### ANNUAL REPORT & ACCOUNTS 2021 ### WHO WE ARE ## WPP IS THE ## CREATIVE ## TRANSFORMATION ## COMPANY ## WE USE THE POWER ## OF CREATIVITY TO BUILD ## BETTER FUTURES FOR OUR ## PEOPLE, PLANET, CLIENTS ## AND COMMUNITIES. ### STRATEGIC REPORT CORPORATE GOVERNANCE ADDITIONAL INFORMATION About us 2 Chairman’s letter 104 Task Force on Climate-related Financial Disclosures statement 214 Highlights 3 Governance at a glance 107 Other statutory information 217 What we do 4 Our Board 108 Shareholder information 218 Where we are 6 Our Executive Committee 111 Five-year summary 221 Chief Executive’s statement 9 How our Board engages 113 Glossary 222 Key events of the year 14 Division of responsibilities 116 Where to find us 224 | Our business model 16 | Board activities 118 | | | --- | --- | --- | | Stakeholder engagement 20 | Composition, succession and evaluation 119 | | | Investment case 22 | Nomination and Governance | | | | Committee report 122 | This report provides an update | The market 24 on our strategic progress, financial Audit Committee report 125 Our strategic progress 26 performance and sustainability Sustainability Committee report 131 activities for the year ended Key performance indicators 56 31 December 2021. Compensation Committee report 133 Chief Financial Officer’s statement 60 Statement of Directors' Responsibilities 155 Financial review 63 To learn more see wpp.com ### Sustainability 68 FINANCIAL STATEMENTS This icon denotes more information Assessing and managing our risks 88 Accounting policies 158 within the report Celebrating Jeremy Bullmore 100 Consolidated financial statements 164 Denotes information subject to limited assurance by Notes to the consolidated financial statements 169 PricewaterhouseCoopers LLP ('PwC') Company financial statements 197 For PwC's 2021 Limited Assurance Notes to the Company financial statements 200 report and the ‘WPP Sustainability Reporting Criteria 2021’ for assured Independent auditor’s report 202 metrics, see our Sustainability Report 2021. Reconciliation to non-GAAP measures of performance 210 1WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## ABOUT US ## OUR MARKET We operate in a fast-paced and We based our vision and strategy on the growing demand for digital services, ## growing market. Our clients are ecommerce solutions and simple, integrated ## investing more in modern marketing – offerings that bring together creativity and skills in technology and data, and our ## digital technologies, ecommerce and purpose to build better futures for all our ## new customer experiences – and stakeholders ## focusing on their environmental and Read more on pages 24 and 25 ## social commitments ## OUR PURPOSE We use the power of creativity to build The world is changing at an unprecedented rate, requiring companies to align people ## better futures for our people, planet, and purpose to achieve sustainable profit ## clients and communities Read more about our sustainability strategy on page 68 ## OUR OFFER WPP provides a modern, integrated The breadth, depth and global scale of our offer meets clients' needs for digital ## offer of communications, experience, technologies and new customer experiences ## commerce and technology services paired with outstanding creativity ## across digital and traditional platforms Read more on pages 18 and 19 ## OUR STRATEGIC To deliver sustainable growth, by Our goal is to continue to enhance WPP’s proposition by investing in talented people ## APPROACH bringing together for our clients the and leveraging our industry-leading global ## diverse talents and capabilities of our media platform, technology capabilities and strategic global partnerships ## global integrated media and creative ## agencies, world-class public relations Read more on page 26 ## firms and specialist communications ## companies ## OUR We are benefiting from resurgent 2021 was a very strong year for WPP, in which we invested more in our people and ## PERFORMANCE demand from clients for our services, communities, delivered transformative ## and have made strong progress on results for our clients, set industry-leading environmental targets and achieved major ## our strategic plans new business successes and retentions. As a result, our performance was ahead of pre-pandemic levels as we saw our fastest organic growth in 20 years Read more on page 63 WPP ANNUAL REPORT 20212 STRATEGIC REPORT ## HIGHLIGHTS ## 2021 was a year of success and momentum, thanks to our extraordinary ## people, agencies, clients and partners. Our purpose ### BUILDING BETTER ## FUTURES FOR 109,000 39% 30,000+ ### OUR PEOPLE talented people in 112 Women in executive Technology partner 1 countries across the globe leadership roles accreditations and Investing in our (2020: 40%) certifications awarded people's future to our people (2020: 21,000+) ### BUILDING BETTER | FUTURES FOR | 0.32 tCO₂e | | 74% | A- | | --- | --- | --- | --- | --- | | OUR PLANET | | 2 | | | | | Carbon emissions per person | | Electricity purchased | CDP scorecard, ranking WPP | | | from direct operations | | from renewable sources | as a leader on climate change | Including our industry-leading (Scope 1 and 2) (2020: 65%) (2020: B) commitment to reduce carbon (2020: 0.52 tCO 2 e) emissions from our own operations to net zero by 2025 and across our supply chain by 2030 ### BUILDING BETTER ## FUTURES FOR 317 $8.7bn ### OUR CLIENTS of the Fortune Global 500 industry-leading net 3 are WPP clients, reflecting Most creative company new billings Delivering transformational demand for our services among of the year 2021 (2020: $4.4bn) results for our clients the world's leading companies ### BUILDING BETTER | FUTURES FOR OUR | Leader | 100% | $9.3m | | --- | --- | --- | --- | | COMMUNITIES | in the Bloomberg | in the Human Rights Campaign | committed to inclusion | | | Gender-Equality Index for | Foundation Corporate Equality | programmes as part of our | Helping to bring about change the fourth year in a row Index for LGBTQ+ communities commitment to invest $30m for the better in society (2020: 100%) over three years ### FINANCIAL | PERFORMANCE | £50.7bn | | | £12.8bn | | 14.4% | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | 3 | 4 | | 4 | | 3 | | | Billings | (+14.4% | ) | Revenue (+13.3% | ) | Headline operating margin | | In 2021, we grew at our (2020: £46.9bn) (2020: £12.0bn) (+1.5 pt) fastest rate for over 20 years (2020: 12.9%) KEY 1 Executive leadership roles are defined by WPP as the agency board and executive leadership population as reported through WPP's financial reporting system. Denotes information subject to limited assurance by PricewaterhouseCoopers LLP ('PwC'). 2 Full Time Equivalent Employee (FTE). For PwC's 2021 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 3 Billings and headline operating margin are defined in the Glossary on page 222. 2021’ for assured metrics, see our Sustainability Report 2021. 4 Like-for-like growth as defined in the Glossary on page 222. Independent limited assurance will be sought by WPP over our percentage electricity purchased from renewable sources. The assurance report will be made available on our website. 3WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## WHAT WE DO ## We provide services to clients ## through integrated creative agencies Global Integrated ## and media agencies, public relations Agencies 83% Public Relations 9% ## agencies and specialist agencies. Specialist Agencies 8% ### GLOBAL INTEGRATED AGENCIES Our creative services include advertising, marketing and brand strategies and campaigns across all media. We are increasing our share in targeted fast-growth areas including digital communications, healthcare, ecommerce, experience, marketing technology and production. Our media offer includes the full range of media planning and buying services, delivered primarily through GroupM, the world’s leading media investment company, and its agencies. Targeted growth segments are digital media (search, social and programmatic), new business models such as Xaxis and Finecast, and data and technology. ### PUBLIC RELATIONS Our PR firms help clients communicate with their stakeholders, from consumers and investors to governments and NGOs. Purpose and reputation, sustainability and digital and social media are key growth areas. ### SPECIALIST AGENCIES Our specialist agencies provide services by region or type. Brand experience and identity, and specialist, targeted services are the principal growth segments. REVENUE LESS PASS-THROUGH COSTS BY BUSINESS SECTOR % WPP ANNUAL REPORT 20214 STRATEGIC REPORT ## HOGARTH: ## SUSTAINABLY ## MADE ### A unique approach to creative ### production to help our agencies ### and our clients limit their carbon ### footprint. Our creative production arm, Hogarth, is the world leader in producing and deploying content across all channels to drive growth ## and engagement for brands. Hogarth works 75% for one in two of the world’s top 100 brands, Estimate of all global | delivering to 157 markets across almost every | productions to be | | --- | --- | | sector, from automotive and entertainment | carbon measured, | | to technology and pharmaceuticals. | optimised and | residually offset by the end of 2023 However, production and content creation is responsible for a substantial proportion of the total carbon footprint of the marketing and communications process. In a typical year, the agency used to fly to around 1,500 locations all over the world, transporting talent, crew, sets and equipment in search of the perfect environment to shoot hours of footage, much of which was never used. A single hour of film typically generates five tonnes of CO 2 e, resulting in estimated industry emissions of around a million tonnes of CO 2 e a year. ## BY CHANGING ## HOW WE MAKE So, as its clients and partners seek to reduce ## the environmental impact of their work and WORK, WE CAN move towards net zero, Hogarth harnessed ## MAKE A SIGNIFICANT a new sustainable approach to content ## REDUCTION IN THE creation – ‘Sustainably Made’. ## ENVIRONMENTAL ## Using virtual studios and real-time camera- IMPACT OF OUR to-cloud technology, the team removed the ## ACTIVITY.” need for location shoots, allowing clients to see the results in real-time from wherever Richard Glasson they are in the world. In turn, this enabled Global CEO, Hogarth real-time feedback, minimising post- production time and expense. Duplication was reduced by using the same virtual set for different markets. And the team extended the lifecycle of assets by using AI-powered tagging throughout the production process, allowing them to identify, recycle and repurpose footage. Sustainably Made is the future of content creation, allowing clients to produce the very highest-quality work at scale, tailored to every channel and audience, while significantly reducing its environmental impact. 5WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## WHERE WE ARE ## WPP companies operate in 112 countries, North America 35% ## providing unrivalled global reach and scale. United Kingdom 15% Western Continental Europe 22% ROW (AP, LA, AME, CEE) 28% NORTH AMERICA UNITED KINGDOM WESTERN CENTRAL & CONTINENTAL EUROPE EASTERN EUROPE (CEE) PEOPLE PEOPLE PEOPLE PEOPLEREVENUE REVENUE REVENUE REVENUE | | | | | | 5,000 | £0.3bn | | --- | --- | --- | --- | --- | --- | --- | | | 11,000 | £1.9bn | | | | | | 22,000 | | | 22,000 | £2.8bn | | | £4.5bn Our 20 largest markets 1 USA UK Germany Greater China 2 Australia India France Canada Italy LATIN AMERICA (LA) AFRICA & MIDDLE EAST (AME) ASIA PACIFIC (AP) Brazil Spain PEOPLE PEOPLE PEOPLEREVENUE REVENUE REVENUE Singapore Netherlands 5,000 £0.4bn Denmark £0.5bn £2.4bn 14,000 Dubai 30,000 Belgium South Africa REVENUE BY REGION Japan % Thailand Mexico 1 2021 revenue less pass-through costs. 2 Including Hong Kong and Taiwan. WPP ANNUAL REPORT 20216 STRATEGIC REPORT ## OUR CAMPUSES In 2018 we announced our ambition to deliver a global network of campus buildings that bring our agencies together in modern, world-class workplaces. Each location provides inspiring spaces for our people to work, learn and create, encouraging closer collaboration and giving our clients easier access to our talent and expertise. Despite the constraints of Covid-19, we opened a further nine campuses in 2021, taking the total to 31. We aim to have at least 65 campuses, accommodating 85,000 people, by 2025, eventually replacing our smaller offices across the globe and reducing our overall need for space by 15-20%. London's Rose Court Campus opened in December 2021, as the base for 2,500 people from 14 WPP companies and teams. ## 22 campuses opened by 2020 ## 10 opening in 2022 Amsterdam Madrid ## 9 | Beijing | Mexico City | | | | | | | --- | --- | --- | --- | --- | --- | --- | | Bogotá | Montevideo | | opened in 2021 | | | | | Bucharest | Mumbai | | | | | | | Chicago | New York – | | | | | | | Frankfurt | 5th Avenue | | | | | | | Hamburg | Columbus Circle | | | | | | | | | | | | Atlanta | Manchester | | Helsinki | 3WTC | | | | | | | | | | | | Austin | Paris | | Hong Kong | Rome | | | | | | | | | Brisbane | | Milan | Brussels | Santiago | | Kansas | Shanghai | | | | | | | | | Detroit | | Prague | Düsseldorf | Tok yo | | Lisbon | Singapore | | | | | | | | | Gurugram | | San Francisco | Guangzhou | Toronto | London – Sea Containers Jakarta Warsaw ## London – 65+ Rose Court campuses to be completed by 2025 7WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## UKRAINE ## Our response | | e have all been moved by the | to enable the exchange of information, | We are also part of a coalition of businesses | | --- | --- | --- | --- | | | extraordinary courage and resolve | and hosting Ukrainian colleagues in its new | offering full-time English language training, | | W | of the Ukrainian people, and | digital hub and our agencies in the city. | recertification, resettlement skills and | | horrified by the terrible human cost of the | | | employment to evacuees as they settle in | | invasion. We have 200 people in the country, | | In Romania, our people are welcoming | the UK. | | and their safety has been our priority. I would | | Ukrainian colleagues at the main railway | | | like to share the actions we have taken to | | station in Bucharest, and offering | On 4 March we announced that the Board of | | support them, alongside our wider response | | accommodation, office space and | WPP had decided that we would discontinue | | to the crisis. | | equipment. They are also donating blood | our operations in Russia. | to the Red Cross and organising collections | We have been in constant contact with | for the wider Ukrainian refugee community. | This followed a week of very careful | | --- | --- | --- | | our leaders in Ukraine to provide whatever | | consideration and internal debate focused | | help we can for our employees, including | In Prague, our agencies are pairing offers | on the impact of such a decision on our | | immediate financial support, assistance | of support with requests for help, providing | nearly 1,400 people in Russia, who have been | | with evacuation and accommodation, | housing, workspaces and funds. And in | dedicated members of the WPP family for | | and medical and security advice. | Hungary and Slovakia they are arranging | many years. Our conclusion was that to | | | transport from the border, accommodation | continue operating in Russia would be | | We have made a commitment to provide | and essentials such as food, clothes and | inconsistent with our values as a company, | | ongoing employment for all our people, | children’s toys. | and that we would do everything we can | | whether they have left or remain in Ukraine. | | to support our Russian colleagues as we | | For employees and their families who have | Our people around the world have made | discontinued our activity in the country. | | had to leave the country we are offering a | their own contribution by donating to the | | | comprehensive package of support, covering | UNHCR appeal set up by WPP agency Blue | We are working to transfer our companies in | | areas such as housing, living expenses, | State to support those forced to flee their | Russia to local ownership to ensure continuity | | healthcare, schooling and language classes. | homes. More than 4,000 individuals between | of employment for our people wherever | | | them donated $670,000, which WPP has | possible. | | The reaction of our people in countries close | matched, bringing the total to $1.34 million. | | | to Ukraine was spontaneous and immediate. | | I deeply regret the effect of our decision on | | Employees in Poland, Romania, Hungary, | A number of clients, inspired by our appeal, | our people in Russia, but this was a moment | | Slovakia, the Czech Republic and elsewhere | donated a further $1.4 million. And through | when we felt we had to take action. While it | | rushed to help. Many drove to the border to | GroupM, we arranged $1.5 million in pro | was not the reason we made it, we have had | | collect Ukrainian colleagues and welcomed | bono media support for the UNHCR campaign, | overwhelming support for the decision from | | them into their homes. | thanks to the generosity of our media partners. | our people, clients and partners. | | Our leaders in Central and Eastern Europe | The wider public campaign run by Blue State | As I write, the war in Ukraine continues. We | | (CEE) have formed a ‘United for Ukraine’ | with UNHCR has generated nearly $70 million | all hope for a swift and peaceful resolution to | | taskforce to keep track of Ukrainian colleagues | at the time of writing. The funds raised are | this appalling conflict and humanitarian crisis. | | and their families in the region and meet | being used by UNHCR, the UN Refugee | The bravery and resilience of our people in | | their short- and medium-term needs. Given | Agency, to provide emergency shelter, relief | Ukraine has been truly inspiring, and we are | | the psychological and emotional impact of | items such as blankets, emergency payments | very proud of them all. I would also like to | | these traumatic events on our people we | and community support for the millions of | thank our employees around the world for | | have stepped up counselling support across | people displaced by the conflict. | their instinctive generosity towards and | | the region. | | support for their colleagues in Ukraine. | In the UK we are working to match Ukrainian Our Warsaw Campus is collecting items colleagues with our employees who are Mark Read people need, from mattresses to children’s planning to host evacuees through the Chief Executive Officer car seats, managing a special online channel Government’s Homes for Ukraine scheme. WPP ANNUAL REPORT 20218 CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT ## CHIEF EXECUTIVE’S ## STATEMENT ## 2021 was the year that really brought our vision to life: ## to make WPP the creative transformation company. We attracted and promoted some of the finest talent in the business, including Global Chief Creative Officer Rob Reilly and Global Chief People Officer Jennifer Remling at the WPP level, and made concrete progress towards our diversity, equity and inclusion (DE&I) goals. We launched our industry-leading net zero commitment, becoming the only company in our sector to pledge to eliminate emissions not only from our own operations but across our supply chain by 2030. And, through our agencies, we created truly extraordinary work that pushed back the boundaries of what our industry is able to achieve: from an audio system that transforms sports events for the visually impaired to an AI-driven predictive data model that supported more than 30 million Covid-19 vaccinations. Three years ago, we set out a vision to make WPP the creative transformation company. ## THROUGH OUR 2021 was an exceptional year for WPP as 2021 was the year that really brought that we delivered growth ahead of pre-pandemic vision to life, and showed what it could mean ## AGENCIES, WE levels, built and extended our relationships for all those with a stake in what we do. ## CREATED TRULY with clients and continued to fulfil our ## EXTRAORDINARY ### purpose of using the power of creativity to BETTER FUTURES FOR OUR PEOPLE ## WORK THAT build better futures for our people, planet, It was not an easy year for our people, clients and communities. which is what makes their achievements ## PUSHED BACK all the more impressive. Through adversity, ## THE BOUNDARIES We were named most creative company of they continued to support one another, ## OF WHAT OUR | | the year at the Cannes Lions International | collaborate and innovate. Our strong | | --- | --- | --- | | INDUSTRY IS ABLE | Festival of Creativity for the first time since | performance is a reflection of the new spirit | | | 2017, were appointed Global Marketing | of partnership across our agencies, a more | ## TO ACHIEVE.” | | Network Partner to The Coca-Cola Company | inclusive culture and increased investment | | --- | --- | --- | | Mark Read | after the largest review in the history of our | in outstanding talent. | | Chief Executive Officer | industry and won and retained a series of | | | | other global client assignments including | In 2021, given the challenges of the ongoing | | | with Google and Unilever. | pandemic, new ways of working and social | and environmental issues around the world, We led the global creative new business it was especially important that we focused rankings by a wide margin, and each of the on providing greater support and top three spots in the media rankings were opportunities for our people. held by GroupM agencies. 9WPP ANNUAL REPORT 2021 STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT ## THERE IS NO STRONGER ## ENDORSEMENT OF THE ## SUCCESS OF THE NEW WPP ## THAN GLOBAL MANDATES ## FROM THE WORLD’S LEADING ## MARKETERS.” | Investing in mental health and breaking | Committee grew from 29% to 35%. At Board | by 2030. As the world’s largest buyer of | | --- | --- | --- | | down the stigma associated with it is a | level, the proportion of women was 43%. Our | advertising space and the world’s largest | | personal priority of mine, and in 2021 we | UK gender pay gap continues to fall and in | producer of advertising content, we have | | launched our cross-agency Mental Health | the US the proportion of our senior managers | the ability to make a real difference. | | Allies programme, providing training to 500 | who are non-white rose from 24% to 26%. | | | leaders, HR professionals and volunteers | | Our net zero commitment, announced on | | across the UK and US. We plan to expand | However, we know we have more work to | Earth Day 2021, is unique in our industry | | the programme to more regions in 2022. | do to ensure our organisation better reflects | because it includes the emissions associated | | | society as a whole, and that progress relies on | with the more than $50 billion of advertising | | Due to our global scale and the breadth | accountability. So, in addition to reporting | we place in the media each year – equivalent | | of our capabilities across our network of | data on our gender and ethnic representation, | to 2.90 million tonnes. We are the only | | agencies, WPP is in a position to provide | from 2021 we included DE&I goals in the | marketing communications company to have | | almost limitless professional development for | incentive plans for senior leaders across | taken on the challenge of developing the | | our people. In the past people found it hard | the WPP network, including mine. | technology and standards to identify and | | to move between our agencies and there | | then dramatically reduce emissions from | | was often little encouragement to do so. | We also stepped up efforts to embed DE&I | advertising globally. | | In 2021 we changed that with the launch | into hiring processes. We implemented our | | | of Career Explorer, a new platform that | diverse candidate slate policy in the US, | As well as placing advertising more | | empowers our people to move seamlessly | Canada, UK and APAC, which means that | sustainably, we want to produce high-quality | | to the open roles that inspire them most. | for the first time roles are now specifically | work with a much smaller carbon footprint, | | We hope it will result in more people | marketed and accessible to candidates from | and in 2021 we pioneered new ways to | | staying at WPP not just for a single job | underrepresented groups. | achieve that. For example, we are using | | but for a rewarding career. | | technology to create virtual production sets | | | We expanded development opportunities | and now tag everything we shoot so we can | | Meanwhile, our new virtual series for students | for employees of colour, including the Elevate | use AI to search, identify and repurpose | | and recent graduates, NextGen Leaders, | sponsorship programme for high-potential | footage. This has the potential to make a | | provided learning and growth opportunities | Black female employees, and our Sayge | significant impact because for every minute | | for incoming talent. An important objective | programme which provides three months | of film that is used, four hours of footage is | | of the programme is to identify future leaders | of coaching for Black mid-level employees. | wasted. As a founding member of AdGreen, | | who are representative of the world around | 72 Black leaders graduated from our 2021 | we also helped clients to reduce their own | | us. In 2021, we welcomed 1,400 participants. | McKinsey Black Leadership Academy | emissions in the production of advertising, | | Of those based in the US and UK, 50% | programmes. | through solutions including a carbon | | identified as Black, Asian or LatinX. Globally, | | calculator for creative work. | | 60% were female, 11% identified as LGBTQ+ | Our 150 active employee resource groups are | | 1 | and 8% identified as having a disability | | | . | centres of inspiration, passion and connection. | BETTER FUTURES FOR OUR CLIENTS | | --- | --- | --- | --- | --- | --- | | | | | | In 2021 we created a central team to better | There is no stronger endorsement of the | | WPP has been recognised for its progress | | | | support them, and to share best practice | success of the new WPP than global | | in DE&I. This year we were named in the | | | | and guidance across the different groups. | mandates from the world’s leading marketers. | | Bloomberg Gender-Equality Index for the | | | | We also formally launched WPP Unite, our | Our revamped offer of outstanding creativity, | | fourth year in a row and among the best | | | | first Company-wide LGBTQ+ community. | the world’s leading media platform in | | places to work for LGBTQ+ equality in the | | | | | GroupM, deep expertise in data and | | Corporate Equality Index. We also entered | | | | Finally, our Inclusive Leadership Learning | technology, and exceptional public relations | | the top 10 in the FTSE Women Leaders Review | | | | Experience pilot helped over 1,000 mid-level | and branding services resonated strongly | | for gender representation among Executive | | | | managers foster a culture of belonging for | with global brands in 2021. We registered | | Committee and direct reports and moved | | | | everyone in their teams. | some of our greatest ever new business wins | | | th | th | | | | | up from 10 | to 8 | at Board level. | | | and retentions and, at $8.7 billion for the year, | | | | | | BETTER FUTURES FOR OUR PLANET | our net new business billings led the industry. | 2 | The proportion of our executive leaders | who | In 2021 WPP became one of just 517 | | | --- | --- | --- | --- | | are women was 39% in 2021, and within this | | companies out of 13,000 to achieve an | We continued to deliver work that | | the proportion of women on the Executive | | A- rating from the CDP, in its annual | demonstrated the power of creative | | | | assessment of the environmental impact | transformation – whether that’s bringing | | | | of companies globally. | the iconic Wendy’s persona to life on Twitch | | 1 Percentages reflect those participants who responded to | | | | in some of the world’s most popular video the survey. 2 Executive leadership roles are defined by WPP as the agency The cornerstone of our sustainability games (making the brand one of the top board and executive leadership population as reported programme is our pledge to achieve net zero 1% of all streamers on Twitch worldwide), through WPP’s financial reporting system. carbon emissions in our own operations by reinventing car ownership for Ford by giving Denotes information subject to limited assurance by PricewaterhouseCoopers LLP (‘PwC’). 2025, and net zero including our supply chain drivers the chance to interact with their WPP ANNUAL REPORT 202110 CHIEF EXECUTIVE’S STATEMENT CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT | new vehicle before it is even delivered, | One piece of work I am particularly proud of | RECORD GROWTH | | --- | --- | --- | | or creating recyclable toothpaste tubes | is a collaboration across many WPP agencies. | During 2021 we grew organically at the | | for Colgate. | Since the beginning of the pandemic we | fastest rate for over 20 years. This was | | | have been supporting the World Health | more than just an economic rebound, | | A range of initiatives in 2021 enabled us to | Organization on a pro bono basis, helping | as we performed ahead of 2019 levels, | | serve our clients in new and better ways. | them to deliver vital public health messages, | demonstrating the success of the strategy | | We continued to invest in our agencies’ | tackle misinformation and encourage people | we first set out in December 2018. | | capabilities and talent, and made strategic | to get vaccinated. | | | acquisitions including DTI Digital, NN4M, | | Organic growth (like-for-like revenue less | | Satalia, Cloud Commerce Group and Made | In many parts of the world, people still | pass-through costs growth) was 12.1% | | Thought to add further dimensions to our | cannot access Covid-19 vaccines. So, in 2021, | (2.9% on a two-year basis), while revenue | | offer. Finsbury Glover Hering merged with | we teamed up with the WHO Foundation to | growth was 13.3%. Headline operating | | Sard Verbinnen to create the world’s leading | create the $5 Vaccine campaign, which gives | margin was up 150 basis points to 14.4%, | | strategic communications firm, and we | people everywhere the chance to play their | and up 170 basis points like-for-like. | | combined the specialist data units of | part in vaccinating the world by spending | | | GroupM and Wunderman Thompson to form | the price of a coffee on a shot that could | Reported profit before tax was £951 million, | | Choreograph – a new global data company. | save someone’s life. The money raised is | compared to a loss of £2.8 billion in 2020, | | Choreograph played a key role in multiple | funding Covid-19 vaccines for lower-income | reflecting principally the £3.1 billion of | | successful pitches including Bayer, | countries where they are in short supply | impairment charges and investment | | Beiersdorf, Coca-Cola, L’Oréal and Unilever. | and needed the most. | write-downs and £313 million of restructuring | and transformation costs during the prior | Coca-Cola and Unilever were among the | As well as creating and delivering the $5V | period. Average adjusted net debt in 2021 | | --- | --- | --- | | clients to recognise our progress as part of | campaign (thanks to Ogilvy, Blue State, | was £1.6 billion, compared to £2.3 billion in | | their appointments of WPP as their global | Landor & Fitch and GroupM), we donated | the prior period, at 2020 exchange rates. | | agency partner. Coca-Cola said “WPP will | 10,000 vaccines on behalf of our clients, | | | bring creative excellence and unparalleled | and are matching every $5V bought by our | While it is right that we celebrate our | | marketing capabilities at a global scale that | own people. | success, it is equally important to recognise | | no other network can deploy”. Unilever said | | that 2021 held many challenges for our | | WPP now has the unique capability to | We also accelerated our own community- | Company and our people. We have all had to | | address the “convergence of media, | facing initiatives in 2021. We made our first | adapt to drastically changed circumstances | | commerce, entertainment and shopping”. | investments through our Racial Equity | and many have faced suffering and loss. Our | | | Programme, part of our wider anti-racism | colleagues’ support for one another has | | BETTER FUTURES FOR OUR | commitments announced in June 2020 and | been a constant throughout the pandemic. | | COMMUNITIES | our pledge to invest $30 million to fund | | | The greatest impact we have is through our | inclusion programmes and support external | For that and many other reasons, I would like | | work for clients, which reaches billions of | organisations. | to say thank you to the 109,000 people who | | people and – with its significant influence on | | make up WPP and our fantastic agencies. | | consumer choice, behaviour and outlook – | Under the scheme, we invited our global | They are the Company, and they are what | | has the power to bring about real change | network of agencies to apply to receive | makes leading it such a privilege. | | for the better. | resources to build and run “bold, audacious | | and creative” initiatives to advance racial | In 2021 this work included helping homeless | equity in our communities. One of the first | | | --- | --- | --- | | people reconnect with society by enabling | projects to receive funding is the Detroit | | | them to open bank accounts without official | Experience Studio, which focuses on | | | documents, designing the world’s first | empowering Detroit’s Black and brown | Mark Read | | carbon-neutral TV, an AI-powered campaign | students who are exploring a creative future. | Chief Executive Officer | | that supported local Indian businesses hit hard | | 31 March 2022 | | by Covid-19, and an immersive experience on | Commitments like this, and our net zero | | | the plastic crisis that helped protect over | pledge, are not just the right thing to do; | | | 22,000 square kilometres of ocean. | they are cutting through with our clients | | and people, who want to work with and for There are too many examples to mention companies that share their values and help more than a fraction, but you can read about them to achieve their own goals. Unilever, some of them in our Sustainability Report. when announcing the result of its recent media review, cited Mindshare’s ‘Good Growth’ programme as being an important factor in WPP’s retention of the account. 11WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## SUPER ## WENDY’S ## WORLD ### Telling a fresh story. OFFER ### EXPERIENCE ### TECHNOLOGY AGENCY ### VMLY&R, KANSAS CITY CLIENT ### WENDY’S Wendy’s sought a way to tell the story of its ‘fresh, never frozen’ beef to a growing generation of consumers in the gaming industry, which is bigger than the music and movie industries combined. Of course, gamers don’t just welcome anyone. As a group constantly overstimulated with messaging, gamers have naturally become sceptical of brands infringing upon their space. So, rather than behaving like a brand with targeted ads and paid sponsorships, the VMLY&R team assumed the role of a player themselves, and transformed their brand message into interactive video game-play. Each week on Twitch, Wendy came to life in some of the most popular video games, then played each game with an 'anti-frozen' twist. VMLY&R played with gamers, created custom content for gamers and even inspired gamers to play as Wendy themselves – all in the name of getting the message out: Wendy’s beef is fresh, never frozen. | 1% | 9.8m | | --- | --- | | Wendy’s became one | minutes gamers spent | | of the top 1% of all | watching Wendy’s | | streamers on Twitch | on Twitch | | 988,000+ | Awards | | --- | --- | | downloads of own | Cannes Lions, Gold | | custom-branded in- | and Silver | game content WPP ANNUAL REPORT 202112 STRATEGIC REPORT 13WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## KEY EVENTS ## OF THE ## YEAR ## 2021 was a year of success ## and momentum for WPP. APRIL – WPP makes industry-leading net zero commitment Watch video here wpp.com/sustainability/ wpp-net-zero JANUARY MARCH – WPP appoints Rob – Forrester Research, JUNE Reilly as Global Chief Inc. names WPP a – WPP wins most Creative Officer leader among – WPP launches global data creative company commerce services company: Choreograph of the year at providers Cannes Lions – WPP publishes US and UK workforce ethnic diversity data for the first time | MARCH | MAY | JUNE | | --- | --- | --- | | – AKQA achieves highest | – AnnaMaria DeSalva, | 190 Cannes Lions won: | | position in Gartner's | Chairman and CEO, | | | Magic Quadrant | Hill+Knowlton, appointed to | | ## 1 WPP Executive Committee – WPP acquires mobile Titanium technology provider NN4M FEBRUARY ## 12 – WPP and TikTok Grand Prix announce strategic partnership ## 28 – Jane Geraghty, Global CEO, Gold Landor & Fitch, appointed to WPP Executive Committee ## 57 Silver ## 92 – WPP acquires DTI Digital Bronze – Sam's Club names VMLY&R as its first – WPP launches Mental Health Agency of Record Allies programme in the UK – WPP acquires minority interests in WPP AUNZ, moving to 100% ownership WPP ANNUAL REPORT 202114 WPP ANNUAL REPORT 202114 KEY EVENTS OF THE YEAR STRATEGIC REPORT NOVEMBER SEPTEMBER – WPP appointed as The – Mindshare retains Coca-Cola Company’s Unilever’s global Global Marketing media account Network Partner – WPP and Snap Inc. launch Augmented – Google consolidates its Reality partnership entire global media account with Essence JULY and MediaCom – WPP receives Sitecore’s – WPP tops the WARC Global Excellence in – TD Bank awards its rankings for creativity, Solution Delivery award North American creative effectiveness and media – WPP’s second NextGen accounts to Ogilvy and – WPP acquires Cloud Leaders programme for DAVID Commerce Group early-career talent | AUGUST | SEPTEMBER | | OCTOBER | DECEMBER | | --- | --- | --- | --- | --- | | – WPP acquires | | – Ogilvy wins Sainsbury’s | – Finsbury Glover Hering | – #1 In R3’s creative new | | AI technology | | digital creative account | and Sard Verbinnen & Co | business rankings | | company Satalia | | | merger | | – WPP and WHO launch the $5 Vaccine campaign – Bayer names MediaCom as global media agency – WPP appoints Jennifer Remling as Global Chief People Officer – WPP achieves leading – WPP announces first A- rating in the CDP successful applications sustainability rankings to its Racial Equity – Wavemaker wins L’Oréal's Programme global media account – Wavemaker wins Beiersdorf’s global – Creative studio Made media planning and Thought joins WPP strategy account WPP ANNUAL REPORT 2021 15 15WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## OUR BUSINESS OUR STRENGTHS ## Our success depends on our creative talent, ## MODEL ## our client relationships, the scale and breadth ## of our offer, and our technology capabilities. ## WPP is the creative – The creative talent of our people ## – Strong creative reputation reflected 109,000 ## transformation company. by industry awards including Cannes, people WARC and many others – Continuing to attract top talent to WPP and its agencies ## We offer clients a – Deep understanding of culture, ## comprehensive range consumers and brands ## of communications, ## experience, commerce – Our relationships with the world’s ## most successful companies 317 ## and technology services. – Strong and enduring CEO, CMO and of the Fortune Global 500, 62 of CIO relationships the FTSE 100, and all 30 of the – Global Client Leaders, providing Dow Jones 30 are our clients ## We bring together diverse easy access to the breadth and depth of WPP's offer ## capabilities from integrated – Unique partnerships with leading technology companies, providing us ## and specialist agencies with preferential access to training, ## globally. new product development and joint go-to-market programmes ## We enhance the impact of – Home to many of the industry’s most ## our agencies with scaled data ## powerful and respected agency brands $8.7bn ## and technology capabilities, – The #1 global media-buying 1 of net new business in 2021 organisation, GroupM, and its ## partnerships and platforms, industry-leading agencies – Iconic creative brands: AKQA, Grey, ## with one goal: to unleash Ogilvy, VMLY&R and Wunderman Thompson ## their creativity. – Integrated agency model, meeting all the needs of clients in communications, experience, health, ecommerce, data and technology – The technology skills and platforms ## to deliver modern marketing solutions 3,300+ – Ability to deliver integrated Adobe-certified professionals campaigns, globally across across WPP, and over 4,500 traditional and digital platforms practitioners – WPP Open – a common data and technology platform for agencies and clients to share the best innovation from across WPP and its strategic technology partners 1 Billings, as defined in the Glossary on page 222. WPP ANNUAL REPORT 202116 OUR BUSINESS MODEL STRATEGIC REPORT ## OPERATING MODEL ## We meet our clients’ needs through a collaborative approach that works ## on a global scale. This drives our revenue while controlling costs, and ## funds re-investment into our capabilities and technology, for our ## agencies, clients, people and shareholders. The work we do for clients helps them WPP CLIENTS communicate their brands, services and products across a range of digital and traditional media channels. We assign Global Client Leaders to | The central WPP team supports | many of our clients to ensure they have easy | | --- | --- | | our agency brands and the work | access to the breadth and depth of WPP. Our | | they do for our clients. It develops | client portfolio is highly diversified and covers | | and executes the strategy of the | every business sector. Our top 30 clients account | | Company, allocates capital to best | for 30% of revenue less pass-through costs. | meet client needs and drive our growth, and provides a range of support functions in areas such as communications, finance, legal Revenues are principally derived from affairs, marketing & growth, REVENUE fixed-fee contracts, retainer agreements and operations, people, sustainability commissions on media placements. Some and technology. engagements include performance incentives linking revenue to quantitative and qualitative goals. We focus on revenue less pass-through costs as a reflection of top-line performance. Our top 20 markets account for 87% of revenue less pass-through costs. AGENCIES Most of our costs are variable in nature. 63% COSTS of our total headline costs are staff costs; 22% Our agencies operate in more than are pass-through costs; 10% are general and 100 markets around the world, administrative costs; and 5% are establishment offering a range of services across 1 costs . Pass-through costs comprise fees paid four key areas – communications, to external suppliers where they are engaged experience, commerce and to perform part or all of a specific project and technology. Our ten largest are charged directly to clients. Pass-through agencies are the core of the WPP costs are predominantly media and data offering and account for 93% of collection costs. revenue less pass-through costs. Read more on page 4 Our profit and cash generation has historically PROFIT AND CASH been strong and we expect this to continue, supported by annual gross cost savings of around £600 million by 2025. This in turn will enable us to continue to invest in our people, technology infrastructure, campuses and standardised systems for our people and clients. We intend to grow the dividend annually and to pay out approximately 40% of headline earnings per share. 1 Total headline costs comprise costs of services and general and DIVIDENDS administrative costs excluding gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, restructuring costs REINVESTMENT: in relation to Covid-19, litigation settlement and gains/losses on PEOPLE, remeasurement of equity interests arising from a change in scope CAPABILITIES, of ownership. EFFICIENT PLATFORM 17WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR BUSINESS MODEL ## OUR OFFER ## Our offer to clients covers four areas that are critical to modern ## marketing: communications, and the higher-growth segments ## of experience, commerce and technology. ### COMMUNICATIONS TECHNOLOGY We create powerful ideas based on We build and optimise technology deep insights to connect brands with and data solutions fit for our clients’ audiences at the right moment and needs. Our services include enterprise ● Communications 62% in the right channels. This includes systems work – architecture design, ● paid advertising campaigns and systems implementation, managed and Technology 38% public relations. services and data analytics – and specific platforms such as CRM, ### EXPERIENCE content and experience management, We bring brands to life through and data management. We also use engaging, unexpected and interactive our unique relationships with the experiences. This includes customer- world’s leading technology facing platforms, such as websites, companies – such as Adobe, Amazon, applications and stores, as well as Facebook, Google, IBM, Microsoft, broader touchpoints like product Salesforce and TikTok – to create design and packaging. unique advantages for our clients. ### COMMERCE To learn more, see wpp.com/about/ We help our clients sell wherever and our-offer-to-clients however their consumers want to buy. We advise on, build, run and activate ecommerce and physical channels, from direct-to-consumer websites and stores to marketplaces and social commerce. ## COMMUNICATIONS ## EXPERIENCE ## TECHNOLOGY ## COMMERCE REVENUE LESS PASS-THROUGH COSTS IN GLOBAL INTEGRATED AGENCIES, EXCLUDING GROUPM Experience, Commerce WPP ANNUAL REPORT 202118 OUR BUSINESS MODEL STRATEGIC REPORT ## INVESTING IN OUR OFFER ## To support our future growth, during 2021 we invested in new strategic acquisitions and ## partnerships – and in our existing operations – to further modernise our offer, strengthen ## our capabilities and serve clients in new and better ways. ## Higher-growth segments ### TECHNOLOGY COMMERCE EXPERIENCE COMMUNICATIONS ### A A P A A technology company A leading UK-based mobile A first-of-its-kind global The merger of Finsbury Glover offering market-leading AI commerce partner for global agency partnership, focusing Hering and Sard Verbinnen & solutions for clients, to brands, offering innovative on delivering new Co (SVC) to create the world’s transform their business and cutting-edge commerce opportunities for creative leading board-level strategic strategies and improve services for retailers. excellence. communications firm. operational efficiency. ### A A P A A Brazilian digital innovation A leading UK-based provider Developed on Microsoft Azure, A UK-based branding and and software engineering of omnichannel ecommerce WPP’s new platform, Cloud design agency, providing business, helping clients platforms and marketplaces Studio, enables greater clients with transformational become more efficient, globally. collaboration between design and creative thinking. digitalised and fully connected creative teams, regardless to their customers. of location. ### M P I M A global partnership A new innovation consultancy A global strategic consultancy, A global data company, (The AR Lab) delivering that helps brands find growth with expertise in consumer bringing together the state-of-the-art marketing amid disruption. insights, brand and marketing specialist data units of GroupM and commerce solutions for strategy, formed by combining and Wunderman Thompson. brands using augmented separate WPP operations into reality. a single platform. ### A A United States-based technology-driven consumer and market intelligence company (acquired by Kantar, which is 40% owned by WPP). ### A Acquisition P Partnership M Merging of WPP capabilities I Investment 19WPP ANNUAL REPORT 2021 STRATEGIC REPORT # STAKEHOLDER ENGAGEMENT We rely on active engagement with our stakeholders to drive our business. Our approach to engagement is driven by our values – openness, optimism and a commitment to extraordinary work. For more on how the Board engages with our stakeholders, please see page 115. And to find out how we engage on sustainability, please see the Sustainability Report 2021 As a Jersey incorporated company, WFP is not subject to UK legislation. However, as a matter of good governance and in order to comply with the provisions of the 2016 UK Corporate Governance Code, the Board considers the matters described in Section (7) of the Companies Act 2000 in its decision-making. 20 WFP ANNUAL REPORT 2021 ## SHAREHOLDERS Our shareholders provide the capital to invest in the business. Shareholders benefit from the Board acting in the best interests of the Company and investing for long-term value generation. ## CLIENTS AND SUPPLIERS Our clients come from businesses across every sector. The work we do for clients provides our revenue and helps them to grow their businesses, build relationships with their customers, and ready themselves for future success. Our suppliers range from small businesses to the world's largest technology partners. They provide us with the products and services we need to meet our clients' needs. ## GOVERNMENTS AND REGULATORS Governments receive the tax contributions we make to public finances, enabling them to invest in public services. Governments and regulators determine the policy frameworks that affect us and our stakeholders. ## PEOPLE We depend on the talent, creativity and technology skills of our people. And we want our employees to embrace our purpose, culture and values. In return, our people receive salaries, pension contributions, employee benefits, career development and training. ## THE PLANET We are committed to responsible and sustainable business practices. We take steps to reduce our own environmental impact, but recognise that our greatest contribution to the planet is through our work with clients, which can shift attitudes and change behaviours to build a sustainable future and a more inclusive society. ## COMMUNITIES We can help boost the impact of charities and non-governmental organisations by providing marketing and creative services, often on a pro bono basis, enabling them to raise awareness and funds, recruit members, and achieve campaign objectives. We believe, and so do many of our stakeholders, that acting responsibly is both the right thing to do and in our long-term interests. STAKEHOLDER ENGAGEMENT STRATEGIC REPORT # HOW WE ENGAGE WITH OUR STAKEHOLDERS # HOW WE REACT TO STAKEHOLDERS # SHAREHOLDERS - We have an extensive investor relations programme, comprising quarterly results presentations, investor days, the AGM, investor and analyst meetings, webcasts and ongoing email exchanges - We disclose relevant information to shareholders through our annual report, quarterly financial statements and RNS announcements - In response to feedback, we established a series of webinars in 2021 designed to give investors and analysts deeper insight into individual agencies, products and services within WPP. We also increased disclosure on GroupM, our largest business unit - In June, we held our first environmental, social and governance investor event to share our strategy on these areas with investors - In March we met our goal to recommence the share buyback scheme, after a pause due to the economic impact of the pandemic - In 2021, we returned over £1 billion in cash to shareholders through dividends and share buybacks (2020: £412 million) # CLIENTS AND SUPPLIERS - We engage with our major clients through our central team of Global Client Leaders, our agency CEOs, and their teams - Our people regularly engage with suppliers and key technology partners in joint product development, skills development and joint go-to market programmes - We evaluate potential suppliers on a variety of factors, including workforce diversity, carbon reduction and human rights - We are investing in innovation to deliver high-quality work for clients, while reducing emissions by using cloud-based and virtual solutions to create content - In 2021, we created the Sustainability Playbook to help clients in their sustainability transformation - We partnered with Unilever, Google and Dow to launch the UK's first accelerator programme to help minority-owned businesses become supply chain ready - We undertook more work for clients addressing the growing importance of reputation and purpose # GOVERNMENTS AND REGULATORS - We participate in Company and industry meetings with governments and regulators to ensure policies are developed taking into account the interests of our clients and the industry - Our public affairs agencies engage in public policy activity on behalf of clients, including direct lobbying of public officials and influencing public opinion - In November we attended COP26 in Glasgow, participating in discussions with the United Nations and NGOs on the climate crisis - In 2021, we contributed £1.6 billion in taxes to public finances # PEOPLE - We regularly survey our staff about their experiences at work - We have extensive internal communications programmes and platforms to keep staff informed, including a regular series of CEO virtual townhalls with our people - Employees' development needs are assessed during formal appraisal processes - In response to our first global people survey, with more than 43,000 participants, we established a people strategy based on career growth, investment in learning, and fostering the best possible culture. See page 52 for more details - To support our people's wellbeing, in 2021 we launched our Mental Health Allies programme, comprising employees who volunteer to be trained to support others - In 2021, we invested £29.7 million in learning and development opportunities for our people # THE PLANET - We engage with corporate, government and NGO clients on issues ranging from climate action to Covid-19 and human rights, during the development of their campaigns - We regularly meet with investors, rating agencies and benchmarking organisations on sustainability issues - In response to the climate crisis, we established an industry-leading target to reach net zero carbon emissions in our operations by 2025 and across our supply chain by 2030, including emissions from media buying - Following investor interest, in November 2021 we amended and supplemented our $2.5 billion revolving credit facility, linking its margin to specific sustainability measures # COMMUNITIES - We work closely with communities and NGO partners to increase our understanding, and amplify the impact, of their work - We encourage our people to volunteer their time - We contribute to early-career development through internships, apprenticeships and the WPP Foundation - In partnership with the WHO Foundation, we commenced the $5 Vaccine campaign to raise funds for Covid-19 vaccines in low-income countries - Our total social contribution in 2021 was £41 million, including: pro bono work for NGOs and charities; negotiating free media space on behalf of pro bono clients; and cash donations to charities - As part of our commitment to invest £30 million over three years in racial equity programmes, in 2021 we invested £5.9 million and committed a further £3.4 million, taking our first-year total to $9.3 million © Geniaco Information subject to limited assurance by PricewaterhouseCoopers (GPC) LLC WPP ANNUAL REPORT 2021 31 STRATEGIC REPORT ## INVESTMENT CASE ## The unrivalled combination of ## UNRIVALLED GLOBAL REACH UNRIVALLED GLOBAL REACH AND SCALE ### 1 ## 112 $50bn+ – A global network of leading agencies, providing the broadest geographic reach ## our deep client relationships, AND SCALE countries in our GroupM global – Home to GroupM, the number one media-buying operation globally, accounting for global network billings ## global scale and value-creating 30% of global media billings, providing value and premium inventory – Present in 112 countries worldwide, providing deep in-market expertise ## growth strategy underpins the ## attractiveness of our investment ## ATTRACTIVE AND GROWING ATTRACTIVE AND GROWING ADDRESSABLE MARKETS ### 2 ## proposition. 60% 30.5% – Extended our offer to high-growth areas of commerce, experience and technology ## ADDRESSABLE MARKETS GroupM’s estimate of GroupM estimates – Repositioned traditional communications offer to faster-growth digital communications global retail of global digital – Over half of revenue is from companies in the consumer packaged goods, technology ecommerce spend advertising spend and healthcare & pharma sectors, which were the least impacted by Covid-19 1 growth in 2021 growth in 2021 In 2021, the attractiveness of our investment – Strong exposure to faster-growing economies such as China, India and Brazil proposition was demonstrated by our performance. Our top-line growth, driven by strong demand for our services in digital | | | DEEP CLIENT RELATIONSHIPS WITH | DEEP CLIENT RELATIONSHIPS WITH LEADING GLOBAL BUSINESSES | | | | --- | --- | --- | --- | --- | --- | | marketing, media, ecommerce and technology, | 3 | | | | | | | | | | 30% | 8.1 | – Partner to most of the world’s largest companies, including 317 of the Fortune Global 500 ## LEADING GLOBAL BUSINESSES resulted in our fastest organic growth for of our revenue less Average client – Strong and enduring CEO, CMO and CIO relationships over 20 years. As a result, we are two years pass-through costs satisfaction score – Global Client Leaders provide easy access to the breadth and depth of WPP ahead of our plan, hitting our 2023 revenue comes from our top (out of 10) target in 2021. 30 clients We look forward to 2022 with confidence, reflected in our guidance of strong top-line | | | SIGNIFICANT STRENGTHS | SIGNIFICANT STRENGTHS IN TECHNOLOGY AND DATA | | | | --- | --- | --- | --- | --- | --- | | growth, improving profitability and continued | 4 | | | | | | | | | | 43% | 5,000+ | – Scaled global partnerships with 25 leading technology companies ## IN TECHNOLOGY AND DATA investment in our people and services. GroupM's proportion data practitioners, – WPP Open, our common data and technology platform for sharing innovations across of digital media who build our WPP and its strategic technology partners, agencies and clients We have also reconfirmed our medium-term billings (2020: 41%) proprietary models – Deep specialisation in technical capabilities in advertising and marketing technology financial targets for 2023, which allow us to – Strong data and digital capabilities invest in talent, incentives and technology, improve our competitive position, and deliver sustainable long-term growth. ## A STRONG FINANCIAL POSITION A STRONG FINANCIAL POSITION ### 5 | | | £1.3bn | 14.4% | | --- | --- | --- | --- | | FINANCIAL TARGETS AND PERFORMANCE | – Resilient revenue streams from a varied client base that covers all business sectors | | | | | | Free cash flow | Headline operating | – Predominantly variable cost structure, which protects profitability during a downturn margin Average – Attractive margin, with scope to improve through our transformation programme Revenue less Headline adjusted – Low adjusted net debt and ample liquidity, after significant growth investments and pass-through operating Capital net debt/ costs growth margin expenditure EBITDA shareholder returns, reflecting strong cash generation 2021 actual 12.1% 14.4% £293m 0.9x ## 0.9x 2022 targets around 5% +50 bps YoY £350-400m N/A 2023 targets 3-4% 15.5-16.0% £300-350m 1.5-1.75x Average adjusted net debt/Headline EBITDA Read more about our outlook and guidance on page 67 ## VALUE CREATION FROM VALUE CREATION FROM STRATEGIC PLANS TO ACCELERATE GROWTH ### 6 ## £245m 31.2p – Expanding further the proportion of our business in high-growth areas ## STRATEGIC PLANS TO Transformation Dividend per share – Our transformation programme has delivered £245 million of gross cost savings, towards ## ACCELERATE GROWTH programme gross (+30.0% on 2020) our 2025 annual run rate target of £600 million. We aim to reinvest £400 million into talent, savings since 2019 technology and incentives to drive growth – Intention to grow dividend annually with a pay-out ratio around 40% of headline EPS 1 Excluding US political advertising. WPP ANNUAL REPORT 202122 INVESTMENT CASE STRATEGIC REPORT | UNRIVALLED GLOBAL REACH AND SCALE - A global network of leading agencies, providing the broadest geographic reach - Home to GroupM, the number one media-buying operation globally, accounting for 30% of global media billings, providing value and premium inventory - Present in 112 countries worldwide, providing deep in-market expertise | 112 countries in our global network | $50bn+ GroupM global billings | | --- | --- | --- | | ATTRACTIVE AND GROWING ADDRESSABLE MARKETS - Extended our offer to high growth areas of commerce, experience and technology - Repositioned traditional communications offer to faster growth digital communications - Over half of revenue is from companies in the consumer packaged goods, technology and healthcare & pharma sectors, which were the least impacted by Covid-19 - Strong exposure to faster-growing economies such as China, India and Brazil | 60% GroupM's estimate of global retail ecommerce spend growth in 2021 | 30.5% GroupM estimates of global digital advertising spend growth in 2021 | | DEEP CLIENT RELATIONSHIPS WITH LEADING GLOBAL BUSINESSES - Partner to most of the world's largest companies, including 317 of the Fortune Global 500 - Strong and enduring CEO, CMO and CIO relationships - Global Client Leaders provide easy access to the breadth and depth of WPP | 30% of our revenue less pass-through costs comes from our top 30 clients | 8.1 Average client satisfaction score (out of 10) | | SIGNIFICANT STRENGTHS IN TECHNOLOGY AND DATA - Scaled global partnerships with 25 leading technology companies - WPP Open, our common data and technology platform for sharing innovations across WPP and its strategic technology partners, agencies and clients - Deep specialization in technical capabilities in advertising and marketing technology - Strong data and digital capabilities | 43% GroupM's proportion of digital media billings (2020: 4%) | 5,000+ data practitioners, who build our proprietary models | | A STRONG FINANCIAL POSITION - Resilient revenue streams from a varied client base that covers all business sectors - Predominantly variable cost structure, which protects profitability during a downturn - Attractive margin, with scope to improve through our transformation programme - Low adjusted net debt and ample liquidity, after significant growth investments and shareholder returns, reflecting strong cash generation | £1.3bn Free cash flow | 14.4% Headline operating margin | | | 0.9x Average adjusted net debt/headline EBITDA | | | VALUE CREATION FROM STRATEGIC PLANS TO ACCELERATE GROWTH - Expanding further the proportion of our business in high-growth areas - Our transformation programme has delivered £265 million of gross cost savings, towards our 2023 annual run rate target of £600 million. We aim to reinvest £400 million into talent, technology and incentives to drive growth - Intention to grow dividend annually with a pay-out ratio around 40% of headline EPS | £245m Transformation programme gross savings since 2019 | 31.2p Dividend per share (×30.0% on 2020) | Excluding US political advertising. WPP ANNUAL REPORT 2021 23 STRATEGIC REPORT ## THE MARKET ## Fast-paced, growing and global. | MARKET ENVIRONMENT | Two other factors are playing a significant | podcasting, while cinema has been slower | | --- | --- | --- | | 2021 was an extraordinary year for our | role in the growth in advertising spend. New, | to recover. Print was the only medium to | | industry. Growth in spend was supported by | app-based or digital-first businesses are able | decline, reflecting the trends in circulation. | | a stronger-than-expected macroeconomic | to afford to invest a greater proportion of | | | environment, a consumption boost from | their income into marketing to grow scale | COUNTRY TRENDS | | pent-up saving and structural growth in | fast because they lack the physical presence | The UK, United States and China remain the | | digital channels. According to GroupM | (and associated costs such as rent) of | largest contributors to growth in advertising | 1 | estimates, global advertising spend | grew by | traditional businesses. In turn, more traditional | spend, spurred by their exposure to digital. | | --- | --- | --- | --- | | 22.5% in 2021, a considerably better outcome | | advertisers such as consumer packaged | Based on GroupM findings, the UK has been | | than the 12.3% forecast in December 2020. | | goods companies are investing in retail and | the fastest growing among major markets, | | | | commerce media – engaging with customers | growing 35.7%, while spend in the US, | | The pace of growth in digital advertising | | closer to the digital point of sale. This is | excluding political advertising, grew by | | has continued to accelerate, reflecting the | | blurring the lines between the marketing | 28.4%. China saw growth in advertising | | seismic shift in the way people consume | | budget and the sales promotion budget, | spend of 18.8% in the year, against a tougher | | media. GroupM estimates that global digital | | significantly growing the addressable market | comparative, with digital accounting for | | advertising spend grew by 30.5% in 2021, | | for marketing services businesses. | nearly 90% of the market. Our fastest-growing | | and now accounts for 64.4% of total spend, | | | Western European market was France where | | up from 59.3% in 2020. | | GROWING TV MARKET | advertising spend grew by 19.0%. Germany’s | | | | By medium, TV had a strong year with | growth was tempered by lingering Covid-19 | | ECOMMERCE DEMAND IS EXPLODING | | global advertising spend on TV growing by | restrictions and less favourable comparatives, | | Within digital, one of the big drivers of growth | | 11.7% in 2021, as advertisers invested in their | with advertising spend advancing 10.5%. | | has been the explosion in ecommerce. The | | brand-building strategies. It also reflects the | | | pandemic accelerated a widespread shift | | growth of connected TV and the increased | | | towards shopping online, amplifying the | | targeting and measurement potential this | | | number of opportunities for brands to connect | | brings to advertisers. Despite restrictions | | | with consumers on digital channels, while | | on mobility, spend on outdoor also grew, | | | also levelling the playing field for challenger | | supported by the increasing availability of | | | brands. GroupM estimates that global retail | | digital screens and programmatic options. | | | ecommerce advanced 20.4% in 2021. | | Audio also saw some growth reinforced by | | 1 2 COMMERCE PENETRATION 2020 2021 | | 48 | | 41 | | 36 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | 52 | | 59 | | 64 | | | E GLOBAL ADVERTISING SPEND BY MEDIA | | | | | | | | | (% of retail sales) % | | | | | | | | | 2019 50 | Digital | | | | | | | | | Traditional (Outdoor, Cinema, Print and TV) | | | | | | China UK US Germany | 40 30 1 All references to estimates and forecasts for advertising spend exclude US political advertising. Source: GroupM 20 This Year Next Year report. 2 Source: Wunderman Thompson Commerce, Dec 2021. 10 ● 0 WPP ANNUAL REPORT 202124 ● THE MARKET STRATEGIC REPORT ## MARKET TRENDS ## The outlook for growth WPP provides services in a global market, The balance of spend is in the higher-growth with an estimated addressable fee income areas of experience, commerce and ## remains positive. | of $329 billion in 2021. Demand in this market | technology. These are forecast to grow at | | --- | --- | | is expected to continue to grow, to over | 10% due to rising consumer expectations of | | $410 billion by 2025, representing cumulative | seamlessly blended online and physical | | annual growth of around 6%. Just over half | environments, sustained expansion and use | | of the addressable market is in our core | of ecommerce channels, and the need for | | communications services of media, creative | client businesses to rapidly adapt in a | | and PR, which are forecast to grow at around | fast-changing market. | 2% annually until 2025. WHY WPP IS WELL POSITIONED TO MANAGE Sector KEY TRENDS IN OUR MAIN OFFER AREAS AND BENEFIT FROM THIS ### COMMUNICATIONS Communications is our largest sector, accounting for two-thirds – 43% of GroupM’s media billings were of our business mix in our Global Integrated Agencies, excluding digital in 2021 1 | GroupM | . The growth opportunity in digital communications | – We are investing for growth in specialist | | --- | --- | --- | | remains attractive, driven by continued consumer migration | | digital platforms, such as Xaxis, our | | to digital behaviours and channels, and clients’ need for high | | programmatic business, Finecast, our | | volumes of content to fill new channels and touchpoints across | | market-leading addressable TV platform, | | consumer journeys. Global digital ad spend grew by 30.5% in | | and DTI Digital, a digital innovation and | 2 | 2021 | . Although traditional communications is a mature market, | software engineering business | | --- | --- | --- | | we continue to see increased demand for services related to | | – In 2021 Superunion was engaged on | | digital communications, purpose, the environment and reputation, | | sustainability-related workstreams with | | notably driven by the impact of the pandemic, a growing | | 80% of its top 20 global clients | awareness of the need for racial equity and concern for the safety of social media platforms. 85% of consumers believe 3 brands should be about something more than profit . ### EXPERIENCE Experience is a rapidly growing area driven by the increasing – Ogilvy was named a Loyalty Service 5 number of people online and the hybrid blend of physical and Providers Leader by Forrester digital channels. According to Forrester, brands with superior – AKQA ranked highest in Gartner’s Magic customer experience deliver five times the revenue growth of Quadrant for Global Marketing Agencies, 4 | | other brands | . | 2021 | | --- | --- | --- | --- | | COMMERCE | Commerce is being driven by the shift to digital and | | – We have 13,500 commerce experts in the | | | omnichannel commerce, including the adaptation of physical | | Company | | | commerce post Covid-19. 73% of consumers believe ecommerce | | – WPP was named as Leader in the Gartner | 6 is more important post pandemic , and ecommerce is now 45% Magic Quadrant study of commerce of retail sales across China and 28% in the UK (two of our largest leaders in Q1 2021 7 | | markets) | . | | | --- | --- | --- | --- | | TECHNOLOGY | Growth for technology services continues due to demand for | | – We possess extensive modern marketing | | | data and analytics, and managed services offerings with | | technology expertise, including 6,000+ | | | lengthier contracts. We believe technology remains the engine | | creative technologists bringing ideas to life | | | behind delivering better customer experiences. 76% of | | – We are a top-three global partner to | | | businesses aspire to create more personalised experiences, | | Adobe and Salesforce in marketing | | | but just 14% are doing so. Data and technology are central | | technology | 4 | | to closing this gap | . | | | | --- | --- | --- | --- | --- | | 1 Revenue less pass-through costs in our Global | | | 3 Source GenerationZ: Wunderman Thompson Intelligence, | 6 Source: Wunderman Thompson, The Future Shopper | | Integrated Agencies, excluding GroupM. | | | December 2020. | Report, 2021. | | 2 Excluding US political advertising. Source: GroupM, | | | 4 Source: WPP Customer Experience Playbook, January 2022. | 7 Source: Wunderman Thompson Commerce, Investor | | This Year, Next Year report, December 2021. | | | 5 Source: Forrester Wave, Loyalty Service Providers, Q3 2021. | Webinar, December 2021. | 25WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## OUR STRATEGIC ## PROGRESS ## VISION ## & OFFER Read more from page 28 ## A strategy for ## growth: for our ## CREATIVITY Read more from page 32 ## people, our clients, ## our agencies and ## our shareholders. ## DATA & ## TECHNOLOGY ### It has been three years since we set 2021 was an outstanding year for WPP. Read more from page 36 ### out our strategy to return WPP to As clients seek to accelerate their growth ### growth. Our top-line performance and transform how they reach customers, ### is ahead of plan, with like-for-like the depth, breadth and global scale of our ### growth of 12.1% in 2021, which is offer – which combines creativity with technology and data, through Choreograph, ### 2.9% over 2019. and the largest global media platform in GroupM – is proving its value for existing and new clients. The talent, dynamism and commitment of our people have also shone through. Our extensive partnership with The ## SIMPLER Coca-Cola Company, the expansion of our work with Google and the continuation of ## STRUCTURE our longstanding relationship with Unilever Read more from page 40 demonstrate the value that three of the world’s leading marketing organisations place in WPP. We have made substantial strategic progress, creating the world’s leading board-level communications firm through the merger of Finsbury Glover Hering and Sard Verbinnen & Co, and acquiring capabilities in AI, commerce and technology services to leverage across all of WPP for future growth. Cash generation continues to be very strong, ## PEOPLE underpinned by efficiencies achieved in our Read more from page 52 transformation programme, allowing us to make significant investments in our offer and reward our people for their huge contribution, while returning over £1 billion in cash to shareholders through dividends and share buybacks. WPP ANNUAL REPORT 202126 OUR STRATEGIC PROGRESS STRATEGIC REPORT # VISION & OFFER A vision developed with our people and clients and a modern offer to meet the needs of a rapidly changing market. - Increased the share of revenue from the high-growth, future-facing areas of experience, commerce and technology to 38% - Industry-leading net new business in 2021 of $8.7 billion - Continued investment in client offer, through acquisitions including Sard Verbinnen, Satala, Cloud Commerce and Numerator (Kantar) - Global Integrated Agencies, excluding GroupM. R3'S NEW BUSINESS LEAGUE (2021 WINS) ![img-0.jpeg](img-0.jpeg) # CREATIVITY A renewed commitment to creativity, WPP's most important competitive advantage. - Recognised as the most creative company of the year at the 2021 Cannes Lions Festival - Topped the WARC 2021 global agency rankings across creativity, effectiveness and media excellence - Invested in leading creative talent ![img-1.jpeg](img-1.jpeg) WPP was named the most creative company of the year at the Cannes Lions International Festival of Creativity. WPP agencies collected a total of 190 Lions # DATA & TECHNOLOGY Harnessing the strength of marketing and advertising technology, and our unique partnerships with leading technology firms. - Continued to enhance our technical expertise and gained over 30,000 accreditations and certifications with our technology partners - Developed new IT platforms to enhance productivity and collaboration - Nearly 6,000 of our people are certified Google Marketing Platform consultants # 4 out of 12 Gartner Magic Quadrant Leaders are WPP digital agencies (March 2021) # SIMPLER STRUCTURE Reducing complexity and ensuring our clients can access the best resources from across the Company. - All-time high client satisfaction score - Combined the specialist data units of GroupM and Wunderman Thompson to form Choreograph - a new global data company - Increased the number of WPP campuses to 31, providing more collaborative workspaces for our agencies and clients # 8.1 (out of 10) Client satisfaction score. See page 40 # 47,500 people based in our campuses (2020: 34,000) # PEOPLE & CULTURE Investment in our people, culture and values to ensure WPP is the natural home for the best and brightest talent. - Listened to our people more and supported their wellbeing - Provided greater opportunities for career development - Continued to build an inclusive culture # 100% of our people have access to wide-ranging support from our Employee Assistance Programme WPP ANNUAL REPORT 2021 27 STRATEGIC REPORT ## OUR STRATEG Y ## – VISION AND OFFER ## A modern offer for the future. | A FOCUS ON HIGHER-GROWTH AREAS | We have simplified our business to allow us | LOOKING AHEAD | | --- | --- | --- | | In 2018 we set out a new vision and | to share resources better across the Company. | Just under half of the addressable market in | | contemporary offer, building on our core | In 2021, this simplification included the | which we operate is in the higher-growth | | strengths in communications, by expanding | formation of Choreograph, from two | sectors of experience, commerce and | | our capabilities in the higher-growth and | separate data units in GroupM and | technology, where client spend is forecast | | future-facing areas of experience, commerce | Wunderman Thompson, to unify and | to increase by some 10% annually until 2025. | | and technology. | accelerate our data capabilities. And Satalia’s | The balance of spend is in our core | | | highly specialised artificial intelligence | communications services, which are expected | | The attractiveness of our offer – outstanding | capabilities have been leveraged across WPP | to grow by around 2% annually. | | creativity combined with strong capabilities | to solve a range of complex optimisation | | | in data and technology, the leading global | challenges for clients and our own business. | Given these trends, our goal is sustainable | | media platform and exceptional PR and | | growth in our core communications | | branding services – continues to attract | We have stepped up internal investment | business, through a focus on digital | | and retain clients. This is reflected in our | to drive significant long-term growth | communications, and further expansion into | | industry-leading new business performance | opportunities. For example, we have | the higher-growth areas (whose share of our | | for 2021: $8.7 billion of net new billings, | created a commerce-as-a-service platform | business mix increased to 38% in 2021). We | | surpassing the (also industry-leading) | to complement our broader expertise in | aim to do this by building on our strengths, | | $4.4 billion achieved in 2020. | commerce, and we are driving further | and by investing in our talent and market- | | | innovation in our market-leading | leading technology and data capabilities. | | INVESTING IN OUR OFFER | programmatic and connected TV | | | As we look to accelerate growth at WPP, | businesses, Xaxis and Finecast. | | we continue to make strategic investments ### to build capabilities in key areas. During 2021, A REFLECTION OF OUR SIMPLE, ## $8.7bn ### we acquired a number of technology, digital INTEGRATED, MODERN OFFER 1 of net new business in 2021 | innovation and data companies. These | Our strategy gave us our greatest ever | | | --- | --- | --- | | include Satalia, a market-leading artificial | new business achievement – WPP’s 2021 | | | | | 1 Billings as defined in the Glossary on page 222. | | intelligence business; Cloud Commerce | appointment as the Global Marketing | | | Group, a technology company helping | Network Partner for The Coca-Cola Company. | | brands to market, sell and deliver products | across ecommerce platforms globally; and | The company was looking for a partner able | | --- | --- | | Made Thought, a London-based branding | to build its brands in the digital age and | | and design agency. In addition, Kantar, in | transform its marketing for the future. Our | | which we own a 40% stake, acquired | data and technology capabilities through | | Numerator, a technology-driven consumer | Choreograph were a critical factor in our | | and market intelligence company. | success. The Coca-Cola Company operates | in over 200 markets across 200 brands and We also merged Finsbury Glover Hering and WPP’s solutions and global scale will unleash Sard Verbinnen & Co, creating the world’s the potential of data-driven marketing for leading board-level strategic this iconic organisation. communications firm. WPP ANNUAL REPORT 202128 OUR STRATEGY STRATEGIC REPORT ## VISION AND OFFER ## As The Coca-Cola Company’s Global Marketing Network Partner, our ## role is to be acatalyst for transformation and a pillar for growth in a new ## age of connected experiences. ## WPP WILL BRING CREATIVE SUCCESS IN THE LARGEST PITCH… ## 200+ The Coca-Cola Company’s global marketing ## EXCELLENCE ANDUNPARALLELED Markets review is widely regarded as the biggest ## MARKETING CAPABILITIES ATA pitch in the history of our industry. So ## GLOBAL SCALE THAT NOOTHER succeeding in the pitch and being appointed ## 200 ## NETWORK CANDEPLOY.” as Global Marketing Network Partner, after Brands nine months and a Company-wide effort Manuel Arroyo involving hundreds of our colleagues, means Global Chief Marketing Officer, the world to us. ## The Coca-Cola Company OpenX ### OpenX, the bespoke DUE TO OUR GLOBAL REACH… WPP team, will provide WPP will handle nearly all of The Coca-Cola global end-to-end Company’s media worldwide and the large capabilities across media, majority of its creative work. We will also be creative, data, production, responsible for production, data, technology, technology, social and PR PR and social, globally. Our work will span the client’s 200-plus markets, five categories and nine geographical operating units. ### …AND OUR MODERN OFFER The Coca-Cola Company was looking for a partner with modern capabilities to build its brands in the digital age and help transform its marketing. Critical to our success were our simple, integrated offer, and our data and technology capabilities through our newly created Choreograph business. The depth, breadth and scale of our expertise is what set us apart from our peers. 29WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY VISION & OFFER 30 WPP ANNUAL REPORT 2021 OUR STRATEGY STRATEGIC REPORT ## CADBURY – ## SHAH RUKH ## KHAN, MY AD ### The small stores around us deserve ### to have a happy Diwali. OFFER ### COMMUNICATIONS ### TECHNOLOGY AGENCY ### OGILVY, MUMBAI & WAVEMAKER CLIENT ### CADBURY (MONDELEZ) The Covid-19 pandemic has had a particularly severe impact on smaller businesses in India. So Ogilvy and Wavemaker, together with Cadbury Celebrations, worked side-by-side in 2020 on the #NotJustACadburyAd campaign to lend a helping hand. In 2021, the team updated the data-driven campaign, using machine learning to create advertisements that served both Cadbury and thousands of local businesses, all given support with the enthusiastic help of Cadbury’s brand ambassador and Bollywood’s biggest star, Shah Rukh Khan. Ogilvy produced ads for small stores that ‘featured’ the famous actor asking passers-by to shop locally for Diwali. The AI-powered, hyper-personalised ads featured more than 2,000 grocery, retail, consumer electronics, home décor, clothing, furniture and jewellery stores across the country. Wavemaker developed the media plan and worked with Google and YouTube to optimise ad reach and engagement. Ads were targeted to consumers based on their geolocation, promoting only nearby small businesses. Since it’s impossible to cover all the stores across the country, the team created a microsite that allowed small business owners to generate their own versions of the ads, with Shah Rukh Khan ’himself’ using owners’ stores’ names in ads that could be easily posted on social media and other platforms. ## 130,000 94m total ads created views on Facebook and YouTube ## 2,000 stores featured WPP ANNUAL REPORT 2021 31 STRATEGIC REPORT OUR STRATEGY ## CREATIVITY ## The driving force behind ## our competitiveness. | CREATIVITY: IT’S WHAT WE DO | that provides clients with transformational | to fund Covid-19 vaccines for lower-income | | --- | --- | --- | | Creativity is our differentiator. It is at the | design and creative thinking. And this year | countries, and collaborated with Pfizer to | | heart of what we do, and – combined with | we announced the acquisition of Village | encourage Grand Theft Auto players in Brazil | | our global media platform, and leading | Marketing in North America, the industry | to get a vaccine shot, both in the metaverse | | technology and data capabilities – is what | leader in influencer marketing and creator | and in the real world. | | delivers results for our clients. During 2021, | economy partnerships. | | | we continued to bolster our creative | | RECOGNITION | | capabilities – by investing in talent, adopting | Fourth, we continued to push the boundaries | Awards are the by-product of doing the right | | new ways of working and utilising new | and expand the definition of creativity itself. | thing for our clients, never the motivation. | | technologies – to help our clients and grow | The metaverse, for example, brings countless | But winning awards is a validation that our | | our business. | new opportunities for creative expression | agencies are at the pinnacle of creativity. We | | | and for brands to connect with consumers. | were honoured to be recognised as the most | | First, we focused on hiring great creative | To capture those opportunities, this year | creative company at the 2021 Cannes Lions | | talent. This included the appointment of Rob | Hogarth launched The Metaverse Foundry, a | Festival, with our agencies receiving 190 | | Reilly as WPP’s Global Chief Creative Officer, | global team of over 700 creatives, producers, | Lions and representing 38 different countries. | | and Dave Rolfe in the new role of Global | visual artists and technologists focused on | In addition, WPP topped WARC’s 2021 global | | Head of Production for WPP and Hogarth, | delivering the most creative and compelling | agency rankings across all three categories | | our creative production arm. We promoted | metaverse experiences for our clients. | – creative, media and effectiveness – reflecting | | Devika Bulchandani, the force behind several | | the breadth of our capabilities. | | iconic campaigns, to Global President of | OUR AGENCIES | | | Ogilvy (while retaining her position as CEO | During 2021, we continued to help clients | We were recognised for our industry-leading | | of Ogilvy North America) and welcomed the | tell their stories in new and imaginative | new business performance, with GroupM | | return of Liz Taylor as Ogilvy’s new Global | ways. This included helping Under Armour | agencies – MediaCom, Mindshare and | | Chief Creative Officer. This year we | celebrate Stephen Curry’s three-point world | Wavemaker – ranked as the top three, | | appointed Mehta Mehta to the new position | record score in basketball, through the sale | respectively, in R3’s 2021 global media league | | of Global Executive Creative Director for | of 2,974 NFT sneakers in the metaverse (read | table. And as you can see on the following | | Hogarth. | more on page 50). We helped Degree, one of | page, our agencies won many other plaudits | | | Unilever’s key brands, raise awareness of its | for their work and achievements. | | Second, we found creative new ways to | mission to create suitable products for those | | | run pitches and win business. We led the | living with a disability (you can see the | LOOKING AHEAD | | industry on new business wins in 2021, often | campaign on page 69). We helped Volvo | Investing further in creativity is key to our | | working remotely throughout the pitch | remind consumers that the biggest threat | future success. To that end, we are using | | process. And rather than flying around the | to our safety isn’t on the road, it’s climate | part of the savings from our transformation | | world to find ‘just the right location’, we | change (read more on page 80). And we | programme to invest in creative talent | | pivoted to producing film and content | helped tell the compelling story of how | – supporting and developing our existing | | remotely, using virtual technology and AI. | Black men are often misrepresented in | people and attracting the next generation | | We also partnered with Microsoft to launch | modern media (see page 75). | of makers and creators. You can read more | | Cloud Studio, an innovative cloud platform | | about our people strategy on page 52. | | that allows creative teams from across WPP’s | Due to our global scale, breadth and scope, | | | global network to produce campaigns for | we have a real opportunity to use the power | | | clients from any location. | of our creativity to support our communities, | | not least by helping governments, vaccine- Third, we invested in new creative businesses makers, health authorities and brands to such as Made Thought, a branding and deliver their communications during the design agency, which is now part of The pandemic. For example, we worked with New Standard, an industry-leading collective the World Health Organization Foundation WPP ANNUAL REPORT 202132 OUR STRATEGY STRATEGIC REPORT ## DELIVERING ## EXCELLENCE | WELCOME RECOGNITION | Here are just a few of the many won in 2021 | | --- | --- | | The work we do for clients is to meet their | by our creative, media, public relations and | | specific business needs. We don’t do it for | specialist agencies. These awards, from the | | the awards, but we like winning them | industry’s pre-eminent voices, recognise the | | because they’re a testament to the talent | breadth of our work across every discipline | | of our people and the excellence of our | of marketing. | agencies. #1 Creative Effectiveness WARC Most Innovative Global Platinum Agency Network SABRE Cannes Lions PRrovoke Most Innovative US Media Agency Media Agency ofthe Year ofthe Year Adweek Digiday The Best of the Best: Creative Media Company Network of the Year ### Campaign Most Creative Company of the Year MediaPost Grand Prix Grand Prix Cannes Lions Cannes Lions #1 Creative AgencyNetwork Bronze WARC Cannes Lions Global Agency #1 Media Agency Network of Network the Year WARC Fe stival of Media 33WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY CREATIVITY ## SKY GLASS ### Say goodbye to the satellite dish, ### say hello to Sky Glass. OFFER ### TECHNOLOGY AGENCY ### MAP PROJECT OFFICE LONDON CLIENT ### SKY Sky collaborated with AKQA’s pre-eminent industrial design studio, Map, to create Sky Glass, the world’s first carbon-neutral TV, requiring 50% less energy than a typical TV and soundbar set-up. One wire and one plug – Sky Glass breaks with the tired conventions of television design. Typically, televisions sit at the heart of a complex ecosystem of surrounding technologies including multiple remotes, set-top box, soundbars and smart speakers. With Sky Glass, however, Map designed a television that integrates hardware, software and content into a single unit, as well as creating an immersive home cinema experience straight out of the box. By combining industrial design with Sky’s service, Glass also takes a first step towards imagining a more environment-friendly future for televisions. While most televisions and related devices quickly end up in landfill as technology advances, Glass can add new features as technology is upgraded – extending the product’s lifespan, as well as cutting down on waste. ## Carbon ## Neutral® The first TV to be certified carbon- neutral by Natural Capital Partners WPP ANNUAL REPORT 202134 OUR STRATEGY STRATEGIC REPORT 35WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY ## DATA & TECHNOLOGY ## Technology powering creativity. | TECHNOLOGY AT WPP | and services, whether that is in commerce, | proudly continue to invest in training on | | --- | --- | --- | | We use technology and data to augment | consulting or systems integration. Our | partner technologies, with over 30,000 | | creativity, and to deliver it faster with more | commitment to distributed innovation – | accreditations and certifications achieved | | impact and insight. Technology is critical | where innovation takes place closest to our | this year by our people. | | to what we do: it helps us to understand | clients, in our agencies and disseminated | | | markets, consumers and behaviours; delivers | across the Company through our technology | PARTNERSHIPS | | the channels for consumers to engage with | platform, WPP Open – means that we are | We have key strategic partnerships with 25 | | a campaign; and provides the technical | innovating at the edges. We are driving this | of the world’s largest and most innovative | | data or insights to inspire and measure our | innovation by investing $300 million annually | technology companies. At the heart of each | | marketing success. | (the equivalent of 2% of sales) in internal | partnership is a joint business plan covering | | | product development to differentiate our | product development, preferential access | | CLIENTS’ TECHNOLOGY NEEDS | proposition and offer to clients. We are also | to data and technology, globally scaled | | For the past decade, our clients’ businesses | automating repetitive and manual processes | enablement programmes for our teams | | have been undergoing digital transformation, | so that we can free up creativity, enabling | (for example, providing us with over 3,300 | | but the events of the past two years have | our people to focus on delivering true value | Adobe-certified professionals across WPP), | | accelerated this trend and created several | to clients. | and joint go-to-market approaches. We are | | permanent structural changes: | | expanding and strengthening our partnership | | | Our technology strategy builds on our | ecosystem to ensure our offerings contain | | – The emergence of omni-channel | capabilities and is focused on three core | innovative and leading-edge elements, and | | commerce as a competitive imperative | components: our platform, WPP Open; our | address clients’ rapidly changing needs. The | | – The integration of physical and digital | people; and our partners. | focus in 2021 has been on new ad-supported | | customer experiences | | platforms (eg TikTok and Instacart), new | | – A build-once, use-many-times approach to | PLATFORM | formats (eg Augmented Reality), commerce | | content production and distribution across | WPP Open, our common data and technology | (eg Shopify) and new managed service | | all channels | platform, offers 50 scaled data and technology | business lines (eg Google Cloud Premier | | – An increased reliance on first-party data | products. We have begun building the | Partner). | | and direct consumer relationships with the | technology chassis that underpins WPP | | | deprecation of third-party cookies | Open, allowing for a network-wide, | RECOGNITION | | | interoperable operating system. Through | WPP was named a leader among commerce | | WPP has been partnering with our clients on | WPP Open, we are seeking to integrate | services providers by Forrester Research, | | the strategic imperative to transform their | marketing silos, reducing time to value for | Inc. in Q1 2021, reflecting the capabilities of | | businesses through technology and data | our clients – a position that is resonating and | the 13,500 commerce service experts we | | so that they can engage with consumers | has been instrumental in our most significant | employ across the globe. And we were | | and then, on an ongoing basis, build the | account wins in 2021. The launch of | named Adobe’s Digital Partner of the Year | | capability in their businesses to allow them | Choreograph, our new data services business, | in the UK. | | to take advantage of those opportunities. | in April 2021 epitomises our data philosophy: | | | Fundamentally, this means that we are | that clients should own their own data to | LOOKING AHEAD | | helping clients to transform their businesses | future-proof their businesses. | Our priorities for the year ahead are delivery | | with new technology, new data, new | | of the WPP Open technology platform, | | business processes and new skillsets. | PEOPLE | commerce-as-a-service, optimisation and | | | Key to our future success is ensuring that our | intelligent decision-making in our products | | A TECHNOLOGY STRATEGY THAT | people have the skills and curiosity to deliver | and operations, and the democratisation of | | SETS US APART | creative transformation. Our Commerce and | data – all to drive creativity. | | Our comprehensive marketing technology | MarTech Academies have been completed | | | offering, scaled globally, means we can | by all Global Client Leaders along with other | | | match clients’ ambitions with capabilities | participants from across the Company. We | | WPP ANNUAL REPORT 202136 OUR STRATEGY STRATEGIC REPORT ## PLATFORM, PEOPLE ## & PARTNERSHIPS ### DRIVING GROWTH AND ### INNOVATION WITH WPPOPEN WPP Open has become a key competitive advantage – both in terms of how we build proprietary products and how we integrate creativity, data and technology ## PLATFORM for our clients. WPP Open, our common data and technology platform, showcasesthebest data, technology products (tools, appsandservices) ## 50 and partnerships from across WPP – allin one place. scaled data and technology products ### OUR CAPABILITY IN TECHNOLOGY ### AND DATA STARTS WITH OUR PEOPLE Across WPP, we have 13,500 colleagues delivering commerce services, 5,000+ data practitioners – leading specialists who build our proprietary models, and 6,000+ creative technologists, bringing great ideas to life using technology. ## PEOPLE Our partner enablement programmes ## helptodevelop our people by focusing 30,000+ onthree high-growth areas: modern accreditations and certifications earned from marketing technology, creative and our technology partners during 2021 – that’s production, and digital media platforms. 