WPP PLC (WPP) 2015 Q4 法說會逐字稿

Good afternoon, everybody. I'm joined by Paul Richardson, our Group Financial Director; and Adam Smith, the wonderfully named Adam Smith who's GroupM's forecasting guru amongst many other things, and he'll give us his views on what's going to happen, what happened last year in the advertising and marketing services market, what will happen next year.

So Paul will kick off analysis of the results. Then, Adam will talk about ad spends around the world; and then I'll come back and talk a little bit about our strategy and priorities.

So, Paul.

Thanks, Martin. So it's quite a lengthy presentation. I've got about 40 slides on the financial section which I'm going to rattle through as fast as I can.

So the results for 2015. This is our 30th anniversary and it was another record year despite second-half currency headwinds. Billings were GBP47.6 billion, up 4.9% in constant currency and up 4% on a like-for-like basis.

Revenue growth of 7.5% in constant currency was reduced to 6.1% on a reportable basis by FX being negative by 1.4%. And on a like-for-like basis, revenues were up 5.3%.

Net sales growth was 5.8% in constant currencies, reduced to 4.6% reportable by FX being negative by 1.2%, and like-for-like net sales were up 3.3%.

The headline PBIT, or profits before interest and tax of GBP1,774 million, were up 8.7% on a constant-currency basis. This was reduced to 5.6% on a reportable basis by currency being negative by 3.1%.

Reported net sales margin of 16.9% was up 0.2 margin points on a reported basis, but up 0.4 margin points on a constant-currency or pre-currency basis, ahead of our full-year margin target of 0.3 margin points pre currency.

Headline diluted earnings per share was up 10.2% to 93.6p, or up 13.3% on a constant-currency basis.

Dividends per share of 44.7p was up 17% in the full year, a payout ratio achieved of 47.7% versus 45% last year.

Overall, we were number one in net new business league tables for the fourth year in a row and the biggest winner in the recent media tsunami reviews.

The increase in value of around GBP0.5 billion in non-controlled investments were through investments in technology and content primarily.

The return on equity improves further from 15% last year to 16.3% this year.

So how did we perform versus our targets? Our target for like-for-like net sales growth this year was 3% and above, and we achieved 3.3%. Our target for net sales margin improvement on a pre-currency basis was 0.3 margin points, and we achieved 0.4 margin points.

In terms of earnings per share goal or target of between 10% and 15%, we achieved a growth of 10.2% on a reported basis and a growth of 13.3% on a constant-currency basis. And this was strong performance against targets despite strong second-half currency headwinds of around 2%.

So in terms of the highlights for the year, the results at a glance.

Revenues of GBP12.2 billion on a constant-currency basis, up 7.5%; net sales of GBP10.5 billion, up 5.8% on a constant-currency basis.

Again, margins improvement to 16.9% of either 0.2% on a reported basis or 0.4% on a constant-currency basis.

Profits before interest and tax of GBP1,774 million, up 8.7% on a constant-currency basis; and headline EBITDA for the first time going over the GBP2 billion threshold at GBP2,002 million.

Diluted earnings per share, as I mentioned, was up 13.3% on a constant-currency basis to 93.6p; and the dividends per share, again on a constant and reported basis, were up 17% at 44.69p.

Average net debt did increase as the year progressed due to the cash outflow being greater than the cash generation, and our average net debt to EBITDA ratio has moved up from the low end of the range of 1.6 times to mid range at 1.8 times.

Average headcount was down almost 2% this year, partly through the transfer to IBM of some IT staff midway through the year, and results in headcount of around 125,000 personnel in the Group on average.

And finally, in terms of market value, our enterprise value to EBITDA is trading at a similar level as it was to last year at 11.8 times compared to 11.9 times last year.

So in terms of the buildup of the revenues from GBP11.5 billion last year, growing organically at 5.3%, adding 2.2% from acquisitions of revenues, and then foreign exchange being minus 1.4%, results in a 6.1% gain on revenues to GBP12.2 billion.

In a similar way on net sales, moving from GBP10.1 billion, organic growth of 3.3%, acquisitions adding 2.5%, and foreign exchange being minus 1.2%, resulting in a 4.6% growth, or GBP10.5 billion of net sales.

Foreign exchange has been challenging for the Group for the last two years. As you see there, on full-year 2014, foreign exchange on either revenues or net sales was down 6%. We started off the year expecting a tailwind where foreign exchange was positive basically about 1%, but as the year progressed, foreign exchange has gone against us, and so in the final quarter, foreign exchange was around 2% to 3% negative, and on the full year has ended up being negative 1.4% or 1.2%.

If we were to run the current exchange rates through our budget for 2016, we are forecasting at today's rates around a plus 3% from foreign exchange. But as you've seen last year where we expected a tailwind at the beginning of the year, it has changed as the year's progressed.

So if the current exchange rates remain, we are expecting a plus 3% of revenues and profits coming through from foreign exchange.

Turning now to the headline income statement, again, many of the figures I have gone through already, so I won't draw through too many of them. Just to note really on the constant-currency side, double-digit growth of profits before tax; and then [the same] likewise in profits after tax, around 12% higher at GBP1.3 billion.

Tax rate down slightly compared to last year at 19% compared to 20% last year, the result of certain settlements we've made in the USA and Western Europe.

And finally, in terms of overall performance on a constant-currency basis, as I've mentioned before, EPS up 13.3%, and on a reported basis at 10.2%.

I should just mention really over the last three years, margins have improved overall, 0.8% on a reported basis and 1.2% on a constant-currency basis. So in each of the last three years on average, we've improved margins by 0.4% on a constant-currency basis.

Turning now to the results on the statutory P&L, there are two additional items in here. There's a net exceptional gain of GBP82 million which I am going to cover off separately shortly. And secondly, there's net finance costs which are greater than the headline costs of GBP186 million, which is quite a swing from last year's net finance costs of GBP117 million.

This related to the revaluation of certain financial instruments. One of those was earn-outs which are performing better than we had originally thought and forecast, and has resulted in the financial charge of around GBP35 million to the P&L. And secondly, we did have some swaps last year which were in the money which have not repeated in 2015.

But otherwise, the figures are very consistent with the headline earnings statement, and overall, the reported earnings per share of 88.4p was up 9.8%.

So in terms of the net exceptional gain of GBP82 million, you saw here, and you saw in the first half actually, a number of these items already in our numbers.

So in the first half, we reported the IBOPE, remeasurement gain of GBP132 million. We had already reported the gain we made on the disposal of certain Kantar investment management assets of GBP44 million to comScore, and we had already reported the disposal of e-Rewards resulting in a GBP30 million gain in the first half.

In the second half, there's an additional gain on the acquisition by Providence Equity Partners of Chime and other items, resulting in exceptional gains of around GBP217 million.

In terms of the overall restructuring charge, one item here which was well forecast was the IT costs in what we call Project GINA. This is the second year of circa GBP40 million of charges, as we saw last year. I think it was GBP39 million, to be exact.

We laid out the landscape where we thought in 2014 there would be a charge of GBP40 million; in 2015, approximately the same, as you see here. And then in 2016 and 2017, we are expecting the benefit of GBP30 million in 2016 and GBP50 million in 2017 to come through.

In terms of severances, this is principally the Kantar Media investment management businesses in terms of what we are shaping the consumer insight business going forward. So it's a new structural approach in how we're going to market to our clients in terms of the consumer insight business, and basically, a combination of the Millward Brown, TNS, and Lightspeed, and Kantar operations businesses around the globe, with a real desire and expectation to improve revenues, and at the same time, the combination of our HR, finance and IT functions for Kantar across the Group.

So that's the principal region in which this severance or restructuring charge is taken; and obviously, again, it is focused on Europe simply because of the cost in that particular marketplace of taking these types of charges.

In terms of how our results would have compared if we had been reporting other currencies, you can see across the top here in terms of reported sterling our revenues were up 6%, and headline PBIT was up 6%, and EPS was up 10%.

If we were a dollar-reporting company, our EPS growth would not have been 10% but would have been just plus 3%. If we were a euro-reporting company, our EPS growth would have been 22%. And if we were a yen-reporting company, our EPS growth would have been 15%. So quite a difference, as you see here, in terms of the EPS performance on the same assets depending on the currency reporting.

So moving now on to revenue and net sales by sector, we've given you both. We're the only group to do so, as you know. Nobody else breaks out the difference between revenues and net sales.

I won't dwell on the revenue numbers but to say that overall, it's been a good year in revenues with up 5.3% on a like-for-like basis. The first-half growth was 4.9%, and the second-half growth was 5.8%.

Turning now to the advertising and media investment management business, which is 45% of the Group, in the same way we had like-for-like revenue growth of 8.4% for the year, we had like-for-like net sales growth of 3.8%. That improved as the year went on. So in terms of the first half, advertising and media investment and management growth was 3.2%, and in the second half accelerating to 4.3%.

In the data investment management business, which is 17% of the Group, our results on a net sales basis were basically flat at 0.3%, but they were an improvement from the first-half growth in net sales of 0.1% to the second-half growth in net sales of 0.5%.

In public relations and public affairs, which is 9% of the Group, we saw net sales growth of 3.4% for the year, accelerating strongly from the 1.6% growth in the first half to 5.1% growth in net sales in public relations and public affairs in the second half.

In branding identity, healthcare and specialist communications, which is 29% of the Group, we saw net sales growth overall of 4.2% for the year, again accelerating from the 2.4% in the first half to the 5.8% in the second half. Again, that was assisted by very strong direct and digital business growth in the second half, basically globally.

