WPP PLC (WPP) 2014 Q2 法說會逐字稿

Good afternoon, everybody, or good morning if you happen to be in New York, or elsewhere in the world where it is morning. I am joined -- this is the half-year call and presentation for WPP. And I am joined on my left by Adam Smith -- the wonderfully named Adam Smith, who is Futures Director -- not Future Director, but Futures Director at GroupM. And he is going to talk a little bit about this year -- next year, the GroupM forecast and media spending around the world. And on my right, Paul Richardson, our CFO; and Chris Sweetland, off-camera at the moment, will come in to talk a little bit about our backroom development.

So, we have a very long presentation. I hope you will bear with us, as there is a lot of detail. There is a lot of information we are giving on half one, particularly given the currency movements. And we have split into a number of sections.

Paul is going to lead off with a summary of the interim results. Then, Adam is going to going to talk a little bit about GroupM's forecast this year and next year, which have recently come out, for the prospects for 2014 and 2015, in terms of media spending. I will come back in to talk about our four core strategic priorities and the key objectives.

And in the course of that, Chris will say a little bit about -- Chris Sweetland, Deputy Finance Director at WPP -- will talk a little bit about back office and what we are doing in terms of synergies in the back office. And I will talk a little bit further about outlooks and conclusions. And then, after an hour or so, we will have Q&A.

So, over to Paul, first.

Okay. Thank you, Martin. I am going to cover about 40 slides, the half-year results, and I will take you through it. I will try and turn the slides at the same time as I am speaking to them.

So, in the first half, billings were up 5.7% on a constant-currency basis. They were down 3% on a reported basis at GBP22 billion, after the impact of foreign exchange. There was revenue growth of 11.3% on a constant-currency basis, and 8.7% like for like. This reduced to a growth of 2.7% after the effect of foreign exchange, which is minus 8.6%.

The net sales growth, which is probably the truer indicator of our underlying performance, grew on a constant-currency basis up 6.4%, and was up 4.1% on a like-for-like basis. This reduced, after the impact of currency being minus 8.3%, to reported net sales down 1.9%. Headline profits before interest and tax of GBP622 million were up 9% on a constant-currency basis, but down 2.4% on a reported basis. The reported net sales margin of 13% was flat with last year, but up 0.3 margin points on a constant and like-for-like basis, in line with our margin goal of 0.3 margin points improvement on a full-year basis, before the impact of foreign exchange.

Headline diluted earnings per share were up 2.8% to 29.2p, up 17% on a constant-currency basis. And we raised the interim ordinary dividend by 10% to 11.62p, a pay-out ratio of 40% versus 37% the year before. We were number one in all new business lead tables for the first half, and have been so for the prior two years.

Turning now to slide 5 in the presentation: So, we had a summary of the interim results, and I am going to focus on the constant-currency rates of growth, and you can see there on the net sales line up 6.4%, on the net sales margin, as I mentioned, up 0.3 margin points to 13%, and on diluted earnings per share, up 17% to 29.2p. Also of note is the reduction in the average net debt for the first half of the year at GBP2.7 billion, down from GBP3.1 billion the year before, which has brought our average-net-debt-to-EBITDA ratio to a low of 1.5 times, down from 1.8 times a year ago, equaling the level we achieved in 2007, also at 1.5 times, and at the lower end of our 1.5 to 2 times range in terms of leverage. And finally, on headcount, an increase of 1.5% in staff over the last 12 months, compared to the prior half-year, and our valuation on the enterprise value to EBITDA has remained at around 10 times this half-year, compared to last half-year.

In terms of the headline PBIT, as you can see there, the GBP622 million is before a couple of items. We had an exceptional gain on disposals and step-ups of around GBP23 million. And we took an exceptional charge of restructuring cost of GBP9 million on the consolidation of the IT infrastructure, which is moving ahead. So, before that, profits would have been GBP636 million, but we excluded those from the headline numbers, so reported headline PBIT of GBP622 million, ie, the 13% margin.

In terms of how we fared against our targets, so on like-for-like sales growth, our target was above 3%, and we achieved that obviously at 4.1%. We had constant-currency net sales margin improvement of 0.3 points, which is in line with our target. And a reported basis; so, we try to achieve a 10% to 15% EPS growth each year. We achieved 2.8% on a reported basis for the far half-year, and achieved a 17% on a constant-currency basis for the half-year, so achieved our goal there.

In terms of currency, the story is very similar to as we saw it back in February for the year ahead. And I think these charts are very illustrative of the strength of the pound, and how it has moved month by month over the various -- over the last 18 months. You can see here on the bottom chart in the orange, how the pound began to strengthen from July 2013 up to, which it was then around $1.52 towards $1.64 in December of 2013, and had continued to strengthen to $1.72.

It has now fallen back a bit to $1.68 on the chart; in fact, it is down at $1.66. But you can see the impact of what it has had on this first half's results, in terms of the strength of the sterling being 6% stronger against the dollar in quarter one, and 8.7% stronger in quarter two. And if the rates remain as we had forecast at $1.68 in this particular chart, you will see the same impact, but declining 8% in quarter three, and just under 4% in quarter four. So, that is the impact versus the US dollar -- the pound strength.

If we turn to the same, against the euro, you could see a very similar shape to the pattern; however, the strength of the pound is probably most accentuated in quarter three, where the pound would be about 6.6% stronger compared to quarter three a year before. If we look at the same against the basket of currencies, in Asia Pacific, Latin America, Africa and the Middle East, you can see a very similar pattern, where the pound has been very strong for the first and second quarter, and a declining level of relative strength as the year progresses.

So, putting all that together, what did it do for the first half in terms of the revenue picture? So, revenues of GBP5.3 billion grew organically by 8.7%, with acquisitions added 2.6%, and then foreign exchange took off 8.6%. So, revenues for the first half reported were up 2.7% to GBP5.5 billion.

Likewise on net sales growth, taking the same analysis, we had net sales of GBP4.9 billion. At a year ago, we have added 4.1% from organic, we have added 2.3% from acquisitions, but foreign exchange has declined the impact to minus 8.3%. So, overall, we are down nearly 2% on a reported net sales basis.

If we look to the effects of currencies in the faster-growing markets collectively -- if you look here on quarter one and quarter two, you can see it's around a 15% impact in terms of their weakness versus the strength of sterling. And what we have also is the high-margin US markets were hit, but not by the same degree; they were down by 8% versus the pound, ie, the US dollar.

In terms of what the impact has been on the margin, it is a very similar picture to what we saw at the end of last year, in the higher-margin markets become a smaller part of our total pie, the European markets with lower margins became a larger part of the total picture. And then the overhead incentives, which are principally denominated in pounds and dollars, are not reduced by the same amount. And, therefore, the overall effect has been to take 0.3 margin points off due to currency. When we look at this same picture for the full year, we are expecting the effect of currency to knock 20 basis points off the full-year constant-currency margin outlook.

Again, telling just a few other currencies, you can see here some of the faster growing markets such as South Africa or the India rupee for example, they have declined something like 19% against India, or 26% against the South Africa rand. So, there continues to be very strong local depreciation of currency versus the pound. When we pull that together over the four quarters, we are expecting the full-year impact to remain at about minus 7% to minus 6% over the full year, or on the net revenues as we predicted at the start of the year.

So, turning now to the headline P&L, on slide 17, focusing really on the constant-currency lines of the graph. So, net sales are up 6.4%, as I mentioned. You had PBIT at GBP622 million, up 9% on a constant-currency basis.

And finance costs of GBP90 million are down significantly compared to a year ago, through a combination of two factors. One was obviously the re-issuance of new bonds at a lower coupon has had a benefit, and also we got some higher interest income from investments carrying in this year, which will continue in the second half of the year. So, when we put that together on a full-year expectation, the GBP90 million of interest in the first half will probably total GBP185 million of interest for the full year, compared to GBP204 million of interest the year before.

Tax rate at 20% is in line with where we were at the end of last year, but is a reduction from the last half-year reported tax rate at 21.8%. It's brought it down to 20%. So, bringing that through down to diluted EPS, on a constant-currency basis, we are up 17%, and on a reported basis we were up almost 3%.

If we then turn to the statutory reported P&L, it's a very similar picture in terms of the operating profit line. So, we have operating profits up 10%, but we had two or three actual benefits in the reported numbers that came through. So, amortization of goodwill intangibles has reduced by GBP20 million, from GBP94 million first half of last year to GBP74 million first half of this year. Again, that is post a major acquisition, five years into the amortization, parts of those intangibles have been fully amortized. So, total GBP20 million has dropped out of amortization expense.

We got a further benefit on interest as well, as we terminated some swaps at the end of their life, and realized a further GBP20 million of profit, so the interest was, again, on a reported basis, went from GBP90 million closer to GBP70 million. And those two elements combined, brought with it the benefit in terms of reported statutory EPS up 25% to 27p, compared to 21.5p the year before.