1 in 3 of our people (2020: 21,000+) ### GLOBAL PARTNERSHIPS AND ### STRATEGIC RELATIONSHIPS Our partnerships comprise four areas: marketing technology (such as Adobe and Salesforce), digital media platforms (including Facebook and Instacart), cloud and AI (such as Amazon and Google) and creative and ## PARTNERS production (TikTok and Snap, for example). During 2021, Our technology partners are some we added one new strategic partnership to our of our largest andfastest-growing clients. ecosystem (Instacart), taking the total to 25. By developing solutions using their technology, and enabling our teams, we become strategic partners, driving joint innovation, deeper access, ## 25 and new opportunities. global strategic partnerships 37WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY DATA & TECHNOLOGY ## VACCINE ## READINESS ## MODEL ### Helping to vaccinate the ### United States against Covid-19. OFFER ### COMMUNICATIONS ### DATA AGENCY ### MEDIACOM, CHICAGO CLIENT ### WALGREEN BOOTS ALLIANCE With misinformation running rampant, some people were hesitant about receiving the Covid-19 vaccine. And because the supply and geographical distribution of doses were unpredictable, reliable sources became paramount. So, Walgreens asked MediaCom to help, focusing on three main goals: building brand trust with Walgreens for the vaccine; driving vaccine appointments; and delivering 30 million Covid-19 shots in arms. To do this MediaCom had to identify and reach those who were most likely to want the shot, and meet fluctuating demand – based on changes to individual mindsets and changes in Covid cases by area. First, the agency created a Vaccine Readiness Model, using a wide range of behavioural, cultural and mindset factors affecting vaccine uptake across the United States, to identify vaccine readiness in real-time, amid ever-changing attitudes and supply availability. The next step was to include Walgreens store location information and pull in audiences within a five-mile radius, reaching those most likely to make an appointment with the right messages at the right time, and helping the ‘vaccine-hesitant’ to become the ‘vaccine-ready’. Through the combination of integrated data insight, modelling and media message delivery via programmatic platforms, the team created one of the most successful data-led campaigns in the world, achieving its objectives and providing millions of Americans with protection against Covid-19. | 34.6m | 43% | | --- | --- | | people vaccinated at | increase in | | August 30, 2021 | appointments | | 47% | Awards | | --- | --- | | increase in media | Festival of Media North | | engagement | America, Gold | The Internationalist Innovative Digital Solution, Grand Prix WPP ANNUAL REPORT 202138 OUR STRATEGY STRATEGIC REPORT 39WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY ## SIMPLER STRUCTURE ## CLIENTS ## Bringing the best of WPP ## to our clients. | A GROWTH MARKET | OUR COMPETITIVENESS | 10-point scale) for client satisfaction on 'ESG | | --- | --- | --- | | The global advertising market is growing | Clients today are increasingly looking for a | achievement', for example. All of this work | | and we have benefited: we have seen record | partner that can provide a suite of services | and more contributed to an all-time high | | growth across our largest clients in terms of | across media, creative, data and technology | ‘Likelihood of recommending WPP’ score | | their spend with WPP. According to GroupM | – simply and seamlessly. We have positioned | from our clients – an average of 8.1 out of 10, | 1 | estimates, global ad spend grew by 22.5% | in | WPP to meet these needs, which has resulted | up from 7.5 in 2018. | | --- | --- | --- | --- | | 2021, and 18 out of our top 30 clients achieved | | in our improved performance. | | | double-digit two-year growth in the year. | | | LOOKING AHEAD | | These trends are driven by increased demand | | The combination of our outstanding | Our focus is on continuing to increase our | | for our digital and commerce expertise; the | | creativity, leading technology and data | impact for clients, using our creativity and | | greater integration of media, creative, data | | expertise, and the strength and scale of | technology to support their transformation | | and technology services; and clients | | GroupM – both at the global and local | journeys. Choreograph, our new data | | reinvesting in marketing for growth. | | level – is proving its value for existing | company, is designing innovative ways to | | | | and new clients. | future-proof our clients’ approach to data. | | INTEGRATED APPROACH | | | We anticipate more client assignments in | | Our leadership team is dedicated to ensuring | | During 2021 we achieved many significant | the ever-more important areas of business | | integrated and collaborative service across | | wins in pitches, from media, creative and | transformation, sustainability, DE&I and | | our global clients. Our Global Client Leaders, | | PR to design, technology and production, | cultural change management. | | responsible for being a single point of entry | | culminating in WPP’s appointment as The | | | into WPP and acting as trusted advisors to | | Coca-Cola Company’s Global Marketing | We are deeply committed to the success of | | our largest clients, focus on how we can help | | Network Partner. Other major cross-agency | our clients and grateful to them for the trust | | power their business. | | wins included AstraZeneca, Beiersdorf, | they continue to place in us. | L’Oréal, Sainsbury’s, TD Bank and Under Our Global Client Leaders help to deliver Armour. our core communications offer, and further develop client relationships across our Overall, on new business in 2021, we ranked ## 18 out of 30 higher-growth capabilities in experience, as number one for both creative and media of our top clients achieved double-digit commerce and technology. Each of our top wins according to R3, with a total of two-year growth in 2021 10 clients work with us in at least three of $8.7 billion of net new business won. our four capability areas of communications, technology, experience and commerce. According to independent research consultancy COMvergence, GroupM led the | We are driving high levels of integration | industry in total media wins and retentions | | --- | --- | | across our network. Over 95% of our top 50 | globally in 2021. Among the rankings of | | clients work with at least five of the agencies | individual agencies MediaCom secured | | in our network and have rewarded us with an | second place and Mindshare was third. | average score of 8.1 (on a 10-point scale) for ‘Collaboration’ in our 2021 client satisfaction Clients are seeking our help across their programme. businesses. Digital transformation, reputation, DE&I, ESG, privacy and data management are central to commercial success for many clients and we are well equipped to deliver services that address these needs. During 2021, we worked with many of our biggest clients in these areas – scoring 8.2 (on a 1 Excludes US political advertising. WPP ANNUAL REPORT 202140 OUR STRATEGY STRATEGIC REPORT ## HAPPY CLIENTS ## During 2021, we registered a ## record-high client satisfaction score. Key to this was the work of our Global Client Leaders (GCLs), who provide a single point of access to WPP and our agencies for a number of our largest clients. GCLs lead these relationships as the client’s business partner for growth, making sure they can easily see and experience the best of what WPP can doacross itsagencies – in terms of capabilities, expertise and talent – and ensuring effective collaboration on behalf of those clients. ### CLIENT SATISFACTION SCORE ### LIKELIHOOD TO RECOMMEND ### SCORE (OUT OF 10) ## 8.1 8.1 ## 7.7 ## 7.5 ### 2018 20202019 2021 41WPP ANNUAL REPORT 2021 STRATEGIC REPORT SIMPLER STRUCTURE ## REINVENTING ## C AR OWNERSHIP ### Ford customer experience ### transformation. OFFER ### EXPERIENCE ### COMMERCE ### TECHNOLOGY AGENCY ### VMLY&R, KANSAS CITY CLIENT ### FORD For as long as vehicles have been made, the primary focus of automakers has been on selling the vehicle – a limited, singular interaction in a years-long ownership experience. Ford's goal was to change this. So when it came to launching the new all-electric Mustang Mach-E, instead of planning to market another new vehicle, Ford and VMLY&R worked together to, reimagine the entire Ford ownership experience. Ford knew from research that they needed to modernise the purchase process and make it more convenient. They also knew owners craved support and engagement beyond the moment of purchase for any new vehicle – especially for what is likely to be their first all-electric vehicle. And they knew that during the time between pre-order and delivery some customers change their minds and drop out. So together with VMLY&R they invented a first-of-its-kind experience that allowed owners to set preferences in their new vehicles before they were even built. By creating the industry’s first Remote Vehicle Setup in 2020, owners could engage with their vehicle during the long wait period between order and delivery. This ensured that all those who pre-ordered remained engaged and stayed with Ford until delivery. The new ecommerce experience accounted for 97% of Mustang Mach-E reservations. All of this effort has created millions of interactions in parts of the Ford business that didn’t even exist just a few years ago. This is the new way forward for all Ford launches to come. | 97% | 600 | | --- | --- | | of Mustang Mach-E | million interactions | | reservations | across digital | touchpoints WPP ANNUAL REPORT 202142 OUR STRATEGY STRATEGIC REPORT 43WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY ## SIMPLER STRUCTURE ## COMP ANIES ## Making our business ## simpler to manage. | During 2021, we continued to simplify our | In 2021, we also established Choreograph, a | We also completed the transaction to | | --- | --- | --- | | structure, allowing us to reduce complexity | new global data company, bringing together | take 100% ownership of WPP AUNZ | | and cost, and respond more quickly to client | the specialist data units of GroupM and | (previously 61.5%), which housed our | | needs. This included the implementation of | Wunderman Thompson into a single company | operations in Australia and New Zealand. | | agency network mergers, the merger of | with global reach, accessible to all WPP | This will improve control and governance | | smaller, sub-scale, local offices and the | clients and companies. Choreograph played | of our fifth largest market and allows our | | concentration of working locations into | a key role in several important client wins in | agencies there to have stronger connections | | fewer, more efficient campuses. | 2021, including Bayer, Beiersdorf, Coca-Cola, | with the rest of the WPP network. | L’Oréal and Unilever. For more information | CREATING LEADING AGENCIES | about Choreograph, see the page opposite. | LOOKING AHEAD | | --- | --- | --- | | After a series of mergers and business | | We continue to focus on three areas to | | combinations over the last few years, we | In addition, we combined separate | transform the way we work and drive | | have a strong footprint of ten global agency | operations into a single brand research and | efficiencies: by simplifying our operating | | networks, providing clients with a full suite | analytics platform under BAV, creating the | model, generating savings in procurement | | of modern marketing solutions across | leading source of brand analytics on some | and real estate, and improving the | | communications, experience, health, | 60,000 brands worldwide. This will enable us | effectiveness of our support functions | | ecommerce, data and technology. | to better integrate brand data into our data | and shared services. For more on these and | | | analytics offer across WPP companies. | other initiatives under the transformation | | Following the successful mergers to create | | programme, please turn to the Chief | | Wunderman Thompson and VMLY&R, in | TRANSFORMATION PROGRAMME: | Financial Officer’s statement on page 60. | | 2021 we made a series of further business | STRUCTURAL SIMPLIFICATION | | | combinations. We brought AKQA and Grey | We have made good progress on our | | | together within AKQA Group, moved | transformation programme, a key objective | | | Geometry into VMLY&R to create VMLY&R | of which is to simplify WPP, as it drives | | | Commerce, a global end-to-end creative | £600 million of annual cost efficiencies by | | | commerce agency, and the specialist agency | 2025. Around £245 million of gross annual | | | GTB became part of VMLY&R. As a result, | savings have been achieved so far, mainly in | | | AKQA, the former Geometry business and | property, procurement and simplification | | | GTB are now reported within Global | initiatives. | | Integrated Agencies (see page 66). We have grown our use of shared, multi- agency campuses for our people, driving efficiencies and allowing clients easier access to our talent and expertise. A further nine campuses opened in 2021, taking the total to 31. We have combined sub-scale agencies in smaller markets, and removed around 500 legal entities from our structure, to reduce the complexity arising from legacy acquisitions. In procurement, we are beginning to consolidate our spend more effectively, improving terms for our agencies with our purchasing scale. WPP ANNUAL REPORT 202144 OUR STRATEGY STRATEGIC REPORT ## FUEL FOR ## GROWTH ## Choreograph: another important ## step in our simplification strategy that ## will help WPP and our clients to grow. Data is fuel for growth, which is why we created Choreograph, our global data services and products company. It combines the specialist Offers direct to clients data units of GroupM and Wunderman Thompson into a single global data company, leveraging our common data and technology platform, WPP Open, and is accessible to all WPP clients and companies. Choreograph unlocks data inside brands to power deeper customer connections. Bringing together a constellation of leading products and expertise, Offers direct to Choreograph delivers an end-to-end data- WPP agencies enablement solution that helps clients address their most critical data-driven marketing challenges. Founded on the principles of flexibility, openness and privacy, our purposeful approach to data helped us to win a number of new clients in 2021, including some of the world's most admired brands. Data with purpose. Fuel for growth. ## 850+ data experts (technologists, product developers and data scientists) Creative data ## specialists 74 markets serviced, by 19 global offices ## CHOREOGRAPH DELIVERS Media data ## A UNIFIED IDENTITY‑BASED specialists ## APPROACH, PROVIDING ## Agencies can access UNIQUE INSIGHTS TO FUEL ## Choreograph’s tools BRAND GROWTH AND through WPP Open ## POWER PERSONALIZED ## EXPERIENCES FOR OUR ## CUSTOMERS WHILE FULLY ## RESPECTING THEIR PRIVACY ## AND PREFERENCES." Matt Harker VP Global Marketing Strategy & Transformation, Walgreens Boots Alliance 45WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY SIMPLER STRUCTURE WPP ANNUAL REPORT 202146 OUR STRATEGY STRATEGIC REPORT STRATEGIC REPORT ## RIOT GAMES th ### Celebrating the 10 'Annie-versary' ### of League of Legends China. OFFER ### COMMUNICATIONS ### EXPERIENCE ### TECHNOLOGY AGENCY ### SUPERUNION AND HOGARTH CLIENT ### RIOT GAMES Riot Games brought us League of Legends, the most played PC game in the world. They also created the annual League of Legends World Championships, the most widely viewed and followed esports events in the th world. And with the League of Legends 10 anniversary on the horizon, they needed to celebrate in true Riot Games fashion, with the help of Superunion Asia. Working in partnership with the Riot Games team, Superunion developed the 'Annie- versary' campaign as a nod to the famous League of Legends character, Annie, an iconic gamer champion. With the insight from Riot Games that gamers love finding Easter eggs and the feeling of being truly part of a gaming community, the campaign taps into the League of Legends players’ secret language and evokes memories from the past ten years of gameplay. The campaign uses memes, secret words and insider jokes, piecing them together to follow a protagonist’s ten-year gaming journey with League of Legends, sharing the wild ride with the gaming community. Riot Games led the film creation and art direction, and Superunion curated the story, developed the creative strategy and ran the post-production including 3D animations, 2D graphics and animated text. The production was provided by Hogarth Worldwide. The film launched at a grand opening celebration event at Hangzhou Olympic Sport Centre and featured across all social media platforms and broadcast media. ## 180m 160m+ active players hours a month gamers spent playing League of Legends 47WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY ## SIMPLER STRUCTURE ## COUNTRIES ## Combining our global scale ## with a local approach. | UNPARALLELED SCALE | INVESTING IN FAST‑GROWING | CAMPUSES | | --- | --- | --- | | We have a unique position as the most | MARKETS | Our campus programme is key to leveraging | | geographically diversified company in the | Our reach comprises an attractive balance | our strengths in individual markets, by | | industry with a worldwide reach to over 100 | of well-established markets in North America | bringing agencies together to facilitate | | markets. Our 20 largest countries account for | and Europe, including the UK, and other | greater collaboration, supporting flexible | | 87% of our revenue less pass-through costs, | markets in structurally faster-growing | and hybrid working, and giving clients | | while our top ten markets represent 77%. | economies, such as India, China and Brazil. | access to the breadth and depth of WPP | | For more information on our largest markets, | | talent in one location. Each campus location | | see the page opposite. | Based on external GDP growth estimates, | also contributes to savings under our | | | we have the leading market share in nine out | transformation programme, by unlocking | 1 | LOCAL APPROACH | of the top ten fastest-growing economies | . | efficiencies through the consolidation of | | --- | --- | --- | --- | | Within our global footprint, we have 17 | And many of the future high-growth clients | | smaller office buildings. For example, our | | Country and Regional Managers covering | are in those markets. | | new Milan campus accommodates 2,000 | | many of our larger markets. Their role is | | | people, from 35 WPP agencies, that were | | to leverage our strengths in each market: | We are investing significantly in these and | | previously in eight different buildings. In | | promoting WPP’s brand, strategy and offer, | similar markets – in technology, campuses, | | 2021, we added nine new campuses, | | co-ordinating WPP resources on behalf of | acquisitions and talent. In 2021, we acquired | | including sites in London, Milan, New York | | clients, encouraging collaboration between | DTI Digital, a leading Brazilian digital | | and Prague, taking the total to 31, | | WPP agencies in-market, and retaining and | innovation and software engineering | | accommodating 47,500 people. | | developing diverse talent. This year, we | company; DAVID, the multi award-winning | | | | strengthened our country leadership with | agency within Ogilvy, expanded its | | LOOKING AHEAD | | the appointment of Arthur Fleischmann in | operations to Bogotá; in India we opened a | | As part of our strategy for growth, and | | Canada, Tebogo Skwambane in South Africa, | new campus for our people and agencies in | | building on WPP’s existing global strength, | | and Rose Herceg to lead Australia and | Gurugram; and in China we made a strategic | | we will continue to invest more in high | | New Zealand. | investment in StarEngine, a Beijing-based | | growth-potential markets, as we expect | | | social content-marketing technology startup. | | them to grow at double-digit annual rates | over the next few years. Those investments are reaping rewards. In | China, Wavemaker secured Under Armour’s | Under our simplification strategy, we expect | | --- | --- | | digital media business, and WPP was named | to open more campuses, reaching at least | | Most Effective Agency Holding Group at the | 65, and housing 85,000 people by 2025. | | Effie Awards Greater China. And in India | Consolidation into fewer, larger buildings | | Wavemaker retained the media mandate | provides an opportunity to reduce our space | | for L’Oré a l . | requirements by 15-20% on average. | | | 1 Top 10 absolute GDP growth markets 2020-2030: Brazil, China, | India, Indonesia, Pakistan, Philippines, Turkey, UK, United States, and Vietnam. Source: The Economist Intelligence Unit, 2021. WPP ANNUAL REPORT 202148 OUR STRATEGY STRATEGIC REPORT ## INTEGRATED COUNTRY OPERATIONS ## Strong growth in key markets. | MAJOR MARKETS PERFORMANCE | 2021 REVENUE LESS PASS-THROUGH | | | | --- | --- | --- | --- | | Our top ten markets account for 77% of | COSTS BY MAJOR MARKET | | | | revenue less pass-through costs. Their | | ● US 35% | | | performance therefore drives our business. | | ● UK 14% | | | In 2020, these markets were negatively | | ● Germany 7% | | | impacted by clients reducing spending | | ● Greater China | 1 6% | | during the pandemic. In 2021 – with the | | ● Australia 3% | | | exception of Australia, which was affected | | ● France 3% | | | by stricter Covid-19 restrictions – these | | ● India 3% | | | markets delivered strong growth, driven by | | ● Canada 2% | | | the demand for digital services, ecommerce | | ● Italy 2% | | | and technology. | | ● Brazil 2% | | | | | ● Other markets 23% | | ### REVENUE LESS PASS‑THROUGH COSTS GROWTH ### LIKE-FOR-LIKE BASIS % 26.1 23.8 17. 7 15.4 15.0 14.4 12.3 12.1 11.3 9.3 0.1 ### GREATER ### US FRANCE WPPGERMANYUK CANADAINDIA ITALY BRAZILAUSTRALIA 1 ### CHINA -4.4 -4.4 -5.8 -8.2 -10.5 -11.5 -11.4 -12.2 -13.1 -14.7 -14.7 2021 WPP average2020 1 Including Hong Kong and Taiwan. 49WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY SIMPLER STRUCTURE WPP ANNUAL REPORT 2021 WPP ANNUAL REPORT 202150 OUR STRATEGY STRATEGIC REPORT STRATEGIC REPORT ## GENESIS ## CURRY FLOW ### The metaverse is real – just ask ### Under Armour. OFFER ### EXPERIENCE ### TECHNOLOGY AGENCY ### BERLIN CAMERON, NEW YORK CLIENT ### UNDER ARMOUR Under Armour wanted to celebrate the three-point world record of their star basketball player, Stephen Curry, so they got Berlin Cameron into the game. 2021 was the year the metaverse was on everyone’s lips, so the agency decided to create the very first metaverse wearable: the ‘Genesis Curry Flow’ sneaker. The Genesis Curry Flow was released in a limited edition of 2,974 NFTs, reflecting Stephen’s world record, and minted in five distinct rarities, each reflecting part of the narrative of his amazing accomplishment. The Genesis NFT came with a locker where gaming platforms Decentraland, Sandbox, Gala Games and Rumble Kong League were able to drop their version of the NFT expressed in the design language of each game. This meant that for the very first time gamers were able to move through the metaverse wearing the same sneaker. The NFTs sold out in minutes, and the goal to raise $1 million for Under Armour’s charities was reached instantly. One sneaker, four exciting worlds – changing the game and the metaverse for good. ## 25m 4.5m visits to the drop site people tried to buy the NFTs, which sold out in 10 minutes ## $17m 1.3bn in secondary sales by impressions February 2022 51WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY ## PEOPLE ## How we fulfil our purpose ## starts with our people. | UNLOCKING OUR CREATIVE | LISTENING TO OUR PEOPLE | During 2021 we continued to work with our | | --- | --- | --- | | POTENTIAL | As we adapted to new ways of working, | leading technology partners such as Adobe, | | We use the power of creativity to build | we launched WPP Pulse, our first global, | Amazon, Google, Microsoft, Salesforce and | | better futures for our people, planet, clients | Company-wide survey, with more than | TikTok to enhance our technical expertise | | and communities. Activating that purpose | 43,000 participants across more than | and gained over 30,000 accreditations | | starts with our people, which is why it is our | 100 countries. | and certifications. | ambition to unlock the creative potential in | every WPP employee. | This showed what our people want most | We doubled down on programmes for | | --- | --- | --- | | | from WPP: fulfilling careers, where they | women, people of colour and the next | | ADAPTING TO NEW WAYS OF | grow and discover new ways of working and | generation of leaders, because we know | | WORKING | learning; the opportunity to contribute to | our growth depends on effective, diverse | | As we navigated Covid-19 restrictions, | inspiring work that creates impact for their | leadership. | | we learned we can deliver outstanding | clients; and a sense of belonging to an | | | service for our clients in a flexible working | organisation they are proud to be part of. | One example is Elevate, a United States | | environment. We won pitches without ever | | sponsorship programme designed to provide | | having been in the same room and were | What we heard determined our focus areas | tools to support Black women in their career | | awarded for inspiring work from teams | for the year ahead. | growth, personal development and wellbeing. | | who had never met in person. | | 20% of participants from the first cohort | | | ENABLING CAREER GROWTH | were either promoted or received a raise | | Our new hybrid working practices are | Due to our size and global reach, we are | within eight weeks. In 2022, we are | | grounded in the reality that work is a part | uniquely positioned to offer our people | expanding Elevate to the UK. | | of life, not the other way around, while | excellent growth and mobility opportunities | | | recognising the important role our campuses | across some of the most exciting, creative | Our Inclusive Leadership Learning Experience | | and offices play in bringing our people | companies in the world, with the power | provided 1,000 mid-level managers with the | | together to create, collaborate, learn and | to drive meaningful impact in the world | skills needed to embed inclusive ways of | | socialise. | around us. | working across the employee experience, | and will expand to more than 40,000 | During the year, we continued to build on | In March, we launched Career Explorer to | managers in the coming year. | | --- | --- | --- | | the new ways to connect that we established | provide greater transparency into job | | | at the start of the pandemic. As part of our | openings across the network. Over 2021, | For those aiming to join the industry, | | virtual global CEO townhall series, Mark Read | our companies posted more than 10,000 | NextGen Leaders – a first-of-its-kind virtual | | was joined by WPP leaders for candid | roles on the platform, receiving over 430,000 | programme that aims to provide learning, | | discussions about issues important to our | views on our internal and external websites. | growth and professional development | | people, with over 44,000 participants tuning | | opportunities – has become an integral part | | in during the year, up from 39,000 in 2020. | INVESTING IN LEARNING | of our early-career talent strategy. In our | | CEO direct-to-staff emails accumulated over | In 2021, we invested £29.7 million in learning | second series, we welcomed 1,400 | | one million unique opens over the year. | and development opportunities for our | participants from diverse backgrounds, | | | people, a 51% increase from the previous | 65% more than in 2020. | | Our global internal email newsletter, The | year. We plan to invest an additional | | | Weekly, had over 1.3 million opens across | £150 million annually in our people by 2025. | For more information see page 55 | 49 editions. WPP TV invited more than 1,000 speakers to share their expertise over 126 episodes with 200,000 views in total. WPP ANNUAL REPORT 202152 OUR STRATEGY STRATEGIC REPORT ## 109,000 people ### SUPPORTING OUR PEOPLE DIVERSITY STAFF COMMUNICATIONS ## 100% 52% 1 million+ of our employees have access to our of our senior managers are women, and unique opens of CEO all-staff emails 1 Employee Assistance Programme 39% at executive leadership levels ## 500 26% 44,000 Mental Health Allies of our senior managers in our largest participants in CEO virtual townhalls market, the United States, are non-white | FOSTERING THE BEST POSSIBLE | With the support of our first Company-wide | HELPING OUR EMPLOYEES TO PLAY | | --- | --- | --- | | CULTURE | LGBTQ+ community, WPP Unite, we | THEIR PART | | When all our people feel secure, safe and | developed the LGBTQ+ inclusive marketing | We know employees want to work for a | | confident to share their ideas, it has a direct | resource hub, to equip our people with the | company that is willing to stand up for the | | impact on creativity and the power of | knowledge, skills and resources to create | issues they care about. | | collaboration. | more inclusive marketing. WPP Unite was | | | | spearheaded in the UK and United States, | As part of our Racial Equity Programme, WPP | | Through partnerships including The LaGrant | and will expand to other regions. We | committed in June 2020 to match personal | | Foundation in the United States and Brixton | achieved the highest score of 100% in the | donations by employees to a number of | | Finishing School in the UK, we are attracting | Corporate Equality Index, which measures | non-profit organisations up to $1,000 per | | different voices and perspectives to WPP. | the attractiveness of workplaces for LGBTQ+ | person, to a total of $1 million. And in | | | employees. | December, we announced our partnership | | We partnered with The One Club for | | with the World Health Organization to create | | Creativity to host the Behind the Stonewall | To continue advancing gender equity, we | the $5 Vaccine campaign, which calls on | | Riots competition for Black LGBTQ+ | expanded our Stella community into India, | people to spend the price of a coffee on a | | creatives, awarding the winners internship | with over 50 leaders across WPP completing | shot that could save someone’s life. WPP | | opportunities at WPP. Read more on page 73. | more than 500 hours of mentoring to help | donated 10,000 vaccines on behalf of our | | | guide and inspire 67 aspiring female leaders. | clients and matched every $5V bought by | | We continue to embed diversity, equity and | | our own people. | | inclusion into everything we do, and you can | The proportion of women in executive | | 1 | read more about the progress we have made | leadership roles | globally was 39% | LOOKING AHEAD TO 2022 | | --- | --- | --- | --- | | against our racial equity commitments, | (2020: 40%) and within this we increased | | In the coming year we will address the | | including our Racial Equity Programme, on | the proportion of women on the Executive | | insights gathered from our people in 2021, | | page 72. | Committee to 35%, compared with 29% in | | build on our listening programme and use | | | the previous year. In 2021, we were named | | our competitive advantage to ensure we | For more information see the People an industry leader in the Bloomberg continue to attract, retain and grow the best, and Communities chapter of our Gender-Equality Index for the fourth most creative minds from all over the world. Sustainability Report 2021 consecutive year. 1 Executive leadership roles are defined by WPP as the agency board and executive leadership population as reported With the challenges of the pandemic and through WPP's financial reporting system. injustices around the world impacting mental This metric was subject to independent limited assurance procedures by PricewaterhouseCoopers LLP (‘PwC’) for the wellbeing, we launched our Mental Health year ended 31 December 2021. For PwC's 2021 Limited Allies programme, providing mental health Assurance report and the ‘WPP Sustainability Reporting training to 500 leaders, HR professionals and Criteria 2021’ for assured metrics, see our Sustainability Report 2021. employees across the UK and United States. We will expand into more regions in 2022. 53WPP ANNUAL REPORT 2021 STRATEGIC REPORT OUR STRATEGY PEOPLE ## INCLUSIVE LEADERSHIP ## Building inclusion as a skill in a hybrid world. We’ve heard from our people that they want Designed in partnership with UniWorld to work somewhere with an inclusive culture. Group (UWG), a WPP associate, the learning A place where they can be their true, experience provided the foundations of authentic selves and are trusted and relied DE&I, how to build trust amongst a team, upon to do their best, most creative work. how to apply cultural intelligence and the Our goal is to help remove the barriers that fundamentals of inclusive leadership in a may prevent people from thriving. We hybrid world. believe inclusion is a skill to be developed – | one that requires knowledge, practice and | We launched a pilot in 2021 with a cross- | | --- | --- | | action – and we know managers play a | section of 1,000 mid-level managers across | | critical role in creating an inclusive employee | five companies and four countries (China, | | experience. They hold the keys to increasing | India, UK and United States). | retention and promotion through more inclusive leadership behaviours. Our long-term goal is to make this learning experience available to everyone across Inclusive Leadership in a Hybrid World is a WPP, starting with 40,000 managers globally five-week, interactive, live and on-demand in 2022. experience delivered in bite-sized moments of engagement. The experience aims to leave participants with a roadmap for how ## 40,000 to build themselves into a more inclusive managers to be leader, resulting in better decision-making, trained by 2022 an increased sense of belonging and greater In partnership with UniWorld Group accountability. WPP ANNUAL REPORT 202154 OUR STRATEGY STRATEGIC REPORT ## NEXTGEN LEADERS I never thought I'd learn so much in only 10 weeks! It was a game- changer for me. Interacting with ## Unlocking WPP for the next generation. WPP leaders across the world has helped me understand the power of creativity, innovation and technology. It has shed a light on the importance of diversity and inclusion and how critical it is to embrace yourself no matter Our ambition is to lower the barrier to entry who you are, where you are from into the creative industry and create a robust or what your background is. pipeline of early talent for WPP and our clients. In 2020, amidst the challenges of FARAH BOUGUERRA the global pandemic, we created NextGen Tunisia Leaders, a ten-week virtual learning programme for college students and recent graduates across the globe. The programme provides participants with insights into the marketing industry and an in-depth look at WPP – from our culture to creativity and innovation, and how we work with our clients. I got to learn so many different things | In our second series in July 2021, 100 leaders | throughout the course and the live | | --- | --- | | from across more than 20 WPP companies | sessions. Additionally, it even | | welcomed 1,400 participants. NextGen has | broadened my network. It was | | inclusion at its core, which is reflected in the | definitely an opportunity that I am | | diverse pool of participants: | glad that I could take part in. | | – 50% of participants in the US and UK | MADHURA MAZUMDAR | | identified as Black, Asian or LatinX | India | – 60% identified as female – 11% identified as LGBTQ+ – 8% identified as having a disability/ 1 neurodiversity All participants received a certificate of completion from Coursera and many secured internships or full-time positions across WPP. For our third series, we want to continue to attract a diverse population with a goal of | doubling the number of participants to 3,000 | A sincere thank you to Mark Read and | | --- | --- | | globally. We will work closely with WPP | to all of WPP. I am grateful for this | | agencies to understand hiring needs, | opportunity that allowed me to better | | mapping internship and early-career roles | understand the different brands, their | | for NextGen graduates. | way of working, how they manage to | create a link with their consumers, the process of setting up an advertising campaign, the questions to ask, and ## 1,400 50% so much more. participants of participants in the US & UK identified as BENJAMIN KODJO KOGBLE Black, Asian or LatinX Togo | 100 | 11% | | --- | --- | | leaders from across | of participants | | WPP | identified as LGBTQ+ | | 1 Percentages reflect those participants who responded | | to the survey. 55WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## KEY PERFORMANCE ## INDICA TORS ### We track our performance against This year we added our transformation ### indicators that reflect our strategic, programme to our KPIs. This ### operational and financial progress, programme aims to simplify WPP, ### as well as our impact on society and build greater collaboration, drive ### the environment. These indicators efficiency and free up funds for ### allow the Board, management and reinvestment in growth. ### stakeholders to compare our ### performance to our goals. ALIGNING PERFORMANCE MEASUREMENT WITH STRATEGY Performance measures are selected to align to our business strategy and include a range of financial and non-financial metrics. Non-financial metrics are measured in a scorecard with appropriate measures set based on role and accountabilities. STRATEGIC ELEMENTS Vision Creativity Data & Simpler People Operational & offer technology structure & culture Client satisfaction score Digital % of media billings (GroupM) Share of revenue less pass-through costs from experience, commerce and technology Gross annual savings from our transformation programme People Proportion of women in 1 executive leadership roles Employees in shared campuses Sustainability Carbon emissions per person from owned operations Share of electricity purchased from renewable sources Financial Like-for-like revenue less pass-through costs growth Headline operating profit margin Like-for-like revenue less pass-through costs growth versus competitors Dividends 1 Executive leadership roles are defined by WPP as the agency board and executive leadership population as reported through WPP's financial reporting system. WPP ANNUAL REPORT 202156 KEY PERFORMANCE INDICATORS STRATEGIC REPORT ## OPERATIONAL | Client satisfaction score | | Digital % of media | | | --- | --- | --- | --- | | | 8.1 | | 43 | | (out of 10) | | billings (GroupM) | | ### Our operational KPIs measure our ### strategic progress towards a new ### vision and contemporary offer to | meet the needs of modern marketing | 2021 | 8.1 | | | | | --- | --- | --- | --- | --- | --- | | | | | 2021 | | 43 | | and our clients’ future success. | 2020 | 8.1 | | | | | | | | 2020 | | 41 | | | 2019 | 7.7 | 2019 | 38 | | ### We have continued to develop our ### operational KPIs. Accordingly data Description and rationale Description and rationale ### is not available for all three years for This measures how satisfied our clients Billings comprise our clients’ spend on 2 ### each operational KPI. Data is shown are with our services, based on 40,000 media, plus our fees . We measure the clients’ 'Likelihood to Recommend' score digital mix to ensure we are staying ### for the years it is available. out of ten. Our ability to retain satisfied relevant to our clients, particularly as 1 clients is a key driver of our revenue . the digital media market now exceeds Read more on strategic progress traditional platforms. on pages 8-55 | Targets and performance | Targets and performance | | --- | --- | | The combination of our modern | GroupM’s digital billing mix increased | | integrated offer combined with our talent | to 43% in 2021, compared with 41% in | | and capabilities is proving its value for | 2020, driven by the rapid growth in | | clients, leading to our highest ever | demand from clients for ecommerce | | customer satisfaction score. We aim to | services, across both our media and | | maintain top-quartile performance. | integrated creative agencies. | | Business mix in | | Gross annual savings | | | --- | --- | --- | --- | | | 38 | | 245 | | experience, commerce, | | from our transformation | | | technology for Global | | programme (£m) | | 3 ### Integrated Agencies (%) | 2021 | | 38 | 2021 | | 245 | | --- | --- | --- | --- | --- | --- | | 2020 – Not yet available | | | 2020 | N/A | | | 2019 | 35 | | 2019 | N/A | | | Description and rationale | | | Description and rationale | | | | Experience, commerce and technology | | | Our transformation programme is | | | | are attractive addressable areas of the | | | designed to simplify our operating model, | | | | market where client spend is forecast to | | | generate efficiencies in procurement and | | | | grow at around 10% annually between | | | real estate, and improve the effectiveness | | | | 2021 and 2025 compared with 2% | | | of our support functions and shared | | | | annually for traditional communications. | | | services. | | | | Targets and performance | Targets and performance | | --- | --- | | The share of revenue of less pass-through | We remain comfortably on target to | | costs from higher-growth areas of our | achieve our goal of £600 million annual | | offer (experience, commerce and | cost efficiencies by 2025, with around | | technology) for our Global Integrated | £245 million of gross annual savings | | Agencies, excluding GroupM, was around | achieved so far against a 2019 base. | 38% in 2021. Our goal is to further increase our mix in these areas. | 1 Includes Kantar. | | --- | | 2 For a full description see Glossary on page 222. | | 3 Share of Global Integrated Agencies, | excluding GroupM. 57WPP ANNUAL REPORT 2021 STRATEGIC REPORT KEY PERFORMANCE INDICATORS ## PEOPLE | | Proportion of women | | | Employees in | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 39 | | 2 | 47,500 | | | in executive leadership | | | shared campuses | | | | Every WPP workplace should be | | 1 | | | | | ### roles ### open, inclusive and collaborative to ### (%) ### allow our people to do their best | work. Our people KPIs assess our | 2021 | 39 | 2021 | | 47,500 | | --- | --- | --- | --- | --- | --- | | progress against these aims. | 2020 | | 2020 | 34,200 | | | | 2019 | 37 | 2019 | 31,300 | | Read more on: | Campuses – page 7 | Description and rationale | Description and rationale | | --- | --- | --- | | Women in leadership – pages 52 and 72 | This measures our gender diversity. We | In 2018 we announced our ambition to | | | believe that diversity drives creativity, so | deliver a global network of modern, | | | we are working hard to improve in all | world-class campus workplaces. Each | | | aspects of diversity, equity and inclusion. | location provides inspiring spaces for our | | | We aim to achieve equal representation of | people, encouraging closer collaboration | | | women at the Board and all other levels. | between our agencies, and giving clients | easier access to our talent and expertise. | Targets and performance | Targets and performance | | --- | --- | | In 2021, the proportion of women in | In 2021, 47,500 of our employees were | | executive leadership roles slightly | based in campuses. We expect this to | | decreased to 39% (2020: 40%), and within | rise to 85,000 employees in at least | | this we increased the proportion on the | 65 campuses by 2025, providing an | | Executive Committee to 35%, compared | opportunity to reduce both our office | | with 29% in the previous year. | space and our environmental footprint. | ## SUSTAINABILITY | Carbon emissions | | Share of electricity | | | --- | --- | --- | --- | | | 0.32 | | 74 | | per person from our | | purchased from | | ### We aim to be a sustainable business ### owned operations renewa ble sources ### and play our part in protecting the ### (tCO 2 e, Scope 1 and 2) (%) ### planet. We have made a series | of commitments to reduce our | 2021 | 0.32 | | 2021 | | | 74 | | --- | --- | --- | --- | --- | --- | --- | --- | | environmental impact, which are | 2020 | | 0.52 | 2020 | | 65 | | | captured in our KPIs. | | | | | 3 | | | | | 2019 | | | 2019 | 37 | | | | | Description and rationale | | | Description and rationale | | | | Read more on our actions to tackle We support urgent action to tackle the We have made good progress in reducing the climate crisis on page 68 climate crisis through the Paris Climate our carbon footprint, but there is more Agreement. We measure carbon emissions we can do, and we have committed to per employee, as headcount is closely solely using renewable electricity to linked to levels of business activity, and support our carbon reduction targets. this allows us to reflect the impact of acquisitions and disposals without 1 Executive leadership roles are defined by WPP as the needing to adjust our baseline. agency board and executive leadership population as reported through WPP's financial reporting system. | 2 Defined as employees and freelancers in campuses. | Targets and performance | Targets and performance | | | --- | --- | --- | --- | | 3 Figure restated in 2020 as part of a data review upon | | | | | | We are committed to achieving net zero | In 2021 we purchased 74% | of our | joining RE100. emissions across our owned operations electricity from renewable sources Denotes information subject to limited assurance by PricewaterhouseCoopers LLP ('PwC'). by 2025 and across our supply chain by (2020: 65%), reflecting progress towards Independent limited assurance will be sought by WPP 2030. In 2021 carbon emissions per our target of 100% by 2025. over our percentage electricity purchased from employee reduced by 38% compared renewable sources and Scope 2 market-based GHG emissions reporting. The assurance report will be made with 2020. available on our website. WPP ANNUAL REPORT 202158 40 0.82 KEY PERFORMANCE INDICATORS STRATEGIC REPORT ## FINANCIAL | Like-for-like (LFL) | | Headline operating | | | --- | --- | --- | --- | | | 12.1 | | 14.4 | | revenue less pass- | | profit margin | | ### Our financial targets help us ### through costs growth (%) ### to track the underlying health ### (%) ### of the Company; compare our | performance to competitors; | 2021 | | | 12.1 | 2021 | | 14.4 | | --- | --- | --- | --- | --- | --- | --- | --- | | set financial guidance for | 2020 | -8.2 | | | 2020 | 12.9 | | | investors; and establish our | 2019 | | -1.6 | | 2019 | | | ### remuneration targets. Description and rationale Description and rationale This is the main measure of our strategic This is a key indicator of our profitability. Read more on our financial goal to return WPP to growth. Like-for-like It comprises profit on trading activities, performance on pages 60-67 revenue growth excludes the impact of excluding certain one-off or exceptional 3 currency and acquisitions. Pass-through items . These items are excluded because costs comprise fees paid to external their size and nature mask the true suppliers when they are engaged to underlying performance year-on-year. perform part or all of a specific project and are charged directly to clients. | Targets and performance | Targets and performance | | --- | --- | | 2021 was an exceptional recovery year, | In 2021, the headline operating margin | | with revenue less pass-through costs | improved 150 basis points due to revenue | | growth of 12.1%, and 2.9% ahead of 2019 | growth and cost savings from the | | levels. Our targets going forward are: | transformation programme. We expect | 1 around 5% growth in 2022, and 3-4% the margin to improve by around 50 bps annual growth from 2023 onwards. in 2022 and to reach 15.5-16.0% in 2023. | Organic revenue | | Dividends per share | | | --- | --- | --- | --- | | | 0.8 | | 31.2 | | growth versus | | (pence) | | 2 ### competitors ### (percentage points) | 2021 | | | 2021 | | 31.2 | | --- | --- | --- | --- | --- | --- | | 2020 | | 0.4 | 2020 | 24.0 | | | 2019 | -1.6 | | 2019 | 22.7 | | | Description and rationale | | | Description and rationale | | | | This measures our growth relative to our | | | Dividends are a key element of our returns | | | | main competitors. It compares organic | | | to shareholders. They are an annual share | | | | revenue growth for WPP against the | | | of our profits and cash flow. | | | average of our global marketing services peers – Dentsu, Havas, IPG, Omnicom and Publicis. | | Targets and performance | Targets and performance | | --- | --- | --- | | | In 2021, WPP’s growth rate was | In 2021 the Board paid an interim dividend | | | 0.8 percentage points faster than the | of 12.5p and has proposed a final dividend | | | average of our main peers, continuing | of 18.7p, which is subject to shareholder | | 1 | the progress made in recent years. | approval. Starting from 2020 the Board | Includes 0.5-1.0pt annually of M&A contributions. 2 Organic revenue growth is defined as like-for-like Our goal is to grow at a faster rate aims to grow the dividend annually and revenue less pass-through costs growth. Omnicom than the industry average. to pay out approximately 40% of headline data is based on revenue. This chart shows data earnings per share. over the last 12 months. Competitor data sourced from publicly disclosed results. 3 For a full description see Glossary on page 222. 0.8 59WPP ANNUAL REPORT 2021 14.4 STRATEGIC REPORT ## CHIEF FINANCIAL ## OFFICER ’S STATEMEN T ## We have the financial strength to invest in future The transformation of our property estate continues, despite the constraints of ## growth through talent, capabilities and targeted Covid-19, with a further nine campuses opened in 2021, taking the total to 31. ## M&A, while rewarding shareholders today. We aim to complete at least 65 campuses, housing more than 85,000 people, by 2025. In procurement, we are beginning to consolidate our spend more effectively, improving terms for our agencies with our purchasing scale. Telecoms savings and software licences were areas of significant efficiency in 2021. In terms of simplification, the combination of sub-scale agencies in smaller markets is leading to a significant improvement in performance; we have removed around 500 legal entities from the Group structure, with a similar figure targeted for 2022; and we have acquired the minorities in WPP AUNZ, taking us to 100% ownership to improve control and governance of our fifth largest geography. Across IT, Finance and HR transformation, significant groundwork has been undertaken as we modernise and move to more standardised processes, with target operating models approved for all three. In IT, transformation plans including network infrastructure, cloud acceleration and platform rationalisation are all on track. The shared services programme is progressing, with a significant portion of finance processes ## WE REMAIN ON INTRODUCTION migrated from the UK to Mumbai, and new 2021 has been a very strong year: well deployments in the Middle East, Asia and ## TARGET TO ACHIEVE beyond our expectations and underlining Latin America. We have, however, experienced ## OUR GOAL OF the resurgent demand from clients for our some delays to the deployment of Workday, ## £600 MILLION | | services, as well as the excellent progress | our new ERP platform, but we are confident | | --- | --- | --- | | ANNUAL COST | we have made against our own strategic | of meeting our revised timetable starting in | | | plan. Our financial performance is covered in | the first half of 2022. | ## EFFICIENCIES detail elsewhere in this report, so my review ## BY 2025.” focuses on two key elements of the broader One of the significant benefits of the finance remit, both of which are significant transformation is that it will improve the John Rogers value drivers for WPP: our transformation quality and speed of financial and other Chief Financial Officer programme and our approach to capital management information available to the allocation. business. We have already made good progress in this area: our corporate plan has, | TRANSFORMATION PROGRAMME | for the first time, been built up from detailed | | --- | --- | | Good progress has been made on our | strategic plans at the agency level, with | | transformation programme, designed to | dedicated plans for our highest growth | | simplify WPP, build greater collaboration, | businesses such as Xaxis, Finecast and | | drive efficiency and free up funds for | Choreograph; we are enhancing management | | reinvestment in growth. We remain on | insights with a new enterprise data tool and | | target to achieve our goal of £600 million | analysis of client profitability; and we have | | annual cost efficiencies by 2025, with | built a detailed commercial playbook and | | around £245 million of gross annual savings | asset pricing tool. We know we need to do | | achieved so far against a 2019 base. | more concerning the quality and coverage of | WPP ANNUAL REPORT 202160 CHIEF FINANCIAL OFFICER’S STATEMENT STRATEGIC REPORT ## our emissions data and our transformation Capex will rise to £350-400 million in 2022, WE SET OUT THE FOUR strategy will enable us to manage more data reflecting the peak of campus and IT ## ELEMENTS OF OUR CAPITAL centrally, improving consistency. We are also investments and some delayed spend from ## ALLOCATION POLICY IN developing more robust protocols for 2020 and 2021. Organic investment in our ## DECEMBER 2020, AND I AM calculating and reporting data and are capabilities and client offer will remain ## aiming to expand the proportion of our data a priority. GLAD TO SAY WE HAVE MADE over which we seek independent assurance. ## REALLY STRONG PROGRESS Dividend: our goal is to pay a dividend that ## ON EACH FRONT.” | Finally, standardised systems will give us | is growing and sustainable, reflecting the | | --- | --- | | significantly improved controls. We have | strong cash generation of the business while | | made huge improvements to our controls | allowing for sufficient reinvestment for growth. | | environment through our governance | Our policy is to grow the dividend annually | | structures, the recruitment of senior leaders | and to pay out approximately 40% of headline | | with strong track records and, most | earnings per share. The full-year dividend of | | importantly, a real change in culture. | 31.2p proposed for 2021 is approximately | 40% of our 78.5p headline diluted EPS, and ### CAPITAL ALLOCATION is up 30% year-on-year on the 2020 pay-out. The discipline with which companies allocate capital is a key determinant of growth and M&A: acquisitions have always been an sustained financial returns. Finance plays a important engine for growth for WPP, crucial role in this process, both in helping enhancing organic growth, bringing in new to set the overall framework and in the capabilities and client relationships, and assessment of where to invest. introducing talent. Our M&A strategy is now more focused than in the past, building out | We set out the four elements of our capital | our capabilities in key growth areas, such as | | --- | --- | | allocation policy in December 2020, and I | marketing technology and ecommerce, and | | am glad to say we have made really strong | concentrating on a few targets with critical | | progress on each front. We’ve also maintained | mass which are scalable across WPP’s | | a very healthy balance sheet for future | offering to our clients. | investments in growth and returns to shareholders. Capital expenditure: our priorities are to invest in our technology infrastructure and campuses, building platforms for our people and our clients, and supporting reduced ource of savings Use of savings property costs and standardised systems. £600m) (£600m) In 2021, we invested £293 million, as we Improve effectiveness 200 Margin opened nine new campuses and continued in support functions 250 improvement DELIVERING GROWTH FROM OUR TRANSFORMATION PROGRAMME to develop a further 10 sites. Most of the rest and shared services £m of our investment was divided between our enterprise IT estate and the development | S | of new products for growth platforms such | | | | --- | --- | --- | --- | | ( | as Choreograph, our data business, and | | | | | Finecast, our connected TV business. | Efficiencies in | | | | | procurement | 200 | and property 400 Reinvestment into talent, technology and incentives to drive growth Simplify operating 150 model SAVINGS OUTCOMES 61WPP ANNUAL REPORT 2021 STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S STATEMENT ## 2021 typified this new approach. In total In 2021, we completed £729 million of share A VERY HEALTHY BALANCE we spent £396 million net on acquisitions buybacks, and ended the year with average ## SHEET FOR FUTURE (excluding earnouts) during the year. We adjusted net debt/EBITDA of 0.9x. As a ## INVESTMENTS IN GROWTH brought in new skills in artificial intelligence result, we have committed to a further ## AND RETURNS TO | (Satalia), commerce (Cloud Commerce) and | £800 million buyback during 2022. | | | --- | --- | --- | | software engineering (DTI Digital). All these | | SHAREHOLDERS.” | | businesses have huge potential to grow in | In line with our clear capital allocation, | | | their own right and to complement our | during 2021 we invested around £700 million | | | existing offer. They are being fully integrated | in future growth, through capex and M&A; | | | into our business rather than standing alone, | and returned over £1 billion to shareholders. | | | to maximise their value to WPP. | We will continue to balance our investments | | in long-term growth and value creation with In addition, we supported the acquisition cash returns to shareholders today. of Numerator by Kantar, in which we own a 40% stake. This transforms Kantar’s US panel business and takes it into a technology lead versus its competitors. We also created a leading global strategic communications | business through the merger of Finsbury | John Rogers | | --- | --- | | Glover Hering with Sard Verbinnen & Co. | Chief Financial Officer | | Throughout WPP we are building leading | 31 March 2022 | global franchises in high-growth areas. Excess capital and leverage target: after making organic investments, paying our regular dividend and completing targeted acquisitions, we will continue to review our capital needs relative to our leverage target of 1.5-1.75x average adjusted net debt/ EBITDA. When we have excess capital, we will return it to shareholders, typically via share buybacks. WPP ANNUAL REPORT 202162 STRATEGIC REPORT ## FINANCIAL ## REVIEW 2 | REVIEW OF RESULTS | | OPERATING PROFITABILITY | Headline operating margin | was up 150 basis | | --- | --- | --- | --- | --- | | Reported billings were £50.7 billion, up 8.0%, | | Reported profit before tax was £951 million, | points to 14.4%, and up 170 basis points | | | from £46.9 billion in 2020 and up 14.4% on a | | compared to a loss of £2.8 billion in 2020, | like-for-like. Operating costs were up | | | like-for-like basis compared to last year. | | reflecting principally the £3.1 billion of | 4.7%, but were flat year-on-year excluding | | | | | impairment charges and investment | the impact of incentives. Staff costs | | | Reported revenue from continuing operations | | write-downs and £313 million of restructuring | pre-incentives rose 3.2% but property costs | | | was up 6.7% at £12.8 billion compared to | | and transformation costs during the prior | fell 17.1% reflecting the campus roll-out and | | | £12.0 billion in 2020. Revenue on a constant | | period. | the continued impact of Covid-19. IT costs | | | currency basis was up 11.6% compared with | | | were flat, and other costs were down 13.2%, | | | last year. Net changes from acquisitions, | | Reported profit after tax was £721 million | driven by lower office costs and bad debt. | | | | 1 | compared to a loss in 2020 of £2.9 billion. | | | | disposals and other adjustments | had a | | | | | negative impact of 1.7% on growth. | | | The Group’s headline operating margin is | | | | | Headline EBITDA (including IFRS 16 | after charging £42 million of severance costs, | | | Like-for-like revenue growth for 2021, excluding | | depreciation) for 2021 was up 18.2% to | compared with £68 million in 2020 and | | 3 | the impact of currency, acquisitions and | £1.8 billion, compared to £1.5 billion the | £592 million of incentive | payments, compared | | --- | --- | --- | --- | | disposals, and the other adjustments, was | previous year. Headline operating profit | to £185 million in 2020 and £294 million in 2019. | | | 13.3%, as compared to 2020. | was up 18.5% to £1.5 billion. The significant | | | | | growth in profitability year-on-year reflects | The average number of people in the Group | | | Reported revenue less pass-through costs | the strong recovery from the impact of | in 2021 was 104,808 compared to 102,822 | | | was up 6.5%, and up 11.5% on a constant | Covid-19 on revenue less pass-through costs, | in 2020. The total number of people at | | | currency basis. Excluding the impact of | as well as improvement in our competitive | 31 December 2021 was 109,382 compared | | | acquisitions and disposals and the other | performance and the progress on our | to 99,830 at 31 December 2020. | | | adjustments, like-for-like growth was 12.1%. | transformation programme, with £245 million | | | Notes of gross savings towards our 2025 annual run 1 Certain businesses were reclassified to associates as the rate target of £600 million. Group no longer controls them. In addition, certain media billings recognised as revenue earlier in the year have been re-assessed under IFRS 15 Revenue from Contracts with Customers and have been excluded from revenue, but have no impact on revenue less pass-through costs. There is no adjustment to previously reported revenue in the 2020 financial year. 2 Headline operating profit (excluding income from associates) as a percentage of revenue less pass-through costs. 3 Short- and long-term incentives and the cost of share-based incentives. FINANCIAL HIGHLIGHTS (2021) | £12.8bn | 12.1% | 14.4% | | --- | --- | --- | | Revenue from continuing | Like-for-like revenue less | Headline operating margin | | operations | pass-through costs growth | (2020: 12.9%) | | (2020: £12.0bn) | (2020: -8.2%) | | This Strategic Report should be read in conjunction with the Corporate Governance report on pages 104-155 and pages 214-221. The Group’s key performance indicators are discussed on pages 56-59. This Strategic Report includes figures and ratios that are not readily available from the Financial Statements. Management believes that these non-GAAP measures, including constant currency and like-for-like growth, and headline profit measures, are both useful and necessary to better understand the Group’s results. Where required, details of how these have been arrived at are shown on pages 210 and 211 and are defined in the Glossary on pages 222 and 223. 2020 figures have been restated as described in the Financial Statements on page 158. The comparative financial result for 2020 is based on the Group's continuing operations with the results of Kantar presented separately as discontinued operations. 63WPP ANNUAL REPORT 2021 STRATEGIC REPORT FINANCIAL REVIEW | EXCEPTIONAL ITEMS | INTEREST AND TAXES | EARNINGS AND DIVIDENDS | | --- | --- | --- | | The Group incurred a net exceptional loss | Net finance costs (excluding the revaluation | Headline profit before tax was up 31.1% to | | of £270 million in 2021. This comprises the | and retranslation of financial instruments) | £1.4 billion, and profits attributable to share | | Group’s share of associate company | were £215 million, a decrease of £15 million | owners were £954 million. | | exceptional losses (£62 million), restructuring | year-on-year, primarily as a result of the | | | and transformation costs (£176 million) and | repayment of the $500 million 3.625% | Reported diluted earnings per share were | | other net exceptional losses (£32 million). | September 2022 bond in July 2021 and | 52.5 pence, compared to a loss per share of | | Restructuring and transformation costs | foreign exchange movements. | 243.0 pence in the prior period. Headline | | mainly comprise severance and property- | | diluted earnings per share were up 30.6% | | related costs arising from the continuing | The reported tax charge was £230 million | to 78.5 pence. | | structural review of parts of the Group’s | (2020: £127 million). The headline tax rate | | | operations, investments in IT and ERP | (measured on headline profit before tax, | The Board is proposing a final dividend for | | systems as part of our transformation | including associate income) was 24.0% | 2021 of 18.7 pence per share, which together | | programme, and our response to the | (2020: 23.0%). Given the Group’s geographic | with the interim dividend paid in November | | Covid-19 situation. This compares with a | mix of profits and the changing international | 2021 gives a full-year dividend of 31.2 pence | | net exceptional loss in 2020 of £477 million. | tax environment, the tax rate is expected to | per share. The record date for the final | | | be around 25.5% in 2022, and to continue to | dividend is 10 June 2022, and the dividend | | | increase in subsequent years. | will be payable on 8 July 2022. | REVENUE LESS PASS-THROUGH COSTS GROWTH VERSUS 2020 % | ike-for-like | | | | 12.1 | | --- | --- | --- | --- | --- | | cquisitions | | -0.6 | | | | X | -5.0 | | | | | eported | | | 6.5 | | L A F WPP ANNUAL REPORT 202164 R STRATEGIC REPORTFINANCIAL REVIEW | REGIONAL REVIEW | REVENUE ANALYSIS | | | | | | --- | --- | --- | --- | --- | --- | | North America like-for-like revenue less | | +/(-) % | +/(-) % | | | | | £ million 2021 2020 | reported | | LFL | 1 | pass-through costs was up 9.7%, and up 3.3% N. America 4,494 4,465 0.7 9.4 on a two-year basis. The USA and Canada United Kingdom 1,867 1,637 14.0 15.0 performed strongly in the year, led by W. Cont. Europe 2,786 2,442 14.1 19.2 GroupM, VMLY&R and Hogarth. Headline 2 AP, LA, AME, CEE 3,654 3,459 5.6 13.3 operating profit was up £44 million to Total Group 12,801 12,003 6.7 13.3 £656 million in 2021 from £612 million in 2020. United Kingdom like-for-like revenue less REVENUE LESS PASS-THROUGH COSTS ANALYSIS pass-through costs was up 15.0%, and up | | | +/(-) % | +/(-) % | | | --- | --- | --- | --- | --- | | 2.9% on a two-year basis. AKQA Group and | £ million 2021 2020 | reported | | LFL | | VMLY&R were the strongest performers. | N. America 3,849 3,744 2.8 9.7 | | | | | Headline operating profit was up £43 million | United Kingdom 1,414 1,234 14.6 15.0 | | | | | to £181 million in 2021 from £138 million in 2020. | W. Cont. Europe 2,226 2,019 10.2 14.5 | | | | AP, LA, AME, CEE 2,908 2,765 5.2 12.3 Total Group 10,397 9,762 6.5 12.1 Western Continental Europe like-for-like revenue less pass-through costs was up 14.5%, and up 5.2% on a two-year basis. HEADLINE OPERATING PROFIT ANALYSIS The strongest performers in the year were | Italy, the Netherlands and Germany. Headline | £ million 2021 % margin | * | 2020 % margin | * | | --- | --- | --- | --- | --- | | operating profit was up £90 million to | N. America 656 17.0 612 16.3 | | | | | £289 million in 2021 from £199 million in 2020. | United Kingdom 181 12.8 138 11.2 | | | | W. Cont. Europe 289 13.0 199 9.8 | In Asia Pacific, Latin America, Africa & the | AP, LA, AME, CEE 368 12.7 312 11.3 | | --- | --- | | Middle East and Central & Eastern Europe, | Total Group 1,494 14.4 1,261 12.9 | | like-for-like revenue less pass-through costs | * Headline operating profit as a percentage of revenue less pass-through costs. | was up 12.3%, and up 0.7% on a two-year Notes basis. Latin America was boosted by a very 1 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals and strong performance in Brazil, while Asia other adjustments. 2 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe. Pacific continued to be negatively impacted by Covid-related restrictions in Australia. Headline operating profit was up £56 million to £368 million in 2021 from £312 million in 2020. REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION VERSUS 2020 % | orth America | +2.8% | | | | --- | --- | --- | --- | | nited Kingdom | | | +14.6% | | estern Continental Europe | | +10.2% | | N sia Pacific, Latin America, Africa & iddle East and Central & Eastern Europe +5.2% U otal +6.5% W A M 65WPP ANNUAL REPORT 2021 T STRATEGIC REPORT FINANCIAL REVIEW | BUSINESS SECTOR REVIEW | REVENUE ANALYSIS | | | | | --- | --- | --- | --- | --- | | During 2020, we announced that we would | | +/(-) % | +/(-) % | | | | £ million 2021 2020 | reported | | LFL 1 | bring together Grey and AKQA under the Global Integrated Agencies 10,836 10,266 5.6 12.6 AKQA Group, and we brought Geometry Public Relations 959 893 7.4 12.6 and GTB into VMLY&R, and International Specialist Agencies 1,006 844 19.1 22.5 Healthcare into VMLY&R and Ogilvy. As a Total Group 12,801 12,003 6.7 13.3 result AKQA Group, Geometry, GTB and International Healthcare are now reported within Global Integrated Agencies, having REVENUE LESS PASS-THROUGH COSTS ANALYSIS previously been reported within Specialist | | | +/(-) % | +/(-) % | | | --- | --- | --- | --- | --- | | Agencies. Prior year figures have been | £ million 2021 2020 | reported | | LFL | | re-presented to reflect these changes. | Global Integrated Agencies 8,638 8,194 5.4 11.3 | | | | Public Relations 910 854 6.5 11.5 Global Integrated Agencies like-for-like Specialist Agencies 849 714 19.0 21.8 revenue less pass-through costs was up Total Group 10,397 9,762 6.5 12.1 11.3%, and up 2.5% on a two-year basis. GroupM, which represented 37% of WPP’s HEADLINE OPERATING PROFIT ANALYSIS revenue less pass-through costs in the year, | was up 16.1% like-for-like. VMLY&R also | £ million 2021 % margin | * | 2020 % margin | * | | --- | --- | --- | --- | --- | | performed strongly with the other integrated | Global Integrated Agencies 1,216 14.1 1,060 12.9 | | | | | agencies all recording broadly similar levels | Public Relations 143 15.7 142 16.5 | | | | | of growth. Headline operating profit was up | Specialist Agencies 135 15.9 59 8.3 | | | | | £156 million to £1,216 million in 2021 from | Total Group 1,494 14.4 1,261 12.9 | | | | | £1,060 million in 2020. | * Headline operating profit as a percentage of revenue less pass-through costs. | | | | Note Public Relations like-for-like revenue less 1 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions, disposals and other adjustments. pass-through costs was up 11.5%, and up 7.0% on a two-year basis. BCW and H+K Strategies grew strongly during the year. In October, we announced the merger of Finsbury Glover Hering with Sard Verbinnen to create a leading global strategic communications firm. Headline operating profit was up £1 million to £143 million in 2021 from £142 million in 2020. REVENUE LESS PASS-THROUGH COSTS BY BUSINESS VERSUS 2020 % +5.4% ublic Relations +6.5% +19.0% otal +6.5% Global Integrated Agencies P Specialist Agencies WPP ANNUAL REPORT 202166 T STRATEGIC REPORTFINANCIAL REVIEW | Specialist Agencies like-for-like revenue less | to the header accounts on a daily basis, | – Current foreign exchange rates imply | | --- | --- | --- | | pass-through costs was up 21.8%, and up | resulting in a reduction of the large gross | around a 0.5% drag on reported revenue | | 7.8% on a two-year basis. We saw strong | cash and overdraft positions at 31 December | less pass-through costs from the | | demand from clients across most of our | 2020. Our bond portfolio at 31 December | movement in sterling year-on-year | | businesses, although the overall growth rate | 2021 had an average maturity of 7.0 years. | – We also anticipate mergers and | | slowed towards the end of the year as the | In July 2021 we repaid the $500 million 3.625% | acquisitions will add 0.5-1.0% to revenue | | contribution from the Covid-related contract | September 2022 bond. A €250 million | less pass-through costs growth | | in Germany eased. Headline operating profit | Eurobond at 3-month EURIBOR +0.45% is | – Given our low leverage and continued | | was up £76 million to £135 million in 2021 from | due to mature in March 2022. | strong cash generation, we expect to | | £59 million in 2020. | | execute around £800 million of share | | | The average adjusted net debt to EBITDA | buybacks in 2022, of which £129 million | | CASH FLOW HIGHLIGHTS | ratio in the 12 months to 31 December 2021 | has already been completed | | In 2021, net cash outflow was £256 million, | is 0.9x, which excludes the impact of IFRS 16. | | | compared to a £1.0 billion inflow in 2020. The | This is below our target range of 1.5-1.75x | MEDIUM-TERM GUIDANCE | | main drivers of the cash flow performance | average adjusted net debt to EBITDA. | At our Capital Markets Day in December | | year-on-year were the higher operating | | 2020, we set out our new medium-term | | profit and continued improvements in | OUTLOOK | financial targets that will allow us to invest in | | working capital, offset by increased spend | WPP is entering 2022 with a strong balance | talent, incentives and technology, improve | | on acquisitions, growth in the dividend and | sheet, good momentum from new business | our competitive position and deliver | | the significant increase in the share buyback. | wins, and a comprehensive client offer. | sustainable long-term growth. These remain: | | BALANCE SHEET HIGHLIGHTS | Our guidance for 2022 is as follows: | – 3-4% annual growth in revenue less | | As at 31 December 2021 we had cash and | | pass-through costs from 2023, including | | cash equivalents of £3.5 billion and total | – Like-for-like revenue less pass-through | M&A benefit of 0.5-1.0% annually | | liquidity, including undrawn credit facilities, | costs growth of around 5% | – 15.5-16.0% headline operating margin | | of £5.5 billion. Average adjusted net debt in | – Headline operating margin improvement | in 2023 | | 2021 was £1.6 billion, compared to £2.3 billion | of around 50 bps, excluding the impacts | – Dividend: intention to grow annually with | | in the prior year, at 2021 exchange rates. | of M&A and foreign exchange | a pay-out ratio around 40% of headline | | On 31 December 2021 adjusted net debt | – Effective tax rate (measured as headline | diluted EPS | | was £0.9 billion, against £0.7 billion on | tax as a % of headline profit before tax) | – Average adjusted net debt/EBITDA | | 31 December 2020, an increase of £0.2 billion | of around 25.5% | maintained in the range 1.5-1.75x | | at 2021 exchange rates. The slightly higher | – Capex £350-400 million, with around | | | adjusted net debt figure reflects mainly the | £100 million relating to ERP system | | | significant increase in share buybacks | deployment previously included in capex | | | year-on-year. | guidance now included in restructuring | | costs During the year, we converted the majority of – Trade working capital expected to be flat our cash pool arrangements to zero-balancing year-on-year cash pools, whereby the cash and overdrafts within these cash pools are physically swept ADJUSTED NET DEBT £ million 4,017 1,540 4,483 901 696 017 2018 2019 2020 2021 For more information on our strategy see pages 28-55 67WPP ANNUAL REPORT 2021 2 STRATEGIC REPORT ## SUSTAINABIL ITY ## Sustainability is ## at the heart of ## our business. ## We know we have WHY SUSTAINABILITY MATTERS inequity, translate into tangible change. The pandemic exposed and accelerated They are looking to WPP and our agencies ## the opportunity to existing issues, from gender inequality to the to help them find and scale solutions. importance of mental health. It also revealed ## reset and to create ### new concerns, such as vaccine inequity and OUR RESPONSE the risk that an uneven economic recovery Our industry is at the heart of many of the ## a more sustainable would intensify social and geopolitical pressing issues that we face as a society – ## and equitable future. tensions. diversity, racial equity, privacy, data ethics and, of course, climate change. And just a few months after world leaders | gathered at COP26 to commit to rapid action | Our creativity, scale and power to bring | | --- | --- | | on climate change, a new UN study shows | people together put us in a privileged | | the scale of the task. Many of the impacts | position. We can help accelerate the | | of climate change are already irreversible, | transition to a low-carbon and more | | pushing both people and nature beyond | equitable economy, make sustainable | | their abilities to adapt. | lifestyles desirable, and support clients as | they adapt and innovate. By living up to Companies are responding. Increasingly, our purpose, we believe we will deliver a our clients are focused on how to ensure the sustainable future not only for our people, targets and pledges they are making, from planet, clients and communities but also combatting climate change to tackling racial for WPP and its shareholders. WPP ANNUAL REPORT 202168 STRATEGIC REPORTSUSTAINABILITY ## DEGREE ## INCLUSIVE ### Let's design for a fairer and more ### inclusive world. OFFER ### EXPERIENCE AGENCY ### WUNDERMAN THOMPSON, ### BUENOS AIRES CLIENT ### UNILEVER 15% of the world's population has a disability, yet products and experiences are still not designed with this community in mind. Across the beauty and personal care industry, there is currently no deodorant product to use that’s suitable for people with upper extremity impairment or visual impairment. Degree Deodorant – maker of the world’s #1 antiperspirant – is committed to inspiring confidence in everyone to be active and move more. Degree believes no one should be held back from breaking a sweat and enjoying the transformative benefits of movement. Degree Inclusive is the world’s first inclusive deodorant built for people with visual impairment and upper extremity impairment, co-created by an inclusive team of design experts from Wunderman Thompson and SOUR, including occupational therapists, engineers, consultants and people living with disabilities across the globe. An innovative deodorant designed for the future, Degree Inclusive is inspiring change across the industry. ## 2bn+ 72k media impressions organic impressions in one week ## Awards Cannes Lions, Innovation Grand Prix Fast Company, Innovation by Design Award SXSW Innovation Award winner 69WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY ## OUR SUSTAINABILITY STRATEGY ### PEOPLE PLANET CLIENTS COMMUNITIES MISSION Become the employer of Maximise our positive impact Enable our clients on their Use the power of our creativity choice for all. on the planet. sustainability journeys. and voice to support healthy and vibrant communities. DELIVERED BY DRIVING DIVERSITY, EQUITY AND INCLUSION Ensuring an inclusive Building campuses which Ensuring our client work is Advancing equity and inclusion working environment with make a positive contribution inclusive and accessible. through our work, external fair representation. to local communities. partnerships and initiatives. ACCELERATING THE SUSTAINABLE ECONOMY | Growing sustainability skills | Reaching net zero across our | Supporting our clients to | Working with partners, social | | --- | --- | --- | --- | | and knowledge across our | supply chain by 2030. | reduce their emissions and | enterprises and clients to drive | | industry. | | deliver their sustainability goals. | sustainability. | ENSURING TRUST, FAIRNESS AND GOVERNANCE | | A culture where everyone is | Developing common carbon | Ensuring fairness and high | Buying responsibly and | | --- | --- | --- | --- | --- | | | treated with dignity and | metrics as we move to | privacy and data ethics | building a diverse supplier | | | respect. | integrated reporting. | standards in our work. | network. | | METRICS – Proportion of women in | | – Progress towards net zero | – Roll out diversity evaluation | – Investment in pro bono | | | senior leadership positions | carbon emissions in our | scores to track progress in | work and free media space | | | – Continued improvement of | operations by 2025 (Scope 1 | inclusive marketing | – Progress towards investing | | | ethnicity data disclosure | and 2) and in our supply | – Rate of growth in | $30 million over three years | | | – Employee participation in | chain by 2030 (Scope 3) | sustainable and inclusive | through our Racial Equity | | | listening and engagement | – Progress towards 100% | client briefs | Programme | | | programmes | renewable electricity | – Building common standards | | | | – Number of participants in | – Phase out single-use plastics | to measure carbon emissions | | | | sustainability or DE&I | in our offices | in media and production | | training programmes – Sustainability strategy embedded in executive remuneration | Our sustainability strategy directs us to | committing to reach net zero carbon | United Nations, especially the World Health | | --- | --- | --- | | use the power of creativity to build better | emissions across our supply chain by 2030. | Organization and UN Women, to use our | | futures for our people, planet, clients and | | creativity and expertise to support their work. | | communities, and supports all five elements | Our clients are increasingly focused on how | | | of our corporate strategy (see table on | to ensure their own targets, from combatting | These commitments are not just the right | | page 71). | climate change to tackling inequity, translate | thing to do; they are cutting through with | | | into tangible change. We are building our | our clients and people who want to work | | Our sustainability strategy sets out the | skills and capacity to assist them on their | with and for companies that share their values | | action we are taking to be the employer of | own sustainability journeys. | and help them to achieve their own goals. | choice for all people, knowing that when all our people feel secure, safe and confident to The greatest impact we have is through There has never been a better time to seize the share their ideas, it has a direct impact on our work for clients, which reaches billions opportunities before us. We are determined creativity and the power of collaboration. of people and – through its influence on to do our very best to realise this potential. consumer choice, behaviour and outlook It shows how we are tackling the greatest – has the power to bring about positive To find out more, watch our ESG investor environmental challenges we face, change. We are proud to partner with the presentation at wpp.com/investors/ investor-days/building-better-futures WPP ANNUAL REPORT 202170 SUSTAINABILITY STRATEGIC REPORT Our sustainability strategy is aligned to all five elements of our corporate strategy. STRATEGIC ELEMENT SUSTAINABILITY STRATEGY VISION & OFFER SUSTAINABILITY AT THE HEART OF OUR OFFER Clients, see page 79 FOR CLIENTS A growing number of clients are embracing and sustainable business practices helps us to Transparency and inclusion, diversity and sustainability and looking broaden and deepen these partnerships, and to trust, see page 83 to articulate the purpose of their brands. They look meet the growing expectations and sustainability for partners who share their sustainability values requirements in client procurement processes. and aspirations. Our commitment to responsible | CREATIVITY SOCIAL INVESTMENT | | | Communities, | | --- | --- | --- | --- | | | Our pro bono work can make a significant | Pro bono work benefits our business too, providing | see page 81 | | | difference to charities and NGOs, enabling our | rewarding creative opportunities for our people | | | | partners to raise awareness and funds, recruit | that often result in award-winning campaigns that | | | | members and achieve campaign objectives. | raise the profile of our companies. | | DIVERSE, EQUITABLE AND INCLUSIVE TEAMS regardless of background, lived experience, sex, People, see pages Diversity and difference power creativity. We gender, race and ethnicity, thinking style, sexual 72-74 foster an inclusive culture across WPP: one that orientation, age, religion, disability, family status is equitable and respectful of diverse thoughts and and so much more. individual expression. We want all of our people to feel valued and able to fulfil their potential, | DATA & | PRIVACY AND DATA ETHICS | | Data: privacy, security | | --- | --- | --- | --- | | TECHNOLOGY | Data – including consumer data – can play an | responsibility to look after this data carefully, | and ethics, see page 86 | | | essential role in our work for clients. Data security | to collect data only when needed and with | | | | and privacy are increasingly high-profile topics for | consent where required, and to store and | | | | regulators, consumers and our clients. We have a | transfer data securely. | | | SIMPLER | NET ZERO CAMPUSES | | Planet, see pages | | --- | --- | --- | --- | | STRUCTURE | Our work to simplify our structure and consolidate | more environmentally friendly buildings that | 76 and 77 | | | our office space is driving a positive impact on our | offer modern, world-class workspaces. By 2025, | | | | energy use and carbon footprint. We continue to | we expect 85,000 of our people will work in at | | | | move employees into campuses, closing multiple | least 65 net zero campuses powered by | | | | smaller sites and replacing them with fewer, larger, | renewable electricity. | | | PEOPLE & CULTURE SHARED VALUES ACROSS OUR BUSINESS | | | People, see pages | | --- | --- | --- | --- | | | AND SUPPLY CHAIN | | 72-74 | | | Strong employment policies, investment in skills | Selecting suppliers and partners who adopt | | | | and inclusive working practices help us recruit, | standards consistent with our own can reduce | Supply network, | | | motivate and develop the talented people we | costs, improve efficiency and protect our | see page 85 | | | need to serve our clients in all disciplines across | reputation. | | our locations. 71WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY ## PEOPLE ## When all our people feel secure, safe and confident ## to share their ideas, it has a direct impact on ## creativity and the power of collaboration. To learn more about our people strategy, including how we are investing in skills and training, see pages 52 and 53 | DIVERSITY, EQUITY AND INCLUSION | ETHNICITY | GENDER BALANCE | | --- | --- | --- | | We put the principles of diversity, equity and | We have acknowledged that we need to | We aim to reach gender parity at all levels | | inclusion at the centre of everything we do, | improve ethnicity representation at all levels | of our business. Half (52%) of our senior | | from how we hire and grow our people, to | of the Company, especially at senior and | managers are women (2020: 51%). The | | how we ensure our approach to performance | leadership levels, and in June 2020 we made | proportion of women in executive leadership | 1 | management prioritises fairness and equity. | a number of commitments to advance racial | roles | is 39%  (2021: 40%). The proportion of | | --- | --- | --- | --- | | Our ambition is to create workplaces where | equity and report our progress annually. For | women on the Executive Committee | | | our people feel not only that they have | our UK and United States' workforce diversity | increased to 35%, compared to 29% in the | | | opportunities to thrive, but also that they | data, see our Sustainability Report 2021. | previous year. At Board level, the proportion | | | are celebrated. | While we have made some good progress | of women is 43% (2020: 43%). In 2021 we were | | | | towards these commitments, we recognise | named an industry leader in the Bloomberg | | | Our Code of Business Conduct sets out our | there is still much work to do. This will be | Gender-Equality Index for the fourth | | | commitment to select and promote our | an ongoing effort across our Company. | consecutive year. | | people without discrimination or concern | for factors such as sex, gender, race and | For information on our Racial Equity | To continue advancing gender equity, we | | --- | --- | --- | | ethnicity, sexual orientation, age, religion, | Programme, see page 81 and for | expanded our Stella community into India, | | disability or family status. This Code applies | workforce diversity data, see our | with over 50 leaders across WPP completing | Sustainability Report 2021 to all our people. more than 500 hours of mentoring to help guide and inspire 67 aspiring female leaders. | In 2021, we piloted the Inclusive Leadership | DISABILITY | | | --- | --- | --- | | learning experience for 1,000 mid-level | We recruit, select and promote our people | Our UK Gender Pay Gap Report 2021 shows | | managers to help equip them with the skills | on the basis of their qualifications, relevant | that while there is still work to be done, we | | needed to embed inclusive ways of working | experience and merit, without discrimination | are moving in the right direction. Both our | | across the employee experience. We will | or concern for disability. Candidates are | mean and median UK consolidated pay gaps | | expand the programme to more than 40,000 | assessed objectively against the requirements | narrowed between 2020 and 2021, but for | | managers in the coming year. | of the job, taking account of any reasonable | as long as there are any gaps, we cannot | | | adjustments that may be required for | be satisfied. | | Progress ultimately relies on accountability. | candidates with a disability. For people who | | | In 2021 we included diversity, equity and | develop a disability during their employment, | | Download our UK Gender Pay Gap Report inclusion goals in our incentive plans for we make adjustments to their working 2021 at wpp.com/gpg2021 senior leaders across WPP and our agencies environment or other employment for the first time. We also established a arrangements wherever possible, within a Global Inclusion Council to help accelerate reasonable time frame and in consultation change throughout WPP. Its role is to with the employee. recommend programmes, policies and | initiatives that will systemically create more | WPP is a proud member of The Valuable 500, | | | --- | --- | --- | | inclusive and diverse workplaces, provide | a global business collective made up of | | | input on leadership succession, remove | 500 CEOs and their companies, innovating | 1 Executive leadership roles are defined by WPP as the agency | | | together for disability inclusion. As part of | board and executive leadership population as reported | barriers to progress and assist in setting through WPP's financial reporting system. aspirational targets for elevating under- our commitment, we established a centre These metrics were subject to independent limited assurance represented talent. of excellence for inclusive design to help procedures by PricewaterhouseCoopers LLP (‘PwC’) for our clients make their customer experiences the year ended 31 December 2021. For PwC's 2021 Limited Assurance report and the ‘WPP Sustainability Reporting For information on our Code of Business disability inclusive and accessible (for an Criteria 2021’ for assured metrics, see our Sustainability Report Conduct and mandatory ethics training, example, see page 69). 2021. see page 83 WPP ANNUAL REPORT 202172 SUSTAINABILITY STRATEGIC REPORT | | | We remain a committed signatory of the | LISTENING TO AND ENGAGING WITH | | --- | --- | --- | --- | | | | Women’s Empowerment Principles, a guide | OUR PEOPLE | | | | for businesses on how to empower women in | We use formal and informal mechanisms to | | 39% (1,552) | 202161% (2,395) | | | | | | the workplace, marketplace and community. | assess and improve employee engagement | | | | We are also a proud partner of UN Women, | and satisfaction. Development needs are | 202060% (2,302)40% (1,506) which is a significant beneficiary of our pro assessed during a formal appraisal process. bono work. | | 202148% (8,784)52% (9,630) | | As we adapted to new ways of working, | | --- | --- | --- | --- | | | | LGBTQ+ | we launched WPP Pulse, our first global | | 49% (7,901)51% (8,298) | 2020 | | | | | | WPP Unite, our Company-wide LGBTQ+ | Company-wide survey, with more than | | | | community, advises on policies that impact | 43,000 participants across more than 100 | | | | the LGBTQ+ talent of WPP and its agencies | countries. This showed what our people | | 43% (36,731)57% (49,104) | 2021 | | | | | | to ensure diverse thinking and creativity | want most from WPP: fulfilling careers, | | | 202043% (33,755)57% (44,604) | thrive within WPP’s workplaces and within | where they grow and discover new ways | | | | its work. Spearheaded in the UK and United | of working and learning, the opportunity | | | | States, in 2021 Unite expanded to Hong Kong | to contribute to inspiring work that creates | | | 202144% (47,910)56% (60,286) | and India, and in 2022 it will expand to other | impact for their clients and a sense of | | | | regions. | belonging at a company they are proud | | 45% (43,958)55% (54,408) | 2020 | | | to be part of. In 2021, WPP was proud to achieve the | Female | ● Male | | | | --- | --- | --- | --- | | | | highest score of 100% in the Corporate | For information on what we heard from our | | | | Equality Index, which measures the | people and how we are responding, see | | | | attractiveness of workplaces for LGBTQ+ | ‘Unlocking our creative potential’ on page 52 | employees. During the year, with the support of Unite, we developed the LGBTQ+ inclusive marketing GENDER DIVERSITY resource hub, to equip our people with the ● 19 or under <1% Board and Executive knowledge, skills and resources to create ● 20-29 35% more inclusive marketing. ● 30-39 38% ● 40-49 18% ● 50-59 7% We also partnered with The One Club for ● 60 and over 2% Creativity to host the first-of-its-kind Behind Senior managers the Stonewall Riots competition for Black LGBTQ+ creatives. We invited this community to respond to a brief designed to honour the trans women and gender non-conforming All other employees individuals behind the Stonewall Riots, who AGE DIVERSITY paved the way for the LGBTQ+ community. In addition to offering all participants access to our NextGen Leaders content, we offered Total employees the winners cash prizes and internship and mentoring opportunities at WPP. ● Gender diversity figures exclude a small proportion Age diversity figures exclude a small proportion 73WPP ANNUAL REPORT 2021 where gender is unknown or undisclosed. In 2021, where age is unknown or undisclosed. In 2021, this this accounted for 1% of total headcount. accounted for 1% of total headcount. STRATEGIC REPORT SUSTAINABILITY PEOPLE | To ensure our Board understands the views | HEALTH, SAFETY AND WELLBEING | Work-related stress is one of our main – and | | | --- | --- | --- | --- | | of our employees on WPP’s purpose, values | Supporting our people’s physical and mental | growing – health and safety hazards. With | | | and strategy, and to consult on key people | health and wellbeing is good for our people | the challenges of the pandemic and other | | | issues, WPP established a UK Workforce | and good for business. Our companies are | issues around the world impacting mental | | | Advisory Panel (WAP) in 2019. Sponsored | required to have a health and safety policy | wellbeing, we launched our Mental Health | | | by our UK Country Manager, the WAP has | in place. | Allies programme, providing mental health | | | representatives from across our UK business | | training to 500 leaders, HR professionals and | | | who gather feedback from their agencies to | Our overall sickness absence rate in 2021 | employees across the UK and United States. | | | feed up to the WPP Board, with Cindy Rose | was 3.0 days per employee (2020: 3.3). This | We will expand into more regions in 2022. | | | fulfilling the position of designated Non- | includes non-work-related illness and injuries, | | | | Executive Director. During the year, similar | work-related illness and injuries, and | Our Employee Assistance Programme is a | | | People Forums were established in the | occupational diseases such as work-related | 24/7 service for employees and eligible | | | United States and India to enable further | stress and ergonomic injuries. There were | family members that provides access to | | | engagement with the Company’s global | no work-related fatalities in 2021. | free confidential counselling and support, | | | employee base. Read more on page 124. | | resources on topics such as managing stress | | | | Health and safety data is collected locally | and dealing with loss, and referrals to local | | | LABOUR RELATIONS | and, in 2021, inconsistencies were identified | financial or legal help. The programme is | | | We support the rights of our people to join | in how this data is defined and collated. | available to all of our people around the world. | | | trade unions and to bargain collectively, | We are working to improve consistency and, | | | | although trade union membership is not | once remediated, aim to include health and | | | | particularly widespread in our industry. In | safety data in scope for independent limited | | | | 2021, around 4% of our employees were | assurance in future. | | 3.8 | 3.3 either members of a trade union or covered 3.1 3.0 by a collective bargaining agreement (2020: In 2021 WPP strengthened its crisis 404,381 | 4%). We held 268 consultations with works | management and business resilience (CMBR) | | | | --- | --- | --- | --- | | | | 330,696 | 325,676 | | councils, mainly in Europe (2020: 185). | measures through the launch of a centralised | | | CMBR unit, which coordinated the Company’s | We have made around 3,300 redundancies | response to the Covid-19 pandemic and to | | | | | --- | --- | --- | --- | --- | | as a consequence of the Covid-19 pandemic | extreme weather and political events that | | | | | and also as part of our transformation | have caused disruption to our operations. | | | | | | | 18 2020 | 2019 | 2021 | | programme, as we merge and restructure | We also established a WPP Covid Relief Fund | | | | | some agencies. We consulted with our | to give financial support to WPP employees | Days lost due to sickness | | | | employees as appropriate and supported | and their families in real time in countries | Days lost per person | | | | affected people through our Employee | most affected by the pandemic. | | | | Assistance Programme, which included | | outplacement in appropriate cases. We have | Read more about our Covid Relief Fund in the | | --- | --- | --- | | | also created an internal talent marketplace | People section of our Sustainability Report 2021 | | DAYS LOST DUE TO SICKNESS | to try and ensure any open roles are filled by | | employees who have the right skills before recruiting for those roles externally. 330,264 20 WPP ANNUAL REPORT 202174 SUSTAINABILITY STRATEGIC REPORT ## COMMIT ## TO CARE ### Changing perceptions of Black men. OFFER ### COMMUNICATIONS ### EXPERIENCE AGENCY ### MINDSHARE, NEW YORK CLIENT ### DOVE MEN+CARE (UNILEVER) Research shows that misrepresentation of Black men in media and culture contributes to negative stereotypes that fuel racism in the US. Black men are 150% more likely to be described as criminal and 60% more likely to be described as threatening, compared to white men. Dove recognised the acute need to dismantle barriers that prevent Black men from experiencing care. So Mindshare together with Dove Men+Care and the National Basketball Players Association created and announced a landmark partnership and content series, Commit to C.A.R.E. (Care About Racial Equity), to help create a society where Black men are cared for, respected, supported and protected. The initiative amplifies the voices of some of the most recognisable and revered Black athletes today. Partnering with 11 NBA stars, the content series explored how racial injustice impacts them, affects their families, and fuels their passion for activism. From there, the programme moved from voices to action, including hosting voter registration drives, supporting legislation like the George Floyd Justice Policing Act, and holding a Men’s Summit to debunk myths surrounding Black men, and more. To empower the next generation, the team created a series of Tech & Talk virtual camps, in partnership with the players' charities. The videos, stories and calls to action were hosted on a dedicated microsite – committocarenow.com – and content was distributed through paid media, driving people to take the Commit to C.A.R.E pledge, and join the fight to end racism. | 12% | 24% | | --- | --- | | increase in brand | increase in association | | awareness | of Dove Men+Care | advocating for racial equity WPP ANNUAL REPORT 2021 75WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY ## PLANET ## We support urgent action to tackle ## the climate crisis. | OUR CLIMATE STRATEGY | campuses, taking the total to 31. We aim | through GroupM's Media Decarbonisation | | | --- | --- | --- | --- | | WPP is a proud signatory to the UN Global | to have at least 65 campuses, accommodating | programme we are investing to enable | | | Compact’s Business Ambition for 1.5°C, the | 85,000 people, by 2025. | investment decisions which factor in supply | | | purpose of which is to galvanise business | | chain decarbonisation. | | | support for strong climate action, and to | Company cars accounted for 57% of our | | | | the UNFCCC’s Race to Zero campaign. | Scope 1 emissions in 2021. We aim to reduce | | For more information, see the Planet section | | | emissions by shifting company cars to | | of our Sustainability Report 2021 | | We are committed to reaching net zero | electric and hybrid vehicles in all markets | | | | emissions in our operations (Scope 1 and 2) | where infrastructure makes it feasible to do | PRODUCTION | | | by 2025 and our supply chain by 2030. | so. In 2022, we will review how we measure | The carbon emissions generated by the | | | To deliver this we have set science-based | and calculate emissions from vehicles. | production of the films and other content we | | | reduction targets (see page 77), approved | | create on behalf of clients are responsible for | | 1 | by the Science Based Targets initiative (SBTi) | REDUCING SCOPE 2 EMISSIONS | | 14% of our total carbon footprint | . Through | | --- | --- | --- | --- | --- | | in June, to reduce emissions as far and as | Scope 2 market-based emissions were | | our production agency, Hogarth, we are | | | quickly as possible. Our 2021 performance | 21,840 tCO | 2 e  , a 28% reduction from 2020. | investing in innovative technology, global | | | is set out in the charts, far right. | Scope 2 location-based emissions were | | partners, and our supply-chain to pioneer a | | | | 55,990 tCO | 2 e  , a 9% reduction from 2020. | new approach to delivering carbon-optimised | | | Of our 50 largest clients, 62% have set or | | | work for our clients (see page 5). | | | are committed to setting science-based | WPP is a member of RE100 and has | | | | | reduction targets through the SBTi. These | committed to sourcing 100% of its electricity | | TECHNOLOGY | | | clients look to us to help them find and scale | from renewable sources by 2025. In 2021, | | The technology we use – from data centres | | | solutions (for examples, see pages 78 and 80). | we purchased 74%  of our electricity from | | to the emails we send – generates 6% of our | | 1 | We also know that collaboration with clients | renewable sources (2020: 65%). | Scope 3 footprint | . As we increase our use of | | --- | --- | --- | --- | | and suppliers will be critical in delivering | | cloud infrastructure, powered by renewable | | | against our own targets. We are very | REDUCING SCOPE 3 EMISSIONS | electricity, we will reduce our energy | | | focused on the role our companies can | Our supply chain makes up the | consumption and our carbon emissions, | | | now play in promoting low-impact and | overwhelming majority (98%) of our total | as well as drive down waste. | | 1 | regenerative living. | emissions | . We aim to halve our Scope 3 | | | --- | --- | --- | --- | | | emissions by 2030 (2019 baseline year). | | AIR TRAVEL | | SCOPE 1 EMISSIONS | | | Business travel accounts for around 3% of | 1 | Our 2021 Scope 1 emissions were 13,292 tCO | | 2 e, | MEDIA DECARBONISATION | our supply chain carbon footprint | . To offset | | --- | --- | --- | --- | --- | --- | | of which a subtotal Scope 1 emissions were | | | With over $50 billion in advertising placed | the resulting emissions, we have been | | | 10,138 tCO | 2 e  (76% of our total Scope 1 | | annually, WPP is the world’s largest investor | purchasing high-quality carbon credits since | | | emissions footprint) has been subject to | | | in media advertising. WPP is the first among | 2007, which are charged to each of our | | | independent limited assurance procedures | | | its peers to account for media emissions | agencies to create an internal carbon cost. | | 1 by PwC. The Scope 1 emissions not subject (more than half of our supply chain emissions ) We aim to permanently reduce air travel by to assurance procedures relate to locally in our science-based reduction targets. around a third versus pre-pandemic levels. contracted company cars for which the emissions have been estimated. We believe that the relative carbon footprint of different media distribution options will | We continue to move employees into a | increasingly influence where client investment | | | --- | --- | --- | | global network of campus buildings that | is made. We are seeing this already and | | | bring our agencies together in modern, | expect this to grow substantially over the | 1 Data from 2019 baseline. | Independent limited assurance will be sought by WPP over more energy-efficient, world-class next three years as the urgency and financial our percentage electricity purchased from renewable sources workplaces. In 2021, despite the constraints imperative to deliver on net zero pledges and Scope 2 market-based GHG emissions reporting. The of Covid-19, we opened a further nine increases across all businesses. That is why assurance report will be made available on our website. WPP ANNUAL REPORT 202176 SUSTAINABILITY STRATEGIC REPORT ### TARGETS AND COMMITMENTS | 84% | | 50% | | Net zero | 100% | | --- | --- | --- | --- | --- | --- | | absolute Scope 1 and 2 GHG | | absolute Scope 3 GHG emissions | | across own operations (Scope 1 | electricity from renewable | | emissions reduction by 2025 | | reduction by 2030 from a 2019 | | and 2) by 2025 and across entire | sources by 2025 | | | 1 | | 1 | | | | from a 2019 base year | | base year | , including media buying | supply chain (Scope 3) by 2030 | | – an industry first | In 2021, air travel emissions were 11,421 | | DATA QUALITY | methodologies. We expect our wider | | --- | --- | --- | --- | | tCO | 2 e  , a decrease of 51%  versus 2020, | A significant challenge for reducing carbon | transformation strategy will enable us to | | as the Covid-19 pandemic continued to limit | | emissions is being able to measure them with | manage more data centrally, improving | | international travel. Some errors and | | confidence. We are working to improve the | consistency. | | inconsistencies were identified in how these | | quality and coverage of our emissions data. | | | emissions were calculated and reported at | | | Data quality is particularly challenging for | | a local level, which is reflected in PwC’s | | We are working to include the portion of | Scope 3 emissions, as they are beyond our | | assurance opinion. We continue to work to | | unassured Scope 1 data, relating to locally | direct control. We are reviewing how we | | improve the accuracy of flight data and | | managed company cars, in scope for limited | capture and calculate Scope 3 emissions | | refine methodologies for calculating flight | | external assurance in future years. As we | and aim to improve both data quality and | | emissions to ensure more consistency across | | refine our methodologies and improve data | coverage so that over time we are able to | | the business. | | quality, we will apply these to prior years and | seek independent limited assurance over a | | | | restate data if a material gap is identified. | larger proportion of Scope 3 emissions. From | | OFFSETTING | | | production to media investment, we support | | The first step to limiting emissions must | | In 2021, some errors were identified in how | the development of more robust protocols | | always be to reduce the total footprint of | | emissions from air travel were calculated and | to measure emissions across the industry. | | any product or service as far as possible. | | reported across a number of territories, | In 2021, as a founding member of AdGreen, | | To ensure carbon credits purchased to | | which is reflected in PwC’s assurance | we helped pilot and launch a new carbon | | offset remaining carbon emissions are of | | opinion. We will work to develop more | calculator to measure the emissions | | a sufficiently high quality, from 2022 WPP | | robust protocols and calculation | associated with producing creative content. | will introduce a new offsetting policy. ### CIRCULAR ECONOMY 2021 PERFORMANCE Moving from a ‘take-make-dispose’ economy to a circular economy where waste is eliminated, resources are circulated and CO 2 e EMISSIONS nature is regenerated could create $4.5 trillion in annual economic output by 2030. WPP can 122,967 0.82 contribute to this transition through the work 0.76 we do for our clients (see example on 0.52 MARKET BASED SCOPE 1 AND 2 CARBON page 78). 0.32 EMISSIONS PROGRESS 87,585 81,139 Within our own operations, we remain 51,962 committed to phasing out plastics that cannot be reused, recycled or composted 35,132 23,325 across our campuses and offices worldwide. 