WPP PLC (WPP) 2021 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the WPP 2021 Preliminary Results Conference Call and Webcast. (Operator Instructions) Today's conference is being recorded.

At this time, I would like to hand the conference over to WPP's CEO, Mr. Mark Read. Please go ahead, sir.

Thank you very much, and welcome, everybody. Thank you for joining us. I'm here in Sea Containers with John and with Peregrine. Pleased to say our offices -- about 1,200 people in the office today. So I think before we start, just a few words. I woke up -- or we woke up like everyone else to see the news in Ukraine. It's obviously terrible and of concern. We do have 200 people there in Kiev. We've been in touch with them over the last few weeks to provide whatever support we can. I'm sure we'll get into the economic impact a little bit in the presentation and in the Q&A. It's obviously early days. But I think we should just at least acknowledge that before we start to get into what I think is a strong set of results for us in 2021.

So on the next slide, we have the cautionary statement, and I ask you to read that before we get into -- on the content chart, Page 3, I'll briefly go through the highlights. Really, it has been, as I said, an exceptional year. John will take you through financial results, capital allocation and our guidance, and I'll come back to review strategic progress in more detail and how that's linking to the financial performance of the company. And we'll get into the Q&A.

So on Slide 4, we really have seen very strong growth in the year, I think, driven by demand for our digital services, e-commerce and technology areas where we are strong. Top line growth has more than doubled our initial guidance, which I remind you we upgraded 3 times during the year, and came in slightly ahead of the October raise that we debated at (inaudible) on the call.

I think growth was consistently strong across the board. All business lines growing double digits in Q4. I think the performance also reflects strongly the changing nature of our business with our integrated agencies now 38% of the exposure to commerce, experience and technology, up from 35% in 2019. The GroupM is now 43% digital. Of course, it's a little bit below the market mix, but that market mix does reflect the performance of digital spend in smaller clients, and our spend reflects the mix of the largest global marketers who tend to be our clients and shows really the scope for further growth and expansion in GroupM's business.

In new business, we're showing continued strength and success with 3 of the world's biggest marketers: Coke, Google, and Unilever. I think that shows the value of WPP and our integrated offer to the biggest marketing clients generally. Now we're still very much a creative business at heart to being back on top of Cannes for the first time since 2017 was really a validation of our commitment and the investment in creative talent we've made consistently over the last 3 years.

On shareholder returns, yes, we have returned GBP 1 billion to shareholders in 2021. I think it's a very strong figure. But if you add in or if you add together the close to GBP 600 million on incentives as we rebuild those, GBP 400 million on M&A and GBP 300 million of CapEx, you can see really we're putting GBP 1.3 billion into our people and into growth and really balancing the cash generation of the business between shareholders and future growth. All of that makes us confident going into 2022 with good momentum on the top line and potential for further strong earnings growth.

So John, take us through the financial performance.

Thank you, Mark. So let me take you through the prelim results for the year ending December 31, 2021. So turning now to Slide 6 and our headline income statement. As Mark has already covered, revenue less pass-through costs of GBP 10.397 billion, up 12.1% on a like-for-like basis, significantly ahead of where we expected at the start of 2021 and also ahead of our Q3 guidance. That delivered an operating profit of GBP 1.494 billion, up 18.5% on the year. Income from associates at GBP 86 million, slightly higher than 2020, given the strong Kantar performance and also broader recovery across the rest of the portfolio, delivered a profit before interest and tax of GBP 1.58 billion, up 24.3%. Reflecting finance costs and tax delivered a profit after tax of just over GBP 1.03 billion, 29.5% up year-on-year. And I should point out here that the tax rate at 24% is slightly higher than expected, given the profit mix and also, of course, the changing international tax environment.

Taking account of noncontrolling interests, delivered profit attributable to shareholders of GBP 954 million, up 28.6% year-on-year. A diluted EPS of 78.5p, up 30.6% and an operating margin of 14.4%, up 1.5 points on the year and ahead of consensus. So overall, a very strong year out turning ahead of 2019 on revenue less pass-through costs and a year ahead of our plan.

Turning now to Slide 7 and a reconciliation of our headline operating profit to our reported operating profit. As you can see, the headline operating profit I just covered at GBP 1.494 billion, we've then adjusted for a goodwill impairment, which, of course, is significantly less than we saw in 2020 when we made substantial impairments as a result of COVID-19. Also adjustments for amortization, impairment of intangibles, a little bit of a write-back on investments, reflecting a write-back of our Imagina investment, allowing for restructuring costs, both normal and COVID-19-related. And I'll come on to talk about those in a little bit more detail later on in my presentation. Gave overall adjustments against headline items of GBP 265 million, delivering reported operating profit of GBP 1.229 billion.

Coming on now to how we're performing across our different sectors. So first, the global integrated agencies, strong growth continuing. So overall like-for-like growth in the year of 11.3% and actually on a 2-year basis, up 2.5%. So good recovery over the year. Headline operating profit of GBP 1.2 billion, up 14.7% and operating margin of 14.1%, up 1.2 percentage points. It's actually worth looking at the graph at the bottom of the page there, which shows a really strong recovery, even on a 2-year basis versus 2019, in the second half of 4.4% up on 2019. So good recovery coming through in the second half.

Turning to Slide 9, actually split out GroupM performance from our global integrated agencies. And again, you see the very strong performance of GroupM, particularly in Q2 and Q3 and also extending into Q4. And you see that the performance of our other integrated agencies in the light blue also recovering well through Q2 and the second half.

Turning to our public relations business. Good recovery, good performance over 2020 and 2021. Like-for-like sales up 11.5%. And on a 2-year basis, actually up 7%. So really showing sustained demand for strategic communication services throughout the pandemic. Headline operating profit up 1.3%, albeit margin down slightly, reflecting on a very strong 2020. Worth noting again through the graph in the second half of the year, almost double-digit growth on a 2-year basis versus 2019. So really, really strong performance and strong performance across the board, Hill+Knowlton, and our Specialist PR Agencies growing at strong double-digit like-for-like growth. BCW also performing well and accelerating in the second half. And of course, we complete the SVC transaction before the year-end, combining that with FGH to present a very strong business going forward.

Turning now to our specialist agencies, again, with a strong recovery through 2021, with revenue less pass-through costs up 21.8% and up 7.8% on a 2-year basis. Really strong headline operating profit recovery, up 127.5% and margin up 7.6 points. So really strong recovery of profit in particular through 2021.

And if you look at the chart below, you'll see very strong performance in Q2 and Q3, largely benefiting from a COVID-related contract we had in Germany under our DKK business. And we saw that normalize coming through Q4. Brand Consulting performing incredibly strongly for both Superunion and Landor and FITCH performing well and also again CMI also maintaining double-digit growth in Q4.

Coming on now to our performance across our major markets, very strong performance and recovery in the U.S. market. You see that consistently through Q2, Q3 and Q4. And also on a 2-year basis, up about 5% in the second half of the year, which gives us real confidence going into 2022. U.K. market also showing strong growth, particularly through Q3. China, it was also pleasing to see recovery in the second half, as we guided to at the interim last year. There's a good recovery coming through in the second half. And then again, on the right-hand side there, you see Germany, particularly strong growth, as I said, in Q3, driven by that COVID contract that I mentioned earlier, albeit normalizing coming through into Q4.

So coming on now to our change in our operating margin. We saw salary increases through 2021. So our staff costs overall up 3.2%, reflecting of course the salary increases we put through. Significant savings on our establishment, reflecting the strong performance of our campus program. Also, overall, we delivered some savings in IT, but they were broadly offset by investments. So relatively neutral year-on-year in terms of our IT costs, also on personnel costs strongly influenced, of course, by the reduced travel in half 1, down slightly year-on-year. And our other operating costs significantly down on 2020, reflecting lower office costs and also bad debt performance, all of which delivered an operating profit pre incentives of just over GBP 2 billion, which is up 44.3% year-on-year and delivers actually a margin of 20.1%, up 5.3 percentage points.

