where the operating margin are going to improve or really it's an overview of the (multiple speakers)

It's a mixture. It's topline -- again I come back to the budget was 5. I'd rather be budget 5 and doing better than budget 2 and doing worse, minus 2 and doing worse. Do you want to (multiple speakers)

The revenue is growing faster than the costs (inaudible)

Thank you for that insightful comment.

Well, my basic English is good (multiple speakers)

So the question is why should the cost grow faster than the revenue and our budgets (inaudible)

In the first half we did get a severance benefit. We did get an SG&A property benefit and that drove the margin increase. (multiple speakers) in the second half, it may be dissimilar. Let me put it like that way and make it a little bit more on the (inaudible).

I mean one of the things that really intrigues us is the balance of our business versus the competition. Our business is much more balanced in the second half and over time despite the fact that fees have become a greater proportion of our revenues, our balance -- the balance of the business has got worse in the sense that the first half has got less important and the second half become more important.

I think that may be a little bit to do the way that we run our business or the people -- it comes back to the caution point that I was making with Richard. I think that there are people who run on a fairly cautious basis and our second half is -- you know you get the breaks. Our second-half margins are much stronger than our first half and we are anticipating obviously and given what I said that our margins in the second half will be better than the second half of last year.

Okay, good. The second question is about the Ipsos Aegis deal. Does it change anything for you, for the market (multiple speakers)

Listen, we got the highest admiration for Ipsos and the job that [Deedya Tricia] has done. He consistently has performed well.

Two observations. One is they have done an un-underwritten deal and they didn't know at the time. But to do an un-underwritten deal when the market is going to hell in a handbasket is quite difficult. But you're not French, you're Italian, so I don't know whether you heard the answer to the question or not.

So that's one thing. The second thing is it's a big piece of business for them to consolidate and it has caused some disruption.

I was in India as I said. It certainly caused some disruption there and is causing disruption in other markets.

So there may be going back to the question about our growth, we may get a little bit of an opportunity particularly on the customer side. Because Synovate tends to be more of a custom business then syndicated. But we shall see, we shall see.

And the follow-up question is about really the risk of contagion that -- of the slowdown in Western market into the BRICs market. I mean, I remember very well -- I think it was in 2008 when we had the slowdown in the Western Europe and then it started to hit really hard in Eastern Europe. I mean how strong do you think the risk is that China and Brazil will start being affected by --?

Well, it's there. Everything is coupled and it's a mistake to say it's decoupled and you can disaggregate one from the other.

In the case of India again, exports and imports are what, 12% of the GDP? It's not an economy that depends on it.

I make the point again about Brazil and China. I think part of the reason for your question, not you personally but generically, is that we just don't like the idea of these people doing better than we do. I think we hate the idea, right?

I mean a Brazilian writes me a note saying I've seen the London riots, are you okay? So in his mind, he's in the favela. I went to Alemao recently in Rio where 15 to 20 people I think were killed and my Brazilian associates, colleagues and friends said what the hell are you doing in a favela in Rio? So I think that is part of the reason.

These people are doing a good job and I think we just -- it's very difficult for us to get -- I mean a big issue to my mind is whether America gets its act together. It did in the 80s against Japan. Will it do it in this millennium against China?

Will it be G1 rather than G2? And never underestimate the Americans on the other hand. America -- this is a bigger challenge.

So I think it's all a bit of that. So I think yes, we are coupled but these people are not fools. The 12 people who run China are extremely intelligent. In fact they do a bloody good job running -- I shouldn't say this. I should stop there. Fine.

Charles Beouelle from Exane BNP Paribas. I think a lot of questions have been asked but I have one specific on the branding an identity business which showed the biggest margin improvement. Can you explain exactly what happened in this one and if this is going to continue and the specific story here?

Landor did reasonably well, did better than the last year. So I've got three businesses there in the branding and identity. Brand Union did okay in relation to last year, maybe had a bit of a tough year. Fitch did very much better. So the three businesses did okay, two of them in particular and that's where we saw the improvement.

It's Matthew from Nomura. Two questions please. First thing is just on your planning and staff costs for next year, you mentioned that you were heavily swayed by GDP growth estimates.

Well it's not heavily swayed. It just sort of seems to me just logic -- it's logic. It may be false logic but it seems to me logical.

I just think people have lost -- I think we just lost perspective. For whatever reason we've lost perspective.

Maybe markets not only -- we said in the release they're rarely wrong, but the other hand, they do swing too far one way and the other. I mean maybe part of this is you go back to the 1930s, the stock market did recover, it went too far, it came back again. Maybe that's what happened in 2010.