Now moving to the same in terms of sales by region.

So North America. And all these regions do show a considerable difference between the revenue growth on a like-for-like basis and the net sales growth, as you can see here. So in North America with revenue growth of 7.1%, had net sales growth of 4.1%.

Again, concentrating on the net sales performance for the year, in the first half in North America, the net sales growth was 2.8%. In the second half, the growth was 5.3%. There was good strength coming through from both the advertising and media business, the public relations; the direct digital operations as well.

In terms of United Kingdom, it's around 14% of our business, we saw a steady growth in the year of around 2.9% evenly split between 2.8% in the first half and 2.9% in the second half.

In Western Continental Europe, around 21% of our business today, we saw net sales growth overall of 2.5%, picking up from the 1.2% growth in half 1 to 3.7% growth in half 2. And we saw good growth coming from Germany, Spain and Italy, which we will detail later, but all of those markets were between 4% and 5% growth on a full-year basis.

In Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, around 30% of the Group, we saw net sales growth overall at 3% probably slightly disappointing in our original expectations, having grown at 2.2% for the first half, accelerating to 3.7% in the second half.

Good growth actually coming out of Latin America, which was around 6% compared to Asia which was around 3%; and actually, promising growth coming out of Japan at 4% in Asia. India consistently strong, double-digit growth of 11%; and China in the second half around 2.5%.

In Latin America, we did, I think, well relative to our peers, growing in the second half in Brazil by 3%, in Mexico by 10%;1 in Argentina very strongly as well.

So one way to look at our business is on a trend basis half year on half year or quarter on quarter. And because of the variations year on year, you can see here on a net sales basis the first half of 2014 was strong at 4.1%, the second half a little bit weaker at 2.5%. And then when we lap a year later a strong first half, the first half of 2015 was 2.3% but second half, which we just reported on, was 4.1%.

But if you add the two half years together, you get a very consistent pattern of growth on net sales. You can see here around 6% to 6.5% basically over the last three sets of half-year results.

Doing the same on revenues, you can see we have accelerated up from around 11% to 12% to 13% on a consistent basis on revenues over the last two years. And when you compare that to the revenues of our competition, you can see we're strong at around 13%. Omnicom is hovering around 10%/11%, Publicis around the 3% to 4% trend rate, and IPG around 11% to 12% as well.

So I think it's a good indication of the momentum of the various holding companies in terms of their midterm revenue growth rates.

Turning now to the profits by sector, and these have been affected quite differently and quite dramatically in some cases by foreign exchange. So I will take you a little bit through this referring to both the reported margin, and on occasions the constant-currency margin.

So looking at the reported numbers for advertising and media investment management, we saw profits of GBP856 million, up 2.5% compared to a year ago; margin declining slightly from 18.6% to 18.4%, down 0.2%. But if I was to look at this discipline on a constant-currency basis over the last two years, we'd have reported profits up 6% and actually a margin increase of 0.2%.

Likewise, in the data investment management business, we're showing on a reported basis profits up 5% to GBP286 million, and a margin improvement of 0.6% from 15.6% to 16.2%. But again, because of its global nature of its operations, on a constant-currency basis, the data investment management business would have grown profits by 12% and had an over 1% margin improvement in its margins.

Less affected by the various effects of currency on the businesses were the public relations and public affairs business, which had a good year, growing profits at 11% to GBP155 million, and growing margins by almost 1% on a reported basis to 16.7%, and actually at 1% on a constant-currency basis as well.

In terms of the branding and identity, healthcare and specialist businesses, profits were up 10% to GBP477 million, and margins were up 0.3% on both a reported and a constant-currency basis to around 15%.

Overall then, the Group saw profits grow on a reported basis by 5.5%, and constant currency profits by 8.7%. In fact, currency reduced revenues by GBP130 million and profits by GBP50 million, GBP40 million of that GBP50 million resulting in the final-quarter changes in currencies.

If I look at the same by region, a similar story is painted. So in North America, very strong performance on a reported basis; profits up 17% to GBP728 million, and margin improvement also strong at 0.9 margin points to 18.8%.

However, the pound was 7% weaker against the dollar, and so on a constant-currency basis, North American profits would have been up 11%, still very good, and the margins would have been up 1.1%.

The UK would be unaffected by the foreign exchange rates, so the performance there of reported growth of 10% in profits and a 0.4% margin improvement was consistent either in sterling or other currencies.

In terms of Western Continental Europe most affected by the currency impact where the pound was 11% stronger overall, we see flat reported profits of GBP277 million but a margin improvement of 0.8%. On a constant-currency basis, the Western Continental European markets showed profit improvement of 10% and a margin improvement of 1.4%.

In terms of the Asia Pacific, Latin America, Africa and Middle Eastern markets, we saw revenues on a reported basis decline by 7% to GBP526 million, and a margin decline of 1.5% to 16.8%.

On a constant-currency basis, profits actually would have been up by 2%, but margins would have still been down about 1% due to operating challenges in Australia, the Middle East and Central and Eastern Europe.

So overall, the pattern, as you saw, is quite mixed in terms of what the reported numbers show and what the underlying constant-currency businesses have performed in these regions.

Turning now more to the fourth quarter and the geographic mix of revenues, you can see there good fourth quarter pretty much across the board for the businesses. Strong growth basically in North America, almost 10%, Latin America very strong at almost 8%, and good growth in Western Continental Europe as well.

You can see there on the full-year basis, and in fact both the faster-growth markets and mature markets in quarter 4 were both growing over 6%. On a full-year basis, mature markets have grown slightly faster in revenues at 5.8%, versus -- sorry. The faster-growth markets have grown at 4.2% versus the mature market growth of 5.8%. So overall, 5.3% growth in revenues.

Now turning to do the same on a net sales basis, we have good performance there again in North America; full-year growth in net sales 4.1%, fourth quarter growth of 6.9%. Weakness you saw in Continental -- sorry, in Central and Eastern Europe on a full-year basis, and in Asia and ANZ in particular at 0.3%. Otherwise, some strong growth coming through in Continental Europe and Latin America you see.

So overall, mature markets at 3.4% and fast-growth markets at 3% on the full-year basis.

In terms of the major six countries which account for 66% of our revenues and net sales, growth very much in line with the average for the Group.

As you can see, good performances coming out of the USA for a third consecutive year; a very solid performance in the UK. China has been challenging overall, so around 2% growth this year; but Germany remains good and solid, in our case growing 4% on net sales and 8% on revenues.

Again, challenging markets for ANZ and France, our number 5 and number 6 territories this year.

Turning now to the BRICs markets, which represent around 12% of revenues, on a like-for-like basis our net sales growing at just over 2% and on revenues just under 4%. So you saw there China, Brazil and Russia all fairly challenged throughout the year, but the lone star of India performing exceptionally well, 10.5% on net sales and nearly 16% (sic - see slide 23, "16.9%") on revenues.

So again, growth by country of our top 25 markets, no great surprises there. Argentina very strong, partly driven by inflation; India, Indonesia, Turkey very good this year. And then, the raft of other countries that we discussed, in the main the major markets, although some of the Western Continental European markets you saw, and I mentioned Italy, Spain and Germany, all doing relatively well versus where they were 12/24 months ago.

In terms of categories, this is really driven by business wins, and so the win of Comcast and NBC. Further additional work this year has pushed that category very strong. It's quite a small category overall. Again, on the drinks business, a couple of wins throughout the year and last year have accelerated the performance in that particular category. But otherwise, they're grouped around one particular -- the main bucket.

In terms of trade estimates of major new business wins, we've got really four pages of chronology of all the wins and losses. Those that are shaded have come through in the final quarter. Again, very satisfying to see the retention of the media business for Unilever, the addition of the planning business for Unilever on a worldwide basis, the additional new media win for L'Oreal, and so on and so forth; for GSK and Consumer Healthcare also.

Some big major wins coming here on the media business late in the year. I won't dwell on any one particular account in detail, but just to go through and show you the names.

So you see there's a range of wins of all sizes coming through for the last 12 months; likewise, a number of losses. Some disappointments, obviously. Only one of the media tsunami accounts obviously we didn't retain.

And then overall, interestingly, a summary has been done by RECMA of the major wins of 2015; 44 of the largest pitches examined, and then brokered down into new clients won and business retained. And you can see on the retained business, obviously, we've done exceptionally well -- obviously, the principal part of that was the Unilever retention -- where others have done in the main well on retentions and we have done the best in terms of new business won.

So overall, we've had a very successful media tsunami in terms of both retentions and business won.

In terms of our own estimates of business at GBP8.6 billion for the year actually it was slightly down on last year's GBP9.3 billion. We also had in 2014 a very strong media business, picking up global accounts of Vodafone, Mars and [AB Inbev] in particular. So we've had two very strong successive year media success over 2014 and 2015.

In the year to date, another -- a good win coming through extending our business for Sony. So winning the PlayStation account globally, extending the mobile business we had, and picking up additional regions on the electronics business.

So turning now to cash flow. As you can see on slide 33, profits generated of GBP1.6 billion, and net cash after tax and interest also GBP1.6 billion generated. So 100% conversion, in a similar pattern to last year.

And now turning to uses of cash, really, the one difference being the amount spent on acquisitions throughout the year of close to GBP700 million compared to just under GBP500 million last year, which resulted in a GBP564 million outflow of cash compared to GBP300 million last year.