So really strong performance on a pre-incentive basis. And of course, it was great to be able to report very strong incentive payments for the year of GBP 592 million, reflecting, frankly, a very strong performance of the business and a great opportunity to reward our people for all the hard work during the year, all of which delivered an operating profit of GBP 1.494 billion. Again, as I mentioned, a margin of 14.4%, up 1.5 points year-on-year.

So coming on now to the margin bridge. And we showed this slide to you at our interims. This shows the margin bridge between margin in 2020 at 12.9% and the outturn of 14.4% in 2021, just to take you through the different components there. The first and foremost is just on our staff costs. If you remember, at the half, we were reporting that was up 4.4% year-on-year. We also guided at the time that we would expect that to reverse in the second half, and that's exactly what we saw. So actually, overall, in the second half, we were about 0 in terms of year-on-year on our staff costs and therefore for the year overall a 2% improvement.

On establishment costs, we showed a similar benefit in the second half to the first half, so up 1.5% overall for the year. In relation to personnel costs we were about flat for the full year, albeit we were up, obviously, 5.8% in the first half. Obviously, people started to return to travel in the second half. That eliminated the first half gain, flat year-on-year and very much as we guided to at our interims. IT costs in line with the first half and also the G&A in line with the first half. And then, of course, the big offset in relation to incentives, very similar to the first half at 3.8% to deliver the 14.4% margin for the year. So very much in line with, if not slightly better than, the guidance that we gave at our interim.

And maybe now just coming on to the guidance for 2022, where we're talking about expected increase of our operating margin of around 50 bps for the full year. So just a little bit of a shape on that. I think we will see a little bit of a drag in relation to our staff costs in 2022 reflecting, of course, increases in salaries and will be somewhat offset by operational leverage.

So I think the overall drag for the year will be about a negative 25 bps. I think in relation to establishment costs, will be broadly flat year-on-year. We will be delivering savings overall, but they are being offset by a return to office costs. So I expect our establishment costs to be broadly flat year-on-year. In relation to personnel costs, we expect that to be a drag of about 50 bps in 2022, reflecting a return to travel, particularly in half 1 from a year-on-year basis. Because obviously, the half 1 of last year, we were very much still in lockdown with very little travel taking place across the organization. And then looking at IT and other G&A combined, a slight drag of about 25 bps. And then from an incentive perspective, while we still expect to be paying strong incentives for 2022, 2021 was an exceptional year. So we think we'll see a tailwind of about 150 bps also on our incentives in 2022, all of which nets off to that around 50 bps improvement in our margin year-on-year. That's important to note that from a phasing perspective, we expect half 1 to be more challenging. We actually expect to go backwards slightly on margin in half 1, reflecting the annualization of the salary cost increases that we put through in around June of 2021 and also, of course, the increases in the travel, particularly in the first half year-on-year that I mentioned earlier. So we expect to go backwards slightly in the first half of the year, and we expect to recover that -- more than recover that, of course, in the second half of the year to deliver an overall improvement of 50 bps.

So coming on now to our transformation program, and I'll talk about the cost savings in a second, but just to sort of bring to life a couple of highlights through the year. So in terms of simplifying our business, great progress being made on our campus program. 9 more campuses opened, 12 under construction, 17 more in scope and GBP 110 million of savings versus 2019 already being seen in 2021. Again, we continue to simplify our business. We've taken out that 500 or so legal entities. So we're down now to about 2,300, and more to go in the year ahead, probably another 500 or so we aim to eliminate in the next 12 months. And also significant agency consolidation in some of our smaller markets, which has been really effective at not only savings and costs, but also driving our top line.

In terms of building world-class support services, really, really, really strong progress here, particularly in relation to hiring the team which is going to deliver this transformation over the next couple of years. So in terms of my direct reports and their teams, around 55% of those people are new into role and actually over 40% are new to WPP. So we're really bringing in a strong team to help us deliver this transformation. We've defined new target operating models across IT, finance and HR and indeed are already implementing the new target operating model IT as we speak. We've delivered GBP 40 million of procurement savings across our business and also set up shared service centers across India, Middle East, Asia and LatAm. Any slight downside is in relation to our Workday deployment, where we've actually delayed deployment until the middle of 2022, but we're confident in the phased rollout of Workday over time.

And in relation to accelerating our capabilities, we've got very clear growth plans for some of our key growth platforms in our business, Choreograph, Xaxis, Finecast, et cetera, and have also committed GBP 40 million to their product innovation. We've enhanced our reporting and our enterprise data and our understanding of client profitability and performance. We've created a commercial playbook and asset pricing tools to ensure that we are pricing effectively within our markets. We've created a career explorer that enables our people to have visibility of all job opportunities right across WPP, and we've leveraged our acquisitions internally, particularly, for example, Satalia where we're really using that to upscale our AI capabilities, not just within Satalia of course, but right across the WPP organization. We are very pleased with the progress that we've made on transformation.

And of course, that has delivered to the bottom line. We set out our targets at our Capital Markets Day in December 2020. We expect to deliver GBP 200 million of savings in 2021. We actually delivered GBP 245 million, split across property at GBP 110 million, procurement at GBP 40 million, travel savings, which we estimated around GBP 80 million or so, business rationalization of around GBP 10 million and shared services at GBP 5 million, delivering GBP 245 million of overall savings. So really promising performance, and that bodes well for delivery of those savings over time as you see set out in the graph.

As I promised earlier, coming on now to Slide 17, I thought I'd set out in a little bit more detail our restructuring costs for 2021. Please see overall restructuring cost of GBP 146 million, which when added to the COVID-related restructuring cost of GBP 30 million gives a total of GBP 176 million. You'll see there that within the GBP 146 million, we've actually included GBP 63 million of costs for Workday, which is effectively a reclassification away from CapEx into our P&L, taking account of the updated IFRIC guidance for SaaS accounting.

So we put the Workday costs into our P&L as an overall GBP 176 million of restructuring costs, of which around GBP 125 million is cash. And actually, if you strip out the Workday, which we previously had in capital, that gives overall restructuring cost of GBP 113 million, slightly ahead of the guidance that we gave. We guided to about GBP 70 million to GBP 100 million due to the additional IT restructuring costs you see there at GBP 31 million in the top half of that table. And of course, in relation to Workday, we are expecting circa GBP 350 million of Workday costs coming through between 2022 and 2025, which will now be included in restructuring and transformation and taken out of CapEx, and I'll come on to show the CapEx slide later on to make that clear. And we anticipate GBP 100 million of Workday costs in 2022.

And in relation to other restructuring and transformation costs, we foresee that as being between GBP 200 million and GBP 250 million between '22 and '25, a slight increase to our previous guidance of GBP 100 million to GBP 200 million or so, albeit in a second you'll see that, when we look at the overall CapEx costs, including Workday, you'll see that those are actually coming down slightly. So net-net overall between restructuring costs and CapEx costs, if they withdraw in relation to the previous guidance that we've given. And we expect about GBP 120 million of those restructuring costs to come through in 2020. And again, all of those will be cash.

So as I said earlier, just coming on now to talk about the phasing of our CapEx and Workday. You'll see here that the costs set out on the left-hand side here as per our Capital Markets Day guidance in December 2020. And then you'll see the numbers. The new guidance on the right-hand side, you'll see (inaudible) 2021 you'll see spend in line with the previous guidance in 2022, a slight catch-up coming through in 2023, in line with 2024 and under 2025. So there's been a slight rephasing of the spend. But overall, actually, when you add it all together, it's coming in about GBP 50 million less than that we previously guided to, reflecting, of course, the slight increase in the restructuring guidance. And as I said, when you add the 2 together, they broadly play a draw.