Turning now to the makeup of our revenues -- as we have gone through before. So, we had organic growth of 4.1% in top line, acquisitions added 2.3%, giving 6.4% constant-currency rate of growth. Foreign exchange was negative 8.3%, hence our reported minus1.9% reported net sales performance.

If we were a dollar-reporting company, our net sales would have grown at 6%, our profits would have grown at 6% on a reported basis, and our EPS would have grown at 12%. So, a marked difference would have been seen if we were a dollar-reporting company, as opposed to a sterling-reporting company.

Turning now to the revenues by discipline: On a net sales basis first -- so, advertising, media investment management represents 44% of the group. And as you can see there, had a range of revenues that I am going to talk about. So, on a reported basis, they were affected by currency, so minus 1.2%. As you know, currency in the US dollar is approximately minus 8%, so on a constant-currency basis, our North American revenues are growing at 7.8%. That include some acquisitions, so on a like-for-like basis, our North American revenues are growing at 5.9%.

A like-for-like basis -- I am going to compare our disciplines and regions through the first half, both by quarter one and quarter two. So, for North America, the growth in like-for-like was 5.9%. In quarter one, it was 5.7%; improved slightly in quarter two to 6.1% like-for-like growth.

On the same measures, our data investment management business, which is 18% of the group currently, grew its like-for-like revenues 1.2% for the first half, moving from 0.6% growth in quarter one, to 1.7% growth in quarter two on a like-for-like basis. Our public relations/public affairs business, approximately 10% of the group, had organic like-for-like growth of 2.7% in the quarter, accelerating from the 1.9% growth in quarter one, to 3.5% in quarter two. And our branding identity healthcare specialist businesses, representing around 29% of the group today, had a very even 3.8% growth for the first half, being 3.7% in quarter one and 3.8% in quarter two. If we then looked overall at our direct, digital interactive revenues, which account for approximately 36% of the group, they grew on a like-for-like basis by 7.7% in the first half.

Turning now to net sales by region -- so, first looking at North America, which represents 35% of the group, it grew at 4.3% organically in the first half. Quarter one was 4.4% and quarter two 4.1%, so, remarkably consistent.

Our UK business, which is 14% of the operations, grew both -- grew the most strongly of all regions, 6.9% organically top-line net sales growth, having grown at 7.3% in quarter one, and 6.5% in quarter two.

In western continental Europe, which is 22% of the group, this half-year had 0.6% overall growth in the first half, slowing slightly from the 1.7% growth in quarter one, to minus 0.3% in quarter two. And in the second quarter, although France, Spain, and Turkey improved their rates of growth, Germany, Holland, Belgium [definitely] slipped back somewhat in terms of their rates of growth that they experienced in the second quarter.

I think most pleasingly in Asia-Pacific, Latin America, Africa and the Middle East, which is around 29% of the group today, organic growth was strong at 5.5%, accelerating the 3.2% growth in quarter one to 7.5% growth in the second quarter. And that was principally through growth, or faster rates of growth, in Central and Eastern Europe, and in the -- as the end markets such as Singapore, Indonesia, Vietnam, and the Philippines.

Turning now to margins, which obviously, in one sense, there is not a great deal to say because margins are flat. But taking you through each individual business line, in terms of advertising, margins 14.7% will remain flat on a reported basis compared to a year ago. On a constant-currency basis, where the group overall had 0.3 margin improvement, they also will likewise improve their constant-currency margin by 0.3 margin points.

Our data investment management business grew margins on a reported basis by 0.1 point to 10.5%. They were the most impacted by the currency impact on margins. And on a constant-currency basis, the data investment management businesses grew margins by 0.8%.

Public relations/public affairs had a good rebound in margins, growing margins from 13.2% last year, by 1.8 margin points to 15% in the first half. And our branding identity healthcare specialist businesses had margins 11.2% on a reported basis, down 1 margin point, with some pressures from the branding identity businesses, and some restructuring charges we took in that discipline, but they were less down on a constant-currency margin basis.

Turning now to the same information by geography: North America had a good performance in top-line revenues, and reported a 0.3 improvement in margins to 14.9%. And the UK also has been a strong market for us -- a strong performance in profitability. Its margins were basically flat or down 0.2%, partially through its increased overhead burden through the businesses, but their margin performance at 13.7% was very credible.

In western continental Europe, we kept pace with our profitability in the past, at margins improving 0.1% to 9.3% margin for the first half. And in Asia-Pacific, Latin America, Africa and the Middle East, Central and Eastern Europe -- again, our margins are most impacted by currencies. We were down 0.6% overall in the first half to a margin of 13.1%, down from 13.7%.

Turning now to the mix of revenues and net sales. We have broken the globe or the world down into nine regions. And these -- this is the difference where either the direct cost in our research business, or the billings of our digital media businesses, flow through into the revenue line.

So, those regions with, I think, the strongest GroupM digital presence are likely to have the biggest differentiation being revenues and net sales. And you can see this quite clearly in North America, which, on a revenue basis, was growing at 10%, and on a net sales basis was growing at 4.3%. But in terms of these markets, reported on a revenue basis, you can see that mature markets grew at 8.7%, as did the faster growth markets. And there were some double-digit growth of revenues in the UK at 15%, North America at 10%, and Asia Pacific at 12%.

If I then turn to, on a net sales basis, exactly the same information -- yes, there we are -- with total net sales of GBP4.8 billion, as opposed to total revenues of GBP5.5 billion, you can see the group overall grew at 4.1%, the mature markets growing at 3.6%, and the faster growing markets growing at 5.5%. All nine regions growing, apart from Asia-Pacific -- sorry, apart from ANZ, in the region there, which is basically flat. Asia Pacific was up 6%, Middle East up 3.8%, western continental Europe as we mentioned up 0.6%, UK strong at nearly 7%, North America at 4%, and Latin America at 6%. So, you can see there the pattern of growth across on a net sales basis.

We then take this one step further, and show you the top five markets in the group, both on the revenues and on the net sales growth, both for this half-year and the two prior periods. And you can see where either the research business is particularly strong, or the [group had] digital business is particularly strong or both, those markets which are most impacted between the difference in revenues and net sales. And that looks like being the USA, UK, greater China, and Germany are all impacted quite significantly by this change, in terms of the flow through on revenue or net sales.

When we do the same for the BRIC markets, overall -- again, you can see the impacts coming through. India, as we have mentioned, has been a strong market for us, and first [up] this year, as has Russia in the first half, although we are expecting a weaker second half coming through from Russia.

So, looking at net sales by country, it's really very much the picture you have just been gone through. Other markets of note which were strong was Turkey was good in the first half; Mexico, Holland, Poland, other example were above-average growth in the first half. But no more detail on that; it's all there for you to take in, in due course. And in terms of client categories, of the major categories, it is good to see above average growth in the automotive and financial services.

In terms of net new business wins -- this is trade estimates -- but you can see here on the shaded part of the slide, of the 12 largest new business wins we have had in the first half, eight have come through in the second quarter. And actually of those eight, half are creative and half are media, so some very significant wins across the group here coming through in the second quarter. And likewise on the second page of wins, where there are six noted, four have come through in the second quarter of this period. Likewise, one loss that came through, reasonably significant in terms of one of the loss of Microsoft business, but otherwise a moderate number of losses coming through.

So, when we look at our own internal estimates of billings, they are basically $4.1 billion of billings won in the first half of this year, a similar number to that which was won in the first half of last year. And in both cases, the second-quarter billings, which are now [a case with] $2.8 billion in quarter two, were very strong, as it was last year at $2.6 billion. So, we have had a pick up in new business being $1.2 billion in quarter one to $2.8 billion in quarter two, making a total of $4.1 billion for the half year. But we did equally as well last year in the prior period.

When I look at what we have done since the 1st of July, again, there have been a number of wins, one switch [and] one business from Allianz from Grey to [Ogilvy], but a number of global wins -- four global wins and two local wins coming through since July.

In terms of strength of balance sheet and cash flow, a strong conversion of the operating profit of GBP531 million into cash generation after taxes and interest of GBP511 million. But I think more interesting in terms of our uses of cash, we have spent quite heavily on the acquisition payments in the first half of this year, compared to a year ago. So, the new acquisitions or new initial payments in total GBP207 million, compared to GBP91 million.

Fortunately, capital expenditure was quite heavy last year, [we were fitting out 3 Columbus Circle], so that is down significantly in this first half. And then on share buybacks, where last half-year we bought in around 1% of share capital costing GBP133 million. This half-year, we bought in 2.3% of share capital costing GBP390 million. So, we were cash-negative in the first half to the tune of GBP199 million.