So that did convert into additional net debt of around GBP3.5 billion up from GBP3 billion one year ago, and slightly higher leverage at 1.8 times compared to 1.6 times one year ago, but continuing very strong interest cover at 11.7 times.

And in terms of leverage, we're just around the midpoint of our targeted range of 1.5 times to 2 times, at 1.8 times to be exact, up from 1.6 times. There's still plenty of headroom within the range.

And in terms of our uses of free cash and our targets in this area, so our continuing medium-term goal for acquisitions spend per annum is around GBP300 million to GBP400 million. Obviously, we overspent last year. We are expecting it to be closer to the GBP300 million to GBP400 million in 2016.

The share buybacks, we have consistently bought shares at around the top of the range at around 3%. That still remains the range of 2% to 3% share buybacks per annum. Dividend growth is really a function of the payout ratio as we've -- [moving it] up from the 45% payout ratio achieving a 47.7% payout ratio leads to a 17% dividend increase. And headroom, our facility still remains strong at just around GBP3.6 billion.

So in terms of earnings per share, since 2008, you can see a strong progression. And if you were to chart the growth from 2010 over the last five years, on a compound annual growth rate we have grown earnings by 11% per annum.

And finally from me, on tax just a few words to note. The headline tax rate at 19% is slightly lower than last year. Again, as I mentioned before, a number of tax settlements were concluded in the USA and Western Continental Europe.

The reported tax rate of 16.6% is considerably lower than the headline rate as a result of most of the disposable gains and remeasurement gains not being taxable. The cash taxes paid are of a very similar amount of around GBP300 million. And the estimated employer and employee social taxes paid during 2015 at around GBP1.5 billion for the Group.

And with that, I'd like to hand over to Adam.

Hello. Twice a year GroupM carries out a sweep of its network and we ask what the shortish-term, roughly 18-months outlook is for advertising revenue. So we're looking at it from the revenue end of the telescope rather than the net sales. The last sweep was in November and we published it in December, and these are headlines from that survey.

So in 2015, which remains a forecast now until about April when we know actuals, we think advertising volume, dollar volume grew by 3.4%. At the time when we made that forecast, that was about 0.5 point lower than we'd expected to be six months before.

So we're looking at a trend which is still shadowing just a little bit behind nominal global GDP. There was a little bit of weakness coming through from Russia obviously in this number, and from Brazil, but we think we've captured most of that for the moment.

Looking to where we think 2016 is going, we have a slight acceleration to 4.5% in advertising dollar volume. The principal component within that would be China where we see a small acceleration to about 9% revenue growth on the back of government stimulation to the consumer economy which took effect from September and is intended to run through 2016.

The USA, we have moderate but believable growth, I think, of 2.7%, which incorporates the quadrennial effect and more general support from good employment levels and the effect on consumer spending power of deflation in staple consumer goods.

The UK is in its fifth straight year of advertising, beating GDP it would seem. We've got about a 7% growth in advertising volumes expected here this year.

One country I might be looking at with particular interest this time around is Japan where we have a 3% growth in for this year which may be coming under a little bit of pressure, but we'll see.

Generally, of course, advertisers remain constrained by a lack of pricing power and a continual focus on performance and delivery by the likes of us, so it's not getting any easier.

The general market environment. This shows how advertising volume growth relates to GDP growth. Again, our bottom-up forecast is short term, 18 months. After that, we have a model which takes over and produces a little bit of an outlying hump here in 2017 which is really the consequence of it's looking at a longer data series of 10 or 15 years during which time advertising has become somewhat less volatile.

I think the message from here is that there's no reason to think that the current advertising trend is going to break out one way or the other from its present GDP tracking trend.

Looking at what the advertising market has done in real terms since the peak in 2007, we think that in 2015 the market finally recovered that earlier peak, and so the prospect for 2016 is for what would be a new record level of advertising investment of $520 billion.

However, not all regions have performed equally. The developed markets have collectively -- they're indexing at 90 relative to their previous peak in 2007, within which the eurozone is somewhat lower, I think around 80, and the eurozone periphery which was particularly badly affected still indexing at around60 relative to its old peak.

In the faster-growing markets cumulatively, they've never gone backwards in real terms in advertising, although the pre-Lehman real terms trend of about 8% advertising growth annually seems to have moderated now to a stable 4%, something of that order.

The principal contributors to advertising growth this year, we envisage about $22 billion net new advertising investment. 85% of that comes from these 10 markets, a fairly normal pattern. If anything, this is slightly less acute because we have Russia dropping out of the picture and the eurozone, a longish tail of slightly better growth in the eurozone or Continental Europe. The chief contributor remains China with $7 billion net of this $22 billion; and the USA, $5 billion.

Brazil was making a notable appearance in this despite the pressures on the market. We still have it growing at 7% nominal this year relative to 5% GDP growth. Advertising is likely to come down to match GDP in the coming years, but we have the Olympics stimulus this year in Brazil, of course.

One of the main features of the market as we see it is that the growth is becoming a little less dependent on the faster-growth markets in total. These typically would have contributed in the first five years of this recovery about 70% of total ad growth; in fact, peaking at 75% in 2013.

That is balancing slightly now towards the developed markets. We're seeing over the 2015/2016 period the faster-growth markets contributing 60% of the growth and the developed markets 40%.

Within the faster-growth markets, the BRIC contribution used to be about one-half of that. Now, it's about 40% of that.

The other principal shift is the dependence on digital for all of our growth at the moment. In fact, net growth in the earlier part of this recovery, it would be supplying 60%/70% of the growth. But we've seen the reversals of traditional media investment of -- obviously, and the countervailing growth in digital, 14% this year we have it and rising to 31% of budgets means that it's contributing, in fact, 105% of net growth in the 2015/2016 period.

What happened last year was a first, which was that traditional media investment in the faster-growth world was negative for the first time. Print has been -- newspapers and magazines have been retreating even in the new world for two or three years now. It wasn't a surprise.

What was unusual was seeing TV in China. The migration of advertising investment from traditional TV to online TV has become very heavy, and this is what tipped the traditional media in the new world into negative last year.

However, the reason for China's TV exodus is heavy regulation restricting what advertisers can do and, indeed, limiting the popularity of some of the programs. And we've learnt this week that the government now wishes to extend these forms of censorship effectively into online TV and to prohibit western investment in productions for local consumption, so there may be some further rebalancing in the video market in China.

So that is the end of the summary and this is where the forecast left us in December.

Thank you very much.

Thank you, Adam, as always, for the thoughts on the coming year.

So we have four core strategic priorities, as you all well know, but before I just go into them, let me just reiterate what we see going on in the world.

A continuation of the shift, despite the faster-growth markets. That's why we put them in inverted commas, the phrase faster growth, growing less fast, in our case at least, and I think in most other cases than the mature markets.

There's still a significant shift from America and New York as the center of the world to the East, meaning China and India; to the South, meaning Latin America. And we've seen an amazing change, for example, in the atmosphere surrounding Argentina with the elevation of President Macri, and we saw a similar sort of a thing in India. But obviously, Latin America is challenged by what's going on in Brazil today and yesterday and the announcement yesterday of a 4%, almost 4% decline in GDP and the trials and tribulations around Petrobras. But movement to the South generally, and a movement to the South East, meaning Africa and the Middle East.

Whilst there continues to be a significant overcapacity in most industries, if not all, the shortage paradoxically is in human capital. Despite some of the trends in employment and the impact of the Internet on employment, what we are seeing is a continuous talent war in all industries, not just our own, where the issue really is how do you find, incentivize, motivate human capital in the long term.

The rise and rise on the web is also critically important. What we're seeing all the time, the disruption in the web and the disintermediation of the web continues.

Growth of retail power. Clearly, in the last 20 years or so, the big retailers Walmart, Carrefour, Tesco, have had the locking nut on retail and retail distribution, and that is being dis-intermediated or disrupted by the new e-retailers, whether it be an Amazon, an Alibaba, a Flipkart, or whatever, that what we're seeing is now a battle, or a battle for control between the e-retailers and the established retailers and the manufacturers.

So an interesting power balance, but manufacturers do -- or change in the power balance -- but manufacturers now do have the opportunity to appeal directly to consumers, as was the case 150 years ago when advertising first started.

Internal communications continues to be the most critical issue, I think, for Chairmen and CEOs communicating internally, strategic and structural change.

As far as structures are concerned, we see global, more global structures and more local structures. Regional structures are tending to be dismantled or diminished as clients look for cost savings. And as technology improves communication and spans of control can be broadened and increased to take care of that.

Relative power of finance procurement, Adam touched on it in his analysis and I'll come back to it, but clearly, the balance of power with inside companies given low growth, given low inflation, lack of pricing power, is moving increasingly towards finance and procurement, and that's a concern when we are very focused on top-line growth and the importance of top-line growth.

Growth of government, governments continue to have an influence. We saw, for example, today, Facebook reversing its policy in relation to structure, in relation to corporation tax here in the UK, and that's as a result of government intervention to some extent in taxation of multinationals. And government will continue to be a major force as an innovator, a stimulator of innovation, investor and regulator.

Acceptance of social responsibility now totally accepted. CSR purpose, probably a better description of it, is at the center of all strategic plans that we see, and very important to growth of our Company and growth of our revenues.

Industry consolidation continues at the client level. We have seen some spectacular examples of that in the last year or so at the media owner level, both new and old media, traditional media; and last but not least, our own industry.