So coming on now to our strong cash generation. You'll see there on the left-hand side very strong operating cash generation of just over GBP 1.8 billion. Good performance on our trade net working capital, better than we guided. We expected there to be a GBP 200 million to GBP 300 million outflow at the start of the year. We actually saw a GBP 300-plus million inflow.

We also saw positive movements on our other working capital, reflecting, of course, a large accrual for our bonus payments for 2021, taking out the interest, lease payments, tax paid, CapEx, as I've already mentioned. That CapEx is about GBP 190 million of property and GBP 100 million on IT. And of course, a strong return to shareholders and dividends, share buybacks and so forth. So our overall net debt for the year increased by GBP 205 million from GBP 696 million in 2020 to GBP 901 million in 2021.

And again, looking at working capital on Slide 20, I think good performance through the year on our overdue debtors, around 12.5% or so overdue. But what was different to 2020 was consistently low through the year. I still think we've got opportunity to improve this going forward. But overall, given the growth of GroupM in particular, we saw GBP 220 million of inflow from working capital. We expect for this year, for 2022, that our trade working capital will be broadly flat year-on-year, albeit we also expect to see a slight outflow in relation to our nontrade working capital as a consequence of the unwind of the bonus accrual.

So coming on now to Slide 21, looking at our overall sort of capital allocation. Obviously, we've been able to invest significantly in our business in 2020, investing in growth, particularly great platforms, Xaxis, Finecast, Choreograph, investing in our talent, investing in our IT, et cetera. And at the same time, we've also been able to return over GBP 1 billion to shareholders in the form of dividends and share buybacks, 30% growth in our dividend year-on-year.

And our balance sheet remains strong. So our average net debt to EBITDA for 2021 at 0.9x, comfortably below our leverage target of 1.5 to 1.75x and hence, why we're able to support an GBP 800 million planned share buyback for 2022, of which we've already completed just under GBP 130 million. And again, that's shown -- or (inaudible) showing our leverage metrics on the following slide, you see that at 0.9x at the bottom. Interest cover is very healthy and overall the balance sheet in very good shape.

So coming now to 23, my last slide and our guidance for the year. So guidance for 2022, we expect like-for-like revenues as pass-through cost of around 5%, a slight headwind from ForEx at about 0.5% and the contribution from M&A of between 50 and 100 bps. Headline operating margin, we expect to be up by around 50 bps. And CapEx at about GBP 350 million to GBP 400 million, roughly half property, half IT and, in addition, GBP 100 million or so of costs on Workday, again, consistent with the guidance that I gave earlier on. Trade working capital around flat year-on-year, GBP 800 million in share buyback and headline tax rate of around 25.5%, a slight uptick on where we've guided to previously, again, just given the prevailing tax environment that's out there from an international perspective. We're not changing our medium-term guidance, this guidance we gave at the Capital Markets Day back in 2020. The revenue less pass-through costs of 3% to 4% growth, broken down into 2.5% to 3% like-for-like and 0.5% to 1% from M&A and a headline operating margin of 15.5% to 16%. So consistent with what we told you back in December of 2020.

And with that, I'll hand back to Mark to take you through our strategic progress. Thank you.

Thanks very much, John. And I'll talk to you about our strategic progress which I think really has been significant, if I think back to this call 3 years ago, where we were facing a situation where our revenues have been declining for 3 years, our largest clients have been up for review. Our debt was approaching, I think, we were unsustainable, to today where we're delivering above-average peer level growth. We've just won probably the largest new business pitch in our industry's history and our balance sheet is in a really strong position. We have made tremendous strategic progress.

And on Slide 25, if I think about what's changed and how the industry is changing, 3 factors really give us strong momentum going into the future. The structural drivers of our industry, our own competitiveness and really the relevance of our offer to the needs of our clients. On structural drivers, there are several factors at play. One is obviously, the growth of digital and commerce everywhere to see, it's still sort of early days, and this is a long-term cycle and all companies are going to need to invest behind.

The other is integrating different parts of the marketing mix and the introduction of new ones. Lots to talk about, fragmentation of scope and complexity. But I think the response from clients increasingly today is to desire simplicity with that's at the heart of what the Coca-Cola Company has asked us to do and media, creative, data and technology need to come together as clients are looking for partners that can bring those together. We've positioned WPP in the center of both of these drivers, now leading to our improved performance, particularly as clients continue to commit and reinvest in marketing for growth.

On competitiveness, I think the results are really very clear, our investments in our client teams and our marketing efforts, our agency mergers leading to much improved client satisfaction. Creativity remains a differentiator. The idea is still important regardless of what medium is executed, and we'll continue to lead with ideas. Rob Reilly, I hope some of you will have a chance to meet. He loves making big impact. We continue to invest in creative across WPP.

Scale in media remains critical. We haven't stood still. It's really a story of continued investment over the last 15 years, I think back to the acquisition of 24/7 Real Media, which seems a long time ago today in 2007, and that's led to our leadership in programmatic and connected television, the depth of our relationships with technology partners and investment in Choreograph, all of these are keeping us ahead of the market. And that's building on our strong new business performance. And that, I think, reflects over the last 2 years, how much more competitive we've become as a company.

And then on relevance, I think we have what clients need, and we're increasingly easy to work with. That simply was not the case about 3 or 4 years ago. If you think about the key issues in the boardroom, digital transformation, reputation, about privacy, how do I manage my data, how do I think about Facebook, these are all issues that people at WPP can help their clients navigate. Our agency mergers have clearly delivered, and our creative agencies, and we have put that deliberately in inverted commas, have transformed a much more relevant offer post that integration.

And we continue to invest through product innovation under Stephan Pretorius. We're putting significant operational and CapEx behind growth platforms like commerce as a service, data, connected television. We're also making acquisitions like Satalia and Cloud Commerce with capabilities that we can leverage across all of WPP, rather than remaining siloed inside one of our operating comps.

Net-net, if you look across the offer to our clients, we're in good shape and -- just we talked about the transformation, which we touched on about the conclusion.

Now on Slide 26, I think we should talk briefly on purpose is absolutely at the heart of our offer. If I remind you, our purpose is to use the power of creativity to build better future for our people, our planet, our clients and communities. And how we do business continues to change and improve. And that's increasingly ever more important to our people and in the fight for talent, I think purpose is critical. And you can see from the range and scope of our commitment, it's something that's now deeply embedded across our organization.

And a few highlights to call out. In the carbon disclosure product, project upgraded our ESG score to an A- in their 2021 ratings, distinguishing WPP is a leader on climate change and reflecting the ambition of our new net zero strategy, our emissions reduction targets and our stronger governance across our carbon emissions. We're proud signatory to the UN Global Compact Business Ambition for 1.5 degrees. The purpose of which is to galvanize business support for strong climate action and to UNFCCC Race to Zero campaign, and we're a marketing partner actually to the UNFCCC. Our science-based targets have been approved by the Science Based Targets initiative, which is also an important step. I point out in the FTSE Women Leaders Review that was published this week. We entered the top 10, the gender representation among our Executive Committee in direct reports moved up from tenth to eighth at (inaudible) in the FTSE 100. And for the fourth year in a row, we're recognized as a leader in the Bloomberg Gender Equality Index.

As I mentioned, it is increasingly important to our people, on Slide 27, purpose at the heart of our offer and people, if you like, are at the heart of our purpose (sic) [people at the heart of our business] And we've done a lot over the last couple of years to really step up our efforts across many fronts. This year, we've been very focused, as have many companies, looking after our people through COVID.