That comes through a little bit in terms of the net debt picture, as at June 30, which was GBP240 million worse than it was a year ago. However, on average, either at June or July, in the range of GBP350 million better on average on net debt coming through at the half year. And as we said earlier, pleasingly, we have got down to our low end of the target on leverage at 1.5 times. And as the graph illustrates here, we peaked in 2009 at 2.8 times multiple -- sorry, at 2.5 times multiple, and have brought it back down to 1.5 times, in line with our -- it was 2.8, was it -- in line with our goal. It's a long time ago now.

So, in terms of our objectives for the year -- so, acquisitions, we talked around GBP300 million to GBP400 million of acquisition spend on a full-year basis. We are obviously keeping pace with that rate, having spent GBP207 million in the first half of this year. Share buybacks -- as I mentioned, the goal is to buy an approximately 3% of share capital. Again, we are on rate for that, having bought in 2.3% in the first half.

And our dividend payout, which was increased by 10%, increased the pay-out ratio of the half-year from 37% payout to 40%. And last year having achieved a 42% payout, the Board think we are likely to achieve a 45% payout this year, given performance -- or current performance and trading conditions. In addition, we did increase our bank facility, and extend the duration from November 2016, in July, to July 2019, and put aside an extra GBP500 million of liquidity on our bank facility at the same time.

So, in terms of the reported numbers, just summarizing on the slide, we were up 2.8% to 29.2p. And in terms of the share count -- I won't go through the detail, but we have had the impact of the convertible come through into the basic numbers, but on a fully diluted basis, which is slide 42 in my presentation, shares are down on average 0.5% at the half-year stage.

And with that, I will hand over to Adam.

Thank you. As some of you may know, twice a year GroupM does a sweep of forecasts. We are trying to predict the growth in annual advertising investments. We cover about 75 countries, and these are the headlines from our July sweep.

We have 4.5% predicted growth for this year, 2014, which is unchanged from our position coming into the year in December. Within this number, we have movement in the shape of a slightly higher momentum in the USA, compensating for a mild disappointment in the Eurozone, which is having trouble getting off the starting line with its ad recovery, and a little bit of a revision to Russia and the Ukraine, and a couple of the smaller Southeast Asian economies -- I am thinking of Thailand and Malaysia.

Moving into 2015, our first bottoms-up prediction for that year is a small acceleration to 5% in ad investment growth. The prime motives for this are, once again, in the USA with building its recovery; China's consumer economy, which continues to grow a little ahead of its general economy. And marginal improvement from Japan, which remains, by some way, the third-largest ad market in the world; and in terms of advertising, it seems to be weathering the consumer tax increase reasonably well, at least to the extent we predicted it would. And finally, on 2015, we expect and hope for a little bit of an improvement from the Eurozone.

So, this is slide 46, and it is showing a ratio of advertising investment to GDP. As a picture of slow global recovery now in its fifth year, the advertising intensity ratio, that is the percent of share of GDP, is stable at around 0.7%, which -- its recent high point going back to 2000 and the dot-com boom was 0.9%. And of which time, the faster growth markets accounted for only 10% of recorded ad investment.

That percentage is now 36%, and continues to increase at about 1 point a year. That explains most of the apparent fall in the advertising intensity ratio. Those younger or faster-growing markets are contributing about 60% of the new ad dollars that we identify.

This means that in late this year sometime, we expect to pass, in real terms, the advertising investment peak achieved in 2007. The older, industrialized world has yet to recover this, and will not recover it even in our model forecasts, which go out to 2019. The main reason for that is the Eurozone, which is 25% lower than its peak in real terms currently. The faster growth world has, on the other hand, never had an ad recession; it collectively -- it paused for growth in 2009; and in the six years from 2000, it doubled in size. And in the 12 years we are tracking from that point on, it will have doubled again, we think.

Our top quartile of countries of the 75 that we cover account for 93% of advertising growth this year. And among those, the top eight are these on chart 48. Our dependence for growth on this group this year is just about 80% of total ad dollars, which is high by historic standards, but we have been as high as 90% in recent years.

The main movement in this chart has been Russia coming off a 10% run rate of growth, to something like 6% now, and India moving in the reverse direction from single digits to -- into the double-digit growth, again, on the back of hopes with the new Modi administration. It also shows us the proportional contribution of the USA, which is nearly a quarter of growth; and China, which is 30%.

This chart, which is number 49, shows us the relative contributions of digital media and traditional media. As with the younger markets, digital is contributing about 60% of our forecast growth. It is rather more concentrated in the older, established markets, where press, of course, is still in fairly rapid retreat, compared to the faster growth markets, which don't have anything like the size of print legacy to erode. Digital shares of ad budgets in the west are 23%, and the faster growth markets are rapidly closing on this percentage themselves -- this year 19%; next year we expect 22%.

My final chart just summarizes the regional growth rates in our forecast. The principal movement here is, and I would draw your attention to is Central and Eastern Europe, where Russia accounts for about half of total investment, and has, of course, been subject to revisions. News from GroupM in Moscow is that we have had no expenditure cuts as a direct result of sanctions, although this may yet happen. But at the moment, they attribute the reduction in growth to more macro disappointments with Russia's economy generally.

At the same time, they point out that ad budgets are set annually, and expected to be held to by media owners. So, the unpredictability really comes in, in calendar 2015. And meanwhile, we have buying opportunities, especially in TV in Russia for those advertisers that want to increase their spend there.

And a final point about Russia is that it has benefited somewhat in recent years from being relatively more attractive to advertisers than other parts of Central and Eastern Europe. So, that polarity might possibly reverse.

I will hand over now to Sir Martin.

Thank you very much, Adam. So, as usual, we are going to now look at our four core strategic priorities. But before we go into those, just following up on what Adam had to say about GDP growth.

Slide 52 just compares the nominal forecast for GDP, the historic GDP and forecast from Goldman Sachs, and compares it to a WPP nominal GDP, bearing in mind that whilst we have very strong Asian and Latin American and African and Middle Eastern and Central Eastern European business, stronger than most, if not all, in relation to our competition, what we have is a very different distribution to worldwide GDP. So, the WPP GDP is, in a sense, quite different. But you can see that gap narrowing between the orange line and the blue line -- orange being Goldman Sachs and blue line being WPP's adjusted -- and it's narrowing because the fast growth markets have slowed down -- still growing faster than the slow growth markets -- and of course, the mature markets have flipped up.

The orange dotted line is the forecast by Goldman for the full year of 2014, and you will see the blue hatched line is the Business Council forecast. It is interesting: The Business Council, along with the International Business Council of the WEF, or the World Economic Forum, which had its summer meeting in Geneva on Thursday and Friday -- they were similarly conservative. It was interesting that clients I think tend to be a little bit more conservative about GDP forecasts than ourselves or our forecasters.

Now, turning to the macro and micro background, macro -- we are certainly seeing uniformly, as Adam has mentioned, higher nominal and real GDP projections for 2015, and at greater than 2014 -- 2014 around 4.5% to 5%; 2015, 5% to 5.5%. And there has been a recovery in the US and UK, and it has been very strong in the UK. UK GDP is rising at about 4% currently. And there is some signs of stabilization in the rest of the Eurozone, although we have had some disappointing statistics -- GDP statistics from Italy and from France, although the reorganization of the government in France may augur better times ahead, in terms of budget deficit control and management.

There is, in addition, at a macro level, pressure on traditional media from viewing habits and significant activity in new media. And whilst events like the Supreme Court disallowance or suppression of Aereo in the US, what we have seen is elsewhere in the world, for example, in Sweden the growth of the Aereo Mobile, which has, as Adam has indicated, put some pressure on, for example, the Swedish linear television market. And there remain, finally, the concerns over Syria, the Ukraine, the Middle East, and the implications of the Ebola health crisis.

I would say on these geopolitical events, which have now risen to the fore, if you were looking at the position a year ago, for example, at meetings in Geneva last week, the point of greatest concern was the Eurozone stability, or lack of it, and what Mario Draghi could do. And Mario Draghi has done an extremely good job and stabilized the Eurozone, although he is indicating today there will be further stimulus.

But I would think that that has -- or I think that that has been replaced by concerns -- geopolitical concerns -- particularly about the Middle East, but even more so about Russia and the Ukraine. And when you remember that Germany is Russia's biggest trading partner, obviously the implications for Germany, if sanctions are going to bite, which we believe they probably will, the implications are quite significant. It is interesting also, the (inaudible) come out, and said they want to see greater discussion and communication between Russia and the West on the sanctions and their implications.

So, at a micro level, on the right-hand side of the slide, the geopolitical issues have replaced the Eurozone in terms of concern. Clients are obviously focused on following consumers. And as Adam has pointed out, those consumers and media opportunities are very much in the new media, the digital growing faster, and the faster growing markets despite the slowdown of many of those markets. But the client investment in capacity and brands is really confined to the faster growth markets, whereas in the slow growth, mature markets it is very focused on brand alone.