And looking at slide 51, and we always compare GDP growth to our revenue growth and forecasts from pundits such as Goldman Sachs. What's interesting about comparing the revenue growth of WPP -- and we show you here revenue and net sales, so we're showing you both figures -- is that we do seem to have a little bit of an upside breakout in the last couple of quarters, and that mirrors the growth that we're seeing at the revenue level and the comparison that Paul showed you for the last two years where we are getting significant traction on the top line on a consistent basis.

And you can see that we've started to outdistance the growth in GDP that we've seen both at the nominal and real levels. We don't have the Business Council forecast for 2016 yet, but the Business Council tends to be even more conservative than Goldman. And what happens over the year is that the Goldman and IMF forecasts tend to come down. What's interesting about 2016 is both the IMF and other pundits have started off with a more conservative forecast.

But what's interesting about this is we do seem to be performing better now than GDP generally. And just to show you what the WPP GDP looks like against the worldwide GDP, you can see on slide 52 that we show that we're over-indexed on the US. We're about right on Europe. We're under indexed on China despite our dominant position there; under-indexed on Japan as we're number 3 behind Dentsu and Hakuhodo in that market. Over-indexed in the UK because that's where we started.

The other markets are roughly even-steven, but you can see here that we have a skew towards the more mature markets, and the difference between the worldwide GDP and WPP's GDP has lessened as we've seen the greater growth of the US and the UK.

To look at the overall environment in a little bit more detail, global GDP growth projections are quite interesting at the moment. It's the first time that I can remember that nominal is maybe even less than real. And we're looking at about 3%/3.5% as the projections. The reason that nominal is even lower or the same is because, firstly, inflation is nonexistent, or virtually nonexistent -- in fact people are worried about deflation; and the second thing, of course, is that these forecasts are based in dollars and the strength of the dollar has made it so.

But this year, 2016, we should see greater growth, as Adam has pointed out, than GDP, largely because of these maxi-quadrennial events, the Olympics, the Rio Olympics, the European Football Championships and the US presidential election.

Now we're also seeing a continuing recovery in the US, a bit patchier than I think people understand, but no impact really of the oil price decrease. That's effectively a tax cut and we haven't seen a significant impact, although I think Adam pointed out this morning and again this afternoon that that oil price increase has remain -- decrease has remained in place, and maybe we'll see an impact on consumption.

But in the US, in the UK, and to some extent the eurozone, we see an improvement. We saw that in our own numbers. But confidence has been held back by disruption from potential Brexits or Grexits. Obviously, the Grexit is on a lower scale but the Brexit has already, I think, had an impact, no so much on ad spending but on capital investment. And it would be cloud cuckoo land to believe that people making significant decisions at this time of year would not wait until the result of the referendum in June 23 as to whether they went ahead or not.

Just talking about it from our point of view, I'm not saying that we would move our head office to Western Continental Europe if the electorate decided to pull out of the EU, but given the fact that the four key markets in Western Europe -- Germany, France, Italy and Spain are all in our top 10; Germany is number 4, France is number 7 or 6, and Spain and Italy are number 9 or number 10 -- given their importance and the fact that Europe is one-third of our business, Western Europe, US is one-third, North America is one-third, and the remaining one-third is Africa, Asia, Latin America, Africa and the Middle East and Central and Eastern Europe, clearly, those four markets in Central -- in Western Continental Europe are really important to us.

And I think we will have to up our focus on those markets if Britain was to come out and increase our focus and increase our resources in those markets, because we really do not wish to be excluded or diminished in any way in them.

Deficit management's still key for the US, obviously. It's one of the issues in the election; key for the EU and for the UK. And as economic confidence wobbles or wanes, the deficit management issue becomes really important. In the UK it's important because, as George Osborne plans for 2020, if we vote to stay in, of course, that would upset the apple cart if we came out, but as he plans for 2020, we're seeing fiscal tightening in the UK in preparation, I think, for fiscal expansion maybe later on in the electoral cycle.

There's concerns over the migration crises, over Russia and the Ukraine, still not sorted out. The Middle East, obviously, and Daesh, and the impact of low price on -- not just on consumption but on producing nations and sovereign wealth funds that tended to pull in their investment horns, and banks obviously are under pressure liquidity-wise and energy loan-wise.

Traditional media continues to be under pressure as new media continues to grow, and there are new entrants experimenting in the agency space as well. The new entrants actually in over-the-top. We've seen AT&T this week announce over-the-top services, and we've seen Verizon as well, so there are some new entrants that are challenging king cable, as others call it.

Geographically, we're into Cuba already, and Iran offers opportunities, although not easy, particularly given sanctions still stay in place, particularly in the banking area. But North Africa also offer opportunities, for example, in Egypt. And I would call out also Argentina, as I mentioned, with the arrival of President Macri.

On the micro level, low growth, as I've said, low inflation, low pricing power, gives a focus on costs. Also, we have disruptors at one end of the spectrum, zero-based budgeters at the other, and activists who may well be focused on the long term in their minds, but the image is, or the perception is they're focused on the short term.

Clients are very focused on opportunities in fast-growth markets and on following consumers into new media. And there's the growing importance of horizontality which we're getting our people to work more effectively together. Shopper marketing becoming more and more important to try and diminish discounts, or discounting at the retail level, and to get greater engagement of consumers in store.

And the application of technology, data and content to our business, which I think has been a critical factor in seeing us increase our market share, particularly in North America, in media and investment management. There's no doubt that that triple area, that trifecta of technology, data and content, adds to any advantage we have in talent and in pricing.

There's also pressure from continuous improvement, or needs for continuous improvement. Efficiency and effectiveness are still key with clients. And there's pressure, continued pressure on pricing and payment terms as a result of what I've said.

Pressure for continuous improvement and pressure from new entrants in the ad tech area and marketing space. We've seen IBM acquire three digital agencies in a week. We've seen Deloittes acquire digital agencies, Accenture. So there are consulting companies and service companies starting to look at the digital agency space with increased intensity.

And finally, the media tsunami has receded, I think, to some extent, although there will continue to be, there are and there will continue to be reviews, but it is leaving us with increased market share.

And we've just compared the market values, the revenues, the EBITDAs and the market cap to EBITDAs and the enterprise value of the EBITDAs of our direct competitors. You can see Nielsen is now the third largest company by market cap, if not by revenues. And you can see the valuations are pretty much in line, whether you look at market cap to EBITDA or enterprise value to EBITDA, with the exceptions maybe of the smaller research companies, GfK and Ipsos, at the other end of the spectrum.

Our four strategic priorities remain the same, although we have altered the priorities. Horizontality, ensuring our people work together for the benefit of clients has become the number 1 priority.

Fast-growth markets remains important as number 2 with the proportion being around 30%. Obviously, that's been affected by the depreciation/devaluation of fast-growth market currencies, but it's around 30%. And again, our objective is to have it at least 40% to 45% upwards to one-half of our business in due course.

New media already close to 40%. We'll get closer to 50% over the next five years. And data investment management and the quantitative disciplines are already one-half of what we do, buttressed by what we're doing in technology, data and content.

As far as horizontality is concerned, we now have 45 clients where we have client leaders, with 38,000, almost 40,000 people working on those accounts, and they account for over a third of our revenues.

Our structure remains heavily branded, and I think this is a big issue that some others might find very difficult to manage. The process of horizontality has to be addressed in our view gradually. We've been doing it for about six/seven/eight years. We have 194,000 people in 112 countries.

And I included here a diagram of what we call the horizontality matrix for us which is important, I think, to understand. The actual organization is there 11 verticals that you have there: the four major agency brands, GroupM in media, Kantar in data, H+ K Strategies, our branding to design group, our healthcare group, GroupH, WPP Digital and WPP Specialist Communications. Those are the verticals.

The horizontals, and you will see there are dotted lines around them, are the client leaders, the 45 client leaders that I referred to. And then the country and regional managers, we have 17 of them covering 51 countries. And you can see that increasingly over time, those client leaders and country and regional managers will exert greater and greater influence at a global level and at a local country level, mirroring what we see happening with clients.

But the organization, actually, is not that complex, but what we do is maintain the vertical brands. We don't cram them together, push them together, slam them together, and we basically respect the individuality of those brands for our own people. Clients, on the other hand, are looking increasingly for us to make available the best people.

So important to understand in the context of the 45 account teams we have that you can see here on slide 59, and the 17 country and regional managers covering 51 of the 112 countries in which we operate.

And horizontality covers people, it covers clients, it covers acquisitions. It's ensuring our people work together to deliver the best results. They deliver specialist skills. They focus on client needs. And some recent examples of wins through teams: Emirates, Legal & General, Tyson Foods, US Navy, Volvo, and Yildiz Holdings, a major Turkish-based company.

We have -- those brands, as I said, are extremely important, certainly for our people. There are nine of them with over $1 billion: three in media; three in creative in advertising, two in data, and one in digital.

And I referred earlier to the importance of technology, data and content as differentiators, increasingly important in juxtaposition to talent and pricing. In technology, data and content, it's our partnership with AppNexus through Xaxis, it's our partnership with Rentrak and comScore that's really becoming very important. There's clearly dissatisfaction with the measurement metrics in North America which are dominated by Nielsen, and which now comScore, with a merged comScore, can increasingly address, dealing with the issues of C-plus-3 versus C-plus-7, dealing with the issues of bots, dealing with the issues of measuring out of home, the viewability, this -- and our big streaming language ludicrous position where a three-second view with 50% of the time the sound turned off is regarded as an acceptable level of consumer engagement.