We launched our Mental Health Allies program, provided mental health training to 500 colleagues across the U.S. and the U.K. in 2021, and we expanded that across our business in 2022. As John mentioned, we invested in a further 9 world-class campuses, including Milan, Prague, Singapore, most recently, our second London campus in Rose Court just down the river from here in Sea Containers. And most importantly, this year, we've really reinvested in our incentive pool to thank people for their hard work this year, both in terms of quantum, but also importantly, in terms of the number of people across the company that, that's reaching.

We also continue to invest in the development of our people, increasing mobility across the group. That's something that we can offer as a competitive advantage to WPP, and we launched our Career Explorer platform to aggregate all the jobs across WPP available to our people in one place, and it's an important sort of cultural change in terms of how we think about our people from a pan-WPP perspective.

We launched the second phase of our NextGen Leaders program, which is a 10-week virtual learning program with the aim of reaching a much more diverse pool of younger talent, interesting another opportunity where being able to be virtual has enabled us to expand the pool of participants. And this year, 50% of the participants in the U.S. and the U.K. identified as Black, Asian or Latin and 60% identified as female. So really good progress in expanding the type of talent that we attract into our industry, and we continue to invest in learning and development programs, particularly with our technology partners.

And then finally, talking to balance and diversity throughout the company. We launched Unite, our first WPP countrywide LGBTQ plus community is now live in the U.K., North America, India and Hong Kong. And for the second year, WPP was deemed among the best places to work for LGBTQ plus equality by the human rights campaign. We launched a very good campaign for them actually yesterday in the U.S. We're making good progress on gender diversity. As I mentioned, women now represent more than 50% of our senior managers and 39% of our senior leadership, up from 37% the year before.

And finally, diversity at the center of our recruitment process, working with Black Talent Networks such as the LAGRANT Foundation, Brixton Finishing School. I'm very keen that we do even more to attract Black talent, particularly into our creative departments, where I think we can really find some unique opportunities.

And that's all part of the $30 million antiracism commitment which we made after the murder of George Floyd, and we'll cover on slide -- on the next slide, Slide 28. And our DE&I and Racial Equity Program, I think is really a differentiator for WPP. It's one of the most, I think, innovative programs of this type. I don't think I've seen anything like it. It's a fund that we apply -- we invite agencies from across WPP to apply for resources and funding to run programs to promote racial justice within and outside WPP and support black and minority ethnic talent getting into our industry and getting into WPP.

We announced 9 initiatives to be funded in September last year. And just to sort of highlight a few, one is a research project by WPP roots here in the U.K. looking at the role of data in reaching minority ethnic audiences in the U.K. to build inclusivity into our data and market research efforts. We have a really fantastic project, Detroit Experience Studio, a commitment led by VMLY&R, UniWorld Group, GTB and our 4 teams to increase career opportunities for young black and brown talent in Detroit. AKQA, have (inaudible) platform to expand professionals from 1,000 black and indigenous people in Brazil. And we have a 10-week training program at WPP to help underrepresented minority of veterans in the U.S. become project managers and leaders. So I think it really sets up an innovative set of programs to help to advance our position in this area.

So turning from our purpose back a little bit to our offering our competitiveness on Slide 29. Let's start with our integrated agencies. I think there's a tremendous amount of progress being made here in terms of people, technology and creativity that we're being recognized for. We've done extremely well in creative work award, both at Cannes and from all our major agencies and many winning awards and actually, each of our major networks winning a Grand Prix at Cannes.

I think if you look at the financial performance of the business, it shows how we're really changing the business mix with nearly 40% of our sales coming from the new growth areas in experience, commerce and technology increasingly being rated by industry analysts ahead of consultants and other competitors, not just in marketing within areas like commerce and loyalty. And you can see that Forrester and Gartner are recognizing our agencies in disciplines like that.

We had good strong recognition in the trade (inaudible) campaign. Wunderman Thompson in the U.K. was named Integrated Marketing Agency of the Year in new category. And this is translating to better financial performance. So I think that's important to think about the strategic objectives that we had 3 years ago to return to peer-level growth, the 2 key topics were really our creative agencies and the United States. And in both areas, as we look forward into next year, they're positively contributing to our overall growth, not far off the average for all of WPP. And I think that puts us in a good place to meet both our numbers for 2022 on our long-term guidance.

On Slide 30, I think we need to recognize the strength of GroupM and its position in media and data around the world at scale across markets and regions increasingly valued by clients. I think one important trend has been with the global consolidation of media and clients continuing to reduce the number of media partners to enhance their ability, I think, to negotiate with the major media partners, the Googles and Metas and Amazons of this world, but also to simplify their partnership strategy and be able to move much more quickly in a much more agile way.

Our 2-year growth rate of 7.4% across GroupM hardly shows the impact of COVID and reflects the strong performance of media. It's a good reminder that GroupM has compounded in the long run at 5% or better, the growth rate similar to a number of global data or business services franchise. We're seeing now very strong growth in Commerce Media billings up 41%, and in our specialty products like Finecast or Xaxis, we're also seeing strong growth. And as you know, we launched Choreograph in 2021 and most of the U.S. business is now present in 10 markets, and that's helping us to differentiate our offer and helping us in our new business performance.

On Page 31, public relations has been, I'd say, growing strongly over the last, I guess, over the last -- certainly last year, much less impacted at the beginning of the pandemic than perhaps we would have expected. And I think reflects its increasing importance to clients and in the marketing mix and the merger of BCW, the continued development and resurgence of Hill+Knowlton and a new combination of Finsbury Glover Hering and Sard Verbinnen means we have an increasingly strong position in this market and represented in boardrooms tackling key issues around reputation and purpose and important to clients, doing this at scale with a global footprint and winning both bigger assignments, but importantly, assignments, integrating this assignment into the rest of WPP. And I think our public relations and communications business is a really a critical strategic capability within WPP.

On Page 32, our specialist agencies had a very strong performance, as John mentioned, in 2022, probably after a slightly tougher 2021, probably after slightly tougher 2020, but I think it reflects resurgence in demand for brand consulting with the importance of purpose and sustainability within those markets.

And on Slide 33, we have been investing more in acquisitions. Net-net, we spent around GBP 400 million on acquisitions during the year. While we did acquire the minorities in our business in Australia and joint-funded the acquisition numerator within Kantar (inaudible) equity stake there. We have also started quite a number of businesses with very strong capability in DTI in Brazil, around 600 and more software engineers who can focus on application development. Satalia, I mentioned the leader in AI solutions. Made Thought, a very strong design business and Cloud Commerce platform would help us invest more behind our commerce as a service space.

And then on Tuesday, we announced (inaudible) social, a leader in the area of influence and creative marketing to have about 150 people specializing that in the U.S. So I think you'll continue to see us make more acquisitions in these areas around digital marketing, technology, data and e-commerce in 2022.

I talked briefly about the highlights of our new business performance on Page 34. We had really a very strong competitive performance. I'd like to see our strength both in creative and in media. Highlights to me, it would be really just look at it through the lens of The Coca-Cola Company, Unilever and Google, 3 of the world's leading marketers who are strengthening and building their partnership with WPP.

And on Slide 35, just to talk briefly about our strategic partnership with The Coca-Cola Companies. It's really a significant and important partnership to us. I think in many ways, we look at it as a validation of the strategy of the company to have strong creative capability, combined with the ability to use data in our marketing to help our clients navigate with increasing global technology and media partners and to invest in technology.

It's really a very significant commitment they've made to us as a company. If you think about The Coca-Cola Companies as a partnership companies, think about their relationship with their bottlers, and in many ways, that's at the heart of their long-term strategic partnership with WPP. They've entrusted us with a tremendous amount of their marketing, their creative work, their media, their data, their production as well as social and PR across 200 markets and 200 brands. And we're fortunate to have very strong sponsors on their side, CEO, James Quincey; and the CMO, Manuel Arroyo you can see James' quotes from their recent earnings call, which called out creativity, data and technology at the heart of that. Work has really started in earnest and speaks focus for us as a company over the coming months.