There is a growing importance of areas of activity which involve what we call horizontality, which is getting people to work together more effectively. And that is epitomized by the growth of big data and the noise surrounding that. But also [shopper] marketing, and we found that to be a very useful entree, in addition, say, to digital to client accounts that we didn't have access to. And we have already announced a major new business assignment in North America in shopper marketing, and there are more to come, which will take us into budgets that hitherto in clients, that hither to, we didn't access.

Having said all that, there is still a great emphasis on efficiency and effectiveness, and it's still key with clients. And there is pressure on pricing, and indeed on payment terms, and we don't think that pressure is likely to relax. I was asked this morning, in this morning's analyst presentation, whether it was cyclical or structural, this pressure? I think it's a bit of both, and it would be unrealistic to believe it would go away. So, there is pressure for continuous improvement.

And finally, we have seen post [pog], if I could put it that way -- Omnicom and Publicis trying to make up the ground they lost as a result of those merger discussions which took on nine months, and there have been varying results. I think our overall conclusion was that Omnicom was being more effective in dealing with it, than Publicis, although if you look at the net new business wins, they have come pretty heavily both from Omnicom and Publicis, and in fact, less so from the other competitors maybe with the exception of Dentsu, but certainly less from a Havas or IPG.

On 54, we have tried to summarize the competitive situation, and show market cap to EBITDA -- those are the diamonds -- ratings, market caps, revenues and EBITDA for 2013. Interestingly, in terms of market capitalization now, Nielsen is the second-largest company, ahead of Omnicom, with Publicis at fifth, and the rest you can see on that slide. And obviously, there are some challenges, for example, in data investment management surrounding one or two of our competitors that they have been trying to deal with.

In terms of our strategy, it is four-fold. It is very simple: It's new markets, it's new media, it's data, investment management, and the application of technology to our Business, and then horizontality. In terms of the faster growing markets, they are about 30% of our Business. Currently, we are hoping to be to 40% to 45% each year.

Currency, on the assumption that currency remains stable, we see a 1% increase in faster growth markets as a proportion of our Business, and acquisitions are very focused on those faster growth markets and grow by about 1%. So, every year, we should see a 2% improvement to get us to our target of 40% to 45%. In five years, we will be at the southerly end of that 40% to 45%.

As far as new media is concerned, we start higher up the chain at 36%, again, with 1% sort of share gain and 1% growth from acquisitions. And again, after five years, we should be at the northerly end of the 40% to 45% range.

Data investment management is well placed at 25% of our Business. And if you add the digital quantitative areas, we're over 50%. And horizontality -- we are starting to see very significant benefits in terms of the yield from team initiatives that we take, and I will come on to that in a second.

If you look at the pie charts on 56, this is today's position: 29% new markets in the first half, 36% new media, and quantitative 51%. Tomorrow, meaning 4 to 5 years hence, 40% to 45% in each of new markets and new media, and quantitative remaining at 50%.

On slide 58, we have tracked the growth of our revenue in faster growth markets, and compared it to the competition. And you can see, despite significant acquisition activities of our competitors in the faster growth markets, the gap really has not lessened. And some of that acquisition activity is resulting in poorer performance that we have seen in some of the organic growth rates quoted, for example, in India and China recently, significant deterioration because of overpricing and limited or poor structures.

On 59, we have just shown the growth of our BRIC market businesses, very impressive -- at least we find them impressive -- compound average growth rates: 16% for Greater China. China, as Paul mentioned, flattened in Q1, but up significantly in Q2. So, some recovery there, probably driven by the credit expansion in China, but it has continued into Q3.

Brazil -- compound average growth rate over 13 years at 12% -- slowed this year, even in front of the World Cup. We have to see what happens in the election. The very sad death of Eduardo Campos leaves Marina Silva in a stronger position. And some of the polls that we are seeing seem to indicate that if the election goes to a second round, which it is probably likely to do, that Marina Silva may be very well placed. So there may be some significant changes in Brazil in the coming months.

India -- we were there last week in Mumbai, launching our top 50 India brands -- the BrandZ survey. India growing at a compound average growth rate of 14% over 13 years -- very strong business there, with a very strong share. And certainly expectations around the new Prime Minister Modi are very high, not euphoria yet, but very strong. But he is a doer, and the hope is he will do across the nation what he did in Gujarat when he was the Senior Minister in that province, but there are 29 provinces or states in India to manage.

And lastly, Russia, which we touched on before -- Adam and Paul had mentioned 13-year compound average growth rate of 47%. But, of course, we've had a very strong first half, but whether that will last, given sanctions, and the attitude to sanctions, we have to see.

60 just delineates where we are in the fast growth markets -- generally a number-one ranking with the exception of Mexico and Russia.

And on 61, we show our media billings and position worldwide, number one worldwide, and number one in Europe and Asia-Pacific. And then, highlighting the change in new media, which Adam I think really described extremely well and very simply.

On 62, we have just included the chart that comes from Mary Meeker's analysis each year. She does a long slide analysis about as long as this one. Each year -- it is on YouTube. You can Google it -- Mary Meeker. And this is the US distribution of time spent by consumers against ad spend. And it is interesting for the discontinuities here.

And I think there are two, possibly three, that it is worth saying a little bit on. The first on the left-hand side of the chart: Consumers spend about 5% of their time on print, of the old type, felling trees and distributing newsprint. Whereas, we as an industry, and this is an industry data for the US, spend about 19% of budgets. Clearly, there is a disequilibrium there. Radio about equal -- I will come back to TV in a minute.

But internet and mobile: Internet about 25% of time spent, and internet approaching -- spending approaching where it should be. But on mobile, there is a big discrepancy -- 20% of time spent. So, 45% of consumers' time is on internet and mobile, and yet we are only spending about 26%. So, clearly, there is a big opportunity priced at about $30 billion of opportunity in the US, in order to get those two things, internet and mobile, into balance.

The third thing that is really interesting is the first time we are seeing a gap between many of what Adam calls linear TV, or what I would call legacy TV, at 38% of time spent, and 40% of ad spend. So, there is starting to be a difference between, or that we have seen, with legacy media elsewhere, maybe with television. And maybe that is a phenomenon that we are going to see, not just in the US, but elsewhere in the world.

On 63, we just take you through our strategy in digital, digital everywhere, specialist expertise, and emphasis on data and technology, and partnering with digital leaders. I would just point out: Our habit is not to guarantee media spends with our clients' investments. What we tend to do is try and build relationships on data. For example, Twitter -- we measure television audience markets in 40 markets, and internet markets, in 40 markets of the world. And we have entered into an agreement with Twitter to use their data to show how engagement -- consumer engagement is amplifying with the use of tablets and smartphones. So, we have the data to show greater engagement.

On 64, we spend a little time explaining about Xaxis. It is now over 800 employees in 40 markets -- has billings of approaching $800 million, almost 3,000 clients, and has grown year on year by 26%. You can see the growth rates for each region with the launch in MENA, in the Middle East and North Africa, it was -- the launch was in Q1 of 2014.

I just want to correct some misapprehensions that came out of some of our competitors -- Omnicom's call a few weeks ago. Firstly, Xaxis is an opt-in, and was the first with an opt-in approach. [IQ] and I think was described as opt-in, but really Xaxis was there a long time before. I think Omnicom referred to a $40-million delta for IQ in Q2. The delta -- the same delta for Xaxis and WPP, and it is the reason that we now distinguish between revenues and net sales.

I would point out that none of our competitors makes that distinction. So, the true comparison between our revenues on the sales side should be with their revenues, because we are of the view that, if the [Accuen] figures are accurate, that that principle media buying in digital is becoming more and more significant. And to give you an idea of our scale, it is running at about 2 to 3 times bigger than the Accuen figure quoted in Q2 of this year.

On 65, we show the geographical penetration of Xaxis, grouped into four groups of markets. The blue countries are the mature markets, so-called for this purpose; the green markets are the growth markets; and the yellow markets are the new markets that were entered in 2014; and the pink markets are the ones that will be entered in 2015. So, clearly, unless we go to Mars or the moon, there will be a limit to what we can do, but the growth is significant, certainly for the foreseeable future.

And on 66, we just lay out what we regard as being the WPP advantage strategically, with these data and quantitative disciplines. And marketing has become more data-driven; the clients want more simplified and better utilization of data. They want real-time feedback. They want updated data, and they want data-driven or campaigns driven by data analytics. And we really do have a unique combination of real assets in research, audience measurement, data management and digital media.

And we made two acquisitions this morning. You may have seen one of them in data investment management in the United States by Kantar of InsightExpress, which is an exciting example of what -- exactly what I have just been talking about.