And we're unique in our sector in terms of the depth and scale of our investment in technology. It commenced with the $0.6 billion/$600 million acquisition of 24/7 Real Media in 2007, and has obviously expanded through Xaxis and through many iterations.

Our investment in external content and technology partnerships now valued at $1.7 billion based on market values or funding rounds. And we have a real leadership position in media and data investment management as a result. And just parenthetically, Xaxis on its own would be valued at $2 billion to $4 billion based on comparable market statistics.

Summarizing where we are, new markets today 30% of our business; new media almost 40%; quantitative 50%. The targets are 40% to 45% for new markets, 40% to 45% for new media; and quantitative, as I said, we're there.

In terms of the Brexit, this demonstrates on slide 66 what's happened to -- and the growth over the past few years, and we think we will comfortably reach our objectives in that area. And you can see the growth of those markets here on slide 67 compared with our competition. Obviously, the feathering down in 2014 and 2015, or 2015, is a reflection of what has been happening to currencies.

But if you look at the underlying growth whether it's Greater China, Brazil, India or China, we're seeing compound average growth rates of 15%, 11%, 15% and, indeed, 41% respectively. You see our position in new markets. This is the RECMA data; this is the RECMA ranking. If you include our other businesses beyond media investment management, which is 25% of our revenues, we have leadership positions in every one of those markets.

And if you look at media on its own, worldwide leadership, it's number 2 in the Americas; worldwide leadership in Europe and Asia Pacific. The gap in the Americas has lessened dramatically. We've gained probably about 4 or 5 share points, if not more, and there will be more to come in the US market alone.

In terms of new media, again, we demonstrate here how important new media is and how it's grown to almost 40% of our business, and we think we will comfortably achieve those objectives.

And just to underline the changes that are taking place, we've got here the US cable and broadcast audience data, and it shows that there are significant changes taking place in viewing habits. And that's obviously one of the things that's very important to address through the measurement changes, not only by the way in terms of traditional media, but in terms of new media too.

We are getting good cooperation from several of the new media owners, but others, I think, will have to be prepared to make available data on a more consistent basis so that we can provide an alternative that is meaningful, because there is dissatisfaction with the established media measurement system in North America, both -- well, in all three communities: amongst the clients, amongst the agencies, and amongst the media owners themselves.

And that's reflected, or those changes are reflected in the data that we get from Mary Meeker. We've not had her latest data. This is still the 2014 data, but this clearly shows that print and Internet and mobile are not balanced in terms of time spent, and there are some changes taking place in linear TV in terms of time spent versus ad spending.

But one has to make the point on behalf of the media owners, traditional media owners, that it's not just about time spent, it's about engagement. And there is some data here from Canada and further data from the UK and elsewhere which does clearly demonstrate that consumer engagement in traditional media is much deeper than perhaps people are giving it credit for.

In terms of our digital strategy, we have three broad strands. One is to stimulate our established businesses to move forward the J. Walter Thompson, OgilvyOne, Y&R Advertising [or] Grey.

Secondly, to stimulate our digital businesses, and we have really a number of very substantial ones; Wunderman and OgilvyOne, both around $1 billion in revenues. VML, possible AKQM, Mirum, all in the $250 million/$300 million/$350 million range, and going global at a fairly rapid rate. And what we see is a need to stimulate and accelerate their growth.

And lastly, what we call the cannibalization thrust, which is to develop new business models and invest in data and technology and content, because if you don't [teach your children] somebody else will. And partner at the same time with digital leads such as Google, or Facebook, or Microsoft, or Snapchat, or Twitter; or indeed Tencent and Alibaba too.

And in that vein, the investment in Xaxis has paid off extremely well. Globally now you see it has over 1,100 employees, $1.1 billion of annual sales projected for 2016 -- that's its revenues, clients almost 3,000 and 17% year-on-year growth.

And just to emphasize the point, it's not just about AppNexus and technology, its Globant the very successful Sapient competitor and what we regard as a Sapient killer in terms of competition; Mutual Mobile, ActionX and Medialets in video and mobile.

And last but not least, the acquisition of Essence joined the Group in November, Google's digital media agency, which is expanding rapidly around the world in data. Not just comScore; it's Invidi and Infoscout.

And in content Vice obviously gets the headlines. Big expansion this week at Vice through Canada and Europe. But Imagina and Fullscreen and China Media Capital, and others; Media Rights Capital bought for series 4 of House of Cards this week, Truffle Pig with Snapchat, are all examples of content investments. Our investments actually together, as I said before, are valued at about $1.7 billion.

In data, 50% of our business, and we're focusing more and more on top-line growth as well as profitability. Why? Marketing is becoming more data driven. Clients need simplified, better utilization of data. Digital campaigns are increasingly driven by data. It's not just commercial campaigns; we're seeing a lot of activity in the political arena, not just at the national level and general election, but at the House of Representatives and the Senate levels too. Ability to provide continuous updated data in real time. And we've got a unique combination of real assets, first-party assets, not third-party assets, in research, audience measurement, data and digital media.

And then, of course, the technology partnerships are foundations for us to develop that with our clients.

Looking at digital and fast-growth markets, fast-growth markets, as I said, are about 30% of our revenue; digital about 40%. There's a lap-over of about 9%; it's overall just under 60% between those two areas. And that's the focus, as I will demonstrate, in terms of our acquisition program.

In terms of objectives, they remain improving operating margins, flexibility in the cost base using free cash flow to enhance shareowner value and improve return on capital. Develop the role of the parent company, emphasizing net sales growth more as margins improve, and improving our creative capabilities.

On operating margins, again, another 30 basis points; well, 40 basis points pre currency, 20 basis points post currency. And as Paul mentioned, last three years, despite the fact that we took a down-our-margin objective from 50 basis points to 30 basis points, we've averaged 40 basis points pre currency over the last three years. So good and continued performance in terms of margins.

These margins are going to be increasingly improved by the impact of our operational effectiveness programs. Shared service centers, offshoring, consolidation of IT and infrastructure, and those programs are scheduled to deliver 100 basis points, 1 margin point over the coming years, and they cover finance and IT which are about 10% of our revenues. And those programs will start to deliver significantly in 2016.

Now whilst we don't think that the world is going to recession, as some people do, there may be some countries that [obey] the definition of a recession, i.e., two quarters of negative GDP growth; some countries might. But overall, I don't think, we don't think that will be the case.

But in any event, we are very keen on maintaining flexibility in our cost base, whether it be freelance, consultants, incentive payments. They account for about 8.3%, actually, a historic high for the last five or so years. So tremendous significant variability in our staff costs as a percentage of net sales just in case it -- things do get more difficult on a global basis.

In terms of using free cash flow, you can see here our headline diluted EPS, and showing our dividend payout ratio and our dividend per share. We've now reached 40% -- just over 47.5%, 47.7%. The target was 50% in two years' time. It looks like now we will possibly reach 50% a year ahead of schedule with the dividend being up this year by 17%.

And in terms of free cash flow to enhance shareholder value, in the last two years, we've delivered 6% to -- back to shareholders, 3% in the form of dividends and 3% in buybacks. And a very significant distribution, or redistribution, return of dividend paybacks, dividend payouts and share buybacks over the last 10 years. GBP5.2 billion has been returned to shareholders alone in the last 10 years, so significant progress in that area too.

And as far as acquisitions are concerned, there's a significant pipeline of recently -- reasonably priced small and medium-sized acquisitions. We've already this year made 14 acquisitions in the first two months, and we'll continue to do small to medium size, as Paul indicated. We continue to focus totally on fast-growth markets, on digital and on data, and it helps us accelerate to our targets.

During last year, we actually made small -- 52 small and medium-sized acquisitions, including some investments. And we continue to find good opportunities, particularly amongst the small and medium-sized companies. There's some concerns about Brazil and India and digital pricing in the US, although that's ameliorated slightly, and we have seen over the last two or three years some significant hits to competition as they over-expanded or overpaid, and with poorly structured acquisitions in China and Brazil and in India in particular.

However, for us, acquisitions added about 2%/2.2% to revenue growth last year, and 2.5% to net sales growth, and will add a similar amount this year, our objective being 0% to 5%. And I think if you take a number in the middle you won't be far off.

Acquisition investments last year are listed here on slide 91, and you can see the Venn diagram of the intersection of fast-growth markets and quantitative and digital. It's the bulk of what we do. And similarly, for the first two months of this year, almost all lying in those fast-growth markets, quantitative and digital, and a coincidence of the two.

If I look at return on equity, the return on equity has grown significantly over the last five or so years, starting off at 11%, now up to over 16%, and up by 1.3 margin points, 130 basis points in the last year.

Average cost of capital remains around just over 6%; slight increase as risk premiums increased in 2015, but still strong growth and a strong difference between return and cost.

And if I look at creative capabilities, we certainly continue to place great emphasis on recruitment, recognized creative success, and acquire highly regarded creative businesses.

And we're placing, as you know, a heavy emphasis on awards, and that's borne fruit five years in a row now. We're the most awarded holding company, ranked number 1 for five years. Ogilvy and Mather for three years in a row has now been the Cannes Network of the Year. Grey Global was named last year by Ad Age and Ad Week as Agency of the Year for the previous year. We were awarded the EFFIE's Most Effective Holding Company award for three years in a row. And WARC 100 has now given it to us -- sorry, four years for EFFIE's, and three years -- two years for WARC 100 as the Most Effective Holding Company.

And we've summarized that here in the last slide before outlook and conclusions.