Now on Slide 36, no earnings call beginning in 2022 would complete without some reference to the Metaverse, and this is no different. I think everyone has their own definition of what the Metaverse is. I think we think about it as really being the digital equivalent of the sort of analog world and the way those 2 worlds merge together. So think about virtual world versus real world or NFT versus owning the real product or real money to cryptocurrency is really the merging of that digital and analog world.

There's no doubt since Facebook's rebranding that this has captured client imagination. But more importantly, I think it is a substantial and growing area of our business. You think about where consumers are spending their time, the 55 million daily users of Roblox where consumers are spending their money, the $54 billion spent on virtual goods in a recent JPMorgan study. And it is an opportunity for us to help our clients find new and creative ways to help them through.

We launched this week the Metaverse Foundry at Hogarth. That brings together a team of more than 700 people to help our clients execute their ideas in the Metaverse. We are sharing 2 ideas of work from WPP companies in the Metaverse. The first one is for EMI and the band Bastille. And what you'll see is us taking their new album and putting it into a virtual world. Just sort of the band in the sense the band playing a concert that you watch in Fortnite, we had the band play. We filmed it with special 3D cameras to create a world that consumers can inhabit. We do that in partnership with Epic Games and with Microsoft. And this experience will be launching soon. And this film is a sneak preview of that new launch. So would you please play the first film?

(presentation)

So that's a sneak preview of what we're launching. Second piece I wanted to show is the Under Armour. It really celebrates Steph Curry's 3-point records in basketball. I think the film is relatively straightforward even to a British audience. What's important is I think the customer engagement we had. We launched 2,974 NFT sneakers. They sold out in a minute, but about 4.5 million people tried to buy them. I think what's also interesting is as you can see how NFT sneakers you could wear them in different virtual worlds. We negotiated with 4 different virtual worlds to have them play, including Decentraland and Sandbox. So I think the film is mostly explanatory. Can you please play the second film?

(presentation)

So I think what's insightful about that film is the degree of customer engagement you can get with no paid media, 4.5 million people engaged. So I think it demonstrates the potential of the metaverse while today there may be more sort of heightened interest than reality. I think it is going to grow. It is increasingly important to our clients. And we have WPP an important role to play and capabilities through companies like the Metaverse Foundry, our investments in business like (inaudible) to help our clients navigate it.

So on Page 37, talking about -- a little bit about the future and our priorities in accelerating our growth. But we've covered a lot of ground. Just a few closing words on our projects for the year. I think it's a little bit more of the same as 2021, but perhaps pushing harder. For our people, it's about bringing them back into offices on a flexible way, adapting to the future of work, giving them more opportunities across WPP and driving the D&I agenda. Innovation is about continuing to invest in creativity, but also investing in new products and services across the company such as the work that we're doing with Choreograph, but the work we're doing with Xaxis or Finecast. And lastly, transformation where we're making very solid progress on a 4- to 5-year program, but it's a real major opportunity for us in an area to free up investment that we can invest back into the business to further accelerate our growth.

So in summary on Page 38. Look, I think 2021 was really a very strong year. We went well beyond a cyclical recovery that you can see that our strategy is delivering results for our people, for our clients and for our shareholders through the numbers. We do enter 2022 well positioned in high-growth markets. I think, importantly, we have now the financial firepower to invest in growth through talent, through capabilities organically and through M&A while rewarding our shareholders today. And our transformation program is further significant potential to enhance that investment and reinvest in growth.

So a good year behind us. I think, notwithstanding today's events, we have to understand today and in the future that we enter 2022 with confidence. Now just one point. I wanted to finish to say thank you before we move to the Q&A, really to thank Fran Butera, who I think all of you know, Fran is retiring next week. He's really been a linchpin of our Investor Relations efforts in the U.S. for more than 20 years. He knows our industry and our business as well as anyone else. He's been a great help to me personally and to our team. And we really valued his calm demeanor through many of the events, his insights into our business and his collaborative spirit. So Fran, thank you very much. I'm sure many of us on the call would like to thank you as well. We wish him all the best. So thanks, Fran, thanks to all the people at WPP and to our clients for their hard work (inaudible) us through 2021.

And let's turn to the Q&A.

(Operator Instructions) We will now take our first question from Tom Singlehurst of Citi.

It's Tom here from Citi. And just echo thanks to Fran for all the hard work over the years. But a couple of questions, if that's okay. Firstly, on the outlook for revenue. You've got that very strong new business performance from last year, but you've ended up sort of opting for a sort of guidance level, at least initially, that's essentially in line with what the other big agency groups are saying at 5%. And I'm just interested in whether you are factoring in much of an additional pickup from new business. And just broadly, how we should think about the sort of relative outlook for WPP versus the market in 2022? It would be great to get some insights on that, to begin with.

And then the second question was on head count. John has prepared the ground for staff costs to sort of move up as a percentage of sales. So -- and then obviously, there's a bit of buffer with the incentive cost. But I'm interested in the interplay between sort of pure wage inflation and head count. How much will head count go up and whether there are any challenges in hiring?

And then very finally, on cash usage. I noticed, by numerator, you've effectively been putting some more money into Kantar, which makes sense given the strong progress they're making now. I'm just interested, overall, on your strategic view vis-à-vis Kantar and whether once this transformation is completed there, whether you anticipate staying strategically and vote for the longer term?

Okay. All right. Why don't I tackle the Kantar question and then John and I will tackle the outlook together and then John can continue on in terms of the head count? On Kantar, we're partners with Bain Capital, and we'll see where that ends up. You say the business is doing well. And we and they are aligned in supporting the company for the moment. Too early to talk about sort of what the next step should be.

I think on in terms of the outlook and guidance for 2022 and the sort of relative performance competitively, we obviously do our budgets and our forecast independently of our competition. The industry consensus was at 3.3%, I think coming out at around 5%, reflects a strong competitive performance and the new business that were there, I don't know. John, add to that? And then...

Yes. Look, I think it's -- I think, in a way, I look at it in terms of the new business sort of really underpins the 5% growth. We've got obviously much better visibility on that new business as a result of the Coke win. So I think we can, notwithstanding the situation, of course, that we've seen today, we can go into 2022 with strong confidence and strong visibility of that 5% growth.

I think in relation to your question on the head count, we started 2021 with about 1,000 people. We finished 2021 with about -- sorry, 100,000 people. We finished 2021 with 109,000 people. So we added a lot of head count through 2021, reflecting the high net sales growth, of course.

But actually, the average across 2021 was about 102,000. So we added quite a lot of people towards the back end of last year. And again, very much in anticipation of that strong growth coming through in 2022. I do think, clearly, we will add more head count as we go through 2022, reflecting that 5% growth. I wouldn't like to sort of forecast at this stage how much, but it might be of the order of 5,000 or 6,000 people or so. And we will probably also see about 4% to 5% inflation come through in relation to salary.

Now -- so all of that sort of obviously goes straight to the bottom line. But at the same time, given the growth levels and the operational gearing for the business we could deliver, we only expect staff costs to be a 25 basis point drag on our margin through 2022. So we do expect those costs to increase. But equally, we expect to see some operational gearing come through net-net the 25 bps drag for the year. Hope that makes sense.

Our next question is from Lisa Yang of Goldman Sachs.

Wishing all my best to Fran as well. Three questions, if I may. Firstly is a follow-up on the outlook guidance. So I'm just wondering if you could maybe share any color in terms of the latest client sentiment and whether you've seen any impact at all at this point from inflationary pressure or, obviously, the recent geographical tensions, although it might still be a little bit early. If you could just help us understand really how you constructed that 5% guidance and how much is factoring from, let's say, the GroupM's trends, contribution from new growth areas, contribution from new business, that will be very helpful.