In terms of horizontality, getting people to work together more effectively, we now have 179,000 people in 3,000 offices in 110 countries. And these have access, interestingly, to almost $24 billion of annual revenues. So, whilst our annual revenues are projected by analysts to be around $19 billion, there is a further $5 billion that is accrued by associates. That is companies that we own 20% to 49% of.

Now, we too have two horizontal integrators. The first is at a client, while we now have 40 client leaders managing 40 of our global accounts, which account for about 35,000 people, and a third of our revenues -- it's about $6 billion out of the $19 billion or so that we see worldwide.

And in addition, we have another integrator at the country level; these are people who are focused, and their brief is to focus on people, on clients, and on acquisitions. And we are now covering about 50 of the 110 countries that we operate in, on a worldwide basis. And as I said before, the focus is on people, clients and acquisitions, ensuring our people work across functions and geographies, and delivering specialist skills like the shopper marketing I mentioned before, and the focus on client needs and their business issues. And we have had recent strong team wins at Vodafone, at Cavalry for Miller Light, at Tata for DoComo, and at Plus for Chanel, and last but not least, Allianz.

On 71, our clients like to talk about their billion-dollar brands, and we thought we should, too. There are eight of them currently: JWT, which will be changing its name to J. Walter Thompson Company celebrating its 150th year; Ogilvy; Y&R; Mediacom and Mindshare, two of our media brands; Wunderman; MillwardBrown; and last but not least, TNS.

Our strategy, as I have said, is very focused on digital and fast growth. Faster growth markets are 29%, digital are 36% of our revenues. That does not lead you to the conclusion that you add one and the other together to make 65%. There is an 8% lap-over, so it takes you down to 57% in digital and fast growth. But that lap-over between those two circles will increase over time, as the faster growth markets become more and more digital.

Now, let me just now turn to our key objectives, which remain the same as historically -- there are six of them: improving operating margins, improving flexibility in our cost base, using free cash flow to enhance shareowner value and improve return on capital, developing the role of the parent company, emphasizing revenue growth as margins improve, and improving the creative capabilities and reputation of all our businesses.

On slide 75, we just recounted our history, our margin history, profit before interest and taxes, and the first-half profits, the headline profits of GBP637 million in the first half of 2013, and GBP622 million in 2014. And I would just draw your attention to the dotted line at the top, which is the 19.7% net sales margin. We have adjusted our margin on revenues, with the new emphasis on net sales to a margin of 19.7%. So, this takes into account IFRS and TNS, just like we did with the margin on revenues, but adjust it to net sales.

So, we are not ducking the issue on margins. The margin target remains 19.7% long term.

Now, in order to achieve that, some of the things we have been doing is what we term operational effectiveness. And I would just like Chris to just say a few words -- a few slides about what we have been doing on process simplification, outsourcing and offshoring.

Okay. Thank you, Martin. So, we are focused on reducing our costs by changing our processes, and we are planning to do this through shared service centres which will generate scale, and improve our process efficiency. We are also going to use offshoring of certain tasks from high-cost markets with outsourcing where appropriate to take advantage of scale and skills of major providers. An example of that is in the US; I will talk about that in a minute.

We have also started a program of consolidation of IT infrastructure and provision of services, and centralizing the systems development and applications to really create the efficiencies and focus on investment. These programs collectively are projected to deliver over 100 basis points of margin improvement from about 10% of our cost base. We are still in the early stage of implementation of these programs; they take quite a long time to develop -- to deliver the full benefit. And really, over the next couple of charts, we want to give you a little bit more detail on what it is that we are doing.

Starting with the shared service centers, we are going to look -- talk a little bit about the US. We started our program in the US in 2012, offshoring finance and admin from the US in New York to India, where we partnered with Genpact. To give you a little bit of a feel for the leverage and arbitrage here, in the US, in New York, we were paying about $25,000 per annum to provide a desk, so the space for one of our finance people. In Delhi, we are paying $27,000 per annum for the space and the salaries and all other costs. So, there's a very big opportunity there. In the US, we started also with Kantar, bringing them into a shared service center, and we have plans to do PR and healthcare in 2015.

Looking at Europe, we started our UK shared service center for our major non-media businesses in 2012, and we brought in the media businesses in 2013, and Kantar will join in 2015. The point worth mentioning here is this brings not only cost benefits, but improvements in process, particularly in the area of net working capital, where we have seen our debt in the 30- to 60-day and 60- to 90-day come down dramatically, generating some quite good inflows. We are planning further shared service centers in 2015 for Spain and in France.

In Asia, we started with Australia, last year. We have now also set up India, and we are planning a hub for the smaller markets in Malaysia, which will open in 2015, and we are planning a shared service center to China in 2016. This is our start. We have activity in every region; we are also, in fact, planning a start in Mexico in 2015.

On the IT front, we started our program in 2013, with a planning and analysis process to estimate the costs and the opportunity. Our program goal is to consolidate WPP IT infrastructure into central organization, from our individual networks. Last year and part of this year, we had 12 individual CIOs with 12 strategies; and when problems were there to be solved, we made 12 solutions. Going forward, there will be one solution; there should be major efficiencies there.

We are working with strategic partners to deliver these savings, and that should also help us reduce the risks involved in delivering the savings. We will ask the partners to commit to certain hard numbers.

The cost of these start-ups are quite substantial, and Paul has already said to you that in the first half, we had exceptional costs of GBP9 million, and these will ramp up further in the second half. The benefits will start soon. The centralization will be operational in early 2015. It will break even in 2016, and deliver operational savings -- material savings from 2017 onwards.

That really summarizes where we stand on that, Martin.

Okay. So, if we go to slide 79, this just shows the flexibility in our cost base. And you can see that there is a proportion of revenues that is about 6.5% at the moment, and is of net sales 7.4%, which is at the north end -- at the top end of flexibility in our cost base.

In terms of using free cash flow, another one of our objectives to enhance shareowner value, you can see that the yield from buybacks and dividends over the years have grown generally. This is expressed as a proportion of the market cap. So, as the market cap has grown, the percentages become more and more difficult to achieve at the same levels. But you can see that in the first half of this year, there was about a 4% return in a mixture of buybacks and dividends.

And in terms of dividend pay-out ratio, as you can see on 81, we are well on track to deliver 45% payout by the end of this year, a year ahead of schedule. And the Board will have to sit down and decide whether it takes it further. I think the limit probably to dividend payout is around 50%, but the Board has to decide whether 45% should be replaced by 50% as a target.

On acquisitions, there's a very significant pipeline of reasonably priced small- and medium-sized acquisitions. We are very focused on the fast growth markets in digital. You see that this morning, for example, with the two acquisitions -- one in media in France, Media Investment Management on the digital side in France. The other, as I mentioned, with InsightExpress in the United States with Kantar.

We are very focused on new markets, like Myanmar, and maybe, in the long run, even markets like Cuba and Iran will become more open. There have been some signs of that perhaps starting to happen.

We have already executed 41 acquisitions with another 2 today making 43. So, we are continuing to find significant opportunities in most markets. I would say overpricing in the US in interactive and digital, and in Brazil and India, and that is clearly starting to show up in some of the like-for-like data that we see coming out, where there has been sharp declines probably because of excessive acquisition activity. Now, acquisitions as a whole are adding about 2% to 3% to our revenue growth.

On 83, we just list all the acquisitions. You can see they are listed as faster growth markets and quantitative, and then acquisitions that obey both of those objectives, faster growth and digital. And then, we have got the investments in acquisitions we have made since July 1. There are five of them here, and there's the incremental two this morning, which would follow the strategic objectives as well.

Now, last year we gave you a snapshot of the returns on these investments. We haven't made a large acquisition since 2008 with TNS, and we focused on smaller companies and medium size. We made 126 investments of this nature, where we have taken the majority stakes between 2009 to 2013 -- 20 in faster growth markets, 39 in quantitative and digital, and 50 covering both, with 17 in those client creative areas where we are trying to bolster existing client relationships.

The total revenue of those acquisitions in 2014 is forecasted $1.673 billion. The total consideration paid so far is $1.647 billion. So, you can see it is really roughly 1 for 1 in terms of sales and revenues.

And on 86, we show the returns. The top line, under the three titles of organic revenue growth, operating margin contribution, return on capital employed, is the data that we gave you last year for the returns on the then acquisitions. Of course, there have been some more, and you can see that the organic revenue growth is very similar. The pattern: faster growing markets, quantitative and digital in the fast and the mature markets, and in the faster growth markets, growing faster than client and creative.

Margins, interestingly, are very similar in all of those segments. And the return on capital employed is significantly in excess of our average cost of capital, which is 7%, ranging from 9% to 14% depending on what segment you are looking at. And you can see, it hasn't shifted dramatically from what we gave you before.