So to sum up, it's been a model year, a year where we've met all the metrics that we've established, with over 3% net sales growth and revenue growth significantly in excess of that. And that's the comparator to our competition, although we do believe our competition should reveal their net sales growth.

Margin improvement of 40 basis points pre currency. Diluted EPS growth in the range, the target range of 10% to 15%. Record absolute revenue, net sales, headline EBITDA, headline PBIT and headline PBIT margin. Return on equity up by 1.3 margin points, and the dividend increased by 17% to a 47.7% payout ratio.

Average net debt to EBITDA ratio of 1.8 times. It's in the middle of our target range, the leader in the not only new business tables but a clear winner in the media tsunami. And a strong start to 2016 with revenue and net sales above budget and a very strong contribution from 2015 acquisitions.

Our long-term model, just to emphasize it, is revenue and net sales growth organically at 0% to 5% in line or in excess of market growth. Margin improvement 30 basis points, pre currency, with a long-term net sales margin target of 19.7%.

Using our cash flow to enhance EPS through acquisitions, buybacks and debt reduction. Acquisition target GBP300 million to GBP400 million of spending. Share buybacks 2% to 3%, and payout ratio at 50%.

Incremental, just to remind you, the incremental share buybacks that we instituted two or three years ago was to buttress the EPS growth, because we took down our margin target from 50 basis points to 30 basis points because we thought pressure in the system was growing and we thought it would bring a better balance to our business. And just to underline the point that Paul made, the last three years, we've actually delivered 40 basis points on average, [1.2%] for the three years, and 80 basis points in reported because of the currency difference.

And, of course, that model that I've just described would deliver the 10% to 15% EPS growth, and you can see over the last 22 years we've averaged 14% compound growth in EPS, so well within the target range.

Looking at 2016, and I think we look at it with some degree of confidence, like-for-like revenue growth -- again, this is revenue growth -- well over 3%; and net sales growth over 3%. So very similar to what we talked about at this time last year, but probably, given the three events, major and maxi-quadrennial events, with a little bit more confidence this time around than last.

Margin improvement in line with our target 30 basis points; margin improvements pre-currency. Acquisitions to add 0% to 5% of revenue and net sales. At current exchange rates, as Paul mentioned, and last year we thought we were going to get a tailwind for the full year and didn't, but this year, we think similarly at this particular point in time, so we'll see whether we're right or not.

But if you take current rates, that would be an impact of plus 3% on revenue and net sales, although it's difficult to project what the impact on margin will be. So we say minimal at this stage.

And staff costs and headcount to remain controlled to deliver the margin target. Obviously, the operational effectiveness and efficiency programs will deliver significantly in this year to help us achieve what we're laying out.

So thank you for that. We're now ready, operator, for any questions.

Thank you, sir. (Operator Instructions). Brian Wieser, Pivotal.

Two questions, briefly. I was wondering if you could talk to profit margin trends at the media agencies versus creative agencies and what you're seeing towards the end of the year in terms of deviations. Is there more pressure on one versus the other at this point? Or alternatively, are you seeing better -- improving trends, rather?

And then separately, I know there was reference to the A&A's programmatic survey this morning on the earlier call, and it does turn out that the actual survey indicated that most marketers doing work in-house are still relying on other agencies for the bulk of the work.

I was wondering if you could talk about what you're seeing with marketers who are maybe overseeing more of their programmatic activities in-house; for example, the degree to which they're relying on the agencies they work with for data services, for best practices, consulting services. It would be useful to hear some of your thoughts around that sort of trend.

About margins, Paul, and then --?

Yes. Margins, Brian, were remarkably consistent actually across the board. We've got very strong margins in the media business. That really has not changed. 2014/2015, they're remarkably constant despite all the activity that went on, which obviously has resulted in good news going forward. And don't forget, we had a very good year in 2014 in terms of new business wins, principally in Europe, but also in the USA.

So our margins are high. To be honest, we know what the competition in terms of what [Aegis'] margins used to be, and they compare very favorably in that sense. So that's consistent and solid.

And in terms of the agencies, I'd say three of our agencies are doing very well and accelerating through. One has obviously had a softer top line. But actually, overall, it's a very tight bunching around high-teens margins that is very strong, as you see in the numbers that come through. And actually, on a constant basis, constant-currency margins are up slightly.

So I think it's encouraging, and that's the simplest answer I can give you, to be quite frank with you.

Yes. Just to reinforce that, I don't think, Brian, there's been any significant change. I was asked this morning on the London conference whether media reviews had been positive in terms of pricing, or neutral, or negative. And I said the honest answer, I can't believe that anybody in their right mind would say that they would have been positive, because clearly, clients are looking for better pricing; it's one of the things. They're looking for better talent. They're looking for better technology, content and data. But clearly, they're looking for more operational efficiency as well as effectiveness. So at best it would be neutral, I would say, and at worst negative. And you see that reflected.

Often if clients are looking for a broader relationship, obviously, there's a bit of give and take. But the clearest indication of what I'm talking about is, Brian, if you ask an agency who wins a piece of business how much they win and how much the loser loses, the loser always plays down the amounts they lose and the winner always plays up the amount, and we're well aware of those differences.

So I would say on balance, profit margins remained. I don't think they're excessive. I don't think they're poor but they've remained. We give you, I don't think we're unique in giving you the margins, but maybe we are. But certainly, one or two of our competition and ourselves give you --- I think we uniquely, probably, give you our margins for advertising and media investment management, and you can compare it to the geographical as well.

On the A&A, in fact, the question we were asked this morning was the precise opposite of what the --. One analyst put his hand up and said that A&A report, which I hadn't seen, indicated that 30% of clients wanted to move their programmatic in-house. Now the question may have been -- I don't know what -- it always, the answer depends on what question you ask. If the question was would you like to as opposed to have you or would you, I think you might get different answers.

Our view on programmatic in-house is that some clients have tried it, but the sense we're getting is that clients are finding it very difficult to do, even after a short period of time, that they can't retain the talent, that they can't invest in the technology or invest in the cost of developing the technology. The talent doesn't want to work on one client; the talent wants to work across broad categories and get variety.

And to invest in the technology at a time when people are pursuing zero-based budgeting approaches is very difficult. And in a zero-based budgeting environment, if that's across the board, I think everybody is being cautious on costs given the environment, the likelihood that people will move things in-house, I think, is less rather than more. And really, you see when -- you only see it move in-house when really companies are faced with really very, very serious economic conditions or business conditions.

I can think of one case where that has been the case recently, but generally, I think it's true to say that clients are finding it very difficult to maintain the cutting edge.

Adam, do you want to add anything?

Yes. Hello, Brian. I look at this from a scale point of view. If you were to take something in-house, what scale economy might you be foregoing? And Xaxis, for instance, 85% of Xaxis' inventory is premium now; only 15% is open market. Premium inventory is your best safeguard against fraud and viewability problems.

Secondly, we kissed a lot of frogs on the tech front so we can find out what works. And when we've found out what works, we can apply pressure to pricing as well. And we'll keep it under constant review, which an in-house operation might struggle to do.

And they're our proprietary products. We have one called [Live Panel], and there's a pipeline of a number of others on the way which we develop, which we can develop and share for the common good. And finally, we can segment the service offer as well, which is what Xaxis has been doing with its various new offerings.

James Dix, Wedbush Securities.

I had a few questions, I guess first in terms of your growth outlook for 2016. I think, Paul, you might have mentioned previously that you were looking for some acceleration in your rest of world growth for 2016 and that perhaps you weren't looking for any acceleration in Western Continental Europe. Any other color you can give on your outlook for organic or like-for-like growth by region in 2016 that we should be thinking about?

And then maybe this is for Paul too also. Is there a good way of thinking about your margin change or expansion in 2015 and in your 2016 outlook excluding the impact of the restructurings, both on the costs you have to incur as well as the payback on the savings?

I haven't quite understood the second question, James, in terms of --. But just so you are aware, in terms of the payback of the restructure we are taking, some of it is quite quick and some of it is actually over a two to three-year period. But in terms of the way we're looking at our business, we tend to look at our business on a pro-forma basis, and so all our businesses will be tasked to achieve the same growth really, taking account of the net benefits of restructuring that might occur in that year for them.

I think to be fair, it would be quite difficult to what you're -- to do what you're suggesting, James, precisely. But usually, the restructuring that we do, or the restructuring expense, which is not significant in the context of the overall operation, is usually done on annual paybacks. The IT investment is probably longer term. I'd make that distinction.

To be honest, you've also summarized really my views on what the budget is showing for 2016. It really is a bounce-back in terms of slightly stronger growth in the [ASEAN] markets, an improvement in the Middle East and Eastern Europe that actually assists the growth that we actually did see in Latin America coming through, or continuing to come through in 2016. So it's really a little bounce-back in some of those markets were rather soft.

At this stage of the year, to be quite honest, it's quite a healthy prospect for Western Continental Europe, and I don't think any of us feel we need to get ahead of ourselves in terms of what may be the outcome. But in terms of Germany, Italy, Spain, we've always said those are our big engines in terms of how our Western Continental European performance does.

Those markets look very strong for us, to be quite frank with you. Other markets, such as Russia, obviously will be challenging. Some of the peripheral markets in Europe will be challenging. But overall, I think it feels much more solid, much more robust, but actually not in that going from [0%] to plus [2%], we're not going to be going from plus 2% to plus [4%], it will be continual progress in that vein.

And North America, as we all know, still got its own uncertainties out there in terms of the cycle and what 2016 will bring.