Second question is on the buyback, the use of cash. Clearly, the buyback being running well ahead of expectations. Your balance sheet is very strong to, doing GBP 800 million both 2021, 2022. How should we think about the level buyback beyond 2023? I think previously, John, you said GBP 300 million to GBP 400 million. But given the pace of the buyback so far, just wondering if -- could we expect more?

And the third question is on the tax rate. I saw it was going up a bit more than what we had expected to 25.5% in 2022. And of course, you have the U.K. tax rate increase in 2023. So yes, just wondering like what's really driving that. And how should we think about the tax rate from 2023 as well? Because I don't think I heard any other companies talking about that yet for 2022.

Okay. Why don't I talk a little bit about what I'm hearing from clients? And then John can sort of underpin that with how you think about building up the forecast and then continue. Look, I think, as I talk to clients, look, notwithstanding the events today, and I think you're right it's too early really to -- it's not the right time to really try and understand the impact of what's happening in Ukraine on the year. There's obviously a concern.

But I think clients -- if you think about our business, there's 3 sectors: technology, consumer packaged business and health care that have been really pretty strong over the last 2 years on a 2-year basis. Then you have sectors like retail, travel and tourism that have come back more strongly and probably have some way to go. And the same is true a little bit geographically. I think people focused a lot on consumer packaged goods because it is a big part of our business and maybe the most visible.

And I'd say their clients are tarnished by input costs. At the same time, when I talk to them, there is a desire to maintain their spend. Now they have to make commercial decisions. But I think that inflation has historically been not a negative for our industry. It's more what central banks do to try and rein inflation in that is negative. But per se, clients are looking to increase their pricing to premiumize their product, to innovate, need to support that with marketing business. And I think that's what they're trying to do where they can. So I think that's the way I think about sort of what I'm hearing from clients. John, what do you think about how we sort of help Lisa on how we sort of filled up the budget?

I mean the other thing I would say to build on your comments, Mark, there are significant markets, particularly in APAC and some parts of Europe, about 9 of our top 20, and also sectors, to Mark's comment, sectors such as leisure and transport that still haven't returned to 2019 levels given the COVID impact. And we would, all else being equal, notwithstanding the impact of the results of today, but we would expect those to recover in 2022. So that gives us, I think, some confidence and some visibility in that 5% growth.

And as I said earlier in response to Tom's question as well, I think the new business and the visibility that we have, obviously, particularly around Coke, also gives us confidence in that 5%. So I'd say we've probably got more visibility and more confidence in that 5% growth than we would ordinarily have at this point in time in the year. So hopefully, that gives you a little bit of a flavor as to how we're feeling about the 12 months ahead.

Coming now to your questions on the buyback and the GBP 800 million we've got planned for 2022. I mean I think the simple way to look at the buyback, again, is just to refer you back to our capital allocation strategy, which we outlined at the Capital Markets Day in December 2022 (sic) [December 2021] where we clearly said, first and foremost, it's our intention to invest in our growth.

I think you've seen that reflected in 2021. You will make significant investments in our people, in our incentive schemes, our salary increases. We've made significant investments in parts of our business like Choreograph, Xaxis and so forth. So that's our first and #1 priority is to grow organically. Our second is to pay a dividend, and you've seen the increase in our dividend year-on-year, and that's also important to us and of course, our shareholders as a business.

Our third priority is to then focus on M&A and M&A -- particularly M&A that drives future growth in our business and where there are synergies between the businesses that we acquire and WPP where we can leverage our scale and help support the growth. And then the fourth is to return any excess to shareholders in the form of share buyback, particularly against the parameters of a net debt-to-EBITDA of 1.5 to 1.75x as a target. So we exited the year at 0.9x, significantly below our guided range. So it shouldn't be a surprise to anyone, therefore, that we're announcing an GBP 800 million share buyback for this year.

I think, what does that mean going forward, well, if you assumed that our acquisitions remained at GBP 400 million or so, if you reflected the guidance we've given today on CapEx and restructuring and also performance, then all else being equal, you could expect the buyback program of a couple of hundred million dollars a year thereafter. But it's a big assumption to make that all else remains equal. Obviously, we have a strong balance sheet. We're very much focused, as Mark said, on looking at how we can grow the business going forward. And we have lots of flexibility. And so I think projecting buybacks beyond 2022 is a little bit challenging because there are so many things that could change between now and the end of 2022. But I'd just refer you back to the capital allocation policy. It's very clearly set out. Anything that allows us to within our balance sheet constraints to return cash, then we will do so.

In relation to the tax rate, you're absolutely right. It is slightly higher than we were previously guiding to. I just think it's simply a reflection of the current tax environment. Obviously, we have the impact of the increase coming through in the U.K. in 2023. We also have the impact of sort of U.S. tax reform, which is yet to be clear, but it's certainly moving in one direction. We have the OECD, BEPS program as well, which is likely to impact the future tax rate. What's clear, I think, to all corporates, the tax rates are going to go up, not (inaudible) to which has the need, of course, to fund the deficit created through the impact of COVID on our global economy. And so we think tax is moving in one direction.

We've given guidance for 2022 at 25.5%. I think it will go up in 2023 at this stage, I wouldn't like to say by how much. But clearly, it's a result of the international tax environment within which we operate.

We now have a question from Lina Ghayor of BNP Paribas Exane.

Lina here. I have 3, if that's okay. The first one is on GroupM. You mentioned digital billings were 43% of total billings. I was hoping you could help us think about the transition towards more and more digital billings. So at what stage should we expect this 43% to increase?

The second question is on your M&A ambition. You did not change your M&A envelope for 2022 while some of your peers are accelerating or doubling down on bolt-on acquisitions. Any specific reason for that? Or are you just happy with this envelope and later on see the need to increase it?

And finally, on third-party cookies. It's been a while since you last updated us on where your clients stand in terms of preparing for a cookie-less world and how you can help them navigate that. So any comments on that would be great as well.

Okay. So look, I think, on GroupM, the 43% digital, I think, is a reflection of the clients that GroupM work with and a pattern of geographic mix. China is a sort of 90% digital market, and that 43% would be a much higher number if you were in China. But I think that -- witness the Super Bowl and the growth of traditional -- both digital media has grown strongly in '20 and '21. Traditional media declines in '20, has bounced back strongly in '21. So I think clients need to reach consumers where they are, and consumers do spend a lot of time in traditional as well as in digital media. So I think our business reflects that. Now there's no doubt that clients are shifting more and more of their media dollars into digital media, both because that's where consumers are going and because clients are looking for the data and targeting that they need, and that was at the hope -- sorry, at the heart of our proposition to The Coca-Cola Company. So I would expect our business to transition in line with the market from 43% over the next few years, if anything, maybe somewhat faster as larger companies catch up with smaller companies in terms of where they want to shift their spend.

In terms of M&A, I think we gave sort of -- I wouldn't want to call it guidance. It's really how we think about it, and the amount that we spend will be determined by the opportunities that we see, then what's important as we come into the year a strong position from a balance sheet and finance perspective with good opportunities ahead of us. And it may well be that, hopefully, we find opportunities that cause us to spend a little bit more than that, but I think it depends on events and we wouldn't want to change what was sort of guidance we gave 15 months ago for that.

On the cookie-less world, I think we talked about this at length. I think, from a WPP or marketing service industry, it's a neutral to net positive impact for us as our clients seek to use data in their marketing in a world that's more data-driven. There's no doubt, I think, that as we've seen in the financial results and evaluations of the major technology companies, that has an impact on their business. But I think, from our perspective, it's much more about shifting budgets between the major players when it is reducing the absolute level of spend that clients place on media. So the cookie-less world sort of disadvantages those players that have less data and those media players that have fewer opted-in consumers and also those companies that have, to some extent, relied on the wild west of the cookie to collect data from across the Internet, something that I don't think is possible or even probably the right thing to do in a more privacy-compliant world. So from our perspective, the data continues to be a hard offer to our clients.