11,421 CARBON EMISSIONS FROM AIR TRAVEL The ongoing impact of the pandemic, which TONNES has kept the majority of our offices closed | | | 2018 2019 2020 | | | 2021 | | 2019 | 2020 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 131,313 | for much of the year, has slowed progress | | | | | | | | | | | towards our commitment, which we aimed | ● Scope 1 and 2 (tCO | 2 e) | | | | | | | | | to meet by the end of 2021. We now aim to | Scope 1 and 2 per person (tCO | | 2 e/person) | | These metrics were subject to independent limited assurance | | | | procedures by PricewaterhouseCoopers LLP (‘PwC’) for the meet our commitment by the end of 2022 Our scope 1 and 2 market based emissions for 2021 year ended 31 December 2021. For PwC's 2021 Limited at the earliest. were 0.32 tCO₂e/person, a 38% reduction from Assurance report and the ‘WPP Sustainability Reporting Criteria 2020. Our carbon intensity per £1 million revenue 2021’ for assured metrics, see our Sustainability Report 2021. 1 Target verified by Science Based Targets initiative in line For more information, see the Planet section was 2.74 tCO₂e, a 37% reduction since 2020. with ambition to limit climate change to 1.5°C from of our Sustainability Report 2021 pre-industrial levels. 77WPP ANNUAL REPORT 2021 2018 STRATEGIC REPORT SUSTAINABILITY PLANET ## LEGO GREEN ## INSTRUCTIONS ### Let's rebuild the world. OFFER ### EXPERIENCE AGENCY ### OGILVY, WARSAW CLIENT ### LEGO In Poland over three quarters of energy still comes from coal and – according to The Economist – the country has the most polluted air in Europe. However, there is limited education in schools about climate change. The LEGO Group believes children are the builders of the future and, as part of its global 'Rebuild the World' positioning, it enlisted Ogilvy to create a local expression of this ambition, aimed at Poland’s growing younger population. 'Green Instructions’ show how to use the same bricks to rebuild existing LEGO® sets into greener versions, reflecting a more sustainable future. These instructions help turn cars into bicycles or scooters, planes into electric trains and coal mines into electricity-generating windmills. All with the aim of educating the next generation about a brighter future. ‘Green Instructions’ were distributed in all LEGO® stores in Poland (printed on recycled paper) with digital versions downloadable from www.greeninstructions.com. During the global lockdown, the campaign moved to online video lessons, led by a well-known Polish teacher. Soon teachers from all over the country discovered them and started using them in their own classrooms. | 723 | 100% | | --- | --- | | schools downloaded | positive reaction | | the video lessons | from over 23,000 | comments posted by parents | Awards | 2m+ | | --- | --- | | One Show, | impressions in | | Green Pencil | the first two weeks | | D&AD, | of launch | Graphite Pencil Cannes Lions, Bronze WPP ANNUAL REPORT 202178 SUSTAINABILITY STRATEGIC REPORT ## CLIENTS ## The work we do for our clients reaches billions ## of people each year, presenting our greatest ## opportunity to create positive change. | WORK WITH IMPACT | ACTING ETHICALLY AND WITH | Our agencies have policies and processes to | | --- | --- | --- | | We continue to strengthen our offer to | INTEGRITY | mitigate against online advertising appearing | | ensure we can provide our clients with the | The work we do for our clients is powerful | on sites with illegal, illicit or unsuitable content. | | latest technology alongside the creativity | – it regularly changes attitudes, opinions and | | | and sustainability expertise they need to | the way people behave. As it is critical that | ETHICAL DECISIONS IN OUR WORK | | deliver against their own sustainability | these changes are for the better, we are | We believe that clients have the right to | | ambitions. | committed to acting ethically in all aspects | communicate their views and market their | | | of our business and to maintaining the | products and services, provided doing so is | | To train and equip our client leads, this year | highest standards of honesty and integrity. | lawful and complies with all applicable | | we launched a Sustainability Playbook to | All the advice we provide to our clients and | regulations and standards. | | showcase the diversity of our sustainability | the content we produce for them must meet | | | capability and innovative work. Our Inclusive | rigorous standards and we will not undertake | We have a review and referral process for | | Marketing Playbook and resource library | work which is intended or designed to | work that may present an ethical risk, such as | | embeds inclusive marketing principles in | mislead or deceive. | work for government clients, work relating to | | everything we do, and our Diversity Review | | sensitive products or marketing to children. | | Panel provides a forum to escalate and | We work hard to maintain strong compliance | | | address concerns around potentially | in areas such as ethics, human rights, privacy | Before our people can accept potentially | | offensive or culturally insensitive work. | and data security. All of this is covered in our | sensitive work, they must refer the decision | | | Code of Business Conduct and in our | to the most senior person in the relevant | | GroupM’s Media Inclusion Initiative, launched | mandatory annual ethics training. | office and then to the most senior WPP | | in 2021, aims to direct investment in, and | | executive in the country concerned, who | | create opportunities for, diverse media | There is growing scrutiny – from consumers | will decide if further referral to a global WPP | | companies and content creators with an | and regulators – of the descriptions and | executive is required. This referral process is | | initial focus on Black-owned media. | labels used to promote the environmental | covered in our mandatory How We Behave | | | credentials of products and services. We are | training, which all staff (including freelancers | | We continue to invest in virtual production | working closely with our agencies to make | working for more than four weeks) are required | | to reduce emissions, partnering with | sure that we are contributing to the | to complete on joining and then annually. | | Microsoft to launch Cloud Studio, an | discussion and to ensure that our marketing | | | innovative cloud platform that allows | services promote transparency on the | Our agencies also have copy-checking and | | creative teams from across WPP’s global | environmental attributes of products. In | clearance processes for the legal team to | | network to produce campaigns for clients | 2022, we will launch further training and | review campaigns before publication. These | | from any location around the world. | resources specifically to help our people | processes have strict requirements in highly | | | appropriately manage and communicate | regulated sectors such as pharmaceutical | | Find out more about virtual production on | environmental claims in their work. | marketing. | page 5 | | We require that all the work our companies | Each of our agencies has a global Risk | | | --- | --- | --- | --- | | To help our leaders develop the knowledge | produce for clients complies with all relevant | Committee, chaired by its respective CEO, to | | | and skills to lead in the age of artificial | legal requirements, codes of practice and | ensure that leadership has a full understanding | | | intelligence, this year we launched an | marketing standards. There are occasional | of the risks across businesses and markets | | | executive diploma in Artificial Intelligence | complaints made about campaigns we have | (see page 88). | | | in Business at the University of Oxford Saïd | worked on, and some of these are upheld by | | | | Business School. | marketing standards authorities. Our | | For more examples of our client work to | address social and environmental issues, agencies take action where needed to download our Sustainability Report 2021 prevent a recurrence. from wpp.com/sustainabilityreport2021 79WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY CLIENTS ## ULTIMA TE ## SAFETY TEST ### Volvo Cars placing sustainability ### at the heart of its brands. OFFER ### COMMUNICATIONS AGENCY ### GREY, LONDON CLIENT ### VOLVO A leader in automotive safety for decades, Volvo Cars is broadening its focus to sustainability and its commitment to climate neutrality and electric vehicles. By 2040, with aims to become a fully climate-neutral company across its value chain and, by 2030, it plans to become a fully electric car company. To announce the news, Grey created the ‘Ultimate Safety Test’ campaign, devised to reflect the company’s commitment to climate neutrality and electrification. In the new film, a spokesperson takes viewers on a tour of Volvo’s safety tests over the decades. During one of these tests in the Arctic Circle, a collapsing glacier becomes a stark reminder that the biggest threat to our safety isn’t on the road, it’s climate change. ## 2.3bn Awards media impressions Cannes Lions, Silver Ad Age, Top 30 Ads of the Year WPP ANNUAL REPORT 202180 SUSTAINABILITY STRATEGIC REPORT ## COMMUNITIES ## We aim to use the power of our creativity and voice ## to support healthy and vibrant communities. | We can help boost the impact of charities | RACIAL EQUITY PROGRAMME | VOLUNTEERING | | --- | --- | --- | | and non-governmental organisations | In 2021 we allocated $9.3 million in inclusion | In addition to providing donations and pro | | (NGOs) to support progress toward the UN | programmes, investing $5.9 million and | bono services, we encourage our people to | | Sustainable Development Goals by providing | committing a further $3.4 million, as part of | volunteer their time. | | marketing and creative services, often on a | WPP’s commitment to invest $30m over | | | pro bono basis (for little or no fee). | three years to use the power of creativity to | Our agencies provide volunteering | | | build more equitable futures for our people | opportunities for our employees. For | | This work is mutually rewarding. While | and communities impacted by racism. | example, to mark its Foundation Day, VMLY&R | | enabling our voluntary sector clients to raise | | ceased normal business operations for a day | | money and awareness, recruit members and | Read more about our Racial Equity Programme | in September to give more than 12,000 | | achieve campaign objectives, pro bono work | and the projects we fund in the Communities | employees around the world the opportunity | | also provides opportunities for our people to | section of our Sustainability Report 2021 | to support their choice of volunteer projects. | work on fulfilling, impactful and sometimes | award-winning campaigns that raise the | WHAT WE GAVE IN 2021 | SOCIAL IMPACT | | | --- | --- | --- | --- | | profile of our companies. | Our pro bono work was worth £7.6 million | Our support helps charities and NGOs to | | | | (2020: £12.6 million), for clients including UN | continue to grow their work in critical areas | | | GIVING CREATIVITY BACK AT SCALE | Women and the World Health Organization. | such as improving health and education, | | | We encourage our people to use their | We also made cash donations to charities of | reducing inequality and protecting human | | | creativity and expertise to support the local | £4.8 million (2020: £4.3 million). | rights. Pro bono work is often worth more | | | causes they are passionate about, from the | | than an equivalent cash donation as it raises | | | arts to conservation, health and human | During the year WPP matched employee | awareness of our partners’ work while | | | rights. At the same time, WPP is proud to | donations to a number of causes including | helping to increase donations, recruit | | | partner with the United Nations, including | our India Covid Relief Fund, Go Give One | members, change behaviour and achieve | | | the World Health Organization (WHO) and | Campaign and Racial Equity Donation Match | campaign goals. | | | UN Women, to provide our skills in creativity, | Programme. | | | | communications, data and technology to | | We have conducted research to quantify this | | | help effect positive change for society. | Our pro bono work, combined with cash | wider impact. Our most recent analysis shows | | | | donations, resulted in a total social | that in 2021 our pro bono work created wider | | | During the pandemic, WPP worked with | investment of £12.4 million (2020: £16.9 million), | social benefits worth £110 million (2020: | | | governments, commercial clients, NGOs and | equivalent to 0.9% of headline profit before | £108 million). This includes, for example, the | | | international health bodies to produce public | tax (2020: 1.6%). | impact of charities being able to improve | | | awareness campaigns to help limit the | | health and wellbeing in communities. Adding | | | spread and impact of Covid-19. We | WPP media agencies negotiated free media | in our charitable donations and free media | | | partnered with the WHO and WHO | space worth £17.3 million on behalf of pro | space as well as our pro bono work, the | | | Foundation on a pro bono basis, tailoring | bono clients (2020: £59.3 million). Our total | wider social benefits created in 2021 were | | | public health messages through made-for- | social contribution, taking into account | worth an estimated £257 million (2020: | | | market campaigns which reached tens of | cash donations, pro bono work, in kind | £649 million). | | | millions of people across 167 countries in | contributions and free media space, was | | | | more than 20 languages. We continue to | £41.0 million (2020: £76.2 million), a decrease | | Read our Quantifying our Impacts report, see | | support the WHO Foundation with their | versus 2020 as investments, particularly in | | more examples of our pro bono work and learn | | vaccine fundraising initiative. | free media space, returned to pre-pandemic | | more about our Racial Equity Programme in | our Sustainability Report 2021 levels. 81WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY COMMUNITIES ## SANTANDER ## BANK ELA ### The first Women’s Day celebration ### in the form of a credit programme. OFFER ### COMMERCE AGENCY ### VMLY&R, SÃO PAULO CLIENT ### SANTANDER BANK Santander Bank is committed to diversity, equity and inclusion, and asked VMLY&R for a campaign in honour of Women’s Day. But the agency’s research showed that women didn’t want a campaign at all. What they wanted was greater opportunities, more jobs, equal payment and respect in and out of the workplace. So, instead of ads, VMLY&R took the entire $250 million budget and created a financial product: a new line of credit for microentrepreneurs – exclusively for women. VMLY&R assessed Santander’s clients’ data and that of millions of potential clients, focusing on the 25% of Brazilian women earning less than US$85 a month, cross-referencing global data on gender (women) and location (low-income areas). From the insights gained, the target group were sent simple text messages, reinforced by communications within Santander’s branches. The initiative also featured in a series of debates streamed live on social media, with the CEOs from some of Brazil’s biggest ecommerce businesses and banks taking part. The results were impressive: all available funds were lent within a week; there was widespread media coverage; and the World Bank was so impressed, it asked to become a partner in the project for the following year. | 100,000 | 44% | | --- | --- | | women joined | of borrowers from the | | Santander Ela on | bank were women after | | the launch date | the campaign (20% | previously) ## Awards Cannes Lions, Bronze Effie Brazil, Bronze WPP ANNUAL REPORT 202182 SUSTAINABILITY STRATEGIC REPORT ## TRANSPARENCY AND TRUST | We set clear standards, policies and | Part of WPP’s Code of Business Conduct | ASSOCIATES, AFFILIATES AND | | --- | --- | --- | | procedures to ensure high levels of | is making sure that our people have the | ACQUISITIONS | | transparency and trust throughout our | confidence to speak up and know how to | We expect associate companies (those in | | business. | raise concerns through various channels | which we hold a minority stake) and affiliate | | | without fear of retaliation. Our approach to | companies (preferred partners to whom | | OUR CODE OF BUSINESS CONDUCT | this is described under Whistleblowing on | we may refer business) to adopt ethical | | Our policy framework and training set clear | page 90. | standards that are consistent with our own. | ethical standards for our people and agencies. | We want to embed a culture of integrity and | MANAGEMENT AND COMPLIANCE | Our due diligence process for acquisitions | | --- | --- | --- | | transparency where our people make the | Our Group Chief Counsel oversees our | and expansion into new markets includes a | | right decisions automatically and instinctively. | approach to ethics and compliance. Senior | review of ethical risks including those relating | | | managers in all our agencies and our business | to bribery and corruption, human rights or | | The WPP Code of Business Conduct applies | and supplier partners are asked to sign a | ethical issues associated with client work. | | to everyone at WPP. It sets out our | copy of the WPP Code of Business Conduct | | | responsibilities to our people, partners and | each year to confirm they will comply with | We identify any specific human rights risks | | shareholders to act ethically, legally and | its principles. Our Board-level Sustainability | associated with different countries of | | with integrity. | Committee and Executive Committee | operation, using sources such as the | | | provide additional oversight and guidance | Transparency International Corruption Index, | | It is underpinned by more detailed policies | on any ethical issues that may arise. | Human Rights Watch country reports and | | on topics including anti-bribery and | | government guidance. | | corruption (ABC), hospitality and gifts, | Our people can report concerns or suspected | | | facilitation payments, the use of third-party | cases of misconduct confidentially (and, if | Acquired businesses must adopt our policies | | advisors, human rights and sustainability. In | they wish, anonymously) through our | and their people must undertake our ethics | | October 2021, we refreshed the WPP ABC | independently managed Right to Speak | training within a month of joining WPP. This | | policy and Advisor Payment Policy and | facility, which is overseen by our business | is agreed in an integration plan before the | | produced a Business Integrity Booklet on | integrity team within our legal function and | acquisition is finalised, and we monitor | | ABC to reflect updated processes around | is available via phone or email in local | progress. | | managing ABC risk and provide additional | languages. We publicise the facility in | | | guidance to our people. In January 2022, we | induction packs, on our intranet and external | INSTITUTE OF BUSINESS ETHICS | | updated the WPP sustainability policy and | website, in offices, in the WPP Policy Book | WPP is a member of the Institute of Business | | introduced a new environmental policy to | and via our mandatory ethics training. Our | Ethics (IBE) and considers it an important | | reflect our climate commitments. | people can also speak directly to our | partner and support for the approach that | | | business integrity team who receive a | the Company takes to business integrity, | | Our people are required to take our online | number of reports through emails, calls, | sustainability and ethics. As set out more | | ethics training promptly upon joining and | texts and in-person appointments. | fully in Risk Governance Framework on page | | then on an annual basis thereafter. Topics | | 88 and Business Integrity Programme on | | include diversity, human rights, conflicts | In 2021, a total of 494 reports were received | page 89, we want to champion and facilitate | | of interest and avoiding misleading work. | from whistleblowers (2020: 418), 333 of | a culture where our people feel that acting | | In 2021, more than 100,000 employees, | which were through the Right to Speak | with honesty and integrity is an expected | | freelancers and contractors completed | hotline. The most commonly raised concerns | metric for success and this is also the IBE’s | | the training. | were about respect in the workplace and | ethos. The IBE shares knowledge and good | | | protection of WPP’s assets. All reports were | practice as well as advice on the | | Our online training on anti-bribery and | followed up, investigated where appropriate | development and embedding of relevant | | corruption covers the requirements of the | by our business integrity team, and reported | policies through networking events, regular | | Foreign Corrupt Practices Act and UK Bribery | to the Audit Committee (see page 90). | publications and training sessions, research | | Act, including issues such as hospitality and | | and benchmarking reports. The IBE is a | | gifts, facilitation payments and the use of | | registered charity funded by corporate and | | third-party advisors. | | individual donations. | 83WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY ## PUBLIC POLICY ### We believe that business can make a Our companies in the United States whose LOBBYING AND POLITICAL ADVOCACY valuable contribution to public policy sole or primary business is lobbying have We occasionally contribute to the debate on debate. To protect the public interest, representatives of both major political public policy issues relevant to our business, it is important to conduct all lobbying parties among senior management. sometimes through our public affairs agencies. with integrity and transparency. | | We will not undertake work that is intended | We advocate on sustainability issues | | --- | --- | --- | | Most of our public policy activity is work | to mislead and always seek to identify the | including climate change, for example at | | that our public affairs businesses carry out | underlying client before taking on work. We | COP26 in Glasgow. We also advocate through | | for clients, including direct lobbying of | do not knowingly represent ‘front groups’ | partnerships such as the Common Ground | | public officials and influencing public | purporting to be independent campaign | initiative in support of the UN Sustainable | | opinion. On occasion, we also advocate | groups but which are in fact controlled by | Development Goals. Demet İkiler, WPP’s | | on issues that affect our business. | another organisation for the purpose of | Turkey Country Manager and EMEA CEO of | | | misleading. | GroupM, serves on the local board of the | | Our public affairs companies include BCW, | | UN Global Compact with responsibility for | | Finsbury Glover Hering & Sard Verbinnen & | Our Group Corporate Affairs Director | diversity and inclusion. Karen Blackett OBE, | | Co, and Hill+Knowlton Strategies. The | has responsibility for developing and | WPP’s UK Country Manager and GroupM UK | | majority of their work takes place in the | implementing our political activity policy | CEO, serves as a non-executive director of | | United States, the UK and the EU, although | and public reporting procedures. The CEO | the Board of the UK’s Cabinet Office. | | many clients are multinational businesses | and CFO in each country or region are | | | operating in many countries. | responsible for implementing our policy | Our agencies contribute to public policy | | | at the local level. | debate in areas where they have expertise | | OUR STANDARDS | | and a special interest. Our digital and research | | Our Code of Business Conduct and Political | Any third parties conducting political | companies, for example, are involved in | | Activities and Engagement Policy govern our | activities on behalf of WPP or its agencies | privacy and data protection issues. | | political activities, and both are available on | must comply with our Political Activities and | | | our website. These documents commit us to | Engagement Policy. Third parties are required | WPP agencies must implement clear | | acting ethically in all aspects of our business | to complete the WPP mandatory ethics | procedures for employing serving or former | | and to maintaining the highest standards of | training or equivalent within their own | politicians, including a six-month ‘cooling-off’ | | honesty and integrity. Political activities in | organisation. | period for people joining WPP from public | | particular should be conducted legally, | | office or the public sector. | | ethically and transparently and all related | POLITICAL CONTRIBUTIONS | | | communication should be honest, factual | WPP agencies are not permitted to make | MEMBERSHIP OF TRADE ASSOCIATIONS | | and accurate. Our policies apply to all | direct cash donations. Other political | We are members of trade associations, | | agencies and employees at all levels. | donations can only be made with the prior | industry groups and membership | | | written approval of a WPP executive | organisations which undertake lobbying | | Many of our companies are members of | director. Donations must be reported to | activity on behalf of their members. We | | professional organisations and abide by | WPP’s legal function before they are made, | select organisations with priorities and | | their codes of conduct. Examples include | to confirm they comply with this policy and | values aligned with our own and with robust | | the UK Association of Professional Political | to obtain the necessary approvals. | governance processes. WPP companies | | Consultants (APPC), and the European Public | | must nominate a senior manager to manage | | Affairs Consultancies’ Association (EPACA). | POLITICAL ACTION COMMITTEES | and oversee trade association relationships. | In countries where it is consistent with | WPP companies comply with all applicable | applicable law, individuals working at WPP | At the WPP level, our memberships include: | | --- | --- | --- | | laws and regulations governing the disclosure | companies may make personal voluntary | 30% Club, the American Benefits Council, | | of public affairs activities. In the United | political contributions directly to candidates | BritishAmerican Business Inc., Business | | States, this includes the Lobby Disclosure Act | for office. | Disability Forum, CBI, China Britain Business | | and the Foreign Agent Registration Act, | | Council, Institute of Business Ethics, the | | which are designed to achieve transparency | BCW and Finsbury Glover Hering also | Northeast Business Group on Health, | | on client representation and require lobby | maintain political action committees (PACs) | Partnership for Global LGBTI Equality, RE100, | | firms to register the names of clients on | which accept voluntary donations from their | The Valuable 500, Women on Boards, and | | whose behalf they contact legislators or | people to support political candidates. In | the World Economic Forum. | | executive branch personnel. A number of | 2021, these PACs made disbursements worth | | | our agencies are listed on the voluntary EU | $129,386 (data from fec.gov). | In our markets, our agencies are often | | Transparency Register of lobbying activities. | | members of local advertising, PR, public | affairs and market research industry associations, as well as national chambers of commerce and business councils. WPP ANNUAL REPORT 202184 SUSTAINABILITY STRATEGIC REPORT ## SUPPLY NETWORK WPP is committed to creating an inclusive, As part of the supplier onboarding process, Our most direct impact on human rights is sustainable, ethical and diverse network of we include a right-to-audit provision in the as a major employer. We recognise the rights business-enabling suppliers. supplier documentation where appropriate. of our people, including those relating to freedom of association and collective ### The wide range of services we offer and our SUPPLIER DIVERSITY bargaining, and we do not tolerate organisational structure means we have WPP is committed to including Certified harassment or any form of forced, compulsory a complex and dynamic supply chain Diverse Suppliers (CDS) in its purchasing or child labour. Human rights are included in ecosystem to manage. We work with over lifecycle, both internally and for the benefit the mandatory ethics training completed on 1 | 75,000 companies across our supply network. | of our clients | . | joining and then annually by all employees. | | --- | --- | --- | --- | | Our suppliers fall into two main categories: | Our Supplier Diversity Programme | | We work with clients to manage any human | | those providing goods and services used | encourages WPP and our agencies to buy | | rights risks from marketing campaigns, for | | to run our companies – such as IT, travel, | from CDS. Through the Global Supplier | | example by protecting children’s rights in | | telecommunications, professional services | Diversity Alliance, with memberships in | | relation to marketing (see page 79). WPP | | and facilities; and those used in client work | Australia, the UK and the United States, we | | agencies will not undertake work designed | | – such as advertising, production and | have access to global directories of CDS, so | | to mislead on human rights issues. | | market research. | we can actively search and include them in | | | | | our RFPs and client tender responses. We | | MODERN SLAVERY | | RISK ASSESSMENT | can also access best practice so diverse | | We do not tolerate any form of modern | | We assess supply chain risk based on | suppliers not only win contracts but also | | slavery in our business or supply chain. | | country, industry and procurement category. | thrive in our ecosystem. In 2021, through the | | | | This is then combined with a supplier-specific | UK chapter, MSDUK, we sponsored the UK’s | | WPP recognises the prevalence of modern | | questionnaire covering governance, | first accelerator programme to help | | slavery across all countries. We aim to | | compliance, sustainability, human rights | minority-owned businesses become | | implement appropriate measures to mitigate | | and labour standards. | supply-chain ready. | | the risk of it occurring, either in our own | operations or those of our partners. Our ### SUPPLIER SELECTION Learn more about the accelerator programme global Supplier Agreement includes a During supplier selection and before WPP in the Responsible Business section of our specific clause relating to modern slavery Sustainability Report 2021 enters into a commercial agreement, the compliance. WPP reserves the right to procurement team ensures potential terminate its contract with any supplier ### HUMAN RIGHTS suppliers sign WPP’s Business Code of found to breach or fail to comply with any Respect for human rights is a fundamental Conduct – Supplier Version, confirming legislation relating to modern slavery. principle for WPP. In our business activities they will comply with our standards or we aim to prevent, identify and address demonstrate that they have the equivalent As part of our due diligence process, suppliers negative impacts on human rights and we standards in place. These standards include are required to complete a self-assessment look for opportunities to promote and requirements relating to labour practices questionnaire which includes specific support human rights, including children’s (such as anti-harassment and discrimination, questions on modern slavery. Any issues rights, through our business activities and and health and safety), human rights raised from the responses are flagged to the in areas such as our pro bono work. (including modern slavery issues such as relevant WPP team for further investigation. child, forced or bonded labour), social WPP companies must comply with our impacts (such as anti-bribery and corruption) To learn more about our Supplier Code Human Rights Policy Statement which and other sustainability issues. of Conduct, Human Rights Policy and reflects international standards and principles, Modern Slavery Act Transparency including the International Bill of Human Statement, see wpp.com/ Our Code requires suppliers to apply similar Rights, the UN Guiding Principles on Business sustainability/policies-and-resources standards to companies within their own and Human Rights, the International Labour supply chain, including evidencing diversity | | Organization’s Declaration on Fundamental | 1 | | --- | --- | --- | | and social responsibility in their cultures, | | Certified Diverse Suppliers are defined as minority-owned, | | | Principles and Rights at Work and the | women-owned, veteran-owned, LGBT-owned, service | behaviours and attitudes. Children’s Rights and Business Principles. disabled veteran-owned, historically underutilised businesses and small businesses. Suppliers are also required to complete a We are a member of the United Nations self-assessment questionnaire which includes Global Compact and report progress against specific questions on modern slavery (see its ten principles annually. ‘Modern Slavery’, right). Any issues raised from the responses are flagged to the relevant WPP team for further investigation. 85WPP ANNUAL REPORT 2021 STRATEGIC REPORT SUSTAINABILITY ## DATA: PRIVACY, SECURITY AND ETHICS | The rise in privacy and data regulation | In 2021, GroupM – WPP’s media investment | All new and current employees, as well | | --- | --- | --- | | around the world reflects consumer demand | group – launched the industry’s first tool to | as consultants, are required to complete | | to put the interests of the individual at the | operationalise data ethics. The Data Ethics | our Safer Data training, which covers data | | heart of considerations around data usage. | Compass is a global web app which allows | protection and privacy. The training is | | WPP demonstrates, through its expertise | advertisers to quickly and consistently | refreshed annually and is updated in line | | and direct engagement, that we are a | evaluate the ethical risk level of data assets | with privacy regulations. This training is | | trusted partner for our clients, suppliers | and decisions. | augmented by subject-focused training, | | and associates. | | where required, covering specific regulations, | | | DIVERSITY, EQUITY AND INCLUSION | regional laws or activities undertaken by | | Our policies and governance ensure we are | WPP is committed to diversity, equity and | our agencies. | | well placed to respond to new regulation, | inclusion in our business, supply chains and | | | including the introduction of new laws in | client work. Increasingly, clients ask us to | Our annual Data Health Checker provides | | China, the United States and the Middle | demonstrate our people are from diverse | us with insight into how data is used, stored | | East, among others. Through our active | backgrounds and representative of their own | and transferred and helps to identify any | | engagement in industry bodies, particularly | customers. We are working to continually | parts of the business that need further | | in the UK with the Advertising Association | improve how we measure performance. For | support on data practices. The results show | | and the United States with the 4As and | over 30 of our markets, we have developed | us that the majority of our agencies continue | | the Network Advertising Initiative, we are | detailed guidance on how we can collect | to have mitigation measures that match | | able to monitor and influence the changing | and report on such data in line with | or exceed their level of privacy risk, with | | regulatory landscape. | regulations and in a way that is culturally | the average risk score being 1.6 out of five | | | sensitive to our own people. We also want | (2020: 1.6), where five is the maximum score | | CLIENTS | to play our part in developing industry | possible and indicates maximum risk. | | Interest and engagement from our clients | standards. | | | continues to grow on data privacy, | | AI, MACHINE LEARNING AND DATA | For information on diversity data, protection and ethics, not only through The privacy, data protection and security see the People section of our commercial and contractual negotiations, teams work closely with the technology Sustainability Report 2021 but throughout the operational relationship. team facilitating both strategic and compliance alignment particularly for the ### GOVERNANCE, POLICIES AND Our privacy teams have established direct development of client-focused data services. ### TRAINING relationships with their client counterparts Our Group Chief Privacy Officer leads our to ensure alignment and engagement on this We are developing skilled, knowledgeable work on privacy, supported by our Global subject and we have jointly hosted privacy- teams with an understanding of the Data Protection Officer. Together, they provide focused client sessions establishing a shared centrality of data to our business. In 2021, practical guidance and support to our understanding in the work being undertaken. there were 10,000 course enrolments agencies, ensure that privacy risks are well through the WPP AI Academy. Our Demystify understood, and promote best practices. We recognise our clients’ focus on the AI training was awarded Data IQ best data increasing importance of first-party data literacy programme. The WPP Risk sub-Committee is responsible and data access and variety rather than for reviewing and monitoring the Group’s acquisition at volume. In April 2021 we In 2021 we launched a new WPP Data and approach to regulatory and legal compliance, launched Choreograph, our new data AI Ethics Hub to share our ethical guidelines as well as monitoring data privacy, ethics and products business, which epitomises and principles across WPP. The hub features security risk. This is pivotal in our approach our data philosophy: that clients should a new WPP Ethics Guidelines Tool, which to our own and our clients’ data, as well own their own data to future-proof their offers practical advice to ensure that all work as contributing to our overall strategy. businesses. Choreograph plays a critical role conforms to WPP guidance on transparency, Co-chaired by WPP’s Chief Privacy Officer and in navigating the privacy and compliance fairness, respect and accountability. Chief Information Officer, members represent landscape, giving clients control and the security, technology and data leadership. ownership of their first-party data. We encourage a culture of curiosity and sharing. In 2021, we held over 40 webinars The WPP Data Privacy and Security Charter ### DATA ETHICS through our Data and AI Community, and communicates our approach to data, setting Data ethics continues to be a focus for WPP. grew the community in Asia Pacific. out core principles for responsible data In 2021, we further developed the WPP Data management through our Data Code of Ethics Statement and Artificial Intelligence Conduct, our technology, privacy and social (AI) Statement into full policies outlining to media policies, and our security standards our people, clients and stakeholders the (based on ISO 27001). The Charter was foundations of our ethical data processing. updated in 2021 to include the WPP AI and Data Ethics policies. WPP ANNUAL REPORT 202186 SUSTAINABILITY STRATEGIC REPORT ## OUR APPROACH TO SUSTAINABILITY | EMBEDDING SUSTAINABILITY IN OUR | Information on employee engagement is on | we believe we can make the most significant | | --- | --- | --- | | COMPANIES | page 73. In April 2021 we launched WPP’s net | contribution towards, see our Sustainability | | WPP sets sustainability policy, with every | zero commitments at a global townhall | Report 2021. | | agency responsible for implementation. | hosted by CEO Mark Read. During the year, | | | | agencies including GroupM, Hogarth and | ABOUT OUR REPORTING | | The Board is responsible for the overall | Landor & Fitch have developed training and | Data included in this Annual Report is for | | long-term success of WPP and for setting the | tools to equip our people with knowledge | the calendar year 2021 and covers all | | Company’s purpose, values and culture and | around the science of climate change and | subsidiaries of the Company. The selected | | strategic direction, including on sustainability. | give them practical tools with which to | ESG performance metrics marked with the | | | respond. This remains a priority in 2022. | symbol throughout this report have been | | The Sustainability Committee supports | | subject to independent limited assurance | | the Board in its oversight of corporate | INVESTOR ENGAGEMENT | procedures by PricewaterhouseCoopers LLP | | responsibility, sustainability and reputational | We believe the more we behave in line with | (‘PwC’) for the year ending 31 December | | matters. It reviews and monitors | our purpose, the better our business will | 2021 in accordance with International | | implementation of the Company’s | perform, thereby maximising shareholder | Standard on Assurance Engagements 3000 | | sustainability strategy and reviews policy | return. We regularly engage with investors | (revised) and in respect of GHG emissions | | statements on environmental and social | on ESG topics and in June we held our first | data, International Standard on Assurance | | matters. The Committee meets a minimum | investor ESG presentation. | Engagements 3410, issued by the | | of four times a year (see page 131). | | International Auditing and Assurance | | | Our involvement with investors, rating | Standards Board. A copy of PwC’s report | | The WPP Executive Committee sets the | agencies and benchmarking organisations on | and our methodology is on our website | | sustainability strategy and oversees the | sustainability during 2021 included: Bloomberg | wpp.com/sustainabilityreport2021. | | approach across agencies in its | Gender-Equality Index; EcoVadis; Ethibel; | | | implementation, ensuring consistent | Vigeo Eiris; FTSE Russell; Human Rights | The majority of our data is collated locally, | | execution and embedding the Company’s | Campaign Foundation’s Corporate Equality | and a common challenge is reconciling | | culture and values. The Global Sustainability | Index; MSCI Research Inc.; Sustainalytics; and | inconsistencies in calculations and data | | Director has operational responsibility for | Thomson Reuters D&I Index. We are included | capture. This prevented us from obtaining | | sustainability. | in the FTSE4Good Index and participate in | independent limited assurance over certain | | | the CDP climate change benchmark, | metrics including waste and health and | | We have a clear policy framework through | receiving a rating of A- in 2021. | safety data. We aim to include these in | | our Code of Business Conduct, Sustainability | | scope for assurance in the future. For further | | Policy (updated in February 2022), Supplier | OUR MATERIALITY PROCESS | information on data quality, see page 77. | | Code of Business Conduct, Data Privacy and | We use a materiality process to ensure our | | | Security Charter, Human Rights Policy | strategy, investments and reporting focus on | | | Statement and other policies included in the | the issues of greatest importance and | | ### NON-FINANCIAL WPP Policy Book. Our operating companies relevance to our business and stakeholders. ### INFORMATION STATEMENT are required to comply with sustainability policy and report performance to WPP on an Our first formal materiality assessment in annual basis. 2014 included interviews with clients, This section provides information required investors, NGOs and sustainable business by regulation in relation to: In 2021, we launched a new sustainability experts, as well as with senior executives strategy aligned with our purpose (page 70) across WPP. We periodically repeat a formal – environmental matters (page 76) and and set science-based carbon-reduction materiality assessment, most recently in TCFD statement (pages 214-216); | targets for the Company (page 76). Our | 2020, to reflect our new corporate strategy | – our people (pages 52 and 53, and 72-74); | | --- | --- | --- | | internal sustainability advisors work to ensure | and changing stakeholder priorities (see | – social matters (page 81); | | consistent implementation of our standards. | Sustainability Report 2021). | – human rights (page 85); and corruption | and bribery (page 90). ### STAKEHOLDER ENGAGEMENT UNITED NATIONS SUSTAINABLE In addition, other related information can be ### Dialogue with our stakeholders, including DEVELOPMENT GOALS (SDGs) found as follows: our people, clients and shareholders, We support the UN SDGs as a framework provides valuable feedback and insight into for government agencies, civil society, the – business model (page 16); sustainability risks and opportunities, for our private sector and citizens to work together – principal risks and how they are managed | Company and our clients. | to create a more sustainable future. We have | (from page 93); | | --- | --- | --- | | | analysed the 17 Global Goals and the 169 | – non-financial key performance indicators | | Most stakeholder engagement takes place in | targets which sit behind them to identify | (page 58). | | the course of doing business. We work with | those which are most relevant for our | | | clients on sustainability issues (see page 79). | business. To learn more about the Goals | | 87WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## ASSESSING AND ## MANAGING OUR RISKS ### The success of our strategic objectives as RISK GOVERNANCE FRAMEWORK setting clear standards and reporting lines discussed in this report depends to a A key element of our risk governance for the accurate and timely monitoring of significant extent on how we identify and framework is our Risk Committees. Each exposures and certain risk types of address the current and emerging risks and network has a global Risk Committee chaired importance); compliance policies and uncertainties we face as a business. The by the CEO and with key senior managers practices; and risks that present themselves Board, assisted by the Audit Committee, has participating to ensure that leadership is throughout each network. This agenda is oversight and responsibility for our approach proactively identifying (including through framed by our business integrity programme to risk management which is structured risk assessments and horizon scanning) and and internal control environment. through our three lines of defence model and understanding the current, new, evolving driven by our risk governance framework, and emerging risks across businesses and In order to carry out their duties business integrity programme, culture based the remediation steps required from time to comprehensively, each Risk Committee has upon the principles set out in our Code of time in certain markets. We also have a WPP secure access to an increasing central pool Conduct and our internal control framework. Risk Committee which has oversight of all of data from, or with the potential to impact, network Risk Committees and itself reports their network that is crucial to the ability The Board has reviewed the design and into the Audit Committee. We also have two to recognise and monitor a full risk and effectiveness of this system during the year sub-committees to focus on the detail of compliance picture; this includes internal and up to the date of this report and carried risks relating to Data Privacy, Security and audit reports, Internal Controls over Financial out a robust assessment of the principal risks Ethics and to Controls at both WPP and Reporting (ICFR) results, general computing that could impact our business. network level. controls results, information from whistleblowers, findings from investigations, The system of controls described below is The agenda of the Risk Committees is to responses from our annual risk mapping designed to manage and mitigate, but may review, monitor and advise on: compliance process and the results of our annual not eliminate, the risk of failure to achieve with laws, regulations, internal procedures, assessment of business integrity risk. our strategic objectives and is not an and industry standards, including anti-bribery absolute assurance against material and corruption matters; the implementation misstatement or loss. of our compliance framework (including ### PP’S RISK GOVERNANCE FRAMEWORK BUSINESS INTEGRITY PROGRAMME ### W WPP Risk Committee INTERNAL AUDIT KEY RISK CERTIFICATIONS BUSINESS ENTERPRISE FINDINGS & TEST INDICATOR (KRI) AND WHISTLEBLOWING INTEGRITY RISK RISK MAPS RESULTS DATA FEEDS DISCLOSURES ASSESSMENT Network Risk Committees INTERNAL CONTROL FRAMEWORK WPP ANNUAL REPORT 202188 STRATEGIC REPORTASSESSING AND MANAGING OUR RISKS ### BUSINESS INTEGRITY PROGRAMME – in respect of systems, advising on the Corporate Governance Code, FRC guidance Our business integrity programme is central implementation of WPP’s policies, on risk management and internal controls to ensuring that the policies, procedures procedures and controls (including around and the COSO framework. and control environment set by the Board internal reporting and approvals) and are understood and adhered to across all providing a compliance lens for the design In order to help our people make the right geographies and markets. It is produced by and structure of our enterprise resource decisions, we provide a number of tools. mapping resources, systems and processes planning (ERP) environment (including The baseline reference of our policies and against WPP’s risk appetite (which the ensuring that its functionality is leveraged procedures are set out in our Policy Book, business integrity team, sitting within WPP’s to restrict access to key transactions to internal control bulletins and accounting legal function, supports the Board and WPP appropriate parties and ensure adequate guidelines. To help our people understand Risk Committee to set), governance segregation of duties and assets); and the ethical and business objectives set out in requirements and regulator expectations – in terms of processes, conducting an the WPP Policy Book, WPP has a mandatory and then crafting actions from the results annual assessment of business integrity online training programme which all our for both the business integrity team and risk, monitoring dynamic data feeds people (including freelancers working for the Risk Committees. (including our financials, internal audit more than four weeks) are required to findings and ICFR results), proactive complete on an annual basis. The programme Actions for the business integrity team focus management of self-certifications and comprises five modules: How We Behave, on tackling root causes of risk and include: disclosures from our people, reviewing Business Integrity, Safer Data, Sustainability and investigating whistleblowing reports and Belonging. In addition, WPP’s business – in respect of resources, championing and tracking remediation efforts. integrity team organises in-person and video and enhancing messages and examples call training sessions, townhalls and ### from global, regional and local leadership POLICIES, PROCEDURES AND CULTURE workshops throughout the year on topics with communications, training sessions, The quality and competence of our people, thought necessary or relevant such as Ethics workshops, townhalls and practical their integrity, ethics and behaviour, and the & Integrity, Respect in the Workplace and guidance, knowhow and resources for culture embedded within our businesses are The ABCs of ABC (Anti-Bribery and our people and providing ‘on the ground’ all vital to the maintenance of our system of Corruption). This top-up programme is support for day-to-day queries from internal control which is maintained and designed in response to data collected our networks; reviewed in accordance with the UK and reviewed by WPP’s business integrity team including from concerns raised and corroborated through investigations and our annual assessment of business integrity risks. It is underpinned with daily support on the ground from our regional compliance directors and managers. The business integrity team also houses an e-library of practical guides and compliance FAQs. RESOURCES The core of our Policy Book is our Code Our people – everyone is accountable of Business Conduct, which is regularly Leadership reviewed by the Board and sets out the ### WPP’S BUSINESS INTEGRITY PROGRAMME Communications, training and guidance principal obligations of all of our people. ‘On the ground’ support As a Group and as individuals we have a collective responsibility to behave in the SYSTEMS OUR RISK APPETITE right way, to live up to our values and to ERP environment Policies, procedures and controls conduct our business with integrity. Our GOVERNANCE REQUIREMENTS Financial reporting Code outlines the commitments we make REGULATOR EXPECTATIONS Internal reporting and approvals to each other, our business partners, and others with a stake in what we do. The PROCESSES principles of the Code are embedded in Business integrity risk assessment our training courses and workshops and Monitoring dynamic data feeds our senior managers are required to certify Whistleblowing compliance with the Code on an annual basis. Due diligence Certifications and disclosures Remediation – and focus on root causes Disciplinary measures and incentives Enterprise risk maps 89WPP ANNUAL REPORT 2021 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS | Our Anti-Bribery and Corruption Policy | This approach is formalised through WPP’s | There has been a steady increase in | | --- | --- | --- | | prohibits any form of bribery across the | Whistleblowing Protocol and Investigations | the number of reports received from | | Group and is supported by the Advisor | Protocol. The Compensation Committee | whistleblowers over the past few years. | | Payment Policy which restricts the use of | continues to review how the Group’s | Every report received is investigated and | | advisors and details the due diligence that | performance rewards support the risk | reported into the Audit Committee by | | must be undertaken and approvals needed | management and internal control systems | WPP’s business integrity function. In 2021, | | in the limited cases where advisors may be | now reinforced, as noted above, by the WPP | a total of 494 reports were received from | | used. In October 2021, we refreshed the WPP | Risk Committee. | whistleblowers, 333 of which were through | | ABC Policy and Advisor Payment Policy and | | the Right to Speak hotline. The most | | produced a Business Integrity Booklet on | WHISTLEBLOWING | commonly raised concerns were about | | ABC to reflect updated processes around | WPP’s Code of Business Conduct sets out | respect in the workplace and protection | | managing ABC risk and provide additional | our responsibilities to our people, partners | of WPP’s assets. | | guidance to our people. | and shareholders to act ethically and legally. | | | | We want to encourage a culture of integrity | RISK IMPACT FROM WHISTLEBLOWER | | Our Gifts and Hospitality Policy sets limits | and transparency where our people make | REPORTS 2021 | | on values that may be given or received, | the right decisions automatically and | All whistleblower reports received by the | | supported in each company by a gift register. | instinctively. | Group Chief Counsel and General Counsel, | Corporate Risk, which includes all Right to | Our Code of Conduct for suppliers replicates | Part of this culture is making sure that our | Speak reports, are handled in line with | | --- | --- | --- | | all of these obligations in our supply chain. | people have confidence and know how to | WPP’s Whistleblowing and Investigations | | Our Policy Book also includes required | speak up and raise concerns with their | Protocols and logged, investigated and | | practices in many operational, tax, legal | managers or supporting teams, through their | tracked through to a conclusion including | | and human resource areas. | employee forums, WPP’s business integrity | any remediation or follow-up actions that | | | team or by calling our Right to Speak hotline | might be required. | | The application of our policies and procedures | (which is confidential and allows for | | | is monitored within each company and by | anonymity) if they experience or hear about | Reports are also analysed for risk impact and | | the internal audit, legal (in particular, the | behaviour which is at odds with the principles | root causes. Learnings generated from this | | business integrity team) and risk and controls | stated in our Code. | analysis are converted into recommendations | | functions. Breaches are investigated by our | | including for training sessions, workshops | | business integrity team sitting within WPP’s | WPP is continuously reviewing these | and practical resources by WPP’s business | | legal function and, where appropriate, | channels to ensure that our people have | integrity team and implemented together | | external advisors. | options that work and with which they | with the support and input of the Risk | | | are comfortable. As a result, in 2021, WPP | Committees. Recommended remediation | | WPP’s business integrity team has a mandate | moved to a new Right to Speak supplier and | can also include disciplinary action, changes | | to make recommendations to realign and | refreshed all Right to Speak literature and | to systems, controls and processes or wider | | support WPP’s networks where required to | communications focusing in particular on | review and monitoring for a particular time | | manage and reduce risk. Recommended | explaining what happens once people have | period. | | remediation can include disciplinary action, | reported and emphasising the importance | | | changes to systems, controls, approvals or | of speaking up and WPP’s zero tolerance | | | functions, monitoring and training sessions. | policy on retaliation. | | TOTAL NUMBER OF REPORTS RISK IMPACT FROM WHISTLEBLOWER REPORTS FROM WHISTLEBLOWERS % 78% 418 9% 5% 3% 2% 2% 19 2020 2021 1% 494 People Financial 361 Legal and Regulatory Clients Strategic Operational WPP ANNUAL REPORT 202190 Data Privacy, 20 Security and Ethics ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT | The nature of each report, action taken and | In addition, our companies must maintain | To add to this, the WPP Risk Committee, | | --- | --- | --- | | outcome is reported to the Audit Committee | and update documentation of their internal | supported by the business integrity team, | | and the approach and process are reviewed | controls and processes. This documentation | has evolved our enterprise-wide risk | | by the auditors. WPP is committed to | incorporates an analysis of business risks, | management process through the design | | providing a safe and confidential way for | detailed control activities and monitoring, | and build of a risk analytics platform which | | people with genuine concerns to raise them, | together with IT and financial controls and | sits over data feeds and alongside refreshed | | and to do so without fear of reprisals. WPP | controls over security of data and the | risk appetite statements and tolerances and | | does not tolerate any retaliatory behaviour | provision of timely and reliable information | incorporates our internal risk management | | against individuals reporting concerns and | to management. | framework including around policies, | | is equally committed to preserving the | | controls and reporting (whether through | | anonymity of an individual who makes a | The information collated feeds up to each | disclosures, monitoring, audit work, | | report and does not wish to have their | network’s Risk Committee which uses it to | investigation work or internal reporting | | identity revealed. | assess and monitor current risk exposures, | processes). The resulting dashboard analysis | | | identify new risk types and set future risk | allows risks to be monitored and tracked | | The consequences of misconduct or | strategy as well as to compile it into | across all businesses and markets and will | | retaliation range from individual performance | reporting and insights for the WPP Risk | feed into the regular risk discussions of | | management, training for a business or an | Committee and executive management. | executive management, the Audit | | office and one-on-one training or coaching | | Committee and the Board. | | for an individual through to staff relocation | 2. EXECUTIVE MANAGEMENT REVIEWS | | | and staff dismissal. | The network reviews are formally | In addition, the Risk and Controls Group | | | communicated to executive management | remains focused on driving continuous | | RISK MANAGEMENT | in monthly reports and quarterly review | improvement in WPP’s internal control | | We use a ‘three lines of defence’ model in | meetings and, in turn, to the Board. At each | environment, looking at the design and | | relation to risk management: | Board meeting, the management team | implementation of internal financial controls | | | presents a business review of each of the | as well as controls that support WPP’s risk | | 1. COMPANY REVIEWS | operations, including an assessment of the | framework and transformation programmes. | | Each network undertakes monthly and | risks in each business and details of any | | | quarterly procedures and day-to-day | change in the risk profile since the last | 3. INTERNAL AUDIT AND AUDIT | | management activities to review their | Board meeting. | COMMITTEE OVERSIGHT | | operations and business risks, supported | | The internal audit function, with Audit | | by our policies, training and guidance on | The business review includes the possibility | Committee oversight and external resource | | required internal controls over financial | of winning or losing major business; | as required, provides an independent review | | reporting and monitoring controls and | succession and the addition or loss of a key | of risk management and internal control via | | reviews within their network. | employee; regulatory changes; sustainability, | internal audits and management of the | | | including risks relating to marketing ethics, | testing programme for ICFR. | privacy, diversity and employment; political instability; and changes in accounting or corporate governance practice. ### LINES OF DEFENCE ### FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE Functions that own and manage risk Functions that oversee or specialise in Functions that provide independent risk management and business integrity assurance, above all internal audit 91WPP ANNUAL REPORT 2021 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS | VIABILITY STATEMENT | – the Group’s current position and prospects; | covenants. However the long-term viability | | --- | --- | --- | | RISK ASSESSMENT | – the ongoing transformation programme | of the Company could be impacted by other | | ASSESSMENT OF PROSPECTS | updated in this report; | as yet unforeseen risks and the mitigating | | An understanding of the Group’s business | – the changes taking place in our industry; | actions that have been put in place in | | model and strategy detailed on pages 16 and | – the long-term impact of technological | respect of the principal risks could turn out | | 28 is central to understanding its prospects. | disruption; and | to be less effective than intended. | – the ongoing simplification of the Group | The Group’s business model, transformation | structure and improving integrated service | Having assessed the current position of the | | --- | --- | --- | | programme and diversification across | offering to clients. | Company, its prospects and principal risks | | marketing services businesses which operate | | and taking into account the assumptions | | in 112 countries, with a broad spectrum of | This period has been chosen as it aligns with | above, the Board has determined that it has | | clients, technology partners and suppliers | our three-year budget process and reflects | a reasonable expectation that the Company | | and track record of making acquisitions and | the Board’s best estimate of the future viability | will be able to continue in operation and | | setting up new businesses, are all relevant to | of the Company. Whilst we have built a | meet its liabilities as they fall due over a | | any consideration of prospects and viability. | five-year plan, levels of uncertainty increase | period of three years from 1 January 2022. | as the planning horizon extends and the | The Directors assess the Group’s prospects | Group’s plans focus more closely on the next | GOING CONCERN | | --- | --- | --- | | on a regular basis through the financial | three years. The Board therefore considers | The Group’s business activities, together | | reporting and planning process, the business | a period of three years to be an appropriate | with the factors likely to affect its future | | reviews at each Board meeting, quarterly | period over which to assess the long-term | development, performance and position are | | reviews of our businesses by the executive | viability of the Company. In testing the | set out in the Financial Review on pages 63-67 | | team and ongoing reviews of the Group’s | viability of the Company, we have undertaken | and Principal Risks and Uncertainties on | | profitability, cash flows and funding | a robust scenario assessment of the principal | pages 93-99. The financial position of the | | requirements. The Board has considered the | risks which could threaten the viability or | Group, its cash flows, liquidity position and | | longer-term risks and opportunities for the | existence of the Company. The impact of the | borrowing facilities are described in the | | Group discussed in the Strategic Report at | Russian invasion of Ukraine and sanctions | financial statements and the notes to the | | a Board strategy session in 2021 and the | response from governments has been | financial statements include the Company’s | | potential impact of competition for talent | considered. In the scenario modelling of the | objectives, policies and processes for | | and competition from consulting firms, | principal risks, we have stress-tested our | managing its capital; its financial risk | | technological disruption, climate change and | forecast cash flows to reflect the potential | management objectives; details of its | | regulation. The Board has also considered | impact of one or more of the Group’s | financial instruments and hedging activities; | | the ongoing impact of the Covid-19 pandemic | principal risks occurring and leading to client | and its exposures to credit risk and liquidity | | across all of the countries in which we operate | loss, loss of reputation, contract breach, our | risk. The Company’s forecasts and | | which also accelerated changes in our sector | inability to win new business, and the impact | projections, taking account of (i) reasonably | | and the economic and geopolitical impacts | of revenue less pass-through costs decline. | possible declines in revenue less pass- | | of the Russian invasion of Ukraine, which are | The Company’s forecasts and projections | through costs; and (ii) remote declines in | | constantly evolving. The Group has | took account of (i) reasonably possible | revenue less pass-through costs for stress- | | experienced and expects to continue to | declines in revenue less pass-through costs; | testing purposes as a consequence of the | | experience unpredictable reductions in | and (ii) remote declines in revenue less | Covid-19 pandemic compared to 2021, | | demand for our services from clients in | pass-through costs for stress-testing | considering the Group’s bank covenant and | | sectors impacted by the pandemic. | purposes; and considered the Group’s bank | liquidity headroom taking into account the | | | covenants and liquidity headroom including | suspension of share buybacks, dividends and | | VIABILITY STATEMENT | the suspension of share buybacks, dividends | acquisitions, and cost mitigation actions | | The Directors’ assessment of the Group’s | and acquisitions. | which are and which could be implemented, | | viability for the next three years has been | | show that the Company and the Group | | made with reference to: | The Company modelled a range of revenue | would be able to operate with appropriate | | | less pass-through cost declines up to a | liquidity and within its banking covenants | | – the impact on the Group of the Covid-19 | decline of 30% compared with the year | and be able to meet its liabilities as they | | pandemic and any new variants and the | ended 31 December 2021, followed by | fall due. The impact of the Russian invasion | | measures to contain its spread, including | growth at previously expected levels from | of Ukraine and sanctions response from | | restrictions on businesses, social activities | 2023 to 2025. Therefore, this modelling does | governments has been considered. The | | and travel, any failure to realise anticipated | not include a faster recovery in the years | Company modelled a range of revenue less | | benefits from the roll-out of vaccination | following a serious decline, as has typically | pass-through cost declines up to 30% | | campaigns and the resulting impact on the | been witnessed in past. In the most extreme | compared with the year ended 31 December | | economies in which the Group operates, | scenarios tested, the Directors have | 2021. The Directors therefore have a | | our clients and demand for our services; | considered the further actions that could be | reasonable expectation that the Company | | – the ongoing reviews, short-term notice | taken to mitigate negative cash flow impact | and the Group have adequate resources to | | periods or assignment nature of many | and ensure additional liquidity, including | continue in operational existence for the | | of the client engagements; | cost mitigations of 70% of the decline in net | foreseeable future. Thus they continue to | | – the volatility of global economic | sales and the suspension of the share | adopt the going concern basis of accounting | | conditions as a consequence of the | buyback programme and dividend. The | in preparing the financial statements. | | Covid-19 pandemic and the economic and | Directors have assumed that the Company | | | geopolitical impacts of the Russian | will be able to refinance existing bonds and, | | | invasion of Ukraine, which are constantly | as a result, the Company will continue to | | | evolving; | operate in accordance with its bank | | WPP ANNUAL REPORT 202192 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT ## PRINCIPAL RISKS AND ## UNCERT AINTIES The Board has carried out a robust assessment of the principal risks and uncertainties affecting the Group and the markets we operate in and strategic decisions taken by the Board as at 31 December 2021 and up to the date of this report including any adverse effects of the Covid-19 pandemic and the geopolitical situation following the Russian invasion of Ukraine and which are described in the table on the following pages. HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### COVID-19 PANDEMIC The extent of the continued impact The Covid-19 pandemic and any new variants and the A strong balance sheet, supported further by action to of the Covid-19 pandemic on our measures to contain its spread may have a continuing maintain liquidity including, if needed, the suspension of business will depend on numerous adverse effect on our business, revenues, results of share buybacks, dividends and acquisitions, cost reduction factors that we are not able to operations and financial condition and prospects. and cash conservation measures, savings on property and accurately predict, including the IT capex. Constant monitoring of working capital position. duration and scope of the pandemic, any existing or new variants, government actions to mitigate the effects of the pandemic and the intermediate and long-term impact of the pandemic on our clients’ spending plans. ### STRATEGIC RISKS The failure to successfully complete A failure or delay in implementing or realising the Board oversight of the implementation of the strategic plan the strategic plan updated in benefits from the transformation plan and/or returning and regular briefings on the Group’s response to the December 2020 to return the the business to sustained growth may have a material pandemic and the economic and geopolitical consequences business to sustained growth and adverse effect on our market share and our business, of the invasion of Ukraine by Russia. simplify our structure. revenues, results of operations, financial condition or prospects. The Executive Committee regularly reviews progress against the strategic plan and actions required to deliver against the plan and convenes regularly to discuss the Group’s response to and implementation of the measures highlighted above to mitigate the impact of the pandemic and the economic and geopolitical consequences of the invasion of Ukraine by Russia on the Group’s operations, people, clients and financial condition. The focus on managing cost and changes in ways of working have accelerated aspects of the transformation as we move faster towards a simplified company structure and enhanced use of technology by our people as a consequence of adapting to remote working. KEY Increased risk No change from last year Reduced risk 93WPP ANNUAL REPORT 2021 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### OPERATIONAL RISKS CLIENTS The competitive landscape in our industry is constantly evolving The transformation plan updated in December 2020. We compete for clients in a and the role of more traditional services and operators in our Emphasis on providing faster, more agile and more highly competitive industry sector is being challenged. Competitors include multinational effectively integrated solutions for our clients. which has been evolving and advertising and marketing communication groups, marketing undergoing structural change. services companies, database marketing information and Simplifying our organisational structure such as the Client loss to competitors or measurement and professional services and consultants and reduction in the number of legal entities in the Group as a consequence of client consulting internet companies. as part of an ongoing programme and the disposal of consolidation, insolvency non-core minority holdings. or a reduction in marketing Client contracts can generally be terminated on 90 days’ notice budgets due to recessionary or are on an assignment basis and clients put their business up Launch of further campus co-locations including in economic conditions for competitive review from time to time. The ability to attract London, Warsaw and Milan. Embedding data and triggered by the pandemic, new clients and to retain or increase the amount of work from technology more deeply into our offer to clients. the invasion of Ukraine by existing clients may be impacted if we fail to react quickly enough Russia, or a geopolitical to changes in the market and to evolve our structure, and by loss Board focus on the importance of a positive and inclusive change or shift in client of reputation, and may be limited by clients’ policies on conflicts culture across our business to attract and retain talent spending would have a of interest. and clients. Team focused on culture, diversity and material adverse effect on our inclusion across the Group and the WPP Global Inclusion market share, business, There are a range of different impacts on our clients globally Council and commitments to anti-racism. revenues, results of operations, as a consequence of the pandemic and the geopolitical and financial condition and economic consequences of the invasion of Ukraine and Continuous improvement of our creative capability and prospects. imposition of sanctions. In the past, clients have responded to reputation of our businesses. weak economic and financial conditions by reducing or shifting their marketing budgets which are easier to reduce in the short The development and implementation of senior term than their other operating expenses. leadership incentives to align more closely with our strategy and performance. Business review at every Board, management and Executive Committee meeting to identify client loss. Monthly updates to the management team on the status of the Group’s major clients and upcoming pitches for potential new clients. Continuous engagement with our clients and suppliers through this period of uncertainty and reduction in economic activity. We receive a significant A relatively small number of clients contribute a significant Increased flexibility in the cost structure (including portion of our revenues from a percentage of our consolidated revenues. Our ten largest clients incentives, consultants and freelancers). limited number of large clients accounted for 17% of revenue less pass-through costs in the year and the net loss of one or ended 31 December 2021. Clients can reduce their marketing Business review at every Board meeting and regular more of these clients could spend, terminate contracts or cancel projects on short notice. engagement at executive level with our clients. have a material adverse effect The loss of one or more of our largest clients, if not replaced by on our prospects, business, new accounts or an increase in business from existing clients, A monthly new and existing business tracker is reviewed financial condition and results would adversely affect our financial condition. by the Executive Committee on a monthly basis with of operations. regular updates to the Board. WPP ANNUAL REPORT 202194 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES PEOPLE, CULTURE We are highly dependent on the talent, creative abilities and Our incentive plans are structured to provide retention AND SUCCESSION technical skills of our people as well as their relationships with value, for example by paying part of annual incentives in Our performance could be clients. We are vulnerable to the loss of people to competitors shares that vest two years after grant date. adversely affected if we do (traditional and emerging) and clients, leading to disruption to not react quickly enough to the business. We are working across the businesses to embed changes in our market and collaboration and investing in training and development fail to attract, develop to retain and attract talented people. The investment in and retain key creative, co-located campus properties is increasing the commercial, technology co-operation across our companies and provides and management talent, extremely attractive and motivating working or are unable to retain and environments. incentivise key and diverse talent. Succession planning for the Chief Executive Officer, the Chief Financial Officer and key executives of the Company is undertaken by the Board and Nomination and Governance Committee on a regular basis and a pool of potential internal and external candidates are identified in emergency and planned scenarios. The Compensation Committee provides oversight for the Group’s incentive plans and compensation. Our first priority during the Covid-19 pandemic has been the safety and welfare of our people and seeking to protect them as much as possible as well as maintaining the ability to serve clients and win new business as markets recover. CYBER AND We may be subject to investigative or enforcement action The IT transformation programmes are underpinning our ### INFORMATION or legal claims or incur fines, damages, or costs and client strategic plan and enhance our data security. ### SECURITY loss if we fail to adequately protect data. A system breakdown We are undertaking a series of or intrusion could have a material adverse effect on our There is a rolling programme to retire servers across the IT transformation programmes business, revenues, results of operations, financial condition Group and move to cloud solutions. to support the Group’s or prospects and have an impact on long-term reputation strategic plan and a failure or and lead to client loss. We monitor and log our network and systems and keep delay in implementing the IT raising our people’s security awareness through our WPP programmes may have a The imposition of sanctions following the Russian invasion of Safer Data training and mock phishing attacks. Heightened material adverse effect on Ukraine has triggered an increase in cyber attacks generally. focus on monitoring our network and systems and its business, revenues, results raising awareness of the potential for phishing and other of operations, financial cyber-attacks during the period of remote working and conditions or prospects. the geopolitical situation and an increased focus on our The Group is reliant on third control environment. parties for the performance of a significant portion of our worldwide information technology and operations functions. A failure to provide these functions could have an adverse effect on our business. During the transformation, we are still reliant on legacy systems which could restrict our ability to change rapidly. The Group has in the past and may in the future experience a cyber-attack which results in disruption to one or more of our businesses or the security of data being compromised. 95WPP ANNUAL REPORT 2021 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### FINANCIAL RISKS | ECONOMIC AND | We are generally paid in arrears for our services. Invoices are | Evaluating and monitoring clients’ ongoing | | --- | --- | --- | | CREDIT RISK | typically payable within 30 to 60 days. | creditworthiness and in some cases requiring credit | | Economic conditions have a | | insurance or payments in advance. | | direct impact on our business, | We commit to media and production purchases on behalf of | | | results of operations and | some of our clients as principal or agent depending on the client | We are working closely with our clients during this period | | financial position. Adverse | and market circumstances. If a client is unable to pay sums due, | of economic uncertainty to ensure timely payment for | | economic conditions, including | media and production companies may look to us to pay those | services in line with contractual commitments and with | | those caused by the pandemic, | amounts and there could be an adverse effect on our working | vendors to maintain the settlement flow on media. | | invasion of Ukraine by Russia, | capital and operating cash flow. | | | severe and sustained inflation | | Our treasury position and compliance with lending | | in key markets where we | | covenants is a recurring agenda item for the Audit | | operate, supply chain issues | | Committee and Board. | affecting the distribution of | our clients’ products and/or | Increased management processes to manage working | | --- | --- | | disruption in credit markets, | capital and review cash outflows and receipts during the | | pose a risk our clients may | Covid-19 pandemic and as a consequence of the invasion | | reduce, suspend or cancel | of Ukraine by Russia. | spend with us or be unable to satisfy obligations. We are subject to credit risk through the default of a client or other counterparty. INTERNAL CONTROLS Failure to ensure that our businesses have robust control Transparency and contract compliance are embedded Our performance could be environments, or that the services we provide and trading through the networks and reinforced by audits at a WPP adversely impacted if we activities within the Group are compliant with client obligations, and network level. failed to ensure adequate could adversely impact client relationships and business volumes internal control procedures and revenues. Regular monitoring of key performance indicators for are in place. trading are undertaken to identify trends and issues. As disclosed in our Form 20-F, in connection with the Group’s An authorisation matrix on inventory trading is agreed We have previously identified assessment of the effectiveness of internal control over financial with the Company and the Audit Committee. material weaknesses in our reporting as of December 31, 2020, we previously identified internal control over financial material weaknesses in our internal control over financial In 2021, our new controls function continued to review reporting. If we failed to reporting with respect to management’s review of the and enhance controls across the Group, under the properly remediate these impairment assessment of intangible assets and goodwill direction of our Global Director of Risk and Controls. As material weaknesses or new (specifically the selection of appropriate discount rates for part of this effort, we significantly enhanced the staffing, material weaknesses are use in the impairment calculations, the determination of the capabilities and resources of our technical accounting identified, they could appropriateness of the cash flow periods and associated function, which supported the retrospective review adversely affect our results discounting and determination of the assumptions in respect of efforts and will continue to provide ongoing support in of operations, investor working capital cash flows, in each case used in the impairment regards to complex accounting matters and judgment confidence in the Group and calculation); the design and implementation of internal controls and changes in accounting standards. the market price of our ADSs to ensure that the complex accounting matters and judgements and ordinary shares. are assessed against the requirements of IFRS and to reflect Management is committed to maintaining a strong changes in the applicable accounting standards and internal control environment, with appropriate oversight interpretations or changes in the underlying business on a timely from our Audit Committee. We have made significant basis; and our net investment hedging arrangements (specifically enhancements to our controls through the implementation concerning the eligibility of hedging relationships under IFRS, the of the remediation and continue to evaluate further adequacy and maintenance of contemporaneous documentation opportunities to improve our control environment. We of the application of hedge accounting, and the review of the have engaged an independent valuation specialist, on an impact of changes in internal financing structures on such on-going basis with oversight by management, to assist hedging relationships). We implemented remedial measures us as an integral part of the discount rate and cash flow during 2021 and believe that we have remediated each of these determination process in the impairment assessment of material weaknesses such that our internal control over financial intangible assets and goodwill. reporting is effective as at 31 December 2021. WPP ANNUAL REPORT 202196 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES INTERNAL CONTROLS If the remedial measures were ultimately insufficient to address This has included such items as updating our discount CONTINUED the material weaknesses, or if additional material weaknesses in determination methodology for a current market internal control are discovered or occur in the future, our ability participant approach; enhancing the level of review to accurately record, process and report financial information and controls related to the selection of the variables and, consequently, our ability to prepare financial statements underpinning the discount rate calculation, the discount within required time periods, could be adversely affected. rate methodology and annual refresh; and implementing In addition, the Group may be unable to maintain compliance additional validation controls and additional reviews of with the federal securities laws and NYSE listing requirements the selection of cash flow periods and net working regarding the timely filing of periodic reports. Any of the capital assumptions. In the case of complex accounting foregoing could cause investors to lose confidence in the matters and hedging arrangements, we performed a reliability of our financial reporting, which could have a comprehensive retrospective review of our controls and negative effect on the trading price of the Group’s ADSs and procedures and implemented enhanced periodic controls ordinary shares. into our control framework and have engaged outside advisors with specialist expertise in the respective subject matter areas to assist with the performance of the comprehensive retrospective review. ### COMPLIANCE RISKS DATA PRIVACY We may be subject to investigative or enforcement action or We develop principles on privacy and data protection We are subject to strict data legal claims or incur fines, damages, or costs and client loss if and compliance with local laws. We also monitor protection and privacy we fail to adequately protect data or observe privacy legislation pending changes to regulations and identify changes legislation in the jurisdictions in every instance: to our processes and policies that would need to be in which we operate and rely implemented. In the case of data transfers, we also extensively on information – The Group has in the past and may in the future experience identify alternative approaches, including using other technology systems. We a system breakdown or intrusion that could have a material permitted transfer mechanisms, in order to limit any store, transmit and rely on adverse effect on our business, revenues, results of potential disruption (eg SCCs instead of Privacy Shield critical and sensitive data such operations, financial condition or prospects following the CJEU Schrems II decision). as strategic plans, personally – Restrictions or limitations on international data transfers could identifiable information and have an adverse effect on our business and operations We implemented extensive training ahead of GDPR and trade secrets: CPPA implementation and the roll-out of toolkits to assist our people to prepare for implementation and will do the – Security of this type of data same as new legislation is adopted in other markets. is exposed to escalating external threats that are A Chief Privacy Officer and Data Protection Officer have increasing in sophistication, been appointed at the Company and Data Protection as well as internal data Officers are in place at a number of our companies. breaches – Data transfers between our Our people must take Privacy & Data Security Awareness global operating companies, training and understand the WPP Data Code of Conduct clients or vendors may be and WPP policies on data privacy and security. interrupted due to changes in law (eg EU adequacy The Data Health Checker survey is performed annually to decisions, CJEU Schrems II understand the scale and breadth of data we collect so decision) the level of risk associated with this can be assessed. 97WPP ANNUAL REPORT 2021 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### COMPLIANCE RISKS TAXATION Changes in local or international tax rules, for example, as a We actively monitor any proposed regulatory or statutory We may be subject to consequence of the financial support programmes implemented changes and consult with government agencies and regulations restricting our by governments during the Covid-19 pandemic, the OECD/G20 regulatory bodies where possible on such proposed activities or effecting changes Inclusive Framework on Base Erosion and Profit Shifting, and changes. in taxation. changes arising from the application of existing rules, or challenges by tax or competition authorities, may expose us Bi-annual briefings to the Audit Committee of significant to significant additional tax liabilities or impact the carrying changes in tax laws and their application and regular value of our deferred tax assets, which would affect the future briefings to executive management. We engage advisors tax charge. and legal counsel to obtain opinions on tax legislation and principles. REGULATORY We operate in a number of markets where the corruption risk Online and in-country ethics, anti-bribery, anti-corruption We are subject to strict has been identified as high by groups such as Transparency and anti-trust training on a Group-wide basis to raise anti-corruption, anti-bribery International. Failure to comply or to create a culture opposed awareness and seek compliance with our Code of and anti-trust legislation and to corruption or failing to instil business practices that prevent Conduct and the Anti-Bribery & Corruption Policy. enforcement in the countries corruption has previously and could expose us to civil and in which we operate. criminal sanctions. A continuously evolving business integrity function to ensure compliance with our codes and policies and remediation of any breaches of policy. Continuous communication of the Right to Speak confidential, independently operated helpline for our people and stakeholders to raise any potential breaches of our Code and policies, which are investigated and reported to the Audit Committee on a regular basis. Due diligence on acquisitions and on selecting and appointing suppliers and restrictions on the use of third-party consultants in connection with any client pitches. Rolling programme of creating shared financial services in the markets in which we operate and the creation of a new controls function in 2020. Risk Committees are well established at WPP and across the networks to monitor risk and compliance through all of our businesses and the enhancement of our business integrity programme across our markets. Gift and hospitality register and approvals process. SANCTIONS Failure to comply with these laws could expose us to civil and Online training to raise awareness and seek compliance We are subject to the laws of criminal penalties including fines and the imposition of economic and updates for our companies on any new sanctions. the United States, the EU, the sanctions against us and reputational damage and withdrawal of UK and other jurisdictions that banking facilities which could materially impact our results. Regular briefings to the Audit Committee and constant impose sanctions and regulate monitoring by the WPP legal team with assistance from the supply of services to external advisors of the sanctions regimes. Executive certain countries. Committee briefed and working with WPP legal to ensure compliance with escalating sanctions as a consequence The Russian invasion of of the Russian invasion of Ukraine. Ukraine has caused the adoption of comprehensive We have taken a number of actions as a consequence of sanctions by, among others, the invasion. We have announced the discontinuance of the EU, the United States and our operations in Russia and ensured compliance with all the UK, which restrict a wide sanctions as they impact any clients, suppliers or financial range of trade and financial arrangements. dealings with Russia and Russian persons. WPP ANNUAL REPORT 202198 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### EMERGING RISKS Increased frequency of This includes storms, flooding, wildfires and water and heat Our strategy of co-locating our people in WPP campuses extreme weather and stress which can damage our buildings, jeopardise the safety of is enabling us to centralise emergency preparedness climate-related natural our people and significantly disrupt our operations. At present procedures. It will also enable us to more efficiently disasters. 10% of our headcount is located in countries at “extreme” risk deploy climate mitigation measures. We integrate from the physical impacts of climate change in the next 30 years. climate-related risk assessment into the technical due diligence suite that we follow when we invest in a new campus building to help ensure that material, acute and chronic physical climate risks are considered in design and embedded into business continuity procedures. Increased reputational risk As consumer consciousness around climate change rises, Our climate crisis training seeks to ensure that our associated with working on our sector is seeing increased scrutiny of its role in driving people recognise the importance of our sector’s role in client briefs perceived to be unsustainable consumption. Our clients seek expert partners addressing the climate crisis. It is part of a broader environmentally detrimental who can give recommendations that take into account sustainability training programme being run in multiple and/or misrepresenting stakeholder concerns around climate change. markets with localised content in key regions. environmental claims. Additionally, WPP serves some clients whose business models We have developed internal tools to help our people are under increased scrutiny, for example energy companies or identify environmentally harmful briefs. These tools associated industry groups who are not actively decarbonising. embed climate-related issues within existing content- This creates both a reputational and related financial risk for WPP review procedures across the organisation. The if we are not rigorous in our content standards as we grow our misrepresentation of environmental issues is governed sustainability-related services. by our Code of Conduct. We also ensure our policies reduce the risk that any client brief undermines the implementation of the Paris Agreement. Changes in regulation and We could be subject to increased costs to comply with potential We are developing a net zero roadmap to deliver against reporting standards. future changes in environmental laws and regulations and our net zero commitments and aim to disclose more increasing carbon offset pricing to meet our net zero details of that roadmap in 2023. commitments. As part of this plan and through our work to decarbonise Carbon emission accounting for marketing and media is in its media and media supply chains, we are exploring infancy and methodologies continue to evolve. This is particularly opportunities to improve accounting for emissions the case for emissions associated with digital media. from media. As we seek to limit emissions we need to reduce the total footprint of any product or service as far as possible. To manage the cost and quality of carbon credits purchased to offset remaining emissions, WPP developed a new offsetting policy and is further developing our offsetting strategy as part of our net zero roadmap. 