On this last objective of improving the creative capabilities and reputation, there is recruitment. There is recognizing a success, acquiring highly regarded businesses, placing greater emphasis on awards -- we were first at Cannes, as the Creative Holding Company of the year for the fourth time in a row, 2011, 2012, 2013, and 2014. We were the EFFIE's most effective holding company for the third year in a row, 2012, 2013, and 2014. And you have the points for Cannes this year for the holding companies.

And on 88, you have the ranks for the agencies, with our agencies at one and four, the two Ogilvy and Y&R. Ogilvy was voted network of the year in 2012, 2013, and 2014 at Cannes. Grey, in another rare occurrence in our industry, was voted by AdAge and AdWeek as Global Agency of the Year for 2014. And Ogilvy won EFFIE most Effective Agency of the year in 2012 and 2013.

So, finally, let me just turn to the conclusions. Strong start to the year in the first half, market-leading like-for-like revenue growth and net sales growth, and enhanced by over 2% of revenue growth from acquisitions. Margin improvement on a constant-currency and like-for-like basis of 30 basis points, 0.3 margin points, in line with the full-year target. However, we did have a strong ForEx headwind, amounting to about 8%, which had an impact on our revenue and results on net sales, and of course, resulting in the flat margin reported. Constant currency net sales up over 6%, profit before interest and taxes up 9%, and fully diluted EPS up 17%. The strong cash flow enabled us to invest GBP612 million in both acquisitions and buy back at the same time, 2.3% of the share capital.

The average-net-debt-to-EBITDA ratio is now 1.5 times. It is the lowest it has been for some years. And so, 2007, as Paul said, it got as high as 2.8 times; it is now 1.5 times. So, it gives us a lot of flexibility to increase the dividend pay-out ratio if required, share buybacks -- increase share buybacks -- and continue to make acquisitions. And the net new business record is now 2.5 years in the top position, of all the net new business tables.

Organic revenue growth and net sales growth of up to 5% is our financial model, supplemented with growth from acquisitions of another 0% to 5%. Margin improvement is 30 basis points. We lowered our basis-point target from 50 basis points to 30 basis points about a year ago. And with our long-term net sales margin target of 19.7%, we are not ducking that, because we're moving from revenue to net sales in terms of evaluation.

Our cash flow, which is about GBP1.4 billion, or $2 billion a year, with EBITDA being at $3 billion, our cash flow is strong and substantial to enhance EPS through acquisitions, to buy back shares and for debt reduction. And acquisitions tend to amount to about GBP300 million to GBP400 million a year, share buybacks 2% to 3%, and the pay-out ratio currently a target of 45%.

On the share buybacks, of course, when we shifted from 1.2% -- 1% to 2%, to 2% to 3%, we did that to make sure that our EPS would come out at 10% to 15% growth. Because having lowered the margin target from 50 basis points to 30 basis points, it was necessary to up the buybacks to achieve the 10% to 15%. And the incremental share buybacks, as I said, is equivalent to another 20 basis points on the margin.

And finally, our forecast -- that is the Q2 revised forecast -- indicates strong revenue growth and like-for-like net sales growth of well over 3%, margin improvement in line with our target of 30 basis points pre-currency, acquisitions to add more than 2% to revenue, at current exchange rates -- the pound having weakened slightly come off the top a bit. Current exchange rates, the full-year foreign-exchange headwind, as Paul said, will be about 6% to 7%, and the margin headwind 20 basis points. Headcount remains a center of focus for us, to enable our companies to enter 2015 with a low built-in cost increase. And operational effectiveness and efficiency programs, as Chris went through, are ramping up to deliver more and more in 2015 and 2016.

So, thanks for bearing with us on a lengthy presentation. It took about an hour, but now I will turn it over to the operator to corral the questions, please?

Thank you.

(Operator Instructions

We have a question from James (inaudible).

It appears that James is in traffic. Can we move on?

I am sorry, Martin, that is very accurate. Sorry, my apologies. Two questions and then maybe one follow-up.

There is still a little bit of data which you gave concerning potential changes in behavior. I think Adam you referenced perhaps declines for the first time in France for linear TV viewing numbers. So from your perspective, are you shifting more budgets to digital from TV this year than last year? And I would say in particular in the United States, and also in the UK, and if there is some difference in the way you are approaching the markets in those two markets I would be particularly interested.

Do you want to lead up on that Adam? We will come back to you James, when Adam has responded.

I can only tell you what we do in the UK in number terms. Last year, we had about 6% of what we call our audio visual budget went on to video-on-demand, or video as it is more commonly called in the US, and this year, we would expect it to be between 7% and 8%.

I am not sure what the US proportion is. The principal difference in the two markets and as far as I am aware is, of course, in US you have a more advanced form of measurement, of both linear or legacy TV, and online in the form of OCR and XCR, which we have not in the UK, and nor any sign of it yet. So that is -- could gives you some idea. I think it is a one-way street, James.

There is nothing in theory to stop the money returning back to legacy TV if it becomes a better buy for us. But it looks like at the moment it's an incremental growth, which is probably running ahead of the share of viewing, which is really all it takes as far as I can tell.

I would just add to Adam's point, James, it is that one of the things that we are watching very carefully. I don't think there have been radical shift in budgets to accommodate it, but I think it's one of the things that we are bearing in mind. What's your next question, James?

Yes it is kind of an ad related one as well. I think Adam, you mentioned perhaps in the UK forecast that it seems at least among WPP clients, the growth that they were making in their paid search spending seemed to be quite a bit above the market in the UK. UK is already a very digital market, but I am just curious as to whether you think you see that happening in any other developed markets? And why do you think that might be happening, like why big brands might be increasing their pace or spending in more developed markets, spend the overall pace that each market is growing?

Two main reasons. Firstly, the factored term, of course, if you are talking about Google, we have got YouTube in there, and YouTube's video assets are becoming more attractive to advertisers. And the important element to this is TrueView, of course, which tells us an element of viewing persistence as we call it, which takes away an element of risk for the advertiser.

The second main reason would be, I think the growth of e-commerce which is already roughly 3% of all household demand and growing -- was $1.5 trillion, and growing about 20% year. I think this is a big driver of search queries, and I don't know where the ceiling for that is.

Yes, I would just add to that if you look at our $75 billion media book, Google this year will probably take about $3 billion as opposed to $2.5 billion. The biggest elements of growth are what Adam mentioned, video and mobile search. So are those of the two areas where we see the strongest growth. James, anything else or can we move on from here?

Just one other, or I guess maybe a one two-parter relating more to your business. Would you say that your initiatives on IT and shared services, would make it easier to get revenue and cost synergies from a large acquisition? And then the follow-up just - -

Well, I think, the answer is in theory, yes. A hypothetical question, and this is not a hypothetical answer. There won't be the large acquisitions that you are implying. Anyway, go on.

And then any outlook for what the restructuring charges might be tracking for the full year. I think you mentioned there might be a ramp on that. I may have missed that but?

Go ahead, Paul.

I think it is sort of estimates at this stage, but I think on a full-year cost is likely to be in the sort of GBP20 million to GBP25 million, so further GBP15 million to GBP16 million likely in the second half.

Okay. And the difference in the mix modes, what those imply?

It is all principally the IT rationalization project, where actions, assuming we do actually get to find what we hope to find by the end of September, there are some actions we need to take in the final quarter of this year, to due to [raise the ship] of those to ready-state, to be alive and active in January 1, 2015.

Great. Thank you very much.

Can we move onto the next question, operator, please?

We take our next question from Dan Salmon of BMO Capital Markets. Please go ahead. Your line is open.

Hey, good afternoon, over there everyone, and hopefully there isn't as much of an echo. But --

We can hear you fine. Go ahead.

Okay, good. So I just wanted to ask a few questions more on WPP's work in programmatic. And the first one is more technical question, just as you are breaking out just sort of gross revenue and net sales now for us. If we look at some of the gap between the top line in the net sales number, especially some of the more mature markets in North America and UK, does that imply that your take rate of the spending that you are doing is decreasing or is there something else happening there that is driving that?

It is getting stronger, I think is the answer to that, Dan. I mean, these are markets where as you saw from the geographical map for Xaxis, these are markets where we started earliest, I think is where we are getting the greatest traction. So I think the reverse of what you are seeing - -

Well, (inaudible -- echoes) better. Not all of it the spend is falling down to the net sales line, does that imply that that volume is coming in at a lower incremental -- ?

No, I think broadly it does feed down to the net sales line. So and it is incremental.

And the volume of that programmatic media buying increases in relation to the rest of the business, that is what's driving the gap. Not the amount that we take out to the billings.

Correct.

Got it.

Okay? The traction rates.

And then the second question was, if you could talk a little bit about how you work problematic outside of Xaxis? Maybe right at some of the media buying agency levels at Mindshare and Mediacom and whatnot? I know the trading [gap] is getting a lot of attention, but we love to hear just low bit more about where else you are doing this type of work through the GroupM business?