And on Brazil, obviously, Brazil has had a tough time in the last few days with the confirmation of an almost 4% decline of GDP; the problems around Petrobras and Lula. And, obviously, the Dilma administration is under pressure. And for us, Latin America and Brazil did quite well as we went through the year considering economic conditions, and obviously it's going to be tougher.

On the other -- on a more positive side, Mexico showing strong signs of life, as is Argentina, I think at least psychologically; and Peru and Colombia.

So I think just functionally, just to add to the detail, functionally advertising and media continues to look stronger, as does digital. Our public relations and public affairs business had a good year last year, certainly compared to [Germany] and certainly increased their market share. And we're seeing [some] reasonable growth there.

Data we're seeing reasonable growth for this year, or we hope to see reasonable growth for this year. But the lead is still with advertising and media, obviously reflecting the growth in digital and digital itself.

On the -- do you want to add any more to that, or that's it?

No. Nothing else.

Okay. Next question, please.

[Doug Arthur, Huber Research].

A couple of questions. Paul, just going back to what James is referring to. If I look at how you reported the numbers, I know a lot of this washes out in the headline numbers, but the other operating costs were up about 8% for the year and they were down in the first half. So they were up quite a bit in the second half as you reported. Is that all the restructuring in there? And what is a more normal increase?

And then I've got a follow-up for Sir Martin.

I think one of the aspects of the IBM or the infrastructure transaction or transformation, [I'll just] take you through.

So as you saw, we had a very significant reduction in headcount, around 2%. You also will note we've had a very significant reduction in the staff cost to revenue ratio of around 0.8 margin points. So beginning in March of 2015, we did outsource a number of staff to IBM and, obviously, part of that is we get charged a fee for their services which would otherwise have been in the staff cost line.

So part of the improvement on the staff cost to revenue ratio, and part of the explanation of why the other costs are higher, is a result of the transition from basically a staff cost to aborting third-party cost in the IT transformation.

So 8% in non-staff, non-establishment costs is not our normal run rate, and approximately one-half of that increase is due to solely the transformation of the infrastructure services being as a charge-back as opposed to a staff cost above the line.

I hope that's pretty clear.

Yes. That's very helpful. And then as a follow-up, Sir Martin, in some ways, you did fewer deals in the fourth quarter but you did some very important ones. You expanded partnership with Adobe Marketing Cloud; you mentioned Essence, the STW transaction in Australia; and I don't even know how to pronounce this, the Acquia partnership. How do you rank those in importance?

Well, I think far be it from me to say that anything we do is unimportant. That would offend the people we're doing it with. But they're all important in the context. I would have said comScore and Rentrak earlier in the year obviously were important.

So you could go through each and every one of the transactions and say they're important. I agree with you on Essence. I think that's important. Something else that we're just on the cusp of doing, which was -- may or may not be announced today or shortly, which a small scale but similarly important.

But I would say you're attaching importance to those fourth-quarter deals, but there were others that happened all the way through the year. And the most important thing is that we improve our position in those fast-growth markets, that we improve them in digital and technology and data, and digital and content.

We invested in film production, actually; Imagine Entertainment, that's also important actually in terms of potential content.

And when you say important, often, quantum is not important as is differentiation or ability to differentiate. We've been through this before. The traditional approach is around talent and price, and then we're now focusing increasingly on technology, data and content to give us --

And when you look at the tsunami results, and we've given you a long list of the results, both good and bad but net strongly good, and I think that demonstrates that clients are starting to understand, I think, the importance of those areas, or starting to highlight the importance of those areas. And I think we do have a competitive edge there and we're starting to see that in North America.

Sometimes, clients -- the strengths, the skills that we have in technology and data, and indeed content, demand different approaches, and if you've got a machine that's working reasonably well, you may not want to disturb it. I think in a couple of cases I've seen that. And the changes that are necessary to get to where we want to get to are so great that they don't want to disturb what they think is working well, which is fair enough.

But I do think there are some industries where we see very heavy marketing spends in proportion to sales or revenues, where if we can get increased efficiency, to a small degree it all drops through to the bottom line, and can make a very significant difference to what our clients are doing and how they go about it.

Great. Thank you.

Peter Stabler, Wells Fargo Securities.

Two questions, first of all for Adam. When we look back over the results of the large holding companies over the last couple of years, traditional advertising has really stood out. Marketing services, while having pockets of strengths, has been, I guess -- I think we would describe it as inconsistent.

So, Adam, when we go back to your forecasts, and thank you for providing this insight, wondering if you could help us understand how you might be looking at the general marketing services. We understand that this is revenues reported by media companies, but do you have any thoughts on forecast outlook for the general large body of marketing services?

And then I have one quick follow-up for Martin. Thanks.

Well, it's plotted a remarkably consistent course in our estimation relative to advertising. There are obviously some overlap, some conversions between activity in advertising and activity in related marketing services.

Public relations has apparently been doing better after really a long, protracted wait for recovery. Sponsorship seems to be doing well. The increased focus on rights and association and the importance of sporting events seem to be driving this, and it's as global thing.

Market research seems -- I'm not really a specialist in the area so I don't want to comment on it too much, but market research appears to be the one which has perhaps struggled to get the most traction, but I wouldn't like to comment any further on that because I'm not an expert on it.

The one thing I notice when I'm compiling the numbers is the relative lack of maturity in marketing services in Asia, which I would, therefore, regard as a potential opportunity for us.

Yes. I would just add a little bit to that, Peter. On data, investment management, market research, consumer insight, whatever you call it, clearly, custom research has had a tough time. In the release, we say syndicated research up 2%, custom down a similar amount. And custom has taken the brunt, not just in the mature markets but in the fast-growth markets too as clients try and reduce spending.

Adam's comment on marketing services in Asia, one of the things we do see, for example in China and in India, is very strong focus on shopper or out-of-home, or rural as opposed to urban marketing. So there are some tremendous opportunities, as he mentioned, and we've already seen them and in fact grasped them for distribution.

The local brands tend to have a focus on distribution and awareness. The multinational brands loyalty, and they need distribution and awareness. And of course, their price points of multinationals are higher. So I would just add that to what Adam said.

What was your follow-up, Peter?

Quickly, Martin, I was intrigued by a comment you had in your prepared remarks. You said one of your goals is to develop the role of the parent company. I wonder if you could briefly elaborate on that.

Thank you.

Well, our -- the horizontality approach has been in place now for, what? Seven or eight years. We fundamentally believe that the clients want the best people working on their business. Our people are very aligned to their brands, to their verticals, and there can sometimes be a contradiction.

If you're dealing with Ogilvy, for example, a business with GBP2.5 billion, GBP2.7 billion as a Group of revenue, against the GBP20 billion, or if you include associates and investments GBP27 billion at WPP, what we want to do is give clients of any of our verticals, whether it's Ogilvy or anybody else, access to everything we do.

Our people tend to align with the brands. Our clients tend, or increasingly want to the very best people working on their business, and they don't care where it comes from.

So you remember that horizontality slide where we showed the matrix of the vertical, the 11 verticals, and the two horizontal integrators which are at the client level and at the country level, and those are -- the client and the country have a dotted line around them. That dotted line will become a stronger dotted line, or even a solid line over time as that dynamic becomes more and more important.

And ultimately, you take Kantar as an example, Kantar, part of that restructuring expense against a project called [One Kantar] where on a country-by-country basis, they are consolidating their offer for clients more and more under the Kantar brand. So if you like, that's a mini WPP. You could apply the same view to GroupM or to GroupH in healthcare, or B to D in branding to design, or indeed WPP Digital. What we're trying to do is to integrate the offer more and more. So the role of the parent company, or holding company, is becoming more and more important.

Now you see a number of our competitors -- and this started probably seven years ago with the HSBC pitch, and everybody in the industry, including the trade magazines, all poo-pooed this as being a fad or a fashion. It's become the formula for success and everybody is trying to develop their own ways of integrating their offer.

In our view, you have to do this slowly and carefully. You can't slam brands together. You can't push them and crush them together. And certainly, you can't mix leadership, because you start to mix leadership, you start to throw up all sorts of problems in terms of conflict of people, let alone conflicts of clients.

So the question is how do you manage what appears to be but what is actually, not such a complex organization. It's really those 11 verticals, with those two horizontal matrices which are -- or parts of the matrix which are at the global and client level, global, client and country level, and how do you make them into a more coherent [whole] for clients. So that's effectively what we're talking about.

Thank you very much.

Dan Salmon, BMO Capital.

My first question, I guess, was for Paul, and it was around how the continued growth of the horizontal client engagement, how has that changed your shared services work; or more broadly, how you look at managing non-labor expenses?

And then a quick follow-up for Sir Martin. It sounds like Latin America has powered through a volatile period. I was just curious, specifically on the Olympics in Brazil. Are clients looking at it any differently this time around than they might have in past years?

Thanks.

Dan, hanks. The horizontality approach, or the team approach, hasn't really had a major or direct impact on the way we think about our back office and our services. We've always been able to pool together the revenues and the costs associated with any client work across our divisions, across our brands, across our geographies, and run a reasonably accurate assessment of the profitability by clients of our top 2,500/3,000 clients.

So in terms of reporting, financial structures, it's not proven to be a difficulty or a hardship. I think, funnily enough, the big advantage or the silent advantage of the IT infrastructure project is having everybody on one email system across the globe able to communicate through Skype for business and other mechanisms basically relatively cheaply and without any barriers in terms of firewalls between our various networks. Then also able to communicate with clients at the same time is very efficient from a time management point of view, but actually, I haven't tried to quantify that cost.