99WPP ANNUAL REPORT 2021 STRATEGIC REPORT ## CELEBRATING AN ## INDUSTRY LEGEND ## Jeremy Bullmore has been described 1998 2001 ### TIME-AND-MOTION MAN POSH SPICE & PERSIL – ## by Campaign magazine as “quite ### AND THE MAD INVENTOR BOTH BIG BRANDS; BOTH ### “Where once there was an ALIVE; AND BOTH ## possibly the most admired man in ### industrial age, and then an BELONGING TO THE PUBLIC information age, we’re now well “It was very astute of the young ## advertising”. He has contributed an into the age of the imagination: Posh Spice to choose not Robbie ## essay to WPP’s Annual Report for an age where the price and Williams nor Sir Cliff Richard nor availability of knowledge and Madonna as her benchmark of ## over 20 years. Thank you, Jeremy. | | technology may favour the small | fame but the country’s best- | | --- | --- | --- | | | over the large; the innocent over | known washing powder. | | | the experienced; the bold over | Because just about the only | | can take no credit for one of the best decisions WPP | the cautious; the inventive | thing that successful brands | | has ever made: to invite Jeremy Bullmore to serve as | (and frequently wrong) over | have in common is a kind of | | I a Non-Executive Director between 1988 and 2004 | percentage-playing | fame. Indeed, it’s been | | and, later, to join the WPP Advisory Board. | consolidators. An age where | suggested that brands are the | | | something called intellectual | real celebrities. And for most | | To mark Jeremy’s retirement after almost 70 years | capital can make a nonsense of | human beings, fame not only | | with JWT and WPP I was going to write a particularly | conventional balance sheets. | holds a powerful fascination but | | personal eulogy on the qualities that characterise | | bestows an incalculable value | | every encounter with him: but the joys of Jeremy’s | “As business learns to compete | on anything that enjoys it. We | | counsel, wit and insight are widely famed. His ability to | in the new creative age, the | value the famous far more highly | | synthesise complex issues into actionable, entertaining | efficient exploitation of the | than the little known. It is one of | | advocacy represents our industry at its very best. | imagination will be as critical | the peculiarities of fame – | | And anyway, Jeremy is famously modest and has | to success as the exploitation | whether for people or products | | declined all our offers of public thanks. | of coal once was.” | – that real fame appears to be | spectacularly untargeted. | Jeremy has displayed the value he brought to WPP in | 1999 | | | --- | --- | --- | | his essays for this Annual Report. Here I have selected | WHY EVERY BRAND | “Victoria Beckham is one such | | words from the essays which resonate and delight as | ENCOUNTER COUNTS: | example. So is Madonna. Real | | much in 2022 as when they were written. They serve | SEDUCTIVE, ANARCHIC OR | fame implies being known to | | as a reminder of what is changing and what will always | CATASTROPHIC | millions of people who have | | be true, however our role and expertise evolve. | “If we successfully traced and | never bought your records and | | | identified every encounter that | never will. Stephen Hawking is | | With wide industry support, we are | had contributed over time to | known to millions of people who | | launching a Best of Bullmore public | that brain’s view of that brand, | will never understand a word he | | online archive later this year. Visitors | the resultant three-dimensional | writes; and to 10 times as many | Time-and-Motion Man will be able to access both the WPP map would be like a huge bowl who will never even try to. and essays and a treasure trove of The Mad Inventor of multi-coloured spaghetti: as if Jeremy’s books, journalism, agony we believe that only conventional “To the consternation of media uncle columns, speeches, communications will be noted by planners and buyers in advertisements and more. our publics and that all other advertising agencies, the encounters will be screened out. same is true for brands.” Mark Read But no manifestation of a brand Chief Executive Officer is ever ignored; and all will make some contribution, positive or Read all of Jeremy’s negative, to that brand’s essays here: wpp.com/ Dream Team for the Next Millennium Jeremy Bullmore the-bullmore-collection reputation.” ### POSH SPICE & ## Persil Why Every Brand Encounter Counts: Seductive, Anarchic or Catastrophic Jeremy Bullmore WPP ANNUAL REPORT 2021100 Jeremy Bullmore Why it’s Time to Say Goodbye to CELEBRATING AN INDUSTRY LEGEND STRATEGIC REPORT IKTHTMISOAIW* (*I know that half the money I spend on advertising is wasted …) You May Not Know Where You’re Going Until You’ve Got There (Which is why The Best Brief may be The Brand) “I’m Sorry – You’ve Lost Me” Five Words No Brand Should Ever Have to Hear ### 2020 ### Jeremy Bullmore NOW IS THE TIME FOR ### BRANDS TO MAKE UP FOR ### LOST TIME | | | 2013 | | Jeremy Bullmore | “On one subject, at least, all | | | --- | --- | --- | --- | --- | --- | --- | | | | WHY IT’S TIME TO SAY | | | commentators are agreed. | | | | | GOODBYE TO IKTHTMISOAIW | | | This last year has called for | | | | | (AS IN: “I KNOW THAT HALF | 2014 | | an unprecedented degree of | | | | Jeremy Bullmore | THE MONEY I SPEND ON | YOU MAY NOT KNOW | | re-examination. (And an | | | | | ADVERTISING IS WASTED…”) | WHERE YOU’RE GOING | | unprecedented use of the word | | | | | “Since IKTHTMISOAIW was first | UNTIL YOU’VE GOT THERE | | unprecedented.) Nothing can be | | | 2008 | | uttered (or not, as the case may | (WHICH IS WHY THE BEST | | taken comfortably for granted; | | | “I’M SORRY – YOU’VE LOST | | be) the value of advertising has | BRIEF MAY BE THE BRAND) | | just about everything needs | | | ME”: FIVE WORDS NO | | been put to the test, over and | “If we start by being honest with | | to be pulled up by its roots, | | | BRAND SHOULD EVER HAVE | | over again, in good times and | ourselves, we should happily | | interrogated and tested for its | | | TO HEAR | | bad, and its use continues. No | concede that just about | | inherent worth. And that is | | | “We’ll probably look back on | | advertiser spends money on | everything we’ve ever done of | | certainly true for The Brand. | | | this time and realise that ‘old’ | | advertising unthinkingly: it either | real originality and merit has | | | | | media and ‘new’ media had | | earns its keep or it gets the | contained some element of | | “For many brands, the year 2021 | | | more in common than we | | elbow. If advertisers were | apparent accident – whose use | | will need to be a year of repair; | | | realised and that ‘digital’ was | | offered the chance to be just | and value became explicably | | a year where communications | | | a curious word to have emerged | | as successful without it, they’d | apparent only after its | | are called upon to help | | | as the name for a form of mass | | snatch at it. | unexpected emergence.” | | compensate for the absence of | | | communication that gets closer | | | | | direct experience. It will demand | | | to conversation than anything | | “It must surely also be true that | 2016 | | creative excellence of the | | | before it. | | the unthinking parroting of | JUST BECAUSE YOU CAN | | highest order; communications | | | | | IKTHTMISOAIW over the years | DOESN’T MEAN YOU | | that are so true to the personality | | | “It won’t be tidy. But there really | | must, at some level of | SHOULD: HOW | | of the brand that they come | | | shouldn’t be any excuses, during | | consciousness, have deterred | “PERSONALISATION” CAN | | close to being its proxy.” | | | recessionary times or not, for | | competitive enterprises – | GET ALTOGETHER TOO | | | | | brands to lose their followers | | whether brands, financial | PERSONAL FOR COMFORT | | | | | through becoming too remote.” | | institutions or charities – from | “We don’t, on the whole, like | | | | | | | making more profitable use of | pushy people; people who get | | | Just Because You Can | | 2011 | | this invigorating activity. And | too close at parties and who tell | | | Doesn’t Mean You Should | How ‘personalisation’ can get ### PLONK AND PLACEBOS: there must be many smaller us that they really, really want to altogether too personal for comfort ### THE CURIOUS TRUTH companies, the ones on whom be best friends. And in much the ### ABOUT STRONG BRANDS; even large national economies same way, we won’t respond How do they know?!?! ### AND WHY PEOPLE ARE depend, who could have been well to pushy brands; brands ### RIGHT TO PREFER THEM even more successful had they that claim to understand us “A fancy label on a wine bottle not been almost unconsciously when they clearly don’t. So won’t make plonk acceptable. discouraged from using brands shouldn’t be seen to be Bad stuff will always be bad advertising by nothing more making all the running. The skilful stuff, however prettily presented. than unfounded superstition. brand custodian imbues a brand But wine that’s known to have with characteristics and Jeremy Bullmore come from a French château will “It’s probably too much to hope character that are most likely actually give more pleasure to that IKTHTMISOAIW will ever to attract the attention of its most drinkers than will exactly meet the oblivion it deserves; but clearly defined target audience the same wine poured from an if we all join in, we can maybe – and then invites that audience anonymous bottle. start to make its perpetuators to make that final, all-important feel as ignorant as they are.” connection themselves.” “Nobody’s been deceived or duped; at little or no extra cost, more enjoyment has been delivered. For everyone in marketing, and particularly in marketing communications, all this clearly has huge implications; half-understood, perhaps, but Plonk and Placebos strangely under-recognised. The curious truth about strong brands; and why people are right to prefer them “A brand is not just a product with lipstick on. A strong brand delivers a set of satisfactions as intertwined and interdependent as if they’d been whirled around together in a kitchen blender.” Jeremy Bullmore 101WPP ANNUAL REPORT 2021 # CORPORATE GOVERNANCE | Chairman's letter | 104 | | --- | --- | | Governance at a glance | 107 | | Our Board | 108 | | Our Executive Committee | 111 | | How our Board engages | 113 | | Division of responsibilities | 116 | | Board activities | 118 | | Composition, succession and evaluation | 119 | | Nomination and Governance Committee report | 122 | | Audit Committee report | 125 | | Sustainability Committee report | 131 | | Compensation Committee report | 132 | | Statement of Directory Responsibilities | 135 | © 2007 American REPORT 2000 CORPORATE GOVERNANCE 103WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE ## CHAIRMAN’S ## LETTER ### 2021 Against the backdrop of the ongoing pandemic, in 2021 WPP demonstrated both its enduring strengths and its capacity to innovate. Our financial performance over the year reflects the talent and broad expertise of our people, the durability of our client relationships, the resilience of WPP’s business model and the long-term sustainability of the Company. It also reflects the success of the strategy first announced in December 2018, which has set a clear vision and purpose for the Company, modernised its offer to clients, reinvigorated its culture, simplified its structure and returned WPP to growth. The progress we have made in the last three years has been recognised by many of our largest clients, who have renewed and expanded their relationships with WPP and our agencies. WPP’s longstanding reputation as a leader in advertising has grown to ## THE PROGRESS WE Since the end of 2021, the world has once encompass all the capabilities modern again changed in ways we could not have marketers need to succeed, from data and ## HAVE MADE IN THE LAST anticipated. technology to ecommerce and experience. ## THREE YEARS HAS BEEN ## RECOGNISED BY MANY | | The 2021 Annual Report by definition relates | The Company has also made good progress | | --- | --- | --- | | OF OUR LARGEST | primarily to events that took place before | against the strategic priorities outlined at the | | | the invasion of Ukraine. However, I want to | ‘Accelerating Growth’ Capital Markets Day in | ## CLIENTS, WHO HAVE acknowledge the enormous impact this December 2020. We remain on track to ## RENEWED AND crisis has had on our people, above all our deliver on our medium-term financial targets, ## EXPANDED THEIR | | colleagues in Ukraine who are facing | and our dividend policy continues to be to | | --- | --- | --- | | RELATIONSHIPS | appalling circumstances with extraordinary | grow the dividend annually and to pay out | | | resilience. | approximately 40% of headline earnings | ## WITH WPP AND per share. ## OUR AGENCIES.” As Mark says at the beginning of this report, the response of our people has been truly inspiring – from the spontaneous offers of support from colleagues in countries neighbouring Ukraine to the generosity of employees worldwide in donating to our UNHCR appeal. You can read more about this and the Company’s wider response on page 8. WPP ANNUAL REPORT 2021104 CORPORATE GOVERNANCECHAIRMAN’S LETTER | A CONNECTED COMPANY | While we still have work to do, the Company | In January 2022, we announced the | | --- | --- | --- | | The scale and breadth of our client and | also made progress in DE&I. At the beginning | appointment of Simon Dingemans as a | | partner relationships, our presence in more | of 2022 WPP was named in the Bloomberg | Non-Executive Director of the Company and | | than 100 countries and our understanding of | Gender-Equality Index for the fourth | member of the Audit Committee. We are | | consumer behaviour globally mean that WPP | consecutive year and was acknowledged as | delighted to welcome Simon to WPP. His | | is in the privileged position of being directly | one of the best places to work for LGBTQ+ | insight from a varied and distinguished | | and uniquely connected to many of the | equality in the Corporate Equality Index. | career, combining both operational and | | trends, issues and organisations shaping | | financial experience, will be invaluable to | | our world. | We were pleased to be ranked in the top 10 | the Board. | for gender representation among senior | For example, during the year the Board held | leaders and at board level in the FTSE Women | Today, we have a strong Board and executive | | --- | --- | --- | | a strategy event in Palo Alto with members | Leaders Review, and to have exceeded the | team, with the expertise, diversity and | | of the executive team. This provided an | Parker Review target on ethnic diversity. As | experience required to support the | | opportunity for the Board not only to | at 31 December 2021, women represented | transformation and success of WPP. | | consider the strategy and to align around the | 43% of the Board and three Directors were | | | vision and prospects of the Company over | from an ethnic minority background. Our | Alongside Board membership we have | | the next three to five years, but also to meet | ambition for Board gender diversity remains | also continuously reviewed the governance | | key WPP technology partners based on the | to reach parity. | architecture of the Board’s Committees | | West Coast and to see our partner strategy | | and made changes to their composition | | in action. | Our Sustainability Report and our Chief | accordingly. The reports from the Committee | | | Executive’s statement in this Annual Report | Chairs can be found on the pages that follow. | | Engagement at the most senior levels with | outline our progress in these areas in greater | | | the world’s leading technology companies | detail. | And finally, as part of our ongoing | | provided great insight into the evolving | | assessment of Board effectiveness, Dr Tracy | | ecosystem in areas such as marketing | BOARD COMPOSITION AND | Long conducted an external Board evaluation | | technology, digital media, cloud, AI and | EFFECTIVENESS | exercise considering the performance of the | | creative production and other fields that will | There are a number of planned Non-Executive | Board and its Committees, the results of | | heavily influence the future of our industry | Director departures over the course of this | which are set out on page 120. I am pleased | | and create opportunities for growth. WPP is | year and next. Jacques Aigrain, our Audit | to report that the evaluation concluded that | | the principal partner to these companies in | Committee Chair, and Sally Susman will | the Board and its Committees continue to | | our industry, which creates significant | retire from the Board at the 2022 Annual | operate effectively. | | advantages in terms of exclusive and early | General Meeting having completed their | | | access to new products and services on | nine-year tenure. Nicole Seligman, our Senior | ENGAGING OUR STAKEHOLDERS | | behalf of our clients. | Independent Director, will not stand for | To remain relevant and grow sustainably, | | | re-election at the 2023 AGM. On behalf of | companies need to demonstrate their value | | WPP is also close to many of the pressing | the Board, and personally, I would like to | to all stakeholders and be able to understand | | issues that we face as a society, from climate | take the opportunity to acknowledge and | and respond to legitimate stakeholder | | change and DE&I (diversity, equity and | thank Jacques and Sally for their significant | concerns – while operating responsibly | | inclusion) to privacy and data ethics. What | and invaluable contribution to WPP, and | at all times. | | we do as a business and the judgements we | service to the Board. | | | make have real impact. | | One of the Board’s fundamental duties is | | | To ensure the Board has the necessary skills, | to appreciate the effect of the Company’s | | The Board and the leadership team are firmly | experience and diversity to effectively | activities on our different stakeholder groups | | committed to the ESG agenda. In April 2021 | support and review the Company’s long- | and to take their interests and perspectives | | WPP announced an industry-leading | term strategy, we have continued to focus | into account. | | commitment to achieve net zero carbon | on succession planning and proactively | | | emissions across our value chain by 2030, | reviewed our non-executive membership. | As we do every year, the Board received | | supported by science-based targets, and in | | presentations from various leaders of WPP’s | | June we hosted our first ever ESG investor | | agencies, which allows us to see and hear | | event. As the world leader in the buying of | | about their work first-hand, connects the | | advertising space and production of | | Board to the operational level of the | | advertising content, WPP has the potential | | Company, and provides an opportunity | | to make a tangible difference and I am | | to examine the strength of alignment | | pleased with our progress and leadership | | across WPP. | position in this area. 105WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE CHAIRMAN’S LETTER The Board also continued to receive Our risk governance framework is set out on insights and feedback from the Company’s page 88 of this report. employees through surveys and our designated workforce Non-Executive The Board also conducted deep-dives on a Director. Both channels are important in range of ESG matters in the year, from the helping the Board to understand sentiment mitigation of the Company’s climate impacts within the Company and highlighting areas to consideration of key policies. we need to focus on to ensure we are ### meeting the needs of our people. OUR PEOPLE AND CULTURE WPP’s purpose – to build better futures for | In addition, our Chief Executive Officer | our people, planet, clients and communities – | | --- | --- | | continued his internal communications | sustains the Company’s culture. How we | | programme which includes regular townhalls | bring that culture to life and fulfil our purpose | | open to all employees. These sessions, which | starts with our people. During yet another | | always incorporate a Q&A, attracted a total | uncertain year, they once again demonstrated | | of approximately 44,000 attendees in 2021. | their resilience, talent and creativity. | CEO all-staff emails had more than a million unique opens during the year. As well as meeting the challenges posed by the pandemic and exceeding the At our ESG event held in June investors and expectations of our clients, they continued other key stakeholders heard about the to address broader societal issues through Company’s sustainability strategy and their work and participation in Company progress and had the chance to challenge initiatives. and ask questions of the executive team. Investor engagement continued throughout To continue to attract, retain and develop the year as I, each of the Committee Chairs talented people like this, we need to be a and the executive team met shareholders place that offers modern, flexible working to discuss areas of strategic importance. environments, listens to its employees, enables career growth, invests in learning, Finally, greater Board-level connectivity allows all our people to participate in our with our key clients was achieved through success, and fosters an inclusive culture that in-person or virtual engagements and celebrates diversity and difference. through updates from our Global Client Leaders, including on WPP’s client Our people strategy is a primary area of satisfaction scores. focus in 2022 both for the Board and the executive team. The Company’s employees ### MANAGING RISKS are ultimately those who will build those To protect the interests of all our stakeholders, better futures for all our stakeholders and, the Board identifies, monitors and analyses on behalf of the Board, I thank each and the risks facing the Company and the markets every one of them. in which it operates on a continuous basis. During the year the Board conducted a thorough assessment of WPP’s principal risks and uncertainties, as well as strategic risk | reviews focused on areas including cyber | Roberto Quarta | | --- | --- | | and information security and broader | Chairman | | aspects of the Company’s transformation | 31 March 2022 | programme. WPP ANNUAL REPORT 2021106 CORPORATE GOVERNANCE ## GO VERNANCE ## AT A GLANCE ## HIGHLIGHTS COMPLIANCE WITH THE CODE During the year ended 31 December 2021, the Company was compliant with the provisions and principles of good governance contained in the 2018 UK Corporate Governance Code (the ‘Code’), with the exception of provision 38 of the Code, where there are ongoing plans to align the CEO’s pension with the ## 43% wider workforce. For more detail see page 143. The table below shows where female representation shareholders can find further information on how the Company has complied on the Board as at with the Code. The Company’s American Depositary Shares are listed on the 31 December New York Stock Exchange (NYSE) and is therefore subject to the rules of the 2021 ## Top 10 NYSE as well as to the US securities laws and the rules of the Securities and for gender Exchange Commission (SEC) applicable to foreign private issuers. As the representation among Company follows UK corporate governance standards, differences from the senior leaders and at NYSE governance standards are summarised in the Company’s Form 20-F filing. board level in the FTSE Women Leaders Review 1. BOARD LEADERSHIP AND COMPANY PURPOSE READ MORE Exceeded Parker Review diversity – Long-term value and sustainability Page 118 target – Culture Page 118 – Shareholder and other stakeholder engagement Page 113 ## 1 – Conflicts of interest Page 123 new NED appointment announced in 2022 2. DIVISION OF RESPONSIBILITIES First ESG investor – Role of the Chairman and Chief Executive Officer Page 116 day held – Non-Executive Directors Page 116 3. COMPOSITION, SUCCESSION AND EVALUATION | – Appointment and succession planning | Page 122 | | --- | --- | | – Skills and experience | Page 119 | | – Evaluation | Page 120 | | – Diversity | Page 120 | 4. AUDIT, RISK AND INTERNAL CONTROL | – Integrity of financial statements | Page 126 | | --- | --- | | – Fair, balanced and understandable | Page 126 | | – Internal controls and risk management | Page 127 | | – External auditor | Page 128 | | – Principal and emerging risks | Pages 93-99 | 5. REMUNERATION | – Policies and practices | Pages 133-154 | | --- | --- | | – Alignment with purpose, values and long-term strategy | Pages 133-154 | | – Independent judgement and discretion | Pages 133-154 | 107WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE # OUR BOARD ![img-2.jpeg](img-2.jpeg) ROBERTO QUARTA CHAIRMAN Appointed: 1 January 2019 (Chairman) June 2019 Nationality: Italian and American Skills and experience: Roberto has extensive and diverse experience in corporate governance and global commerce having served on the boards of a number of UK and international companies. His career in private equity brings valuable experience to WPP, particularly when evaluating acquisitions and new business opportunities. He is Chairman of Smith & Nephew plc, a Partner of Clayton, Dubiler & Rice and Chairman of Clayton, Dubiler & Rice Europe. Previously he was Chief Executive and then Chairman of RBA Group plc, Chairman of Reed SA, Chairman of RII plc and a Non-Executive Director at BAE Systems plc, Equart NV, Foster Wheeler AG and PowerGen plc. External appointments: Chairman, Smith & Nephew, Partner, Clayton, Dubiler & Rice, Chairman, Clayton, Dubiler & Rice Europe. ![img-3.jpeg](img-3.jpeg) MARK READ CHIEF EXECUTIVE OFFICER Appointed: 1 September 2018 Nationality: British Skills and experience: Mark has a deep understanding of the industry having held multiple leadership positions at WPP since he joined in 1998. As Head of Strategy and then CEO of WPP Digital he was responsible for WPP's first moves into technology. In 2019, he became Global CEO of Mundemar, which he transformed into one of the world's leading creative, data and technology agencies. Earlier is his career, he co-founded internet start-up WebRewards and specialised in media and marketing as a principal at consultancy Boss Allen Hamilton. Mark was voted the industry's Most Influential Person of 2019 in Consultancy's Top 100 Digital Agencies report and in 2021 he was recognised as a African Champion of Women in Business for the fourth consecutive year. Mark has an MBA from INSEAD and an Economics degree from Trinity College, University of Cambridge, and was a Henry Fellow at Harvard University. External appointments: Chairman of the Natural History Museum Digital Council. ![img-4.jpeg](img-4.jpeg) JOHN ROGERS CHIEF FINANCIAL OFFICER Appointed: 1 February 2020, Chief Financial Officer from 1 May 2020 Nationality: British Skills and experience: John has extensive finance, strategy, digital, property and retail experience. He joined WPP from 1 Salisbury plc where he was Chief Executive Officer of Salisbury's Argos. John was previously the Chief Financial Officer of 1 Salisbury plc, responsible for business strategy, new business development, Salisbury's Online and Salisbury's Bank, in addition to its core finance functions. John is a member of The Prince's Advisory Council for Accounting for Sustainability. He also sits on the Retail Sector Council, which acts as a point of vision between the UK Government and retail sector. John is also an Independent Non-Executive Director of Grab Holdings Limited, a technology company listed on NLEDAG. External appointments: Member, The Prince's Advisory Council for Accounting for Sustainability; Member, Retail Sector Council, Independent Non-Executive Director, Grab Holdings Limited. # INDEPENDENT NON-EXECUTIVE DIRECTOR ![img-5.jpeg](img-5.jpeg) NICOLE SELIGMAN SENIOR INDEPENDENT DIRECTOR, NON-EXECUTIVE DIRECTOR Appointed: 1 January 2019 Nationality: American Skills and experience: Nicole is a global business leader and an internationally recognised lawyer. She brings to the board analytical skills, in-depth knowledge of public company corporate governance and a comprehensive understanding of media and business issues. Nicole was previously President of Sony Entertainment, Inc. and global General Counsel for Sony Corporation. Prior to that, as a partner at law firm Williams & Connolly, Nicole represented key public figures and major media and other companies in complex litigation. She is a Magna-Cum-Laude graduate of both Harvard College and Harvard Law School. External appointments: Non-Executive Director, ViacomCBS Inc.; Non-Executive Director, HomeIT's Holdings plc; Non-Executive Director, Far Peak Acquisition Corporation. # COMMITTEE # MEMBERSHIP KEY 1 Audit 2 Compensation 3 Nomination and Governance 4 Sustainability 5 Committee Chair # NON-EXECUTIVE DIRECTOR TENURE # AS AT 31 DECEMBER 2021 ![img-6.jpeg](img-6.jpeg) 1 0-3 years 7 2 3-6 years 5 3 6-9 years 4 4 10-14 years 0 # GENDER AS AT 31 DECEMBER 2021 ![img-7.jpeg](img-7.jpeg) Male 8 Female 4 WPP ANNUAL REPORT 2021 OUR BOARD CORPORATE GOVERNANCE # INDEPENDENT NON-EXECUTIVE DIRECTORS ![img-8.jpeg](img-8.jpeg) ANGELA AHRENDTS OBE NON-EXECUTIVE DIRECTOR Appointed: 1 July 2020 1 Nationality: British and American Skills and experience: Angela brings expertise as a leader of creative and technology driven global businesses. From 2014 until 2019, she was Senior Vice President, Retail at Aspela, Inc., where she integrated and redesigned the physical and digital global consumer experience. Angela was CEO of Butberry from 2016 to 2016, where she repositioned the brand as a luxury high-growth company and created the Butberry Foundation. Prior to Butberry, Angela was Executive Vice President at Liz Claiborne, Inc. and President of Donna Karan International, Inc. Angela was a member of the UK Prime Minister's Business Advisory Council from 2010 to 2015. External appointments: Non-Executive Director, Ralph Lauren Corporation and Airbnb, Inc., Chair of Save the Children International, Non-Executive Director, Charity, Water and ThemOne Institute for Society; member of the Global Leadership Council of the Oxford University; said Business School and British American Business International Advisory Board. ![img-9.jpeg](img-9.jpeg) JACQUES AGIRAIM NON-EXECUTIVE DIRECTOR Appointed: 12 May 2019 1 Nationality: Swiss and French Skills and experience: Jacques has extensive business, corporate finance and governance expertise. He was a Senior Advisor at Warburg Prince LLP from 2001 to 2009. Jacques was a member of the Executive Committee of Swiss Re AG and CEO from 2006. Prior to Swiss Re, he spent 20 years with JPMorgan Chase. Jacques was previously Chairman of LCH Cleaned Group Ltd from 2010, a Director of the Qatar Financial Centre Authority and a Super-slurry Board Member of LUThetica AG and Swiss International Airlines AG. He holds a PhD in Economics from Sorbonne University and an MA in Economics from Paris Dauphine University. External appointments: Chairman, LynneBeBose(1W); Non-Executive Director, London Stock Exchange Group plc; Non-Executive Director, Clearwater Analytics; Chairman, Singular Skill, Channel; ACUTRONIC Holding AG. ![img-10.jpeg](img-10.jpeg) SANDRIKE DUPOUR NON-EXECUTIVE DIRECTOR Appointed: 5 February 2020 1 Nationality: French Skills and experience: Sandrine brings substantial financial expertise gained in global companies and strong strategic capability to the Board. She has executive leadership experience in the telecommunications, entertainment and media industries and an enthusiasm for cultural, technological and business transformation. Sandrine is currently Chief Financial Officer of UCB, a global pharmaceutical company. Previously she was CFO of Pocomo. She held a number of leadership roles at Vivendi, in France and in the United States, across its entertainment and telecommunications business. Sandrine began her career as a financial analyst at BNP and then Credit Agricole in the telecoms sector. She has held other non-executive director roles, most recently at Solocal Group. External appointments: Chief Financial Officer, UCB. Sandrine will succeed Jacques as Audit Committee Chair on 1 April 2022. ![img-11.jpeg](img-11.jpeg) TAREN FARAHAT NON-EXECUTIVE DIRECTOR Appointed: 9 October 2018 1 Nationality: Brazilian and Egyptian Skills and experience: Tarek has extensive leadership and brand building experience gained in leading businesses in the Americas, Europe, Middle East and Africa. He worked for Procter & Gamble for over 20 years, his last position as President of Procter & Gamble Latin America and member of the Global Leadership Council. Tarek was previously Chairman of the board of J&L S.A. and a board member of Higgins's Pride Corporation and Alpargatas. Tarek is currently a strategic advisor, consultant and partner for companies in the consumer goods, Pintech and Healthcare sectors. Tarek is a graduate of the American University in Cairo, Faculty of Commerce and Finance. External appointments: Chairman and Co-Founder, GoPublic and Ponti-e. ![img-12.jpeg](img-12.jpeg) TOM ILUBE OBE NON-EXECUTIVE DIRECTOR Appointed: 2 October 2020 1 Nationality: British Skills and experience: Tom brings a wealth of expertise as a technology entrepreneur. He is Chair of the Rugby Football Union (RFU) and CEO of Crossword Cybersecurity plc. From 2010 to 2016, Tom was Managing Director of Consumer Markets at Cellcredit Information Group. Prior to Cellcredit, Tom founded and was CEO of Garlik, a venture capital backed identity protection company. He 30 year career in the UK technology sector includes roles at Egg Barking plc, PricewaterhouseCoopers, Goldman Sachs and the London Stock Exchange. He was made a Doctor of Science (Mons) in Capua by City, University of London, an Honorary Doctor of Technology by the University of Wolverhampton, and an Honorary Fellow of Jesus College, Oxford and St Anne's College. In 2017 Tom topped the Powerful ranking of the most influential people of African or African Caribbean heritage in the UK. External appointments: Founder and CEO, Crossword Cybersecurity plc; Chair, Dental Limited; Founder and Chair, African Gifted Foundation; Chair, the Rugby Football Union (RFU). ![img-13.jpeg](img-13.jpeg) CINDY ROSE OBE NON-EXECUTIVE DIRECTOR Appointed: 1 April 2019 1 Nationality: British and American Skills and experience: Cindy has extensive experience as a leader in the technology and media sectors and a deep understanding of the role of technology in business transformation. She was appointed President of Microsoft Western Europe in October 2020, prior to which she was Microsoft UK CEO from 2016. She previously held roles as Managing Director of the UK consumer division at Vodafone and as Executive Director of Digital Entertainment at Virgin Media. She also spent 16 years as The Viral Disney Company, ultimately as Senior Vice President and Managing Director of Disney Interactive Media Group. Cindy is a graduate of Columbia University and New York Law School. External appointments: President, Microsoft Western Europe; Member of the advisory board of Imperial College Business School in London; Member of the advisory board of McLaren. WPP ANNUAL REPORT 2021 109 CORPORATE GOVERNANCE OUR BOARD # INDEPENDENT NON-EXECUTIVE DIRECTORS ![img-14.jpeg](img-14.jpeg) SALLY SUSMAN NON-EXECUTIVE DIRECTOR Appointed: 13 May 2018 1 Nationality: American Skills and experience: Sally brings expertise in communications, public affairs, governance and strategy. She is Executive Vice President, Chief Corporate Affairs Officer for Pfizer and also heads Pfizer's corporate responsibility group. Before joining Pfizer in 2007, Sally was Executive Vice President of Global Communications at Emile Leader, where she directed global corporate affairs strategy and served as a member of the Executive Committee. She previously held several senior corporate affairs posts at American Express, in both London and the United States. She started her career in government service where positions included Deputy Assistant Secretary for Legislative and Intergovernmental affairs in the U.S. Department of Commerce. Sally has a BA in Government from Connecticut College and has studied at the London School of Economics. External appointments: Executive Vice President, Chief Corporate Affairs Officer, Pfizer, Go-Chair, International Rescue Committee ![img-15.jpeg](img-15.jpeg) KEITH WEED CBE NON-EXECUTIVE DIRECTOR Appointed: 1 November 2019 1 Nationality: British Skills and experience: Keith has a wealth of experience as a marketing and digital leader and an understanding of the ways in which technology is transforming businesses. From 2010 to 2019, Keith was Chief Marketing and Communications Officer at Unilever, under that included creating and leading Unilever's sustainability programme. Keith was named the World's Most Influential Chief Marketing Officer by Forbes in 2017, 2018 and 2019, and Global Marketer of the Year 2017 by the World Federation of Advertisers. He received The Drum's Lifetime Achievement Award in 2016 and was inducted into the Marketing Hall of Fame in 2019. Keith is a Non Executive Director of J Sainsbury plc. External appointments: Non Executive Director, J Sainsbury plc; Trustee Director of Business in the Community; Board Trustee, Orange Park Opera; President of the Royal Horticultural Society; Board Trustee, Leverhulme Trust ![img-16.jpeg](img-16.jpeg) JASMINE WHITBREAD NON-EXECUTIVE DIRECTOR Appointed: 1 September 2019 1 Nationality: British and Swiss Skills and experience: Jasmine's experience spans marketing, technology, finance, media, telecommunications and not-for-profit organisations, and she brings this breadth of perspective and, knowledge of many of WFP's client sectors. Jasmine began her career in marketing in the technology sector, including with Thomson Financial in the US. After completing the Stanford Executive Program, Jasmine went on to hold leadership roles with Oxford and Save the Children, starting in WWII in West Africa and, from 2010 to 2015, as the first Chief Executive of Save the Children International. Jasmine was a Non Executive Director of BT Group plc from 2011 to 2019 and Chief Executive Officer of London First from 2016 and March 2021. External appointments: Chair of the Board, Travis Perkins plc; Non-Executive Director, Standard Chartered plc; Non Executive Director, Compagnie Financière Richmond SA; Visiting Fellow, Oxford University ![img-17.jpeg](img-17.jpeg) DR. YA-QIN ZHANG NON-EXECUTIVE DIRECTOR Appointed: 1 January 2021 1 Nationality: American Skills and experience: Ya-Qin is a world-renowned technologist, scientist and entrepreneur with a particular understanding of the changing consumer technology landscape in China. He was President of Body Inc., the global internet services and AI company headquartered in Beijing, between 2015 and 2019. Prior to joining Body, he held several positions during his 14-year tenure at Microsoft, both in the United States and China, including Corporate Vice President and Chairman of Microsoft China. Ya-Qin is currently a Non-Executive Director of Fortescue Metals Group, Asianfit Technologies Limited and ChinaSoft International Limited. He is also Chair Professor of AI Science at Tonghua University and the founding Dean of the Institute for AI Industry Research at the same university. External appointments: Non-Executive Director of Fortescue Metals Group, Asianfit Technologies Limited and ChinaSoft International Limited; Chair Professor of AI Science at Tonghua University and the founding Dean of the Institute for AI Industry Research at the same university; Fellow, American Academy of Arts and Sciences. ![img-18.jpeg](img-18.jpeg) BALBIR KELLY-BISLA COMPANY SECRETARY Appointed: 27 April 2020 Skills and experience: Balbir has significant governance experience across various roles in listed companies, most recently as Company Secretary of William Hill plc. Prior to joining William Hill, Balbir was Director of Investor Relations at Glassdon Midline plc (GSA), leading an engagement with ESD focused investors, and before that held company secretarial roles at GSA, Lootminute.com, Royal & Sun Alliance and Segro plc. # DIRECTOR APPOINTMENT SINCE YEAR-END ![img-19.jpeg](img-19.jpeg) SIMON DINGEMANS NON-EXECUTIVE DIRECTOR Appointed: 31 January 2022 1 Nationality: British Skills and experience: Simon has extensive business, capital markets, corporate finance and governance experience and is currently a Senior Advisor at global investment firm, The Carlyle Group. Prior to joining Carlyle, Simon was Chief Financial Officer of Glassdon Midline plc and a member of the main board from 2011 to 2019. Prior to GSA, Simon worked in investment banking for 20 years at SG Warburg and then Goldman Sachs, where he was Managing Director and Partner for ten years as a leader of their European M&A Business and Head of UK Investment Banking. Simon served as Non-Executive Chair of the Financial Reporting Council in 2016/2020 and previously also served as Chairman of the TSG Group. Simon has a master's degree in Geography from Oxford University. WFP ANNUAL REPORT 2021 CORPORATE GOVERNANCE ## OUR EXECUTIVE COMMITTEE ## The Executive Committee of WPP is responsible for ## leading the Company and executing its strategy. ## Its members lead WPP’s largest operating companies ## and central corporate functions. | MARK READ | JOHN ROGERS | AJAZ AHMED | | --- | --- | --- | | CHIEF EXECUTIVE OFFICER | CHIEF FINANCIAL OFFICER | CHIEF EXECUTIVE OFFICER, AKQA | | Biography can be found on page 108. | Biography can be found on page 108. | GROUP | Ajaz is the CEO of AKQA Group. Recognised as a creative pioneer, AKQA has won three Grands Prix in the last two years at Cannes Lions and over 60 Agency of the Year titles. | JON COOK | ANNAMARIA DESALVA | MEL EDWARDS | | --- | --- | --- | | GLOBAL CHIEF EXECUTIVE OFFICER, | CHAIRMAN AND CEO, | GLOBAL CHIEF EXECUTIVE OFFICER, | | VMLY&R | HILL+KNOWLTON STRATEGIES | WUNDERMAN THOMPSON | | Jon has led VMLY&R since its formation | AnnaMaria re-joined Hill+Knowlton as | Mel was appointed as CEO of the newly | | in 2018 as WPP’s global brand and | CEO in 2019, having previously served as | formed Wunderman Thompson in 2018, | | customer experience agency. He was | Worldwide Director of Healthcare from | having previously been the Global CEO | | formerly Global CEO of VML, which he | 2006 to 2009. AnnaMaria led global | of Wunderman. She joined Wunderman | | joined in 1996. | corporate affairs for DuPont and served | as UK CEO in 2012. | as Senior Advisor to DowDuPont’s CEO, following senior roles at Pfizer and Bristol-Myers Squibb. | LAURENT EZEKIEL | JANE GERAGHTY | RICHARD GLASSON | | --- | --- | --- | | CHIEF MARKETING | GLOBAL CHIEF EXECUTIVE OFFICER, | GLOBAL CHIEF EXECUTIVE OFFICER, | | & GROWTH OFFICER | LANDOR & FITCH | HOGARTH | | Laurent became WPP’s first Chief | Jane was appointed Landor & Fitch’s | Richard was appointed CEO of Hogarth | | Marketing & Growth Officer in 2019. | Global CEO in 2017, having previously | Worldwide in 2016, having joined the | | He joined from Publicis where he was | been President of EMEA. She has | company in 2011. Prior to this he was | | President of Digitas, North America, and | held senior positions at Naked | CEO of Gyro, the B2B marketing | | International and Client Leader for GSK. | Communications, ITV, Ogilvy New York, | specialist. | McCann-Erickson and Saatchi & Saatchi. 111WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE OUR EXECUTIVE COMMITTEE | ANDREA HARRIS | MICHAEL HOUSTON | DONNA IMPERATO | CHRISTIAN JUHL | | --- | --- | --- | --- | | GROUP CHIEF COUNSEL | GLOBAL CHIEF EXECUTIVE OFFICER, | GLOBAL CHIEF EXECUTIVE OFFICER, | GLOBAL CHIEF EXECUTIVE OFFICER, | | | GREY | BCW | GROUPM | | Andrea was appointed as Group Chief | Grey is among the industry’s most | Donna became CEO of BCW, one of the | GroupM is the world’s largest media | | Counsel in 2005 having joined WPP | awarded creative agencies. Michael | world’s largest global public relations | investment group and home to WPP’s | | in 1996. Andrea is Chair of the Risk | became CEO of Grey Group in 2017, | and public affairs agencies, renowned | media agencies. Formerly Global CEO | | Committee and a member of the | after roles including Global President | for its creative and integrated | of Essence, Christian was appointed | | Executive Committee’s Sustainability | and CEO of Grey North America. | communications excellence, in 2018. | CEO of GroupM in 2019. | | Committee. | | Before leading BCW, Donna was Global | | CEO of Cohn & Wolfe for 15 years. | NICK LAWSON | ANDY MAIN | LINDSAY PATTISON | STEPHAN PRETORIUS | | --- | --- | --- | --- | | GLOBAL CHIEF EXECUTIVE OFFICER, | WORLDWIDE CHIEF EXECUTIVE | CHIEF CLIENT OFFICER | CHIEF TECHNOLOGY OFFICER | | MEDIACOM | OFFICER, OGILVY | | | | Appointed: January 2022 | Prior to joining Ogilvy in 2020, Andy | Lindsay became Chief Client Officer | Stephan was appointed as WPP’s first | | | led Deloitte Digital and scaled it into | of WPP in 2018. Prior roles include | CTO in 2018. Before that he was UK | Nick was appointed Global CEO of a multi-billion-dollar global business. Chief Transformation Officer of WPP Group CEO and Global CTO of MediaCom in 2020, having worked at Andy is an entrepreneur who helped and Global CEO of Maxus, which she Wunderman, having joined the agency the agency for 30 years. He joined as a reshape the industry by making the joined as UK CEO in 2009. in 2016. Planning Assistant in 1991 and has held first move by consultancies into leadership positions since 2006 as UK creative services. CEO, EMEA CEO and Worldwide COO. | ROB REILLY | JENNIFER REMLING | ANDREW SCOTT | | --- | --- | --- | | GLOBAL CHIEF CREATIVE OFFICER | GLOBAL CHIEF PEOPLE OFFICER | CHIEF OPERATING OFFICER | | Rob was previously Global Creative | Jennifer was appointed Global Chief | Andrew joined WPP in 1999 as Director | | Chairman of McCann Worldgroup, | People Officer in October 2021, joining | of Corporate Development. He held a | | which was named Network of the Year | from GroupM where she held the same | number of other senior roles including | | by Cannes Lions and The Effies during | role. Jennifer has worked in senior | Chief Operating Officer for Europe | | his tenure. Before McCann he was | positions across the industry, including | before being appointed COO in 2018. | | Partner and Worldwide Chief Creative | at Essence, R/GA, AKQA, 360i and | | | Officer at CP+B, helping it to win | Sapient. | | Ad Age’s Agency of the Decade. WPP ANNUAL REPORT 2021112 CORPORATE GOVERNANCE ## HOW OUR ## BOARD ENGAGES | OUR APPROACH TO ENGAGEMENT | Through open and transparent dialogue with | incorporated company, WPP is not subject | | --- | --- | --- | | The success of our business is dependent | our key stakeholders, we aim to develop a | to UK legislation. However, as a matter of | | upon our ability to understand and respond | clear understanding of their needs, assess | good governance and in order to comply | | to the needs of the various stakeholders | their perspectives and monitor their impact | with the provisions of the 2018 UK Corporate | | connected with WPP. When making decisions, | on our strategic ambition and culture. | Governance Code, the Board considers the | | our Board and its Committees consider | Decisions of the Board are taken after | matters described in Section 172 of the | | which course of action best leads to the | receiving reports from management on | Companies Act 2006 in its decision making. | | success of the Company over the long term, | issues concerning our key stakeholders and | | | which requires an understanding of how our | after discussing the potential impact of | Illustrations of how Section 172 factors have | | decisions impact these stakeholder groups. | decisions on them, reflecting what are | been applied by the Board can be found | | | referred to as Section 172 factors. As a Jersey | throughout the Strategic Report. | ### OUR ENGAGEMENT DURING 2021 Page 20 within the Strategic Report sets out our most important stakeholders and how, as a Company, we engage with these stakeholders on an operational level. The following table summarises how the Board engages with each of these stakeholder groups. STAKEHOLDER GROUP DIRECT BOARD ENGAGEMENT INDIRECT BOARD ENGAGEMENT IMPACT OF ENGAGEMENT | SHAREHOLDERS | The Chief Executive Officer and the | Feedback to the Board on investor | In 2021, the Board met its goal to | | --- | --- | --- | --- | | Our shareholders provide | Chief Financial Officer hosted four | views, particularly from the Chairman, | recommence the share buyback | | capital to invest in the | quarterly results presentations and took | Chair of the Compensation Committee, | scheme, after a pause due to the | | business and support the | questions from investors and analysts. | Chief Executive Officer and Chief | economic impact of the pandemic, | | valuation and liquidity | | Financial Officer. | and over £1 billion in cash was | In 2021 we held our first investor event | of WPP shares. | | | returned to shareholders through | | --- | --- | --- | --- | | | focused on our Environmental, Social | Monthly reports to the Board detailing | | | Shareholders benefit | | | dividends and share buybacks | | | and Governance strategy where WPP’s | investor relations activities, key themes | | | from the Board acting in | | | (2020: £412 million). | | | shareholders heard from the Chief | of interest from investors and share | | the best interests of the Executive Officer, Chief Financial Officer register composition and movements. Performance metrics have been Company and investing and other senior management about changed based on feedback from for long-term value Analyst and broker briefings and the progress made across the four shareholders over the years and generation. reports of meetings with major pillars of our purpose statement, and we have evolved remuneration shareholders. were able to share their views directly structures to align more directly with through the interactive webinar. our strategy, sustainability targets and shareholder interests. The Chairman, Chairs of the Board | Committees and Executive Directors | In response to feedback, a series of | | --- | --- | | met regularly with institutional investors | webinars were introduced by the | | to discuss the business and to respond | Chief Financial Officer and hosted | | to any concerns. | by divisional management in 2021, | designed to give investors and The 2021 AGM was live streamed via a analysts deeper insight into individual webcast hosted by the Chairman and agencies, products and services Chief Executive, where shareholders within WPP and offering the were able to watch the presentations opportunity to submit questions. and ask questions in advance and during the meeting. ### GOVERNMENTS As a listed global company, engagement Reports to the Board and its In 2021 we contributed £1.4 billion in with listing authorities and financial Committees on regulatory changes taxes to public finances. ### AND REGULATORS regulators. from the Group Chief Counsel, Global Governments receive the Corporate Affairs Director and Group tax contributions we The Chief Executive Officer met regularly Company Secretary. | make to public finances, | with government representatives and | | | --- | --- | --- | | enabling them to invest | regulators around the world, including | Received reports from the Chief | | in public services. | through attendance at COP26 in | Privacy Officer and Global Data | | | Glasgow during November 2021. | Protection Officer on changing | | Governments and | | regulatory landscapes with regards | Responded to government regulators determine the to data protection, security and consultations, such as the Parker Review. policy frameworks that privacy as well as data ethics and affect us and our Approved WPP’s Modern Slavery Act artificial intelligence. stakeholders. Statement. 113WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE HOW OUR BOARD ENGAGES ### OUR ENGAGEMENT DURING 2021 CONTINUED STAKEHOLDER GROUP DIRECT BOARD ENGAGEMENT INDIRECT BOARD ENGAGEMENT IMPACT OF ENGAGEMENT ### CLIENTS AND Engaged with clients on issues Received updates on WPP’s client We made strong strategic progress including strategy, changes taking satisfaction scores. through new mergers and acquisitions, ### SUPPLIERS place in our market and understanding to provide new capabilities to scale Our clients come from Received reports from operating the changes taking place in our clients’ across the Company, and structural businesses across every companies, which included updates on and suppliers’ markets. and organisational changes which sector. The work we do how they supported and engaged with simplify WPP and improve the way for clients provides our Through our Chief Executive Officer, clients during the Covid-19 pandemic. we go to market, serve clients and | revenue and helps them | engaged with suppliers in joint product | | | | --- | --- | --- | --- | | | | Received deep-dive updates at each | work with suppliers. For more detail | | to grow their businesses, | development, skills development and | | | | | | Board meeting from Global Client | see page 118. | | build relationships with | joint go-to-market programmes. | | | Leaders on key clients. their customers and The Chief Executive Officer hosted ready themselves for Received updates on the supplier internal ‘fireside chats’ with the CEOs future success. onboarding processes, including of several clients. workforce diversity and carbon Our suppliers range Board engagement with key partners, reduction metrics. from small businesses including site meetings in the US with to the world’s largest strategic technology partners. technology partners. They provide us with the products and services we need to meet our clients’ needs. ### PEOPLE Cindy Rose, our Workforce Formal reports to the Board from the With the challenges of the pandemic We depend on the Engagement Non-Executive Director, Chief Executive Officer and Chief and other issues around the world talent, creativity and attended meetings of the Workforce People Officer included: impacting mental wellbeing, we technology skills of our Advisory Panel (WAP), in addition to launched our Mental Health Allies – in-depth reviews of the people people. And we want our the US and India People Forums and programme, providing mental health strategy, people risk and workforce employees to embrace updated the Board on matters training to 500 leaders, HR engagement our purpose, culture and discussed. professionals and employees across – Health & Safety updates with a | values. In return, our | | | the UK and US. We will expand into | | --- | --- | --- | --- | | | The Chief Executive Officer hosted 17 | particular focus on mental health | | | people receive salaries, | | | more regions in 2022. | | | townhalls and various leadership | and wellbeing | | pension contributions, events, which gave him the chance to – return to work initiatives in addition To align management with employee benefits, speak to people directly and to hear to the ongoing impact of the employees and shareholders, senior career development from attendees in return. Covid-19 pandemic on our people executives are being held to account and training. and actions being taken to support on ESG metrics. DE&I goals were The Board engaged with senior them included in incentive plans for senior managers at the Board Strategy Day – progress on DE&I initiatives executives for the first time in 2021, and wider WPP management at the – results of various employee and carbon reduction and single-use September 2021 Leadership Event. | engagement surveys undertaken | plastic targets were also included in | | --- | --- | | through the year and actions taken | incentive plans for executive directors | | to address employee feedback | for the first time in 2021. | In response to our first global people WPP’s Global Inclusion Council met survey, with more than 43,000 throughout the year to deliver on our participants, the Board approved a diversity, equity and inclusion people strategy based on career commitments. growth, investment in learning, and Reports at each Audit Committee fostering the best possible culture. meeting were received on issues raised via Right to Speak channels. WPP ANNUAL REPORT 2021114 HOW OUR BOARD ENGAGES CORPORATE GOVERNANCE STAKEHOLDER GROUP DIRECT BOARD ENGAGEMENT INDIRECT BOARD ENGAGEMENT IMPACT OF ENGAGEMENT | PLANET | The Board undertook deep dives on | Reports to the Sustainability | The Company developed new and | | --- | --- | --- | --- | | We are committed to | a range of environmental, social and | Committee included updates on the | industry-leading commitments to | | responsible and | governance (ESG) topics, including the | development of a Company-wide | reach net zero carbon emissions | | sustainable business | development of industry-leading net | sustainability strategy and industry- | across its own operations by 2025 | | practices. We take steps | zero carbon reduction commitments. | leading net zero carbon reduction | and across its value chain by 2030, | | to optimise our own | | commitments; setting science-based | including emissions from media | The Board and Sustainability environmental impact, carbon reduction targets; progress on investment. In June 2021 this ambition Committee reviewed climate-related but recognise that our WPP’s single-use plastics commitment, was underpinned by science-based risks and opportunities as part of their greatest contribution to including adjusted commitment targets, verified by the Science review and approval of WPP’s Task the planet is through our timescales; performance against Based Targets initiative. For more Force on Climate-related Financial work with clients, which sustainability KPIs including renewable detail see page 76. Disclosures statement on page 214, in | can shift attitudes and | | energy, carbon reduction and waste | | | --- | --- | --- | --- | | | addition to including climate-related | | Following investor interest, in | | change behaviours to | | management; and stakeholder | | | | risks as an emerging risk for the first | | November 2021 we amended and | | build a sustainable future | | engagement and feedback. | | | | time. For more detail see page 99. | | supplemented our $2.5 billion | and a more inclusive revolving credit facility, linking its society. In November 2021, WPP executives margin to specific sustainability attended COP26 in Glasgow, measures. participating in discussions with the United Nations and NGOs on the The ongoing Covid-19 pandemic climate crisis. affected the Company’s ability to meet its commitment to phase out single-use plastics across its offices and this will be a priority for the Sustainability Committee to address in 2022. | COMMUNITIES | The Board received updates on the | The Sustainability Committee oversaw | In partnership with the WHO | | --- | --- | --- | --- | | We can help boost the | 2020 commitment to spend $30 million | the work on the sustainability strategy | Foundation, we commenced the | | impact of charities and | over three years to fund inclusion | and the progress made on embedding | pro bono $5 Vaccine campaign to | | non-governmental | programmes within WPP and support | Group-wide sustainability targets tied | support access to Covid-19 vaccines | | organisations by | external organisations. To read more | to the WPP purpose statement. | in low-income countries. | | providing marketing and | about how we are investing in our | | | | | | Reports to the Sustainability | As part of our racial equity | | creative services, often | communities, please see page 81. | | | | | | Committee included updates on | commitments made in 2020, in 2021 | on a pro bono basis, partnerships with the United Nations, we allocated $9.3 million in inclusion enabling them to raise including the World Health programmes as part of WPP’s awareness and funds, Organization and UNFCCC, to provide commitment to invest $30 million recruit members, and our skills in creativity, communications, over three years. achieve campaign data and technology to help effect objectives. We believe, positive change for society. and so do many of our stakeholders, that acting Updates received from the business on responsibly is both the elements of the Group’s operations right thing to do and in which impact the wider community, our long-term interests. including the Group’s tax strategy. Denotes information subject to limited assurance by PricewaterhouseCoopers LLP (‘PwC’). 115WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE ## DIVISION OF RESPONSIBILITIES ### The WPP Board is committed to ensuring there is a strong and ### effective system of corporate governance in place to support ### the successful execution of the Company’s strategy. ### GOVERNANCE MODEL ### THE BOARD – Responsible for the overall long-term CHAIRMAN NON-EXECUTIVE DIRECTORS success of WPP and for setting the – Responsible for Board governance principles, – Bring an external perspective to support and Company’s purpose, values and culture including setting the Board agenda and challenge the performance of management and strategic direction ensuring the Board receives timely and – Assist in developing the Company’s strategy and – Oversees the implementation of appropriate accurate information offer specialist advice to management based on risk assessment processes to identify and – Ensures all Directors are enabled to play their their particular skills and experience mitigate WPP’s principal risks and consider full part in Board activities emerging risks – Represents the Board in discussions with SENIOR INDEPENDENT DIRECTOR – Responsible for corporate governance shareholders and other stakeholders – Provides a sounding board for the Chairman and – Oversees the execution of the strategy and acts as an intermediary for the other Directors responsible for the overall financial CHIEF EXECUTIVE OFFICER – Meets with the Non-Executive Directors (without performance of the Company – Responsible for the day-to-day leadership of the Chairman present) when necessary and at the Company, representing the Company to least once a year to appraise the Chairman’s The Matters Reserved for the Board are clients, suppliers, governments and employees performance and communicates the results to available on our website, wpp.com – Develops the strategic direction for the Chairman consideration by the Board – Sets the tone at the top with regard to culture COMPANY SECRETARY and values – Ensures the Board operates in accordance with – Ensures there are effective processes for the corporate governance framework and that engaging with and listening to employees there are good information flows between the and other stakeholders Board and Committees – Advises the Board on matters of corporate governance – Supports the Board’s development through organising training and induction programmes – Supports the Board and Committee Chairs with annual agenda planning WPP ANNUAL REPORT 2021116 CORPORATE GOVERNANCEDIVISION OF RESPONSIBILITIES ### BOARD COMMITTEES NOMINATION AND GOVERNANCE AUDIT COMMITTEE COMPENSATION COMMITTEE COMMITTEE – Monitors the integrity of the financial – Sets, reviews and recommends the – Reviews the size, skills, diversity, statements policy on remuneration of the Chairman, experience and composition of the Board – Provides oversight of internal controls and executives and senior management team – Leads the process for Director risk management – Recommends and monitors the appointments in conjunction with the – Manages the relationship with the external implementation of the Company’s overall Board and Director and senior auditor, including making recommendations remuneration policy and strategy management succession planning to the Board and shareholders in relation to – Reviews the remuneration and related – Oversees general governance matters, the appointment and re-appointment of the policies across the general workforce and including the ongoing suitability of the external auditor the alignment of incentives and rewards governance framework with culture Read more on page 125 Read more on page 122 Read more on page 133 SUSTAINABILITY COMMITTEE – Supports the Board in its oversight of corporate responsibility, sustainability and reputational matters – Reviews and monitors implementation of the Company’s sustainability strategy – Reviews policy statements on environmental and social matters Read more on page 131 ### EXECUTIVE COMMITTEES EXECUTIVE COMMITTEE DISCLOSURE COMMITTEE RISK COMMITTEE Assists the Chief Executive Officer in An executive Disclosure Committee responsible An executive Risk Committee, which assists the discharging his responsibilities and is for overseeing the accuracy and timeliness of Board and Audit Committee in discharging their collectively responsible for implementing Group disclosures and reviewing controls and responsibilities by reviewing, monitoring and strategy, ensuring consistent execution procedures in relation to the public disclosure advising on the design and implementation of and embedding the Company’s culture of financial information. WPP’s compliance framework, compliance and values. policies and procedures and risks that present themselves throughout WPP. 117WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE # BOARD ACTIVITIES The key areas of focus considered by the Board during 2021 are set out below. The Board is responsible for setting the Company's purpose, values and culture, in addition to overseeing the Company's overall financial performance and execution of the strategy. The Board recognises the importance of considering the perspectives of, and the potential impact on, the Company's key stakeholders in its discussions. Its responsibilities are discharged through an annual programme of meetings, each of which follows a tailored agenda. A typical Board meeting will comprise reports on operational and financial performance including on the transformation programme, progress on strategy, people updates and a deep dive into a particular ESG topic. ## MATTERS CONSIDERED ### PERFORMANCE - Received regular updates on the Group's financial performance including to assess ongoing impact of the Covid-19 pandemic - Reviewed the Company's financial results, earnings guidance, investor materials and related announcements - Considered performance against the 2020-2021 budget and agreed on the 2021-2022 budget - Confirmation of the viability statement and going concern assessment - Monitored progress of the transformation programme ### STRATEGY & PURPOSE - Board strategy meeting to consider the end-to-end strategy and to align around the vision and future prospects of the Company over the next three to five years, with a strong focus on technology partners, digital transformation and ecommerce - First investor day held to discuss the Company's ESG strategy - Received presentations from the agencies on their work to support WPP's strategy - MBA activities, including the buy-in of WPP AUNZ minorities and acquisition of Satalia and HINAN in UK and DTI Digital in Brazil, in addition to Kantar's acquisition of Numerator and the merger of Findbury Glover mining with DVC - Simplification activities, including the launch of global data company Choreograph and the opening of new WPP campuses in Milan and Prague ### PEOPLE & CULTURE - Considered how the people strategy would enable the overall business strategy and foster the best possible culture - Prioritised return to work initiatives, the impact of the ongoing Covid-19 pandemic on our people and actions being taken to support them - Received regular updates from the Chief People Officer on talent, succession planning and employee engagement, with a particular focus on driving greater diversity and inclusion supported by data and insights - Received regular updates from the designated NED on the Workforce Advisory Panel and other People Forums - Regularly discussed progress against the set of commitments and actions announced to advance racial equity - Incorporated diversity and sustainability metrics into the compensation schemes for senior leaders for the first time - Industry-leading commitment made to net zero carbon emissions across entire supply chain by 2030, as well as announcing new commitments to reduce carbon emissions from our own operations to net zero by 2025 ### GOVERNANCE ### & COMPLIANCE - Received reports from board Committees and the external auditor - Reviewed and approved the 2020 Annual Report, Form 20-F and Sustainability Report - Reviewed the 2021 Modern Slavery Act Statement and approved it for publication on the Company website - Reviewed Annual General Meeting arrangements to consider the impact of Covid-19 and approved the 2021 Notice of Annual General Meeting - Undertook and considered the output of an externally facilitated evaluation of the Board's effectiveness, the effectiveness of each committee and individual directors. For more details see page 100 - Continued focus on the Board's composition, diversity and succession plans, resulting in the appointment of a new Non Executive Director and Board Committee membership changes - Reviewed the risk management and internal controls across the Group, including in-depth reviews of internal controls over financial reporting, with a focus on remediation of material weaknesses. For more details see page 127 - Carried out a robust assessment of the principal risks and uncertainties affecting the Group and the markets we operate in and strategic risk reviews, including cyber and information security. WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE ## COMPOSITION, SUCCESSION ## AND EVALUATION BOARD ATTENDANCE TABLE: 2021 Nomination and Audit Compensation Governance Sustainability Board Committee Committee Committee Committee Total number of scheduled meetings 6 9 5 4 4 Members Attended Attended Attended Attended Attended Roberto Quarta 6 5 4 Mark Read 6 John Rogers 6 Angela Ahrendts 6 4 Jacques Aigrain 6 9 5 Sandrine Dufour 6 9 5 Tarek Farahat 6 9 Tom Ilube 6 9 5 4 Cindy Rose 6 9 5 Nicole Seligman 6 5 4 Sally Susman 6 4 4 Keith Weed 6 4 Jasmine Whitbread 6 5 4 Dr. Ya-Qin Zhang – appointed on 1 January 2021 6 Number of ad hoc meetings 7 1 5 0 1 ### BOARD COMPOSITION OUR BOARD – A DIVERSE MIX OF SKILLS, As at the date of this report, our Board EXPERIENCE AND KNOWLEDGE comprised 12 independent Non-Executive Directors, the Chairman and two Executive SKILLS Directors. The aim is to ensure the balance 14 14 of the Board reflects the needs of the 11 Company, is culturally diverse and is able to 10 10 9 consider matters from a broad perspective, 7 understanding the views of all our stakeholders. Each individual Board member brings a wide range of skills and experience from different business backgrounds to Board Audit and Finance FMCG Technology Sustainability Global Strategy, risk media & transactions, deliberations. Further details, including the management advertising M&A external appointments held by Board members and their Committee membership, can be found on pages 108-110. Further detail GEOGRAPHICAL EXPERIENCE on the responsibilities of the Chairman and members of the Board can be found 14 13 on pages 116-117. 12 10 9 The chart opposite details those skills and 5 experience of our Board which are identified as being particularly important to the execution of the Company’s strategy. | | Africa & | Asia | Europe Latin | International North | | | | --- | --- | --- | --- | --- | --- | --- | | | Middle | Pacific | | | America | America | | 13 | East | | | | | | 119WPP ANNUAL REPORT 2021 Corporate governance CORPORATE GOVERNANCE COMPOSITION, SUCCESSION AND EVALUATION | DIVERSITY | RE-ELECTION OF DIRECTORS | introduce the Company’s key stakeholders, | | --- | --- | --- | | WPP believes that diversity and difference | The Chairman, Senior Independent Director | as well as explain the commercial and | | power creativity. We foster an inclusive | and Non-Executive Directors are appointed | regulatory environment in which the | | culture across WPP: one that is equitable and | for a three-year term, subject to annual | Company operates. More detail is set out | | respectful of diverse thoughts and individual | re-election by the shareholders at the AGM. | in the table below. | | expression; and the same principle applies | With only specific exceptions to ensure Board | | | to the composition of our Board. The Board | continuity, Non-Executive Directors shall not | INDEMNIFICATION OF DIRECTORS | | has a diverse range of experience by way | stand for re-election after they have served | Liability insurance and third-party indemnity | | of expertise, business sector background | for the period of their independence, as | provisions are in force for the benefit of | | and length of tenure on the Board. Our | determined by applicable UK and United | directors and officers who held office during | | Non-Executive Directors demonstrate | States standards, which is nine years. | the year and up to the approval of the Annual | | expertise from a range of industries including | | Report. | | tech, marketing, financial services, FMCG | Jacques Aigrain and Sally Susman will not | | | and pharma, representative of our customer | stand for re-election at the AGM in 2022. | BOARD EVALUATION | | base. The chart on page 119 illustrates the | With the exception of Simon Dingemans, | Each year, WPP completes a review of the | | range of skills across the Board, with the | who is standing for election for the first time, | Board and its Committees to monitor their | | new appointments in 2021-2022 bringing | all other Directors will stand for re-election | effectiveness and identify improvement | | additional expertise in technology, M&A and | at the AGM with the support of the Board. | opportunities. Progress against the outcomes | | corporate governance. | The Non-Executive Directors’ letters of | of the 2020 evaluation conducted by Nicole | | | appointment are available for inspection | Seligman, Senior Independent Director, are | | The Board’s Diversity Policy, which is available | at the Company’s registered office. | set out in the table shown overleaf. | on our website, wpp.com, reinforces the | Board’s ongoing commitment to all aspects | INDUCTION PROGRAMME | 2021 BOARD EVALUATION | | --- | --- | --- | | of diversity and supports the principles of the | To ensure that they are able to effectively | In accordance with the Code requirements, | | FTSE Women Leaders and Parker reviews on | contribute to discussion and decision-making, | it is the Board’s policy to undertake an | | gender and ethnic diversity. As at 31 December | all Directors participate in an induction | externally facilitated evaluation every three | | 2021, we met both diversity targets as women | programme on joining the Board. Each | years. The 2021 evaluation was externally | | represented 43% of the Board (46% as at | induction programme is tailored to the | facilitated by Dr Long of Boardroom Review | | 31 December 2020) and three Directors are | individual Director, based on their personal | Limited who has no other connection with the | | from an ethnic minority background. We | experience and background, including | Company. During the course of the review, | | were pleased to be ranked in the top 10 for | matters specific to their role as a member | Dr Long attended Board and Committee | | gender representation among senior leaders | of the committees upon which they sit. | meetings as an observer and held one-on-one | | and at board level in the FTSE Women Leaders | | discussions with each Director, the Group | | Review. As at the date of reporting, the | Each induction programme includes | Company Secretary, Group Chief Counsel | | percentage of women on our Board is | meetings with members of the Executive | and Chief Operating Officer. Discussions | | 40% following the appointment of Simon | Committee, senior management and external | were based around a number of themes, | | Dingemans, however, our ambition for Board | advisors including the external auditor and | including the Board’s leadership and | | gender diversity remains to reach parity. | the Company’s corporate brokers. New | contribution, the work of the Board (with | | | Directors will also receive a Board induction | a focus on strategy, ESG, risk and control, | | Diversity, equity and inclusion is also | pack, which is devised to assist with building | people and wider stakeholder engagement), | | integrated across workforce policy and the | an understanding of the Company and to | and the use of time and information. | Board is provided with regular updates covering a range of metrics and measures, including trends around gender and ethnic TYPICAL AREAS OF FOCUS FOR INDUCTION PROGRAMMES INCLUDE diversity. WPP was named in the 2022 MEETINGS STAKEHOLDERS Bloomberg Gender-Equality Index for the Meetings with Board members and members Stakeholder perceptions and key issues fourth consecutive year. For more information of the Executive Committee, including WPP’s raised by, for example, investors, regulators on gender diversity in executive leadership operating company leaders and country and industry groups are explained by our roles see page 53. managers in key markets investor relations and sustainability teams, as well as the Company’s external advisors BRIEFINGS CORPORATE GOVERNANCE Briefing sessions on the financial structure The Group Company Secretary provides and organisation, key financial metrics, advice on corporate governance matters, principal risks and the Company’s internal including duties and responsibilities as a control framework, provided by the Chief director of a listed company. Training Financial Officer, the Group Chief Counsel and development requirements are typically and the Group’s external auditor identified as part of the induction WPP ANNUAL REPORT 2021120 COMPOSITION, SUCCESSION AND EVALUATION CORPORATE GOVERNANCE | The output of the 2021 review was that the | – Risk/risk appetite: further align approach | At the Board strategy meeting in October, | | --- | --- | --- | | Board is operating effectively, with strong | to risk appetite across the organisation to | members of the senior management team | | leadership and support for the quality of the | support the longer-term strategy and | together with the Board, had an opportunity | | relationships among the Chairman, the | inform key decisions. Monitor cyber risk | to review WPP’s strategy for growth, operating | | Senior Independent Director, Non-Executive | and resilience across the organisation. | model and data and technology approach. | | Directors and the Executive Directors. Good | – Meeting agendas: improve the use of time | | | progress was also acknowledged to have | balance between presentation and | The Group Chief Counsel and the Group | | been made to further enhance the skills and | discussion at meetings to create more | Company Secretary provide regular updates | | experience on the Board and Committees, | time for debate. | on current legal and governance matters | | to align with the strategy and governance | | relevant to WPP, with external counsel | | requirements. The Board continues to be | CHAIRMAN’S PERFORMANCE REVIEW | providing briefings on the wider landscape. | | positively engaged with the strategic | The Senior Independent Director met with | The Board activities schedule on page 118 | | process and transformation programme. | the Non-Executive Directors during the year | sets out further detail on topics covered | | | to appraise the performance of the Chairman. | during the year. | Key areas of focus in 2022 will be: | | BOARD TRAINING AND DEVELOPMENT | The Board is asked to complete a | | --- | --- | --- | | – Strategy and performance: create further | To assist the Board in undertaking its | programme of training covering How We | | engagement opportunities with | responsibilities, ongoing training is provided | Behave, Business Integrity, Safer Data and | | stakeholders to receive insights and | to all Directors and training needs are assessed | Sustainability which are connected to the | | enhance visibility of the emerging and | as part of the induction programme and | ethical and business objectives set out in | | evolving landscape. Ensure there is | Board evaluation process. In 2021, the Board | our Code of Conduct. As part of our ongoing | | continued and dedicated focus on the | programme included regular presentations | commitment to create more open and | | transformation programme including | from the management teams of our businesses | inclusive workplaces, the Board is also asked | | performance of the component parts. | on developments in our sector and our | to complete a dedicated Company-wide | | – Succession planning: to continue to | operating environment, particularly focused | inclusion module – Belonging at WPP. | | strengthen leadership, talent, diversity and | on digital transformation and trends, | | | succession for key senior management | sustainability and ESG, and key emerging risks. | All Directors have access to the advice and | | positions, and consider future Board and | | services of the Group Chief Counsel and the | | committee composition. | | Group Company Secretary. The Board also | obtains advice from professional advisors, as and when required, and Directors may, as KEY RECOMMENDATIONS FOR 2021 WHAT WE HAVE DONE IN 2021 required, obtain external advice at the expense of the Company. SUSTAINABILITY AND ESG The Board approved the sustainability strategy Build further on WPP’s sustainability strategy and WPP held its first investor day on ESG ### TIME COMMITMENT and commitment to ESG matters, with issues to discuss the strategy and how WPP In addition to attending Board and ongoing dialogue with stakeholders is helping clients grow inclusively and sustainably Committee meetings, each of the Non- Executive Directors devotes sufficient time STRATEGY Regular updates on progress against the to the Company to ensure that their Maintain momentum on the execution of the strategy and transformation programme were responsibilities are met effectively. When strategy, monitor effectiveness and keep provided by the CEO and CFO, including deep making new appointments, the Board takes stakeholders informed of progress dives on component parts into account other demands on Directors’ time. Prior to appointment, significant RISK FRAMEWORK The Board continued its focus on risk Continue to focus on the effectiveness of management and reviewing the effectiveness commitments are disclosed by Directors the Company’s approach to risk management of the Company’s approach and systems, to the Board. Any additional external and system of internal controls, as well as including providing oversight on the design appointments are not undertaken by any monitoring future risks and challenges and build of a new risk analytics platform and of the Directors without prior approval from across businesses and markets the assessment of and reporting on emerging the Board. and principal risks | ORGANISATION OF MEETINGS | Board strategy event was held in October | | --- | --- | | Consider organisation of meetings post | in Palo Alto, hosting senior management, | | Covid-19 to create opportunities again and | key clients and tech partners and other | | time for discussion and renewed exposure to | stakeholders, as well as informal gatherings | | senior management and key stakeholders | with senior leaders throughout the year | 121WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE ## NOMINA TION AND ## GOVERNANCE COMMITTEE REPORT As noted in last year’s report, the Board was | Committee members | further enhanced during the year with the | | --- | --- | | – Roberto Quarta (Chair) | appointment of Dr. Zhang who joined as a | | – Nicole Seligman | Non-Executive Director in January 2021. | – Sally Susman – Tom Ilube CBE (appointed 1 January 2021) These appointments support the Committee’s – Angela Ahrendts DBE (appointed priority to diversify the Board, build further 15 March 2022) confidence in the leadership of the Company The Company Secretary is Secretary to the and bring different perspectives to discussions, Committee and attends all meetings. ROBERTO QUARTA reflective of our stakeholders and the CHAIR OF THE NOMINATION AND markets in which we operate. Key responsibilities: GOVERNANCE COMMITTEE – Reviewing the composition of the Board The Committee also considered the findings including the balance of skills, knowledge ### DEAR SHAREHOLDER of the 2021 Board evaluation which was and expertise, experience and diversity As Chair of the Nomination and Governance conducted by Dr Tracy Long, and I am – In conjunction with the Board, considering Committee, I am pleased to present the pleased that the review concluded that the succession planning for Non-Executive Committee’s 2021 report. Committee and the Board are operating Directors, Executive Directors and senior management effectively. – Making recommendations to the Board During the year, the Committee focused on for the appointment or reappointment near to medium-term succession planning, Lastly, the Committee continued to review of Directors particularly relating to the planned departures action taken to comply with the Code and – Considering other significant commitments of long serving directors, Jacques Aigrain, other legal, governance and regulatory of prospective directors and reviewing the our Audit Committee Chair and Sally Susman, obligations during the year. external commitments of Directors at the 2022 AGM, and Nicole Seligman, our – Monitoring external governance Senior Independent Director at the 2023 I should like to thank the other Committee developments and bringing any issues to AGM. Each would have completed or be members for their dedication throughout the the attention of the Board | | approaching their nine-year tenure on the | year and the sections that follow provide | | --- | --- | --- | | Attendance at Committee meetings during | Board, at the time of departure. I am delighted | more detail on the work undertaken by the | | the year can be found on page 119. | that Sandrine Dufour will succeed Jacques | Committee during the year. | Aigrain as Audit Committee Chair, effective from 1 April 2022. Roberto Quarta | The Committee, with the assistance of | Chair of the Nomination | | --- | --- | | Russell Reynolds, led the search process for a | and Governance Committee | | new NED candidate based on agreed criteria, | 31 March 2022 | NON-EXECUTIVE DIRECTOR and I am delighted that following a formal APPOINTMENT PROCESS selection process, Simon Dingemans joined the Company as a Non-Executive Director on Engage with search consultancy 31 January 2022 and became a member of STEP 1 and provide them with a search the Audit Committee upon appointment. specification More detail on the Non-Executive Director appointment process is set out in the table Shortlisting candidates to the left. Simon brings a wealth of financial STEP 2 by Committee and capital markets expertise and proven listed company experience and we are delighted to have him on the Board. Interview process with STEP 3 Committee members and Chief Executive Officer Recommendation to the Board STEP 4 on the chosen candidate Appointment terms drafted and STEP 5 agreed with the selected candidate prior to announcement WPP ANNUAL REPORT 2021122 NOMINATION AND GOVERNANCE COMMITTEE REPORT CORPORATE GOVERNANCE | BOARD AND COMMITTEE CHANGES | Simon Dingemans will stand for election at | CONFLICTS OF INTEREST | | --- | --- | --- | | As mentioned, two of our long-standing | the AGM. All other Directors, with the exception | The Committee and the Board are satisfied | | Non-Executive Directors, Jacques Aigrain | of Jacques Aigrain and Sally Susman, will | that the external commitments of the | | and Sally Susman will not be standing for | stand for re-election. | Non-Executive Directors and of me, your | | re-election at the AGM in 2022, and Simon | | Chairman, do not conflict with our duties and | | Dingemans was appointed on 31 January 2022. | The Committee has commenced a search | commitments as Directors of the Company, | | | process to identify a successor for the Senior | and that each Non-Executive Director is | | We made a number of changes to Board | Independent Director so that an appointment | able to dedicate sufficient time to the | | Committee membership in early 2021, as | can be made in good time with a smooth | Company’s affairs. | | disclosed in last year’s report and, in addition, | transition, taking into account the significance | | | Sally Susman stepped down as Co-Chair of | of the role. | Directors have a duty to avoid a situation | | the Sustainability Committee in June 2021, | | in which they have, or may have a direct | | while remaining a member of that Committee. | The Committee will continue to review and | or indirect interest that conflicts, or might | | Sandrine Dufour will take over from Jacques | refresh the composition and size of the Board | conflict with the interests of the Company. | | Aigrain as Chair of the Audit Committee with | and its Committees to ensure we have the | This duty is in addition to the existing duty | | effect from 1 April 2022 and Simon Dingemans | right balance of skills and attributes and fresh | owed to the Company to disclose to the | | became a member of the Audit Committee | perspectives, to support the next stage of | Board any interest in a transaction or | | upon joining the Board. Angela Ahrendts was | the Company's growth and long-term | arrangement under consideration by the | | appointed to the Nomination and Governance | strategy. The Committee recommended | Company. Our Directors must: report any | | Committee, and Dr. Ya-Qin Zhang was | that given the current size of the Board, | changes to their commitments to the | | appointed to the Sustainability Committee, | future appointments should be made on | Committee; immediately notify the Company | | with effect from 15 March 2022. | a needs basis. | of actual or potential conflicts or a change | in circumstances relating to an existing | SUCCESSION PLANNING | The Committee supported the Board on | authorisation; and complete an annual | | --- | --- | --- | | Board succession planning, from the | succession plans for management and | conflicts questionnaire. Any conflicts or | | perspective of addressing distinct | Executive Committee members to ensure a | potential conflicts identified are considered | | experiential gaps, diversity and governance | diverse pipeline of potential successors to | and, as appropriate, authorised by the Board | | requirements, following the planned | support the transformation programme. | in accordance with the Company’s Articles | | departures at the 2022 and 2023 AGMs, | | of Association. A register of authorised | | formed a key area of focus this year. | ASSESSMENT OF INDEPENDENCE OF | conflicts is also reviewed periodically. | ### NON-EXECUTIVE DIRECTORS | The Committee, having considered the | The Committee assessed the independence | During the financial year, no actual or | | --- | --- | --- | | criteria, relevant skills, experience and | of all the Non-Executive Directors pursuant | potential conflicts were identified. | | expertise needed on the Board, with the | to the Code and concluded that all are | | | assistance of Russell Reynolds, who are | considered independent and continue to make | BOARD EVALUATION | | independent of the Company and all the | independent contributions and effectively | The Committee considered the findings of | | Directors, led the search for a new Non- | challenge management. The Committee | the 2021 Board evaluation. | | Executive Director with financial expertise | was satisfied with the contributions and | | | as well as M&A and UK governance and | time commitment of all the Non-Executive | The performance of the Committee was | | regulatory experience in large UK listed | Directors during the year. | considered as part of the 2021 Board | | companies. The Committee considered | | evaluation process, which concluded that | | a list of potential candidates and took into | As disclosed in last year’s report, effective | the Committee is operating effectively and | | account the balance of skills, knowledge, | 31 March 2021, Jasmine Whitbread was | continues to successfully plan for and ensure | | independence, diversity and experience | appointed a director and Chair of Travis | Board composition is aligned to strategy | | of the Board, together with an assessment | Perkins plc, a company which John Rogers | and governance requirements, and reflects | | of the time commitment expected. The | was also a Non-Executive Director of, at the | greater diversity and an enhanced mix of | | preferred candidate met with the Chair | time. John Rogers stepped down as a | skills and expertise. Further details on the | | and other members of the Committee and | Non-Executive Director of Travis Perkins plc, | process and output of the Board evaluation | | Board, following which the Committee | effective October 2021 and therefore the | are set out on page 120. | | recommended to the Board the appointment | cross-directorship no longer exists. The | | | of Simon Dingemans. | Board determined that the cross directorship | | did not affect its assessment of Jasmine’s independence as she consistently demonstrated (and continues to demonstrate) independence of thought and challenge. 123WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE NOMINATION AND GOVERNANCE COMMITTEE REPORT | GOVERNANCE | well as engages and hears from our people | FOCUS FOR 2022 | | --- | --- | --- | | The Committee has responsibility for | on a broad range of topics. The views and | The Committee, in conjunction with the | | overseeing the effective governance of the | insights from the various forums are shared | Board, will continue to review succession | | Board and its Committees and for making | directly with the Board, and the Board’s | plans both at the Board and senior | | recommendations to the Board to ensure | feedback and how the insights have informed | management level to develop a strong and | | arrangements are consistent with emerging | decision making is presented back. During | diverse talent pipeline. As mentioned, a | | best practice. | 2021, Keith Weed, Chair of the Sustainability | particular focus in 2022 will be on identifying | | | Committee, and Tom Ilube also attended | a successor for the Senior Independent | | The Committee also reviewed the | WAP meetings respectively as guests to | Director. The Committee will also continue to | | composition and make-up of the Board | discuss topics such as sustainability and | monitor external governance developments | | Committees as detailed above. | diversity and inclusion. Jasmine Whitbread, | likely to impact the operation of the Board. | Chair of the Compensation Committee, the | Templates and guidance for Board and | WPP Chief People Officer and the Global | TERMS OF REFERENCE | | --- | --- | --- | | Committee presentations were further | Head of Reward also attended WAP meetings | The Committee’s terms of reference are | | enhanced in order to support the Board and | as guests to engage with members on | reviewed annually by the Committee and | | Committees’ consideration of employee and | remuneration and the impact of remuneration | adopted by the Board, most recently on | | other stakeholder views when making | policy and outcomes. Issues raised at the | 8 February 2022. A copy of the Committee’s | | decisions. | WAP meetings and People Forums included: | terms of reference is available on the | | | return to office plans and future working | Company’s website at wpp.com/investors/ | | WORKFORCE ENGAGEMENT | environments post Covid-19; diversity and | corporate-governance. | | In order to apply the requirements of the UK | inclusion; talent frameworks and development; | | | Corporate Governance Code that relate to | and mental health and wellbeing. | | workforce engagement, WPP established a | UK Workforce Advisory Panel (WAP) in 2019 | The Chief Executive Officer and the Chief | | --- | --- | | with Cindy Rose continuing to fulfil the | People Officer provided frequent People | | position of designated Non-Executive Director. | updates to the Board, including results on | | During the year, similar People Forums were | the various employee engagement and | | established in the United States and India to | belonging surveys undertaken throughout | | enable further engagement with the | the year. In addition, the Global Inclusion | | Company’s global employee base. | Council met throughout the year to deliver | on the Company’s diversity, equity and | Cindy regularly attends the WAP meetings | inclusion commitments. For more information | | --- | --- | | and where possible, the United States and | on actions taken in response to employee | | India People Forums, and presents updates | feedback, please see page 52. | on issues discussed at Board meetings as WPP ANNUAL REPORT 2021124 CORPORATE GOVERNANCE ## AUDIT COMMITTEE ## REPORT – leading the external audit tender process Committee members and recommending to the Board, subject 1 – Jacques Aigrain (Chair) to shareholder approval, the appointment 1 – Sandrine Dufour of PricewaterhouseCoopers LLP (PwC) as – Tarek Farahat external auditor from the Company’s 2024 – Cindy Rose OBE financial year onwards; – Tom Ilube CBE (appointed 1 January 2021) – being appraised of the investigation into – Simon Dingemans (appointed 31 January 2022) FCPA violations by the SEC, as announced The Company Secretary is Secretary to the on 24 September 2021; Committee and attends all meetings. JACQUES AIGRAIN – ongoing monitoring of the business The entire Board is invited to attend the CHAIR OF THE AUDIT COMMITTEE integrity programme, including oversight Committee meetings and typically the Chair of whistleblower reports; of the Board and the Senior Independent – continuing to engage with the internal Director attend. Other regular attendees include ### DEAR SHAREHOLDER audit plan and monitoring progress; the Chief Executive Officer, the Chief Financial As Chair of the Audit Committee, I am – providing recommendations to the Board Officer, the Chief Operating Officer, the Group pleased to present the Committee’s 2021 to recommence and extend the share Chief Counsel, the Group Finance Director, the report, my last as I step down from the Board buyback programme; and Group Chief Accountant, the Group Finance | Controller, the Global Director Risk and Controls, | at the 2022 AGM, following a nine-year | – Providing oversight for the restatement of | | --- | --- | --- | | the General Counsel Corporate Risk, the Director | tenure. I am delighted that Sandrine Dufour | historic tax asset and liability adjustments. | | of Internal Audit, and the external auditor. | will succeed me as Chair of the Committee | For more details see page 158. | effective from 1 April 2022 as announced on The Board has determined that Jacques Aigrain 29 March 2022. In the following pages of this Other reviews undertaken in 2021 by the and Sandrine Dufour are audit committee financial | experts as defined by the Sarbanes-Oxley Act | report, we have set out an overview of the | Committee included: | | --- | --- | --- | | 2002 and, together with Tarek Farahat, have | activities undertaken or overseen by the | | | recent and relevant financial experience for the | Committee during the year. | – Group tax strategy, performance and | | purposes of the 2018 UK Corporate Governance | | drivers of the Group effective tax rate; | Code. As announced on 31 January 2022, In 2021, the Committee continued to fulfil its – reports on any actual or potential material Simon Dingemans was appointed as a Director important oversight role, monitoring the litigation; and member of the Committee effective from integrity of the Company's financial reporting – Group Treasury performance and risk 31 January 2022 and is considered to have recent and the effectiveness of internal control and management; and relevant financial experience. The members risk management systems on which it has – Group Finance team structure and of the Committee have been determined to | be independent within the meaning of the | reported to the Board. | reorganisation; | | --- | --- | --- | | applicable NYSE listing standards and rules of | | – the Procurement supplier onboarding | | the Securities Exchange Act 1934, as amended. | Key areas of focus for the Committee in | processes; and | | The Committee has, as a whole, competence | 2021 included: | – reports on data protection and data privacy. | relevant to the sectors in which the Company operates. – continuing to provide oversight of the The Chief Financial Officer provided regular Key responsibilities financial reporting process and integrity updates directly to the Board on the – Monitoring the integrity of financial information of the financial statements; transformation programme, as well as deep provided to shareholders, including the review – monitoring the role and performance of dives on component parts. of significant financial reporting judgements the Risk and Controls Group against its – Reviewing the integrity, adequacy and objectives to strengthen the Internal The Committee reviewed letters received effectiveness of the Company's internal Financial Controls Framework, particularly from and the Company's responses to the financial controls and the internal control focused on Sarbanes-Oxley Act Financial Reporting Council’s (FRC) Corporate and risk management systems, including the risk management framework and related compliance, and developing controls Reporting Review team, in relation to the compliance activities relating to risks identified in the Risk Company's 2020 Annual Report and Accounts. 2 | – Monitoring and reviewing the Company's | Appetite Framework; | The FRC confirmed closure of its review | and | | --- | --- | --- | --- | | internal audit function | – monitoring the processes and progress to | suggested comments are reflected in the | | | – Reviewing the selection and appointment | address the material weaknesses identified | | | | | | 2 Scope and limitations of the FRC review: the FRC’s review was | | of the external auditor as part of the 2020 audit, relating to based on the 2020 Annual Report and Accounts of WPP plc – Reviewing the effectiveness of the external goodwill impairment as well as net and did not benefit from detailed knowledge of our business audit process and reviewing and monitoring or an understanding of the underlying transactions entered investment hedging and complex IFRS the independence and objectivity of the into by the Company. As part of their review, the FRC provided and accounting matters; external auditor no assurance that the Company’s 2020 Annual Report and Accounts were correct in all material respects and did not Attendance at Committee meetings during the verify the information provided but considered compliance year can be found on page 119. with reporting requirements only. The FRC accepts no liability for reliance on their review by the Company or any third party, 1 including but not limited to investors and shareholders. Sandrine Dufour will succeed Jacques Aigrain as Audit Committee Chair, effective 1 April 2022. 125WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT | 2021 Annual Report. Summary review findings | FINANCIAL REPORTING | The Committee therefore recommended to | | --- | --- | --- | | are expected to be published by the FRC on | The Committee is responsible for reviewing | the Board (which the Board subsequently | | their website in due course. | the quarterly, half yearly and annual financial | approved) that, taken as a whole, the 2021 | | | results, including the Annual Report, with | Annual Report and Accounts is fair, balanced | | The annual Board effectiveness evaluation | management, focusing on the integrity of the | and understandable and provides the | | assessed the performance of the Committee | financial reporting process, compliance with | necessary information for shareholders | | and I am pleased that this concluded that it | relevant legal and financial reporting | to assess the Company’s position and | | operates effectively and the Board takes | standards and application of accounting | performance, business model and strategy. | | reassurance from the quality of the | policies and judgements. | | | Committee’s work. The Board is satisfied | | INTERNAL AUDIT | | that the Committee members bring a wide | During the year, the Committee considered | The Internal Audit team, which reports | | range and depth of financial and commercial | management’s application of key accounting | functionally to the Audit Committee, provides | | experience and, in addition to those | policies, compliance with disclosure | independent assurance over the Company’s | | members designated to have recent and | requirements and relevant information | risk management and internal controls | | relevant financial experience for the purposes | presented on significant matters of | processes via internal audits and the testing | | of the 2018 UK Corporate Governance Code | judgement to ensure the adequacy, clarity | programme for the Sarbanes-Oxley Act. The | | (the 'Code'), Tom Ilube and Cindy Rose bring | and completeness of half yearly and annual | Internal Audit team has unrestricted access | | extensive subject matter and process | financial results announcements. The | to all Group documentation, premises, | | expertise including on emerging | Committee undertook a detailed review | functions, and employees to enable it to | | technologies and cyber security to the | before recommending to the Board that the | perform its work. | | Committee's membership. | Company continues to adopt the going | | | | concern basis in preparing the annual | The Committee Chair met regularly with the | | As announced on 31 January 2022, Simon | financial statements. | Director of Internal Audit during the year | | Dingemans became a member of the | | without executive management present to | | Committee upon his appointment to | The Committee also reviewed various | discuss risk matters and the nature of internal | | the Board and brings recent and relevant | materials to support the statements in the | audit findings in more depth. The Director | | financial experience for the purposes of | Annual Report on risk management and | of Internal Audit formally reports to each | | the Code. | internal control and the assessment of the | Committee meeting on the key findings of | | | Company's long-term viability – see page 92 | the function, together with the status of | | And finally, I would like to take the opportunity | for more details. | management’s implementation of | | to thank the members of the Committee, | | recommendations. On a quarterly basis this | | together with management, for their support | FAIR, BALANCED AND | includes key themes from internal audit’s | | during the year and throughout my time on | UNDERSTANDABLE | work. Significant issues identified were | | the Committee. I am very proud of the work | To support the Board’s confirmation that | discussed in detail by the Committee along | | the Committee has achieved in the past few | the Annual Report and Accounts, taken as | with the remediation plans to resolve them. | | years and wish Sandrine, the Board and the | a whole, is considered to be fair, balanced | | | management team continued success as | and understandable, and provides the | The annual internal audit plan, which includes | | they deliver on the Company's strategic | information necessary for shareholders to | assurance over our transformation activities, | | priorities. The sections that follow provide | assess the Company's position, performance, | was approved by the Committee and | | a more detailed explanation of the work of | business model and strategy, the Committee | progress against the plan was monitored | | the Committee undertaken during the year. | oversaw the process by which the Annual | throughout the year and changes to the plan | | | Report and Accounts were prepared. | noted. The team was able to continue to | operate successfully during the Covid-19 | Jacques Aigrain | The Committee received a summary of the | pandemic despite the inability to travel. | | --- | --- | --- | | Chair of the Audit Committee | approach taken by management in the | We are satisfied that the scope, extent, and | | 31 March 2022 | preparation of the Annual Report and | effectiveness of internal audit work are | | | Accounts, and considered in particular: the | appropriate for the Group and that there is | | | accuracy, integrity and consistency of the | an appropriate plan in place to sustain and | | | messages conveyed in the Annual Report; | continually improve this. | the appropriateness of the level of detail in | the narrative reporting; and that a balance | As noted in last year’s report, the Committee | | --- | --- | | had been sought between describing | approved the appointment of Phil Gerrard as | | potential challenges and opportunities. | Director of Internal Audit in March 2021, in | succession to Paul Stanley who retired later in the year. WPP ANNUAL REPORT 2021126 AUDIT COMMITTEE REPORT CORPORATE GOVERNANCE | RISK MANAGEMENT AND | As reported in our Annual Report on Form | Management also undertook a series of steps | | --- | --- | --- | | INTERNAL CONTROL | 20-F for the fiscal year ended 31 December | to complete a comprehensive review and | | The Board has overall responsibility for | 2020, material weaknesses were identified in | remediation of the Company's controls and | | setting the Company’s risk appetite and for | our internal control over financial reporting, | procedures and engaged outside advisors to | | ensuring there is effective risk management. | which related to: | assist in remediating material weaknesses | | The Committee supports the Board in the | | around complex accounting matters and | | management of risk and, in 2021, was | – Impairment assessment of intangible | judgement and changes in accounting | | responsible for monitoring and reviewing | assets and goodwill; | standards. More broadly, the comprehensive | | the effectiveness of the Company’s approach | – Complex accounting matters and | retrospective review included identifying all | | to risk management and the internal control | judgements and changes in accounting | critical accounting judgements with respect | | framework. | standards; and | to financial statement line items, evaluating | | | – Net investment hedging relationships. | the application of the underlying accounting | | Under the overall supervision of the | | standards to those judgements and | | Committee, the WPP Risk Committee, an | During 2021, and as described below, the | verifying the completeness, accuracy and | | executive committee supported by Risk | Committee finished implementing previously | reasonableness of those final judgements. As | | Committees in each network, identifies and | reported plans to remediate these material | part of this effort, management significantly | | assesses emerging and principal risks and | weaknesses, and management concluded | enhanced the staffing, capabilities and | | oversees and manages day-to-day risk in the | that such material weaknesses were | resources of our technical accounting | | business. The General Counsel, Corporate | remediated as at 31 December 2021. | function, which supported the retrospective | | Risk provides regular updates to the | | review efforts and will continue to provide | | Committee on risk matters including | With respect to the material weakness | ongoing support in regards to complex | | emerging risks, adherence to the Company’s | relating to the control over the discount rate | accounting matters and judgement and | | business integrity programme (including | methodology used in impairment testing, | changes in accounting standards. Under the | | mitigating and remediation actions) and the | management enhanced its risk assessment of | direction of our Global Director of Risk and | | monitoring and evolution of the Company’s | the impairment assessment process and | Controls, our new controls function that was | | four risk modules: governance, culture, | changed the approach to determining inputs | established in 2020 implemented enhanced | | appetite and management. | with respect to the discount rates used in | periodic controls, including controls to | | | impairment assessments and established a | identify and evaluate changes in the | | An overview of how our risks are assessed | more comprehensive review process over | underlying business, identify and evaluate | | and managed and how these were reviewed | inputs and the overall discount rate | amended or clarified accounting standards, | | to assess the Company's viability can be | methodology. Management also engaged an | or new guidance with respect to accounting | | found on pages 88-92 together with an | independent valuation specialist to assist as | standards, as well as controls surrounding | | assessment of the principal risks and | an integral part of the input determination | the verification of critical accounting | | uncertainties facing the Company on pages | process on an ongoing basis and | judgements, including those most likely | | 93-99. | implemented additional validation controls. | to be impacted by amendments to, or | | | We also conducted a refreshed risk | clarifications of accounting standards we | | In fulfilling its responsibilities, the Committee | assessment of the goodwill impairment | have adopted. Throughout 2021, our controls | | received reports throughout 2021 to enable | testing process; updated the Company's | function continued to review and enhance | | evaluation of the control environment and | control framework to ensure each risk is | controls across the Company. | | risk management framework. | mapped to a specific mitigating control; | | | | engaged valuation specialists to assist in | With respect to our net investment hedging | | INTERNAL CONTROLS OVER | ensuring the accuracy and integrity of the | arrangements, management re-reviewed | | FINANCIAL REPORTING | impairment testing model and determining | our hedging relationships and the associated | | The Committee carried out in-depth | recoverable amounts that require significant | documentation and analysed the application | | reviews of the Group’s internal controls | judgement; and implemented additional | of hedge accounting to all other financial | | over financial reporting, with a focus on | reviews of the selection of cash flow periods. | instruments to which such accounting | | monitoring remediation of material | With respect to our controls relating to the | treatment is being applied. Management | | weaknesses and compliance with Section | determination of the assumptions in respect | has updated the design of our controls | | 404 of the Sarbanes-Oxley Act. The following | of working capital cash flows included in the | to verify the nature and existence of | | paragraphs outline the approach taken by | impairment calculation, additional validation | contemporaneous hedge documentation | | management in relation to the remediation of | controls and additional reviews of the net | in accordance with IAS 39. | | material weaknesses, which the Committee | working capital assumptions were | | | oversaw and continues to monitor. | implemented. | | 127WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT | BUSINESS INTEGRITY | AUDIT TENDER | From the Company’s 2024 financial year | | --- | --- | --- | | During the year, the Committee reviewed the | Deloitte LLP (Deloitte) was appointed | onwards, PwC will be appointed in Deloitte’s | | adherence to, and evolution of, the business | external auditor of the Company in 2002 and, | place, subject to shareholder approval. We | | integrity programme. The Company has | as defined by the transitional arrangements | wish to thank each firm that participated in | | established and in 2021 refreshed its | for competitive tender, they are not | the tender for the professionalism and | | procedures by which all employees may, in | permitted to be reappointed as the | commitment they demonstrated through | | confidence (and, if they wish, anonymously) | Company’s auditor after the 2023 fiscal | the process. | | report any concerns and more information | year-end. | | | on this can be found on page 90. The | | A transition governance group (Governance | | Committee received regular updates on the | We advised shareholders in last year’s | Group) has been established, led by the | | Company’s systems and controls for ethical | Annual Report that the Committee had | Group Finance Director. Ten workstream | | behaviour, which included matters reported | initiated a competitive tender process for | teams, consisting of members from both | | on the Company's Right to Speak helpline | the external audit contract. The tender | WPP and PwC, have been created to ensure | | and investigations and actions undertaken in | process was overseen by an audit tender | all aspects of the transition are proactively | | response. The Committee received regular | committee (ATC), chaired by Jacques Aigrain. | managed. The workstreams provide regular | | reports on the total number and nature of | Other members of the ATC were Sandrine | updates to the Governance Group, which in | | reports from whistleblowers and | Dufour, the CFO, the Group Chief Counsel, | turn provides quarterly updates to the | | investigations by region and by network | and the Group Finance Director. | Committee. This supports the Committee in | | both for substantiated and unsubstantiated | | overseeing the transition from Deloitte to | | cases. During the year the Committee was | Following a detailed market assessment, a | PwC to ensure that: | | satisfied that the Right to Speak helpline | number of audit firms, including some firms | | | arrangements are effective and facilitate the | outside the Big Four, were approached to | – Deloitte continues to discharge its | | proportionate and independent investigation | participate in this process. The current | auditing responsibilities effectively to the | | of reported matters and allow appropriate | external auditor, Deloitte, was not invited | end of its time in office; and | | follow-up action. | to participate in the tender due to the | – PwC takes the necessary steps to ensure | | | prevailing rules on audit firm rotation. | that it is independent of the Company and | | TERMS OF REFERENCE | | fully mobilised by the time it begins audit | | The Committee’s terms of reference are | This enabled the Committee to recommend | planning activities (including shadowing | | reviewed annually by the Committee and | to the Board the appointment of PwC as the | Deloitte’s 2023 audit) to observe Deloitte | | adopted by the Board, most recently on | preferred new auditor from two shortlisted | at an appropriate juncture in 2023. | | 20 January and 9 February 2022 respectively. | bidding firms, a recommendation which the | | | A copy of the Committee’s terms of | Board subsequently endorsed in September | The Committee looks forward to reporting | | reference is available on the Company’s | 2021. The Committee’s judgement was that | to shareholders on discharging the activities | | website at wpp.com/investors/corporate- | PwC was best placed to succeed Deloitte | associated with this transition in the | | governance | and deliver a high quality audit for the | Company’s 2022 Annual Report. | Company and in the best interests of its | EXTERNAL AUDITOR | shareholders. Subject to shareholder | | --- | --- | | The Committee has primary responsibility for | approval, Deloitte will continue in office until | | overseeing the relationship with the external | 2023, at which point they will retire after | | auditor, including assessing its performance, | completing the audit for the financial year | | effectiveness and independence annually | ending 31 December 2023. The overleaf | | prior to making a recommendation to the | timeline further illustrates the Company’s | | Board in respect of its reappointment or | evaluation and decision making process. | removal. The Company has complied with the Competition and Markets Authority’s Statutory Audit Services Order 2014 for the financial year under review in respect to audit tendering and the provision of non-audit services. WPP ANNUAL REPORT 2021128 CORPORATE GOVERNANCEAUDIT COMMITTEE REPORT 2021 EXTERNAL AUDIT TENDER PROCESS Decision makingEvaluationPre-tender Key steps Invitation to RFP issued Site meetings Written Oral Committee Board decision participate and and data room proposals presentations recommendations interview of Lead opened evaluation to ATC panel Partners March – April May – June June July September Governance Committee Chair, Business and Business and ATC, Business ATC Committee Board CFO and Group Functional Functional and Functional Financial Director Leadership Leadership Leadership Outputs | Short listing and | Knowledge | Initial feedback | Proposal Evaluation | Debrief and final | Recommended two | Successful firm | | --- | --- | --- | --- | --- | --- | --- | | pre-selection of | building by firms | shared with Lead | and ‘exam | evaluation of | firms for appointment, | appointed with | | Lead Partners | | Partners as input to | questions’ for oral | each firm | with a preference | effect from | | | | development of | presentation | | expressed for one firm | 1 January 2024 | their proposals | EFFECTIVENESS AND INDEPENDENCE | AUDIT/NON-AUDIT SERVICES | | APPOINTMENT OF EXTERNAL AUDITOR | | --- | --- | --- | --- | | OF THE EXTERNAL AUDITOR | £m | | AT GENERAL MEETING | | In 2021, the Committee evaluated the | | | The Committee has recommended to the | | effectiveness of the external audit process | 2021 | | Board, and the Board has approved that | | through its ongoing review of the external | 2020 | 30.5 | Deloitte should be reappointed as auditor. | | audit planning process and discussions with | | | Resolutions will be put to the 2022 | Audit fees (2021: 31.9, 2020: 29.3) key members of the Company's finance team. Annual General Meeting proposing the Non-audit fees (2021: 1.8, 2020: 1.2) re-appointment of Deloitte and to authorise | The Committee also considered: | | the Audit Committee to determine the | | --- | --- | --- | | | Deloitte attended all Committee meetings in | auditor’s remuneration. | | – a report from Deloitte confirming it | 2021 and met the Committee at least once | | | maintains appropriate internal safeguards | without executive management present. | NON-AUDIT SERVICES | | in line with applicable professional | | To preserve objectivity and independence, | | standards to remain independent, and | Overall therefore, the Committee | Deloitte is not asked to provide other | | mitigation actions to safeguard Deloitte’s | concluded that: | services unless it is in the best interests | | independence such as the operation of | | of the Company, in accordance with the | | the Non-Audit Services policy; | – it continues to be satisfied with the | Non-Audit Services Policy that sets out the | | – the appointment of James Bates as the | performance of the external auditor and | circumstances and financial limits within | | lead audit partner for Deloitte in respect | with the policies and procedures in | which Deloitte is permitted to provide | | of the 2021 audit; and | place to maintain its objectivity and | certain non-audit services. | | – the Audit Quality Review’s 2020/21 Audit | independence; and | | | Quality Inspection Report on Deloitte and | – Deloitte possesses the skills and | All fees are summarised periodically for the | | the actions taken by Deloitte to address | experience required to fulfil its duties, | Committee to assess the aggregate value of | | the findings in that report. | there was constructive challenge and | non-audit fees against audit fees. During the | | | appropriate scepticism where necessary | year, Deloitte received £31.9 million in fees | | | to ensure balanced reporting and that the | for work relating to the audit services it | | | audit for the year ended 31 December 2021 | provides the Company. Non-audit related | | | was effective. | work undertaken by Deloitte amounted to | fees of £1.8 million this year, which amounted to 5.6% of the total audit fees paid. 33.7 129WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT ### FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL JUDGEMENTS Key accounting judgements made by management were reported to and examined by the Committee and discussed with management and Deloitte. The Committee considered the following significant financial reporting judgements in relation to the financial statements: AREA OF FOCUS CRITICAL JUDGEMENTS AND ESTIMATES ACTIONS TAKEN/CONCLUSION Goodwill impairments The Committee assessed the appropriateness of the assumptions used by management in the goodwill Estimates and judgements in relation to goodwill impairment assessment model, with a particular focus on the discount rate and growth assumptions. impairment testing. Remuneration The Committee reviewed the assumptions applied by management in relation to judgemental elements Accounting for elements of remuneration where of remuneration, including pensions, bonus accruals and share-based payments, and agreed that these estimates and judgements are required. are reasonable. Taxation The Group Tax Director presented to the Committee in December 2021. The Committee considered The estimates and judgements made in respect management’s assumptions, in particular in relation to the level of central tax provisions, and believed of tax. that the level of central tax provisions is reasonable. The Committee also considered the restatement of the previously reported corporate income tax recoverable, corporate income tax payable and tax charge and agreed that the restatement was appropriate. OTHER AREAS Headline profit The Committee considered the judgement applied by management in calculating headline profit, in order Judgements relating to headline profit measures. to present an alternative picture of performance by excluding significant, non-recurring or volatile items otherwise included in the reportable figures. The Committee reviewed management’s judgements relating to restructuring and transformation costs, with particular focus on the continued rollout of the Group’s new ERP system and other ongoing transformation projects, including IT transformation projects, shared service centres and campus co-locations. The Committee was satisfied that excluding these amounts from headline profit measures was reasonable and that it had been disclosed appropriately. Going concern The Committee reviewed the scenarios modelled by management and assessed management’s view that The going concern assessment and viability the likelihood of declines of over 30% of revenue less pass-through costs compared to 2021 was remote. statement. The Committee has considered and concurs with management’s going concern, viability and forecasting assumptions, as set out on page 92. Revenue The Committee reviewed the judgements made in the assessment of certain large, central revenue The judgements made in respect of revenue. contracts and was satisfied that they had been treated appropriately. Liabilities in respect of put options and earnouts The Committee considered management’s calculations of the fair value of liabilities in respect of put The accuracy of the calculation of the fair value of option agreements and payments due to vendors (earnout agreements), including the forecasts, growth liabilities in respect of put options and earnouts. rates and discount rates used in these calculations. The Committee was satisfied that liabilities for potential future earnout payments had been accounted for appropriately. Investments The Committee examined management’s valuations, based on input from external advisors, forecasts, The valuations of non-controlled investments. recent third-party investment, external transactions and/or other available information such as industry valuation multiples. The Committee considered Deloitte’s testing of the valuations and agreed that the valuations were appropriate based on the information available to the Group. WPP ANNUAL REPORT 2021130 CORPORATE GOVERNANCE ## SUSTAINABILITY ## C OMMITTEE REP ORT ### CLIMATE CRISIS Committee members Recognising the growing urgency of the – Keith Weed CBE (Chair) climate crisis, the Committee had regular – Sally Susman (stepped down as in-depth progress reviews as the Company Co-Chair 8 June 2021) developed new and industry-leading – Angela Ahrendts DBE (appointed commitments to reach net zero carbon 1 January 2021) emissions across its own operations by 2025 – Jasmine Whitbread and across its value chain by 2030. In June – Dr. Ya-Qin Zhang (appointed | 15 March 2022) | | this ambition was underpinned by science- | | --- | --- | --- | | | KEITH WEED CBE | based targets, verified by the Science Based | | Regular attendees include the Chief | CHAIR OF THE | Targets initiative. In November, WPP | | Executive Officer, the Chief Financial | SUSTAINABILITY COMMITTEE | | executives attended COP26 in Glasgow, Officer, the Senior Independent hosting a panel discussion alongside the Director, the Group Chief Counsel, the ### DEAR SHAREHOLDER UNFCCC to explore the role of production Chief People Officer, the Director of As the Chair of the Committee, I am pleased and consumption in accelerating the Sustainability and the Global Corporate to present the Committee’s 2021 report. transition. The sustainability section on Affairs Director. pages 68-87 sets out the Company’s net zero | The Company Secretary is Secretary to | I would like firstly to take the opportunity to | commitments and performance. In 2022, the | | --- | --- | --- | | the Committee and attends all meetings. | thank Sally for co-chairing the Committee | Company will develop a detailed roadmap to | | | with me until June this year and for her very | deliver against these commitments. | | Key responsibilities | significant contribution to the success of the | | | – Understanding the sustainability | Committee since its formation in 2019. | HEALTH AND SAFETY | risks and opportunities for the The Committee assists the Board in its Company The Committee was formed in December oversight of health and safety related matters – Assisting the Board in its oversight 2019 to give increased focus on sustainability and, in 2021, received an update on the of corporate responsibility, for the Board and the Company, to strive to Group’s new Crisis Management and sustainability, health and safety and | reputation matters taking into | meet the expectations of our stakeholders | Business Resilience Unit, established in | | --- | --- | --- | | account the Company’s purpose, | and to ensure we are managing our risks and | March, to ensure that WPP agencies and | | strategy and culture | taking advantage of the opportunities. | people are well prepared to recognise | | – Assessing the Company’s current | | and respond to existing and emerging | | sustainability footprint, reviewing | The ongoing impact of the Covid-19 pandemic, | disruptive events. | sustainability targets and social unrest, political division and climate- commitments and materiality related disasters around the globe continue In February of this year, the Committee was – Reviewing and considering the to drive a focus on environmental, social and updated on the Company’s investment in Company’s Modern Slavery governance (ESG) matters, with significant mental health and wellbeing (see page 74), Statement and sustainability-related | policies including Environment | risks and opportunities for our business and | which will be a continued area of focus for | | --- | --- | --- | | Policy for approval by the Board | our clients. | the Board and the Committee in 2022. | | Attendance at Committee meetings | A large part of the focus of the Board and | Throughout the year, the Committee | | during the year can be found on | the organisation in 2021 has been the | alongside the Board received regular | page 119. | development and launch of a new | updates on the Group’s response to the | | --- | --- | | sustainability strategy for WPP, detailed on | Covid-19 pandemic, including a WPP Covid | | pages 70 and 71, which sets out how WPP | Relief Fund to give financial support to WPP | | aims to use the power of creativity to build | employees and their families in real time in | | better futures for our people, planet, clients | countries most affected by the pandemic | | and communities. | and work with the World Health Organization | Foundation on their Go Give One fundraising campaign. Further details can be found on page 81. 131WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE SUSTAINABILITY COMMITTEE REPORT | TRANSPARENCY AND ENGAGEMENT | TERMS OF REFERENCE | | --- | --- | | The Committee continues to support | The Committee’s terms of reference are | | management’s engagement strategy on | reviewed annually by the Committee and | | sustainability. During the year, management | adopted by the Board most recently on | | hosted a series of townhalls to discuss ESG | 19 January and 8 February 2022 respectively. | | topics with employees, and held its first | A copy of the Committee’s terms of reference | | ESG investor presentation. I also enjoyed | is available on the Company’s website at | | engaging with key investors on ESG topics | wpp.com/investors/corporate-governance | and look forward to a continued dialogue in 2022. I would like to thank the members of the Committee and the management team for | | The Committee will continue to monitor | their commitment throughout the year and | | --- | --- | --- | | | sustainability KPIs to measure delivery | look forward to continuing our work in 2022. | | UN CLIMATE CHANGE | against the Company’s strategy and targets. | | | CONFERENCE (COP26) | Progress relies on accountability so, in 2021, | | | Making it easier for consumers to live more | we included diversity, equity and inclusion | | | sustainably and reducing the carbon emitted in | goals in our incentive plans for senior | Keith Weed | production both require innovation. Spurring executives for the first time. We also included Chair of the Sustainability Committee innovation often requires consumer preferences our carbon reduction targets in incentive 31 March 2022 to shift, which is where the power of creativity plans for Executive Directors from 2021. is required. It is here that WPP plays a vital role through the work we do with our clients and valued partners such as the UNFCCC. The Committee notes that the ongoing Covid-19 pandemic has affected the | WPP is a partner to the UNFCCC and, at COP26 | Company’s ability to meet its commitment | | --- | --- | | in Glasgow, we hosted an important discussion | to phase out single-use plastics across its | | with the UNFCCC’s Deputy Executive Secretary, | offices and this will be a priority for the | Ovais Sarmad. Joining the discussion were the Committee to address in 2022. CFO of Alphabet and Google, Ruth Porat, and the CEO of Reckitt Benckiser, Laxman In August, the Committee participated Narasimhan. The panel was moderated by in the selection process to appoint a Bloomberg Television’s Maria Tadeo and focussed on the role responsible consumption new independent assurance provider, and production can play in accelerating the PricewaterhouseCoopers LLP (‘PwC’), transition to deliver the Paris Agreement on to support WPP’s assurance programme climate change. for certain non-financial data disclosed in this report. Throughout this report, selected ESG metrics highlighted with the symbol were subject to external independent limited assurance procedures by PwC for the year ended 31 December 2021. For the details and results of the limited assurance see wpp.com/sustainabilityreport2021. Selected content highlighted with the symbol in the Governance section of the TCFD statement on pages 214-216 was also subject to external independent limited assurance procedures by PwC for the year ended 31 December 2021. For the details and results of this limited assurance see wpp.com/sustainabilityreport2021. WPP ANNUAL REPORT 2021132 CORPORATE GOVERNANCE ## COMPENSATION COMMITTEE REPORT the retention and incentivisation of the Committee members leadership team to deliver a demanding plan – Jasmine Whitbread (Chair) for continued growth and value creation. – Jacques Aigrain – Sandrine Dufour (appointed 1 January 2021) The Committee believes that the decisions – Tom Ilube CBE (appointed 5 February 2021) made in respect of fixed compensation, the – Roberto Quarta annual Short Term Incentive Plan (STIP) and – Cindy Rose OBE (appointed 5 February 2021) long-term Executive Performance Share Plan – Nicole Seligman (EPSP) are a fair and accurate reflection of | Attendees | JASMINE WHITBREAD | the outstanding performance of the Company | | --- | --- | --- | | Other attendees at the Committee | CHAIR OF THE | and the Executive Directors during 2021. | | meetings were: | COMPENSATION COMMITTEE | | | – Chief Executive Officer | | COMPENSATION IN 2021 | – Chief Financial Officer ### DEAR SHAREHOLDER BASE SALARY 2021 – Chief People Officer On behalf of the WPP Board, I am pleased to Mark Read’s salary was last reviewed on – Global Reward and Performance Director present the Compensation Committee report appointment in September 2018. The review – Committee advisor (WTW) | | for the financial year ended 31 December 2021. | due in 2020 was postponed due to the impact | | --- | --- | --- | | The Chief Executive Officer and Chief Financial | In the report, I include my introductory letter | of Covid-19 which drove a focus on cost | | Officer are not present when matters relating | and At a Glance summary of compensation, | reduction including the postponement of | | to their own compensation or contracts are | an overview of the Directors’ Compensation | salary increases for all employees. His salary | | discussed and decided. | Policy (the 'Policy') approved by shareholders | was reviewed in 2021, alongside a wider | | | at the 2020 AGM and the Annual Report on | workforce salary review. In doing so, the | The Company Secretary is Secretary to the Compensation setting out the implementation Committee took into consideration the Committee and attends all meetings. of the Policy in 2021. The Report also sets out external market in the UK as well as the global the proposed implementation for 2022. advertising and media sector; Mark’s strong Key responsibilities performance in role since his appointment; – Setting the Compensation Policy and the | terms and conditions for the Chairman of | RETURN TO GROWTH | and the compensation landscape across the | | --- | --- | --- | | the Board, Executive Committee and | WPP has demonstrated exceptional | wider workforce. | | Company Secretary | performance in 2021, delivering growth | | | – Designing and monitoring incentive | ahead of pre-pandemic levels and our fastest | The Committee agreed an increase of 6.7% | | arrangements including setting targets | organic growth for over 20 years. WPP's | to £1,040,000 effective from 1 June 2021 | and assessing performance strategy is coming to fruition and the depth, which was Mark's first increase in three years. – Maintaining an active dialogue with breadth and global scale of our offer has Average annual salary increases in the UK shareholders and ensuring WPP practice enhanced our relationships with existing were around 5.6% in 2021, however individual aligns with corporate governance standards clients and built solid foundations with increases varied based on several factors. new clients. Mark's increase was within the range awarded to other high-performing employees. Such performance is underpinned by the | | creative talent and hard work of our people, | STIP 2021 | | --- | --- | --- | | OUR COMPENSATION | who continued to collaborate and innovate | The Executive Directors participated in the | | | whilst demonstrating their resilience during | 2021 STIP, which was based on a combination | ## DECISIONS DURING THE another challenging year. of financial and non-financial measures that ## YEAR REFLECT OUR are fully aligned to the delivery of the ## PAY-FOR-PERFORMANCE | | Our pay-for-performance philosophy applies | Company strategy and our purpose. The plan | | --- | --- | --- | | PHILOSOPHY IN WHAT | throughout the Group and the leadership | was rolled out to around 160 senior leaders | | | team believes our people should be rewarded | across WPP. This is the first time a single | ## HAS BEEN A YEAR for such outstanding performance. A record STIP plan has been in place for all senior ## OF EXCEPTIONAL bonus pool will be extended to a wider group leadership which included an element of ## PERFORMANCE.” of employees than is typical, with over half the bonus based on WPP financials as well of employees receiving some form of annual as the performance of individual agency Jasmine Whitbread bonus to recognise their efforts in 2021. brands. Employees across the wider Chair of the workforce are eligible to participate in Compensation Committee WPP's performance in 2021 is testament alternative annual bonus plans. to the exceptional executive team leading To learn more see the transformation. The Committee wpp.com/about/ recognises the role that compensation plays corporate-governance in the global competition for talent and in 133WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT | The financial measures, which determined | John Rogers was determined by the | including shareholders. A review of market | | --- | --- | --- | | 75% of the award, were like-for-like headline | Committee, resulting in a maximum STIP for | data within the FTSE 50 and our sector | | operating profit growth, headline operating | both Executive Directors. | globally supported the Committee's view | | margin improvement and like-for-like revenue | | that an increased EPSP award for the CEO | | less pass-through costs growth. The financial | EPSP 2017-2021 | would be appropriate. Therefore, the | | element of the STIP delivered maximum | The 2017 EPSP award completed its five-year | Committee determined that an award of | | payout following very strong performance | performance period on 31 December 2021. | 390% of base salary to the CEO, which is | | in 2021. The Committee felt that this was an | Awards vest based on performance against | within the range approved by shareholders, | | accurate reflection of performance and has | three metrics: relative total shareholder | would be granted. This is an increase from | | made no adjustments to the outcome. | return (TSR), return on equity (ROE) and | the award level of 350% which Mark has | | | earnings per share (EPS). This is a legacy plan | received since appointment and the targets | | We introduced a balanced scorecard of | in which targets were set prior to the CEO's | have been set to be stretching to recognise | | non-financial measures which determined | appointment, Covid-19 and the launch of the | this level of award. | | the remaining 25% of the award. The scorecard | strategy. The Committee did not feel it was | | | included measures under four categories: | appropriate to adjust the targets during the | EPSP PLAN RULES | | Client; People and Diversity, Equity and | performance period. As a result, | The EPSP plan rules, approved in 2013, will | | Inclusion (DE&I); Purpose and Reputation; | performance over the five-year period fell | expire in 2023. We believe it is prudent to | | and Strategic Priorities. | below threshold levels for each of the three | renew the plan rules well in advance of their | | | performance measures resulting in no | expiry, therefore updated EPSP plan rules are | | The Committee is of the view that | vesting in respect of the 2017 EPSP awards. | proposed for shareholder approval at the | | performance against all four categories in | | 2022 AGM. There are no material changes. | | 2021 has been outstanding. From a Client | COMPENSATION FRAMEWORK | | | perspective, highlights of the year include | FOR 2022 | DIRECTORS' COMPENSATION POLICY | | significant client wins, such as Coca-Cola, | EPSP 2022 | REVIEW | | Google and Unilever, resulting in WPP being | We recognise the considerable challenges | The Directors' Compensation Policy will be | | ranked at the top of the global R3 new | faced by WPP in ensuring that the | reviewed during 2022 and presented for | | business rankings for the year. From a People | compensation for the CEO, who is leading | shareholder approval at the 2023 AGM. The | | and DE&I perspective, we monitor closely | the transformation of our business, fairly | Committee intends to consult with major | | the diversity of senior leadership and | recognises his significant contribution, is | shareholders prior to proposing any changes | | employees of all levels across the Company. | motivating and supports his retention in a | to the Policy. | | We are pleased to see progress, as well as | highly competitive market. WPP is a global | | | the significant investment in initiatives to | business and our executives who have | CONCLUSION | | promote diversity and inclusion at WPP. | proven their ability to continue to deliver the | I would like to thank the leadership team | | | transformation needed against an exceptional | for its outstanding contributions to | | In terms of Purpose and Reputation, in April | external environment are in great demand. | exceptional performance in what continues | | 2021, WPP announced its commitment to | The Committee is of the view that a market- | to be a challenging environment. | | reach net zero carbon emissions in its | competitive package with a long-term | | | operations by 2025 and across its entire | incentive that continues to be subject to | We welcomed three new members to the | | supply chain by 2030, an industry first. This | stretching, meaningful and transparent | Committee in 2021: Sandrine Dufour, Tom | | commitment underpins our sustainability | performance conditions is a key aid to | Ilube and Cindy Rose. I would like to express | | programme, where significant achievements | retention and ensures Mark’s compensation | my thanks to them for their fresh perspective, | | have been made during the year. And, finally, | continues to be aligned with the interests | as well as to longer-serving members for | | we continued to make good progress against | of WPP and its shareholders. | their continuing high engagement and | | our Strategic Priorities. Highlights of the year | | commitment. | | include a number of strategic acquisitions, | We consulted with several of WPP’s largest | | | facilitating our focus on the high-growth | shareholders on this matter and received | | | areas of commerce and technology. | valuable input to our decision in respect of | Jasmine Whitbread | | | the CEO’s 2022 EPSP award. The Committee | Chair of the | | Full details of non-financial performance are | also considered the extent to which extant | Compensation Committee | | included on pages 144 and 145. | incentive plans provide a retention tool, the | 31 March 2022 | increasing compensation compression | The Committee considered the Executive | between the Executives and other senior | | --- | --- | | Directors' non-financial performance under | leaders across our business, the competitive | | each of the four categories. An overall | nature of the global executive market, as well | | assessment of 25% for both Mark Read and | as the interests of our wider stakeholders | WPP ANNUAL REPORT 2021134 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE # 2021 PERFORMANCE OUTCOMES # STIP PERFORMANCE The information below summarises the 2021 STIP performance outcomes for our Executive Directors. Full details of financial and non financial performance are included on pages 144 and 145. | | WEIGHTING | | | | | OUTCOME ACHIEVED | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Threshold (0% payable) | Target (50% payable) | Maximum (100% payable) | | Mark Read | John Rogers | | Like-for-like headline operating profit growth | 25% | 5.0% | 10.0% | 15.0% | 24.8% | 25% | 25% | | Headline operating margin improvement | 25% | 0.25% | 0.75% | 1.25% | 1.7% | 25% | 25% | | Like-for-like revenue less pass through costs growth | 25% | 2.0% | 6.0% | 6.0% | 12.1% | 25% | 25% | | Non-financial performance | 25% | See pages 144 and 145 for performance against non financial measures for both Mark Read and John Rogers | | | | 25% | 25% | | Total | 100% | | | | | 100% | 100% | Actual performance // indicates a scale break # EPSP PERFORMANCE | | WEIGHTING | | Threshold (0% payable) | | Maximum (100% payable) | | OUTCOME ACHIEVED | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | Average ROE over five years | 1/3 | | 14.9% | 15% | | 18% | 0% | | EPS growth over five years | 1/3 | -7.1% | | 7% | | 14% | 0% | | Relative TSR (common currency) - assessed as outperformance against set % of peer group | | | 87% | 50% | | +0% | | | Relative TSR (local currency) - assessed as outperformance against set % of peer group | | | 33% | 50% | | +0% | | | Total | 100% | | | | | | 0% | Actual performance // indicates a scale break WPP ANNUAL REPORT 2021 155 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT TOTAL COMPENSATION 2021 £000 | Mark Read | | | | | | John Rogers | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (maximum) | | | | | | (maximum) | | | | | | | | | | 7,439 | | | | 4,731 | | | 2021 | | | | | | 2021 | | | | | (target) | | | | | | (target) | | | | | | | | 4,683 | | | | 3,011 | | | | 2021 | | | | | | 2021 | | | | | (actual) | | | | | | (actual) | | | | | | | 3,799 | | | | | | 4,776 | | | 2020 | | | | | | 2020 | | | | | (actual) | | | | | | (actual) | | | | | | 1,136 | | | | | | | 4,385 | 0 2,000 4,000 6,000 8,000 0 2,000 4,000 6,000 Fixed compensation, consisting of base salary, benefits and pension ## • (as set out in the single figure on page 141) Short-term incentives (STIP) ## • Long-term incentives (EPSP) ## • Buy-out awards (see page 147 of the 2020 Compensation Committee Report) ## • Target: 50% of maximum STIP, 60% of maximum LTIP. SHAREHOLDING REQUIREMENTS Mark Read is on target to reach his shareholding requirement within seven years of his appointment to an Executive Director, as required by the Policy. John Rogers achieved his shareholding requirement in 2021. Their shareholding as at 31 December 2021 is shown below as a 1 percentage of base salary. ark Read 2018 | | 121% | | 2020 | | | | --- | --- | --- | --- | --- | --- | | 2019 | | | | 77% | | | | | 215% | 2021 | | | | 2020 | | | | | 402% | 305% 2021 300% 538% 600% 1 The share price used for the calculation is the average share price for the last two months of the year. PENSIONS As set out in our 2020 report, Mark Read’s pension contribution is being reduced to align executive pensions with the wider workforce in the UK and will be 10% of base salary by the end of the policy period. The chart below shows the contribution levels at the end of each year of the Policy period. John Rogers’ pension contribution is already aligned at 10% of base salary since being set at this level on appointment. M 2021 2021 Appointed to the Board 3 September 2018 17.6% 2020 2019 15% John Rogers 2021 Appointed to the Board 3 February 2020 12% 2022 10% Target WPP ANNUAL REPORT 2021136 Target 8,000 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE # COMPENSATION POLICY The Directors' Compensation Policy was approved by shareholders at the 2020 AGM. The table below shows a summary of the Policy and how it will be implemented for 2022. Full details of the Policy can be found at pages 120-125 of the 2019 Annual Report and Accounts. # ALIGNING COMPENSATION WITH STRATEGY Performance measures are selected to align to our business strategy and include a range of financial and non-financial metrics. Non-financial metrics are measured in a scorecard with appropriate measures set based on role and accountabilities. These measures are based on four categories: Client – relating to new business and client satisfaction; People and DE&I – this will include improvements in relation to diversity as well as the delivery of our broader people strategy; Purpose and Reputation – aligned to the Company's sustainability strategy and the management of governance and controls as well as industry achievements and awards; and Strategic Priorities – in relation to our Group-wide transformation. | | STRATEGIC ELEMENTS | | --- | --- | | Financial measures | Vision & offer | Creativity | Data & technology | Simpler structure | People & culture | | Short-term incentive plan given | Like-for-like headline operating profit growth | ● | | | ● | ● | | Headline operating profit margin improvement | ● | | ● | ● | ● | | Like-for-like revenue less pass-through costs growth | ● | ● | ● | ● | | | Non-financial scorecard | | | | | | | Client | ● | ● | ● | ● | ● | | People and DE&I | ● | ● | | | ● | | Purpose and Reputation | ● | ● | ● | ● | ● | | Strategic Priorities | ● | ● | ● | ● | ● | | Continuous incentive plan design | Return on invested capital | | | ● | ● | | | Adjusted free cash flow | ● | | | ● | | | Relative TSR | ● | ● | ● | ● | ● | TIMELINE OF COMPENSATION ELEMENTS | | 2022 | 2023 | 2024 | 2025 | 2026 | | --- | --- | --- | --- | --- | --- | | Base salary Benefits Pension | | | | | | | STIP | Cash | Deferred shares (Executive Share Award) | | | | | EPSP | Performance period | | | Holding period | | WFP ANNUAL REPORT 2021 127 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT COMPENSATION POLICY ### FIXED ELEMENTS OF COMPENSATION PURPOSE | COMPONENT AND | AND LINK | | | IMPLEMENTATION | | --- | --- | --- | --- | --- | | TIME HORIZON | TO STRATEGY OPERATION OPPORTUNITY | | | FOR 2022 | | ● Base salary To maintain | | Base salary is typically reviewed every two years | Increases for Executives will usually be | Mark Read: £1,040,000 | | | package | but may be reviewed annually if the Committee | aligned to the wider workforce which | John Rogers: £740,000 | | | competitiveness | deems appropriate. | will reflect the performance of the | | | | and reflect skills | | Company, individual and local | Salary levels may be | The Committee may realign base salary over a and experience; economic factors. reviewed in 2022. phased period for new Board appointees who to enable start on a lower-than-market salary. Increases above the normal level may recruitment and be made to take into account special retention. Salary levels and increases take into consideration: circumstances such as: – Salary increases awarded across the Group – Increase in the nature or scope of – Individual performance the role – Levels in other companies of similar size, – To reflect development in a role scope and complexity such as in the case of an executive appointed at a below-market salary | ● Benefits Provide an annual | | The fixed annual allowance will be reviewed | The maximum benefit allowance | Mark Read: £35,000 | | --- | --- | --- | --- | --- | | | fixed and | periodically by the Committee and any changes will | payable is £50,000. | John Rogers: £30,000 | | | non-itemised | be effective for the next fiscal year. The allowance is | | | | | allowance to | set with regard to the individual concerned and the | | | | | enable the | role they undertake. | | | executive to Should the Executive be required to move to a procure benefits different country, a relocation benefit may be to enable them provided in addition to the usual benefit allowance. to undertake their role and ensure their wellbeing and security. | ● Pension To enable | | Pension is provided by way of contribution to a | Executive Director: 10% of base salary. | Mark Read: 12%* | | --- | --- | --- | --- | --- | | | provision for | defined contribution retirement arrangement, | | | | | | | Current: | John Rogers: 10% | | | retirement | or as a cash allowance, determined as a | | | CEO – 12% of base salary reducing to benefits. percentage of base salary. * To be reduced to 10% during 10% over the 2020-2022 Policy period. 2022 as part of plans to align executive pensions with the CFO – 10% of base salary. wider workforce. WPP ANNUAL REPORT 2021138 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### VARIABLE ELEMENTS OF COMPENSATION PURPOSE | COMPONENT AND | AND LINK | | | | | IMPLEMENTATION | | --- | --- | --- | --- | --- | --- | --- | | TIME HORIZON | TO STRATEGY OPERATION OPPORTUNITY PERFORMANCE | | | | | FOR 2022 | | ● Short-term | – Cash bonus | | Targets are set early in the year. | Maximum | Performance measures and | Mark Read: 0-250% | | incentive plan | – Executive | | The Committee determines the | opportunity | targets are reviewed and | John Rogers: 0-225% | | (STIP) | | Share Award | extent to which these targets have | – 250% of base | set annually to ensure | | 75% financial and (ESA) been achieved at the end of the salary continued strategic 25% non-financial | | year based on performance. | | alignment. | | | --- | --- | --- | --- | --- | | To drive the | | Target opportunity | | targets | | achievement | The STIP is delivered as follows: | – 50% of the | Financial measures may | | | of strategic | | maximum | represent a minimum of 75% | | – At least 40% of the STIP pay-out priorities for the opportunity of the award and a is delivered in the form of financial year maximum of 100%. conditional deferred shares (ESA) Less than the and to motivate, which will be released after a maximum Individual strategic or retain and reward period of two years opportunity may non-financial objectives executives over – The Committee has discretion be applied to may represent up to 25% the short and to adjust the formulaic bonus Executives. of the award. medium term. outcomes both upwards and Dividends will accrue The ESA element downwards (including to zero) if on the ESA during of the incentive it is determined that performance the deferral period. aligns executives has been impacted by unforeseen with shareholder circumstances and the outcome interests. is not reflective of the underlying company performance – STIP is subject to the malus and clawback policy | ● Long-term | To drive the | The EPSP comprises a grant of | Maximum | Vesting of the EPSP is | Mark Read: 0-390% | | --- | --- | --- | --- | --- | --- | | incentive plan | achievement | performance share awards which | opportunity | subject to the achievement | John Rogers: 0-300% | | – Executive | of long-term | will vest subject to the achievement | – 400% of base | of demanding performance | | | Performance | strategic | of performance conditions. | salary | targets. | (See pages 134 and 148 | | Share Plan | priorities, to aid | | | | for further details) | | | | The EPSP has a performance period | Less than the | Performance measures are | | | (EPSP) | retention and to | | | | | | | | of three years, followed by a two-year | maximum | set by the Committee and | | align executive holding period of the vested shares. opportunity may may be a mix of market, and shareholder | | | be applied to | financial and non-financial | | --- | --- | --- | --- | | interests over | The Committee has the discretion to | | | | | | executives. | measures. In 2022 the | | the long term. | adjust the formulaic outcome of the | | | measures will be relative award to ensure that vesting reflects Dividends will accrue TSR, ROIC and cumulative underlying Company performance on awards during the adjusted free cash flow and value creation for shareholders. performance period. (AFCF). EPSP is subject to the malus and Threshold performance will clawback policy. produce an award of 20% of the award granted and increase on a sliding scale to 100% for maximum performance achievement. | ● Shareholding | To align the | Executive Directors and other | Chief Executive | If an Executive Director fails | | --- | --- | --- | --- | --- | | requirements | interests of | members of the senior management | Officer: 600% of | to achieve the required | | | Executive | team are subject to shareholding | base salary. | levels of shareholding, the | | | Directors with | requirements which seek to reinforce | | Committee will decide | Chief Financial shareholders. the WPP principle of alignment of what remedial action or Officer: 300% of management’s interests with those penalty is appropriate. Executive base salary. of shareholders. This may involve a reduction Directors are Minimum for any in future share awards or required to hold other new executive requiring the Director to 100% of their appointed to the purchase shares in the shareholding Board: 200% of market to meet the requirement for base salary. shareholding requirements. a period of one | year following | Executive Directors | If the Executive Director | | --- | --- | --- | | cessation of | will be permitted a | fails to maintain their | | employment, | period of seven years | shareholding requirement | | reducing to 50% | from the date of | post-employment, this may | | for a second year. | their appointment | result in a reduction of | | | to achieve the | outstanding awards. | required level. 139WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ## ANNUAL REPORT ## ON COMPENSATION | This section of the report sets out details | The Committee members have no personal | EXTERNAL ADVISORS | | --- | --- | --- | | of how the Directors’ Compensation Policy | financial interest (other than as a shareholder | The Committee retains WTW to act as | | was implemented in 2021. We start by | as disclosed on page 152) in the matters | independent advisors. They provide advice | | setting out the details of the operation of | to be decided by the Committee, potential | to the Compensation Committee and work | | the Compensation Committee and then | conflicts of interest arising from cross- | with management on matters related to our | | present a summary of the 2021 Director | directorships, or day-to-day involvement | compensation policy and practices. They are | | compensation together with a summary | in running the Company’s businesses. The | a member of the Remuneration Consultants | | of pay across the Group. | terms of reference for the Compensation | Group and have signed the code of conduct | | | Committee are available on the Company’s | relating to the provision of advice in the UK. | | Payments have been made in accordance | website. | Considering this, and the level and nature of | | with the Directors’ Compensation Policy, | | the service received, the Committee remains | | approved by shareholders at the 2020 AGM. | ADVISORS TO THE | satisfied that the advice is objective and | | The information included in this section has | COMPENSATION COMMITTEE | independent. WTW provides limited other | | been audited where stated. | The Compensation Committee regularly | services at a Group level and some of our | | | consults with Group Executives. The | operating companies engage them as | | GOVERNANCE IN RELATION | Committee invites certain individuals to | advisors at a local level. In 2021, WTW | | TO COMPENSATION | attend meetings, including the Chief | received fees of £53,959 in relation to the | | During 2021, there were five scheduled and | Executive Officer and Chief Financial Officer | provision of advice to the Committee. The | | five unscheduled Compensation Committee | (who are not present when matters relating | Committee receives external legal advice, | | meetings. A table of Board and Committee | to their own compensation or contracts | where required, to assist it in carrying out | | attendance can be found on page 119 and | are discussed and decided), the Company | its duties. | | the detail of key activities discussed is set | Secretary, the Chief People Officer and the | | | out below. | Global Reward and Performance Director. | DIRECTOR CHANGES DURING | | | The latter two individuals provide a | THE YEAR | | | perspective on information reviewed by | There were no Executive Director changes | | | the Committee and are a conduit for | during 2021. | requests for information and analysis from the Committee’s external advisors. ### ACTIVITY DURING THE YEAR The key activities of the Compensation Committee are set out below. In addition to the specific items outlined, the Committee reviews any compensation matters relating to the Executive Directors and the Executive Committee, as well as all compensation governance matters. 2021 Q1 Q3 – Determined performance outcomes for 2016-2020 EPSP – Received an update on the wider workforce providing an overview of the – Consideration of 2020 STIP in the context of performance during the year diversity demographics and compensation of employees at WPP and the impact of Covid-19 on wider stakeholders – Received an update on emerging trends for the use of ESG metrics in incentives – Setting targets for 2021 STIP and 2021 EPSP – Consideration of the use of malus adjustments in respect of the previous CEO – Reviewed and approved 2020 Compensation Committee Report Q2 Q4 – Reviewed the CEO's salary – Received update on the performance of inflight EPSP awards – Reviewed and approved proposed changes to ExCo salaries and – Received update on executive compensation market trends, investor views compensation structure and governance – Received update on industry compensation practices – Reviewed and approved the proposed changes to the EPSP rules – Received an update on the wider workforce salary landscape To learn more see wpp.com/about/ corporate-governance WPP ANNUAL REPORT 2021140 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### STATEMENT OF SHAREHOLDER VOTING The results of the shareholder vote at the Company’s 2021 AGM in respect of the 2020 Compensation Committee Report is set out below along with the result of the vote on the Directors’ Compensation Policy at the 2020 AGM: Voting outcome for 2020 Compensation Committee Report (At 2021 AGM) Votes for Votes against Votes cast Votes withheld Resolution Number % Number % Number Number To approve the 957,496, 84 0 98.44 15,129,720 1.56 972,705,014 613,013 Compensation Committee Report Voting outcome for 2020 Compensation Policy (At 2020 AGM) Votes for Votes against Votes cast Votes withheld Resolution Number % Number % Number Number To approve the 885,129,086 90.76 90,096,398 9.24 975,225,484 14,009,046 Compensation Policy ### EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED) Single total figure of compensation Short-term incentive £000 | Base | | | | Total | Long-term | | | Total | | | Total annual | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | salary | 2 | Benefits | Pension | fixed | incentive | | 3 | variable | Other | 3 | compensation | | | £000 | | £000 | £000 | £000 Cash Deferred | | £000 | | £000 | £000 | | | £000 | Mark Read 2021 1,013 37 149 1,199 1,560 1,040 0 2,600 – 3,799 2020 910 36 158 1,104 – – 32 32 – 1,136 1 John Rogers 2021 740 32 74 846 999 666 2,265 3,930 – 4,776 2020 643 30 64 737 – – 1,538 1,538 2,110 4,385 1 John Rogers joined the Company on 27 January 2020. His base salary and benefits for that year reflect his time in role. 2 Mark Read and John Rogers voluntarily reduced their base salary for a four-month period in 2020 as part of cost-reduction targets implemented during the Covid-19 pandemic. 3 John Rogers received buy-out awards to compensate for the forfeiture of incentive awards from his previous employer. In 2021 this comprised an EPSP which vested in March 2022 based on a performance period of 1 Jan 2019 to 31 Dec 2021 with a final vesting value of £2,265,468. See page 147 for further details. In 2020 this comprised cash of £1,457,538, restricted stock of £652,614 and an EPSP which vested in March 2021 based on a performance period of 1 Jan 2019 to 31 Dec 2020 with a final vesting value of £1,538,363. 141WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION ### FIXED ELEMENTS OF COMPENSATION (AUDITED) The Compensation Policy summaries below are from the 2020 Directors’ Compensation Policy, as approved by shareholders, and represent the maximum levels applicable. ### BASE SALARY Typically reviewed every Salary levels and increases take into consideration: Increases for Executives will usually two years but may be be aligned to the wider workforce – Salary increases awarded across the Group reviewed annually if the which will reflect the performance of Base – Individual performance salary Committee deems the Company, individual and local – Levels in other companies of similar size, scope policy appropriate economic factors and complexity Mark Read’s salary was last reviewed on appointment in Base salary Annual base received in September 2018. The review due in 2020 was postponed | | | | salary | 2021 | | --- | --- | --- | --- | --- | | due to the impact of Covid-19 which drove a focus on cost | | Effective date | £000 | £000 | | reduction including the postponement of salary increases | Mark Read 1 June 2021 £1,040 £1,013 | | | | for all employees. When reviewing Mark’s salary in 2021, John Rogers 27 Jan 2020 £740 £740 the Committee took into consideration the external market in the UK as well as the global advertising and media sector; Mark’s strong performance in role since his appointment; and salary increases across the wider workforce during the year. The Committee agreed an increase of 6.7% to £1,040,000 effective from 1 June 2021 which was Mark's first increase in three years. Average annual salary increases in the UK were around 5.6% in 2021. However, individual increases varied based on several factors. Mark Read's increase was within the range of awards to other high-performing employees. ### BENEFITS Fixed, non-itemised Allowance as follows: Reviewed periodically by the allowance enabling Committee Maximum – £50,000 Executives to procure Benefits CEO – £35,000 their own benefits policy CFO – £30,000 as required 2021 In addition to the allowance received, the values Benefits disclosed include the value of expenses related £000 directly to attendance at Board meetings. The expenses Mark Read 37 for Mark Read and John Rogers were £2,431 (£945 and John Rogers 32 £1,641 respectively in 2020). These values include the grossed-up cost of UK income tax and national insurance paid by the Company on behalf of the Directors. WPP ANNUAL REPORT 2021142 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### PENSION Contribution to a defined Opportunity is as follows: Only base salary is pensionable contribution retirement Executive Director – 10% of base salary arrangement, or a cash Pension allowance Current: policy CEO – 12% of base salary reducing to 10% over the Policy period CFO – 10% of base salary In line with the plan to reduce Mark Read's pension to Contractual 2021 pension Pension ensure alignment with the wider workforce by the end of (% of base salary) £000 the policy period, his pension was reduced to 12% during Mark Read 12 149 2021 and will reduce further to 10% by the end of 2022. John Rogers 10 74 ### SHORT-TERM INCENTIVE (AUDITED) | | Maximum opportunity | Financial measures may | At least 40% of the STIP | Deferred shares are subject | | --- | --- | --- | --- | --- | | | – 250% of base salary | represent a minimum of | payout is deferred into | to malus provisions | | | | 75% of the award and a | shares, vesting after | | | Short-term | Target opportunity | | | Cash bonus is subject to | | incentive | | maximum of 100% | two years | | | | – 50% of the maximum | | | clawback provisions | policy opportunity Individual strategic or non-financial objectives may represent up to 25% of the award ### 2021 STIP OUTCOME Maximum bonus 2021 STIP 2021 STIP 2021 STIP (% of salary) (% of maximum) (% of base salary) (£000) Mark Read 250 100 250 2,600 John Rogers 225 100 225 1,665 ### PERFORMANCE AGAINST 2021 FINANCIAL OBJECTIVES (75% OF AWARD) The financial bonus targets and outcomes for the year are set out in the table below. Performance against all financial objectives is calculated on a ‘like-for-like’ basis other than headline operating margin which is calculated on a constant currency basis. Weighting (as portion of Threshold Target Maximum Actual % of award Measure financial element) (0% payable) (50% payable) (100% payable) performance achieved Like-for-like headline operating profit growth 1/3 5.0% 10.0% 15.0% 26.8% 25% Headline operating margin improvement 1/3 0.25% 0.75% 1.25% 1.7% 25% Like-for-like revenue less pass-through costs growth 1/3 2.0% 4.0% 6.0% 12.1% 25% Total achieved 75% 143WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION ### PERFORMANCE AGAINST 2021 INDIVIDUAL STRATEGIC OBJECTIVES (25% OF AWARD) Non-financial performance is assessed using a scorecard of measures with four categories: Client; People and DE&I; Purpose and Reputation; and Strategic Priorities. The Committee has assessed performance against these targets holistically to inform its decision on each Executive's non-financial performance. NON-FINANCIAL PERFORMANCE APPLICABLE TO BOTH EXECUTIVE DIRECTORS Personal measures 2021 Area 2021 performance Purpose and Sustainability – Established an industry-leading target to achieve net zero carbon emissions in our operations by 2025 and | Reputation – Aligned | across our supply chain by 2030. See page 76 for details | | --- | --- | | to the Company’s | – Work continued to remove plastics which cannot be reused, recycled or composted across our campuses | | sustainability strategy, | and offices worldwide | | the management of | – Amended and supplemented our $2.5 billion revolving credit facility to link the margin on the facility to | | governance and | specific sustainability measures | controls as well as industry achievements Creative – WPP named most creative company of the year at the Cannes Lions International Festival of Creativity and and awards reputation WPP agencies collected a total of 190 Lions with winners representing 38 different countries – WPP topped all three categories in the global WARC Rankings 2021 for creativity, effectiveness and media excellence Governance – Enhanced the review and referral process for accepting new clients and work that may present an ethical risk. and controls See page 83 for more details of our standards, policies and procedures – Rolled out the enhanced control framework for SOX developed in 2020 MARK READ – NON-FINANCIAL PERFORMANCE Personal measures 2021 Area 2021 performance Client – relating to new Client – Maintained the record-high client satisfaction score based on Likelihood to Recommend of 8.1 out of 10 in 2021. business and client satisfaction See page 57 for details satisfaction New business – Achieved industry-leading new business performance in 2021 with $8.7 billion of net new billings, surpassing the (also industry-leading) $4.4 billion achieved in 2020 – Appointed Global Marketing Network Partner to The Coca-Cola Company and won and retained a series of other global client assignments including with Google and Unilever – WPP ranked top of the R3 global and US holding company rankings for 2021, as well as top in the creative and media new business rankings People and DE&I Inclusive culture – Launched and developed a number of initiatives across our agencies to foster an open and inclusive culture. – improvements in See pages 52-55 for details relation to diversity and – We continue to focus on driving greater gender balance throughout the Company with women in Executive delivery of our people Committee and Direct Reports at 42.9% (35.8% in 2020) as reported in the Hampton Alexander Review strategy – Placed DE&I at the centre of our recruitment and development processes, using analytics to provide a more inclusive employee experience. Formed partnerships with several leading diversity and inclusion organisations and funded a number of local initiatives to advance racial equity. For more information see the Communities section of the Sustainability Report 2021 Employee WPP Pulse, our first global company-wide engagement survey, was rolled out in 2021, with more than 43,000 engagement participants across over 100 countries. See page 52 for details WPP ANNUAL REPORT 2021144 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE Personal measures 2021 Area 2021 performance Strategic priorities Focus on – Increased the share of revenue from the high-growth, future-facing areas of experience, commerce and – in relation to our high-growth technology Group-wide areas – Made strategic investments to build capabilities in key areas acquiring a number of technology, digital transformation innovation and data companies including Satalia, Cloud Commerce Group and Made Thought – Created a commerce-as-a-service platform to complement our broader expertise in commerce, and further innovation in our market-leading programmatic and connected TV businesses, Xaxis and Finecast – We have made significant investment in training for our leaders and employees on commerce and technology Continued Continued to integrate our portfolio of agencies further in 2021 and acquired the minorities in WPP AUNZ. simplification Created the world’s leading board-level communications firm through the merger of Finsbury Glover Hering and | of WPP | Sard Verbinnen | | --- | --- | | Transformation | The transformation programme remains on track with around £245 million of gross annual savings achieved so far | | programme | against a 2019 base | JOHN ROGERS – NON-FINANCIAL PERFORMANCE Personal measures 2021 Area 2021 performance Client – relating to new Profitability A strong focus on client profitability, including an improvement in data quality and the visibility of client business and client profitability and actions to drive profit as well as enhancing pricing discipline and governance by implementing | satisfaction | | new policies and alternative value-based pricing models | | --- | --- | --- | | People and DE&I | Diversity of the | Ensured an inclusive culture is a priority across the Company, as has been discussed elsewhere in this report. | | – improvements in | senior finance | Female representation in the senior finance team has increased over the last two years, with women now | | relation to diversity and | leadership | representing 35% of the team | delivery of our people strategy Development Providing career development opportunities and training has been a priority. Within the finance team, we have built an understanding of our training needs and developed a foundation for the finance team training programme including: SOX training, senior finance team development and change management training Campus Our campus programme continues to be executed in line with the plan, with the addition of nine campuses programme delivered in 2021, taking the total to 31 Strategic priorities Delivery – Good progress on the transformation programme with around £245 million of gross annual savings achieved – in relation to our against the so far against a 2019 base Group-wide transformation – Significant groundwork undertaken to modernise our approach to finance and IT and move to a more transformation programme standardised approach, including network infrastructure, cloud acceleration and platform rationalisation – The shared services programme is progressing, with a significant portion of finance processes migrated from the UK to Mumbai, and new deployments in the Middle East, Asia and Latin America – Cash management: working capital improved by $500m, $750m of cash centralised in 2021 on top of $800m in 2020 145WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION ### SHORT-TERM INCENTIVE WEIGHTINGS AND MEASURES FOR 2022 The Committee has reviewed the performance objectives for 2022 to ensure continued alignment with Company strategy. The Group financial measures remain headline operating profit growth, headline operating profit margin improvement and revenue less pass-through costs growth. Non-financial performance continues to be measured based on a scorecard including the following metrics: Client – relating to new business and client satisfaction; People and DE&I – this will include improvements in relation to diversity as well as the delivery of our people strategy; Purpose and Reputation – aligned to the Company’s sustainability strategy, the management of governance and controls as well as industry achievements and awards; and Strategic Priorities – in relation to our Group-wide transformation. The Committee is of the view that the specific targets for the STIP are commercially sensitive and it would be detrimental to the Company to disclose them in advance of, or during, the relevant performance period. To the extent targets are no longer commercially sensitive they will be disclosed at the end of the relevant performance period in that year’s Annual Report, as we have done in previous years. ### LONG-TERM INCENTIVES (AUDITED) ### VESTING OF 2017-2021 EPSP AWARDS Vesting of the 2017 EPSP awards was dependent on performance against three measures, all assessed over a five-year period: – WPP’s relative TSR, measured in common and local currency, against a custom group of WPP’s comparators (Dentsu, Interpublic, Ipsos, Nielsen, Omnicom and Publicis – GfK and Havas were removed from the peer group as they were subject to complete acquisitions in 2017 and were listed for less than 40% of the performance period), weighted by their respective market capitalisation – Compound annual growth in headline EPS – Average ROE Performance against all three measures was below the threshold required for vesting. | | | | Threshold | | | Maximum | | Actual | | % of maximum | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Performance measure Weighting | | | | % | | | % | | % | | achieved | | | | | | 50% of | | | 90% of | | | | | | | | Relative TSR (common currency) | | weighted peer | | | weighted peer | | | | 37 | | | | | | 1 / | | | | | | | | | | | | | | 3 | | | | | | | | | | | 0.0 | | | | | group | | | group | | | | | | | | | | outperformed | | | outperformed | | | | | | | | Relative TSR (local currency) 32 EPS growth 1 / 7.0 14.0 -7.1 0.0 3 Average ROE 1 / 15.0 18.0 14.5 0.0 3 Total vesting (% of maximum) 0.0 | | | | Additional | | | | | Value of vested | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | shares in respect | | | | | | | 2017-2021 | | | | Number of | | of dividend | | | Number of | Share price | | EPSP awards | | | shares awarded | | | | accrual | shares vesting | | on vesting | | | £000 | Mark Read 106,498 0 0 n/a 0 WPP ANNUAL REPORT 2021146 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### VESTING OF BUY-OUT AWARDS John Rogers received buy-out awards on appointment to compensate for the forfeiture of incentive awards from his previous employer (full disclosure is included on page 147 of the 2020 Compensation Committee Report). The second of the EPSP awards granted to John Rogers has vested at 88.5% following performance in between threshold and maximum of the TSR performance measure. The Committee has the discretion to determine the extent to which the award will vest if an average ROIC of 7.5% over the performance period is not achieved. However, this was not required as the ROIC threshold was met. | | | Threshold | Maximum | | | --- | --- | --- | --- | --- | | | Weighting | (15% payable) | (100% payable) Actual performance Vesting | | | Relative TSR common currency 50% | | 50% of weighted | 90% of weighted | 86% 90% | | | | peer group | peer group | | | Relative TSR local currency 50% 84% 86% | | outperformed | outperformed | | Average ROIC Underpin Average ROIC of 7.5% 8.8% – Total vesting (as a % of maximum) 88.5% | | Additional shares | | | | Value of | | | --- | --- | --- | --- | --- | --- | --- | | Number of shares | in respect of | Number of | Share price | | vested shares | 1 | | awarded | dividend accrual | shares vesting | on vesting | 1 | £000 | | John Rogers 243,934 9,091 224,972 £10.070 2,265 1 The share price increased 72% between the grant and vest dates for this award. £948,482 of the total value of vested shares is attributable to share price appreciation. ### 2021 EPSP AWARDS GRANTED Maximum opportunity 1 / ROIC Three-year performance Subject to malus and 3 | | – 400% of base salary | | | period plus two-year | clawback provisions | | --- | --- | --- | --- | --- | --- | | | | 1 / | AFCF | | | | Executive | | | 3 | | | holding period | Performance | Threshold performance will | | | Awards accrue dividends | | --- | --- | --- | --- | --- | | | | 1 / | TSR | | | Share Plan | | | 3 | | result in 20% vesting (EPSP) Policy increasing on a straight line basis to 100% for maximum performance In 2021, the Executive Directors were granted awards under the EPSP as approved by shareholders in 2020. In previous years, awards have been made in the latter half of the year. The Committee agreed that awards will be made in March going forwards aligning to a more typical compensation calendar. The performance measures are ROIC, AFCF and relative TSR. Proposed targets were developed based on detailed medium-term financial plans and robust modelling, with reference to analyst consensus estimates. Definition of measure Relative TSR TSR performance is compared to that of five comparators: Dentsu, IPG, Omnicom, Publicis and the FTSE 100 Index. Each comparator carries an equal weighting. TSR performance is calculated both in common and local currency (weighted equally). Using a dual basis ensures that the interests of both local and international investors are reflected in the performance measures. AFCF A cumulative AFCF for each of the three years in the performance period. Adjusted free cash flow is (Adjusted free cash flow) calculated as cash generated by operations plus dividends received from associates, interest received, investment income received, and proceeds from the issue of shares, less interest and similar charges paid, dividends paid to non-controlling interests in subsidiary undertakings, repayment of lease liabilities (including interest), and purchases of property, plant and equipment and purchases of other intangible assets over the course of the performance period. ROIC An average of the year end ROIC for each of the three years in the performance period calculated as: (Return on invested capital) Headline operating profit/Invested capital Where invested capital = (Opening net assets + closing net assets)/2 + average net debt + average lease liabilities (opening lease liabilities + closing lease liabilities)/2 147WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION The table below summarises the awards granted and the performance conditions against which participants will be measured. Face value at Basis and level of award Number of date of grant 1 Awards granted in 2021 (% of salary) shares awarded £000 Mark Read 350 369,278 3,412 John Rogers 300 240,233 2,220 Performance measure Relative TSR AFCF ROIC Weight One-third One-third One-third Nature Relative to peers Cumulative Average Performance zone (threshold to maximum) Median to upper decile £2,100m-£2,900m 14.1%-15.9% Payout For performance below threshold there is nil vesting. 20% vesting occurs at threshold performance, 100% vesting at maximum performance and straight-line vesting between threshold and maximum Performance period 1 January 2021 to 31 December 2023 Holding period 1 January 2024 to 31 December 2025 1 Awards were granted on 28 March 2021. Face value is calculated based on the five-day average share price preceding the date of award (£9.241). ### EPSP MEASURES AND TARGETS FOR 2022 The table below shows the targets against which performance will be measured for the awards granted in 2022. The Committee considers the measures and targets set to be appropriate and challenging. Performance measure Relative TSR AFCF ROIC Weight One-third One-third One-third Nature Relative to peers Cumulative Average Performance zone (threshold to maximum) Median to upper decile £2,300m – £3,100m 16.5%-18.5% Payout For performance below threshold there is nil vesting. 20% vesting occurs at threshold performance, 100% vesting at maximum performance and straight-line vesting between threshold and maximum Performance period 1 January 2022 to 31 December 2024 Holding period 1 January 2025 to 31 December 2026 As set out in the Chair’s letter, in making the decision on the level of EPSP award made to the CEO, the Committee considered a number of factors, namely performance, retention and remaining market-competitive. The CEO's performance since being appointed to the role in 2018 has been outstanding. He is leading WPP through a multi-year transformation successfully in a challenging environment, creating growth for shareholders. A market-competitive package with a long-term incentive that continues to be subject to stretching, meaningful and transparent performance conditions aligns Mark’s interests to those of WPP and its shareholders. In considering a higher award, the Committee made reference to market data to validate whether an increase was appropriate through that lens too. This demonstrated that the CEO’s current compensation is below median against the FTSE 50, and falls significantly below the sectoral norms and our most directly comparable competitors, a pressure seen across the business. This data reinforced the Committee’s decision to make an award of 390% of base salary, which is within the range approved by shareholders within our current Policy. The targets have been set to be stretching to recognise this level of award. The award made to the CFO will be at the same level as prior awards at 300%. WPP ANNUAL REPORT 2021148 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE # ALIGNING PAY AND PERFORMANCE As set out in the Directors' Compensation Policy, the Committee's objective is to align variable compensation with the key strategic priorities of WPP, maximising the dynamic between pay and performance. The following graph and table demonstrate the relationship between pay and performance over the last ten years for the CEO. The graph shows WPP's performance against the performance of the FTSE 100 over the ten-year period to 31 December 2021. TSR is rebased to £100 from 1 January 2011 to show the value of a hypothetical £100 holding. The FTSE 100 has been chosen as a comparator as the Company has been a constituent member throughout the period. With respect to 2018, the pay for both the current and previous CEO is included separately. HISTORICAL TSR PERFORMANCE¹ ![img-20.jpeg](img-20.jpeg) Source: IAP Capital 10 | | 2018 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 HSE | 2018 HSE | 2019 | 2020 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | CEO total compensation (£000)² | 17,543 | 29,846 | 42,704 | 70,409 | 48,148 | 13,930 | 3,085 | 965 | 2,594 | 1,136 | 3,799 | | Year-on-year change in CEO total compensation (%) | 47 | 70 | 43 | 65 | (32) | (71) | (78) | n/a | NA³ | (56) | 234 | | Short-term incentive award against maximum (%) | 62 | 82 | 72 | 86 | 60 | 0 | 0 | 30 | 33 | 0 | 100 | | Long-term incentive award against maximum (%) | 86 | 87 | 100 | 100 | 100 | 73 | 33 | 33 | 15 | 5 | 0 | | Change in annual TSR (%)⁴ | 58 | 56 | 3 | 18 | 19 | (20) | (33) | (33) | 27 | (25) | 43 | | Change in five-year TSR (%)⁴ | 45 | 261 | 172 | 135 | 210 | 96 | 15 | 13 | (4) | (44) | (39) | ¹ Growth in the value of a hypothetical £100 holding over ten years versus the FTSE 100 (the broad market equity index of which WPP is a constituent) based on one month average of holding day values (Source: Capital). ² Calculated based on the methodology used for a following compensation in the single figure of compensation taken. ³ TSR calculated using a one month trading day average, consistent with the data shown in the graph. ⁴ FTSE calculated using a six month averaging period, consistent with the applicable calculation methodology under the EPST. ⁵ St Martin Gomer (2013) (with the Company on 14 April 2016, Mark Read (HK)) was appointed as Chief Executive Officer from 31 December 2016. ⁶ Mark Read was appointed to the role of Chief Executive Officer in September 2016. The year-on-year change has been calculated based on the total compensation for this four-month period. WPP ANNUAL REPORT 2021 53 ANNUAL REPORT ON COMPENSATIONCORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ### NON-EXECUTIVE DIRECTORS’ FEES Base fees reflect the skills, Additional fees reflect To enable the Chairman and No element of pay is experience and time additional time required Non-Executive Directors to performance-linked Non-Executive required to undertake in any additional duties for undertake their roles Director policy the role the Company The fees due to Non-Executive Directors were reviewed and increased in 2021. The Chair of the Sustainability Committee's fee was reviewed and increased effective June 2021 and the Senior Independent Director's fee was reviewed and increased effective October 2021. The fees are shown in the table below: £000 Chairman 525 Non-Executive Director 85 Senior Independent Director 40 Chair of Audit or Compensation Committee 40 1 Chair of Nomination and Governance Committee 15 2 Chair of Sustainability Committee 40 Member of Audit or Compensation Committee 20 Member of Nomination and Governance Committee 10 Member of Sustainability Committee 10 1 The Nomination and Governance Committee is chaired by Roberto Quarta as part of his role as Chairman, no additional fee is paid. 2 In prior years the Sustainability Committee has been co-chaired with each Chair receiving a fee of £15,000. The Committee now has a single Chair, who receives a fee of £40,000. ### NON-EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED) The single figure table below details the value of fees and taxable benefits received by the Non-Executive Directors during 2021 while they held a position on the Board. The benefits amounts include the grossed-up cost of UK tax and national insurance paid by the Company on behalf of the Directors where applicable. | | Fees | | Benefits | Total | | --- | --- | --- | --- | --- | | | £000 | | £000 | £000 | | 2021 2020 | | 1 | 2021 2020 2021 2020 | | Roberto Quarta 525 490 33 27 558 517 2,4 Angela Ahrendts 95 41 1 0 96 41 Jacques Aigrain 145 135 3 2 148 137 2,4 Sandrine Dufour 125 89 0 1 125 90 Tarek Farahat 105 98 0 0 105 98 2,4 Tom Ilube 133 20 5 1 138 21 2 Cindy Rose 123 98 6 5 129 103 Nicole Seligman 147 135 0 1 147 136 3 Sally Susman 107 103 0 1 107 104 3 Keith Weed 114 93 8 5 122 98 Jasmine Whitbread 135 118 6 5 141 123 Dr. Ya-Qin Zhang, appointed 1 January 2021 85 n/a 0 n/a 85 n/a 1 In 2020, the Non-Executive Directors took a voluntary 20% reduction in fees for four months between April and July 2020. 2 Sandrine Dufour and Cindy Rose were appointed to the Compensation Committee effective 1 January 2021 and 5 February 2021 respectively. Tom Ilube was appointed to the Audit Committee and the Nomination Committee effective 1 January 2021 and the Compensation Committee effective 5 February 2021. Angela Ahrendts was appointed to the Sustainability Committee effective 1 January 2021. 3 Sally Susman stepped down as co-chair of the Sustainability Committee effective 8 June 2021, while remaining a member of that Committee. Prior to this date the Sustainability Committee was co-chaired by Sally Susman and Keith Weed. 4 Angela Ahrendts, Sandrine Dufour and Tom Ilube were appointed to the Board on 1 July 2020, 3 February 2020 and 5 October 2020. WPP ANNUAL REPORT 2021150 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### PAYMENTS TO PAST DIRECTORS No payments were made to past directors during the year. ### EXECUTIVE DIRECTORS’ INTERESTS (AUDITED) Executive Directors’ interests in the Company’s ordinary share capital are shown in the following table. Other than as disclosed in this table, no Executive Director had any interest in any contract of significance with the Group during the year. Each Executive Director has a technical interest as an employee and potential beneficiary in shares in the Company held under the Employee Share Ownership Plan Trusts (ESOPs). More specifically, the Executive Directors have potential interests in shares related to the outstanding awards under the EPSP and outstanding ESAs. As at 31 December 2021, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 5,803,641 shares in the Company (4,863,244 in 2020). Shareholding requirements | | | | Shares without | | | Shares with | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Total | performance | | | performance | | | Total | | | | | | beneficial | | | conditions | | conditions | | unvested | | | % of | Achieved/ | | Director | interests | | | (unvested) | 1 | (unvested) | 2,3 | | shares | base salary | | On track | Mark Read At 31 December 2021 512,292 97,523 1,672,916 1,770,439 600% 4 At 25 March 2022 566,060 0 1,951,164 1,951,164 John Rogers At 31 December 2021 272,692 0 783,721 783,721 300% 4 At 25 March 2022 391,715 0 750,373 750,373 1 For Mark Read, shares due pursuant to the 2019 Executive Share awards. Additional dividend shares will be due on vesting. 2 Maximum number of shares due on vesting pursuant to the outstanding EPSP awards, full details of which can be found below. Additional dividend shares will be due on vesting. 3 As noted in footnote 2 above, less the maximum due under the 2017 EPSP award, and for John Rogers the remaining portion of his buy-out award, both of which lapsed/vested on 15 March 2021 (full details can be found on pages 146 and 147), plus the 2022 EPSP granted on 25 March 2022. 4 Total beneficial interests calculated at the last practicable date for this Annual Report. ### SHAREHOLDING REQUIREMENTS As detailed in the Directors’ Compensation Policy, the Executive Directors are required to achieve a minimum level of shareholding of WPP shares. The Chief Executive Officer and Chief Financial Officer are required to hold shares to the value of 600% and 300% of base salary respectively. Both Directors have seven years from the date they were appointed to their respective roles in which to reach the required level. As at 31 December 2021, the Chief Executive Officer held shares to the value of 538% of his base salary. At the same date, the Chief Financial Officer held shares to the value of 402% of his base salary. This was calculated based on the average share price for the last two months of the year. ### OUTSTANDING SHARE-BASED AWARDS The table below shows outstanding shares as at 31 December 2021. ESAs (Executive Share Awards) are granted under the WPP Stock Plan 2018. This is the stock component of the annual short-term incentive plan and granted subject to the achievement of performance measures prior to grant. EPSP awards (Executive Performance Share Plan) are subject to performance measures over the period stated below. Dividend shares will accrue on these awards. | | | | | | Share price on | | No. of shares | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Award type Grant date Performance period | | | | | grant date | | granted Vesting date | | Mark Read | | ESA 14.05.20 n/a £5.502 97,523 07.03.202 2 | | | | | | | | | | EPSP | 04.12.17 01.01.17 | -31.12.21 £12.911 106,498 15.03.2022 | | | | | | | | | 06.12.18 01.01.18 | -31.12.22 £8.604 396,617 15.03.2023 | | | | | | | | | 24.09.19 01.01.19 | -31.12.23 £10.035 340,059 15.03.2024 | | | | | | | | | 24.11.20 01.01.20 | -31.12.22 £7.411 460,464 15.03.2023 | | | | | | | | | 28.03.21 01.01.21 | -31.12.23 £9.241 369,278 15.03.2024 | | | | | 1 | John Rogers EPSP | 14.05.20 | 01.01.19-31.12.21 £5.854 243,934 15.03.2022 | | | --- | --- | --- | --- | | | 24.11.20 01.01.20 | | -31.12.22 £7.411 299,554 15.03.2023 | | | 28.03.21 01.01.21 | | -31.12.23 £9.241 240,233 15.03.2024 | | 1 The EPSP award made in May 2020 was made by way of a buy-out award. The terms of the award are consistent with those applicable to the 2019 EPSP awards other than the performance period which | | | | is shortened to three-years to mirror the time horizon of the award being bought out. 151WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION # NON-EXECUTIVE DIRECTORS' INTERESTS (AUDITED) Non-Executive Directors' interests in the Company's ordinary share capital are shown in the following table. Except as disclosed in this table, no Non-Executive Director had any interest in any contract of significance with the Group during the year. | Non-Executive Director | Total interests at 31 December 2021 | Total interests at 20 March 2022 | | --- | --- | --- | | Roberto Quarta | 87,500 | 87,500 | | Angela Ahrendits | 12,571 | 12,571 | | Jacques Aignan | 24,000 | 24,000 | | Sandrine Dufour | 15,000 | 15,000 | | Tarek Farahat | 3,775 | 3,775 | | Tom Fube | 4,333 | 5,333 | | Cindy Rose | 8,000 | 8,000 | | Nicole Seligman | 8,750 | 8,750 | | Sally Susman | 5,000 | 5,000 | | Keith Weed | 8,626 | 8,626 | | Jasmine Whitbread | 5,833 | 8,733 | | Dr. Ya-Qin Zhang | 0 | 0 | Total benefit to members calculated at the last practicable date for this annual Report. # COMPENSATION IN THE WIDER CONTEXT When setting the Directors' Compensation Policy and making decisions in relation to executive compensation, the Compensation Committee considers the wider workforce and the broader compensation context. The Committee places significant value on the views of employees and has facilitated the engagement with the Workforce Advisory Panel (WAP) on compensation matters at the executive level and throughout the organisation. This included the Compensation Committee Chair and the Global Reward and Performance Director's attendance at a WAP meeting to discuss how executive compensation aligns with wider Company compensation policies. Further information on the Workforce Advisory Panel can be found in the Nomination Committee report on page 126. The Committee also receives regular updates on compensation for the wider workforce to ensure that pay for Executives is set against this backdrop. In 2021 the Committee focused on the approach to salary reviews across the networks, as well as receiving employee demographics and compensation structures and data for consideration of pay gap reporting. # RELATIVE IMPORTANCE OF SPEND ON PAY The following table sets out the percentage change in total staff costs, headcount, dividends and share buybacks. | | 2021 | 2020 | % change | | --- | --- | --- | --- | | Total staff costs (continuing operations) | 67,166.7m | 66,554.5m | 9.3 | | Headcount - average over year | 106,808 | 104,163 | 0.8 | | Dividends and share buybacks | 61,155.2m | 6,612.2m | 176.9 | # ANNUAL PERCENTAGE CHANGE IN COMPENSATION OF DIRECTORS AND EMPLOYEES The table overleaf shows the annual change in each individual Director's pay for 2021 and 2020. The changes reflect the impact of the Directors' voluntary four-month 20% salary/fee reduction in 2020, implemented as part of cost reduction targets during Covid-19. Since WPP plc, the statutory entity for which this disclosure is required, does not have any employees, the table includes a voluntary disclosure of the annual average change for employees of the UK head office. Mark Read received a base salary increase of 6.7% effective from 1 June 2021 (see page 142) his first increase in three years. The overall change in salary for 2021 reflects both this increase and the voluntary salary reduction taken in 2020. John Rogers joined the Company on 27 January 2020 and his salary and benefits for 2020 were prorated accordingly. John did not receive a salary increase during 2021. The change in salary for 2021 reflects both the prorated 2020 values and the voluntary salary reduction in 2020. 153 WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCECOMPENSATION COMMITTEE REPORT Non-Executive Director fees were reviewed during the year and the Chair of the Sustainability Committee and the Senior Independent Director’s fees were increased from June 2021 (see page 150). The individual increases in fees for 2021 shown below also reflect the prorating of fees for new appointments, changes to the membership of committees and the voluntary fee reductions taken in 2020. In line with the regulations, the annual change in bonus for the Executive Directors is based on the bonus earned in respect of the financial year, as disclosed in the single total figure of compensation, not the bonus paid in the year. As the Executive Directors did not receive a bonus in respect of 2020 it is not possible to calculate a percentage change between 2021 and 2020. The annual change in average employee bonus is based on the bonus paid in each financial year. This reflects the timing of payments and the availability of the information to calculate the average employee values. Year-on-year change in pay 2020 – 2021 2019 – 2020 Base salary/Fees Benefits Annual bonus Base salary/Fees Benefits Annual bonus % change % change % change 1,2 % change % change % change 1 Executive Directors 3 Mark Read 11.3 4.0 – (6.7) 0.0 (100) 4 John Rogers 15.1 8.1 – n/a n/a n/a Non-Executive Directors Roberto Quarta 7.1 19.6 (2.0) (51.9) 5 Angela Ahrendts 131.2 n/a n/a n/a Jacques Aigrain 7.1 53.1 (6.9) (73.3) 5 | Sandrine Dufour | | 40.1 (48.4) n/a n/a | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Tarek Farahat 7.1 (65.0) (6.7) (57.2) | | | Non-Executive | | | Non-Executive | | | | | 5 | | | Directors do | | | Directors do | | | Tom Ilube | | 554.5 429.6 n/a n/a | | | | | | | | | | | | not receive | | | not receive | | | Cindy Rose 25.6 21.5 24.1 113.8 | | | | | variable | | | variable | | | | | compensation | | | compensation | | | Nicole Seligman 8.7 (78.6) (6.9) 47.2 Sally Susman 4.4 (71.3) 5.1 135.3 Keith Weed 22.2 40.2 447.1 820.9 Jasmine Whitbread 14.5 21.6 218.9 1,318.1 5 Dr. Ya-Qin Zhang , appointed 1 January 2021 n/a n/a n/a n/a 6 Average UK head office employees 2.5% 0.0% (49.5)% 1.2% 0.0% 23.6% 1 The annual percentage change in bonus is calculated by reference to the bonus payable in respect of the financial year ended 31 December 2021 compared to the financial year ended 31 December 2020 for Executive Directors, and by reference to cash bonus payments received during the financial year ended 31 December 2021 in comparison to the financial year ended 31 December 2020 for the UK head office employees. Non-Executive Directors do not receive variable compensation. 2 As the Executive Directors did not receive a bonus in respect of the financial year ended 31 December 2020, it is not possible to calculate a percentage change in between 2020 and 2021. 3 Mark Read took a voluntary 20% salary reduction for a period of four months in 2020 as part of cost reduction targets implemented during Covid-19, this together with a salary increase after 3 years is reflected in the changes shown. 4 John Rogers joined the Company on 27 January 2020 and his salary and benefits in 2020 were prorated accordingly. There have been no changes to his contractual salary since appointment. Changes reflected above are a result of a prorated salary in 2020 and a voluntary 20% salary reduction for a period of four months in 2020 as part of cost reduction targets implemented during Covid-19. 5 Angela Ahrendts, Sandrine Dufour, Tom Ilube and Dr. Ya-Qin Zhang were appointed to the Board on 1 July 2020, 3 February 2020, 5 October 2020 and 1 January 2021 respectively. 6 Based on full-time equivalent comparisons. Average is calculated by reference to the median percentage change. Due to the timing of annual bonus payments, the change in average employee annual bonus of -49.5% reflects the change between the bonus paid in respect of 2020 performance (paid in 2021) and 2019 performance (paid in 2020) and is therefore not directly comparable to Executive Director bonus awards made in respect of 2021 performance (paid in 2022) and 2020 performance (where nil was paid in 2021). ### CEO PAY RATIO The ratios shown in the table below compare the total compensation of the CEO (as shown in the single figure table on page 141) to the compensation of the median UK employee and those at the lower and upper quartile. Year Methodology used 25th percentile pay ratio 50th percentile pay ratio 75th percentile pay ratio 2021 Total compensation Option B 101:1 79:1 55:1 2020 Total compensation Option B 36:1 24:1 15:1 2019 Total compensation Option B 79:1 55:1 34:1 Given the complexity of WPP and the number of payrolls used across the UK Group, Option B (using the gender pay gap information to identify three employees as the best equivalents of the 25th, 50th and 75th percentile employees) was the most appropriate methodology to use to determine the CEO pay ratio. We believe this approach provides accurate information and representation of the ratios. The latest data collected as part of gender pay reporting was used, with a snapshot date of 5 April 2021. The ratio has been computed taking into account the pay and benefits of over 10,000 UK employees, other than the role of the CEO. Where an employee works part-time, fixed pay, benefits, 153WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION and any variable pay were adjusted, where appropriate, to reflect full-time equivalent compensation. The 25th, 50th and 75th percentile employees were determined based on this adjusted data and are considered to be representative. Total compensation for 2021 was calculated using single figure table methodology for these employees in order to provide a meaningful comparison with the CEO. We are satisfied that the median pay ratio is consistent with the compensation policies for our UK workforce taken as a whole and our objective of delivering market competitive pay for each role. The salary and total pay and benefits for the 25th, 50th and 75th percentile employees are shown in the table below: | Year | | Methodology used | 25th percentile pay | 50th percentile pay | 75th percentile pay | | --- | --- | --- | --- | --- | --- | | 2021 | Salary | Option B | £33,567 | £44,250 | £61,500 | | | Total pay and benefits | Option B | £57,604 | £48,295 | £68,583 | | 2020 | Salary | Option B | £30,000 | £40,000 | £71,000 | | | Total pay and benefits | Option B | £31,800 | £46,800 | £73,840 | | 2019 | Salary | Option B | £31,000 | £44,739 | £70,000 | | | Total pay and benefits | Option B | £32,636 | £46,975 | £77,436 | The pay ratio reflects how the structure and approach to compensation changes with increased seniority and accountability within the Group and is therefore consistent with pay, reward and progression policies. The CEO's pay is significantly weighted towards performance-related pay with a focus on aligning with long-term performance and the interests of shareholders. 