Their role is to drive both targeting and measurement of performance through the use of data, and there's many interesting ways that we can do that without cookies. We can look at targeting people based on context and content, on weather. Our investments in AI are designed to replace a lot of the signal strength that we've lost from the cookie and other things that we can infer from marketing for our clients. So I think there's a tremendous amount of opportunity. And what's interesting is what the team at Satalia is trying to think about doing in terms of how we use AI to replace some of that sort of signal lost from the cookie, okay?

Our next line is Dan Salmon of BMO Capital Markets.

Okay. Great. Taking the early shift. So Mark, I have 2 questions. The first for you is a bit more of a big-picture one. We touched on it once again today. How much has changed through the pandemic? There was already a lot changing before the pandemic. So I was just curious to ask you your big-picture views on the role of the holding company generally. Your competitive set continues to change and evolve. Can you talk maybe a little bit about what you see as the key strengths and weaknesses of the holding company structure today and how you might see it evolving over the next few years?

And then a second one, either for you or for John. WPP, like all of your peers now, are forecasting around 5% organic revenue growth for the year. Do you think mid-single-digit organic revenue growth is the new normal for the industry? Or is there still a little bit of COVID follow-through impact on that?

Okay. Well, why don't I do the first? And John do the second to suggest. Look, I think, increasingly, we think about WPP as a company and not a holding company. And that's something that we said actually for the last 3.5 to 4 years. I think, as you say rightly, the pandemic has changed a lot. There's very few periods where we see such significant consumer changes that we've seen, but it's largely been an acceleration of trends that we knew before the growth of digital media, the growth of e-commerce, the shift to video, explosion of mobile. I mean the only thing that's probably a surprise has been the sort of resurrection of the QR code that we thought has died, but in many other ways, the pandemic sort of accelerated all the trends we thought we saw.

I think what clients need is simplicity and integration. And what that means is that WPP needs to come closer together, be more of a company. And that is the type of company and the culture that we've been focused on building for the last 3 years. They also, I think, need strong creative ideas. And creativity is at the heart of our offer and our culture. Again, I think that's something that -- but I need to combine that with an understanding and in-depth and decent understanding of the way the world is changing of technology, of data and ability to execute and operate that around the world.

And as I said, I think, in the presentation, if you look at the relationship that we're building with The Coca-Cola Company, it's, in many ways, I think, the type of relationship of the future and the type of relationship we want to have with our clients. I mean it's -- I'd say it's an amazing number of clients have asked -- talked to us since that about what it means in what they're trying to achieve. What I think what they're saying is that creativity and ideas remain critical, but they obviously need to have global partners with reach and breadth and scale to be able to execute those around the world as well as an understanding of how to use data in their marketing and how technology is changing the way they reach consumers. And I think, if you look at WPP and a pretty unique set of capabilities, I think that we're in an excellent position to deliver that.

And I'll make one comment on your second question, which doesn't answer it directly, but I think addresses the first, which is, it's not the end of the world if everyone is guiding to 5%. Because actually, it implies the strong demand for the services that our industry provides. And I think that that's a positive thing, not a negative thing. But now I'll leave John to tell you what we're going to do, why are we going to continue to perform competitively strongly.

Thanks, Mark. Yes. Look, I mean, Dan, as I said earlier on in my presentation, we're not changing our previous guidance for 2023 today. So obviously, we said (inaudible) 3.5% to 4% and like-for-like of 2.5% to 3%. And we're reiterating that guidance again today for 2023 and beyond.

That said, of course, we are very consciously invested in those high-growth areas of our business. As I said earlier, on data within Choreograph, in commerce, particularly within Wunderman Thompson, but in other parts of our business as well. So we're very confident of investing in those high-growth areas. You'll see in the announcement that we talked about our mix is definitely changing. So within our global integrated agencies, stripping out GroupM, which is largely communications-driven, 38% of the work that we are doing is in the areas of commerce, experience and technology. And these are very high-growth areas. A couple of years ago, that 38% was 36%. So we are definitively changing the mix of our business into those parts of the market that are growing at double digit. So at some point, that will translate into our longer-term growth potential. We're excited about the performance in 2021. We're confident about our performance going into 2022 at 5%. And we're doing all the right things to lay the groundwork for future growth in 2023 and beyond, but we're not updating our guidance in that respect today.

Our next question is from Matti Littunen of Bernstein.

First question relating to that, the reiteration of the 2023 guidance. I also recall in the Capital Markets Day in 2020 you gave sort of a target for the revenue mix in 2025. It's sort of 40-60 mix at group level with 40% coming from commerce, technology and experience. Would you sort of still retain that target? And are you sort of tracking towards that sort of number? Or is it a bit too early to say?

Then related to that revenue mix, could you sort of -- I would love to hear your thoughts on how do you think that would potentially impact the cyclicality of your sort of overall net revenues?

And then final question on China. Some sequential improvement on the 2-year stack growth there. Could you give us a bit of color on what was driving that and how you expect that to continue as far as you can tell into early 2022?

So maybe I'll pick up the first one and then maybe Mark may comment on some of the others. Look, I think, in a way, in terms of that 40-60 split that we gave you at the Capital Markets Day, we're in some ways victim of our own success because our GroupM business, which is primarily communications business, has grown so well and we anticipate to grow further over the years ahead. And the consequence of that is it's somewhat distorting the great underlying success that we're seeing in our creative globally integrated agencies in relation to the move towards those high-growth areas of commerce, experience and technology.

So I think we're not coming off that 46% target per se, but I think what we are saying is that, given the growth of GroupM, we are focusing more on the mix in the creative agencies and the great progress that we've seen over the last couple of years. So I think we'll be reporting on that number more readily because we think it's a better reflection of what's happening in the underlying business rather than an aggregated number across the business.

In terms of cyclicality, again, I think the business is incredibly robust. We're investing in these areas, technology, experience, commerce, and seeing huge growth in commerce and have been advising many of our clients. I think about 75% of our top clients we're doing some form of commerce-related work for. We do see these as being very strong revenue streams going forward. So I think if that gives us a degree of robustness in our business model, then I think that is the case. I don't expect us to be particularly cyclical over the years ahead. We can divert or increasingly divest a lot of our work into these high-growth areas.

In relation to China and the 2-year recovery, I mean I think we signaled this at the interims where I said we expected to see recovery come through in the second half. And we did see that come through very clearly. We're still, that said, below where we were in 2019, which is disappointing. And so we still think -- and that's true of not just China, but that's true of quite a few of our Asian markets, reflecting perhaps, if you like, the more intense lockdown that we've seen in parts of the globe. So we do expect to see some recovery to come back in 2022. I would -- I mean you put as sort of mid-single-digit-type growth in 2022 in China, I think that would be consistent with our forecast. I think we will expect to see some further recovery, particularly in the luxury and travel areas, where we over-index, and also automotive, where we over-index in China. So we're confident of seeing that growth come through mid-single-digits for 2022.

I mean -- what I might add, I don't know if it addresses your question directly. I think if I were sort of thinking about an investment in WPP, I was looking at what is the strategic progress the company is making, what is our competitive performance and what is the relevance of our offer, which I think are all questions that people had about the group 3 years ago. I'd look at 2022 as very positive. Now we don't break down our 5% guidance by sector or country, even though you might like us to.

But what I would say is, if you look at the 5%, the U.S.A. is not -- is around the 5% and our creative agencies are around 5% level. And those are 2 important strategic questions that I think investors had about WPP 3 years ago, indeed, over the last 3 years. And so coming off the back of a strong 2021 into 2022, delivering growth of around the average of the group in those 2 areas, I think it's a very strong indication of, first, our strategic progress; secondly, of our competitive performance; and thirdly, the relevance of our offer to clients. And so I'm sort of keen that we put these sort of strategic questions to bed. I know we probably never will. But I think that -- those are the things that you need to think about in terms of what is going to be the long-term performance of the company as an investment for our shareholders.