So I think there are some secondary benefits from what we're doing on infrastructure to facilitate the ease of communication and community, but in terms of -- in any other sense it's not a concern because we've always had a good understanding of client visibility on revenues and profitability.

Yes. I don't know whether we can get slide 58 up on the web; if we can do it or not. It doesn't matter if you can't. But if you go back to slide 58, which is the horizontality slide, just to your question, what that enables us to do when you consolidate the verticals in that way, the 11 verticals, you take the four, J. Walter Thompson, Ogilvy, Y&R Brands, and Grey, you would have the same back-office platform for them as best you can.

GroupM obviously has six constituent agencies now within it. Kantar has its own brands such as TNS and Millward Brown, and on. So what it enables you to do is create the same platform across function, and that enables the horizontality approach to get even greater traction, I think, and more effective traction.

As the client need has become more and more important and more influential, and the same applies for country and regional managers, we'll get even better data. But as Paul indicated, we've got pretty strong data that indicates what we're doing from a top-line, and indeed a bottom-line point of view across those clients.

You had something -- oh, the Olympics. Yes. I think we did well in Latin America, and certainly well competitively, even in Q4, because most of our competitors seemed to have an extremely tough time in Q4.

Now Latin America is a place where countries are going in different directions. Obviously, Venezuela is having an extremely tough time. Argentina did, but as I said, the new President Macri has made a very considerable difference in a very short period of time, even -- well, certainly psychologically, and I think even in practical terms.

Brazil is going through a very rough time and I don't think Brazil will recover from this for -- at least for the next two/three/four years, but we take a very positive long-term view on Brazil. And, in fact, we've made two or three acquisitions, as you've seen, on a small scale in recent weeks and months.

As far as the Olympics is concerned, there are some challenges, the challenges being the Zika virus, the challenges being the social unrest that we've already seen. I think it will be a visually stunning Olympics.

The timing of it from a time slot on television point of view is pretty good. The Brazilians did an incredibly good job with the World Cup a couple of years ago, and I'm sure they will do an extremely good job.

The facilities, I understand, are in pretty good shape now and ready for the Olympics when it starts. And I think as soon as the tournament, the Olympics starts, and we saw this refugee Olympics team which I think was a very good move by the IOC and Thomas Bach a day or so ago --

So I think the atmosphere will be good, the Olympics will be good and it will draw money in. I think the issue always, Dan, on this is what happens after. And it can suck money in to the event and the event can be highly successful, but then there's the day after the party. And you often see with these events that it does suck money forward and the after-event is not as good as you would like.

Do you want to add anything to that, Adam?

Only that Brazil is unique in that, as you're probably well aware, it's a full-service market and it's very heavily TV biased; 70% something of measured media spend going into TV. And to secure your place in the front row of the TV slots, you would have had to book in 2015 to get grandfather rights on that slot.

So we have 7% growth in for Brazil this year in advertising volume -- that was a forecast made in November -- versus a nominal GDP, although it may be negative, of course, in real terms, but nominal GDP of 5%. So we don't think that's going to be sustained beyond this year, but who knows? When we come to revise this forecast in the summer, I think we'll have a much clearer steer, but we've already been pulling the Brazil numbers down. That 7% came from a 9% forecast only six months earlier, so we've come some way, I think, to meeting the circumstances of Brazil.

Great. Thanks, everyone.

[David Neborsky, JPMorgan].

Just a question on new business. A lot of the recent account movement seems to have come at the expense of one your peers, especially in the media side. We know sometimes these things go in cycles, but do you think this is likely to continue, or do you see a more normalized or [muted] year for new business movement?

You mean the level of new business?

Yes.

Or the level of reviews. I think we indicated in the presentation that we thought that the tsunami, as we called it, was not over but it was lessening. I guess the violence of the storm has lessened, thankfully, because it put a lot of pressure on our people and has been extremely draining. Particularly if you're the incumbent and you have to make the trains run on time and then pitch for the business, or re-pitch for the business, at the same time you effectively have to have two teams working on it at once, so it's difficult.

But it has lessened, but I wouldn't take the view that you -- it may have lessened a bit, but it will continue. Clients quite understandably, and you could even argue rightly, are focused on making sure they have their costs in the most effective way.

You look at what's happening in media, you look at pricing, you look at measurement; I touched on the measurement issue. You look at bots. You look at the difficulty of, as Adam mentioned, buying premium inventory. All these things add up to great complexity.

I know a lot of people think that the clients are confused. I don't think clients are confused. I think clients understand what's going on but it is very complex. And so having the opportunity to look at that complexity with an agency or agencies and come up with a number of potential solutions I think is a good thing to do. It's difficult. It's a difficult process. And sometimes it goes on for a very long period of time and puts a lot of demands, as I say, on the agency, particularly an incumbent. But it's not going to be at the same level as we've seen.

If you look at the RECMA numbers, interestingly, there was a document from RECMA a few months ago which said there wasn't a media tsunami in 2015. It was the same level of media reviews as 2014. And certainly, if you look at our overall numbers, as Paul said, our overall new business number for this year was slightly down on last year -- on the previous year, on 2014.

So we've had two very good years. In fact, we've topped the new business tables I think for four years in a row. So we've had good runs of -- and you see that reflected in the numbers.

If you look at the combined two-year numbers at revenue and net sales, and of course, we're the only ones that provide net sales figures, and unfortunately, people then mix up the revenue and net sales figures, but basically, if you strain out and compare apples with apples, it's quite interesting to what you see on a two-year comparison, for example, the last two years between the various companies. And I think it gives you a good guidance as to what's been happening on their top-line performance.

Okay. And then on a prior question, you laid out some of the benefits of Xaxis holding premium inventory with regard to things like fraud and viewability. How important have these factors been in winning new business during reviews? And how are clients looking at some of these benefits that are just maybe a prior hesitation to buy this inventory direct from their agency?

Do you want to comment on that one? I'll come back on it.

I wasn't involved with the reviews, but I am aware of how we're approaching these around the world, which is consistently to be on the front foot in raising standards with the other industry representatives, because we regard, certainly regard --

Let's take viewability, for instance. There may be agreed national standards which are helpful, but we view exceeding those standards as an important form of differentiating our service. And so I would certainly think that we regard that as a competitive opportunity to address forward and viewability.

And I'd just add that it's quite clear, and I've attended a few of these pitches -- they let me go to one or two of them -- it's quite clear that technology, data and content are becoming more and more important differentiators between agencies. We have taken -- I would claim a unique approach. We've built -- we've applied our own technology through Xaxis. We've linked with AppNexus to provide a third force, if you like, to compare against Google and DoubleClick or against Facebook and Atlas.

And we're a $30 billion company, a $29 billion company competing against companies which are, what? $550 billion or $400 billion. We're peanuts in comparison, but I think we do do an extremely good job.

And you can see, with the growth of what we're seeing, the growth of AOL, Verizon under Verizon's leadership with Microsoft. And potentially, if they did something with Yahoo!, it would be the interesting creation of another third, or if you include us, a fourth force, a fourth alternative in a more competitive environment.

Just touching on the measurement issue, we are getting good traction at comScore, or comScore is getting good traction with some of the new media. Google has been responsive and helpful. I think all the new media owners, and they are media owners, they're not technology companies as far as we're talking about them in this context, it's going to be very important for Facebook, for example, to step up to the demand for better measurement. And that demand for better measurement doesn't just come from agencies; it comes from media owners and it comes from clients.

Keith Weed, CMO of Unilever, second largest advertiser, our second largest client, has made it quite clear his three Vs on value, viewability and validation, and has made it quite clear that the standard for viewability has to be very high. GroupM has been in the forefront of that in terms of new measurements, approaches, out-of-home measurement, C-plus-7 versus C-plus-3, bots. How can a three-second view with the sound turned off 50% of the time qualify as a view?

I know that people's attention spans are getting less and less, but you can't seriously believe that that's going to have as much impact as the sort of engagement that you have even with the traditional media which are increasingly under pressure. And we've tried to point that out as one particular point to think about in our presentation.

So all these things are more important and I think clients are very aware of it. Having said that, the talent that presents and the price at which they present are very important.

And I would just add, maybe somewhat controversially, that I remember asking one of our clients many years ago what his biggest problem was, and he said, the irrational competitor. And when you have desperate competitors, I give you one concrete example that I used in London earlier today at a media case.

So when we take on a client, we always -- we take on a client, we will only take on a client in the media if we can credit insure. And in this particular case, we couldn't get credit insurance and so we asked for further information. The client, the potential client who had awarded us the business declined; a new client declined to give us the information. We said we're not going to handle it then. We can't -- or not going to handle it; we can't handle it unless we get the more defined information and we're comfortable.

We declined. One or our competitors, one I would put in the desperate category, immediately took it. There can be -- we cannot make any sense. The risk there just outweighs any return. And so you have a lot of the irrationality which sometimes determines the results of reviews, and we've seen that also in terms of guaranteed pricing or indicative pricing.

So all these things about qualitative differentiation, whether it's about talent or whether it's about technology or data or content, can sometimes be negated by desperation.

Okay. Thanks a lot.

There are no further questions at this time.

All right. Thank you very much, operator. Thank you, everybody, for joining us. Paul and I are here in London. Fran actually is -- Fran Butera actually is in London too with Chris Sweetland, but we're very happy to take any further questions. A big thank you to Adam for joining us and we'll talk to you again in a quarter or so.

Thank you very much.