2021 was a year of outstanding performance resulting in an increase in the CEO's total compensation largely related to incentive awards compared with the prior year, reflecting WPP's pay for performance philosophy. At the 25th, 50th and 75th percentile employee level, variable compensation carries a much smaller weighting. Consequently, the CEO pay ratio has increased since 2020. ### SHARE-BASED COMPENSATION BELOW THE BOARD The Company uses share-based compensation programmes to incentivise and retain employees, recruit new talent and encourage a strong ownership culture among employees. The use of the core share plans in 2021 is described below. ### WPP STOCK PLAN 2018 (WSP) The WPP Leader programme made awards under the WSP to around 1,800 of our key executives in 2021. Awards vest three years after grant, provided the participant is still employed within the Group. In addition, senior executives have part of their annual bonus paid in the form of Executive or Performance Share Awards that vest two years after grant. The Executive Directors' Executive Share Awards are granted under the WSP. No further awards are made to Executive Directors. All awards granted under the WSP are subject to malus and clawback conditions. ### WPP SHARE OPTION PLAN 2015 During 2021, the WPP Share Option Plan 2015 was used to make awards to over 43,000 employees. By 31 December 2021, options under this plan, and its predecessor, the Worldwide Ownership Plan, had been granted to approximately 206,000 employees over 105 million shares since March 1997. While the Share Option Plan provides the authority to make executive option awards, in addition to all employee awards, no awards were granted in 2021. The Executive Directors do not participate in this plan. ### SHARE INCENTIVE DILUTION FOR 2011 TO 2021 The share incentive dilution level, measured on a ten-year rolling basis, was at 2.9% at 31 December 2021 (2020: 2.8%). It is intended that awards under all plans, other than share options, will all be satisfied with purchased shares held either in the ESOPs or in treasury. ### Jasmine Whitbread Chair of the Compensation Committee on behalf of the Board of Directors of WPP plc 31 March 2022 WPP ANNUAL REPORT 2021 CORPORATE GOVERNANCE ## STATEMENT OF DIRECTORS' ## RESPONSIBILITIES ### STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT The Directors confirm that so far as they are aware, there is no ### OF THE PREPARATION OF FINANCIAL STATEMENTS relevant audit information of which the Company’s auditors are The Directors are responsible for preparing the financial statements unaware. Each Director has taken all the steps that he or she ought to in accordance with applicable law and regulations. The Directors have taken, as a Director, in order to make himself or herself aware of have elected to prepare financial statements for the Group in any relevant audit information and to establish that the Company’s accordance with International Financial Reporting Standards (IFRS) auditors are aware of that information. as issued by the International Accounting Standards Board (IASB) as they apply to the financial statements of the Group for the year In accordance with the principles of the UK Corporate Governance ended 31 December 2021. Under company law the Directors must not Code, the Board has established arrangements to evaluate whether approve the accounts unless they are satisfied that they give a true the information presented in the Annual Report is fair, balanced and and fair view of the state of affairs of the Company and of the profit understandable; these are described on page 126. or loss of the Company for that period. The Board considers the Annual Report and financial statements, International Accounting Standard 1 requires that financial statements taken as a whole, are fair, balanced and understandable and provide present fairly for each financial year the Company’s financial position, the information necessary for shareholders to assess the Company’s financial performance and cash flows. This requires the faithful position, performance, business model and strategy. representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria The letters from the Chairs of the Sustainability, Nomination and for assets, liabilities, income and expenses set out in the International Governance, Audit and Compensation Committees, the statements Accounting Standards Board’s “Framework for the Preparation and regarding Directors’ responsibilities and statement of going Presentation of Financial Statements”. concern set out above and the Directors’ remuneration and interests in the share capital of the Company are included in the In virtually all circumstances, a fair presentation will be achieved by Directors’ report, which also includes the Strategic Report and compliance with all applicable IFRSs. Directors are also required to: Corporate Governance sections. – properly select and apply accounting policies; – present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable By Order of the Board information; – provide additional disclosures, when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions Balbir Kelly-Bisla on the entity’s financial position and financial performance; and Company Secretary – make an assessment of the Company’s ability to continue as a going 31 March 2022 concern. The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors’ report and Directors’ Compensation Report. The Directors are responsible for the maintenance and integrity of the Company website. Jersey legislation and UK regulation governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions. 155WPP ANNUAL REPORT 2021 WPP ANNUAL REPORT 2021156 FINANCIAL STATEMENTS ## FINANCIAL ## STATEMENTS Accounting policies 158 Consolidated financial statements 164 Notes to the consolidated financial statements 169 Company financial statements 197 Notes to the Company financial statements 200 Independent auditor's report 202 Reconciliation to non-GAAP measures of performance 210 157WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS ## ACCOUNTING POLICIES The consolidated financial statements of WPP plc and its subsidiaries (the Group) In 2020, as part of the Group's transformation plan, the Group commenced for the year ended 31 December 2021 have been prepared in accordance with a multi-year implementation of a cloud-based ERP and human capital International Financial Reporting Standards (IFRS) as issued by the International management tool. The Group has completed its assessment of the financial Accounting Standards Board (IASB) as they apply to the financial statements of reporting impact of this agenda decision on this implementation and has the Group for the year ended 31 December 2021. changed the accounting policy in the financial statements to align with the clarified guidance within the IFRIC agenda decision. As a result, the Group BASIS OF PREPARATION has expensed all costs associated with this implementation, which amount to The consolidated financial statements have been prepared under the historical £62.2 million as at 31 December 2021. This balance includes costs that were cost convention, except for the revaluation of certain financial instruments and previously capitalised as at 31 December 2020 of £14.0 million. held for sale assets. The financial statements have been prepared using the going concern basis of accounting. The principal accounting policies are set At the date of authorisation of these financial statements, there were a number out below. of standards or amendments to standards, which have not been applied in these financial statements, that were in issue but not yet effective. The Group BASIS OF CONSOLIDATION does not consider that any of these standards or amendments to standards in The consolidated financial statements include the results of the Company issue but not yet effective will have a significant impact on the financial andall its subsidiary undertakings made up to the same accounting date. statements. Allintra-Group balances, transactions, income and expenses are eliminated infull on consolidation. The results of subsidiary undertakings acquired or RESTATEMENT disposed of during the period are included or excluded from the consolidated During 2021, the Group determined that the financial statements for the prior income statement from the effective date of acquisition or disposal. periods contained errors relating to historic tax asset and liability adjustments that had accumulated over a number of years in the Group consolidation. As a NEW IFRS ACCOUNTING PRONOUNCEMENTS result, previously reported corporate income tax recoverable, corporate income In the current year, the following Standards and Interpretations became tax payable and tax charge were incorrect. The cumulative impact resulted in effective: an overstatement of equity as at 31 December 2019 of £118.5 million, which has been corrected by reducing the 2020 opening retained earnings by £113.7 – Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, million and other reserves by £4.8 million. Corporate income tax recoverable IFRS 7, IFRS 4 and IFRS 16); has reduced by £22.8 million (2019: £22.8 million) and corporate income tax – Covid-19 Related Rent Concessions beyond 30 June 2021 (Amendment to payable increased by £93.5 million (2019: £95.7 million) on the consolidated IFRS 16); and balance sheet at 31 December 2020. These changes also decreased the tax – IFRIC Agenda Decision on Accounting Treatment for Configuration and charge in the year ended 31 December 2020 by £2.2 million (2019: increase of Customisation Costs in a Cloud Computing Arrangement. £12.2 million). The restatement resulted in an increase in the basic and diluted earnings per share from continuing and discontinued operations of 0.2p and The Group does not consider that other standards or amendments to 0.2p, respectively, for the year ended 31 December 2020 (2019: decrease of standards adopted during the year have a significant impact on the financial 1.0p and 0.9p respectively). statements. GOVERNMENT SUPPORT IMPACT OF INTEREST RATE BENCHMARK REFORM – PHASE 2 In reaction to the Covid-19 pandemic, certain governments have introduced The amendments issued by the IASB, Interest Rate Benchmark Reform – measures to assist companies. A reduction to operating costs is recorded in Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16), are relation to government subsidies/schemes where these amounts will never mandatory and were effective from 1 January 2021. They provide relief on have to be repaid. Further details of such amounts are included in note 3. certain existing requirements in IFRS Standards, relating to modifications of In other cases, this involves the deferral of certain tax payments in order to financial instruments and lease contracts or hedging relationships triggered by stimulate the economy. The deferral of payments does not impact the income a replacement of a benchmark interest rate in a contract with a new alternative statement and these are charged as normal in the period they are incurred. benchmark rate, as a result of Interest Rate Benchmark Reform. The Group does not consider that these amendments had a significant impact on the financial statements as they provide relief for the possible effects of the uncertainty arising from interest rate benchmark reform. IMPACT OF COVID-19-RELATED RENT CONCESSIONS BEYOND 30 JUNE 2021 The amendment to IFRS 16, Covid-19-Related Rent Concessions beyond 30 June 2021, was issued by the IASB in March 2021 and was effective from 1 April 2021. It provides an extension to the period under which practical relief to lessees could be applied in accounting for rent concessions occurring as a direct consequence of Covid-19, as introduced in the original amendment, Covid-19-Related Concessions (Amendment to IFRS 16). There has been no material impact to our financial statements as a result of the application of this amendment. IMPACT OF IFRIC AGENDA DECISION ON ACCOUNTING TREATMENT FOR CONFIGURATION AND CUSTOMISATION COSTS IN A CLOUD COMPUTING ARRANGEMENT In April 2021, an IFRIC agenda decision was issued in relation to the accounting treatment for configuration and customisation costs in a cloud computing arrangement. This guidance clarified that in order for an intangible asset to be capitalised in relation to customisation and configuration costs in a software-as-a-service (SaaS) arrangement, it is necessary for there to be control of the underlying software asset or for there to be a separate intangible asset which meets the definition in IAS 38 Intangible Assets. WPP ANNUAL REPORT 2021158 FINANCIAL STATEMENTSACCOUNTING POLICIES GOODWILL AND OTHER INTANGIBLE ASSETS PROPERTY, PLANT AND EQUIPMENT Intangible assets comprise goodwill, certain acquired separable corporate Property, plant and equipment are shown at cost less accumulated brand names, acquired customer relationships, acquired proprietary tools depreciation and any provision for impairment with the exception of freehold andcapitalised computer software not integral to a related item of hardware. land which is not depreciated. The Group assesses the carrying value of its property, plant and equipment to determine if any impairment has occurred. Goodwill represents the excess of fair value attributed to investments in Where this indicates that an asset may be impaired, the Group applies the businesses or subsidiary undertakings over the fair value of the underlying requirements of IAS 36 Impairment of Assets in assessing the carrying amount netassets, including intangible assets, at the date of their acquisition. of the asset. This process includes comparing its recoverable amount with its carrying value. Depreciation is provided at rates calculated to write off the Goodwill impairment reviews are undertaken annually or more frequently cost less estimated residual value of each asset on a straight-line basis over ifevents or changes in circumstances indicate a potential impairment. its estimated useful life, as follows: The carrying value of goodwill is compared to the recoverable amount, defined as the higher of fair value less costs to sell and value in use. The net – freehold buildings – 50 years; present value of future cash flows is derived from the underlying assets using – leasehold land and buildings – over the term of the lease or life of the a projection period of up to five years for each cash-generating unit. After the asset,if shorter; projection period, a steady growth rate representing an appropriate long-term – fixtures, fittings and equipment – 3-10 years; growth rate for the industry is applied. Any impairment is recognised – computer equipment – 3-5 years. immediately as an expense and is not subsequently reversed. INTERESTS IN ASSOCIATES AND JOINT VENTURES Corporate brand names, customer relationships and proprietary tools An associate is an entity over which the Group has significant influence. acquired as part of acquisitions of businesses are capitalised separately from Incertain circumstances, significant influence may be represented by factors goodwill as intangible assets if their value can be measured reliably on initial other than ownership and voting rights, such as representation on the Board recognition and it is probable that the expected future economic benefits ofDirectors. that are attributable to the asset will flow to the Group. The Group’s share of the profits less losses of associate undertakings net Certain corporate brands of the Group are considered to have an indefinite of tax, interest and non-controlling interests is included in the consolidated economic life because of the institutional nature of the corporate brand income statement and the Group’s share of net assets is shown within names, their proven ability to maintain market leadership and profitable interestsin associates in the consolidated balance sheet. The Group’s share operations over long periods of time and the Group’s commitment to develop ofthe profits less losses and net assets is based on current information and enhance their value. The carrying value of these intangible assets is produced by the undertakings, adjusted to conform with the accounting reviewed at least annually for impairment and adjusted to the recoverable policies of the Group. amount if required. The Group assesses the carrying value of its associate undertakings to Amortisation is provided at rates calculated to write off the cost less estimated determine if any impairment has occurred. Where this indicates that an residual value of each asset on a straight-line basis over its estimated useful life investment may be impaired, the Group applies the requirements of IAS 36 as follows: inassessing the carrying amount of the investment. This process includes comparing its recoverable amount with its carrying value. The recoverable – brand names (with finite lives) – 10-20 years; amount is defined as the higher of fair value less costs to sell and value in use. – customer-related intangibles – 3-10 years; – other proprietary tools – 3-10 years; The Group accounts for joint venture investments under the equity method – other (including capitalised computer software) – 3-5 years. which is consistent with the Group’s treatment of associates. CONTINGENT CONSIDERATION OTHER INVESTMENTS Contingent consideration is accounted for in accordance with IFRS 3 Business Certain equity investments are designated as either fair value through other Combinations. Contingent consideration only applies to situations where comprehensive income or fair value through profit or loss. Movements in contingent payments are not dependent on future employment of vendors fair value through profit or loss are recorded in the consolidated income and any such payments are expensed when they relate to future employment. statement within revaluation and retranslation of financial instruments. Future anticipated payments to vendors in respect of contingent The Group generally elects to classify equity investments as fair value through consideration(earnout agreements) are initially recorded at fair value which other comprehensive income where the Group forms a strategic partnership isthe present value of the expected cash outflows of the obligations. The with the investee. obligations are dependent on the future financial performance of the interests acquired (typically over a four- to five-year period following the year of NON-CURRENT ASSETS HELD FOR SALE AND acquisition) and assume the operating companies improve profits in line DISCONTINUED OPERATIONS withDirectors’ estimates. The Directors derive their estimates from internal Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, business plans together with financial due diligence performed in where certain conditions are met, an asset or disposal group that is for sale connectionwith the acquisition. is recognised as "held for sale". The Group has classified a disposal group as held for sale if the carrying amount will be recovered principally through a Subsequent adjustments to the fair value are recorded in the consolidated sale transaction rather than through continuing use. For this to be the case, income statement within revaluation and retranslation of financial instruments. the disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. Such assets are measured at the lower of carrying amount and fair value less costs to sell, and are not depreciated or amortised, excluding certain assets that are carried at fair value under IFRS 5. Furthermore, when an associate is classified as held for sale, equity accounting ceases. 159WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS ACCOUNTING POLICIES A discontinued operation is a component of the entity that has been disposed At the inception of the hedge relationship, the Group documents the of or is classified as held for sale and that represents a separate major line of relationship between the hedging instrument and hedged item, along with business or geographical area of operations, is part of a single co-ordinated its risk management objectives and its strategy for undertaking various hedge plan to dispose of such a line of business or area of operations, or is a subsidiary transactions. Furthermore, at the inception of the hedge and on an ongoing acquired exclusively with a view to resale. The profit or loss from a discontinued basis, the Group documents whether the hedging instrument that is used in operation is shown as a single amount on the face of the income statement ahedging relationship is highly effective in offsetting changes in fair values and the comparatives and related notes restated accordingly. This represents orcash flows of the hedged item. total post-tax profit of the disposal group for the whole of the financial year including any post-tax gain or loss on the measurement of fair value less costs Note 26 contains details of the fair values of the derivative instruments used to sell, as well as the post-tax loss on sale of the disposal group. Assets and for hedging purposes. liabilities classified as held for sale are shown as a separate line on the balance sheet. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with ACCRUED AND DEFERRED INCOME any changes in the fair value of the hedged items that are attributable to the Accrued income is a contract asset and is recognised when a performance hedged risk. obligation has been satisfied but has not yet been billed. Contract assets are transferred to receivables when the right to consideration is unconditional The effective portion of changes in the fair value of derivatives that are and billed per the terms of the contractual agreement. designated and qualify as cash flow or net investment hedges is recognised in other comprehensive income and deferred in equity. The gain or loss relating In certain cases, payments are received from customers or amounts are billed to the ineffective portion is recognised immediately in profit or loss. Amounts with an unconditional right to receive consideration prior to satisfaction of deferred in equity are recycled in profit or loss in the periods when the performance obligations and recognised as deferred income. These balances hedged item is recognised in profit or loss. However, when the forecast are considered contract liabilities and are typically related to prepayments transaction that is hedged results in the recognition of a non-financial asset or for third-party expenses that are incurred shortly after billing. a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of TRADE RECEIVABLES AND WORK IN PROGRESS the asset or liability. Trade receivables are stated net of loss allowances. Hedge accounting is discontinued when the hedging instrument expires or Work in progress includes outlays incurred on behalf of clients, including is sold, terminated, exercised, or no longer qualifies for hedge accounting. production costs, and other third-party costs that have not yet been billed At that time, any cumulative gain or loss on the hedging instrument recognised andare considered receivables under IFRS 15 Revenue from Contracts in equity is retained in equity until the forecast transaction occurs. If a hedged withCustomers. transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period. EXPECTED CREDIT LOSSES The Group has applied the simplified approach to measuring expected credit Derivatives embedded in other financial instruments or other host contracts losses, as permitted by IFRS 9 Financial Instruments. This has been applied to are treated as separate derivatives when their risks and characteristics are trade receivables, contract assets and lease receivables. Under this approach, not closely related to those of host contracts and the host contracts are not the Group utilises a provision matrix based on the age of the trade receivables carried at fair value with unrealised gains or losses reported in the and historical loss rates to determine the expected credit losses. The Group consolidated income statement. also considers forward-looking information. Therefore, the Group does not track changes in credit risk, but recognises a loss allowance based on the LIABILITIES IN RESPECT OF OPTION AGREEMENTS financial asset's lifetime expected credit loss. For all other assets, the general Option agreements that allow the Group’s equity partners to require the approach has been applied and a loss allowance for 12-month expected credit Group to purchase a non-controlling interest are treated as derivatives over losses is recognised. the Group's own equity instruments and are recorded in the consolidated balance sheet initially at the present value of the redemption amount in Under IFRS 9, the expected credit losses are measured as the difference accordance with IAS 32 Financial Instruments: Presentation and subsequently, between the asset’s gross carrying amount and the present value of estimated the financial liability is measured in accordance with IFRS 9 Financial future cash flows discounted at the financial asset’s original effective interest Instruments. On initial recognition, the corresponding amount is recognised rate. Given the short-term nature of the Group’s trade receivables, work in against the equity reserve, which is subsequently reversed on derecognition, progress and accrued income, which are mainly due from large national or either through exercise or non-exercise of the option agreement. Changes in multinational companies, the Group's assessment of expected credit losses the measurement of the financial liability due to the unwinding of the discount includes provisions for specific clients and receivables where the contractual or changes in the amount that the Group could be required to pay are cash flow is deemed at risk. recognised in profit or loss within revaluation and retranslation of financial instruments in the consolidated income statement. Further details on expected credit losses are provided in note18. DERECOGNITION OF FINANCIAL LIABILITIES FOREIGN CURRENCY AND INTEREST RATE HEDGING In accordance with IFRS 9 Financial Instruments, a financial liability of the The Group’s policy on interest rate and foreign exchange rate management Group is only released to the consolidated income statement when the sets out the instruments and methods available to hedge interest and currency underlying legal obligation is extinguished. risk exposures and the control procedures in place to ensure effectiveness. DEBT The Group uses derivative financial instruments to reduce exposure to foreign Interest-bearing debt is recorded at the proceeds received, net of direct exchange risk and interest rate movements. The Group does not hold or issue issue costs. derivative financial instruments for speculative purposes. CASH AND CASH EQUIVALENTS Derivatives are initially recognised at fair value at the date a derivative Cash and cash equivalents comprise cash at bank and in hand and short-term contract is entered into and are subsequently remeasured to their fair value highly liquid investments which are readily convertible to known amounts of at each balance sheet date. The resulting gain or loss is recognised in profit or cash and which are subject to insignificant risk of changes in value, including loss immediately unless the derivative is designated and effective as a hedging bank deposits and money market funds. The Group's overdrafts are included in instrument, in which event the timing of the recognition in profit or loss cash and cash equivalents where they are repayable on demand, are components depends on the nature of the hedge relationship. of the Group's centralised treasury strategy employed across the Group and form an integral part of the Group's cash management, in accordance with IAS 7 Statement of Cash Flows. WPP ANNUAL REPORT 2021160 FINANCIAL STATEMENTSACCOUNTING POLICIES BORROWING COSTS GLOBAL INTEGRATED AGENCIES Finance costs of borrowing are recognised in the consolidated income Revenue is typically derived from integrated product offerings including media statement over the term of those borrowings. placements and creative services. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue or a combination of the REVENUE RECOGNITION three, as agreed upon with each client. Revenue for commissions on purchased The Group is a leading worldwide creative transformation organisation offering media is typically recognised at the point in time the media is run. national and multinational clients a comprehensive range of communications, experience, commerce and technology services. Contracts often involve The Group receives volume rebates from certain suppliers for transactions multiple agencies offering different services in different countries. As such, the entered into on behalf of clients that, based on the terms of the relevant terms of local, regional and global contracts can vary to meet client needs and contracts and local law, are either remitted to clients or retained by the Group. regulatory requirements. Consistent with the industry, contracts are typically If amounts are passed on to clients they are recorded as liabilities until settled short-term in nature and tend to be cancellable by either party with 90 days' or, if retained by the Group, are recorded as revenue when earned. notice. The Group is generally entitled to payment for work performed to date. Variable incentive-based revenue typically comprises both quantitative and The Group is generally paid in arrears for its services. Invoices are typically qualitative elements. Incentive compensation is estimated using the most payable within 30 to 60 days. Revenue comprises commissions and fees likely amount and is included in revenue up to the amount that is highly earned in respect of amounts billed and is stated exclusive of VAT, sales taxes probable not to result in a significant reversal of cumulative revenue and trade discounts. Pass-through costs comprise fees paid to external recognised. The Group recognises incentive revenue as the related suppliers when they are engaged to perform part or all of a specific project performance obligation is satisfied. and are charged directly to clients, predominantly media costs. Costs to obtain a contract are typically expensed as incurred as the contracts are PUBLIC RELATIONS AND SPECIALIST AGENCIES generally short-term in nature. Revenue for these services is typically derived from retainer fees and fees for services to be performed subject to specific agreement. Most revenue under In most instances, promised services in a contract are not considered distinct these arrangements is earned over time, in accordance with the terms of the or represent a series of services that are substantially the same with the same contractual arrangement. pattern of transfer to the customer and, as such, are accounted for as a single performance obligation. However, where there are contracts with services DISCONTINUED OPERATIONS (DATA INVESTMENT MANAGEMENT) that are capable of being distinct, are distinct within the context of the Revenue for market research services is typically recognised over time based contract, and are accounted for as separate performance obligations, on input measures. For certain performance obligations, output measures such revenue is allocated to each of the performance obligations based on as the percentage of interviews completed, percentage of reports delivered relative stand-alone selling prices. to a client and the achievement of any project milestones stipulated in the contract are used to measure progress. Revenue is recognised when a performance obligation is satisfied, in accordance with the terms of the contractual arrangement. Typically, While most of the studies provided in connection with the Group’s market performance obligations are satisfied over time as services are rendered. research contracts are undertaken in response to an individual client’s or Revenue recognised over time is based on the proportion of the level of group of clients’ specifications, in certain instances a study may be developed service performed. Either an input method or an output method, depending as an off-the-shelf product offering sold to a broad client base. For these on the particular arrangement, is used to measure progress for each transactions, revenue is recognised when the product is delivered. When the performance obligation. For most fee arrangements, costs incurred are terms of the transaction provide for licensing the right to access a product used as an objective input measure of performance. The primary input of on a subscription basis, revenue is recognised over the subscription period, substantially all work performed under these arrangements is labour. There typically on a straight-line basis. is normally a direct relationship between costs incurred and the proportion of the contract performed to date. In other circumstances relevant output TAXATION measures, such as the achievement of any project milestones stipulated in Corporate taxes are payable on taxable profits at current rates. The tax the contract, are used to assess proportional performance. expense represents the sum of the tax currently payable and deferred tax. For our retainer arrangements, we have a stand-ready obligation to perform The Group is subject to corporate taxes in a number of different jurisdictions services on an ongoing basis over the life of the contract. The scope of these and judgement is required in determining the appropriate provision for arrangements is broad and generally not reconcilable to another input or transactions where the ultimate tax determination is uncertain. In such output criteria. In these instances, revenue is recognised using a time-based circumstances, the Group recognises liabilities for anticipated taxes based method resulting in straight-line revenue recognition. on the best information available and where the anticipated liability is both probable and estimable, liabilities are classified as current. Any interest and The amount of revenue recognised depends on whether we act as an agent penalties accrued are included in corporate income taxes both in the or as a principal. Certain arrangements with our clients are such that our consolidated income statement and balance sheet. Where the final outcome responsibility is to arrange for a third party to provide a specified good or of such matters differs from the amount recorded, any differences may impact service to the client. In these cases we are acting as an agent as we do not the income tax and deferred tax provisions in the period in which the final control the relevant good or service before it is transferred to the client. When determination is made. we act as an agent, the revenue recorded is the net amount retained. Costs incurred with external suppliers (such as production costs and media suppliers) The tax laws that apply to the Group’s subsidiaries may be amended by the are excluded from revenue and recorded as work in progress until billed. relevant tax authorities. Such potential amendments are regularly monitored and adjustments are made to the Group’s tax liabilities and deferred tax assets The Group acts as principal when we control the specified good or service and liabilities where necessary. prior to transfer. When the Group acts as a principal (such as when supplying in-house production services, events and branding), the revenue recorded is The tax currently payable is based on taxable profit for the year. Taxable profit the gross amount billed. Billings related to out-of-pocket costs such as travel differs from net profit as reported in the consolidated income statement are also recognised at the gross amount billed with a corresponding amount because it excludes items of income or expense that are taxable or deductible recorded as an expense. in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been Further details on revenue recognition are detailed by sector below. enacted or substantively enacted by the balance sheet date. 161WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS ACCOUNTING POLICIES Deferred tax is the tax expected to be payable or recoverable on differences LEASES between the carrying amounts of assets and liabilities in the financial The Group leases most of its offices in cities where it operates. Other lease statements and the corresponding tax bases used in the computation of contracts include office equipment and motor vehicles. taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences At inception of a contract, the Group assesses whether a contract is, or unless specifically excepted by IAS 12 Income Taxes. Deferred tax is charged contains, a lease based on whether the contract conveys the right to control the or credited in the consolidated income statement, except when it relates to use of an identified asset for a period of time in exchange for consideration. items charged or credited to other comprehensive income or directly to equity, in which case the deferred tax is also dealt with in other comprehensive The Group recognises a right-of-use asset and a lease liability at the lease income or equity. Deferred tax assets are recognised to the extent that it is commencement date. The right-of-use asset is initially measured based on the probable that taxable profits will be available against which deductible initial amount of the lease liability adjusted for any lease payments made at or temporary differences can be utilised, which can require the use of accounting before the commencement date, plus any initial direct costs incurred, less any estimation and the exercise of judgement. Such assets and liabilities are not lease incentives received. The assets are depreciated over the term of the lease recognised if the temporary difference arises from the initial recognition of using the straight-line method. The lease term includes periods covered by an goodwill or other assets and liabilities (other than in a business combination) in option to extend if the Group is reasonably certain to exercise that option. a transaction that affects neither the taxable profit nor the accounting profit. The lease liability is initially measured at the present value of the lease The carrying amount of deferred tax assets is reviewed at each balance sheet payments that are not paid at the commencement date, discounted using the date and reduced to the extent that it is no longer probable that sufficient interest rate implicit in the lease or, if that rate cannot be readily determined, taxable profits will be available to allow all or part of the asset to be recovered. the Group’s incremental borrowing rate for the same term as the underlying lease. Lease payments included in the measurement of lease liabilities Deferred tax liabilities are recognised for taxable temporary differences arising comprise fixed payments less any lease incentives receivable and variable on investments in subsidiaries and associates, and interests in joint ventures, lease payments that depend on an index or a rate as at the commencement except where the Group is able to control the reversal of the temporary date. Lease modifications result in remeasurement of the lease liability. difference and it is probable that the temporary difference will not reverse intheforeseeable future. Depreciation is recognised in both costs of services and general and administrative costs and interest expense is recognised under finance costs Deferred tax assets and liabilities are offset when there is a legally enforceable in the consolidated income statement. right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group The Group has elected to use the exemption not to recognise right-of-use intends to settle its current tax assets and liabilities on a net basis. assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets (under $5,000). The payments Deferred tax is calculated at the tax rates that are expected to apply in the associated with these leases are recognised as cost of services and general period when the liability is settled or the asset is realised based on enacted and administrative costs within the consolidated income statement on a orsubstantively enacted legislation. straight-line basis over the lease term. RETIREMENT BENEFIT COSTS The Group assesses at the reporting date whether there are any indicators The Group accounts for retirement benefit costs in accordance with IAS 19 of impairment and performs an impairment test when an impairment Employee Benefits. indicator exists. The Group tests a right-of use asset as a stand-alone asset for impairment when it either meets the definition of investment property For defined contribution plans, contributions are charged to the consolidated which generates independent cash flows or it is vacant with minimal to no income statement as payable in respect of the accounting period. continued utility for the Company. When a right-of-use asset is tested as a stand-alone asset, an impairment loss is recognised when the carrying amount For defined benefit plans the amounts charged to operating profit are the of the right-of-use asset exceeds its recoverable amount. The recoverable current service costs, past service costs, administrative expenses and gains amount of a right-of-use asset is estimated mainly based on the present value and losses on settlements and curtailments. They are included as part of staff of the estimated sublease income, discounted using the property yield rates. costs. Past service costs are recognised immediately in the consolidated income statement when the related plan amendment occurs. Net interest The property held by the Group as right-of-use assets to earn rentals is expense is calculated by applying the discount rate to the recognised overall classified as investment property. The Company measures its investment surplus or deficit in the plan. property applying the cost model. Actuarial gains and losses are recognised immediately in other comprehensive TRANSLATION OF FOREIGN CURRENCIES income. Foreign currency transactions arising from normal trading activities are recorded at the rates in effect at the date of the transaction. Monetary assets Where defined benefit plans are funded, the assets of the plan are held and liabilities denominated in foreign currencies at the year-end are translated separately from those of the Group, in separate independently managed at the year-end exchange rate. Foreign currency gains and losses are credited funds. Pension plan assets are measured at fair value and liabilities are or charged to the consolidated income statement as they arise. measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high-quality The income statements of foreign subsidiary undertakings are translated corporate bond of equivalent currency and term to the plan liabilities. intopounds sterling at average exchange rates and the year-end net assets The actuarial valuations are obtained at least triennially and are updated ofthese companies are translated at year-end exchange rates. at each balance sheet date. Exchange differences arising from retranslation of the opening net assets and Recognition of a surplus in a defined benefit plan is limited based on the on foreign currency borrowings (to the extent that they hedge the Group’s economic gain the Company is expected to benefit from in the future by investment in such operations) are reported in the consolidated statement means of a refund or reduction in future contributions to the plan, in ofcomprehensive income. accordance with IAS 19. Goodwill and fair value adjustments arising on the acquisition of a foreign PROVISIONS FOR LIABILITIES AND CHARGES entity are treated as assets and liabilities of the foreign entity and translated Provisions comprise liabilities where there is uncertainty about the timing of atthe closing rate. settlement, but where a reliable estimate can be made of the amount. These include provisions for other property-related liabilities such as onerous contracts and dilapidations. Also included are other provisions, primarily long-term employee benefits such as deferred compensation plans, and legal claims, where the likelihood of settlement is considered probable. WPP ANNUAL REPORT 2021162 ACCOUNTING POLICIES FINANCIAL STATEMENTS # HYPERINFLATION IN ARGENTINA During 2021, 2020 and 2019, Argentina was designated as a hyperinflationary economy and the financial statements of the Group's subsidiaries in Argentina have been adjusted for the effects of inflation in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies. IAS 29 requires that the income statement is adjusted for inflation in the period and translated at the year-end foreign exchange rate and that non-monetary assets and liabilities on the balance sheet are restated to reflect the change in purchasing power caused by inflation from the date of initial recognition. In 2021, this resulted in an increase in goodwill of £23.9 million (2020: £22.4 million, 2019: £4.0 million), an increase in other intangibles of £7.6 million (2020: £5.3 million, 2019: £7.1 million), and an increase in property, plant and equipment of £20.3 million (2020: £19.3 million, 2019: £10.7 million). A consumer price index (CPI) of 582.5 was used at 31 December 2021 (2020: 383.9; 2019: 383.4). The impact on other non-monetary assets and liabilities and the impact on the Group's income statement in the year were immaterial. # SHARE-BASED PAYMENTS The Group issues equity settled share-based payments (including share options) to certain employees and accounts for these awards in accordance with IFRS 2 Share-Based Payment. Equity settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. Details regarding the fair value of equity settled share-based transactions are set out in notes 26 and 27. The fair value determined at the grant date is recognised in the consolidated income statement as an expense on a straight line basis over the relevant vesting period, based on the Group's estimate of the number of shares that will ultimately vest and adjusted for the effect of non-market-based vesting conditions. # NON-CONTROLLING INTERESTS Non-controlling interests in acquired companies are measured at the non-controlling interests' proportionate share of the acquiree's identifiable net assets. The acquisition of a non-controlling interest in a subsidiary, and the sale of an interest while retaining control, is accounted for within equity, and the cash cost of such purchases is included within "financing activities" in the cash flow statement. # CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY IN APPLYING ACCOUNTING POLICIES Management is required to make key decisions and judgements whilst acknowledging there is estimation uncertainty in the process of applying the Group's accounting policies. These estimates and judgements are reviewed on an ongoing basis. Where judgement has been applied or estimation uncertainty exists, the key factors taken into consideration are disclosed in the accounting policies and the appropriate note in these financial statements. The most significant areas of estimation uncertainty include: - Goodwill: the discounted cash flow methodology employed by the Group when testing for goodwill impairment requires estimates regarding revenue growth, operating margins, discount rates and working capital requirements. Further details of the methodology, discount rates, long-term growth rates and estimates used in relation to the goodwill impairment, and sensitivities to these estimates, are set out in note 14; - Provision for post-employment benefits: estimates are required in the accounting for defined benefit pension plans, including establishing discount rates, rates of increase in salaries and pensions in payment, inflation and mortality assumptions. These estimates are made by management based on the advice of qualified advisors. Details of the assumptions used and the sensitivity of the benefit obligation to these assumptions are set out in note 26; - Taxation: estimates are required in determining whether a provision is required and the amount of taxes that will be due, particularly given the many countries in which the Group operates. Where the final tax outcome is different from the amounts recorded, such differences may expose the Group to additional tax liabilities or impact the carrying value of deferred tax assets, which would affect the future tax charge. Further details on the tax charge, corporate income tax payable and deferred tax balances are set out in the income statement, balance sheet and notes 7 and 10. WPP ANNUAL REPORT 2021 43 FINANCIAL STATEMENTS # CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021 | | Notes | 2020 £m | 2021 £m | 2022 £m | | --- | --- | --- | --- | --- | | **Continuing operations** | | | | | | Revenue | 2 | 13,801.1 | 13,003.8 | 13,034.1 | | Costs of services | 3 | (10,597.5) | (9,987.9) | (10,825.0) | | Gross profit | | 2,205.6 | 2,074.9 | 2,609.0 | | General and administrative costs | 3 | (974.4) | (4,293.0) | (1,113.1) | | Operating profit/(loss) | | 1,359.0 | (2,378.1) | 1,395.9 | | Share of results of associates | 6 | 33.8 | (136.0) | 16.7 | | Profit/(loss) before interest and taxation | | 1,392.8 | (2,414.1) | 1,392.6 | | Finance and investment income | 6 | 69.4 | 82.7 | 99.0 | | Finance costs | 6 | (283.6) | (312.0) | (359.1) | | Revaluation and retranslation of financial instruments | 6 | (87.8) | (147.2) | 163.8 | | Profit/(loss) before taxation | | 950.8 | (2,790.6) | 1,214.3 | | Taxation | 7 | (230.1) | (127.1) | (267.2) | | Profit/(loss) for the year from continuing operations | | 720.7 | (2,917.7) | 937.1 | | **Discontinued operations** | | | | | | Profit for the year from discontinued operations | 12 | - | 16.6 | 10.8 | | Profit/(loss) for the year | | 720.7 | (2,901.3) | 937.9 | | **Attributable to** | | | | | | Equity holders of the parent: | | | | | | Continuing operations | | 637.7 | (2,971.6) | 867.9 | | Discontinued operations | | - | 6.5 | (3.0) | | | | 637.7 | (2,965.1) | 864.1 | | Non-controlling interests: | | | | | | Continuing operations | | 83.0 | 53.9 | 79.2 | | Discontinued operations | | - | 9.9 | 16.6 | | | | 83.0 | 63.8 | 93.8 | | | | 720.7 | (2,901.3) | 937.9 | Earnings per share from continuing and discontinued operations | Basic earnings per ordinary share | 9 | 83.4p | (242.5p) | 67.5p | | --- | --- | --- | --- | --- | | Diluted earnings per ordinary share | 9 | 83.5p | (242.5p) | 67.5p | | **Earnings per share from continuing operations** | | | | | | Basic earnings per ordinary share | 9 | 83.4p | (243.0p) | 67.8p | | Diluted earnings per ordinary share | 9 | 83.5p | (243.0p) | 67.5p | Notes The accompanying notes form an integral part of the consolidated income statement. 1. Figures have been restated as described in the accounting policies. 96 WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS # CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 | | 2021 Est. | 2020 Est. | 2019 Est. | | --- | --- | --- | --- | | Profit/(loss) for the year | 720.7 | (2,901.5) | 937.9 | | Items that may be reclassified subsequently to profit or loss | | | | | Exchange adjustments on foreign currency net investments | (985.0) | 81.5 | (683.1) | | Gain on net investment hedges | 65.5 | 9.7 | - | | Loss on cash flow hedges | (28.0) | (5.9) | - | | Share of other comprehensive income/(loss) of associate undertakings | 12.5 | (61.5) | - | | Exchange adjustments recycled to the income statement on disposal of discontinued operations | - | (20.6) | (265.0) | | | (86.0) | 0.0 | (909.1) | | Items that will not be reclassified subsequently to profit or loss | | | | | Actuarial gain/(loss) on defined benefit pension plans | 16.3 | 2.0 | (36.4) | | Deferred tax on defined benefit pension plans | (3.0) | 7.6 | 6.6 | | Movements on equity investments held at fair value through other comprehensive income | (35.5) | (107.7) | (161.6) | | | (36.2) | (118.3) | (171.6) | | Other comprehensive loss for the year | (108.2) | (115.3) | (1,060.7) | | Total comprehensive income/(loss) for the year | 612.5 | (3,016.6) | (162.8) | Attributable to | Equity holders of the parent: | | | | | --- | --- | --- | --- | | Continuing operations | 539.8 | (3,562.9) | 167.8 | | Discontinued operations | - | (32.6) | (386.6) | | | 539.8 | (3,576.5) | (218.6) | | Non-controlling interests: | | | | | Continuing operations | 73.7 | 50.5 | 41.9 | | Discontinued operations | - | 9.6 | 13.9 | | | 73.7 | 50.5 | 73.8 | | | 612.5 | (3,016.6) | (162.8) | Notes The accompanying notes form an integral part of this consolidated statement of comprehensive income. Figures have been restated as described in the accounting policies. WPP ANNUAL REPORT 2021 45 FINANCIAL STATEMENTS # CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021 | | Notes | 2020 £m | 2020 £m | 2019 £m | | --- | --- | --- | --- | --- | | Net cash inflow from operating activities | 11 | 2,092.8 | 2,034.0 | 1,850.5 | | Investing activities | | | | | | Acquisitions | 11 | (384.1) | (178.6) | (161.3) | | Disposal of investments and subsidiaries | 11 | 38.3 | 373.3 | 3,361.0 | | Purchases of property, plant and equipment | | (363.2) | (318.5) | (239.5) | | Purchases of other intangible assets (including capitalised computer software) | | (29.9) | (34.6) | (34.8) | | Proceeds on disposal of property, plant and equipment | | 8.7 | 11.2 | 176.0 | | Net cash (outflow)/inflow from investing activities | | (462.2) | (367.6) | 1,759.6 | | Financing activities | | | | | | Repayment of lease liabilities | | (320.7) | (300.1) | (269.8) | | Share option proceeds | | 6.6 | - | 0.6 | | Cash consideration received from non-controlling interests | 11 | 39.5 | - | - | | Cash consideration for purchase of non-controlling interests | 11 | (105.0) | (80.6) | (62.7) | | Share repurchases and buybacks | 11 | (898.5) | (292.2) | (65.8) | | Proceeds from issue of bonds | 11 | - | 913.5 | - | | Repayment of borrowings | 11 | (397.1) | (282.7) | (1,712.2) | | Financing and share issue costs | | (8.6) | (7.1) | (6.6) | | Equity dividends paid | | (316.7) | (122.0) | (750.5) | | Dividends paid to non-controlling interests in subsidiary undertakings | | (196.5) | (83.3) | (96.2) | | Net cash outflow from financing activities | | (2,087.0) | (292.5) | (2,922.0) | | Net (decrease)/increase in cash and cash equivalents | | (666.6) | 1,656.7 | 688.1 | | Translation of cash and cash equivalents | | (100.5) | (99.2) | (89.7) | | Cash and cash equivalents at beginning of year | | 6,337.1 | 3,799.6 | 3,355.3 | | Cash and cash equivalents including cash held in disposal group at end of year | | 3,540.6 | 6,337.1 | 3,799.6 | | Cash and cash equivalents held in disposal group presented as held for sale | | - | - | (66.3) | | Cash and cash equivalents at end of year | 11 | 3,540.6 | 6,337.1 | 3,733.5 | Note This accompanying notes form an integral part of the consolidated cash flow statement. 166 WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS # CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2021 | | Notes | 2021 Est. | 2020 Est. | 2019 Est. | | --- | --- | --- | --- | --- | | **Non-current assets** | | | | | | Intangible assets: | | | | | | Goodwill | 14 | 7,413.3 | 7,388.8 | 10,110.4 | | Other | 14 | 1,339.5 | 1,389.3 | 1,448.8 | | Property, plant and equipment | 15 | 894.4 | 790.9 | 876.0 | | Right-of-use assets | 13 | 1,395.1 | 1,504.3 | 1,734.5 | | Interests in associates and joint ventures | 16 | 412.9 | 330.7 | 815.0 | | Other investments | 16 | 318.3 | 387.3 | 498.3 | | Deferred tax assets | 17 | 341.5 | 212.9 | 187.9 | | Corporate income tax recoverable | | 44.4 | 24.8 | - | | Trade and other receivables | 18 | 152.4 | 156.2 | 137.6 | | | | **12,555.2** | **12,185.4** | **11,824.7** | | **Current assets** | | | | | | Corporate income tax recoverable | | 90.4 | 110.3 | 142.6 | | Trade and other receivables | 18 | 11,562.5 | 10,972.3 | 11,822.3 | | Cash and short-term deposits | | 2,882.9 | 12,899.1 | 11,305.7 | | | | **12,225.6** | **23,981.7** | **23,270.4** | | Assets classified as held for sale | | - | - | 685.3 | | | | **12,225.6** | **23,981.7** | **23,750.9** | | **Current liabilities** | | | | | | Trade and other payables | 19 | (10,252.5) | (13,859.7) | (14,188.1) | | Corporate income tax payable | | (386.2) | (424.4) | (515.6) | | Short-term lease liabilities | 13 | (379.7) | (323.8) | (302.2) | | Bank overdrafts, bonds and bank loans | 21 | (267.2) | (8,419.2) | (8,798.0) | | | | **(16,485.4)** | **(23,227.0)** | **(23,883.9)** | | Liabilities associated with assets classified as held for sale | | - | - | (172.4) | | | | **(16,485.4)** | **(23,227.0)** | **(24,054.3)** | | **Net current (liabilities)/assets** | | **(1,149.8)** | **734.6** | **(218.4)** | | **Total assets less current liabilities** | | **11,585.4** | **12,940.0** | **13,528.3** | | **Non-current liabilities** | | | | | | Bonds and bank loans | 21 | (4,216.8) | (4,975.3) | (4,047.5) | | Trade and other payables | 20 | (419.9) | (333.5) | (649.4) | | Corporate income tax payable | | - | (1.3) | - | | Deferred tax liabilities | 17 | (392.8) | (304.1) | (379.8) | | Provision for post-employment benefits | 24 | (136.4) | (156.7) | (119.0) | | Provisions for liabilities and charges | 22 | (248.5) | (306.3) | (247.6) | | Long term lease liabilities | 13 | (1,743.1) | (1,830.5) | (1,967.5) | | | | **(7,216.4)** | **(7,689.9)** | **(7,331.0)** | | **Net assets** | | **4,049.0** | **5,050.1** | **5,297.3** | | **Equity** | | | | | | Called up share capital | 27 | 122.4 | 129.6 | 132.8 | | Share premium account | | 574.7 | 570.3 | 570.3 | | Other reserves | 28 | (222.9) | 191.2 | (174.7) | | Own shares | | (1,113.5) | (1,116.3) | (1,118.7) | | Retained earnings | | 4,347.3 | 4,959.3 | 8,576.2 | | **Equity shareholders' funds** | | **3,496.4** | **4,732.0** | **7,923.9** | | Non-controlling interests | | 483.6 | 318.1 | 371.4 | | **Total equity** | | **4,049.0** | **5,050.1** | **5,297.3** | Notes The accompanying notes form an integral part of this consolidated balance sheet. Figures have been restated as described in the accounting policies. The financial statements were approved by the Board of Directors and authorised for issue on 31 March 2022. Signed on behalf of the Board: Mark Read Chief Executive Officer John Rogers Chief Financial Officer WFP ANNUAL REPORT 2021 97 FINANCIAL STATEMENTS ## CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Total | Called-up | | | Share | | | | | | | equity | | Non- | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | share | premium | | Other | | Own | Retained | | shareholders’ | | controlling | | | | | | capital | account | | reserves | 1 | shares | earnings | | 1,2 | funds | 1 interests | | Total | 1 | | | £m | | £m | | £m | £m | | £m | | £m | | £m | £m | | Balance at 1 January 2020 132 . 8 570 . 3 (1 6 9.9) (1,178.7) 8 , 6 8 9. 9 8,0 44 . 4 371. 4 8, 415 . 8 1 Restatement − − (4 . 8) − (113. 7) (118. 5) − (11 8. 5) Restated balance at 1 January 2020 132. 8 5 70. 3 (174. 7) (1 ,178. 7) 8,576.2 7, 9 2 5 . 9 37 1. 4 8 , 2 97. 3 Share cancellations (3. 2) − 3.2 – (281. 2) (281.2) – (281.2) Treasury share allocations − − − 0.6 (0. 6) – – – 1 (Loss)/profit for the year − − − − (2,9 65.1) (2, 965.1) 63. 8 (2,901.3) Exchange adjustments on foreign currency net investments − − 85.2 − − 8 5.2 (3 .9) 81. 3 Gain on net investment hedges − − 9. 7 − − 9. 7 − 9. 7 Loss on cash flow hedges − − (5 .9) − − (5 .9) − (5 .9) Share of other comprehensive loss of associate undertakings − − (61 . 5) − − (61 . 5) − (61. 5) Exchange adjustments recycled to the income statement on disposal of discontinued operations − − (2 0. 6) − − (2 0. 6) – (2 0. 6) Movements on equity investments held at fair value through other comprehensive income − − − − (1 2 7. 7 ) (1 2 7. 7 ) – (1 2 7. 7) Actuarial gain on defined benefit pension plans − − − − 2.0 2 .0 – 2.0 Deferred tax on defined benefit pension plans − − − − 7. 4 7. 4 – 7. 4 Other comprehensive income/(loss) − − 6 .9 – (118. 3) (111. 4) (3 .9) (115.3) 1 Total comprehensive income/(loss) − − 6 .9 – (3,083.4) (3,076.5) 5 9.9 (3,016.6) Dividends paid − − – – (12 2 .0) (12 2 .0) (8 3. 3) (205. 3) Non-cash share-based incentive plans (including share options) − − – – 74 . 4 74 . 4 – 74 . 4 Net movement in own shares held by ESOP Trusts − − – 5 9. 8 (6 4 .9) (5 .1) – (5 .1) Recognition/derecognition of liabilities in respect of put options − − 103. 5 – (26.6) 76 .9 – 76 .9 3 Share purchases – close period commitments − − 252 . 3 – – 252. 3 – 252 . 3 4 Acquisition of subsidiaries − − – – (112 .7) (112. 7) (2 9.9) (14 2 . 6) Balance at 31 December 2020 1 2 9. 6 570. 3 191.2 (1 ,11 8 . 3) 4 , 9 5 9. 2 4 ,7 32 .0 31 8 .1 5 ,0 5 0.1 Ordinary shares issued − 4.4 − − − 4.4 − 4.4 Share cancellations (7. 2) − 7. 2 − (7 2 9. 3) (7 2 9. 3) − (7 2 9. 3) Treasury share allocations − − − 3.7 (3.7) – − − Profit for the year − − − − 6 3 7. 7 6 3 7. 7 8 3 .0 720. 7 Exchange adjustments on foreign currency net investments − − (94 . 7) − − (94 . 7) (10. 3) (10 5. 0) Gain on net investment hedges − − 45.5 − − 45. 5 − 45.5 Loss on cash flow hedges − − (3 8 .0) − − (3 8 .0) − (3 8 .0) Share of other comprehensive income of associate undertakings − − 7. 3 − 6. 2 13 .5 − 13. 5 Movements on equity investments held at fair value through other comprehensive income − − − − (3 5. 5) (3 5. 5) − (35 .5) Actuarial gain on defined benefit pension plans − − − − 14 .3 14 .3 − 14. 3 Deferred tax on defined benefit pension plans − − − − (3.0) (3 .0) − (3.0) Other comprehensive loss − − (7 9.9) − (1 8 .0) (97. 9) (10. 3) (108 .2) Total comprehensive (loss)/income − − (7 9. 9) − 6 1 9. 7 5 3 9. 8 72 .7 61 2.5 Dividends paid − − − − (314.7) (314. 7) (114. 5) (4 2 9. 2) Non-cash share-based incentive plans (including share options) − − − − 9 9. 6 9 9. 6 − 9 9. 6 Tax adjustment on share-based payments − − − − 15. 4 15. 4 − 15. 4 Net movement in own shares held by ESOP Trusts − − − 2.5 (9 1 . 7) (8 9. 2) − (8 9. 2) 5 R ecognition/derecognition of liabilities in respect of put options − − (242 .7) − 1 .1 (2 41 . 6) − (2 41 . 6) 6 Share purchases – close period commitments − − (211. 7) − – (211. 7) − (211 .7) Share of other equity movements of associates − − − − (8 .0) (8. 0) − (8. 0) 4 Acquisition of subsidiaries − − − − (180. 3) (180. 3) 176 . 3 (4 .0) Balance at 31 December 2021 122. 4 5 74 . 7 (3 3 5 .9) (1 ,1 12 .1) 4 , 3 6 7. 3 3 ,61 6 . 4 4 52. 6 4 , 0 6 9. 0 Notes The accompanying notes form an integral part of this consolidated statement of changes in equity. 1 Figures have been restated as described in the accounting policies. 2 Accumulated losses on existing equity investments held at fair value through other comprehensive income are £309.1 million at 31 December 2021 (2020: £27 3.6 million). 3 During 2019, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 2 January 2020 and ending on 27 February 2020, in accordance with UK listing rules. The commitment resulting from this agreement constituted a liability at 31 December 2019 and was recognised as a movement in other reserves in the year ended 31 December 2019. As the close period ended on 27 February 2020 the movement in other reserves has been reversed in the year ended 31December 2020. 4 Acquisition of subsidiaries represents movements in retained earnings and non-controlling interests arising from changes in ownership of existing subsidiaries and recognition of non-controlling interests on new acquisitions. 5 During the year, the Group merged Finsbury Glover Hering and Sard Verbinnen & Co to form a leading global communications firm. As a part of this transaction, certain management acquired shares in the Company and a put option was granted which allows the equity partners to require the Group to purchase these shares. This resulted in a movement in other reserves in the year of £219.6 million. 6 During 2021, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 16 December 2021 and ending on 18 February 2022, in accordance with UK listing rules. The commitment resulting from this agreement constituted a liability at 31December 2021 and was recognised as a movement in other reserves in the year ended 31December 2021. WPP ANNUAL REPORT 2021168 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 1. GENERAL INFORMATION WPP plc is a company incorporated in Jersey. The address of the registered office is 13 Castle Street, St Helier, Jersey, JE1 1ES and the address of the principal executive office is Sea Containers, 18 Upper Ground, London, United Kingdom, SE1 9GL. The nature of the Group’s operations and its principal activities are set out in note 2. These consolidated financial statements are presented in pounds sterling. 2. SEGMENT INFORMATION The Group is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services. Substantially all of the Group’s revenue is from contracts with customers. Reportable segments The Group is organised into three reportable segments – Global Integrated Agencies, Public Relations and Specialist Agencies. IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Group’s Chief Executive Officer (the Chief Operating Decision Maker). Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 permits aggregation of these components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable segments, the Directors have had regard to the similar economic characteristics of certain operating segments, their shared client bases, the similar nature of their products or services and their long-term margins, amongst other factors. During 2020, the Group announced the intention to combine Grey and AKQA into AKQA Group, to bring Geometry and GTB into VMLY&R and International Healthcare into VMLY&R and Ogilvy. As a result AKQA, Geometry, GTB and International Healthcare are now reported within Global Integrated Agencies, having previously been reported within Specialist Agencies. Prior year figures have been re-presented to reflect these changes. Reported contributions were as follows: | | | | Revenue less | | | Headline | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | pass-through | | | operating | | | | Revenue | 1 | | costs | 2 | profit | 3 | | Continuing operations – Income statement | | £m | | £m | | | £m | 2021 Global Integrated Agencies 10,836.3 8,638.7 1,215.5 Public Relations 959.0 909.7 143.1 Specialist Agencies 1,005.8 848.8 134.9 12,801.1 10, 397.2 1,493.5 4 2020 Global Integrated Agencies 10,265.5 8,194.2 1,059.9 Public Relations 892.9 854.4 141.3 Specialist Agencies 844.4 713.4 59.3 12,002.8 9,762.0 1,260.5 4 2019 Global Integrated Agencies 11,269.2 9,090.4 1,358.6 Public Relations 956.5 898.0 140.6 Specialist Agencies 1,008.4 858.1 61.4 13,234.1 10,846.5 1,560.6 Notes 1 Intersegment sales have not been separately disclosed as they are not material. 2 Revenue less pass-through costs is defined on page 223. 3 A reconciliation from reported operating profit to headline operating profit is provided on page 210. 4 Prior year figures have been re-presented to reflect the changes to segments described above. 169WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | | | | | | Depreciation | | | | | Share of | | | Interests in | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share-based | | Capital | | | and | | Goodwill | | results of | | associates and | | | | | payments | | additions | 1 | amortisation | | 2 | impairment | | associates | | joint ventures | | | | Continuing operations – Other information | | £m | | £m | | £m | | | £m | | £m | | | £m | 2021 Global Integrated Agencies 92.3 252.7 372.8 – 22.7 115.2 Public Relations 4.8 17.9 28.1 – 1.7 8.0 3 Specialist Agencies 2.5 22.5 43.1 1.8 (0.6) 289.7 99.6 293.1 444.0 1.8 23.8 412.9 2020⁴ Global Integrated Agencies 61.3 234.2 449.7 2,355.1 19.0 158.4 Public Relations 8.0 15.5 32.8 161.5 1.3 6.4 3 Specialist Agencies 5.1 22.9 59.4 306.3 (156.3) 165.9 74.4 272.6 541.9 2,822.9 (136.0) 330.7 2019⁴ Global Integrated Agencies 57.2 284.5 424.6 4.8 16.8 164.6 Public Relations 4.6 17.5 31.5 – (0.3) 5.5 3 Specialist Agencies 4.2 27. 8 52.2 42.9 (1.8) 642.9 66.0 329.8 508.3 47.7 14.7 813.0 Notes 1 Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software). 2 Depreciation of property, plant and equipment, depreciation of right-of-use assets and amortisation of other intangible assets. 3 Specialist Agencies includes the Kantar associates and amounts previously reported under the Data Investment Management segment. 4 Prior year figures have been re-presented to reflect the changes to segments described above. Contributions by geographical area were as follows: | | | | | 2021 | 2020 | 2019 | | | | | 2021 | 2020 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Continuing operations | | | | £m | £m | £m | | | | | £m | £m | | | 1 | | | | | | | | 1 | | | | | Revenue | | | | | | | Non-current assets | | | | | | | | | 2 | | | | | | 2 | | | | | | North America | | | 4,494.2 4,464.9 4,854.7 | | | | North America | | | 5,075.4 4,962.1 | | | | United Kingdom 1,866.9 1,637.0 1, 797.1 | | | | | | | United Kingdom 1,565.4 1,488.7 | | | | | | | Western Continental Europe 2,786.3 2,441.6 2,628.8 | | | | | | | Western Continental Europe 2,618.8 2,745.0 | | | | | | | Asia Pacific, Latin America, | | | | | | | Asia Pacific, Latin America, Africa & | | | | | | | Africa & Middle East and | | | | | | | Middle East and Central & Eastern Europe 2,933.6 2,767.1 | | | | | | Central & Eastern Europe 3,653.7 3,459.3 3,953.5 12,193.2 11,962.9 12,801.1 12,002.8 13,234.1 3 Notes Revenue less pass-through costs 1 Non-current assets excluding financial instruments and deferred tax. | | 2 | | 2 | | --- | --- | --- | --- | | North America | | 3,849.2 3,743.4 4,034.3 | North America includes the United States with non-current assets of £4,730.1 million | | United Kingdom 1,414.3 1,233.8 1,390.1 | | | (2020: £4,609.0 million). | Western Continental Europe 2,225.4 2,019.4 2,176.4 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 2,908.3 2,765.4 3,245.7 10,397.2 9,762.0 10,846.5 3 Headline operating profit 2 North America 655.7 611.9 662.0 United Kingdom 180.9 137.7 188.5 Western Continental Europe 288.6 198.7 261.5 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 368.3 312.2 448.6 1,493.5 1,260.5 1,560.6 Notes 1 Intersegment sales have not been separately disclosed as they are not material. 2 North America includes the United States with revenue of £4,220.8 million (2020: £4,216.1 million, 2019: £4,576.5 million), revenue less pass-through costs of £3,597.4 million (2020: £3,524.8 million, 2019: £3,806.3 million) and headline operating profit of £615.2 million (2020: £563.7 million, 2019: £620.6 million). 3 Revenue less pass-through costs and headline operating profit are defined on pages 222 and 223. WPP ANNUAL REPORT 2021170 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS 3. COSTS OF SERVICES AND GENERAL a competitive advantage in the market as our clients, and their clients, move AND ADMINISTRATIVE COSTS to an ever-increasing digital world. It includes costs of £62.2 million (including £14.0 million that was previously capitalised at 31 December 2020) in relation 2021 2020 2019 to the rollout of a new ERP system in order to drive efficiency and Continuing operations £m £m £m collaboration throughout the Group. The remaining £51.3 million relates to the Costs of services 10,597.5 9,987.9 10,825.1 continuing restructuring plan, first outlined on the Investor Day in December General and administrative costs 974.6 4,293.0 1,113.1 2018. As part of that plan, restructuring actions have been taken to right-size 11,572.1 14,280.9 11,938.2 under-performing businesses, address high-cost severance markets and simplify operational structures. Costs of services and general and administrative costs include: Restructuring costs in relation to Covid-19 of £29.9 million (2020: £232.5 million, 2021 2020 2019 2019: £nil) primarily relate to property costs which the Group undertook in Continuing operations £m £m £m response to the Covid-19 pandemic. As management continues to assess the Staff costs (note 5) 7,166. 7 6,556.5 7,090.6 impact of Covid-19 on long-term working practices and the Group’s real estate Establishment costs 529.0 638.5 672.9 portfolio, further impairments may occur in the future. We note that there are Media pass-through costs 1,865.3 1,555.2 1,656.2 other Covid-19 related amounts, including credits, which have not been Other costs of services and general reflected on the grounds that they cannot effectively be distinguished from 1 and administrative costs 2,011.1 5,530.7 2,518.5 the day-to-day activities of the business. 11,572.1 14,280.9 11,938.2 In 2021, the Group received £5.3 million (2020: £77.1 million, 2019: £nil) of aid Included within costs of services and general administrative costs are the from governments around the world in relation to the Covid-19 pandemic, following: which is included as a credit in other staff costs. 2021 2020 2019 Continuing operations £m £m £m Total impairment charges included in restructuring costs of £39.2 million (2020: £196.7 million) consist of £17.6 million (2020: £147.6 million) within restructuring Goodwill impairment (note 14) 1.8 2,822.9 47.7 costs in relation to Covid-19 and £21.6 million (2020: £49.1 million) within Investment and other impairment (reversals)/ charges (42.4) 296.2 7.5 restructuring and transformation costs. These impairment charges include Restructuring and transformation costs 145.5 80.7 153.5 £19.3 million (2020: £117.0 million) in relation to right-of-use assets, £9.8 million (2020: £79.7 million) of related property, plant and equipment and £10.1 million Restructuring costs in relation to Covid-19 29.9 232.5 – (2020: £nil) of other intangibles, arising from the Group’s reassessment of its Litigation settlement 21.3 25.6 (16.8) property requirements as a result of effective remote working practices during Gain on sale of freehold property in New York – – (7.9) the Covid-19 pandemic and continued focus on campuses. There were no Amortisation and impairment of acquired impairment charges included in restructuring costs in 2019. intangible assets 97.8 89.1 121.5 Amortisation of other intangible assets 19.9 35.2 21.2 The goodwill impairment charge of £2,822.9 million in 2020 reflects the adverse Depreciation of property, plant impacts of Covid-19 on a number of businesses in the Group at that time. and equipment 151.2 174.8 185.5 Depreciation of right-of-use assets 272.9 331.9 301.6 Auditors’ remuneration: (Gains)/losses on sale of property, plant and equipment (1.3) 0.3 3.2 2021 2020 2019 Losses/(gains) on disposal of investments £m £m £m and subsidiaries 10.6 (7.8) (40.4) Fees payable to the Company’s auditors for Gains on remeasurement of equity interests the audit of the Company’s annual accounts 7.1 6.4 6.5 arising from a change in scope of ownership – (0.6) (0.4) Fees payable for the audit of the Company’s | Net foreign exchange losses 4.4 5.9 6.1 | subsidiaries 24.8 22.9 28.0 | | --- | --- | | Short-term lease expense 18.0 36.7 83.8 | Fees payable to the auditors pursuant to | | Low-value lease expense 2.3 2.3 2.9 | legislation 31.9 29.3 34.5 | 1 Audit-related services 0.4 0.4 0.4 Note 2 1 Other services 1.4 0.7 7.8 Other costs of services and general and administrative costs include £538.6 million (2020: £685.6 million, 2019: £731.4 million) of other pass-through costs. Tax compliance services – 0.1 – Total other fees 1.8 1.2 8.2 In 2021, operating profit includes credits totalling £19.3 million (2020: Total fees 33.7 30.5 42.7 £46.3 million, 2019: £26.9 million) relating to the release of excess provisions Notes and other balances established in respect of acquisitions completed prior 1 Audit-related assurance services are in respect of the review of the interim financial information. to 2020. Further details of the Group’s approach to acquisition reserves, 2 Other services include audits for earnout purposes. as required by IFRS 3 Business Combinations, are given in note 29. Amortisation and impairment of acquired intangible assets of £97.8 million 4. SHARE OF RESULTS OF ASSOCIATES (2020: £89.1 million, 2019: £121.5 million) includes an impairment charge in the Share of results of associates includes: year of £47.9 million (2020: £21.6 million, 2019: £26.5 million) in regard to certain brand names that are no longer in use, including £43.8 million for brands with 2021 2020 2019 an indefinite life. Continuing operations £m £m £m Share of profit before interest and taxation 208.5 142.5 99.2 Investment and other impairment reversals of £42.4 million primarily relates Share of exceptional losses (62.3) (146.1) (47.8) to the partial reversal of a £255.6 million impairment taken in 2020 relating to Share of interest and non-controlling interests (83.9) (91.4) (19.4) Imagina, an associate in Spain. Share of taxation (38.5) (41.0) (17.3) 23.8 (136.0) 14.7 Losses on disposal of investments and subsidiaries of £10.6 million in 2021 includes a loss of £4.9 million on the disposal of XMKT in China, which Share of exceptional losses of £62.3 million (2020: £146.1 million, completed in September 2021. Gains on disposal of investments and 2019: £47.8 million) primarily comprise £38.8 million (2020: £54.3 million, subsidiaries of £40.4 million in 2019 include a gain of £28.6 million on the 2019: £5.3 million) of amortisation and impairment of acquired intangible disposal of the Group’s interest in Chime. assets as well as restructuring and one-off transaction costs of £18.8 million (2020: £89.3 million, 2019: £20.3 million) within Kantar. Restructuring and transformation costs of £145.5 million (2020: £80.7 million, 2019: £153.5 million) include £94.2 million in relation to the Group’s IT transformation programme. This programme will allow technology to become 171WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. OUR PEOPLE Revaluation and retranslation of financial instruments include: Our staff numbers averaged 104,808 for the year ended 31 December 2021 against 104,163 in 2020 and 132,823 in 2019. Their geographical distribution 2021 2020 2019 Continuing operations £m £m £m wasas follows: Movements in fair value of treasury instruments 9.1 15.4 0.4 2021 2020 2019 Premium on the early repayment of bonds (13.0) – (63.4) North America 21,764 21,524 25,008 Revaluation of investments held at | United Kingdom 10,995 10,670 14,192 | | fair value through profit or loss (7.5) 8.0 9.1 | | --- | --- | --- | | Western Continental Europe 21,514 21,551 26,973 | | Revaluation of put options over | | Asia Pacific, Latin America, Africa & | | non-controlling interests (40.6) 12.3 (24.3) | | Middle East and Central & Eastern Europe 50,535 50,418 66,650 | | Revaluation of payments due to | | | 104,808 104,163 132,823 | vendors (earnout agreements) (58.7) 13.4 (3.7) | Retranslation of financial instruments 22.9 (196.3) 245.7 | Their reportable segment distribution was as follows: | | | | | (87.8) (147.2) 163.8 | | --- | --- | --- | --- | --- | --- | | | | 1 | | 1 | | | | 2021 2020 | | 2019 | | | Note Global Integrated Agencies 89,701 88,406 90,582 1 Interest expense and similar charges are payable on bank overdrafts, bonds and bank loans held at amortised cost. Data Investment Management − 1,341 26,325 Public Relations 7,121 6,810 6,890 The majority of the Group’s long-term debt is represented by $1,063 million Specialist Agencies 7,986 7,606 9,026 of US dollar bonds at an average interest rate of 4.26%, €3,600 million of 104,808 104,163 132,823 Eurobonds at an average interest rate of 1.94% and £650 million of Sterling bonds at an average interest rate of 3.21%. Note 1 Prior year figures have been re-presented to reflect the changes to segments described in note 2. Average borrowings under the US Dollar Revolving Credit Facilities At the end of 2021, staff numbers were 109,382 (2020: 99,830, 2019: 106,786). (note 10) amounted to nil (2020: nil). Staff costs include: Average borrowings under the Australian Dollar Revolving Credit Facilities amounted to A$52 million at an average rate of 1.89% (2020: A$151 million at | | 2021 | 2020 | 2019 | an average rate of 2.06%). | | --- | --- | --- | --- | --- | | Continuing operations | £m | £m | £m | | | Wages and salaries 4,797.2 4,781.0 4,946.2 | | | | Average borrowings under the US Commercial Paper Programme for 2021 | | Cash-based incentive plans 455.2 110.7 227.6 | | | | amounted to nil (2020: $2 million at an average interest rate of 1.66% inclusive | | Share-based incentive plans 99.6 74.4 66.0 | | | | of margin). | Social security costs 630.1 570.9 591.7 Average borrowings under the Euro Commercial Paper Programme for 2021 Pension costs 177.7 171.7 169.7 amounted to nil (2020: nil). Severance 41.8 68.2 42.6 1 Other staff costs 965.1 779.6 1,046.8 7. TAXATION 7,166.7 6,556.5 7,090.6 The tax rate on reported profit/(loss) before tax was 24.2% (2020: -4.6%, Note 2019: 23.7%). 1 Freelance and temporary staff costs are included in other staff costs. The tax charge comprises: Compensation for key management personnel includes: | | | | | | 2021 | 2020 | 1 | 2019 | 1 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | 2020 | 2019 | Continuing operations | £m | £m | | £m | | | | £m | £m | £m | Corporation tax | | | | | | | Short-term employee benefits 28.0 17.9 18.3 | | | | Current year 404.0 307.8 435.2 | | | | | | | Pensions and other post-retirement benefits 0.9 1.0 1.0 | | | | Prior years (41.4) (83.2) (63.4) | | | | | | | Share-based payments 14.6 10.3 10.8 | | | | | 362.6 224.6 371.8 | | | | | | | 43.5 29.2 30.1 | | | Deferred tax | | | | | | | Key management personnel comprises the Board and the Executive | | | | Current year (131.0) (80.2) (78.3) | | | | | | | Committee. Further details of compensation for the Board are disclosed on | | | | Prior years (1.5) (17.3) (6.3) | | | | | | | pages 133-154. | | | | | (132.5) (97. 5) (84.6) | | | | | Tax charge 230.1 127.1 287.2 6. FINANCE AND INVESTMENT INCOME, FINANCE COSTS AND REVALUATION AND RETRANSLATION OF FINANCIAL INSTRUMENTS Note 1 Figures have been restated as described in the accounting policies. Finance and investment income includes: | | 2021 | 2020 | 2019 | The corporation tax credit for prior years in 2021, 2020, and 2019 primarily | | --- | --- | --- | --- | --- | | Continuing operations | £m | £m | £m | comprises the release of a number of provisions following the resolution | | Income from equity investments 17.9 8.7 18.3 | | | | of tax matters in various countries. | Interest income 51.5 74.0 80.7 69.4 82.7 99.0 Finance costs include: 2021 2020 2019 Continuing operations £m £m £m Net interest expense on pension plans 1.8 2.9 3.5 Interest on other long-term employee benefits 2.4 3.1 3.9 1 Interest expense and similar charges 188.5 205.0 252.0 Interest expense related to lease liabilities 90.9 101.0 99.7 283.6 312.0 359.1 WPP ANNUAL REPORT 2021172 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The tax charge for the year can be reconciled to profit/(loss) before taxation 8. ORDINARY DIVIDENDS in the consolidated income statement as follows: Amounts recognised as distributions to equity holders in the year: 2021 2020 1 2019 1 2021 2020 2019 2021 2020 2019 Continuing operations £m £m £m Per share Pence per share £m £m £m Profit/(loss) before taxation 950.8 (2,790.6) 1,214.3 2020 Final dividend 14.00p – 37.30 p 167.7 – 466.4 2 Tax at the corporation tax rate of 19.0% 180.7 (530.2) 230.7 2021 Interim dividend 12.50p 10.00p 22.70p 147.0 122.0 284.1 Tax effect of share of results of associates (13.3) 16.2 (2.7) 26.50p 10.00p 60.00p 314.7 122.0 750.5 Irrecoverable withholding taxes 52.3 49.4 44.7 Items that are not deductible in determining taxable profit 29.3 67.0 53.7 2021 2020 2019 2021 2020 2019 Per ADR 1 Cents per ADR $m $m $m Goodwill impairment 0.6 542.4 10.4 Effect of different tax rates in subsidiaries 2020 Final dividend 89.85¢ – 249.00¢ 215.3 – 622.8 operating in other jurisdictions 81.2 92.7 7 7.1 2021 Interim dividend 85.98¢ 64.18¢ 144.88¢ 202.2 156.6 362.6 Origination and reversal on unrecognised 175.83¢ 64.18¢ 393.88¢ 417.5 156.6 985.4 temporary differences (36.3) (29.3) (3.4) Tax losses not recognised or utilised in Proposed final dividend for the year ended 31 December 2021: the year 7. 4 21.1 13.2 Utilisation of tax losses not previously 2021 2020 2019 recognised (5.1) (1.7) (42.7) Per share Pence per share Recognition of temporary differences not previously recognised – – (24.1) Final dividend 18.70p 14.00p – Net release of prior year provisions in relation to acquired businesses (1.1) (1.7) (19.9) 2021 2020 2019 Other prior year adjustments (41.8) (98.8) (49.8) 1 Per ADR Cents per share Impact of deferred tax rate change (23.8) – – Final dividend 128.63¢ 89.85¢ – Tax charge 230.1 127.1 287.2 Note Effective tax rate on profit/(loss) before tax 24.2% (4.6%) 23.7% 1 These figures have been translated for convenience purposes only, using the approximate Notes average rate for the year of US$1.3757 (2020: US$1.2836, 2019: US$1.2765). This conversion should 1 Figures have been restated as described in the accounting policies. not be construed as a representation that the pound sterling amounts actually represent, 2 As the Group is subject to the tax rates of more than one country, it has chosen to present or could be converted into, USdollars at the rates indicated. its reconciliation of the tax charge using the UK corporation tax rate of 19.0% (2020: 19.0%, 2019: 19.0%). The payment of dividends will not have any tax consequences for the Group. FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS Final dividends are paid in the subsequent year to which they relate. The 2019 The tax charge may be affected by the impact of acquisitions, disposals and final dividend which was due to be paid in 2020 was cancelled to protect other corporate restructurings, the resolution of open tax issues, and the liquidity in light of the threat from Covid-19 at that time. ability to use brought forward tax losses. Changes in local or international tax rules, for example, increasing tax rates as a consequence of the financial 9. EARNINGS PER SHARE support programmes implemented by governments during the Covid-19 BASIC EPS pandemic, the OECD/G20 Inclusive Framework on Base Erosion and Profit The calculation of basic reported and headline EPS is as follows: Shifting, and changes arising from the application of existing rules or challenges by tax or competition authorities, may expose the Group to Continuing operations 2021 2020 1 2019 1 additional tax liabilities or impact the carrying value of deferred tax assets, 2 Reported earnings (£m) 637. 7 (2,971.6) 8 47.9 which could affect the future tax charge. Headline earnings (£m) (page 210) 954.5 742.5 972.0 Weighted average shares used in basic Liabilities relating to open and judgemental matters are based upon an EPS calculation (m) 1,194.1 1,223.0 1,250.0 assessment of whether the tax authorities will accept the position taken, after Reported EPS 53.4p (243.0p) 67.8p taking into account external advice where appropriate. Where the final tax Headline EPS 79.9p 60.7p 77. 8p outcome of these matters is different from the amounts which were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Discontinued operations 2021 2020 2019 2 The Group does not currently consider that judgements made in assessing tax Reported earnings (£m) – 6.5 (3.8) liabilities have a significant risk of resulting in any material additional charges Weighted average shares used in basic EPS calculation (m) – 1,223.0 1,250.0 or credits in respect of these matters, within the next financial year, beyond | the amounts already provided. | Reported EPS – 0.5p (0.3p) | | | | | | --- | --- | --- | --- | --- | --- | | In the UK Budget on 3 March 2021, the Chancellor of the Exchequer announced | Continuing and discontinued operations 2021 2020 | | 1 | 2019 | 1 | | an increase in the UK corporation tax rate from 19% to 25%, which is due to be | | 2 | | | | | | Reported earnings | (£m) 637. 7 (2,965.1) 844.1 | | | | effective from 1 April 2023. This change was enacted at the balance sheet Weighted average shares used in basic date, and the Group has remeasured UK deferred tax balances accordingly EPS calculation (m) 1,194.1 1,223.0 1,250.0 and recognised a tax credit of £23.8 million in current period tax expense. Reported EPS 53.4p (242.5p) 67.5p Notes TAX RISK MANAGEMENT 1 Figures have been restated as described in the accounting policies. We look to maintain open and transparent relationships with the tax 2 Reported earnings is equivalent to profit/(loss) for the year attributable to equity holders authorities in the jurisdictions in which we operate and relevant government of the parent. representatives. We maintain active engagement with a wide range of international companies and business organisations with similar issues. We engage advisors and legal counsel to obtain opinions on tax legislation and principles. We have a Tax Risk Management Strategy in place which sets out the controls established and our assessment procedures for decision making and how we monitor tax risk. We monitor proposed changes in taxation legislation and ensure these are taken into account when we consider our future business plans. Our Directors are informed by management of any significant tax law changes, the nature and status of any significant ongoing tax audits, and other developments that could materially affect the Group's tax position. 173WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 9. EARNINGS PER SHARE CONTINUED | | | | 10. SOURCES OF FINANCE | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | DILUTED EPS | | | | The following table summarises the equity and debt financing of the Group, | | | | | | The calculation of diluted reported and headline EPS is as follows: | | | | and changes during the year: | | | | | | Continuing operations 2021 2020 | 1 | 2019 | 1 | | Shares Debt | | | | | Diluted reported earnings (£m) 637.7 (2,971.6) 8 47.9 | | | | | 2021 | 2020 | 2021 | 2020 | | | | | | Analysis of changes in financing | £m | £m | £m | £m | Diluted headline earnings (£m) 954.5 742.5 972.0 Beginning of year 699.9 703.1 5,032.7 4,272.9 Weighted average shares used in reported | | 2 | | Ordinary shares issued 4.4 – – – | | --- | --- | --- | --- | | diluted EPS calculation (m) | | 1,215.3 1,223.0 1,260.6 | | | Weighted average shares used in headline | | | Share cancellations (7.2) (3.2) – – | diluted EPS calculation (m) 1,215.3 1,236.0 1,260.6 Net (decrease)/increase in Diluted reported EPS 52.5p (243.0p) 67. 3p drawings on bank loans and corporate bonds – – (397.1) 632.8 Diluted headline EPS 78.5p 60.1p 7 7.1p Amortisation of financing costs included in debt – – 8.1 7.5 | Discontinued operations 2021 2020 2019 | Changes in fair value due to | | --- | --- | | Diluted reported earnings (£m) – 6.5 (3.8) | hedging arrangements – – (2.5) (1.4) | | Weighted average shares used in diluted | Other movements – – (0.4) (7.1) | 2 EPS calculation (m) – 1,223.0 1,260.6 Exchange adjustments – – (199.1) 128.0 Diluted reported EPS – 0.5p (0.3p) End of year 697.1 699.9 4,441.7 5,032.7 1 1 The table above excludes bank overdrafts which fall within cash and cash Continuing and discontinued operations 2021 2020 2019 equivalents for the purposes of the consolidated cash flow statement. Other Diluted reported earnings (£m) 637.7 (2,965.1) 844.1 liabilities from financing activities including lease liabilities and derivatives Weighted average shares used in diluted 2 used for hedging debts are disclosed in note 13 and note 26, respectively. EPS calculation (m) 1,215.3 1,223.0 1,260.6 Diluted reported EPS 52.5p (242.5p) 67.0p SHARES Notes At 31 December 2021, the Company's share base was entirely composed 1 Figures have been restated as described in the accounting policies. of ordinary equity share capital and share premium of £697.1 million 2 The weighted average shares used in the basic EPS calculation for 2020 have also been used for (2020: £699.9 million), further details of which are disclosed in note 27. reported diluted EPS due to the anti-dilutive effect of the weighted average shares calculated for the reported diluted EPS calculation. DEBT Diluted EPS has been calculated based on the diluted reported and diluted US$ bonds The Group has in issue $750 million of 3.75% bonds due September headline earnings amounts above. At 31 December 2021, options to purchase 2024, $93 million of 5.125% bonds due September 2042 and $220 million of 7.2 million ordinary shares (2020: 14.2 million, 2019: 19.3 million) were 5.625% bonds due November 2043. outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices of these options were greater than the Eurobonds The Group has in issue €750 million of 3.0% bonds due November average market price of the Group’s shares and, therefore, their inclusion 2023, €500 million of 1.375% bonds due March 2025, €750 million of 2.25% would have been accretive. bonds due September 2026, €750 million of 2.375% bonds due May 2027, €600 million of 1.625% bonds due March 2030, and €250 million of Floating A reconciliation between the shares used in calculating basic and diluted EPS Rate Notes carrying a coupon of 3m EURIBOR +0.45% due March 2022. is as follows: Sterling bonds The Group has in issue £250 million of 3.750% bonds due May | | 2021 | 2020 | 2019 | 2032 and £400 million of 2.875% bonds due September 2046. | | --- | --- | --- | --- | --- | | | m | m | m | | | Weighted average shares used in basic | | | | Revolving Credit Facility The Group has a five-year Revolving Credit Facility | EPS calculation 1,194.1 1,223.0 1,250.0 of $2.5 billion due March 2026, signed in November 2021. The Group’s Dilutive share options outstanding 1.3 – 0.3 borrowings under these facilities, which are drawn down predominantly in Other potentially issuable shares 19.9 13.0 10.3 pounds sterling, averaged nil in 2021 (2020: nil). Weighted average shares used in diluted EPS calculation 1,215.3 1,236.0 1,260.6 In May 2021, the Group's subsidiary, WPP AUNZ, repaid in full its A$150 million Revolving Credit Facility due August 2021, and its A$270 million Revolving At 31 December 2021 there were 1,224,459,550 (2020: 1,296,080,242, Credit Facility due August 2023. The Group's borrowings under the Australian 2019: 1,328,167,813) ordinary shares in issue, including 70,489,953 treasury dollar facilities, which were drawn down in Australian dollars and New Zealand shares (2020: 70,748,100, 2019: 70,787,730). dollars, averaged the equivalent of A$52 million in 2021 (2020: A$151 million). The Group had available undrawn committed credit facilities of £1,847.5 million at 31 December 2021 (2020: £2,023.2 million). Borrowings under the $2.5 billion Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of the Group. The $2.5 billion Revolving Credit Facility, due March 2026, includes terms which require the consent of the majority of the lenders if a proposed merger or consolidation of the Company would alter its legal personality or identity. COMMERCIAL PAPER PROGRAMMES The Group operates commercial paper programmes using its Revolving Credit Facility as a backstop. The average US commercial paper outstanding in 2021 was nil (2020: $2 million). The average Euro commercial paper outstanding in 2021 was nil (2020: nil) inclusive of the effect of currency swaps. There was no US or Euro commercial paper outstanding at 31 December 2021. WPP ANNUAL REPORT 2021174 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | The following table is an analysis of future anticipated cash flows in relation to | | | 11. ANALYSIS OF CASH FLOWS | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | the Group’s debt, on an undiscounted basis which, therefore, differs from the | | | The following tables analyse the items included within the main cash flow | | | | | | | fair value and carrying value: | | | headings on page 166. | | | | | | | | 2021 | 2020 | Net cash from operating activities: | | | | | | | | £m | £m | | | | | | | | Within one year (326.8) (182.2) | | | | 2021 | 2020 | 1 | 2019 | 1 | | Between one and two years (745.4) (725.6) | | | | £m | £m | | £m | | | Between two and three years (646.5) (795.7) | | | Profit/(loss) for the year 720.7 (2,901.3) 937.9 | | | | | | | Between three and four years (492.8) (649.1) | | | Taxation 230.1 129.3 366.0 | | | | | | Revaluation and retranslation of financial Between four and five years (698.0) (528.2) instruments 87.8 147.2 (154.4) Over five years (2,546.3) (3,387.1) Finance costs 283.6 312.3 376.4 Debt financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes (5,455.8) (6,267.9) Finance and investment income (69.4) (82.8) (102.6) Short-term overdrafts – within one year (342.3) (8,562.0) Share of results of associates (23.8) 136.0 (21.2) Future anticipated cash flows (5,798.1) (14,829.9) Goodwill impairment on classification as held for sale − – 94.5 Effect of discounting/financing rates 1,014.1 1,235.2 Gain on sale of discontinued operations − (10.0) (73.8) Attributable tax expense on sale of discontinued Debt financing (4,784.0) (13,594.7) operations − 1.9 157. 4 Cash and short-term deposits 3,882.9 12,899.1 Operating profit/(loss) of continuing Adjusted net debt (901.1) (695.6) and discontinued operations 1,229.0 (2, 267.4) 1,580.2 Adjustments for Analysis of fixed and floating rate debt by currency including the effect of Non-cash share-based incentive plans (including cross-currency swaps: share options) 99.6 74.4 71.4 Fixed Floating Period Depreciation of property, plant and equipment 151.2 174.8 203.2 2021 £m rate 1 basis (months) 1 Depreciation of right-of-use assets 272.9 331.9 317.9 | Currency | Impairment charges included within restructuring | | --- | --- | | $ – fixed 1,231.8 4.18 n/a 72 | costs 39.2 196.7 – | | £ – fixed 1,094.1 2.97 n/a 155 | Goodwill impairment 1.8 2,822.9 47.7 | Amortisation and impairment of acquired € – fixed 1,976.0 2.04 n/a 69 intangible assets 97. 8 89.1 135.6 – floating 210.2 n/a EURIBOR 3 Amortisation of other intangible assets 19.9 35.2 29.6 Other (70.4) n/a n/a n/a Investment and other impairment (reversals)/charges (42.4) 296.2 7.5 4,441.7 Losses/(gains) on disposal of investments and subsidiaries 10.6 (7.8) (45.1) Fixed Floating Period Gains on remeasurement of equity interests arising 2020 £m rate 1 basis (months) 1 from a change in scope of ownership − (0.6) (0.4) | Currency | Gain on sale of freehold property in New York − – (7.9) | | --- | --- | | $ – fixed 1,585.1 4.06 n/a 70 | (Gains)/losses on sale of property, plant and | | £ – fixed 1,094.1 3.21 n/a 167 | equipment (1.3) 0.3 3.2 | | € – fixed 2,104.6 2.20 n/a 79 | Operating cash flow before movements | in working capital and provisions 1,878.3 1,745.7 2,342.9 – floating 223.9 n/a EURIBOR 15 (Increase)/decrease in trade receivables and Other 25.0 n/a n/a n/a accrued income (458.9) 585.2 159.0 5,032.7 Increase in trade payables and deferred income 777.8 195.0 394.7 Note (Increase)/decrease in other receivables (120.0) 123.3 (263.8) 1 Weighted average. Increase/(decrease) in other payables – short-term 547.0 (36.6) (16.4) (Decrease)/increase in other payables – long-term (11.0) (44.3) 53.7 The following table is an analysis of future undiscounted anticipated cash flows (Decrease)/increase in provisions (32.9) 15.6 23.1 in relation to the Group’s financial derivatives, which include interest rate swaps, Cash generated by operations 2,580.3 2,583.9 2,693.2 forward contracts and other foreign exchange swaps assuming interest rates Corporation and overseas tax paid (391.1) (371.5) (536.0) and foreign exchange rates as at 31 December: Payment on early settlement of bonds (13.0) – (63.4) | | Financial liabilities Financial assets | | | | | | | | Interest and similar charges paid (173.7) (173.9) (270.6) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Payable | | Receivable | | Payable | | Receivable | | Interest paid on lease liabilities (88.4) (98.5) (105.1) | | 2021 | | £m | | £m | | £m | | £m | | Interest received 47.5 73.6 80.8 Within one year 185.8 173.7 581.1 582.5 Investment income 17.8 8.7 18.3 Between one and two years 551.4 521.1 30.0 30.4 Dividends from associates 53.4 32.5 33.3 Between two and three years 11.6 6.0 – – Net cash inflow from operating activities 2,032.8 2,054.8 1,850.5 Between three and four years 449.8 445.6 – – Note Between four and five years – – – – 1 Figures have been restated as described in the accounting policies. Over five years – – – – 1,198.6 1,146.4 611.1 612.9 Financial liabilities Financial assets Payable Receivable Payable Receivable 2020 £m £m £m £m Within one year 201.7 195.4 102.3 98.2 Between one and two years 11.6 6.2 17.8 13.6 Between two and three years 41.9 35.7 449.2 461.2 Between three and four years 11.6 6.3 – – Between four and five years 449.8 466.3 – – Over five years – – – – 716.6 709.9 569.3 573.0 175WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. ANALYSIS OF CASH FLOWS CONTINUED 12. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Acquisitions and disposals: In July 2019, the Group announced the proposed sale of its Kantar business to Bain Capital. On 5 December 2019 the first stage of the transaction completed, 2021 2020 2019 consisting of approximately 90% of the Kantar group, with consideration of £m £m £m £2,140.2 million after tax and disposal costs. The sale involved the Group Initial cash consideration (227.6) (32.8) (3.9) disposing of the Kantar business and holding 40% equity stakes post-transaction Cash and cash equivalents acquired (2.3) − – which are treated as associates. This generated a pre-tax gain of £73.8 million, Earnout payments (57.0) (115.2) (130.2) tax charge of £157.4 million and goodwill impairment of £94.5 million for the Purchase of other investments Group. In 2020, the remaining stages of the transaction completed with total (including associates) (99.2) (30.4) (27. 2) consideration of £236.1 million after tax and disposal costs. This generated a Acquisitions (386.1) (178.4) (161.3) pre-tax gain of £10.0 million and a tax charge of £1.9 million. Proceeds on disposal of investments 1 and subsidiaries 51.9 320.0 2,468.5 Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Cash and cash equivalents disposed (23.6) (47.7) (327.5) where certain conditions are met, an asset or disposal group that has been Disposals of investments and subsidiaries 28.3 272.3 2,141.0 put up for sale should be recognised as "held for sale". The criterion was met Cash consideration received from on 9 July 2019, following Board approval of the disposal of Kantar to Bain non-controlling interests 39.5 – – Capital, representing the date at which the appropriate level of management Cash consideration for purchase was committed to a plan to sell the disposal group. The Kantar disposal of non-controlling interests (135.0) (80.6) (62.7) group therefore became held for sale on this date. Cash consideration for non-controlling interests (95.5) (80.6) (62.7) The Kantar group is classified as a discontinued operation in 2019 and 2020 Net acquisition payments and under IFRS 5, as it forms a separate major line of business and there was a disposal proceeds (453.3) 13.3 1,917.0 single co-ordinated plan to dispose of it. Note 1 Proceeds on disposal of investments and subsidiaries includes return of capital from investments Results of the discontinued operations, which have been included in profit for in associates. the year, were as follows: Share repurchases and buybacks: | | | | 2020 | 2019 | | --- | --- | --- | --- | --- | | | | | £m | £m | | 2021 | 2020 | 2019 | | | Revenue 107.4 2, 387.5 £m £m £m Costs of services (92.3) (1,951.5) Purchase of own shares by ESOP Trusts (89.2) (5.1) – Gross profit 15.1 436.0 Shares purchased into treasury (729.3) (285.1) (43.8) General and administrative costs (4.4) (151.7) Net cash outflow (818.5) (290.2) (43.8) Operating profit 10.7 284.3 Share of results of associates – 6.5 Proceeds from issue of bonds: Profit before interest and taxation 10.7 290.8 | | 2021 | 2020 | 2019 | Finance and investment income 0.1 3.6 | | --- | --- | --- | --- | --- | | | £m | £m | £m | Finance costs (0.3) (17. 3) | | Proceeds from issue of €750 million bonds – 665.5 – | | | | Revaluation and retranslation of financial instruments – (9.4) | | Proceeds from issue of £250 million bonds – 250.0 – | | | | Profit before taxation 10.5 267.7 | | Net cash inflow – 915.5 – | | | | Attributable tax expense (2.2) (78.8) | Profit after taxation 8.3 188.9 Repayment of borrowings: 1 Goodwill impairment on classification as held for sale – (94.5) 2021 2020 2019 Gain on sale of discontinued operations 10.0 73.8 £m £m £m Attributable tax expense on sale of discontinued Decrease in drawings on bank loans (36.3) (59.6) (70.6) operations (1.9) (157.4) Repayment of $500 million bonds (360.8) − − Repayment of €250 million bonds − (223.1) – Net gain attributable to discontinued operations 16.4 10.8 Repayment of €600 million bonds − − (512.7) Repayment of $812 million bonds − − (618.8) Attributable to Partial repayment of $272 million bonds − − (135.4) Equity holders of the parent 6.5 (3.8) Partial repayment of $450 million bonds − − (176.2) Non-controlling interests² 9.9 14.6 Repayment of £200 million bonds − − (199.5) 16.4 10.8 Net cash outflow (397.1) (282.7) (1,713.2) Notes 1 In 2019, goodwill impairment of £94.5 million arose from the assessment of fair value less costs Cash and cash equivalents: to sell under IFRS 5. 2 In 2020, non-controlling interests includes £9.3 million recognised on the disposal of Kantar | | | 2021 | 2020 | 2019 | within WPP Scangroup, a 56% owned subsidiary of the Group. | | --- | --- | --- | --- | --- | --- | | | | £m | £m | £m | | | Cash at bank and in hand 2,776.6 10,075.0 10,442.1 | | | | | For the year ended 31 December 2020, the Kantar group contributed | | Short-term bank deposits 1,106.3 2,824.1 863.6 | | | | | £30.8 million (2019: £322.9 million) to the Group’s net operating cash flows, | | | 1 | | | | paid £0.9 million (2019: £53.2 million) in respect of investing activities and | | Overdrafts | | (342.3) (8,562.0) (8,572.4) | | | | paid £0.7 million (2019: £27.2 million) in respect of financing activities. 3,540.6 4, 337.1 2,733.3 Note 1 Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group’s cash management. The Group considers that the carrying amount of cash and cash equivalents approximates their fair value. WPP ANNUAL REPORT 2021176 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | The gain on sale of discontinued operations disposed by 31 December 2020 is | | | 13. LEASES | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | calculated as follows: | | | The movements in 2021 and 2020 were as follows: | | | | | | | | 2020 | 2019 | | Land and | | Plant and | | | | | £m | £m | | buildings | | 1 machinery | | Total | | | | | Right-of-use assets | | £m | | £m | £m | Intangible assets (including goodwill) 162.5 2,410.0 1 January 2020 1,706.1 28.4 1,734.5 Property, plant and equipment 15.1 115.7 Additions 233.0 35.0 268.0 Right-of-use assets 27.2 103.5 Disposals (40.5) (1.9) (42.4) Interests in associates and joint ventures 4.6 92.3 Depreciation of right-of-use assets (312.1) (19.8) (331.9) Other investments – 11.5 Impairment charges included within Deferred tax assets 6.1 44.1 restructuring costs (117.0) – (117.0) Corporate income tax recoverable 16.9 49.8 Other write-downs (8.1) – (8.1) Trade and other receivables 170.3 748.8 Exchange adjustments 0.4 1.0 1.4 Cash and cash equivalents 32.2 324.9 31 December 2020 1,461.8 42.7 1,504.5 Trade and other payables (141.6) (839.8) Additions 264.6 17.2 281.8 Corporate income tax payable (5.6) (48.2) Transfers to net investment in subleases (26.9) − (26.9) Lease liabilities (23.2) (106.3) Disposals (53.6) (1.3) (54.9) Deferred tax liabilities (1.3) (98.6) Depreciation of right-of-use assets (254.7) (18.2) (272.9) Provisions for post-employment benefits (7.9) (26.7) Impairment charges included within Provisions for liabilities and charges (0.6) (22.4) restructuring costs (18.9) (0.4) (19.3) Net assets 254.7 2,758.6 Other reversals 6.8 − 6.8 Exchange adjustments (22.1) (1.9) (24.0) Non-controlling interests (6.1) (19.1) 31 December 2021 1,357.0 38.1 1,395.1 Net assets excluding non-controlling interests 248.6 2,739.5 Note 1 For the years ended 31 December 2021 and 2020, the Company has £38.5 million and £67.9 million Consideration received in cash and cash equivalents 240.9 2,352.1 of right-of-use assets that are classified as investment property, respectively. 