I think just to build a little bit on Mark's comments there as well, we do obviously have forecast for our business cut by country, cut by agency, cut by sector. And what's really interesting, actually, if I look at the 2022 budget numbers, whichever dimension you want to look at it, geographically or by agency, it's really consistent. It's about 5%. There aren't any massive overperformance or any massive underperformance. And that actually gives me a lot of confidence going into the year. We've got a very robust business across the board. We're not just relying on one particular geography or one particular agency to drive our growth. We're seeing it very consistent. And given that -- that budget, by the way, is built up from the bottom up by the businesses. It's in some ways coincidental that, that 5% or broadly 5% price across all these different areas is consistent across the business.

Plenty more answers than I had questions, so thank you very much for that.

That's all right. As always we are above you.

Above and beyond.

Our next question is from Matthew Walker of Credit Suisse.

Hope you can hear me okay. First question was -- the first question was on the topical thing matter there, you've got a new company, Foundry, deal with metaverse. What kind of scale of revenue do you expect to get from metaverse? How do you sort of define it in '22? And do you think that advertising in the metaverse from clients, do you think it's basically just spend which is shifting from other things, from other media? Or is it sort of truly incremental to the client budget?

The second question is just interested in your thoughts on what happened with Google and Meta. Do you think the clients are just pulling away from Meta because of privacy issues and putting the money with Google? I'd be interested in your thoughts on that.

And then finally, probably a less popular question. And obviously, you said that purpose is at the heart of WPP and the offer. And yes, some of your rankings have improved. But I was just wondering like you do have quite a lot of fossil fuel companies. And some people maybe unkindly, have pointed out that with fossil fuel companies like a small change in their output, pretty much wipes out all of what we is trying to achieve by themselves. So how do you feel about continuing to work with fossil fuel companies? Because they often talk about how they're going to improve themselves, but the vast, vast majority of what they do is still in fossil fuel.

Okay. Why don't we start there, Matthew, and I'll answer that directly. I prefer energy companies, but we still do work with a number of energy companies. I think it's fair to say that we want to work with companies to share our value and share the move to low carbon future. And energy companies are in the process of doing that. They may not be doing that at the speed and pace which would please all commentators, but they are shifting their investments. I do think that those companies have and should communicate what they're doing to consumers and to other stakeholders that that's the right thing for them to do, but they have to do that in a way that is fair and accurate, and that does not involve greenwashing. Something, by the way, that's increasingly difficult to do if you want to do it in a much more sort of transparent and social media-led world.

So I think, for us at WPP, we do look at the clients we work with, and there are clients that we have declined in that sector. Secondly, we have to make sure that all of the work that we do for them conforms to the highest standards of fairness, of accuracy, provide training and we do have discussions with those clients and what they're doing. And I think that as we continue to work on this transition, we should be there to support them on that transition.

Turning to the Metaverse. Look, clearly, Facebook's rebranding captured the world's imagination, if you like. We do talk about 700 people in our Metaverse Foundry, which isn't a new company. It's really part of Hogarth production.

We're not launching more companies. We are trying to simplify the office part of Hogarth, it really is designed to highlight the expertise in that area. I think -- look, it's an interesting question. Is it additive or not? I mean if you look at GroupM's forecast, 20% growth last year, 10% growth this year, 5% to 6% next year in advertising spend, it's clear that the advertising paid media industry is in a healthy place. If you look at that work we did with Under Armour, there was no paid media involved in it. We earned a fee for our involvement in it. They raised, I think, $2 million or $3 million to charity and had 4.5 million consumers engaging it. So I think it's, to some extent, I wouldn't necessarily call it additive, but I would certainly call it incremental and it reflects the growth in sort of fee in relation to paid media that we see in our business. And we'll have to see how big -- I saw some very large JPMorgan numbers that people are a little bit skeptical about for the Metaverse.

But if you think about where the trends are growing, where the innovation is going, I think people are spending more time in these virtual environments. And it's easy to be cynical about it, just as people were cynical about people watching video on mobile phones 10 or 15 years ago. It's very hard to judge, I think, exactly what the impact will be.

On Google and Meta, I think what you're seeing really is a shift in spend driven by the ROI of those investments. And logic would tell you that if Facebook has access to less data and is therefore -- and that data was driving higher ROI, loss of access to that data would drive a lower ROI and would cause clients to shift budget towards those platforms that can drive a higher ROI, i.e., Google who through their search data have probably a bigger sense of what intent is. So I think that it's not necessarily in relation to privacy issues. It's more really in relation to where clients seek the highest ROI. We are seeing tremendous growth in our spend actually on TikTok. We saw our spend on TikTok grow 5x in 2021. And I think, again, if you look at the ROI on TikTok, it's really pretty high because the consumer audience has grown faster than marketers' ability to shift their budgets there. And our job is to search out the highest ROI for our clients' media spend and find those media properties where they can get that. And actually, platforms like TikTok, which are probably slightly underleveraged relative to the consumer audience, should be attractive. So that's what we do for our clients. And I think that's the impact that you see in their financial results and hence valuation.

Our next question is from Sarah Simon of Berenberg.

Sorry. Most of the interesting questions have been answered, so I just had a couple. John, you gave us some new phasing of the restructuring. Can you just remind us or just point us to the page where the cash restructuring or the new phasing of cash restructuring is laid out?

Secondly, on Russia, just to tick the box. Can you remind us what the exposure is to kind of Russia, Ukraine, broader Eastern Europe? And then the sort of big interesting one. Obviously, Mark, you were just talking about the shift in terms of (inaudible) just on the changes they've announced to Android. Do you think that -- I mean, do you think, overall, this is going to result in more spend going to walled gardens and that's Facebook included? Or do you think this will result in a more even playing field?

Well, I think, naturally, it will involve more spend going to walled garden than people that have logged-in users. Now the -- I think given a fair amount of time to phase it out, so it's not going to have an immediate impact. But I think that clients seek out -- the value of data is the ability for it to improve your ROI. Clients will seek out those companies to have that, and that would tend to be the walled gardens. So Facebook will benefit on one side by being a walled garden and will have a disbenefit on the other by not having access to the Android data, and we'll have to see where those 2 things net out.

And Sarah, just on your other 2 questions. On restructuring and the cash component, we don't actually set that out, to be honest. It's quite a simple response because the vast majority of our restructuring costs going forward will be cash. So hopefully, that's clear to all that we've guided to in relation to Workday cost, GBP 350 million, and also the GBP 200 million, GBP 250 million on other restructuring over '22 to '25 of our majority of that is cash. So I think that's a simple way to look at it.

In relation to your question on exposure to Russia, yes, less than 1% of our of our revenue sits within Russia. I don't have the numbers direct to hand in relation to Eastern Europe. Obviously, it depends on how you define that as well, but it's a relatively small percentage. It won't be much above sort of low single-digit percentage-wise. So we don't have a high exposure to those geographies. But as we said at the very beginning of the call, the issue is much more about the potential broader macroeconomic impact of what's going on in Ukraine today, and that could clearly have global implications, not just local ones.

There are no further questions at this time. I will now hand the call over to Mr. Mark Read for further closing remarks.

All right. Well, thank you, everyone, for your questions. Thank you, in particular, to our clients for their confidence in us; our people, for their hard work in 2021. I think it's a very strong set of results, and we face 2022 with confidence. Our thoughts like yours are with the news in Ukraine, which I'm sure we'll continue to follow throughout the day. So thank you, everyone, for your questions and your attendance and look forward to speaking with you soon.