Well, that is in, of course of development. You want to say a little bit about that Adam?

I am not very closely familiar with this except that the trade desk as it is referred to, I am not sure that is what we are going to be calling it permanently -- is a very important focus for us, because it's a service the clients require and one in which GroupM has a distinct advantage. In the term, as you may be aware we are not beholden to any particular data providers, and we can exert scale economies, which we can convert into advantage to clients. So it's a very important part of the strategy.

I would just add that, Xaxis is getting greater and greater traction as you can see from the statistics that we provide in the presentation. And that, for example, we had a discussion this morning in the Analysts call about [CritAir] and Rocket Fuel and what had happened at both of their evaluations and their numbers. And I think Xaxis is getting greater traction as a result.

And then, just the last question which is a perfect follow from that last comment is, as you take a long-term view, Sir Martin, of where these services are going long-term. How do you see the balance being what the holding companies and WPP are doing versus the technology providers and vendors? Obviously, I know you have taken a little bit more of a mixed approach from some of your own technology, but how do see that balance settling over the long term?

Well, I think it's becoming increasingly important, Dan. And I think you'll see us trying to deepen it. It iss not really the creation of technology, it is really more the application of technology, and what we are seeking to do is to apply it more deeply, and we will link with technology partners even more aggressively over the coming years. Nothing beyond what we say in terms of acquisition or investment in terms of the [GBP]300 million to [GBP]400 million, but I think emblematically and qualitatively stronger. So I think it's important to maintain or indeed develop our positions for Xaxis and other things that we do.

Great. Thank you.

Thank you.

We will take our next question from Brian Wieser from Pivotal Research. Please go ahead.

Thanks for taking the question. Two for you. First, I was wondering if you could elaborate on the margin pressures in the UK specifically? I thought it was about is interesting that you were flat year-over-year there, obviously no currency impact and you still had solid underlying growth?

And a second question, also following up on the panel, you mentioned this morning, which is actually I guess the Rubicon panel, I think Xaxis position is very clear regarding how they get paid. As Brian Lesser intimated that there are evidentially undisclosed rebates being paid by media owners and tech companies to other trading desks, and marketers are gradually becoming aware of that. Given the growing importance of trading desks to programmatic platforms, I was wondering if you could comment on the degree to which transparency and compensation makes a difference in new business at this point in time? Or if it is just one of many considerations marketers think about?

Well, I think -- let me answer the second one, and I will ask Paul to just talk about the UK margins, I think it's the constant currency like-for-like issue. But anyway, let me come back to Xaxis. I mean, what we see is -- and it is not disclosed pricing model Xaxis, and we have made that quite clear. We made it opt-in. And that is because of the data benefits that are built-in to the Xaxis platform and the technology benefits. But of course, I think Xaxis -- in the research that we have done -- and I stress that it is our research not external research -- pricing is about 30% better as a result of clients using Xaxis.

We believe that over time, those benefits are going to become even more pronounced, and even more effective in terms of communication. So we think that the Xaxis model will be very important. What is very important now, and will grow very important. In terms of transparency, transparency is important, and we are very transparent about what we do, and how we do it.

I mean, in the Omnicom call, John Wren sort of tried to suggest somewhat erroneously, because 24 hours later Daryl Simm who heads OMD group or OMG made the correction. That Accuren was an opt-in model and unique, it isn't. Xaxis has been an opt-in model since its inception -- in fact, we changed all of our contracts -- in fact ripped up all our contracts, and went into new contracts to make it clear that was the model. So we have been very clear about the nature of that model and how it will develop.

Paul, do you want to say?

Yes. I think on the UK, it's a very small difference. It is really actually a function of how well the UK done over the last couple of years. A high proportion of our -- principally US overhead switches, where all our global network and headquarter is pushed out of the UK, and there have been some currency impacts of that. But also there has just been a larger burden of overhead that is being pushed from the US to the UK, that slightly benefited the US, and slightly detrimentally impacted the UK.

Yes, and would just come back on your question, Brian. Really for us to get a true competitive comparison, I mean we are the only company that gives the net sales figure as opposed to the revenue figure.

It has now become apparent from the Omnicom call, that they do trade media. We are not clear from the Publicis calls whether that is case for not. This morning it was said that their margin degradation of 30 basis points was due to problems on digital trading. That was not our understanding, it was on technology.

But to clear all this stuff up, I think what we need to have is a standard where all the companies give their revenues and give their net sales. Because if you have got activities going on like food, brokerage operations, sell by tell operations, barter operations, there maybe -- and we have seen it with our own research -- operations what we call data investment management, there may be significant differences starting to develop, between what we call revenues and what we call net sales.

And you are asking about transparency, well this is been transparent about what is happening at the revenue level, and what is happening at the gross margin or net sales level.

No, I think on being transparent on that -- I guess, what I am getting at what was intimated at the panel, and certainly was very clear in my conversations with (inaudible) afterwards, was that there are definitely other agency trading desks that are seemingly taking undisclosed rebates, and some are some are seemingly not very happy. And you are at least transparent about not being non-transparent, others not even being transparent it sounds like. And so, I think that is coming up in your conversations with marketers.

Well, I think it's one of the reasons why clients has started to try and put together their own programmatic desks, because they feel they will have better control. I don't begin the longer run frankly, that will hold, given the nature of our business and what people want to do in relation to working with multiple clients. It is a bit like in-house agencies as opposed to outhouse agencies.

So I think it is a temporary phenomenon, but we will have to see how it goes. All we know is that we are making great progress with Xaxis. It is growing as I say from finding these targeted audiences for our clients, and overlaying -- or not even overlaying, making it as fundamental with data and technology benefits that clients get by using Xaxis. Do you want to add anything, Adam or not?

Only to make a distinction between what we still call a trade desk, although there is the terminology problematic buying units is entering circulation. To distinguish that from Xaxis, which is an audience buying model. Xaxis is not necessarily a trade desk, and that is just an important distinction, and some -- we offer both. And when I answered your first question, it was - - I was thinking in terms of the trade desk, the angle of that.

Okay, any more Brian? Are you -- ?

No. I'm good.

Thank you.

We take our next question from [Doug Arthur] of Evercore. Please go ahead, your line is open.

Yes, thanks. Two questions. Just -- I know Brian asked on the UK margins, just net sales clearly even with a little bit of a slowdown in July, is trending better than previously forecast. You are sticking with you margin guidance for the year -- currency. Is it mostly currency or is it still currency, and competitive pricing issues? So that's question one.

I'm sorry. So is it currency or competitive pricing issues in relation to what?

In relationship to the fact, that despite better net sales year-to-date, you are not really changing your margin guidance for the year?

No I think that's fair. I mean, I think we said a year or so ago that we lowered our margin guidance from 50 basis points to 30 basis points because of the pressure we see from clients, procurement finance, and because of the competitive pressures. So I think it's still the same. The currency will take a year to -- well, it is now six months, but a year from Q4 of last year to cycle its way through with either translation losses, these are not fundamental currency losses.

Okay. And then just specifically on public relations and public affairs, I mean you had a bit of an easy comp in the second-quarter, but growth has clearly strengthened quite a bit. A, I guess, if you see that is sustainable in second-half, and B kind of what is driving that?

Well, I think it's fair what you say, easier comparators, but we have seen an improvement. We specifically referenced Burson-Marsteller and Cohn & Wolfe specialist PR agencies in the press release. So I think it's a function of that, and we are hopeful that will continue as we go through the year.

Okay, great. Thank you.

We take our next question from Alexia Quadrani of JPMorgan. Please go ahead, your line is open.

Thanks. This is Townsend Buckles in for Alexia.

A deep Alexia, that's for sure. (Laughter).

Martin, you mentioned clients are feeling a bit more conservative about the macro outlook than maybe you in the forecast.

Yes.

I notice for next year has yet to really to get going, but if you can talk about your client's level of confidence to spend on marketing at the year-end and next?

Well, I hope that what will happen is -- I mean we had this M&A activity which I think surprised us -- it certainly surprised me if not the rest of my colleagues. And I think you can explain it in part. I mean there is a lot of net cash sitting on balance sheets, now up to over [$]7 trillion including -- according to Thomson Reuters with relatively unleveraged balance sheets.

So you could explain that on one level that, there is a fine line limit to what you can do a costs. So why don't we -- we being clients -- let's invest a little bit in acquisitions to get the top line growth going. And certainly when you look at the results from clients getting the top line result has been more difficult than the bottom line. And the bottom line is been achieved by cutting costs or being very tough on costs.

And some of the things that we see happening with 3G, and Valiant really sort of exacerbating that attention on cost. But it may be that we have reached some sort of finite level. And acquisitions are risky, particularly large acquisitions and pricing given where markets are high. It may be that a lot of the acquisition activity was driven for tax reasons, for inversion reason. I mean, we are seeing 3G today with Burger King and Horton's in Canada, and their headquarters will shift to Canada which I guess follows the Valiant inversion model.