1 | Re-investment in equity stake | | – 231.7 | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Land and | | Plant and | | | | Transaction costs (4.5) (56.1) | | | | buildings | | machinery | | Total | | | 2 | | Lease liabilities | | £m | | £m | £m | | Deferred consideration | | 1.6 1.6 | | | | | | | | Total consideration received 238.0 2,529.3 | | | 1 January 2020 2,223.4 26.3 2,249.7 | | | | | | Additions 226.9 37.1 264.0 Loss on sale before exchange adjustments (10.6) (210.2) Interest expense related to lease liabilities 96.8 1.7 98.5 Exchange adjustments recycled to the income statement 20.6 284.0 Disposals (49.4) (1.7) (51.1) Gain on sale of discontinued operation 10.0 73.8 Repayment of lease liabilities (including interest) (379.1) (19.5) (398.6) Exchange adjustments (6.8) 0.6 (6.2) Notes 1 Re-investment in equity stake represents the value of the Group’s 40% stake in the new Kantar 31 December 2020 2,111.8 44.5 2,156.3 group as part of the disposal. Additions 27 7.0 16.1 293.1 2 Deferred consideration in 2019 is made up of £79.6 million expected to be received in future Interest expense related to lease liabilities 89.7 1.2 90.9 periods on the satisfaction of certain conditions and the deferral of £78.0 million consideration Disposals (64.2) (1.9) (66.1) against services the Group will supply to Kantar on favourable terms in the future. The conditions expected to be met in the future include the settlement of ongoing legal cases, realisation of the Repayment of lease liabilities (including interest) (390.6) (18.5) (409.1) value of certain investments and the utilisation of certain tax losses and allowances. There was Exchange adjustments (21.2) (2.1) (23.3) uncertainty at the date of disposal in regard to the ultimate resolution of these items and 31 December 2021 2,002.5 39.3 2,041.8 estimates of amounts due to be received were required to be made; there were no individually material estimates. Future services provided by the Group to Kantar arose through the negotiation of Transition Service Arrangements, as is customary for a disposal of this magnitude. The following table shows the breakdown of the lease expense between The Group will support Kantar for a period of up to four years, primarily in the area of IT, on terms amounts charged to operating profit and amounts charged to finance costs: which are favourable to the disposal group. As such, an element of consideration has been deferred and will be recognised as the services are provided. 2021 2020 Continuing operations £m £m Depreciation of right-of-use assets: Land and buildings (254.7) (312.1) Plant and machinery (18.2) (19.8) Impairment charges (12.5) (125.1) Short-term lease expense (18.0) (36.7) Low-value lease expense (2.3) (2.3) Variable lease expense (56.2) (65.4) Sublease income 17.3 25.3 Charge to operating profit (344.6) (536.1) Interest expense related to lease liabilities (90.9) (101.0) Charge to profit before taxation for leases (435.5) (63 7.1) Variable lease payments primarily include real estate taxes and insurance costs. 177WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 13. LEASES CONTINUED | | | OTHER INTANGIBLE ASSETS | | | | --- | --- | --- | --- | --- | --- | | The maturity of lease liabilities at 31 December 2021 and 2020 were as follows: | | | The movements in 2021 and 2020 were as follows: | | | | | 2021 | 2020 | | Brands | | | | £m | £m | | with an | | | | | | | indefinite | Acquired | Within one year 369.7 412.3 | | | | | useful life | | intangibles | | Other | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Between one and two years 321.9 3 57.7 | | | | | £m | | £m | £m | £m | | Between two and three years 273.7 309.0 | | Cost | | | | | | | | | Between three and four years 229.1 255.3 | | 1 January 2020 1,091.4 1,602.9 312.3 3,006.6 | | | | | | | | | Between four and five years 199.1 209.9 | | Additions – – 54.3 54.3 | | | | | | | | | Over five years 1,227.1 1,238.9 | | Disposals – (21.5) (74.8) (96.3) | | | | | | | | | | 2,620.6 2,783.1 | New acquisitions – 4.8 0.2 5.0 | | | | | | | | | Effect of discounting (578.8) (626.8) | | | 1 | | | | | | | | | | Other movements | | | – 5.7 13.1 18.8 | | | | | | Lease liability at end of year 2,041.8 2,156.3 | | Exchange adjustments (19.5) (22.2) (4.8) (46.5) | | | | | | | | | Short-term lease liability 279.7 323.8 | | 31 December 2020 1,071.9 1,569.7 300.3 2,941.9 | | | | | | | | | Long-term lease liability 1,762.1 1,832.5 | | Additions − − 29.9 29.9 | | | | | | | | Disposals − (7. 3) (44.6) (51.9) The total committed future cash flows for leases not yet commenced at New acquisitions − 97.7 − 97.7 31 December 2021 is £534.9 million. 1 Other movements − − 3.9 3.9 Exchange adjustments (4.6) (15.7) (1.4) (21.7) The Group does not face a significant liquidity risk with regard to its lease | liabilities. Refer to note 25 for management of liquidity risk. | 31 December 2021 1,067. 3 1,644.4 288.1 2,999.8 | | --- | --- | | 14. INTANGIBLE ASSETS | Amortisation and impairment | | GOODWILL | 1 January 2020 13.2 1,279.3 245.3 1,537.8 | | The movements in 2021 and 2020 were as follows: | Charge for the year – 88.5 35.2 123.7 | Disposals – (17.4) (72.0) (89.4) £m Other movements – 5.7 5.4 11.1 Cost Exchange adjustments (0.4) (26.9) (3.3) (30.6) 1 January 2020 10,888.6 31 December 2020 12.8 1,329.2 210.6 1,552.6 1 Additions 37.3 Charge for the year 43.8 53.5 19.9 117.2 Disposals (24.6) Impairment charges included within Exchange adjustments (94.0) restructuring costs − − 10.1 10.1 31 December 2020 10,807.3 Disposals − (3.5) (24.5) (28.0) 1 | Additions | 335.8 | Other movements − − (1.5) (1.5) | | --- | --- | --- | | Disposals (5.4) | | Exchange adjustments 0.2 (8.2) (2.1) (10.1) | | Exchange adjustments (146.7) | | 31 December 2021 56.8 1,371.0 212.5 1,640.3 | 31 December 2021 10,991.0 Net book value | Accumulated impairment losses and write-downs | 31 December 2021 1,010.5 273.4 75.6 1,359.5 | | --- | --- | | 1 January 2020 778.0 | 31 December 2020 1,059.1 240.5 89.7 1,389.3 | | Impairment losses for the year 2,822.9 | 1 January 2020 1,078.2 323.6 67.0 1,468.8 | Exchange adjustments (182.4) Note 31 December 2020 3,418.5 1 Other movements in acquired intangibles include revisions to fair value adjustments arising on Impairment losses for the year 1.8 the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. Exchange adjustments (41.6) 31 December 2021 3,378.7 Cash-generating units (CGUs) with significant goodwill and brands with an indefinite useful life as at 31 December are: Net book value 31 December 2021 7,612.3 Brands with an Goodwill indefinite useful life 31 December 2020 7,388.8 2021 2020 2021 2020 1 January 2020 10,110.6 | | | £m | £m | £m | £m | | --- | --- | --- | --- | --- | --- | | Note | GroupM 2,982.5 2,953.7 − – | | | | | | 1 Additions represent goodwill arising on the acquisition of subsidiary undertakings including the | | | | | | Wunderman Thompson 997.3 949.4 405.1 403.9 effect of any revisions to fair value adjustments that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. The VMLY&R 675.6 411.9 189.8 193.4 effect of such revisions was not material in either year presented. Ogilvy 784.4 782.0 205.0 206.5 Burson Cohn & Wolfe 585.7 591.1 128.4 128.8 AKQA Group 570.2 585.2 − − Finsbury Glover Hering + Sard Verbinnen & Co 393.2 220.7 − − Other 623.4 894.8 82.2 126.5 7,612.3 7,388.8 1,010.5 1,059.1 Other goodwill represents goodwill on a large number of CGUs, none of which is individually significant in comparison to the total carrying value of goodwill. Separately identifiable brands with an indefinite useful life are carried at historical cost in accordance with the Group’s accounting policy for intangible assets. The carrying values of the other brands with an indefinite useful life are not individually significant in comparison with the total carrying value of brands with an indefinite useful life. WPP ANNUAL REPORT 2021178 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Acquired intangible assets at net book value at 31 December 2021 include brand names of £137.4 million (2020: £17.8 million), customer-related intangibles of £110.4 million (2020: £67.1 million), and other assets (including proprietary tools) of £25.6 million (2020: £0.6 million). The total amortisation and impairment of acquired intangible assets of £97.8 million (2020: £89.1 million) includes an impairment charge in the year of £47.9 million (2020: £31.6 million) in regards to certain brand names that are no longer in use, including £43.8 million for brands with an indefinite useful life. £45.1 million of the impairment charge relates to the Global Integrated Agencies segment, and £2.8 million relates to the Specialist Agencies segment. In addition, the total amortisation and impairment of acquired intangible assets includes £0.5 million (2020: £0.6 million) in relation to associates. In accordance with the Group's accounting policy, the carrying values of goodwill and intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment review is undertaken annually on 30 September. A goodwill impairment charge of £1.6 million relating to Specialist Agencies was recognised during the year due to a number of under-performing businesses in the Group. In certain markets, the impact of local economic conditions and trading circumstances on these businesses was sufficiently severe to indicate impairment to the carrying value of goodwill. Under X90, an impairment charge is required for both goodwill and other indefinite fixed assets when the carrying amount exceeds the "recoverable amount", defined as the higher of fair value less costs to sell and value in use. The review assessed whether the carrying value of goodwill and intangible assets with indefinite useful lives was supported by the value in use determined as the net present value of future cash flows. Due to the significant number of CGUs, the impairment test was performed in two steps. In the first step, the recoverable amount was calculated for each CGU using the latest available forecasts for 2021 and/or 2022, nil growth rate thereafter (2020: nil) and a conservative pre-tax discount rate of 13.5% (2020: 13.5%). The pre-tax discount rate of 13.5% was above the rate calculated for the global networks of 12.5% (2020: 12.5%). For smaller CGUs that operate primarily in a particular region subject to higher risk, the higher of 13.5% or 100 basis points above the regional discount rate was used in the first step. The recoverable amount was then compared to the carrying amount, which includes goodwill, intangible assets and other assets. CGUs where the recoverable amount exceeded the carrying amount were not considered to be impaired. Those CGUs where the recoverable amount did not exceed the carrying amount were then further reviewed in the second step. In the second step, these CGUs were retested for impairment using more refined assumptions. This included using a CGU specific pre-tax discount rate and management forecasts for a projection period of up to five years, followed by an assumed long-term growth rate of 2.0% (2020: 2.0%). If the recoverable amount using the more specific assumptions did not exceed the carrying value of a CGU, an impairment charge was recorded. The long-term growth rate is derived from management's best estimate of the likely long-term trading performance with reference to external industry reports and other relevant market trends. As at 31 December 2021, we have assessed long-term industry trends based on recent historical data including the long-term impact of Covid-19 and assumed a long-term growth rate of 3.0% (2020: 3.0%). Management have made the judgement that the long-term growth rate does not exceed the long-term average growth rate for the industry. The discount rate uses the capital asset pricing model (CAPRI) to derive the cost of equity along with an estimated cost of debt that is weighted by an appropriate capital structure to derive an indication of a weighted-average cost of capital. The cost of equity is calculated based on long-term government bond yield, an estimate of the required premium for investment in equity relative to government securities and further considers the volatility associated with peer public companies relative to the market. The cost of debt reflects an estimated market yield for long-term debt financing after taking into account the credit profile of public peer companies in the industry. The capital structure used to weight the cost of equity and cost of debt has been derived from the observed capital structure of public peer companies. The pre-tax discount rate applied to the cash-flow projections for the CGUs that operate globally was 12.5%. We developed a global discount rate that takes into account the diverse nature of the operations, as these CGUs operate with a diverse range of clients in a range of industries throughout the world, hence are subject to similar levels of market risks. The pre-tax discount rates applied to the CGUs that have more regional specific operations ranged from 11.5% to 18.4%. Our approach in determining the recoverable amount utilises a discounted cash flow methodology, which necessarily involves making numerous estimates and assumptions regarding revenue less pass through costs growth, operating margins, appropriate discount rates and working capital requirements. The key assumptions used for estimating cash flow projections in the Group's impairment testing are those relating to revenue less pass through costs growth and operating margins. The key assumptions take account of the business's expectations for the projection period. These expectations consider the macroeconomic environment, industry and market conditions, the CGU's historical performance and any other circumstances particular to the unit, such as business strategy and client mix. These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied in determining the level of CGU identified for impairment testing and the criteria used to determine which assets should be aggregated. A difference in testing levels could affect whether an impairment is recorded and the extent of impairment loss. Changes in our business activities or structure may also result in additional changes to the level of testing in future periods. Further, future events could cause the Group to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired. As part of the overall effort to simplify operations and provide clients with integrated offerings, certain operations have been realigned between the various networks. These realignments have been reflected in the CGUs being tested. This includes the combination of AIGIA and Grey, bringing Geometry and OTB into VMLY&R, and moving International Healthcare into VMLY&R and Ogilvy. Historically our impairment losses have resulted from a specific event, condition or circumstance in one or more of our companies, such as the impact of Covid-19 or the loss of a significant client. As a result, changes in the assumptions used in our impairment model have generally not had a significant effect on the impairment charges recognised. Given the significant recoveries achieved by CGUs in 2021, a reasonably possible change in assumptions would not lead to a significant impairment. The carrying value of goodwill and other intangible assets will continue to be reviewed at least annually for impairment and adjusted down to the recoverable amount if required. # IMPAIRMENTS IN 2020 In 2020, £2,822.9 million of impairment charges were incurred. The impairments related to historical acquisitions whose carrying values were reassessed in light of the impact of Covid-19. The impairments were driven by a combination of higher discount rates used to value future cash flows, a lower profit base in 2020 and lower industry growth rates. By operating sector, £2,355.1 million of the impairment charge related to Global Integrated Agencies, £161.5 million related to Public Relations and £306.3 million related to Specialist Agencies. This reflects the changes to segments described in Note 2 - Segment Information. As noted above, the impairment review is undertaken annually on 30 September. Given the Covid-19 pandemic, impairment indicators such as a decline in revenue less pass through costs forecasts, and downturns in the global economy and the advertising industry were identified in the first half of 2020. As such, the Group also performed an impairment test over goodwill and intangible assets with indefinite useful lives as at 30 June 2020. Given the continued impact of Covid-19, an additional impairment test was performed as of 31 December 2020. WFP ANNUAL REPORT 2021 79 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. INTANGIBLE ASSETS CONTINUED 15. PROPERTY, PLANT AND EQUIPMENT In developing the cash flows for the 2020 impairment tests, we considered the The movements in 2021 and 2020 were as follows: impact of the Covid-19 pandemic to our businesses and adjusted projected revenue less pass-through costs and operating margins in 2020 and/or 2021 Fixtures, Freehold Leasehold fittings and Computer accordingly. For the remaining years in the projection period, we assessed | | | Land | buildings | | buildings | | equipment | | equipment | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | when the cash flows would recover to 2019 levels as representative of | | £m | | £m | | £m | | £m | | £m | £m | | pre-Covid-19 revenue less pass-through costs and operating margins. For many | Cost | | | | | | | | | | | of our CGUs, recovery to 2019 levels by 2023 was estimated with some CGUs 1 January 2020 34.3 26.2 1,048.8 212.4 423.9 1,745.6 using alternative recovery profiles as considered appropriate. Additions – 8.9 135.7 25.0 48.7 218.3 New acquisitions – – 0.2 – 0.2 0.4 The pre-tax discount rate applied to the cash flow projections for the CGUs Disposals – (0.2) (99.1) (41.1) (83.7) (224.1) that operate globally was 12.5%. The pre-tax discount rates applied to the CGUs that have more regional specific operations ranged from 10.8% to 18.6% Exchange adjustments – 4.7 (33.1) (7.0) (7. 4) (42.8) for the 30 June 2020 test, 11.3% to 14.4% for the 30 September 2020 test, and 31 December 2020 34.3 39.6 1,052.5 189.3 381.7 1,697.4 11.2% to 13.6% for the 31 December 2020 test. Additions 14.3 8.9 134.5 31.5 74.0 263.2 As part of the overall effort to simplify operations and become more New acquisitions – – 1.5 1.3 1.2 4.0 client-centric, certain operations were realigned between the various Disposals (0.1) (0.6) (108.3) (60.0) (56.4) (225.4) networks. These realignments were reflected in the CGUs being tested. The Exchange most significant of these for the 30 June 2020 test included the treatment of adjustments (5.3) 13.5 (5.2) (12.6) (8.7) (18.3) Landor and Fitch as a single CGU given the collaboration of the two brands 31 December 2021 43.2 61.4 1,075.0 149.5 391.8 1,720.9 from both a management and client perspective; the shift of certain European operations into VMLY&R; and the transfer of certain Asian operations from Depreciation and impairment VMLY&R to Ogilvy in order to improve the operational synergies and offer in 1 January 2020 – 4.2 443.3 111.2 310.9 869.6 the respective regions. Charge for the year – 1.2 76.6 33.2 63.8 174.8 Impairment charges Subsequent realignments to improve the operational synergies and regional included within offers were reflected in the September and December tests including the shift restructuring costs – – 72.1 6.3 1.3 79.7 of certain Latin American and European operations between Wunderman Other write-downs – – 2.6 – – 2.6 Thompson, VMLY&R and GroupM; and the transfer of certain Asian operations Disposals – – (79.0) (38.3) (82.5) (199.8) to VMLY&R that previously operated independently from a network. Exchange adjustments – (3.1) (5.2) (5.5) (6.6) (20.4) The transfers of carrying value between CGUs were determined on a relative 31 December 2020 – 2.3 510.4 106.9 286.9 906.5 value basis. These realignments did not have a significant impact on the Charge for the year – 1.0 66.5 27.6 56.1 151.2 impairment figures recognised. The CGUs with significant impairments of Impairment charges goodwill as at 31 December 2020 are set out in the below table with the included within recoverable amount determined as of the December 2020 test. restructuring costs – – 7.1 1.8 0.9 9.8 Disposals – – (108.2) (55.9) (55.1) (219.2) | | | | | | Goodwill | | Exchange | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Recoverable | | | impairment | | adjustments – (0.6) (6.2) (8.5) (8.5) (23.8) | | | | | amount | | charge | | | | | | | | 2020 | | 2020 | 31 December 2021 – 2.7 469.6 71.9 280.3 824.5 | | | Operating Sector | | | £m | | £m | | | Wunderman Thompson Global Integrated Agencies 1,956.8 1,207.5 | | | | | | | Net book value | | VMLY&R Global Integrated Agencies 1,075.7 516.9 | | | | | | | 31 December 2021 43.2 58.7 605.4 77.6 111.5 896.4 | | Burson Cohn & Wolfe Public Relations 790.2 144.8 | | | | | | | 31 December 2020 34.3 37. 3 542.1 82.4 94.8 790.9 | 1 Geometry Global Global Integrated Agencies 164.4 305.8 1 January 2020 34.3 22.0 605.5 101.2 113.0 876.0 Landor & Fitch Specialist Agencies 17 7.6 185.4 Other 1,409.5 462.5 At 31 December 2021, capital commitments contracted, but not provided for in respect of property, plant and equipment, were £107.3 million 5,574.2 2,822.9 (2020: £132.5 million). Note 1 Prior year figures have been re-presented to reflect the changes to segments described in Note 2 – Segment Information. WPP ANNUAL REPORT 2021180 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. INTERESTS IN ASSOCIATES, JOINT VENTURES AND The market value of the Group’s shares in its principal listed associate OTHER INVESTMENTS undertakings at 31 December 2021 was as follows: GIIR Inc: £21.7 million, The movements in 2021 and 2020 were as follows: and High Co SA: £32.2 million (2020: GIIR Inc: £19.0 million, and High Co SA: £32.8 million). The carrying value (including goodwill and other intangibles) Interests in of these equity interests in the Group’s consolidated balance sheet at associates 31 December 2021 was as follows: GIIR Inc: £40.0 million, and High Co and joint Other ventures investments SA: £37.7 million (2020: GIIR Inc: £41.2 million, and High Co SA: £38.9 million). £m £m 1 January 2020 813.0 498.3 Where the market value of the Group’s listed associates is less than the Additions 15.2 15.9 carrying value, an impairment review is performed utilising the discounted Share of results of associate undertakings (136.0) – cash flow methodology discussed in note 14, which represents the value in use. Share of other comprehensive loss of associate undertakings (61.5) – Dividends (32.5) – The Group’s investments in its principal associate undertakings are represented by ordinary shares. Other movements (5.2) – Exchange adjustments 21.8 – AGGREGATE INFORMATION OF ASSOCIATES THAT ARE NOT Disposals (7. 3) (7.0) INDIVIDUALLY MATERIAL Reclassification from subsidiaries 4.5 – The following table presents a summary of the aggregate financial Reclassification from other investments to associates 0.2 (0.2) performance of the Group’s associate undertakings and joint ventures. Revaluation of other investments through profit or loss – 8.0 | Revaluation of other investments through other | | 2021 | 2020 | 2019 | | --- | --- | --- | --- | --- | | comprehensive income – (127. 7) | Continuing operations | £m | £m | £m | | Amortisation of other intangible assets (0.6) – | Share of results of associate | | | | undertakings (note 4) 23.8 (136.0) 14.7 Write-downs (280.9) – Share of other comprehensive | 31 December 2020 330.7 387. 3 | income/(loss) of associate | | --- | --- | | Additions 93.6 5.9 | undertakings 13.5 (61.5) – | | Share of results of associate undertakings 23.8 − | Share of total comprehensive | income/(loss) of associate Share of other comprehensive income of associate undertakings 37. 3 (197.5) 14.7 undertakings 13.5 − Dividends (53.4) − The application of equity accounting is ordinarily discontinued when the Other movements (0.2) − investment is reduced to zero and additional losses are not provided for Exchange adjustments (22.5) − unless the Group has guaranteed obligations of the investee or is otherwise Disposals (4.8) (31.9) committed to provide further financial support for the investee. Reclassification from subsidiaries 4.2 − Revaluation of other investments through profit or loss − (7.5) In the year ended 31 December 2020, share of losses of £62.9 million were not recognised in relation to Imagina, an associate in Spain, as the investment was Revaluation of other investments through other comprehensive income − (35.5) reduced to zero. As at 31 December 2021, the cumulative share of Amortisation of other intangible assets (0.5) − unrecognised losses relating to Imagina is £23.0 million. Reversal of write-downs 28.5 − At 31 December 2021, capital commitments contracted, but not provided for, 31 December 2021 412.9 318.3 in respect of interests in associates and other investments were £5.4 million (2020: £7.5 million). The investments included above as "other investments" represent investments in equity securities that present the Group with opportunity for return through dividend income and trading gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. For unlisted securities, where market value is not available, the Group has estimated relevant fair values on the basis of information from outside sources. The carrying values of the Group’s associates and joint ventures are reviewed for impairment in accordance with the Group’s accounting policies. The Group’s principal associates and joint ventures at 31 December 2021 included: Country of incorporation % owned Advantage Smollan Ltd UK 25.1 Barrows Design and Manufacturing (Pty) Limited South Africa 35.0 Dat Viet VAC Media Corporation Vietnam 30.0 GIIR Inc. Korea 30.0 Haworth Marketing & Media Company USA 49.0 High Co SA France 34.1 Imagina Spain Spain 22.5 Nanjing Yindu Ogilvy Advertising Co. Ltd China 49.0 Smollan Holdings (Pty) Ltd South Africa 24.8 1 Summer (BC) JVCo S.a.r.l Luxembourg 40.0 Note 1 Representing the Group's interest in Kantar in the Rest of World chain. 181WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. DEFERRED TAX If it is probable that some portion of these assets will not be realised, no asset The Group's deferred tax assets and liabilities are measured at the end of each is recognised in relation to that portion. period in accordance with IAS 12 Income Taxes. The recognition of deferred tax assets is determined by reference to the Group's estimate of recoverability, If market conditions improve and future results of operations exceed our using models where appropriate to forecast future taxable profits. current expectations, our existing recognised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions Deferred tax assets have only been recognised for territories where the Group deteriorate further or future results of operations are less than expected, considers that it is probable that all or a portion of the deferred tax assets will future assessments may result in a determination that some or all of the be realised. The main factors that we consider include: deferred tax assets are not realisable. As a result, all or a portion of the deferred tax assets may need to be reversed. – the future earnings potential determined through the use of internal forecasts; – the cumulative losses in recent years; – the various jurisdictions in which the potential deferred tax assets arise; – the history of losses carried forward and other tax assets expiring; – the timing of future reversal of taxable temporary differences; – the expiry period associated with the deferred tax assets; and – the nature of the income that can be used to realise the deferred tax asset. Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax balances for financial reporting purposes: | | | | As | | | | As | | --- | --- | --- | --- | --- | --- | --- | --- | | Gross | Offset | reported | | Gross | Offset | reported | | | 2021 | 2021 | | 2021 | 2020 | 2020 | | 2020 | | £m | £m | | £m | £m | £m | | £m | Deferred tax assets 565.0 (223.5) 341.5 47 7.5 (264.6) 212.9 Deferred tax liabilities (536.0) 223.5 (312.5) (568.7) 264.6 (304.1) 29.0 – 29.0 (91.2) – (91.2) The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2021 and 2020: Accounting Retirement Property, Other Deferred provisions benefit plant and Tax losses Share-based Restructuring temporary compensation and accruals obligations equipment and credits payments provisions differences Total £m £m £m £m £m £m £m £m £m 1 January 2020 53.5 87. 4 57.5 84.7 86.3 21.5 25.8 14.2 430.9 (Charge)/credit to income (1.5) 30.3 (3.5) (3.4) 5.9 0.4 31.9 (2.7) 57.4 Credit to other comprehensive income – – 7. 4 – – – – – 7.4 Exchange differences and other movements (2.5) (8.2) (3.5) (0.4) (1.9) (0.5) (1.3) 0.1 (18.2) 31 December 2020 49.5 109.5 57.9 80.9 90.3 21.4 56.4 11.6 47 7.5 Acquisition of subsidiaries – – – – – – – 0.9 0.9 Credit/(charge) to income 58.2 0.3 1.2 (15.9) 19.7 9.9 9.1 (1.6) 80.9 Charge to other comprehensive income – – (3.0) – – – – – (3.0) Credit to equity – – – – – 11.9 – – 11.9 Exchange differences and other movements 0.8 (3.6) (2.7) 3.0 0.5 0.3 (4.4) 2.9 (3.2) 31 December 2021 108.5 106.2 53.4 68.0 110.5 43.5 61.1 13.8 565.0 Other temporary differences comprise a number of items including tax deductible goodwill, none of which is individually significant to the Group's consolidated balance sheet. At 31 December 2021 the balance related to temporary differences in relation to revenue adjustments, tax deductible goodwill, fair value adjustments and other temporary differences. In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2021 and 2020: Brands Other and other Associate Financial temporary intangibles earnings Goodwill instruments differences Total £m £m £m £m £m £m 1 January 2020 352.3 76.5 135.4 36.9 21.7 622.8 Acquisition of subsidiaries 1.5 – – – – 1.5 (Credit)/charge to income (22.3) (16.7) (7.8) – 6.7 (40.1) Exchange differences and other movements (4.7) (1.8) (4.5) (1.1) (3.4) (15.5) 31 December 2020 326.8 58.0 123.1 35.8 25.0 568.7 Acquisition of subsidiaries 22.5 – – – – 22.5 (Credit)/charge to income (19.5) (21.4) 8.2 (35.5) 16.6 (51.6) Exchange differences and other movements (4.7) 0.2 1.9 (0.3) (0.7) (3.6) 31 December 2021 325.1 36.8 133.2 – 40.9 536.0 WPP ANNUAL REPORT 2021182 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Days past due At the balance sheet date, the Group has gross tax losses and other temporary Carrying differences of £6,961.4 million (2020: £6,895.2 million) available for offset against | | | amount at | | | | | | | 181 | Greater | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | future profits. Deferred tax assets have been recognised in respect of the tax | | 31 December | | Not past | | 0-30 | 31-90 | 91-180 | days- | | than | | benefit of £2,259.2 million (2020: £2,041.3 million) of such tax losses and other | | | 2020 | | due | days | days | days | 1 year | 1 year | | | temporary differences. No deferred tax asset has been recognised in respect | 2020 | | £m | | £m | £m | £m | £m | £m | | £m | | of the remaining £4,702.2 million (2020: £4,853.9 million) of losses and other | Gross trade | | | | | | | | | | | receivables 6,684.7 5,696.8 661.2 169.2 55.6 32.7 69.2 temporary differences as the Group considers that there will not be enough Loss taxable profits in the entities concerned such that any additional asset could allowance (112.5) (4.4) (1.2) (1.9) (15.2) (25.2) (64.6) be considered recoverable. Included in the total unrecognised temporary 6,572.2 5,692.4 660.0 167. 3 40.4 7.5 4.6 differences are losses of £63.8 million (2020: £65.4 million) that will expire Other within one to ten years, and £4,457.3 million (2020: £4,594.9 million) of losses financial that may be carried forward indefinitely. assets 527.2 451.8 32.5 8.6 11.8 4.3 18.2 7,099. 4 6,144.2 692.5 175.9 52.2 11.8 22.8 At the balance sheet date, the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which deferred tax liabilities have Other financial assets are included in other debtors. not been recognised was £1,385.3 million (2020: £1,655.3 million). No liability Past due amounts are not impaired where collection is considered likely. has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and 2021 2020 the Group considers that it is probable that such differences will not reverse £m £m in the foreseeable future. Amounts falling due after more than one year Prepayments 3.0 2.8 18. TRADE AND OTHER RECEIVABLES Fair value of derivatives 0.5 9.6 The following are included in trade and other receivables: Other debtors 149.1 143.8 2021 2020 152.6 156.2 £m £m Amounts falling due within one year The Group has applied the practical expedient permitted by IFRS 15 to not Trade receivables (net of loss allowance) 6,600.5 6,572.2 disclose the transaction price allocated to performance obligations unsatisfied Work in progress 254.0 264.1 (or partially unsatisfied) as of the end of the reporting period as contracts typically have an original expected duration of a year or less. VAT and sales taxes recoverable 350.3 236.6 Prepayments 215.3 248.1 | | | | 2021 | 2020 | | --- | --- | --- | --- | --- | | Accrued income 3,435.7 3,150.1 | | | £m | £m | | Fair value of derivatives 2.5 0.2 | | Loss allowance | | | | Other debtors 504.0 501.0 | | At beginning of year 112.5 111.7 | | | | | 11,362.3 10,972.3 | New acquisitions 3.7 3.5 | | | Charged to the income statement 17.2 50.6 The ageing of trade receivables and other financial assets by due date is as follows: Released to the income statement (27.9) (9.8) Exchange adjustments (1.7) (2.8) Days past due Utilisations and other movements (33.3) (40.7) Carrying | | amount at | | | | | | | 181 | Greater | | At end of year 70.5 112.5 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 December | | Not past | | 0-30 | 31-90 | 91-180 | days- | | than | | | | | 2021 | | due | days | days | days | 1 year | 1 year | | The loss allowance is equivalent to 1.1% (2020: 1.7%) of gross trade accounts | | 2021 | | £m | | £m | £m | £m | £m | £m | | £m | | receivables. Gross trade receivables 6,671.0 5,755.6 589.8 194.4 64.0 10.6 56.6 Impairment losses on work in progress, accrued income and other debtors Loss were immaterial for the years presented. allowance (70.5) (2.3) (0.2) (1.9) (7.5) (4.9) (53.7) The Group considers that the carrying amount of trade and other receivables 6,600.5 5,753.3 589.6 192.5 56.5 5.7 2.9 approximates their fair value. Other financial assets 496.3 422.1 15.2 2.7 3.0 2.7 50.6 7,096.8 6,175.4 604.8 195.2 59.5 8.4 53.5 183WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. TRADE AND OTHER RECEIVABLES CONTINUED 20. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE AFTER EXPECTED CREDIT LOSSES MORE THAN ONE YEAR The Group has applied the simplified approach to measuring expected credit The following are included in trade and other payables falling due after more losses, as permitted by IFRS 9 Financial Instruments. This has been applied to than one year: trade receivables, contract assets and lease receivables. Under this approach, the Group utilises a provision matrix based on the age of the trade receivables 2021 2020 £m £m and historical loss rates to determine the expected credit losses. The Group Payments due to vendors (earnout agreements) 111.1 56.5 also considers forward-looking information. Therefore, the Group does not track changes in credit risk over the life of a financial asset, but recognises a Liabilities in respect of put option agreements with vendors 333.1 101.4 loss allowance based on the financial asset's lifetime expected credit loss. For Fair value of derivatives 47.2 11.2 all other assets, the general approach has been applied and a loss allowance Other creditors and accruals 128.5 144.4 for 12-month expected credit losses is recognised. 619.9 313.5 The Group considers that the carrying amount of trade and other payables Under IFRS 9, the expected credit losses are measured as the difference approximates their fair value. between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest The following table sets out payments due to vendors, comprising rate. Given the short-term nature of the Group’s trade receivables, work in contingent consideration and the Directors’ best estimates of future progress and accrued income, which are mainly due from large national or earnout-related obligations: multinational companies, the Group's assessment of expected credit losses includes provisions for specific clients and receivables where the contractual 2021 2020 cash flow is deemed at risk. Additional provisions are made based on the £m £m assessment of recoverability of aged receivables over one year where Within one year 85.6 57.8 sufficient evidence of recoverability is not evident. Between one and two years 24.0 17. 2 Between two and three years 35.7 6.0 As a result of the ongoing Covid-19 pandemic, the Group also performed a detailed review of trade receivables, work in progress and accrued income Between three and four years 51.4 30.5 aged less than one year, taking into account the level of credit insurance the Between four and five years – 2.8 Group has along with internal and external data including historical and Over five years – – forward-looking information. This review focused on significant individual 196.7 114.3 clients along with the industry and country in which the clients operate where there is continued risk due to the pandemic. The following table is an analysis of future anticipated cash flows in relation to liabilities in respect of put option agreements with vendors at 31 December: 19. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR 2021 2020 The following are included in trade and other payables falling due within £m £m one year: Within one year 58.4 9.3 Between one and two years 15.1 51.0 | | 2021 | 2020 | | | | --- | --- | --- | --- | --- | | | £m | £m | Between two and three years 14.4 10.0 | | | Trade payables 10,596.9 10,206.5 | | | Between three and four years 99.0 26.2 | | | Deferred income 1,334.0 1,153.7 | | | Between four and five years 76.6 9.0 | | | Payments due to vendors (earnout agreements) 85.6 57.8 | | | Over five years 128.0 5.2 | | | Liabilities in respect of put option agreements | | | | 391.5 110.7 | with vendors 58.4 9.3 Fair value of derivatives 6.4 1.8 1 21. BANK OVERDRAFTS, BONDS AND BANK LOANS Share repurchases – close period commitments 211.7 – Amounts falling due within one year: Other creditors and accruals 2,959.3 2,430.6 15,252.3 13,859.7 2021 2020 £m £m Note 1 During 2021, the Company entered into an arrangement with a third party to conduct share Bank overdrafts 342.3 8,562.0 buybacks on its behalf in the close period commencing on 16 December 2021 and ending on Corporate bonds and bank loans 224.9 57.2 18 February 2022, in accordance with UK listing rules. The commitment resulting from this 567.2 8,619.2 agreement constitutes a liability at 31December 2021, which is included in trade and other payables: amounts falling due within one year and has been recognised as a movement in equity. The Group considers that the carrying amount of bank overdrafts The Group considers that the carrying amount of trade and other payables approximates their fair value. approximates their fair value. Amounts falling due after more than one year: 2021 2020 £m £m Corporate bonds and bank loans 4,216.8 4,975.5 The Group estimates that the fair value of corporate bonds is £4,790.3 million at 31 December 2021 (2020: £5,509.1 million). The fair values of the corporate bonds are based on quoted market prices. The Group considers that the carrying amount of bank loans of £14.7 million (2020: £57.2 million) approximates their fair value. WPP ANNUAL REPORT 2021184 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | The corporate bonds, bank loans and overdrafts included within liabilities fall | | | 23. SHARE-BASED PAYMENTS | | | | | --- | --- | --- | --- | --- | --- | --- | | due for repayment as follows: | | | Charges for share-based incentive plans were as follows: | | | | | | 2021 | 2020 | | 2021 | 2020 | 2019 | | | £m | £m | Continuing operations | £m | £m | £m | | Within one year 567.2 8,619.2 | | | Share-based payments 99.6 74.4 66.0 | | | | Between one and two years 629.2 590.9 Share-based payments comprise charges for stock options and restricted Between two and three years 550.4 669.4 stock awards to employees of the Group. Between three and four years 418.8 540.2 Between four and five years 623.6 445.6 As of 31 December 2021, there was £203.4 million (2020: £134.9 million) of total Over five years 1,994.8 2,729.4 unrecognised compensation cost related to the Group’s restricted stock plans. 4,784.0 13,594.7 That cost is expected to be recognised over an average period of one to two years. 22. PROVISIONS FOR LIABILITIES AND CHARGES Further information on stock options is provided in note 27. The movements in 2021 and 2020 were as follows: | | Property | | Other | Total | RESTRICTED STOCK PLANS | | --- | --- | --- | --- | --- | --- | | | | £m | £m | £m | The Group operates a number of equity-settled share incentive schemes, in | | 1 January 2020 81.5 166.3 247.8 | | | | | most cases satisfied by the delivery of stock from one of the Group’s ESOP | | Charged to the income statement 14.8 50.4 65.2 | | | | | Trusts. The most significant current schemes are as follows: | 1 Acquisitions – 0.7 0.7 EXECUTIVE PERFORMANCE SHARE PLAN (EPSP) Utilised (1.6) (17.0) (18.6) This scheme is intended to reward and incentivise the most senior executives Released to the income statement (1.5) (15.0) (16.5) of the Group. The performance period is three or five complete financial years, Other movements (15.0) 48.7 33.7 commencing with the financial year in which the award is granted. The vest Exchange adjustments (1.5) (4.5) (6.0) date will usually be in the March following the end of the performance 31 December 2020 76.7 229.6 306.3 period. Vesting is conditional on continued employment throughout the Charged to the income statement 25.2 35.8 61.0 vesting period. 1 Acquisitions – 7.3 7.3 The 2020 and 2021 EPSP awards are subject to three equally weighted Utilised (7.0) (69.9) (76.9) performance conditions: three-year average Return on Invested Capital (ROIC), Released to the income statement (18.3) (25.0) (43.3) cumulative Adjusted Free Cash Flow (AFCF), and relative Total Shareholder Other movements (5.2) 18.9 13.7 Return (TSR). Achieving the threshold performance requirement will result in Exchange adjustments (0.8) 1.2 0.4 a vesting opportunity of 20% for that element. The vesting opportunity will 31 December 2021 70.6 197.9 268.5 increase on a straight-line basis to 100% of the award for maximum performance. The Compensation Committee has an overriding discretion to Note 1 Acquisitions include £7.3 million (2020: £0.4 million) of provisions arising from revisions to fair determine the extent to which the award will vest. value adjustments related to the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by The 2019 EPSP awards are subject to a relative TSR performance condition, IFRS 3 Business Combinations. with a ROIC underpin. TSR performance will be compared to companies representing the most relevant, listed global competitors, with performance The Company and various of its subsidiaries are, from time to time, parties to below median resulting in zero vesting. Performance between median and legal proceedings and claims which arise in the ordinary course of business. upper decile provides for a vesting opportunity of between 15% and 100%. The Directors do not anticipate that the outcome of these proceedings and The awards will vest subject to a ROIC underpin of an average of 7.5% over claims will have a material adverse effect on the Group’s financial position or the performance period. The Compensation Committee has an overriding on the results of its operations. discretion to determine the extent to which the award will vest. The utilisation of “Other” provisions during the year is primarily driven by For EPSP awards granted between 2014 and 2018 there are three performance litigation settlements. criteria, each constituting one-third of the vesting value, and each measured over the performance period: (i) TSR against a comparator group of companies. Threshold performance (equating to ranking in the 50th percentile of the comparator group) will result in 20% vesting of the part of the award dependent on TSR. The maximum vest of 100% will arise if performance ranks in the 90th percentile, with a sliding scale of vesting for performance between threshold and maximum. (ii) Headline diluted earnings per share. Threshold performance (7% compound annual growth) will again result in a 20% vest. Maximum performance of 14% compound annual growth will give rise to a 100% vest, with a sliding vesting scale for performance between threshold and maximum. (iii) Return on equity (ROE). Average annual ROE defined as headline diluted EPS divided by the balance sheet value per share of shareholders’ equity. Threshold performance ranges between 10-14% average annual ROE and maximum performance ranges between 14-18%. Threshold again gives rise to a 20% vest, 100% for maximum, with a sliding scale in between. 185WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. SHARE-BASED PAYMENTS CONTINUED 24. PROVISION FOR POST-EMPLOYMENT BENEFITS PERFORMANCE SHARE AWARDS (PSA) Companies within the Group operate a large number of pension plans, the Conditional stock awards made under the PSA are dependent upon annual forms and benefits of which vary with conditions and practices in the countries performance targets, typically based on one or more of: operating profit, concerned. The Group’s pension costs are analysed as follows: profit before taxation and operating margin. Grants are made in the year | following the year of performance measurement, and vest two years after | | 2021 | 2020 | 2019 | | --- | --- | --- | --- | --- | | grant date provided the individual concerned is continually employed by | Continuing operations | £m | £m | £m | | the Group throughout this time. | Defined contribution plans 162.8 157.8 154.9 | | | | Defined benefit plans charge to operating profit 14.9 13.9 14.8 LEADERS, PARTNERS AND HIGH POTENTIAL GROUP Pension costs (note 5) 177.7 171.7 169.7 The WPP Leader programme makes conditional stock awards to around Net interest expense on pension plans (note 6) 1.8 2.9 3.5 1,800 of our key executives. Awards vest three years after grant, provided the 179.5 174.6 173.2 participant is still employed within the Group. VALUATION METHODOLOGY DEFINED BENEFIT PLANS For all of these schemes, the valuation methodology is based upon fair value The pension costs are assessed in accordance with the advice of local on grant date, which is determined by the market price on that date or the independent qualified actuaries. The latest full actuarial valuations for the application of a Black-Scholes model, depending upon the characteristics of various pension plans were carried out at various dates in the last three years. the scheme concerned. The assumptions underlying the Black-Scholes model These valuations have been updated by the local actuaries to 31 December are detailed in note 27, including details of assumed dividend yields. Market 2021. price on any given day is obtained from external, publicly available sources. The majority of plans provide final salary benefits, with plan benefits typically MARKET/NON-MARKET CONDITIONS based either on mandatory plans under local legislation, termination indemnity Most share-based plans are subject to non-market performance conditions, benefits, or on the rules of WPP sponsored supplementary plans. The such as margin or growth targets, as well as continued employment. implications of IFRIC 14 have been allowed for where relevant, in particular EPSP is subject to a number of performance conditions, including TSR, with regard to the asset ceiling/irrecoverable surplus. a market-based condition. The Group’s policy is to close existing defined benefit plans to new members. For schemes without market-based performance conditions, the valuation This has been implemented across a significant number of the pension plans. methodology above is applied and, at each year-end, the relevant charge for each grant is revised, if appropriate, to take account of any changes in Contributions to funded plans are determined in line with local conditions and estimate of the likely number of shares expected to vest. practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded For schemes with market-based performance conditions, the probability plans) paid for 2021 amounted to £16.7 million (2020: £20.3 million, 2019: of satisfying these conditions is assessed at grant date through a statistical £37.1 million). Employer contributions and benefit payments in 2022 are model (such as the Monte Carlo model) and applied to the fair value. This initial expected to be approximately £15 million. valuation remains fixed throughout the life of the relevant plan, irrespective of the actual outcome in terms of performance. Where a lapse occurs due to (A) ASSUMPTIONS cessation of employment, the cumulative charge taken to date is reversed. There are a number of areas in pension accounting that involve estimates made by management based on advice of qualified advisors. These include Movement on ordinary shares granted for significant restricted stock plans: establishing the discount rates, rates of increase in salaries and pensions in payment, inflation, and mortality assumptions. The main weighted average Non- Non- assumptions used for the actuarial valuations at 31 December are shown in vested vested 31 the following table: | | 1 January | | | | | | | | December | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2021 | Granted | | Forfeited | | Vested | | | 2021 | | | | | | | | | number | | number | | number | | number | | number | | | | 2021 | 2020 | 2019 | 2018 | | | | m | | m | | m | | m | | m | | | % pa | % pa | % pa | % pa | | Executive Performance | | | | | | | | | | | UK | | | | | | | Share Plan (EPSP) 13.0 6.1 (2.2) (0.2) 16.7 | | | | | | | | | | | | 1 | | | | | | | | | | | | | | | | | Discount rate | | 1.8 1.3 2.0 2.8 | | | | Performance Share Rate of increase in pensions Awards (PSA) 4.3 0.4 (0.2) (1.4) 3.1 in payment 4.5 4.4 4.4 4.3 Leaders, Partners and Inflation 3.2 2.8 2.6 2.8 High Potential Group 11.0 3.6 (1.1) (3.1) 10.4 North America 1 Discount rate 2.6 2.0 3.0 4.1 Weighted average fair 2 | value (pence per share) | Rate of increase in salaries | | n/a 3.0 3.0 3.0 | | --- | --- | --- | --- | | Executive Performance | Western Continental Europe | | | | Share Plan (EPSP) 943p 951p 1,289p 833p 900p | | 1 | | | | Discount rate | | 1.2 0.9 1.2 2.0 | Performance Share Rate of increase in salaries 2.3 2.2 2.2 2.3 Awards (PSA) 675p 666p 534p 859p 604p Rate of increase in pensions in payment 1.8 1.8 1.8 1.2 Leaders, Partners and High Potential Group 831p 990p 853p 709p 922p Inflation 1.7 1.7 1.7 1.7 Asia Pacific, Latin America, Africa & The total fair value of shares vested for all the Group’s restricted stock plans Middle East and Central & Eastern Europe | during the year ended 31 December 2021 was £64.1 million (2020: £71.6 million, | | 1 | | | --- | --- | --- | --- | | | Discount rate | | 5.3 4.2 4.6 5.0 | | 2019: £90.8 million). | Rate of increase in salaries 5.6 5.2 6.1 5.8 | | | Inflation 3.7 3.7 3.7 3.6 Notes 1 Discount rates are based on high-quality corporate bond yields. In countries where there is no deep market in corporate bonds, the discount rate assumption has been set with regard to the yield on long-term government bonds. 2 The salary assumptions are no longer applicable to the US as all plans were frozen. Active participants will not accrue additional benefits for future services under these plans. WPP ANNUAL REPORT 2021186 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. PROVISION FOR POST-EMPLOYMENT BENEFITS CONTINUED The following table presents a sensitivity analysis for each significant actuarial For the Group’s pension plans, the plans’ assets are invested with the objective assumption showing how the defined benefit obligation would have been of being able to meet current and future benefit payment needs, while affected by changes in the relevant actuarial assumption that were reasonably controlling balance sheet volatility and future contributions. Pension plan possible at the balance sheet date. This sensitivity analysis applies to the assets are invested with a number of investment managers, and assets are defined benefit obligation only and not to the net defined benefit pension diversified among equities, bonds, insured annuities, property and cash or liability in its entirety, the measurement of which is driven by a number of factors other liquid investments. The primary use of bonds as an investment class is to including, in addition to the assumptions below, the fair value of plan assets. match the anticipated cash flows from the plans to pay pensions. The Group is invested in high-quality corporate and government bonds which share similar The sensitivity analyses are based on a change in one assumption while risk characteristics and are of equivalent currency and term to the plan holding all other assumptions constant so that interdependencies between liabilities. Various insurance policies have also been bought historically to the assumptions are excluded. The methodology applied is consistent with provide a more exact match for the cash flows, including a match for the actual that used to determine the recognised defined benefit obligation. The mortality of specific plan members. These insurance policies effectively sensitivity analysis for inflation is not shown as it is an underlying assumption provide protection against both investment fluctuations and longevity risks. to build the pension and salary increase assumptions. Changing the inflation The strategic target allocation varies among the individual plans. assumption on its own without changing the salary or pension assumptions will not result in a significant change in pension liabilities. Management considers the types of investment classes in which the pension plan assets are invested. The types of investment classes are determined by (Decrease)/increase in benefit obligation economic and market conditions and in consideration of specific asset class 2021 2020 risk. Sensitivity analysis of significant actuarial assumptions £m £m Discount rate Management periodically commissions detailed asset and liability studies Increase by 25 basis points: performed by third-party professional investment advisors and actuaries that UK (7. 6) (8.8) generate probability-adjusted expected future returns on those assets. These studies also project the estimated future pension payments and evaluate the North America (6.4) (7.6) | efficiency of the allocation of the pension plan assets into various investment | Western Continental Europe (3.4) (4.0) | | | | --- | --- | --- | --- | | categories. | | 1 | | | | Other | | (0.6) (0.6) | Decrease by 25 basis points: At 31 December 2021, the life expectancies underlying the value of the accrued UK 8.0 9.1 liabilities for the main defined benefit pension plans operated by the Group North America 6.6 7.8 were as follows: Western Continental Europe 3.6 4.3 1 | | | | Western | | Other | 0.6 0.6 | | --- | --- | --- | --- | --- | --- | --- | | Years life expectancy | All | North | Continental | | Rate of increase in salaries | | | after age 65 | plans | America UK | Europe Other | 1 | | | Increase by 25 basis points: Current pensioners Western Continental Europe 0.8 0.9 (at age 65) – male 22.3 21.8 23.5 20.9 13.3 1 | Current pensioners | Other | | 0.5 0.6 | | --- | --- | --- | --- | | (at age 65) – female 24.0 23.3 25.0 23.9 16.4 | Decrease by 25 basis points: | | | | Future pensioners | Western Continental Europe (0.8) (0.9) | | | | (current age 45) | | 1 | | | | Other | | (0.5) (0.5) | – male 24.1 23.2 25.5 23.1 13.3 Rate of increase in pensions in payment Future pensioners (current age 45) Increase by 25 basis points: – female 25.8 24.6 27.1 25.9 16.4 UK 0.9 1.1 Note Western Continental Europe 1.7 2.1 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe. Decrease by 25 basis points: UK (0.9) (0.7) The life expectancies after age 65 at 31 December 2020 were 22.1 years and Western Continental Europe (1.7) (2.0) 23.6 years for male and female current pensioners (at age 65) respectively, Life expectancy and 23.7 years and 25.2 years for male and female future pensioners (current age 45), respectively. Increase in longevity by one additional year: UK 13.3 14.0 In the determination of mortality assumptions, management uses the most North America 5.3 5.9 up-to-date mortality tables available in each country. Western Continental Europe 4.2 4.8 Note The following table provides information on the weighted average duration 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe. of the defined benefit pension obligations and the distribution of the timing of benefit payments for the next ten years. The duration corresponds to the weighted average length of the underlying cash flows. Western All North Continental plans America UK Europe Other 1 Weighted average duration of the defined benefit obligation (years) 11.2 9.3 13.6 12.4 6.3 Expected benefit payments over the next ten years (£m) Benefits expected to be paid within 12 months 47.4 22.8 13.5 5.6 5.5 Benefits expected to be paid in 2023 42.6 20.8 12.2 5.5 4.1 Benefits expected to be paid in 2024 41.7 20.2 12.6 5.4 3.5 Benefits expected to be paid in 2025 42.0 18.9 13.3 5.7 4.1 Benefits expected to be paid in 2026 43.9 19.9 13.3 5.8 4.9 Benefits expected to be paid in the next five years 215.1 85.8 71.4 31.8 26.1 Note 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe. 187WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. PROVISION FOR POST-EMPLOYMENT BENEFITS CONTINUED The following table shows the split of the deficit at 31 December between (B) ASSETS AND LIABILITIES funded and unfunded pension plans. At 31 December, the fair value of the assets in the pension plans and the assessed present value of the liabilities in the pension plans are shown in the 2021 2020 2019 2021 Present 2020 Present 2019 Present following table: | | | | Surplus/ | | value of | | Surplus/ | | value of | | Surplus/ | | value of | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | (deficit) | | liabilities | | (deficit) | | liabilities | | (deficit) | | liabilities | | | 2021 | 2020 | 2019 | | £m | | £m | | £m | | £m | | £m | | £m | | £m % | £m % | £m % | | | | | | | | | | | | | Funded plans by region Equities 31.8 5.8 41.6 6.7 55.5 9.1 UK 0.4 (231.9) 0.7 (262.7) 0.3 (247.6) Bonds 259.7 47.0 284.2 46.1 272.5 44.8 North America 20.1 (237.9) 17.4 (271.8) 12.8 (286.2) Insured annuities 222.5 40.3 252.8 41.0 239.1 39.3 Western Continental Property 1.0 0.2 0.7 0.1 0.7 0.1 Europe (45.1) (87.6) (38.6) (84.3) (33.3) ( 77.6) Cash 15.3 2.8 14.7 2.4 17.7 2.9 Asia Pacific, Latin America, Africa & Middle Other 21.8 3.9 22.6 3.7 23.0 3.8 East and Central & Total fair value of assets 552.1 100.0 616.6 100.0 608.5 100.0 Eastern Europe (6.4) (25.7) (5.8) (24.1) (3.6) (20.9) Present value of liabilities (688.5) (772.7) (767.5) Deficit/liabilities in Deficit in the plans (136.4) (156.1) (159.0) the funded plans (31.0) (583.1) (26.3) (642.9) (23.8) (632.3) Irrecoverable surplus (0.2) (0.6) – 1 Unfunded plans Net liability (136.6) (156.7) (159.0) by region Plans in surplus 30.1 27.2 20.6 North America (48.2) (48.2) (55.3) (55.3) (58.0) (58.0) Plans in deficit (166.7) (183.9) (179.6) Western Continental Notes Europe (28.9) (28.9) (47.3) (47.3) (46.1) (46.1) 1 The related deferred tax asset is discussed in note 17. Asia Pacific, Latin America, Africa & Middle East and Central & All plan assets have quoted prices in active markets with the exception of Eastern Europe (28.3) (28.3) (27.2) (27.2) (31.1) (31.1) insured annuities and other assets. The value of insured annuities is equal to Deficit/liabilities in the value of the pension benefits covered by the annuities. the unfunded plans (105.4) (105.4) (129.8) (129.8) (135.2) (135.2) 2021 2020 2019 Surplus/(deficit) in plans by region £m £m £m Deficit/liabilities in the plans (136.4) (688.5) (156.1) (772.7) (159.0) (767.5) UK 0.4 0.7 0.3 North America (28.1) (37.9) (45.2) In accordance with IAS 19, plans that are wholly or partially funded are Western Continental Europe (74.0) (85.9) (79.4) considered funded plans. Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe (34.7) (33.0) (34.7) (C) PENSION EXPENSE Deficit in the plans (136.4) (156.1) (159.0) The following tables show the breakdown of the pension expense between amounts charged to operating profit and amounts charged to finance costs: Some of the Group’s defined benefit plans are unfunded (or largely unfunded) by common custom and practice in certain jurisdictions. In the case of these 2021 2020 2019 unfunded plans, the benefit payments are made as and when they fall due. Continuing operations £m £m £m Pre-funding of these plans would not be typical business practice. 1 Service cost 12.6 12.0 12.9 Administrative expenses 2.3 1.9 1.9 Charge to operating profit 14.9 13.9 14.8 Net interest expense on pension plans 1.8 2.9 3.5 Charge to profit before taxation for defined benefit plans 16.7 16.8 18.3 Note 1 Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments. The following table shows the breakdown of amounts recognised in other comprehensive income (OCI): 2021 2020 2019 £m £m £m Return on plan assets (excluding interest income) (29.3) 57. 2 16.7 Changes in demographic assumptions underlying the present value of the plan liabilities (3.6) 3.8 5.9 Changes in financial assumptions underlying the present value of the plan liabilities 31.1 (54.0) (64.3) Experience gain/(loss) arising on the plan liabilities 15.7 (4.4) 5.1 Change in irrecoverable surplus 0.4 (0.6) – Actuarial gain/(loss) recognised in OCI 14.3 2.0 (36.6) WPP ANNUAL REPORT 2021188 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # (D) MOVEMENT IN PLAN LIABILITIES The following table shows an analysis of the movement in the pension plan liabilities for each accounting period: | | 2010 $m | 2010 $m | 2009 $m | | --- | --- | --- | --- | | Plan liabilities at beginning of year | 772.7 | 767.5 | 1,036.0 | | Service cost | 12.6 | 12.0 | 14.9 | | Interest cost | 15.0 | 17.0 | 26.3 | | Actuarial (gain)/loss | | | | | Effect of changes in demographic assumptions | 3.6 | (3.8) | (0.9) | | Effect of changes in financial assumptions | (31.1) | 54.0 | 64.3 | | Effect of experience adjustments | (19.7) | 4.4 | 13.3 | | Benefits paid* | (28.5) | (59.6) | (140.8) | | Gain due to exchange rate movements | (6.9) | (6.3) | (22.7) | | Settlement payments* | (0.3) | (17.0) | (67.4) | | Transfer to disposal group classified as held for sale | - | - | (148.0) | | Other* | 0.5 | 2.4 | 8.0 | | Plan liabilities at end of year | 688.5 | 772.7 | 767.5 | Notes Includes current interest costs, past service costs related to plan amendments and (gain)/loss as settlement costs and adjustments. * In 2009, there was no commitment to a contact (sales defined benefit plan that allowed certain participants to receive immediate lump sum pay outs, which totaled 68.7 million. * In 2014, the Group comprised the transfer of the defined benefit obligations for certain oil plans to an issued resulting in 68.7 million in settlement payments. * Other includes acquisitions, disposals, plan participants' contributions and reissurifications. The reissurification represent certain of the Group's defined benefit plans which are included in the case for the first time in the periods presented. # (E) MOVEMENT IN PLAN ASSETS The following table shows an analysis of the movement in the pension plan assets for each accounting period: | | 2010 $m | 2010 $m | 2009 $m | | --- | --- | --- | --- | | Fair value of plan assets at beginning of year | 496.6 | 608.3 | 840.6 | | Interest income on plan assets | 10.3 | 16.1 | 20.6 | | Return on plan assets (excluding interest income) | (39.3) | 57.3 | 16.7 | | Employer contributions | 16.7 | 20.3 | 37.1 | | Benefits paid* | (59.9) | (59.6) | (140.8) | | Loss due to exchange rate movements | (0.4) | (6.8) | (16.7) | | Settlement payments* | (0.3) | (17.0) | (67.4) | | Administrative expenses | (1.8) | (1.9) | (2.1) | | Transfer to disposal group classified as held for sale | - | - | (111.1) | | Other* | 0.1 | 1.8 | 0.8 | | Fair value of plan assets at end of year | 532.1 | 616.6 | 838.5 | | Actual return on plan assets | (19.3) | 71.3 | 39.1 | Notes * In 2014, there was no commitment to a contact (sales defined benefit plan that allowed certain participants to receive immediate lump sum pay outs, which totaled 68.7 million. * In 2014, the Group comprised the transfer of the defined benefit obligations for certain oil plans to an issued resulting in 68.7 million in settlement payments. * Other includes acquisitions, disposals, plan participants' contributions and reissurifications. The reissurification represent certain of the Group's defined benefit plans which are included in the case for the first time in the periods presented. # 25. RISK MANAGEMENT POLICIES # FOREIGN CURRENCY RISK The Group's results in pounds sterling are subject to fluctuation as a result of exchange rate movements. The Group does not hedge this translation exposure to its earnings but does partially hedge the currency element of its net assets using foreign currency borrowings, cross-currency swaps and forward foreign exchange contracts. The Group effects these currency net asset hedges by borrowing in the same currencies as the operating (or "functional") currencies of its main operating units. The majority of the Group's debt is therefore denominated in US dollars, pounds sterling and euros. The Group's borrowings at 31 December 2021 were primarily made up of 21,667 million, 31,936 million and €2,600 million (2020: 22,167 million, 31,094 million and €2,600 million). The Group's average gross debt during the course of 2021 was 31,936 million, 31,094 million and €2,600 million (2020: 22,311 million, 3999 million and €2,609 million). The Group's operations conduct the majority of their activities in their own local currency and consequently the Group has no significant transactional foreign exchange exposures arising from its operations. Any significant cross-border trading exposures are hedged by the use of forward foreign exchange contracts. No speculative foreign exchange trading is undertaken. # INTEREST RATE RISK The Group is exposed to interest rate risk on both interest-bearing assets and interest-bearing liabilities. The Group has a policy of actively managing its interest rate risk exposure while recognizing that fixing rates on all its debt eliminates the possibility of benefiting from rate reductions and, similarly, having all its debt at floating rates unduly exposes the Group to increases in rates. Including the effect of interest rate and cross-currency swaps, 100% of the year-end US dollar debt is at fixed rates averaging 5.16% for an average period of 75 months; 100% of the sterling debt is at a fixed rate of 2.97% for an average period of 155 months; 90.4% of the euro debt is at fixed rates averaging 2.04% for an average period of 69 months; and 9.6% of the euro debt is at floating rates averaging 0% for an average of 3 months. # GOING CONCERN AND LIQUIDITY RISK In considering going concern and liquidity risk, the Directors have reviewed the Group's future cash requirements and earnings projections. The Directors believe these forecasts have been prepared on a prudent basis and have also considered the impact of a range of potential changes to trading performance. The impact of the Russian invasion of Ukraine and sanctions response from governments has been considered. The Company modelled a range of revenue less pass-through costs compared with the year ended 31 December 2021 and a number of mitigating cost actions that are available to the Company. Considering the Group's bank covenant and liquidity headroom and cost mitigation actions which could be implemented, the Company and the Group would be able to operate with appropriate liquidity and within its banking covenants and be able to meet its liabilities as they fall due with a decline in revenue less pass-through costs up to 30% in 2023. The likelihood of such a decline is considered remote as compared to Company expectations and external benchmarks, including previously witnessed declines in times of economic stress or external forces such as the pandemic. The modelling in this extreme scenario includes cost mitigations of 70% of the decline in net sales and the suspension of the share buyback programme and dividend. Further measures that were not included in the modelling, should the Company face such an extreme scenario, include the reduction of capital expenditure and acquisitions. Therefore, the Directors have concluded that the Group will be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis and that there are no material uncertainties which give rise to a significant going concern risk. WPP ANNUAL REPORT 2021 99 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 28. RISK MANAGEMENT POLICIES CONTINUED At 31 December 2021, the Group has access to 16.3 billion of committed facilities with maturity dates spread over the years 2020 to 2016 as illustrated below: | | 2020 £m | 2020 £m | 2016 £m | 2015 £m | 2016+ £m | | --- | --- | --- | --- | --- | --- | | £ bonds (£400m (2.875% 2016)) | 400.0 | | | | 400.0 | | US bond (£220m (3.625% 2016)) | 162.5 | | | | 162.5 | | US bond (£5m (3.125% 2016)) | 68.6 | | | | 68.6 | | £ bonds (£550m (3.75% 2016)) | 350.0 | | | | 350.0 | | Eurobonds (£400m (3.625% 2016)) | 504.5 | | | | 504.5 | | Eurobonds (£750m (2.375% 2017)) | 630.6 | | | | 630.6 | | Eurobonds (£750m (2.25% 2016)) | 630.6 | | | | 630.6 | | Bank revolver (£2,500m 2016) | 1,847.5 | | | | 1,847.5 | | Eurobonds (£300m (1.375% 2015)) | 420.4 | | | 420.4 | | | US bond (£750m (3.75% 2016)) | 554.2 | | 554.2 | | | | Eurobonds (£750m (3.0% 2016)) | 630.6 | | 630.6 | | | | Eurobonds (£350m (3m EURIBOR + 0.65% 2016)) | 210.2 | 210.2 | | | | | Total committed facilities available | 6,509.7 | 210.2 | 630.6 | 554.2 | 420.4 | | Drawn down facilities at 31 December 2021 | 4,463.3 | 210.2 | 630.6 | 554.2 | 420.4 | | Undrawn committed credit facilities | 1,847.5 | | | | | | Drawn down facilities at 31 December 2021 | 4,463.3 | | | | | | Net cash at 31 December 2021 | (1,940.6) | | | | | | Other adjustments | (20.8) | | | | | | Adjusted net debt at 31 December 2021 | 920.1 | | | | | Given the strong cash generation of the business, its debt maturity profile and available facilities, the Directors believe the Group has sufficient liquidity to match its requirements for the foreseeable future. # TREASURY ACTIVITIES Treasury activity is managed centrally from London, New York and Hong Kong, and is principally concerned with the monitoring of working capital, managing external and internal funding requirements and the monitoring and management of financial market risks, in particular interest rate and foreign exchange exposures. The treasury operation is not a profit centre and its activities are carried out in accordance with policies approved by the Board of Directors and subject to regular review and audit. The Group manages liquidity risk by ensuring continuity and flexibility of funding even in difficult market conditions. Undrawn committed borrowing facilities are maintained in excess of peak net borrowing levels and debt maturities are closely monitored. Targets for average adjusted net debt are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group's major operations. # CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 10, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity and in notes 27 and 28. # CREDIT RISK The Group's principal financial assets are cash and short-term deposits, trade and other receivables and investments, the carrying values of which represent the Group's maximum exposure to credit risk in relation to financial assets, as shown in note 26. The Group's credit risk is primarily attributable to its trade receivables. The majority of the Group's trade receivables are due from large national or multinational companies where the risk of default is considered low. The amounts presented in the consolidated balance sheet are net of loss allowances, estimated by the Group's management based on expected losses, prior experience and their assessment of the current economic environment. A relatively small number of clients make up a significant percentage of the Group's debtors, but no single client represents more than 5% of total trade receivables as at 31 December 2021 or 31 December 2020. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies or banks that have been financed by their government. A relatively small number of clients contribute a significant percentage of the Group's consolidated revenues. The Group's clients generally are able to reduce advertising and marketing spending or cancel projects at any time for any reason. There can be no assurance that any of the Group's clients will continue to utilize the Group's services to the same extent, or at all, in the future. Clients can reduce their marketing spend, terminate contracts, or cancel projects on short notice. The loss of one or more of our largest clients, if not replaced by new accounts or an increase in business from existing clients, would adversely affect our financial condition. # SENSITIVITY ANALYSIS The following sensitivity analysis addresses the effect of currency and interest rate risks on the Group's financial instruments. The analysis assumes that all hedges are highly effective. # CURRENCY RISK A 10% weakening of sterling against the Group's major currencies would result in the following losses being recognised in the income statement, which would arise on the retranslation of foreign currency denominated borrowings and derivatives. A 10% strengthening of sterling would have an equal and opposite effect. | | 2021 £m | 2020 £m | | --- | --- | --- | | US dollar | 8.7 | 159.1 | | Euro | 17.4 | 167.2 | # INTEREST RATE RISK A one percentage point increase in market interest rates for all currencies in which the Group had cash and borrowings at 31 December 2021 would increase profit before tax by approximately £33.3 million (2020: £40.9 million). A one percentage point decrease in market interest rates would have an equal and opposite effect. This has been calculated by applying the interest rate change to the Group's variable rate cash and borrowings. 90 WFP ANNUAL REPORT 2021 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL INSTRUMENTS equity during the year for currency derivatives that are designated and CURRENCY DERIVATIVES effective hedges was a credit of £45.5 million (2020: £9.7 million) for net The Group utilises currency derivatives to hedge significant future transactions investment hedges and a debit of £38.0 million (2020: £5.9 million) for cash and cash flows and the exchange risk arising on translation of the Group’s flow hedges. investments in foreign operations. The Group is a party to a variety of foreign currency derivatives in the management of its exchange rate exposures. The Changes in the fair value relating to the ineffective portion of the currency instruments purchased are primarily denominated in the currencies of the derivatives that are designated hedges amounted to £2.5 million (2020: £nil) Group’s principal markets. The Group designates foreign currency denominated which is included within revaluation and retranslation of financial instruments debt as hedging instruments against the currency risk associated with the in the income statement. At the balance sheet date, the total nominal amount translation of its foreign operations. of outstanding forward foreign exchange contracts not designated as hedges was £764.8 million (2020: £304.6 million). The Group estimates the fair value of The Group also designates certain cross currency swaps as hedging these contracts to be a net liability of £3.9 million (2020: £1.6 million). instruments in cash flow hedges to manage its exposure to foreign exchange movements on its borrowings. Contracts due in November 2023 have receipts As at 31 December 2021, the Group had designated its $93 million bond, of €500.0 million and payments of $604.2 million. Contracts due in March 2025 $750 million bond, $220 million bond, and $604 million leg of its cross currency have receipts of €500.0 million and payments of £444.1 million. swap, as the hedging instruments in a net investment hedge relationship. Possible sources of ineffectiveness include any impairments to the Group's net At 31 December 2021, the fair value of the Group’s currency derivatives is investment in US dollars. The hedges are documented and are assessed for estimated to be a net liability of approximately £46.7 million (2020: £1.6 million). effectiveness on an ongoing basis. These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £0.5 million (2020: £9.6 million) assets included These arrangements are designed to address significant exchange exposure in trade and other receivables and £47.2 million (2020: £11.2 million) liabilities and are renewed on a revolving basis as required. included in trade and other payables. The amounts taken to and deferred in An analysis of the Group’s financial assets and liabilities by accounting classification is set out below: Held at Derivatives in fair value designated Held at fair through other hedge value through comprehensive Amortised Carrying relationships profit or loss income cost value £m £m £m £m £m 2021 Other investments – 228.3 90.0 – 318.3 Cash and short-term deposits – – – 3,882.9 3,882.9 Bank overdrafts, bonds and bank loans – – – (567.2) (567.2) Bonds and bank loans – – – (4,216.8) (4,216.8) Trade and other receivables: amounts falling due within one year – – – 7,012 .3 7,012.3 Trade and other receivables: amounts falling due after more than one year – – – 84.5 84.5 Trade and other payables: amounts falling due within one year – – – (10,674.8) (10,674.8) Trade and other payables: amounts falling due after more than one year – – – (1.5) (1.5) | Derivative assets 0.5 2.5 – | | – 3.0 | | --- | --- | --- | | Derivative liabilities (47.2) (6.4) – | | – (53.6) | | Payments due to vendors (earnout agreements) – (196.7) – | | – (196.7) | | Liabilities in respect of put options | – (391.5) – | – (391.5) | (46.7) (363.8) 90.0 (4,480.6) (4,801.1) Held at Derivatives in fair value designated Held at fair through other hedge value through comprehensive Amortised Carrying relationships profit or loss income cost value £m £m £m £m £m 2020 Other investments – 263.3 124.0 – 387.3 Cash and short-term deposits – – – 12,899.1 12,899.1 Bank overdrafts, bonds and bank loans – – – (8,619.2) (8,619.2) Bonds and bank loans – – – (4,975.5) (4,975.5) Trade and other receivables: amounts falling due within one year – – – 6,989.3 6,989.3 Trade and other receivables: amounts falling due after more than one year – – – 110.1 110.1 Trade and other payables: amounts falling due within one year – – – (10,268.0) (10,268.0) Trade and other payables: amounts falling due after more than one year – – – (0.9) (0.9) Derivative assets 9.6 0.2 – – 9.8 Derivative liabilities (6.3) (6.7) – – (13.0) Payments due to vendors (earnout agreements) – (114.3) – – (114.3) Liabilities in respect of put options – (110.7) – – (110.7) 3.3 31.8 124.0 (3,865.1) (3,706.0) 191WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL INSTRUMENTS CONTINUED Reconciliation of level 3 fair value measurements: The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels Payments due Liabilities in to vendors respect of Other 1 to 3 based on the degree to which the fair value is observable: | | | | (earnout | put options | | investments | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | agreements) | | | £m | | £m | | Level 1 fair value measurements are those derived from quoted prices | 1 January 2020 (243.7) (204.5) 456.1 | | | | | | | (unadjusted) in active markets for identical assets or liabilities; Gains recognised in the income statement 13.4 12.3 7.9 Level 2 fair value measurements are those derived from inputs other than Losses recognised in other quoted prices included within level 1 that are observable for the asset or comprehensive income − – (106.1) liability, either directly (ie as prices) or indirectly (ie derived from prices); Exchange adjustments 5.3 2.3 – Additions (4.5) (4.2) 15.9 Level 3 fair value measurements are those derived from valuation techniques Disposals − – (7.0) that include inputs for the asset or liability that are not based on observable Reclassification from other market data (unobservable inputs). investments to interests in associates − – (0.2) Level 1 Level 2 Level 3 Cancellations − 30.5 – 2021 £m £m £m Settlements 115.2 52.9 – Derivatives in designated hedge relationships 31 December 2020 (114.3) (110.7) 366.6 Derivative assets – 0.5 – Losses recognised in the income Derivative liabilities – (47.2) – statement (58.7) (40.6) (7.7) Held at fair value through profit or loss Losses recognised in other | Other investments 0.4 – 227.9 | comprehensive income – – (42.8) | | | | --- | --- | --- | --- | | Derivative assets – 2.5 – | Exchange adjustments 1.0 1.3 – | | | | Derivative liabilities – (6.4) – | | 1 | | | | Additions (81.7) (247.7) | | 5.9 | | Payments due to vendors (earnout agreements) – – (196.7) | Disposals – – (32.0) | | | | Liabilities in respect of put options – – (391.5) | Cancellations – 0.8 – | | | | Held at fair value through other | Settlements 57.0 5.4 – | | | comprehensive income 31 December 2021 (196.7) (391.5) 290.0 Other investments 27.9 – 62.1 Note | | | | | | | 1 During the year, the Group merged Finsbury Glover Hering and Sard Verbinnen & Co to form a | | --- | --- | --- | --- | --- | --- | --- | | | Level 1 | Level 2 | | Level 3 | | leading global strategic communications firm. As a part of this transaction, certain management | | 2020 | £m | | £m | | £m | | acquired shares in the Company and a put option was granted which allows the equity partners Derivatives in designated hedge relationships to require the Group to purchase these shares. This resulted in additions to liabilities in respect Derivative assets – 9.6 – of put options in the year of £219.6 million. Derivative liabilities – (6.3) – The fair values of financial assets and liabilities are based on quoted market Held at fair value through profit or loss prices where available. Where the market value is not available, the Group Other investments 0.1 – 263.2 has estimated relevant fair values on the basis of available information from Derivative assets – 0.2 – outside sources. There have been no movements between level 3 and Derivative liabilities – (6.7) – other levels. Payments due to vendors (earnout agreements) – – (114.3) Liabilities in respect of put options – – (110.7) PAYMENTS DUE TO VENDORS AND LIABILITIES IN RESPECT Held at fair value through other OF PUT OPTIONS comprehensive income Future anticipated payments due to vendors in respect of contingent Other investments 20.6 – 103.4 consideration (earnout agreements) are recorded at fair value, which is the present value of the expected cash outflows of the obligations. Liabilities in There have been no transfers between these levels in the years presented. respect of put option agreements are initially recorded at the present value of the redemption amount in accordance with IAS 32 and subsequently measured at fair value in accordance with IFRS 9. Both types of obligations are dependent on the future financial performance of the entity and it is assumed that future profits are in line with Directors’ estimates. The Directors derive their estimates from internal business plans together with financial due diligence performed in connection with the acquisition. As of 31 December 2021, the potential undiscounted amount of future payments that could be required under the earnout agreements for acquisitions completed in the current year and for all earnout agreements ranges from £nil to £124 million (2020: £nil to £41 million) and £nil to £595 million (2020: £nil to £808 million), respectively. The decrease in the maximum potential undiscounted amount of future payments for all earnout agreements is due to earnout arrangements that have completed and payments made on active arrangements during the year, and exchange adjustments, partially offset by earnout arrangements related to new acquisitions. WPP ANNUAL REPORT 2021192 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At 31 December 2021, the weighted average growth rate in estimating future SHARE OPTIONS financial performance was 16.7% (2020: 14.8%), which reflects the prevalence WPP EXECUTIVE SHARE OPTION SCHEME (WPP) of recent acquisitions in the faster growing markets and new media sectors. As at 31 December 2021, unexercised options over ordinary shares of 6,741 have The weighted average of the risk-adjusted discount rate applied to these been granted under the WPP Executive Share Option Scheme as follows: obligations at 31 December 2021 was 6.5% (2020: 4.0%). Number of ordinary Exercise price Exercise shares under option per share (£) dates A one percentage point increase or decrease in the growth rate in estimated 3,696 8.333 2015-2022 future financial performance would increase or decrease the combined liabilities due to earnout agreements and put options by approximately £6.0 million 3,045 10.595 2016-2023 (2020: £1.5 million) and £6.6 million (2020: £1.4 million), respectively. WPP WORLDWIDE SHARE OWNERSHIP PROGRAMME (WWOP) As at 31 December 2021, unexercised options over ordinary shares of 1,090,954 A 0.5 percentage point increase or decrease in the risk adjusted discount and unexercised options over ADRs of 191,669 have been granted under the rate would decrease or increase the combined liabilities by approximately WPP Worldwide Share Ownership Programme as follows: £8.6 million (2020: £2.0 million) and £8.9 million (2020: £2.0 million), respectively. An increase in the liability would result in a loss in the revaluation of financial Number of ordinary Exercise price Exercise instruments, while a decrease would result in a gain. shares under option per share (£) dates 69,004 8.458 2015-2022 OTHER INVESTMENTS 792,200 13.145 2017-2024 The fair value of other investments included in level 1 is based on quoted 3,625 13.145 2018-2024 market prices. Other investments included in level 3 are unlisted securities, 225,500 13.505 2016-2023 where market value is not readily available. The Group has estimated relevant fair values on the basis of information from outside sources using the most 625 13.505 2017-2023 appropriate valuation technique, including all external funding rounds, revenue and EBITDA multiples, the share of fund net asset value and discounted cash Number of ADRs Exercise price Exercise under option per ADR ($) dates flows. Certain investments are valued using revenue multiples. An increase or decrease in this multiple of 0.5 times revenue would result in an increase or 23,024 67.490 2015-2022 decrease in the value of investments and a corresponding credit or charge 91,660 102.670 2017-2024 to equity of £3.8 million. The sensitivity to changes in unobservable inputs is 76,985 110.760 2016-2023 specific to each individual investment. WPP SHARE OPTION PLAN 2015 (WSOP) There are no individually material investments designated as fair value through As at 31 December 2021, unexercised options over ordinary shares of other comprehensive income. 12,396,275 and unexercised options over ADRs of 1,442,375 have been granted under the WPP Share Option Plan as follows: 27. AUTHORISED AND ISSUED SHARE CAPITAL | | | | | Number of ordinary | | | Exercise price | Exercise | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Equity | Nominal | | shares under option | | | per share (£) | dates | | | ordinary | | value | | | | | | | | shares | | £m | | | 11,250 7.34 4 2023-2027 | | | | Authorised | | | | | 2,525,625 7.3 44 2023-2030 | | | | | 1 January 2020 1,750,000,000 175.0 | | | | | | 8,750 8.372 2021-2025 | | | | 31 December 2020 1,750,000,000 175.0 | | | | | 1,256,150 8.372 2021-2028 | | | | | 31 December 2021 1,750,000,000 175.0 | | | | | | 10,375 9.600 2022-2026 | | | 1,947,050 9.600 2022-2029 | Issued and fully paid | | 3,258,125 11.065 2023-2030 | | | | | --- | --- | --- | --- | --- | --- | | 1 January 2020 1,328,167,813 132.8 | | | 9,250 13.085 2020-2024 | | | | Exercise of share options 1,000 – | | 1,329,975 13.085 2020-2027 | | | | | Share cancellations (32,088,571) (3.2) | | | 34,250 15.150 2018-2022 | | | | At 31 December 2020 1,296,080,242 129.6 | | | 917,975 15.150 2018-2025 | | | | Exercise of share options 534,800 − | | | 4,500 15.150 2019-2025 | | | | Share cancellations (72,155,492) (7. 2) | | | 7,500 17.055 2019-2023 | | | | At 31 December 2021 1,224,459,550 122.4 | | 1,075,500 17.055 2019-2026 | | | | | | Number of ADRs | | | Exercise price | Exercise | COMPANY’S OWN SHARES under option per ADR ($) dates The Company’s holdings of own shares are stated at cost and represent shares 279,970 48.950 2023-2030 held in treasury and purchases by the Employee Share Ownership Plan (ESOP) 167,410 53.140 2021-2028 trusts of shares in the Company for the purpose of funding certain of the 228,630 62.590 2022-2029 Group’s share-based incentive plans, details of which are disclosed in the 378,030 73.780 2023-2030 Compensation Committee report on pages 133-154. 154,820 88.260 2020-2027 The trustees of the ESOP purchase the Company’s ordinary shares in the 130,170 105.490 2020-2026 open market using funds provided by the Company. The Company also has 103,345 115.940 2018-2025 an obligation to make regular contributions to the ESOP to enable it to meet its administrative costs. The number and market value of the ordinary shares of the Company held by the ESOP at 31 December 2021 was 5,803,641 (2020: 4,863,244) and £65.0 million (2020: £38.9 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2021 was 70,489,953 (2020: 70,748,100) and £789.1 million (2020: £566.0 million) respectively. 193WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. AUTHORISED AND ISSUED SHARE CAPITAL CONTINUED The aggregate status of the WPP Share Option Plans during 2021 was as follows: | | | Outstanding | | Exercisable | | | --- | --- | --- | --- | --- | --- | | 1 January | | 31 December | | 31 December | | | | 2021 Granted Exercised Forfeited | | 2021 | | 2021 | Movements on options granted (represented in ordinary shares) WPP 6,741 – – – 6,741 6,741 WWOP 2,499,674 – (54,050) (396,325) 2,049,299 184,124 WSOP 17,940,725 5,155,800 (480,750) (3,007,625) 19,608,150 14,287,525 20,4 47,140 5,155,800 (534,800) (3,403,950) 21,664,190 14,478,390 | | | Outstanding | | Exercisable | | | --- | --- | --- | --- | --- | --- | | 1 January | | 31 December | | 31 December | | | | 2021 Granted Exercised Forfeited | | 2021 | | 2021 | Weighted average exercise price for options over Ordinary shares (£) WPP 9.355 – – – 9.355 9.355 WWOP 12.631 – 7. 304 11.803 12.923 8.458 WSOP 10.596 11.065 8.372 10.116 10.854 9.322 ADRs ($) WWOP 98.509 – 49.313 89.225 101.693 67.490 WSOP 70.363 73.780 53.248 66.257 72.228 61.479 OPTIONS OVER ORDINARY SHARES TERMS OF SHARE OPTION PLANS In 2015, the Group introduced the Share Option Plan 2015 to replace both Weighted Weighted the "all-employee" Worldwide Share Ownership Plan and the discretionary Range of average average Executive Stock Option Plan. Two kinds of options over ordinary shares can | | exercise prices | | exercise price | | contractual life | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Outstanding | | £ | | £ | | Months | be granted, both with a market value exercise price. Firstly, options can be | | | 7.3 44-17.055 11.021 86 | | | | | | granted to employees who have worked at a company owned by WPP plc for | at least two years which are not subject to performance conditions. Secondly, OPTIONS OVER ADRs options may be granted on a discretionary basis subject to the satisfaction of performance conditions. Weighted Weighted Range of average average The Worldwide Share Ownership Programme was open for participation exercise prices exercise price contractual life Outstanding $ $ Months to employees with at least two years’ employment in the Group. It was not available to those participating in other share-based incentive programmes 48.950-115.940 75.684 83 or to Executive Directors. The vesting period for each grant is three years As at 31 December 2021 there was £10.2 million (2020: £7.2 million) of total and there are no performance conditions other than continued employment unrecognised compensation costs related to share options. The cost is with the Group. expected to be recognised over a weighted average period of 21 months (2020: 20 months). The Executive Stock Option Plan has historically been open for participation to WPP Group Leaders, Partners and High Potential Group. It is not currently Share options are satisfied out of newly issued shares. offered to Parent Company Executive Directors. The vesting period is three years and performance conditions include achievement of various TSR The weighted average fair value of options granted in the year calculated (Total Shareholder Return) and EPS (Earnings Per Share) objectives, as well using the Black-Scholes model was as follows: as continued employment. The terms of these stock options are such that if, after nine years and eight months, the performance conditions have not 2021 2020 2019 been met, the stock option will vest automatically. Fair value of UK options (shares) 220.0p 128.0p 117.0p The Group grants stock options with a life of ten years, including the Fair value of US options (ADRs) $14.89 $8.95 $8.49 vesting period. Weighted average assumptions UK risk-free interest rate 0.63% -0.02% 0.57% US risk-free interest rate 1.16% 0.31% 1.61% Expected life (months) 48 48 48 Expected volatility 34% 34% 24% Dividend yield 3.4% 4.2% 3.8% Options are issued at an exercise price equal to market value on the date of grant. The average share price of the Group for the year ended 31 December 2021 was £9.64 (2020: £6.96, 2019: £9.39) and the average ADR price for the same period was $66.44 (2020: $44.56, 2019: $59.93). Expected volatility is sourced from external market data and represents the historical volatility in the Company’s share price over a period equivalent to the expected option life. Expected life is based on a review of historical exercise behaviour in the context of the contractual terms of the options, as described in more detail below. WPP ANNUAL REPORT 2021194 FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 28. OTHER RESERVES Other reserves comprise the following: | | Capital | | | | | | | | | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | redemption | | | Equity | | Hedging | | Translation | | | | other | | | reserve | | reserve | | reserve | 1 | | reserve | 1 | reserves | | | | | £m | | £m | | £m | | | £m | | £m | Balance at 1 January 2020 3.2 (478.1) – 305.0 (169.9) 2 Restatement – – – (4.8) (4.8) Restated balance at 1 January 2020 3.2 (478.1) – 300.2 (174.7) Exchange adjustments on foreign currency net investments – – – 85.2 85.2 Gain on net investment hedges – – – 9.7 9.7 Loss on cash flow hedges – – (5.9) – (5.9) Share of other comprehensive loss of associate undertakings – – – (61.5) (61.5) Exchange adjustments recycled to the income statement on disposal of discontinued operations – – – (20.6) (20.6) Share cancellations 3.2 – – – 3.2 Recognition/derecognition of liabilities in respect of put options – 103.5 – – 103.5 Share purchases – close period commitments – 252.3 – – 252.3 Balance at 31 December 2020 6.4 (122.3) (5.9) 313.0 191.2 Exchange adjustments on foreign currency net investments – – – (94.7) (94.7) Gain on net investment hedges – – – 45.5 45.5 Loss on cash flow hedges – – (38.0) – (38.0) Share of other comprehensive income of associate undertakings – – – 7.3 7.3 Share cancellations 7.2 – – – 7.2 Recognition/derecognition of liabilities in respect of put options – (242.7) – – (242.7) Share purchases – close period commitments – (211.7) – – (211.7) Balance at 31 December 2021 13.6 (576.7) (43.9) 271.1 (335.9) Notes 1 Prior year figures have been re-presented to separately disclose the hedging reserve included previously within the translation reserve. 2 Other reserves and retained earnings have been restated for the impact of a tax restatement, as described in the accounting policies. The equity reserve primarily relates to the recognition of liabilities in respect of put options agreements entered into by the Group as part of a business combination that allows non-controlling shareholders to sell their shares to the Group in the future. During 2021, the Company entered into an agreement with a third party to conduct share buybacks on its behalf in the close period commencing on 16 December 2021 and ending on 18 February 2022, in accordance with UK listing rules. The commitment resulting from this agreement constituted a liability at 31 December 2021 and was also recognised as a movement in the equity reserve in the year ended 31 December 2021. The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedges. The translation reserve contains the accumulated gains/(losses) on currency translation of foreign operations arising on consolidation and fair value gains/ (losses) on net investment hedges. The translation reserve comprises: 2021 2020 £m £m Balance relating to continuing net investment hedges (2.3) 9.7 Balance relating to discontinued net investment hedges (85.0) (142.5) Balance related to retranslation of foreign currency net investments 358.4 445.8 271.1 313.0 195WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29. ACQUISITIONS Goodwill arising from acquisitions represents the value of synergies with The Group accounts for acquisitions in accordance with IFRS 3 Business our existing portfolio of businesses and skilled staff to deliver services to Combinations. IFRS 3 requires the acquiree’s identifiable assets, liabilities and our clients. Goodwill that is expected to be deductible for tax purposes is contingent liabilities (other than non-current assets or disposal groups held for £83.9 million. sale) to be recognised at fair value at acquisition date. In assessing fair value at acquisition date, management make their best estimate of the likely outcome Non-controlling interests in acquired companies are measured at the where the fair value of an asset or liability may be contingent on a future event. non-controlling interests’ proportionate share of the acquiree’s identifiable In certain instances, the underlying transaction giving rise to an estimate may net assets. There continues to be no subsidiaries with non-controlling interests not be resolved until some years after the acquisition date. IFRS 3 requires the that are individually material to the Group. release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition The contribution to revenue and operating profit of acquisitions completed date are charged to profit. At each period end management assess provisions in the year was not material. There were no material acquisitions completed and other balances established in respect of acquisitions for their continued between 31 December 2021 and the date the financial statements have been probability of occurrence and amend the relevant value accordingly through authorised for issue. the consolidated income statement or as an adjustment to goodwill as appropriate under IFRS 3. 30. RELATED PARTY TRANSACTIONS The Group enters into transactions with its associate undertakings. The Group The Group acquired a number of subsidiaries in the year. The following table has continuing transactions with Kantar, including sales, purchases, the sets out the book values of the identifiable assets and liabilities acquired and provision of IT services, subleases and property related items. their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date. In the year ended 31December 2021, revenue of £117.2 million (2020: £90.6 million) was reported in relation to Compas, an associate in | | | Book | | Fair | | Fair | the USA. All other transactions in the years presented were immaterial. | | --- | --- | --- | --- | --- | --- | --- | --- | | | | value at | | value | value to | | | | | acquisition | | adjustments | | Group | | | | | | £m | | £m | | £m | The Group invested a further £92.9 million in Kantar in 2021 to fund its 40% | | Intangible assets – 97.7 97. 7 | | | | | | | share of the Numerator acquisition. | Right-of-use assets 36.6 (3.4) 33.2 The following amounts were outstanding at 31 December: Property, plant and equipment 4.0 – 4.0 Cash and cash equivalents (2.3) – (2.3) | | | 2021 | 2020 | | --- | --- | --- | --- | | Trade receivables due within one year 40.0 – 40.0 | | £m | £m | | Other current assets 5.9 0.9 6.8 | Amounts owed by related parties | | | | Total assets 84.2 95.2 179.4 | Kantar 30.3 39.0 | | | | Current liabilities (28.5) (0.3) (28.8) | Other 45.7 27.9 | | | | Trade and other payables due after one year (2.3) (5.8) (8.1) | | 76.0 66.9 | | Deferred tax liabilities – (22.5) (22.5) | Long-term lease liabilities (34.2) – (34.2) | Amounts owed to related parties | | | --- | --- | --- | | Total liabilities (65.0) (28.6) (93.6) | Kantar (6.2) (5.6) | | | Net assets 19.2 66.6 85.8 | Other (51.4) (36.0) | | | Non-controlling interests (3.0) | | (57.6) (41.6) | Goodwill 331.9 Consideration 414.7 31. EVENTS AFTER THE REPORTING PERIOD Consideration satisfied by: On 4 March 2022, due to the Russian invasion of Ukraine, the Board of WPP Cash 225.9 announced its intention to discontinue operations in Russia. In 2021, Russia Equity instruments of subsidiary company 110.8 represented 0.8% of the Group's revenue. Payments due to vendors 78.0 Equity instruments of the subsidiary company relate to shares issued by FGH SVC Holdco Inc. and represent 16.5% ownership of this subsidiary company. WPP retains a 57.9% stake in FGH SVC Holdco Inc. following this transaction. Increases in non-controlling interests in the period arising from the acquisition of subsidiaries are due to changes in ownership of existing subsidiaries and both increases in the non-controlling interests that arise on acquisition of a new subsidiary, as noted in the table above, along with the impact of share issuances in subsidiaries that contain non-controlling interests as a part of the overall acquisition arrangement, but occurring immediately prior to the acquisition of a new subsidiary. WPP ANNUAL REPORT 2021196 FINANCIAL STATEMENTS # COMPANY PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2021 | | Notes | 1999 £m | 2020 £m | | --- | --- | --- | --- | | Turnover | | - | - | | Operating income | | 1.8 | 0.8 | | Operating profit | | 1.8 | 0.8 | | Interest receivable and similar income | | 8.1 | 0.3 | | Interest payable and similar charges | 33 | (91.8) | (128.1) | | Loss on ordinary activities before taxation | | (82.0) | (127.0) | | Taxation on loss on ordinary activities | 34 | - | - | | Loss for the year | | (82.0) | (127.0) | Note The accompanying notes form an integral part of this profit and loss account. All results are derived from continuing activities. There are no recognised gains or losses in either year, other than those shown above, and accordingly no statement of comprehensive income has been prepared. WPP ANNUAL REPORT 2021 107 FINANCIAL STATEMENTS # COMPANY BALANCE SHEET AS AT 31 DECEMBER 2021 | | Notes | 2021 £m | 2020 £m | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investments | 35 | 15,603.1 | 15,303.6 | | | | **15,603.1** | **15,303.6** | | **Current assets** | | | | | Debtors due within one year | 36 | 1,992.5 | 1,997.6 | | Cash at bank and in hand | | - | 0.5 | | | | **1,992.5** | **1,997.9** | | **Current liabilities** | | | | | Creditors' amounts falling due within one year | 37 | (10,045.8) | (9,043.7) | | **Net current liabilities** | | **(8,853.3)** | **(7,065.8)** | | **Total assets less current liabilities** | | **6,549.8** | **6,237.8** | | Creditors' amounts falling due after more than one year | 38 | (29.4) | (479.7) | | **Net assets** | | **6,924.4** | **5,758.1** | | **Capital and reserves** | | | | | Called-up share capital | | 102.6 | 139.6 | | Share premium account | | 576.7 | 570.3 | | Other reserves | 39 | (231.7) | (10.0) | | Capital redemption reserve | | 15.6 | 6.4 | | Own shares | | (1,041.6) | (1,045.3) | | Profit and loss account | | 5,077.0 | 6,107.1 | | **Equity shareholders' funds** | | **6,924.4** | **5,758.1** | Note The accompanying notes form an integral part of the balance sheet. The financial statements were approved by the Board of Directors and authorised for issue on 31 March 2022. Mark Read Chief Executive Officer John Rogers Chief Financial Officer Registered Company Number: 11074 WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS ## COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Total | | | | | | | | Capital | | | | | | equity | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Ordinary share | | | | Share | Other | redemption | | | Own | Profit and | | shareholders’ | | | | capital | | premium | | reserves | 1 | reserve | | shares | loss account | | | funds | | | | £m | | £m | £m | | | £m | £m | | £m | | £m | Balance at 1 January 2020 132.8 570.3 (262.3) 3.2 (1,045.9) 6,563.5 5,961.6 Share cancellations (3.2) – – 3.2 – (281.2) (281.2) Treasury share allocations – – – – 0.6 (0.6) – Loss for the year – – – – – (127.0) (127.0) Dividends paid – – – – – (122.0) (122.0) Non-cash share-based incentive plans (including share options) – – – – – 74.4 74.4 Share purchases – close period commitments – – 252.3 – – – 252.3 Balance at 31 December 2020 129.6 570.3 (10.0) 6.4 (1,045.3) 6,107.1 5,758.1 Ordinary shares issued − 4.4 − − − − 4.4 Share cancellations (7.2) − − 7.2 − (729.3) (729.3) Treasury share allocations − − − − 3.7 (3.7) − Loss for the year − − − − − (82.0) (82.0) Dividends paid − − − − − (314.7) (314.7) Non-cash share-based incentive plans (including share options) − − − − − 99.6 99.6 Share purchases – close period commitments − − (211.7) − − − (211.7) Balance at 31 December 2021 122.4 574.7 (221.7) 13.6 (1,041.6) 5,077.0 4,524.4 Notes The accompanying notes form an integral part of this statement of changes in equity. 