I guess what I'm saying is GDP estimates tend to be lagging and therefore relying on them for planning for next year might not give you the sort of conservative accounting assumptions you want to have. That's basically what happened in 2009.

We'll see. The two GDP estimates that I referred to were ones that were made last week by -- the banks are most conservative. The banks are most frustrated.

The banks are the ones that complain most about the regulators. The banks are the ones that say that life is the most impossible. So it's probably about the gloomiest bunch of people we can lay our hands on.

People running businesses -- the people that we deal with in the real world every day are not as gloomy. Now maybe that's because they are looking at today rather than what you're looking at which 12 to 18 months time.

But they are not as gloomy. I mean they say -- it's a bit like saying would somebody come back from holiday and tap the CFO on the shoulder or the CMO on the shoulder and say -- I think that's true. I think people will read -- they'll be sitting on the beach and they'll read on their iPads now and they'll read -- or their Kindles because it's better in the sunlight -- they will read this stuff. They'll read the stuff and they'll come back and say look I am worried, so be careful.

But even if they say that for a minute, that means -- I think it means don't invest in the factory. If you're a consumer and you read this stuff, you would feel a bit edgy about buying a car, a TV, going on holiday.

If you're running a company, you'd be edgy about hiring people. Our reaction is to say in the release we're going to be very careful about hiring and headcount.

We are. We've discussed it at our Q2 in the first half and we're going to be very cautious. We told the companies. We said look, given all the stuff that's in the press, you have got to change your mental attitude to hiring. Don't be too aggressive.

Second question is on insight. You mentioned that Eric was getting stuck into TNS in some way. Could you just be a bit more specific? What actually is being done about consumer insight and how long is it going to take?

Well, our view is it should be yesterday. So we want it to be done very quickly. But I think the answer is looking very hard at talent and recruitment and making sure he's got the right talent in the right places and where he has got gaps to fill in.

I think he's looking very closely at response times and flexibility and organization and trying to make -- reduce levels, levels of decision-making and response. I would just say two things really.

One is making sure we've got the right talent in the right place. This is on the custom side of the business, not on the syndicated side of the business.

And then the second part -- so there's not a World Panel or a Millward Brown or whatever it happens to be. And then the second thing is that there's not restructuring but getting it organized in a more effective way and being more responsive.

I think the third thing is that we have focused very much on margin with -- to be fair and I think maybe -- it's just interesting that in the analytical comment, we're getting more cue to us now for improving our margin. I'm just talking generally about the business than what we've done.

We've had sessions with you where you have said you're not really interested in margin. It's organic growth. There's more focus in the last three to six months on margin than there has been I think in the last two or three years.

And maybe that's because we saw two companies miss. IPG missed, Publicis missed. Omnicom had made some cost provisions in the first quarter which clearly has had some impact in the second quarter and given them the flexibility to get a little bit of margin improvement for the first time for some period of time.

And there seems to be a shift in attention. I think you still look at the organic growth very intently, but it's a difference.

So I would say the third thing is that getting a bit better balance between revenue growth and margin. And I think probably the emphasis on margin was fair because we've got two big businesses together over the last two years and therefore you would focus on the synergies and you would focus on the costs. So I think those three things.

It's Thomas Singelhurst, Citigroup. I have one question. You make a very specific point in the release of saying that there will be a significant impact from winning assignments in the second half of this year and it's (multiple speakers)

That's late, Tom. Later in the year.

Later in the year.

That's right and into 2012. (multiple speakers) don't misquote us.

In an attempt to quantify that, should we view that -- the differential between the 4.3% in July and the 6% you need to achieve (multiple speakers)

One swallow doesn't make a summer or whatever it is. You focus -- I think was it March or April was 4 and then May and June got better. I mean you can drive yourself crazy and us crazy frankly by focusing on one month as opposed to another.

And there is -- it's 16 billion of revenue a year. So you're talking about 1.5 billion a month.

And with complete -- with accounting and completion accounting in terms of contracts, I mean it can vary. So I wouldn't read too much into it. And maybe we should stop giving you the monthly figures.

My point is not so much on the month-to-month but the point about significant impacts, should we look at that as one percentage point annualized?

Well, you could -- I don't want -- and there's very good reason for why I don't want to be drawn into it because -- how can I put it? Some of the wins are commercially sensitive, and let me put it like that.

And I'd rather not get drawn into it. But you can -- you've got enough knowledge and history in the business to make a judgment about that.