So we are seeing that sort of activity. That may not last. What I hope will happen, is that as big clients look at 2015 that they start to come to the [immoral] conclusion, that flexibility in OpEx, in operating expenditure is key. And that therefore, and they invest in brands, not only in the fast-growth markets, where it is clear that they are doing that on the back of capacity increases. But they are also invest in building market share and maintaining sales or increasing sales in the mature markets.

So I think Adam's basic point is steady growth, low growth, certainly it is lower than we were experiencing pre-Lehman pre-2008, a low GDP growth. But it's there, the 4.5% or thereabouts, and for ad spend, and then 5% next year. We don't have any quadrennial events next year interestingly. We have the build-up to the presidential election in 2016. But beyond that and the build-up to the Summer Olympics in Brazil and the European football championship in 2016. But apart from that sort of build-up, there is no real reason from our point of view, I guess that 2015 should be better than 2014. But it looks as though, early forecast, that that that might be the case.

So I think one can feel a little bit optimistic. But you've got to put it in the constraints, that it still are verily difficult economic environment. And the problem, the point that we are making in our press releases et cetera, is that the environment, the uncertainty is being heightened by the sort of risks that we see in the Middle East, and now developing in the Ukraine and Russia, which could be quite serious. I thought it was interesting last week in the discussions that I attended that, the Ukraine and Russia assumed a much greater proportion -- a much greater degree of concern than I thought before I got involved in those conversations.

Thanks. And another one on the TV to online shift in viewership and ad spend, is your sense that TV has hit an inflection point where the shift is really accelerating? And do you feel the TV outlook for market share and growth going forward, at least in the mature markets is really weaker, from the prior days of the Twin Peaks as you have described TV and digital in the past?

And the follow-up on that, how you weigh the challenges and benefits to your business in this changing mix? I know you are growing digital capabilities aggressively, but is it a headwind if that core TV business slows down or starts to shrink?

I don't think it is going to surprise anybody, and tipping point just sounds a bit of the dramatic as if its -- I don't think TV is lined up for a decline like we have seen in print. And we know that TV is aging faster than the population in most developed markets. So we have got plenty of warning and we are working on it.

And as threat to the business, and advertisers -- well, I would point out to you the heavy use of TV by online brands, which suggests there is maybe a bit of difficulty substituting traditional TV with other media. But what we know is that it is difficult to measure the online audience, in the kind of standardized public way, that we have great used in measuring TV. This creates a risk for advertisers to create a job for us in creating and managing the data.

So I think the need will be as present as ever for advertisers to announce what they want to do, in a fast and high reach way. The method by which we do it is going to become quite a bit different. It is a bit cultural change for advertisers, who are used to seeing what their pay rate doing in a very public way, for it becomes less visible when it's going online.

So I don't see any fundamental loss of appetite, I do see a need to manage this transition which is what we are doing. I think it will be quite a slow burn thing.

And I just add to that I think what it does point out is the need to integrate it even more effectively, with what you call legacy or digital or whatever. To integrate, so for example, what we have done with Twitter in terms of building the data feeds, not guaranteeing spending on Twitter, but building the data feeds for our audience measurement such that we understand the nature of engagement amongst consumers.

I mean, the -- whether you talk about C plus 7 in terms of audience measurement, whether you are talking about this data being available to show that consumers are interacting more effectively with live programming, I think what you have got to do a show the links and the potential for integration.

That may -- I mean, what we are talking about, may have driven in part the original discussions between 20th Century Fox and Time Warner. And I think what we are bound to see more of that, these are deals that are taking place or attempted to take place for two reasons.

One is offensive reasons, to categorize on sports programming or HBO in that case or global capabilities. And the other part is defensive, to try and work against the growth of Google, Twitter or Facebook or whoever. So I think it is a little bit both. But really at the end of the day, don't worry about it, and let -- market, you see market, overall industrial expenditure declines.

Now we have been at this for 28 years. We show you the 28 year record of the company in the data, and in fact, I can put it up there. We have had three basic challenges in terms of timing, one was [91]2, the other was 2001, [2002] and the other was 2008. You don't see it in this chart, this is from the acquisition activity. But on a like-for-like basis, I mean, certainly it was significant. You see the organic growth rate there on 1996. It was [91], went negative in 2001, [2002].and then in 2009, that was probably a more realistic way.

Now it's [$]1 trillion industry, [$]500 billion in traditional and [$]500 billion in what we do elsewhere. As long as that market grows, it is, and if there is substitution, we don't - - we are not necessarily disadvantaged. So if traditional print moves into, let's call it digital print, or even if traditional TV moves into new TV, let's call it tablets and smartphones, that is not a disadvantage for us, it's an opportunity. Because as Adam has pointed out, we are sort of agnostic about where it goes. In fact, that's the point.

Now Google is a media owner, it is not a technology company, same for Facebook and same for twitter. And we just are sitting here, trying to decide where is the best place to invest if it was one client, the trillion dollars that client spends in one way or another in old media, new media, and adjacent areas.

Makes sense. Thank you.

We will take our next question from Peter Stabler of Wells Fargo Securities. Please go ahead, your line is open.

Hello. This is Steve filling in for Peter. I have two questions.

When you have portfolio companies within data investment management, do you see particular areas investment required? And is the decision of some large marketers to invest behind their own marketing data management solutions a threat or a non-issue for this segment?

Well, let's deal with that first. I mean, I think as we saw this morning, InsightExpress, if you will see if you look at the acquisitions that we have outlined in the presentation before, we continue to make investments both in operating expenditure, and acquisitions.

So giving an example on operating expenditure, we built the largest online panel in the world, Lightspeed, largely by organic growth. We did make one acquisition, GMI a year or so ago. But it is I think is up to [$]300 million of revenue, if my memory serves me right, we built that from scratch.

So in these -- we don't break it out separately, but in these margins for data investment management or indeed the company as a whole, there are sort of software investments or OpEx investments that are built-in. There are then acquisitions, like GMI in the case of Lightspeed or InsightExpress as we have done today. And there be more coming this year. There are acquisitions that we are making to expand the capabilities.

On the data clients, I mean, there are clients it is a bit like problematic buying. There are clients who rely on data, and want to develop their own data, but I would say that's good news for us. The opportunities for us to help them leverage that data -- and we are unique amongst the immediate competitors in having a data investment management business.

I mean it's interesting that Nielsen has become the second-largest company in the marketing services area, by certainly by market cap. Because I think that does show how it is becoming increasingly important, and I do think leveraging that data, helping clients to leverage it -- and there are a number of specific examples that we are involved in at the moment -- is a big opportunity for us. And in fact, our competition, ex a Nielsen and [IPSAR] and the Gfk, our direct data competition are unable to do that. They rely on third-party data. They don't have on -- first party data that they can play with, and they don't have the capabilities to leverage it. So I think it's a big, big opportunity for us.

Sounds good. Thanks. And my second question would be, net new business momentum appears to be stronger than usual versus the competitive set? Do you believe that will [affect] to your year guidance, and what kind of basing for onboarding do you expect with some of the larger wins?

Well, I think there is a lot going on. There is a lot happening, and a lot of business in review -- coming into review, a lot actually I would say, at a pretty high level even for what is traditionally a sort of slow part of the year.

As far as onboarding is concerned, it is the usual. I mean, the usual 30, 60, 90, days -- that most of our contracts are on 90 days. So if we are terminated, or if we win, in an incumbent agency has 90 days to get its act together usually, and the incoming agency here has 90 days.

A lot of people talk about the cost of onboarding business, and it being a drag. I mean, I think that is a little bit sort of inaccurate, because there isn't sort of globs of new business that happened for 90 days, and then stop. I mean, there is a continuous flow one way or the other, and we take our hits just like anybody else.

So it is a balance. But the net new business is strong, there is more. There is stuff that will come shortly, which is not included in this presentation. So I think all in all, it's fine. And we have stuck manfully to 3% plus on net sales, since we did our budgets. I did insert the word, well over 3% into our presentation. So that is what we see for net sales.

And obviously, net new business as it has been for the last 2.5 years is important. I would just point out also, that not only do we get a strong revenue growth, but that we get margin growth as well. Which in some cases competitively has been absent. And so, we always see it as a balance between the two. Maybe some people feel we put too much emphasis on margins, but that has always been a part of our philosophy.

Great. Thank you for the color.

�nybody else up for it?

We have no further questions from the audience.

Okay. Well, thanks to everybody for listening to the long turgid presentation, and thanks for the Q&A, which was much more lively. Thank you, and we look forward to seeing you, and hearing from you in the third quarter. Thank you very much operator. Thanks from the team here.