1 Other reserves are analysed in note 39. 199WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS # NOTES TO THE COMPANY FINANCIAL STATEMENTS ### 33. ACCOUNTING POLICIES The principal accounting policies of WRF plc (the Company) are summarised below. These accounting policies have all been applied consistently throughout the year and preceding year. ### (A) BASIS OF ACCOUNTING The separate financial statements of the Company are prepared under the historical cost convention in accordance with the Companies (Jersey) Law 1991. The Company meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting Council. These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101), as permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payment, financial instruments, capital management, presentation of a cash flow statement and certain related-party transactions. Where required, equivalent disclosures are given in the consolidated financial statements. The financial statements are prepared on a going concern basis, further details of which are in the Strategic Report on page 92. ### (B) TRANSLATION OF FOREIGN CURRENCY Foreign currency transactions arising from operating activities are translated from local currency into pounds sterling at the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are translated at the period end exchange rate. Foreign currency gains or losses are credited or charged to the profit and loss account as they arise. ### (C) INVESTMENTS Fixed asset investments are stated at cost less provision for impairment. Investments are tested for impairment annually. At 31 December 2021, the recoverable amount was assessed based on the Group's market value and exceeded the carrying value at that date. ### (D) TAXATION Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences unless specifically excepted by IAS 12 Income Taxes. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the deferred tax is also dealt with in other comprehensive income or equity. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or other assets and liabilities (other than in a business combination) in a transaction that affects neither the tax profit nor the accounting profit. ### (E) GROUP AND TREASURY SHARE TRANSACTIONS Where a parent entity grants rights to its equity instruments to employees of a subsidiary, and such share-based compensation is accounted for as equity settled in the consolidated financial statements of the parent, IFRS 2 Share-based Payments requires the subsidiary to record an expense for such compensation with a corresponding increase recognised in equity as a contribution from the parent. Consequently, in the financial statements of WRF plc, the Company has recognised an addition to fixed asset investments of the aggregate amount of these contributions of £99.6 million in 2021 (2020: £74.4 million), with a credit to equity for the same amount. ### (F) EXPECTED CREDIT LOSSES Amounts owed by subsidiaries are recorded at amortised cost and are reduced by expected credit losses. The general approach has been applied and a loss allowance for 12-month expected credit losses is recognised. Under IFRS 9 Financial instruments, the expected credit losses are measured as the difference between the asset's gross carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. 200 WRF ANNUAL REPORT 2021 NOTES TO THE COMPANY FINANCIAL STATEMENTS FINANCIAL STATEMENTS 33. INTEREST PAYABLE AND SIMILAR CHARGES 37. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in creditors falling due within one year: | | 2021 | 2020 | | | | | --- | --- | --- | --- | --- | --- | | | £m | £m | | 2021 | 2020 | | Bank and other interest payable 1.4 12.0 | | | | £m | £m | | Interest payable to subsidiary undertakings 90.5 116.1 | | | Bank overdrafts − 716.4 | | | | | 91.9 128.1 | | Amounts due to subsidiary undertakings 10,633.0 8,344.9 | | | Share purchases – close period commitments 211.7 – Other creditors and accruals 1.1 2.4 34. TAXATION ON LOSS ON ORDINARY ACTIVITIES The tax assessed for the year differs from that resulting from applying the 10,845.8 9,063.7 rate of corporation tax in the UK of 19% (2020: 19%). The differences are explained below: During the year, the Group converted the majority of its cash pool arrangements to zero-balancing cash pools, whereby the cash and overdrafts 2021 2020 within these cash pools are physically swept to the header accounts on a daily £m £m basis. At 31 December 2021, there are no gross cash or overdraft balances Loss on ordinary activities before tax (82.0) (127.0) reported by the Company as these now form amounts owed by/to subsidiary Tax at the rate of 19% (2020: 19%) thereon 15.6 24.1 undertakings. Factors affecting tax charge for the year | Group relief not paid for (15.6) (23.0) | 38. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN | | | | --- | --- | --- | --- | | Items that are not deductible – (1.1) | ONE YEAR | | | | Tax charge for the year − – | The following are included in creditors falling due after more than one year: | | | | | | 2021 | 2020 | | 35. FIXED ASSET INVESTMENTS | | £m | £m | | The following are included in the net book value of fixed asset investments: | Amounts due to subsidiary undertakings 25.4 479.7 | | | Subsidiary Total borrowings are repayable as follows: undertakings £m | | | | 2021 | 2020 | | --- | --- | --- | --- | --- | | Cost | | | £m | £m | | 1 January 2020 13,231.5 | Within one year 10,845.8 9,063.7 | | | | | Additions 74.4 | Between one and five years 25.4 331.4 | | | | | 31 December 2020 13,305.9 | Over five years − 148.3 | | | | | Additions 99.6 | | 10,871.2 9,543.4 | | | 31 December 2021 13,405.5 39. EQUITY SHAREHOLDERS’ FUNDS Accumulated impairment losses and write-downs Other reserves at 31 December 2021 comprise a translation reserve of 1 January 2020 – £10.0 million (2020: £10.0 million) and an equity reserve of £211.7 million Impairment losses for the year (2.3) (2020: £nil). 31 December 2020 (2.3) Impairment losses for the year (0.1) At 31 December 2021 the Company's distributable reserves amounted to 31 December 2021 (2.4) £4,388.4 million (2020: £5,622.1 million) which, under the Companies (Jersey) Law 1991, is total reserves including share capital and capital redemption reserve. Further details of the Company’s share capital are shown in note 27. Net book value 31 December 2021 13,403.1 31 December 2020 13,303.6 1 January 2020 13,231.5 Fixed asset investments primarily represent 100% of the issued share capital of WPP Emerald Limited, a company incorporated in Ireland. Fixed asset investments were purchased in a share-for-share exchange. 36. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in debtors falling due within one year: 2021 2020 £m £m Amounts owed by subsidiary undertakings 1,992.3 1,997.3 Other debtors 0.2 0.3 1,992.5 1,997.6 The amounts owed by subsidiary undertakings are repayable on demand. There was no loss allowance on debtors in the year ended 31 December 2021 (2020: £nil). 201WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC ## REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS ### 1. OPINION In our opinion: - the financial statements of WPP plc (the 'parent company') and its subsidiaries (the 'group') give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2021 and of the group's profit and of the parent company's loss for the year then ended; - the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB); - the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 "Reduced Disclosure Framework"; and - the financial statements have been properly prepared in accordance with Companies General Law, 1991. We have audited the financial statements which comprise: - the accounting policies; - the consolidated income statement; - the consolidated statement of comprehensive income; - the consolidated cash flow statement; - the consolidated balance sheet; - the consolidated statement of changes in equity; - the related notes 1 to 31 of the consolidated financial statements; - the parent company profit and loss account, balance sheet and statement of changes in equity; and - the related notes 33 to 39 of the parent company financial statements. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law, and IFRSs as issued by the IASB. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 "Reduced Disclosure Framework" (United Kingdom Generally Accepted Accounting Practice). ### 2. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (ISAS 5.0A) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the group and parent company for the year are disclosed in note 3 to the financial statements. We confirm that we have not provided any non-audit services prohibited by the FRC's Ethical Standard to the group or the parent company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ### 3. SUMMARY OF OUR AUDIT APPROACH | Key audit matter | The key audit matter we identified in the current year was valuation of goodwill. Within this report, the key audit matter is identified as follows: ☑ Decreased level of risk | | --- | --- | | Materiality | We considered a number of metrics when determining group materiality, including: pre-tax profit; revenue; and headline EBITDA. Our selected materiality represents 5.8% of pre-tax profit from continuing operations (2020: 9.5% of pre-tax profit adjusted to exclude impairment of goodwill and investments in associates, and retentulation of financial instruments), 0.6% of revenue (2020: 0.6%) and 2.7% of headline EBITDA (2020: 2.8%). | | Scoping | Those entities subject to audit represented 70% of the group's consolidated revenue (2020: 75% of revenue from continuing operations) achieved through a combination of direct testing and specified audit procedures, including substantive analytical review procedures, performed by the group auditor and/or component auditors across the world. | | Significant changes in our approach | We have revised our assessment of key audit matters as compared to the prior year as discussed in section 5 below. | 202 WPP ANNUAL REPORT 2021 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS 4. CONCLUSIONS RELATING TO GOING CONCERN 5. KEY AUDIT MATTERS In auditing the financial statements, we have concluded that the directors’ use Key audit matters are those matters that, in our professional judgement, were of the going concern basis of accounting in the preparation of the financial of most significance in our audit of the financial statements of the current statements is appropriate. period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those Our evaluation of the directors’ assessment of the group’s and parent which had the greatest effect on: the overall audit strategy, the allocation of company’s ability to continue to adopt the going concern basis of accounting resources in the audit; and directing the efforts of the engagement team. included: These matters were addressed in the context of our audit of the financial – testing controls over management’s going concern model, including the statements as a whole, and in forming our opinion thereon, and we do not review of the inputs and assumptions used in the model; provide a separate opinion on these matters. – identifying the key assumptions and evaluating the appropriateness of these assumptions and their consistency with management’s presentations to the During the year we reassessed the risks of material misstatement in respect Board and Audit Committee; of revenue recognition. In 2020, revenue recognition for open contracts at – comparing the forecasts within the going concern model to recent 31 December 2020 in certain of the group’s operating companies accounted historical financial information; for on a percentage of completion basis (“POC”) had been identified as a – testing the mechanical accuracy of the going concern model; key audit matter. In the current period, we have concluded that revenue – testing the covenant compliance calculations and headroom thereof; recognition does not represent a key audit matter, as a result of the – confirming the existence and availability of financing facilities; decentralisation of POC revenue across the group, the change in the business – evaluating the appropriateness of management’s sensitivity analysis environment, and a resulting decrease in the significance of estimates around modelled under their most severe scenario; and the cut-off assertion. – evaluating the disclosures on going concern. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 203WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC 5.1. VALUATION OF GOODWILL Key audit matter description How the scope of our audit responded to the key audit matter Key observations VALUATION OF GOODWILL (Refer to the Accounting Policies and Note 14 (Intangible assets) to the financial statements, and the Audit Committee Report) The group’s assessment of goodwill for impairment involves Our audit procedures focused on challenging and evaluating the Based on our the comparison of the recoverable amount of goodwill to its discount rates, short-term forecasts and long-term growth rates procedures, we carrying value at each measurement date, calculated as the used in the respective discounted cash flow models to determine determined higher of fair value less costs to sell and value in use. The group the recoverable amount of each group of cash generating units management’s used the value in use approach, which uses a discounted cash and included the following audit procedures, among others: assumptions used flow model to estimate the recoverable amount of each cash in the valuation of generating unit or group of cash generating units and requires – We tested the effectiveness of controls over management’s goodwill to be management to make significant estimates and assumptions selection of short-term cash flow forecasts, discount rates and reasonable. related to discount rates, short-term forecasts and long-term long-term growth rates used to determine the recoverable growth rates. The net book value of goodwill was £7,612 million amount for each group of cash generating units. as at 31 December 2021 (31 December 2020: £7,389 million). – We assessed the appropriateness of forecasted revenue and operating margin growth rates by comparing to external We identified goodwill valuation as a key audit matter because economic data, including peers, market data and wider of the significant judgements made by management to estimate economic forecasts. the recoverable amount of goodwill and the increased auditor – We evaluated management’s ability to accurately forecast judgement and level of audit effort required to obtain evidence future revenues and growth rates by comparing actual results to test these significant judgements, including the use of to management’s historical forecasts. specialists. This included consideration of the short-term cash – With the assistance of our valuation specialists, we assessed flow forecasts of the group’s various businesses and the the mechanical accuracy of the impairment models and the sensitivity of certain other inputs to the value in use calculations methodology applied by management for consistency with for certain groups of cash generating units. Estimates of future the requirements of IAS 36. performance and market conditions used to arrive at the net – With the assistance of our valuation specialists, we evaluated present value of future cash flows at the relevant assessment the appropriateness of the discount rates and long-term date, which is used within the goodwill impairment analysis, are growth rates used for each group of cash generating units by: subjective in nature. Through our risk assessment procedures, – Testing the source information underlying the we identified those inputs that were the most sensitive to the determination of the discount rate and the mathematical recoverable values computed by the value in use calculations accuracy of the calculation; for certain groups of cash generating units, which enabled us – Assessing the methodology applied in the discount rate to design our audit procedures to focus on those estimates that calculation against market practice valuation techniques; are either complex, including the discount rate calculations, or and subjective in nature, including the short-term forecasts and – Assessing the long-term growth rates against independent long-term growth rates. market data and an independently derived weighted average rate for each country, based on their GDP forecasts. – We evaluated the group’s disclosures on goodwill against the requirements of IFRS. WPP ANNUAL REPORT 2021204 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS # 6. OUR APPLICATION OF MATERIALITY # 6.1. MATERIALITY We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: | | Group financial statements | Parent Company financial statements | | --- | --- | --- | | Materiality | £55 million (2020: £50 million) | £37.5 million (2020: £25 million) | | Basis for determining materiality | We have considered a number of metrics when determining group materiality, including: pre-tax profit; revenue; and headline EBITDA. Our selected materiality figure represents 5.8% of pre-tax profit, 0.4% of revenue and 2.7% of Headline EBITDA. In 2020, we determined materiality to be £50 million, as 9.5% of pre-tax profit excluding impairment of goodwill and investments in associates, and retranslation of financial instruments, 0.4% of revenue and 2.8% of Headline EBITDA. | The basis for materiality is shareholder's equity. The materiality used is less than 1% of shareholders' equity (2020: less than 1% of shareholders' equity). | | Rationale for the benchmark applied | We have determined that the critical benchmark for the Group was pre-tax profit because we consider this measure to be the primary focus of users of the financial statements. We also considered revenue and headline EBITDA as relevant metrics to the users of the financial statements. In 2020, pre-tax profit excluded impairment of goodwill and investments in associates, and retranslation of financial instruments as a result of the significant impairment charges recognised that were specific to 2020. | Due to the nature of the company as a parent entity holding company, we consider shareholders' equity to be the most appropriate basis for materiality. | ![img-21.jpeg](img-21.jpeg) Group materiality 100m Component materiality range £0.0m-£0.5m Audit Committee reporting threshold 10m ● PAT ● Group materiality WPP ANNUAL REPORT 2021 105 FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC 6.2. PERFORMANCE MATERIALITY We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. | | Group | Parent Company | | --- | --- | --- | | | financial statements | financial statements | | Performance | 60% (2020: 65%) of group materiality 60% (2020: 65%) of parent company materiality | | materiality Basis and rationale In determining performance materiality, we considered factors The parent company performance materiality has been set at 60% of for determining including: parent company materiality, to align with the group performance performance materiality threshold used. materiality – our risk assessment, including our assessment of the impact of previously identified material weaknesses, our assessment of the group’s overall control environment and that we consider it appropriate to rely on controls, financial processes and systems in the majority of areas of the audit; and – our past experience of the audit, including the restatements required during 2020 for the 2018 and 2019 financial statements. 6.3. ERROR REPORTING THRESHOLD Those entities subjected to audit represented 70% of the group’s consolidated We agreed with the Audit Committee that we would report to the Committee revenue (2020: 73% revenue from continuing operations) achieved through all audit differences in excess of £2.0 million (2020: £2.0 million), as well as a combination of direct testing and specified audit procedures, including differences below that threshold that, in our view, warranted reporting on substantive analytical review procedures, performed by the group auditor qualitative grounds. We also report to the Audit Committee on disclosure and component auditors across the world. Our audit work on components is matters that we identified when assessing the overall presentation of the executed at levels of materiality appropriate for such components, many of financial statements. which are local statutory materiality levels which in all instances are no higher than 50% of group performance materiality. 7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT 7.1. IDENTIFICATION AND SCOPING OF COMPONENTS In order to support our conclusion that there were no significant risks of In selecting the components that are in scope each year, we refresh and material misstatement of the aggregated financial information of the remaining update our understanding of the group and its environment, including components, we tested the consolidation process and performed analytical obtaining an understanding of the group’s system of internal controls, and procedures at both the group level and component level for components assessing the risks of material misstatement at the group level, in order to deemed to be out-of-scope. ensure that the components selected for audit provide an appropriate basis on which to undertake audit work to address the identified risks of material misstatement. Such audit work represents a combination of procedures, all of which are designed to target the group’s identified risks of material misstatement in the most effective manner possible. 30% Revenue 70% Full audit scope Analytical procedures at group level WPP ANNUAL REPORT 2021206 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS 7.2 . OUR CONSIDERATION OF THE CONTROL ENVIRONMENT As a result of the Covid-19 pandemic, our oversight of component auditors WPP plc is reliant on the effectiveness of a number of IT applications and including site visits was conducted largely remotely using video conferencing. controls to ensure that financial transactions are processed and recorded completely and accurately. As the group files its financial statements in the US, In years when we elect to not visit a component, either physically or virtually, the group is required to comply with the US Sarbanes Oxley Act. Accordingly, we: we perform testing of the operating effectiveness of internal controls, including the general IT controls, over financial reporting in all areas of the audit. – include the component audit partner in our team planning meeting; – discuss their risk assessment; and As set out in the Audit Committee’s report, in 2020 management identified – review the documentation of the findings from their work and discuss with material weaknesses in internal control over financial reporting with respect to them as needed. three areas of financial reporting and have concluded that these weaknesses were remediated during 2021. We did not rely on controls in our substantive These are designed so that the Senior Statutory Auditor or a senior member testing of the related areas. of the group audit team can have oversight of the work of our component auditors on a regular basis. In addition, we assess the competence of each of 7.3. OUR CONSIDERATION OF CLIMATE-RELATED RISKS our component auditors. The group identified climate-related risks such as the increased frequency of extreme weather and climate-related natural disasters, increased reputational We also hold quarterly meetings with management at a regional and global risk associated with working on environmentally detrimental client briefs, level in order to update our understanding of the Group and its environment and/or misrepresenting environmental claims and changes in regulation and on an ongoing basis. reporting standards which could result in climate-related litigation and claims. The risks are disclosed within the Task force on climate-related financial 8. OTHER INFORMATION disclosures (“TCFD”) statement on pages 214-216 of the Annual Report. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The We obtained an understanding of management’s process for considering the directors are responsible for the other information contained within the annual impact of climate-related risks at both a head-office and operating company report. level. We evaluated these risks to assess whether they were complete and consistent with our understanding of the entity and our wider risk assessment Our opinion on the financial statements does not cover the other information procedures. and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our procedures to address the identified risks included considering their impact on the financial statements overall, including the application of Our responsibility is to read the other information and, in doing so, consider individual accounting standards. We further reconciled the disclosures made whether the other information is materially inconsistent with the financial to underlying supporting evidence. We assessed the TCFD recommended statements or our knowledge obtained in the course of the audit, or otherwise disclosures within the Annual Report and considered whether they are appears to be materially misstated. materially consistent with the financial statements and our knowledge obtained in the audit. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement 7.4. WORKING WITH OTHER AUDITORS in the financial statements themselves. If, based on the work we have The group audit team exercises its oversight of component auditors using a performed, we conclude that there is a material misstatement of this other carefully designed programme, which considers a variety of factors including information, we are required to report that fact. the size of entity and number of significant risks. The group audit team directs, supervises and evaluates the audit work performed by component audit We have nothing to report in this regard. teams by: 9. RESPONSIBILITIES OF DIRECTORS – speaking regularly with teams about the status of their work; As explained more fully in the statement of directors’ responsibilities, the – reviewing reporting and underlying workpapers where determined to be directors are responsible for the preparation of the financial statements and necessary; and for being satisfied that they give a true and fair view, and for such internal – attending key meetings including close meetings. control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due In order to drive consistency and comparability over the audit work performed to fraud or error. by our component auditors, the group engagement team directly leads the risk assessment process in all areas of the audit. This process involves In preparing the financial statements, the directors are responsible for workshops with our local audit teams to enhance and confirm the group teams assessing the group’s and the parent company’s ability to continue as a going understanding of local processes and risks. After consideration of how the concern, disclosing as applicable, matters related to going concern and using nature and extent of those operating unit level risks contribute to risk of the going concern basis of accounting unless the directors either intend to material misstatement at a group level the group engagement team, in liquidate the group or the parent company or to cease operations, or have no consultation with the local team, confirms the specific audit procedures that realistic alternative but to do so. component auditors are instructed to perform. 207WPP ANNUAL REPORT 2021 FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC 10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT As a result of these procedures, we considered the opportunities and OF THE FINANCIAL STATEMENTS incentives that may exist within the organisation for fraud. In common with all Our objectives are to obtain reasonable assurance about whether the financial audits under ISAs (UK), we are also required to perform specific procedures to statements as a whole are free from material misstatement, whether due to respond to the risk of management override, including adjustments made in fraud or error, and to issue an auditor’s report that includes our opinion. the financial reporting process outside of local operational reporting. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material We also obtained an understanding of the legal and regulatory frameworks misstatement when it exists. Misstatements can arise from fraud or error and that the group operates in, focusing on provisions of those laws and are considered material if, individually or in the aggregate, they could regulations that had a direct effect on the determination of material amounts reasonably be expected to influence the economic decisions of users taken and disclosures in the financial statements. The key laws and regulations we on the basis of these financial statements. considered in this context included the Securities and Exchange Commission rules, Securities Law in the UK and US, the UK Listing Rules, Companies (Jersey) A further description of our responsibilities for the audit of the financial Law, 1991 and tax legislation in the group’s various jurisdictions. statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which 11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF may be fundamental to the group’s ability to operate or to avoid a material DETECTING IRREGULARITIES, INCLUDING FRAUD penalty. These included the US Foreign Corrupt Practices Act and the UK Irregularities, including fraud, are instances of non-compliance with laws and Bribery Act. regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including 11.2. AUDIT RESPONSE TO RISKS IDENTIFIED fraud. The extent to which our procedures are capable of detecting As a result of performing the above, we did not identify any key audit matters irregularities, including fraud is detailed below. related to the potential risk of fraud or non-compliance with laws and regulations. 11.1. IDENTIFYING AND ASSESSING POTENTIAL RISKS RELATED TO IRREGULARITIES Our procedures to respond to risks identified included the following: In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, – reviewing the financial statement disclosures and testing to supporting we considered the following: documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; – the nature of the industry and sector, control environment and business – enquiring of management, the audit committee and external legal counsel performance including the design of the group’s remuneration policies, key concerning actual and potential litigation and claims; drivers for directors’ remuneration, bonus levels and performance targets; – performing analytical procedures to identify any unusual or unexpected – the group’s own assessment of the risks that irregularities may occur either relationships that may indicate risks of material misstatement due to fraud; as a result of fraud or error that was approved by the board; – reading minutes of meetings of those charged with governance, reviewing – results of our enquiries of management, the group’s general counsel, internal audit reports and reviewing correspondence with relevant tax internal audit and the audit committee about their own identification and authorities; and assessment of the risks of irregularities; – in addressing the risk of fraud through management override of controls, – any matters we identified having obtained and reviewed the group’s testing the appropriateness of journal entries and other adjustments, documentation of their policies and procedures relating to: including those made outside of local operational reporting; assessing – identifying, evaluating and complying with laws and regulations and whether the judgements made in making accounting estimates are whether they were aware of any instances of non-compliance; indicative of a potential bias; and evaluating the business rationale of any – detecting and responding to the risks of fraud and whether they have significant transactions that are unusual or outside the normal course of knowledge of any actual, suspected or alleged fraud; business. – the internal controls established to mitigate risks of fraud or non- compliance with laws and regulations; and We also communicated relevant identified laws and regulations and potential – the matters discussed among the audit engagement team including fraud risks to all engagement team members including internal specialists and significant component audit teams and relevant internal specialists, significant component audit teams, and remained alert to any indications of including fraud, impairment, tax, valuations, pensions and IT specialists fraud or non-compliance with laws and regulations throughout the audit. regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. WPP ANNUAL REPORT 2021208 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS # REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS # 12. OPINIONS ON OTHER MATTERS PRESCRIBED BY OUR # ENGAGEMENT LETTER In our opinion the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006 as if that Act had applied to the group. In our opinion, based on the work undertaken in the course of the audit: - the information given in the strategic report and the corporate governance report for the financial year for which the financial statements are prepared is consistent with the financial statements; and - the strategic report and the corporate governance report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report. # 13. CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the group's compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit: - the directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 92; - the directors' explanation as to its assessment of the group's prospects, the period this assessment covers and why the period is appropriate set out on page 93; - the directors' statement on fair, balanced and understandable set out on page 100; - the board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 93-99; - the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 107; and - the section describing the work of the audit committee set out on pages 129-150. # 14. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION # 14.1. ADEQUACY OF EXPLANATIONS RECEIVED AND ACCOUNTING RECORDS Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion: - we have not received all the information and explanations we require for our audit; or - proper accounting records have not been kept by the parent company, or proper returns adequate for our audit have not been received from branches not visited by us; or - the parent company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. # 14.2 DIRECTORS' REMUNERATION Under our engagement letter we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the directors' remuneration report to be audited is not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. # 15. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS # 15.1. AUDITOR TENURE Following the recommendation of the audit committee, we were appointed by the company at the Annual General Meeting on 20 May 2002 to audit the financial statements for the year ending 31 December 2002 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 20 years, covering the years ending 31 December 2002 to 31 December 2021. # 15.2. CONSISTENCY OF THE AUDIT REPORT WITH THE ADDITIONAL REPORT # TO THE AUDIT COMMITTEE Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with (5A) (UK) # 16. USE OF OUR REPORT This report is made solely to the company's members, as a body, in accordance with Article 15A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and those matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (37R) s.1.1(d), these financial statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (ESEF RTS). This auditor's report provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS. James Bates, FCA For and on behalf of Deloitte LLP Recognized Auditor London, United Kingdom 31 March 2022 WPP ANNUAL REPORT 2021 209 FINANCIAL STATEMENTS ## RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE The Group presents alternative performance measures, including headline Headline operating profit margin before and after share of results of associates: operating profit, headline profit before interest and tax, headline EBITDA, headline profit before tax, headline earnings, headline EPS, revenue less Margin 2021 Margin 2020 Margin 2019 Continuing operations % £m % £m % £m pass-through costs and adjusted net debt. They are used by management for Revenue less pass- internal performance analyses; the presentation of these measures facilitates through costs 10, 397.2 9,762.0 10,846.5 comparability with other companies, although management’s measures may Headline operating profit 14.4 1,493.5 12.9 1,260.5 14.4 1,560.6 not be calculated in the same way as similarly titled measures reported by Share of results of other companies; and these measures are useful in connection with associates (excluding discussions with the investment community. exceptional gains/losses) 86.1 10.1 62.5 Headline PBIT 15.2 1,579.6 13.0 1,270.6 15.0 1,623.1 In the calculation of headline profit, judgement is required by management in determining which revenues and costs are considered to be significant, Calculation of headline EBITDA: non-recurring or volatile items that are to be excluded. 2021 2020 2019 The exclusion of certain adjusting items may result in headline earnings being Continuing operations £m £m £m materially higher or lower than reported earnings, for example when significant Headline PBIT (as above) 1,579.6 1,270.6 1,623.1 impairments or restructuring charges are excluded but the related benefits are Depreciation of property, plant and equipment 151.2 174.8 185.5 included headline earnings will be higher. Headline measures should not be Amortisation of other intangible assets 19.9 35.2 21.2 considered in isolation as they provide additional information to aid the Headline EBITDA (including depreciation understanding of the Group’s financial performance. of right-of-use assets) 1,750.7 1,480.6 1,829.8 Depreciation of right-of-use assets 272.9 331.9 301.6 | Reconciliation of revenue to revenue less pass-through costs: | | | | Headline EBITDA 2,023.6 1,812.5 2,131.4 | | --- | --- | --- | --- | --- | | | 2021 | 2020 | 2019 | Headline EBITDA is a key metric that private equity firms, for example, use for | | Continuing operations | £m | £m | £m | | valuing companies, and is one of the metrics that management uses to assess Revenue 12,801.1 12,002.8 13,234.1 the performance of the business. Headline EBITDA (including depreciation of Media pass-through costs (1,865.3) (1,555.2) (1,656.2) right-of-use assets) is used in the Group’s key leverage metric. Other pass-through costs (538.6) (685.6) (731.4) Revenue less pass-through costs 10, 397.2 9,762.0 10,846.5 Reconciliation of profit/(loss) before taxation to headline PBT and headline earnings: Pass-through costs comprise fees paid to external suppliers when they are 2021 2020 1 2019 1 engaged to perform part or all of a specific project and are charged directly Continuing operations £m £m £m to clients. This includes the cost of media where the Group is buying digital media for its own account on a transparent opt-in basis and, as a result, the Profit/(loss) before taxation 950.8 (2,790.6) 1,214.3 subsequent media pass-through costs have to be accounted for as revenue, Amortisation and impairment of acquired intangible assets 97. 8 89.1 121.5 as well as billings. Therefore, management considers that revenue less pass-through costs gives a helpful reflection of top-line growth. Goodwill impairment 1.8 2,822.9 47.7 Losses/(gains) on disposal of investments and subsidiaries 10.6 (7.8) (40.4) Reconciliation of operating profit/(loss) to headline operating profit: Gains on remeasurement of equity interests arising from a change in scope of ownership – (0.6) (0.4) 2021 2020 2019 Continuing operations £m £m £m Investment and other impairment (reversals)/ charges (42.4) 296.2 7.5 Operating profit/(loss) 1,229.0 (2,278.1) 1,295.9 Restructuring and transformation costs 145.5 80.7 153.5 Amortisation and impairment of acquired | intangible assets 97.8 89.1 121.5 | Restructuring costs in relation to Covid-19 29.9 232.5 – | | --- | --- | | Goodwill impairment 1.8 2,822.9 47.7 | Share of exceptional losses of associates 62.3 146.1 47.8 | | Losses/(gains) on disposal of investments | Litigation settlement 21.3 25.6 (16.8) | and subsidiaries 10.6 (7.8) (40.4) Gain on sale of freehold property in New York – – ( 7.9) Gains on remeasurement of equity interests Revaluation and retranslation of financial arising from a change in scope instruments 87.8 147.2 (163.8) of ownership – (0.6) (0.4) Headline PBT 1,365.4 1,041.3 1,363.0 Investment and other impairment (reversals)/ | charges (42.4) 296.2 7.5 | Headline tax charge (327.9) (239.9) (311.8) | | --- | --- | | Litigation settlement 21.3 25.6 (16.8) | Headline non-controlling interests (83.0) (58.9) (79.2) | | Gain on sale of freehold property in New York – – (7.9) | Headline earnings 954.5 742.5 972.0 | Restructuring and transformation costs 145.5 80.7 153.5 Note Restructuring costs in relation to Covid-19 29.9 232.5 – 1 Figures have been restated as described in the accounting policies. Headline operating profit 1,493.5 1,260.5 1,560.6 Finance and investment income 69.4 82.7 99.0 Headline PBT and headline earnings are metrics that management use to assess the performance of the business. Finance costs (excluding interest expense related to lease liabilities) (192.7) (211.0) (259.4) (123.3) (128.3) (160.4) 12.1 9.8 9.7 1 Interest cover on headline operating profit times times times Note 1 Interest expense related to lease liabilities is excluded from interest cover as lease liabilities are excluded from the Group’s key leverage metrics. Headline operating profit is one of the metrics that management uses to assess the performance of the business. WPP ANNUAL REPORT 2021210 RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE FINANCIAL STATEMENTS Calculation of headline taxation: The Group bases its internal cash flow objectives on free cash flow. Management believes free cash flow is meaningful to investors because it is 2021 2020 1 2019 1 the measure of the Group’s funds available for acquisition related payments, Continuing operations £m £m £m dividends to shareholders, share repurchases and debt repayment. The purpose Headline PBT 1,365.4 1,041.3 1,363.0 of presenting free cash flow is to indicate the ongoing cash generation within the Tax charge 230.1 127.1 287.2 control of the Group after taking account of the necessary cash expenditures Tax credit/(charge) relating to gains on of maintaining the capital and operating structure of the Group (in the form of disposal of investments and subsidiaries 31.5 (2.7) (6.9) payments of interest, corporate taxation and capital expenditure). Tax credit relating to gain on sale of freehold property in New York – – 0.5 ADJUSTED NET DEBT AND AVERAGE ADJUSTED NET DEBT Tax (charge)/credit relating to litigation settlement (5.4) 5.4 (4.2) Management believes that adjusted net debt and average adjusted net debt Deferred tax impact of the amortisation of acquired are appropriate and meaningful measures of the debt levels within the Group. intangible assets and other goodwill items 5.6 36.0 13.3 This is because of the seasonal swings in our working capital generally, and Tax credit relating to restructuring those resulting from our media buying activities on behalf of our clients in and transformation costs 38.4 14.3 29.2 particular. Tax credit relating to restructuring and transformation costs in relation to Covid-19 7.3 51.2 – Deferred tax relating to gains on Adjusted net debt at a period end consists of cash and short-term deposits, disposal of investments and subsidiaries 20.4 8.6 (7.3) bank overdraft, bonds and bank loans due within one year and bonds and bank Headline tax charge 327.9 239.9 311.8 loans due after one year. Headline tax rate 24.0% 23.0% 22.9% Reconciliation of adjusted net debt: Note 1 Figures have been restated as described in the accounting policies. 2021 2020 2019 £m £m £m The Group has reassessed the measure of headline tax rate, as some associate Cash and short-term deposits 3,882.9 12,899.1 11,305.7 businesses are classified as US tax partnerships with their related tax forming Bank overdraft, bonds and bank loans due part of the headline tax charge, and now considers the most appropriate within one year (567.2) (8,619.2) (8,798.0) metric is to use the headline tax charge as a percentage of headline PBT (that Bonds and bank loans due after one year (4,216.8) (4,975.5) (4,047.3) includes the share of headline results of associates). The headline tax rate on Adjusted net debt (901.1) (695.6) (1,539.6) headline PBT including the share of headline results of associates was 24.0% (2020: 23.0%, 2019: 22.9%). Average adjusted net debt is calculated as the average daily net borrowings of the Group. Adjusted net debt excludes lease liabilities. Given the Group’s geographic mix of profits and the changing international tax environment, the headline tax rate is expected to increase over the next FUTURE RESTRUCTURING AND TRANSFORMATION COSTS few years. Further restructuring and transformation costs are expected from 2022 to 2025, with approximately £350 million in relation to the continued rollout of Calculation of headline non-controlling interests: the Group’s new ERP system in order to drive efficiency and collaboration throughout the Group. Costs of between £200 million and £250 million are also 2021 2020 2019 expected in relation to other IT transformation projects, shared service centres Continuing operations £m £m £m and co-locations. Non-controlling interests 83.0 53.9 79.2 Non-controlling interests relating to restructuring CONSTANT CURRENCY AND PRO FORMA (‘LIKE-FOR-LIKE’) costs in relation to Covid-19 – 5.0 – These consolidated financial statements are presented in pounds sterling. Headline non-controlling interests 83.0 58.9 79.2 However, the Group’s significant international operations give rise to fluctuations in foreign exchange rates. To neutralise foreign exchange impact Reconciliation of free cash flow: and illustrate the underlying change in revenue and profit from one year to the next, the Group has adopted the practice of discussing results in both reportable 2021 2020 2019 £m £m £m currency (local currency results translated into pounds sterling at the prevailing foreign exchange rate) and constant currency. Cash generated by continuing and discontinued operations (note 11) 2,580.3 2,583.9 2,693.2 Plus Management also believes that discussing pro forma or like-for-like contributes to the understanding of the Group’s performance and trends because it allows Interest received 47.5 73.6 80.8 for meaningful comparisons of the current year to that of prior years. Investment income 17.8 8.7 18.3 Dividends from associates 53.4 32.5 33.3 Further details of the constant currency and pro forma methods are given in Share option proceeds 4.4 – 0.6 the Glossary on pages 222 and 223. Less Earnout payments (57.0) (115.2) (130.2) Reconciliation of reported revenue less pass-through costs to like-for-like Interest and similar charges paid (173.7) (173.9) (270.6) revenue less pass-through costs: Purchases of property, plant and equipment (263.2) (218.3) (339.3) Revenue less Purchase of other intangible assets (including pass-through capitalised computer software) (29.9) (54.4) (54.8) costs | Repayment of lease liabilities (320.7) (300.1) (249.8) | Continuing operations | £m | | --- | --- | --- | | Interest paid on lease liabilities (88.4) (98.5) (105.1) | 2019 10,846.5 | | | Corporation and overseas tax paid (391.1) (371.5) (536.0) | Impact of exchange rate changes (130.0) -1.2% | | | Dividends paid to non-controlling interests in | Impact of acquisition (65.1) -0.6% | | subsidiary undertakings (114.5) (83.3) (96.2) Like-for-like growth (889.4) -8.2% Free cash flow 1,264.9 1,283.5 1,044.2 2020 9,762.0 -10.0% Impact of exchange rate changes (487.4) -5.0% Impact of acquisition (58.6) -0.6% Like-for-like growth 1,181.2 12.1% 2021 10, 397.2 6.5% 211WPP ANNUAL REPORT 2021 ## ADDITIONAL ## INFORMATION Task Force on Climate-related Financial Disclosures statement 214 Other statutory information 217 Shareholder information 218 Five-year summary 221 Glossary 222 Where to find us 224 212 WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION 213WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT WPP was an early adopter of the Task Force on Climate-related Financial Disclosures. WPP's fourth disclosure, set out below, is structured around the four TCFD themes of governance, strategy, risk management, and metrics and targets. We aim to develop our disclosures in line with TCFD's 't-recommended disclosures. Some of these recommendations, published in October 2021, will take more time for us to fully consider. These relate to: detailed time horizon, financial impacts, and scenario analysis of climate-related risks and opportunities. We will be working to implement the rest of the 2021 TCFD Annex recommendations over the course of 2022 and intend to apply these more fully in our next TCFD Report. WPP's overall approach to risk management and a summary of our principal risks can be found on pages 63-99 of this Annual Report. The climate-related risks set out below are included under 'emergent' risks in our summary of principal risks and for consistency with our wider risk disclosures we have not identified climate-related risk as short, medium or long-term. Opportunities identified below are already being realised. There is no material impact from climate change on our current year financial reporting. # GOVERNANCE Our Executive Directors have overall responsibility for climate-related risks and opportunities and our performance on carbon reduction is integrated into their incentive plans. The WPP Executive Committee sets the sustainability strategy and oversees the approach across agencies in its implementation. The Sustainability Director has operational responsibility for sustainability. The Board is responsible for the overall long-term success of WPP and for setting the Company's strategic direction, including on climate change. The Sustainability Committee of the Board is attended by both the CEO and CFO, as well as experienced Non-Executive Directors (see 'Our Board' from page 108) with extensive sustainability expertise, and supports the Board in its oversight of the Company's net zero strategy. The Sustainability Committee met four times in 2021 and selected a sustainability-related topic to be presented to the Board after each Committee meeting. The Committee's remit includes reviewing and monitoring implementation of the Company's sustainability strategy and evaluating performance against targets and commitments. In 2021, climate strategy was discussed at all Sustainability Committee meetings as the Committee monitored the development and launch of WPP's science-based carbon reduction targets and net zero strategy. During the year, the Committee supported management in its engagement strategy on sustainability. This included consultation with investors and clients while developing the Company's new commitments. WPP also held its first ESG-investor presentation in which we communicated the Company's strengthened carbon reduction commitments and integrated ESG strategy, and how we believe living up to our purpose will unlock greater sustainable returns for our shareholders. As the Company's clients integrate climate adaptation and mitigation into their business strategies, the Committee will review the growth of services which maximise their success. It will also review climate adaptation and transition plans, including steps to ensure that our campuses and offices are resilient to extreme weather and that we are meeting growing regulatory requirements that face both WPP and its clients. Further information on sustainability governance is provided on page 87 of this Annual Report. # CLIMATE CHANGE AND OUR STRATEGY Climate action is central to WPP's purpose and strategy. WPP is a proud signatory to the UN Global Compact's Business Ambition for 1.5°C, the purpose of which is to galvanise business support for strong climate action, and to the UNFCCC's Race to Zero campaign. In April 2021 we committed to reach net zero emissions in our operations (Scope I and II) by 2025 and our value chain (Scope II) by 2030. This includes emissions from media buying (more than half of our total footprint) - and an industry first. To deliver this we have set science-based reduction targets (see 'metrics and targets' on page 216), to reduce emissions as far and as quickly as possible from a 2019 baseline. Of our 50 largest clients, 62% have set or committed to set targets in line with an ambition to limit climate change to 1.5°C through the Science Based Targets Initiative (SBTi). These clients look to us to help them find and scale solutions (for an example, see page 80). We also know that collaboration with clients and suppliers will be critical in delivering against our own targets. We are very focused on the role our companies can now play in promoting low-impact and regenerative living. # IDENTIFYING CLIMATE RISK AND OPPORTUNITY Sustainability risks are integrated into our overall risk management processes. Performance and updated risk implications are reviewed by the Audit Committee on a regular basis. Our overall risk management process is outlined on pages 88-99 and climate change risk is included as an emerging risk within the principal risks and uncertainties disclosure on page 99. WPP has implemented Risk Committees at Group level and in our operating companies with the aim of ensuring accountability at both levels to identify, monitor and proactively manage risk and compliance issues and we are embedding climate risks in their agendas. Our business integrity programme is integral to ensuring that the policies, procedures and control environment set by the Board and commitments made on topics such as climate risk are understood and adhered to across all geographies and markets. In 2021, the business continuity implications of physical climate change and the risk of not meeting WPP's sustainability commitments were integrated into the Business Integrity function's annual risk assessment. The Board Sustainability Committee reviews WPP's climate-related risks and opportunities on an annual basis. This analysis is informed by interviews with sustainability and consumer experts from within WPP's agencies and external data sources including Maplecroft's Climate Change Exposure Index and the Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathways (RCPs). Factors considered include regulatory requirements, reputational risk, physical risks and opportunities to advise our clients. Evaluation criteria include relevance to our industry, relevance to sustainability, regulatory and legal risks, financial implications and the operations affected. To see: Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures (October 2021) KEY We are advised as a signator in the governance section of the TCFD statement highlighted with the symbol © www.LEAD.IT/collaboration/initiatives/zone-procedures-by-financial-regulation/expers-LIF-PCoC1. A copy of PoC's report and our methodology is available on our website www.comclimateabilityreport2021. WPP ANNUAL REPORT 2021 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT ADDITIONAL INFORMATION ADDITIONAL INFORMATION CLIMATE-RELATED RISK OR OPPORTUNITY POTENTIAL IMPACT HOW IT IS MANAGED PHYSICAL RISKS AND OPPORTUNITIES Increased frequency of This includes storms, flooding, wildfires and Our strategy of co-locating our people in WPP campuses is enabling extreme weather and water and heat stress which can damage our us to centralise emergency preparedness procedures. It will also climate-related natural buildings, jeopardise the safety of our people and enable us to more efficiently deploy climate mitigation measures. We disasters significantly disrupt our operations. At present intend to integrate climate-related risk assessment into the technical 10% of our headcount is located in countries at due diligence suite that we follow when we invest in a new campus “extreme” risk from the physical impacts of building to help ensure that material, acute and chronic physical climate change in the next 30 years. climate risks are considered in design and embedded into business continuity procedures. TRANSITION RISKS AND OPPORTUNITIES Changes in regulation WPP could be subject to increased costs WPP is developing a net zero roadmap to deliver against its net zero and reporting to comply with potential future changes in commitments and aims to disclose more details of that roadmap in 2023. standards environmental laws and regulations and increasing carbon offset pricing to meet its As part of this plan and through our work to decarbonise media and net zero commitments. media supply chains, we are exploring opportunities to improve accounting for emissions from media. Carbon emission accounting for marketing and media is in its infancy and methodologies As we seek to limit emissions we need to reduce the total footprint continue to evolve. of any product or service as far as possible. To manage the cost and quality of carbon credits purchased to offset remaining emissions, This is particularly the case for emissions WPP developed a new offsetting policy and is further developing our associated with digital media. offsetting strategy as part of our net zero roadmap. Increased demand for Our clients look to us to provide the insight, To realise this opportunity, we will need to invest in the innovation and sustainable products expertise and creative solutions they need to growth of sustainability-focused services. and services transition their business models away from fossil fuels. For example, 62% of our top 50 clients have Our sustainability strategy (see page 70) outlines our commitment to committed to setting science-based carbon developing products and services which enable our clients to adopt reduction targets. leadership positions on climate change and exceed the expectations of consumers. There is an opportunity for WPP to grow revenues from products and services which In 2021 we continued to invest in our virtual advertising production support clients as they seek to decarbonise capability, which reduces the emissions and environmental impact their businesses. of production shoots (see page 5). This may include developing low or net zero Increasingly, our agencies are hiring for sustainability-focused leadership marketing, media and ecommerce services, roles. We expect this community to continue to grow. Additionally, we developing sustainability-focused brand are evaluating whether to increase our sustainability resources for strategies, and promoting sustainable clients organically or by acquisition. consumption to consumers. In 2021, we continued to train our people to deliver net zero products and services through programmes such as AdGreen and to innovate on behalf of our clients through initiatives like Change the Brief, now open-sourced across our industry through the Change the Brief Alliance. KEY Risk Opportunity 215WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT CLIMATE-RELATED RISK OR OPPORTUNITY POTENTIAL IMPACT HOW IT IS MANAGED TRANSITION RISKS AND OPPORTUNITIES Achieving resource efficiencies through cutting our carbon footprint and improving energy efficiency. ☐ Through carbon reduction initiatives we have the opportunity to decrease the costs associated with energy use and limit increased costs associated with carbon taxation. This relates both to our buildings, and to energy-interest activities such as data storage. Our industry is increasingly reliant on data, digital content and centralized cloud computing. We expect to see an increase in externality taxes designed to curb the carbon emissions associated with data storage, which may lead to companies embedding data minimisation strategies. This creates an opportunity for companies such as WPP, which are following a policy of using data well rather than focusing on collection, to emerge as practice leaders and drive innovation. Through our campus strategy we have been driving energy efficiency gains by ensuring that all buildings with a floor space exceeding 50,000 square feet will be certified to advanced sustainability standards including LEED and BRIEAM. By 2023, 85,000 of our people will be based in net zero campuses using electricity from 100% renewable sources. As part of our net zero strategy we are working to identify the potential cost savings of embedding best practice solutions in our buildings. For more details see our Sustainability Report. We are working to embed our net zero ambitions in our data and AI strategy to maximise carbon-reduction opportunities. This includes through traditional methods such as embedding the use of efficient hardware and renewable energy into purchasing decisions, and by pursuing data minimisation, federation and virtualisation solutions which reduce energy consumption by keeping data in its place of origin. Increased reputational risk associated with misrepresenting environmental claims in marketing and advertising content ● As consumer consciousness around climate change rises, our sector is seeing increased scrutiny of our role in driving unsustainable consumption. Our clients seek expert partners who can give recommendations that take into account stakeholder concerns around climate change. All the advice we provide to our clients and the content we produce for them must meet rigorous standards and we will not undertake work which is intended or designed to mislead or deceive. This is covered in our Code of Conduct and in our How We Behave online training, which all employees (including freelancers working for more than four weeks) are required to complete annually. Our climate crisis training will ensure that our people recognise the importance of our sector's role in addressing the climate crisis. It will be part of a broader sustainability training programme which we will run in multiple markets with localised content in key regions. Increased reputational risk associated with working on client briefs perceived to be environmentally detrimental ● WPP serves some clients whose business models are under increased scrutiny, for example energy companies or associated industry groups who are at different stages of the decarbonisation process. This creates both a reputational and related financial risk for WPP if we are not rigorous in our content standards as we grow our sustainability-related services. We are also developing internal tools to help our people identify environmentally harmful briefs. These tools will embed climate-related issues within existing content review procedures across the organisation. The misrepresentation of environmental issues is governed by our Code of Conduct. We are also reviewing our policies to reduce the risk that any client brief undermines the implementation of the Paris Agreement. Our sustainability strategy outlines our commitment to supporting our clients on their sustainability journeys (see page 70). WPP, Data 2020: What does the future of data look like? METRICS AND TARGETS We have been reporting on our performance on carbon emissions reduction since 2006. In 2020 we worked with the consultancy Carbon Intelligence to map our carbon emissions (Scope 1, 2 and 3) using 2019 data. We use Greenhouse Gas Protocol standards to calculate our emissions, which categorise a company's emissions into three scopes: Scope 1 is then divided into 15 sub-categories, 11 of which are relevant for WPP. For a full explanation of our approach to calculating our carbon footprint, see 'Understanding our emissions' in the 'Planet' chapter of our Sustainability Report 2021. Our carbon emissions statement is included on page 217 of this report. Additional information relating to our carbon-reduction targets, worksiteams and performance data is set out on pages 76 and 77 and in the Planet chapter of our Sustainability Report 2021. In June 2021, WPP's emissions reduction targets were verified by the Science Based Targets initiative (SBT) aligned to 13°C requirements. From a 2019 baseline, WPP aims to reduce Scope 1 and 2 emissions by 16% by 2020, and halve Scope 3 emissions by 2020. We are also committed to source 100% of our electricity from renewable sources by 2025. To meet our targets, we are focusing our efforts on reducing emissions hotspots, including working towards net zero campuses by 2021, reducing emissions from production and media, and reducing emissions by using smarter technology. More information can be found in the 'Planet' section of our Sustainability Report 2021. In 2022 we will also focus on climate-related training for our people, and on continuing to improve the quality of our carbon emissions data. A common challenge for reducing carbon emissions is being able to measure them with confidence. We are working to improve the quality and coverage of our emissions data. During the year WPP appointed PriceWaterhouseCoopers LLP (PwC) to support the expansion of WPP's assurance programme for the carbon data disclosed in this report. Throughout this report, selected carbon metrics highlighted with the symbol © were subject to independent limited assurance by PwC. For the details and results of the limited assurance see wpp.com/sustainabilityreport2021. For the first time, PwC have also assured the governance section of the TCFD statement (wpp.com/sustainabilityreport2021). Beyond our science-based targets, our most material climate-related opportunities relate to our client work. As part of our sustainability strategy, we will develop metrics which track the growth of sustainable products and services. Examples of work relating to climate change are included in our downloadable Sustainability Report 2021: wpp.com/sustainabilityreport2021. 26 WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION ## OTHER STATUTORY INFORMATION EMISSIONS AND ENERGY CO 2 e EMISSIONS BREAKDOWN (TONNES/ENERGY (MWh) 2021 2020 2019 Emissions | source UK | | | | | | Non-UK Total Total Total | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Energy | Tonnes of | | | Energy | Tonnes of | | Energy | Tonnes of | | | Tonnes of | | | Tonnes of | | | | Continuing operations | MwH | | CO | 2 e | MWh | CO | 2 e | MWh | | CO | 2 e | | CO | 2 e | | CO | 2 e | Scope 1 Natural Gas 9,768 1,996 15,045 3,075 24,813 5,071 4,069 6,299 Diesel and Heating Oil 0 0 2,325 638 2,325 638 692 541 Company cars (Centrally Contracted) N/A 20 N/A 4,409 N/A 4,429 17,041 18,175 Sub-total Scope 1 9,768 2,016 17,3 70 8,122 27,138 10,138 Company cars (Local Contracts) N/A N/A N/A 3,154 N/A 3,154 Total Scope 1 9,768 2,016 17, 370 11,276 27,138 13,292 21,802 25,015 Standard electricity Scope 2 (location-based) 0 0 34,317 20,602 34,317 20,602 28,984 56,421 Green and renewable electricity (location-based) 12,833 2,725 86,800 31,425 99,633 34,150 31,671 27,324 Heat and steam 0 0 7,251 1,238 7,251 1,238 1,177 1,820 Total Scope 2 (location-based) 12,833 2,725 128,368 53,265 141,201 55,990 61,832 85,565 Standard electricity (market-based) 0 0 34,317 20,602 34,317 20,602 28,983 60,750 Green and renewable electricity (market-based) 12,833 0 86,800 0 99,633 0 0 0 Heat and steam 0 0 7,251 1,238 7,251 1,238 1,177 1,820 Total Scope 2 (market-based) 12,833 0 128,368 21,840 141,201 21,840 30,160 62,570 Total Scope 1 and 2 Total Scope 1 and 2 (location-based) 22,601 4,741 145,738 64,541 168,339 69,282 83,634 110,580 Total Scope 1 and 2 (market-based) 22,601 2,016 145,738 33,116 168,339 35,132 51,962 87,585 Scope 3 Business air travel N/A 535 N/A 10,886 N/A 11,421 23,325 122,967 Business air travel travel emissions N/A 535 N/A 10,886 N/A 11,421 23,325 122,967 WPP’S CARBON INTENSITY (TONNES OF CO 2 e) Intensity metric Total Scope Tonnes per full-time employee 1 and 2 (market-based) N/A 0.19 N/A 0.34 N/A 0.32 0.52 0.82 Tonnes per £m revenue (market-based) N/A N/A N/A N/A N/A 2.74 4.33 6.62 Scope 3 Tonnes per full-time employee N/A 0.05 N/A 0.11 N/A 0.10 0.23 1.15 Notes 1 We align our organizational boundary for reporting to the accounting definition of a subsidiary, where WPP have control of the entity, either through majority ownership of the equity share capital or through other facts and circumstances that lead to the conclusion that WPP have power over the investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of returns WPP is entitled to. For entities meeting this organizational boundary definition, we collect utility data for all buildings that WPP occupy, regardless of the control that we have over those buildings. This operational boundary includes shared leased premises and therefore best represents our actual consumption and the impact that our business has on the environment. 2 This year, in line with UK Streamlined Energy and Carbon Reporting (SECR) requirements, we have calculated our energy use and emissions for UK markets and is stated in a separate column. 3 Energy Efficiency Initiatives: our work to simplify our structure and consolidate our office space is driving a positive impact on our energy use and carbon footprint. We continue to move employees into campuses, closing multiple smaller sites and replacing them with fewer, larger, more environmentally friendly buildings that offer modern, world-class workspaces. By 2025, we expect 85,000 of our people will work in net zero campuses powered by renewable electricity. When we lease, purchase, fit out or renovate a building larger than 50,000 square feet, we require it to be certified to an internationally recognised standard such as the US LEED Standard or the UK BREEAM standard. We aim for all our new workspaces to achieve the highest accreditation considering the individual workspace. We recognise that achieving these certifications is only one step to reducing the footprint of our buildings and supporting our people’s wellbeing. In 2021 we launched a programme to better assess and understand our building portfolio. This will help us identify opportunities to reduce energy use, optimise resource use, support our employees’ wellbeing needs and create opportunities for circular business models in our materials use. 4 In 2021, subtotal Scope 1 emissions, which include centrally, but not locally, contracted cars were subject to independent limited assurance for the first time. Locally-managed car emissions were estimated and were not subject to assurance due to inconsistencies in capturing emissions data. In 2022, we will review and strengthen how we measure and calculate emissions from vehicles. 5 Additional information on our Energy, Air Travel and Waste methodologies is included in our ‘WPP Sustainability Reporting Criteria 2021’. Indicates the selected metrics have been subject to independent limited assurance procedures by PricewaterhouseCoopers for the year ending 31 December 2021. For PwC’s 2021 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2021’, see our 2021 Sustainability Report at www.wpp.com/sustainability Independent limited assurance will be sought by WPP over our percentage electricity purchased from renewable sources and Scope 2 market-based GHG emissions reporting. The assurance report will be made available on our website. 217WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION # SHAREHOLDER INFORMATION # SHARE CAPITAL AND CONTROL Details of our issued share capital and the number of shares held in Treasury as at 31 December 2021 can be found in note 27 to the financial statements. Our ordinary shares are listed on the London Stock Exchange (LSE) and are also quoted on the New York Stock Exchange (NYSE) in the form of American Depositary Receipts (ADRs). The rights and obligations relating to the ordinary share capital are outlined in the Articles of Association; there are no restrictions on transfer, no restrictions on voting rights and no securities carry special voting rights with regard to control of the Company. At the AGM on 9 June 2021, shareholders passed resolutions authorising the Company, in accordance with its Articles, to allot shares up to a maximum nominal amount of 660,619,626 of which 66,062,963 could be allotted for cash free of statutory pre-emptive rights. In the year under review no shares were issued for cash free from pre-emption rights. Details of share capital movements are given in note 27 to the financial statements on pages 193-196. # AUTHORITY FOR PURCHASE OF OWN SHARES At the AGM on 9 June 2021, shareholders passed a special resolution authorising the Company, in accordance with its Articles of Association, to purchase up to 121,256,871 of its own shares in the market. In the year under review, 72,155,690 ordinary shares were purchased. # MAJOR SHAREHOLDERS The table below shows the holdings of major shareholders in the Company's issued ordinary share capital in accordance with the Disclosure Guidance and Transparency Rules (DTRs) notified to the Company as at 31 December 2021 and 25 March 2022. Information provided to the Company under the DTRs is publicly available via the regulatory information services and on the Company's website. | | At 31 December 2021 | At 25 March 2022 | | --- | --- | --- | | BlackRock Inc | 6.99% | 7.40% | | Wellington Management Group LLP | - | 3.04% | SHAREHOLDERS AS AT 31 DECEMBER 2021 | Holding of shares | Number of holders | % Owners | Shareholdings | % Outstanding | | --- | --- | --- | --- | --- | | Up to 1,000 | 5,693 | 52 | 1,610,916 | 0.1 | | 1,001 to 5,000 | 1,549 | 15 | 3,741,756 | 0.3 | | 5,001 to 100,000 | 2,303 | 22 | 70,936,423 | 5.8 | | 100,001 to 1,000,000 | 1,001 | 9 | 137,832,305 | 26.0 | | Over 1,000,000 | 239 | 2 | 830,588,393 | 67.8 | | Shareholders by geography | % | Shareholders by type | % | | --- | --- | --- | --- | | UK | 29.3 | Institutional investors | 95.2 | | United States | 37.9 | Our people | 0.7 | | Rest of World | 32.8 | Other individuals | 4.1 | | Total | 100 | Total | 100 | 28 WPP ANNUAL REPORT 2021 SHAREHOLDER INFORMATION ADDITIONAL INFORMATION # SHARE PRICE The closing price of the shares at 31 December was as follows: | | At 31 March 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | --- | --- | --- | --- | --- | --- | --- | | Ordinary 10p shares | 1,039.5p | 1,119.5p | 800.0p | 1,066.5p | 866.4p | 1,141.0p | Share price information is also available online at wpp.com/investors/share-price # SHARE BUYBACK PROGRAMME The Board has been authorised to issue and allot ordinary shares under Article 10 of the Company's Articles of Association. The power under Article 10 and the authority for the Company to make purchases of its own shares are subject to shareholder authorities which are sought on an annual basis at our Annual General Meeting (AGM). Any shares purchased by the Company may be cancelled, held as Treasury shares or used for satisfying share options and grants under the Company's employee share plans. On 11 March 2021 the Company announced the recommencement of the share buyback programme, with a plan to purchase up to £300 million by 18 June 2021. On 1 August 2021 the Company announced a further share buyback programme of up to £250 million which would take place during the period commencing 1 August 2021 and ending no later than 22 October 2021. On 28 October 2021 the Company announced a share buyback programme of up to £300 million beginning 28 October 2021, and on 3 December 2021 announced an extension of up to £50 million to this programme. The Company announced a share buyback programme of up to £250 million on 16 December 2021, which would take place during the period commencing 16 December 2021 and ending no later than 18 February 2022. As a result of these programmes, the Company bought back £729,376,556 million of shares in 2021. On 6 March 2022 the Company announced a share buyback programme of up to £200 million beginning on 4 March 2022. On 24 March 2022 the Company announced a share buyback programme of up to £300 million, which would take place during the period commencing 24 March 2022 and ending no later than 24 June 2022. # DIVIDENDS Subject to shareholder approval at the 2022 AGM, the final dividend for 2021 will become due and payable on 8 July 2022 to all holders of ordinary shares on the Register of Members at the close of business on 10 June 2022. The table below sets out the dividend per share ordinary shareholders have received for the last five years. | | 2022 | 2021 | 2020 | 2019 | 2018 | | --- | --- | --- | --- | --- | --- | | Interim dividend per ordinary share | 12.50p | 10.00p | 22.70p | 22.70p | 22.70p | | Final dividend per ordinary share | 18.70p | 16.00p | | 37.30p | 37.30p | | Total | 31.50p | 26.00p | 22.70p | 60.00p | 60.00p | # AMERICAN DEPOSITARY RECEIPTS (ADRS) Each ADR represents five ordinary shares. WPP plc is subject to the informational requirements of the United States' securities laws applicable to foreign companies and files an annual report on Form 20-P and other information with the US Securities and Exchange Commission. These documents are available at the Commission's website, sec.gov. # ADR DIVIDENDS ADR holders are eligible for all stock dividends or other entitlements accruing on the underlying WPP plc shares and receive all cash dividends in US dollars. These are normally paid twice a year. Dividend cheques are mailed directly to the ADR holder on the payment date if ADRs are registered with WPP's US depositary. Dividends on ADRs that are registered with brokers are sent to the brokers, who forward them to ADR holders. WPP's US depositary is Citibank N.A. (address on page 220). Dividends per ADR in respect of each financial year are set out below. | | 2022 | 2021 | 2020 | 2019 | 2018 | | --- | --- | --- | --- | --- | --- | | In £ sterling | | | | | | | Interim | 67.50p | 50.00p | 115.50p | 115.50p | 115.50p | | Final | 93.50p | 70.00p | | 186.50p | 186.50p | | Total | 156.00p | 120.00p | 115.50p | 300.00p | 300.00p | | In US dollars' | | | | | | | Interim | 85.90p | 64.18p | 166.88p | 155.53p | 166.37p | | Final | 128.65p | 89.85p | | 249.00p | 260.34p | | Total | 214.65p | 154.03p | 166.88p | 400.53p | 386.65p | These figures have been translated into an economic purpose only using the appropriate averages rate for the year of 2021-2022 (2020-2021-2022, 2019-2020-2021, 2018-2021-2022, 2017-2020-2021). This conversion rate does not correspond to a representation that the period sterling amounts actually represent, or would be converted into, US dollars at the rates indicated. Dollar amounts paid to ADR holders depend on the sterling/dollar exchange rate at the time of payment. No withholding tax is imposed on dividends paid to ADR holders. The dividends received will be subject to United States' taxation. WPP ANNUAL REPORT 2021 29 ADDITIONAL INFORMATION SHAREHOLDER INFORMATION LISTING RULES ACCESS NUMBERS/TICKER SYMBOLS For the purposes of Listing Rule (LR) 9.8.4R, the information required to be disclosed by that section can be found in the following locations: NYSE Reuters Bloomberg Ordinary shares – WPP.L WPP LN Applicable sub-paragraph American Depositary Shares WPP WPP.N WPP US | Section | within LR 9.8.4R Location | | | | --- | --- | --- | --- | | 4 Details of long-term | | Directors’ compensation report page | | | | incentive schemes | 133-154 | SHAREHOLDER CONTACTS | | 5 Details of Directors’ | | Directors’ compensation report page | ORDINARY SHARES | | | waiver of emoluments | 133-154 | For any queries regarding your shareholding, please contact Computershare: | | 6 Director waiver of future | | Directors’ compensation report page | | | | emoluments | 133-154 | | By telephone: +44 (0)370 707 1411 The above table sets out only those sections of LR 9.8.4R which are relevant. The remaining sections of LR 9.8.4R are not applicable. Lines are open from Monday to Friday, 8.30am to 5.30pm UK time, excluding public holidays. ARTICLES OF ASSOCIATION There are no restrictions on amending the Articles of Association of the Using the contact form on the website: investorcentre.co.uk/je/contactus Company (Articles) other than the requirement to pass a special resolution of the shareholders at a general meeting. Subject to applicable law and the In writing: Computershare Investor Services (Jersey) Limited, 13 Castle Street, Company’s Articles, the Directors may exercise all powers of the Company. St Helier, Jersey, JE1 1ES The Articles are available on the Company’s website at AMERICAN DEPOSITARY RECEIPTS (ADRS) OFFICE wpp.com/investors/corporate-governance For any queries regarding WPP ADRs, please contact Citibank Shareholder Services (Citibank): SHAREHOLDER INFORMATION 2022 FINANCIAL CALENDAR By telephone: +1 877 248 4237 Opening hours are Monday to Friday, 8.30am to 6pm US Eastern Standard Ordinary dividend timetable Final Interim Time. Please call +1 781 575 4555 if calling from outside of the US. Ordinary ex-dividend date 9 June 2022 13 October 2022 Dividend record date 10 June 2022 14 October 2022 By email: citibank@shareholders-online.com Dividend payment date 8 July 2022 1 November 2022 Other key dates: In writing: Citibank N.A., PO Box 43077, Providence, RI 02940–3077, USA 2021 preliminary results 24 February 2022 REGISTERED OFFICE First quarter trading update 27 April 2022 WPP plc Annual General Meeting 24 May 2022 13 Castle Street, St Helier 2022 interim results August 2022 Jersey, JE1 1ES Third quarter trading update October 2022 Telephone: +44 (0)20 7282 4600 RESULTS ANNOUNCEMENTS Registered number: 111714 Results announcements are issued to the London Stock Exchange and are available on its news service. They are also sent to the US Securities and Website: wpp.com Exchange Commission and the NYSE, issued to the media and made available on our website. TAXATION INFORMATION As this is a complex area investors should consult their own tax advisor SHAREHOLDER COMMUNICATIONS regarding the US federal, state and local, the UK and other tax consequences A growing number of our shareholders have opted to receive communications of owning and disposing of shares and ADSs in their particular circumstances. from us electronically. The use of electronic communications, rather than printed paper documents, means information about the Company can be DIVIDENDS RECEIVED accessed through emails or the Company’s website, thus reducing our UK resident individuals receive a Dividend Allowance in the form of a 0% tax impact on the environment. Shareholders who have elected for electronic rate on the first £2,000 of dividend income received each tax year. Dividends communication will be sent an email alert containing a link to the relevant received by UK resident individuals on or before 5 April 2022, and which are documents. We encourage all our shareholders to sign up for this service. over the £2,000 Dividend Allowance, are taxed at a rate of 7.5% for individuals You can register for this service at investorcentre.co.uk/je or by contacting in the basic rate band, at 32.5% for higher rate tax payers and at 38.1% for Computershare by the telephone number provided below. individuals with income of £150,000 or more. For dividends received after 5 April 2022 these rates increase by 1.25% to 8.75% for individuals in the basic WPP’s public website, wpp.com, provides current and historical financial rate band, to 33.75% for higher rate tax payers and to 39.35% for individuals information, news releases, trading reports and share price information. with income of £150,000 or more. Go to wpp.com/investors CAPITAL GAINS TAX PAYMENT OF DIVIDENDS The market value of an ordinary share at 31 March 1982 was 39p. Since that date From July 2022 we will only pay cash dividends in to your nominated rights issues have occurred in September 1986, August 1987 and April 1993. For bank account. To update your payment details please go to capital gains tax purposes the acquisition cost of ordinary shares is adjusted www.investorcentre.co.uk/je or contact Computershare at the details below. to take account of such rights issues. Since any adjustments will depend on individual circumstances, shareholders are advised to consult their SHAREHOLDERS’ REGISTER professional advisors. A register of shareholders’ interests is kept at the Company’s registrar’s office in Jersey and is available for inspection on request. The register includes CAPITAL GAINS information on nominee accounts and their beneficial owners. As liability to capital gains tax on a disposal of WPP shares will depend on individual circumstances, shareholders are advised to consult their professional advisors. WPP ANNUAL REPORT 2021220 ADDITIONAL INFORMATION ## FIVE-YEAR SUMMARY Continuing operations | | | 1 | | 1 | | | | --- | --- | --- | --- | --- | --- | --- | | 2021 | 2020 | | 2019 | | 2018 | 2017 | | £m | £m | | £m | | £m | £m | Income statement 2 Billings 50,656.8 46,917.8 53,059.0 53,219.7 52,915.4 Revenue 12,801.1 12,002.8 13,234.1 13,046.7 13,146.4 2 Revenue less pass-through costs 10,397.2 9,762.0 10,846.5 10,875.7 11,143.9 Operating profit/(loss) 1,229.0 (2,278.1) 1,295.9 1,245.3 1, 577.9 3 Headline EBITDA 2,023.6 1,812.5 2,131.4 1,932.5 2,099.6 3 Headline operating profit 1,493.5 1,260.5 1,560.6 1,651.2 1,793.1 Profit/(loss) before taxation 950.8 (2,790.6) 1,214.3 1,019.3 1,894.0 3 Headline PBT 1,365.4 1,041.3 1,363.0 1,543.0 1,7 17.6 Profit/(loss) for the year 720.7 (2,917.7) 927.1 763.3 1,811.0 3 Headline operating profit margin 14.4% 12.9% 14.4% 15.2% 16.1% Balance sheet Non-current assets 12,535.2 12,185.4 15,826.7 17,8 54 .1 18,427.7 Net current (liabilities)/assets (1,149.8) 754.6 (298.4) (649.5) (356.1) Net assets 4,069.0 5,050.1 8, 297.3 9,784.3 9,960.5 Adjusted net debt (901.1) (695.6) (1,539.6) (4,016.7) (4,483.1) Average adjusted net debt (1,565.1) (2,331.0) (4,282.0) (4,965.6) (5,142.7) 2021 2020 1 2019 1 2018 2017 Our people Revenue per employee (£000) 122.1 116.7 124.3 123.0 123.5 2 Revenue less pass-through costs per employee (£000) 99.2 94.9 101.8 102.5 104.7 Staff cost per employee (£000) 68.4 63.8 66.6 65.5 66.4 Average headcount 104,808 102,822 106,498 106,090 106,414 Share information 4 Headline – basic earnings per share from continuing operations 79.9p 60.7p 77.8p 92.4p 104.2p – diluted earnings per share from continuing operations 78.5p 60.1p 77.1p 91.4p 103.0p Reported – basic earnings per share from continuing operations 53.4p (243.0p) 67.8 p 56.0p 136.9p – diluted earnings per share from continuing operations 52.5p (243.0p) 67.3p 55.4p 135.3p 5 Dividends per share 31.20p 24.00p 22.70p 60.00p 60.00p Share price – high 1,129.5p 1,071.0p 1,07 7.5 p 1,471.0p 1,921.0p – low 765.8p 483.7p 800.4p 805.0p 1,253.0p Market capitalisation at year-end (£m) 12,918.7 9,802.7 13,410.0 10,682.6 17,029.8 Notes 1 Figures have been restated as described in the accounting policies. 2 Billings and revenue less pass-through costs are defined on pages 222 and 223. 3 The calculation of ‘headline’ measures of performance (including headline EBITDA, headline operating profit, headline operating profit margin and headline PBT) is set out on pages 210 and 211. 4 Headline earnings per share is set out in note 9 of the financial statements. 5 Dividends per share represents the dividends declared in respect of each year. The information on this page is unaudited. 221WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION ## GLOSSARY Term used in Annual Report United States’ equivalent or brief description ADRs/ADSs American Depositary Receipts/American Depositary Shares. The Group uses the terms ADR and ADS interchangeably. One ADR/ADS represents five ordinary shares Allotted Issued Average adjusted net debt and adjusted net debt Average adjusted net debt is calculated as the average daily net borrowings of the Group. Adjusted net debt at a period end is calculated as the sum of the net borrowings of the Group, derived from the cash ledgers and accounts in the balance sheet. Net adjusted debt excludes lease liabilities Billings and estimated net new billings Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the total of other fees earned. Net new billings represent the estimated annualised impact on billings of new business gained from both existing and new clients, net of existing client business lost. The estimated impact is based upon initial assessments of the clients’ marketing budgets, which may not necessarily result in actual billings of the same amount Brand awareness The number of people or percentage of a group that are aware of a brand Brand consideration Those who would consider purchasing a brand are measured as a subset of those aware of a brand Called-up share capital Ordinary shares, issued and fully paid Click-through rate (CTR) The ratio of the number of users exposed to a specific link on a website page or in an email and those who click the link and view the advertised product or service Company or Parent Company WPP plc Constant currency The Group uses US dollar-based, constant currency models to measure performance. These are calculated by applying budgeted 2021 exchange rates to local currency reported results for the current and prior year. This gives a US dollar-denominated income statement which excludes any variances attributable to foreign exchange rate movements Direct-to-consumer Marketing from company to consumer without distributor or retailer involvement ESOP Employee share ownership plan EURIBOR The euro area inter-bank offered rate for euro deposits Finance lease Capital lease Free cash flow Free cash flow is calculated as cash generated by operations plus dividends received from associates, interest received, investment income received, and proceeds from the issue of shares, less corporation and overseas tax paid, interest and similar charges paid, dividends paid to non-controlling interests in subsidiary undertakings, repayment of lease liabilities (including interest), earnout payments and purchases of property, plant and equipment and purchases of other intangible assets Freehold Ownership with absolute rights in perpetuity Full-Time Equivalent (FTE) employee A permanent person or employee of WPP Group or any of its majority owned Operating Companies, as captured locally by each reporting unit and entered into the centralised Finance system. FTE employees do not include contractors General and administrative costs General and administrative costs include marketing costs, certain professional fees and an allocation of other costs, including staff and establishment costs, based on the function of employees within the Group General Data Protection Regulation (GDPR) A European Union law governing digital data collection, use and storage Group WPP plc and its subsidiaries Headline earnings Headline PBT less headline tax charge and non-controlling interests Headline EBITDA Profit before finance and investment income/costs and revaluation and retranslation of financial instruments, taxation, gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, amortisation of other intangibles, depreciation of property, plant and equipment, depreciation of right-of-use assets, restructuring and transformation costs, restructuring costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York, share of exceptional gains/losses of associates and gains/ losses on remeasurement of equity interests arising from a change in scope of ownership Headline operating profit Operating profit before gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, restructuring costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York and gains/losses on remeasurement of equity interests arising from a change in scope of ownership 222 WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION GLOSSARY Term used in Annual Report United States’ equivalent or brief description Headline operating profit margin Headline operating profit margin is calculated as headline operating profit (defined above) as a percentage of revenue less pass-through costs Headline PBIT Profit before finance and investment income/costs and revaluation and retranslation of financial instruments, taxation, gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, restructuring costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York, share of exceptional gains/losses of associates and gains/losses on remeasurement of equity interests arising from a change in scope of ownership Headline PBT Profit before taxation, gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, restructuring costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York, share of exceptional gains/losses of associates, gains/losses arising from the revaluation and retranslation of financial instruments and gains/losses on remeasurement of equity interests arising from a change in scope of ownership Headline tax charge Taxation excluding tax/deferred tax relating to gains/losses on disposal of investments and subsidiaries, investment and other impairment (reversals)/charges, goodwill impairment and other goodwill write-downs, restructuring and transformation costs, restructuring costs in relation to Covid-19, litigation settlement, gain on sale of freehold property in New York, and the deferred tax impact of the amortisation of acquired intangible assets and other goodwill items IFRS/IAS International Financial Reporting Standards/International Accounting Standards LIBOR The London inter-bank offered rate Net Promoter Score (NPS) A metric used to assess overall customer satisfaction and how likely customers are to recommend a company to a peer or colleague Net working capital The movement in net working capital consists of movements in trade working capital and movements in other working capital and provisions per the analysis of cash flows note OCI Consolidated statement of comprehensive income Pass-through costs Pass-through costs comprise fees paid to external suppliers where they are engaged to perform part or all of a specific project and are charged directly to clients, predominantly media and data collection costs Pro forma (“like-for-like”) Pro forma comparisons are calculated as follows: current year, constant currency actual results (which include acquisitions from the relevant date of completion) are compared with prior year, constant currency actual results, adjusted to include the results of acquisitions and disposals, the reclassification of certain business to associates in 2021 and the restatement of agency arrangements under IFRS 15 for the commensurate period in the prior year. The Group uses the terms “pro forma” and “like-for-like” interchangeably Profit Income Profit attributable to equity holders of the parent Net income Programmatic advertising Automated buying and selling ad inventory, using software to make data-driven decisions Revenue less pass-through costs Revenue less pass-through costs is revenue less media, data collection and other pass-through costs Sarbanes-Oxley Act or SOX An Act passed in the United States to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes Share capital Ordinary shares, capital stock or common stock issued and fully paid Shares in issue Shares outstanding Share premium account Additional paid-in capital or paid-in surplus (not distributable) UK Corporate Governance Code The UK Corporate Governance Code published by the Financial Reporting Council dated April 2018 WPP WPP plc and its subsidiaries 223WPP ANNUAL REPORT 2021 ADDITIONAL INFORMATION ## WHERE TO FIND US | COMPANY CENTRES | CONTACT POINTS | CORPORATE COMMUNICATIONS | | --- | --- | --- | | WPP NEW YORK | INVESTOR RELATIONS | AND MEDIA RELATIONS | | 3 World Trade Center | John Rogers | Chris Wade | | 175 Greenwich Street | Chief Financial Officer | Chief Communications Officer | | New York NY 10007 | Tel +44 (0)20 7282 4600 | Tel +44 (0)20 7282 4600 | | Tel +1 (212) 632 2200 | john.rogers@wpp.com | chris.wade@wpp.com | | WPP LONDON | Peregrine Riviere | EMEA | | Sea Containers | Group Investor Relations Director | Niken Wresniwiro | | 18 Upper Ground | Tel +44 (0)20 7282 4600 | Tel +44 (0)20 7282 4600 | | London SE1 9GL | peregrine.riviere@wpp.com | niken.wresniwiro@wpp.com | Tel +44 (0)20 7282 4600 | | INVESTOR INFORMATION | NORTH AMERICA | | --- | --- | --- | | WPP ASIA PACIFIC | Investor relations material and our financial | Martina Suess | | 50 Scotts Road | statements are available online at | Tel +1 (212) 632 2522 | | Singapore 228242 | wpp.com/investors | martina.suess@wpp.com | Tel +65 6508 5219 ASIA PACIFIC | COMPANY INFORMATION | Jonathan Sanchez | | --- | --- | | If you would like further general | Tel +65 9011 4679 | | information about WPP, its companies or | jonathan.sanchez@wpp.com | any of the programmes or initiatives mentioned in this Annual Report, please SUSTAINABILITY visit our website, wpp.com, or email: David Henderson enquiries@wpp.com Global Corporate Affairs Director Tel +44 (0)20 7282 4600 david.henderson@wpp.com FORWARD-LOOKING STATEMENTS or acts of terrorism; the Company’s ability to attract new clients; the economic In connection with the provisions of the U.S. Private Securities Litigation and geopolitical impact of the Russian invasion of Ukraine; the risk of global Reform Act of 1995 (the ‘Reform Act’), the Company may include forward- economic downturn; technological changes and risks to the security of IT looking statements (as defined in the Reform Act) in oral or written public and operational infrastructure, systems, data and information resulting from statements issued by or on behalf of the Company. These forward-looking increased threat of cyber and other attacks; the Company’s exposure to statements may include, among other things, plans, objectives, beliefs, changes in the values of other major currencies (because a substantial portion intentions, strategies, projections and anticipated future economic of its revenues are derived and costs incurred outside of the UK); and the performance based on assumptions and the like that are subject to risks and overall level of economic activity in the Company’s major markets (which uncertainties. These statements can be identified by the fact that they do not varies depending on, among other things, regional, national and international relate strictly to historical or current facts. They use words such as ‘anticipate’, political and economic conditions and government regulations in the world’s ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’, ‘believe’, ‘target’, and other advertising markets). In addition, you should consider the risks described words and similar references to future periods but are not the exclusive means under the heading Principal risks on pages 93-99, which could also cause of identifying such statements. As such, all forward-looking statements involve actual results to differ from forward-looking information. In light of these and risk and uncertainty because they relate to future events and circumstances other uncertainties, the forward-looking statements included in this document that are beyond the control of the Company. Actual results or outcomes may should not be regarded as a representation by the Company that the differ materially from those discussed or implied in the forward-looking Company’s plans and objectives will be achieved. Neither the Company, statements. Therefore, you should not rely on such forward-looking nor any of its directors, officers or employees, provides any representation, statements, which speak only as of the date they are made, as a prediction of assurance or guarantee that the occurrence of any events anticipated, actual results or otherwise. Important factors which may cause actual results expressed or implied in any forward-looking statements will actually occur. to differ include but are not limited to: the impact of outbreaks, epidemics The Company undertakes no obligation to update or revise any such or pandemics, such as the Covid-19 pandemic and ongoing challenges and forward-looking statements, whether as a result of new information, future uncertainties posed by the Covid-19 pandemic for businesses and events or otherwise. governments around the world; the unanticipated loss of a material client or key personnel; delays or reductions in client advertising budgets; shifts in WEBSITE industry rates of compensation; regulatory compliance costs or litigation; WPP’s website wpp.com gives additional information on the Group. changes in competitive factors in the industries in which we operate and Notwithstanding the references we make in this Annual Report to WPP’s demand for our products and services; our inability to realise the future website, none of the information made available on the website constitutes anticipated benefits of acquisitions; failure to realise our assumptions part of this Annual Report or shall be deemed to be incorporated by regarding goodwill and indefinite lived intangible assets; natural disasters reference herein. 224 WPP ANNUAL REPORT 2021 Written by WPP Designed and produced by Superunion, London superunion.com ©WPP 2022 This report is printed on Arena Extra White Smooth which is made of FSC® certified and other controlled material. Printed in the UK by Pureprint Group. A CarbonNeutral® company, certificated to Environmental Management System ISO14001 and holders of FSC® chain of custody certification.