And I don't even have to say we will go offline and then not bother to follow up on it which -- the wonderful thing about these things, you get a difficult question, you say we will deal about it offline and then you forget about it. I just rather not talk about it, okay?

Good morning. It's [Jonathan Arit] from Singers. I've got two relatively hopefully straightforward questions for you.

First one just on revenue growth for H2, you've had a very strong performance on new business wins and no doubt that's giving you quite a lot of comfort for H2. Could you just talk about the outlook for more pitches? Is there a lot out there? Are they sizable? Could we see another very strong performance for the rest of the year coming through there?

I think Chris says it comes -- it's like London buses. They come in threes and you have dry periods.

So you have your ups and downs and we've had our ups and downs and we win and we do stupid things and then lose business or we don't win it. But there is a lot going on, a lot of media, a lot of media.

Not so much creative, but it's still significant creative. And of course you see the big stuff. The comment that was made about the big stuff, and the small agencies where the -- what the relative position in share -- and you would tend to see the big stuff in the US and the UK and maybe France Germany, Italy, and Spain because people are interested in those markets.

But there's very little knowledge about what goes on in India. Our biggest win was I-Cherry in Brazil which was enormous.

There's very little knowledge about that and these markets -- so I think everybody's thinking is going to have to shift because BRICs and Next Eleven becoming more important, you've got to get more knowledge about -- just like we have because we tend to focus on the mature markets. But there was a lot of activity, a lot.

And my second question is on working capital. Obviously had quite a large [negative three] in H1. I wondered if you could just go through that in a little bit more detail.

And then secondly, just explain what sort of pressures you're seeing on the working capital front. Are you seeing much tougher terms being attached to the new business you're winning or are existing clients changing their payment terms at all please?

The point about working capital is always got to be careful how you interpret it. Because what happens in the business is we have a very strong final quarter where we go relatively negative in terms of working capital and we have an outflow in the first half of the year.

I grant you that the outflow in this first half was significantly greater than the outflow in the prior six months. That was really for two reasons.

One was the December 2010 position was much stronger in terms of negativity than December 2009. So the bounce back was even greater.

The June to June position actually is relatively even as you can see actually on the balance sheet in terms of where the net debt position is. The second thing, there was an accrual for bonuses. About 130 million of that difference was in -- because of bigger bonuses in the first half release in this year paid provisions stored up at the end of the year.

So the 130 difference is purely an incentive accrual, a large incentive accrual. The other difference, about 200 million, is simply because of the bigger position in December 2010 versus December 2009.

The way we look at the situation is on the average net debt because that really is measuring your working capital on a daily basis. I think what has been pleasing is actually we have had a really stellar first half situation.

If you looked at our cash flow -- inflows, outflows, actually in the first six months we were neutral but the average net debt is down GBP500 million. So that is good.

Is it going to be easy to continue this level of improvement? It's going to be challenging because as you say, the terms are not getting easier.

But actually in terms of the flavor is clients -- it was more of a 12 to 15 months ago issue. It's still around but it's not nearly as intense as it was post Lehman -- the situation when everyone was looking at effectiveness and liquidity on balance sheets. So I think it's manageable but I think I would take a lot of comfort from our average net debt position as opposed to the point to point which as I say is expandable but with some difficulty.

I would be not as nice as Paul in the answer. I would say actually that the net debt position has improved significantly and our management of working capital and cash flow has been very strong in the first half of the year. It's GBP500 million average net debt. And look at the cash flow figures in the first half. I mean basically even steven.

The other point is on terms. We have taken a very rigid position on extension.

We believe we are not a bank. And when we are asked to be a bank, we have said no. And this comes down to rational competitors as well, if you have competitors out there that are prepared to do that.

I remember Aegis had a bad debt in Spain because they extended credit to somebody for a year --

Two years.

Two years. What do you do if somebody is prepared to do that?

So we've taken a view and it's very difficult because our operating companies have budgets to make, they have incentives they want to earn etc. and it's very difficult. But we have taken actually quite a tough position on it.

But it sometimes -- people in our own Company say why are you doing that? But I would say I agree with Paul that the pressure is less than it has been.

Do you think you have lost any material business because of that policy at all?

Whether it's business is worth having is another question because if you get asked to do that, clearly procurement and finance are becoming so important that you question the point of it.

We are not in the banking -- and it destroys shareholder value because our cost of capital is in most cases higher than other people's. So why should we be the financing institution? But you know Paul is right. It was a function of the illiquidity post Lehman but it has got better.

Thank you.

Okay, alright. Anything else, we are all here. Thank you.