## WPP IS THE ## TRANSFORMATION ## COMPANY ## ANNUAL REPORT ## & ACCOUNTS 2022 CONTENTS ### WHAT YOU WILL FIND IN THIS REPORT ### STRATEGIC REPORT CORPORATE GOVERNANCE ADDITIONAL INFORMATION About us 2 Chairman’s letter 100 Task Force on Climate-Related 220 Financial Disclosures statement Highlights 4 Governance at a glance 103 Other statutory information 227 Chief Executive’s statement 6 Our Board 104 Shareholder information 228 Key events of the year 12 Our Executive Committee 107 Five-year summary 231 Our business model 14 How our Board engages with stakeholders 109 Glossary 232 Our agencies 16 Division of responsibilities 112 Where to find us 234 | Where we are 18 | Board activities 114 | | --- | --- | | Stakeholder engagement 22 | Composition, succession and evaluation 115 | | Investment case 24 | Nomination and Governance 118 | This report provides an update on Committee report The market in 2022 26 our strategic progress, financial Audit Committee report 122 Creativity 28 performance and sustainability activities Sustainability Committee report 128 for the year ended 31 December 2022 Data and technology 32 Compensation Committee report 130 People 36 To learn more see wpp.com Statement of Directors’ responsibilities 157 Clients 40 This icon denotes more information Companies 44 within the report ### FINANCIAL STATEMENTS Countries 48 These metrics were subject to Accounting policies 160 independent limited assurance Key performance indicators 52 procedures by Consolidated financial statements 166 Chief Financial Officer’s statement 56 PricewaterhouseCoopers LLP (‘PwC’) Notes to the consolidated financial statements 171 for the year ended 31 December Financial review 61 2022. For the results of PwC’s 2022 Company financial statements 203 Limited Assurance report and the Sustainability 66 ‘WPP Sustainability Reporting Notes to the Company financial statements 206 Assessing and managing our risks 86 Criteria 2022’, see our 2022 Independent auditor’s report 208 Sustainability Report Reconciliation to non-GAAP 216 measures of performance ### QR CODES Wherever you see a QR code throughout this report, you can scan to access further content online ## OUR AGENCIES WERE ## RESPONSIBLE FOR SOME ## OF THE MOST INNOVATIVE ## AND IMPACTFUL WORK ## OF 2022” Mark Read Chief Executive Officer ## Creativity is the powerhouse of WPP. ## CREATIVE ## It’s what makes us different. Drives us forward. ## And delivers exceptional results for our clients ## TRANSFORMATION ### NIKE: NEVER DONE EVOLVING FORD: VERY GAY RAPTOR ### 10 20 Harnessing the power of AI to showcase the brilliance How a homophobic comment ignited a mission of Serena Williams through the years to redefine Ford’s Ranger Raptor truck ### SHEBA: HOPE REEF SKY: GIGAFAST WITH SKY BROADBAND ### 30 34 To highlight its commitment to source sustainable ingredients A race through the metaverse to showcase for its products, Sheba regenerated a coral reef Sky’s newest broadband offer ### JOHANNITER: ANTI-LOOK QR CODE BURGER KING: BURGER GLITCH ### 46 60 The life-saving QR code design that stops Glitches in the gaming world are annoying. bystanders gawking at accident sites Until you get rewarded for finding them 1WPP ANNUAL REPORT 2022 STRATEGIC REPORT ABOUT US ## ABOUT US ## OUR OUR ## VISION PURPOSE ## To be the most creative We use the power of creativity to ## company in the world build better futures for our people, ## planet, clients and communities Read more on pages 4 and 68 ## OUR OFFER EXPERIENCE COMMS ### WPP provides a modern, integrated offer of communications, ### experience, commerce and technology services through our global ### integrated media and creative agencies, world-class public relations ### firms and specialist communications companies TECH COMMERCE Read more on pages 14 to 17 ## OUR STRATEGIC APPROACH ### We continue to enhance WPP’s proposition by investing in talented people and leveraging our industry-leading ### global media platform, technological capabilities and strategic global partnerships | CREATIVITY | DATA & TECHNOLOGY | PEOPLE & CULTURE | | --- | --- | --- | | An ongoing commitment | Harnessing our capabilities in data | Investing in our people, | | to creativity, WPP’s most | and technology and our unique | culture and values to ensure | | important competitive | partnerships with leading | WPP is the natural home for | | advantage | technology firms | the best and brightest talent | | Read more on pages 28 to 29 | Read more on pages 32 to 33 | Read more on pages 36 and 70 | ### Central to our strategy is our goal of reducing complexity and delivering a simpler structure for the benefit ### of our clients, across our companies and within our individual markets | CLIENTS | COMPANIES | COUNTRIES | | --- | --- | --- | | We are a client-centric | We now have fewer, | We integrate at a country | | organisation in order to | more integrated companies | level to serve clients locally, | | deliver the best of WPP | equipped to adapt to a | leverage local scale and | | | changing market | attract talent | | Read more on pages 40 to 41 | Read more on pages 44 to 45 | Read more on pages 48 to 49 | WPP ANNUAL REPORT 20222 STRATEGIC REPORT Two in every three girls spend more than an The agency tracked 50 toxic trends in ## TOXIC hour a day on social media – more time than real-time across multiple social platforms, 1 they spend with their friends. The harmful building fake transcripts based on the ## INFLUENCE beauty trends, hacks and products they are most popular phrases of hundreds of toxic exposed to are increasingly linked to a rise influencers. These words were then ‘spoken’ in depression and teen suicide. by deepfake versions of their mother in an ### Taking action to make social eye-opening shareable film that rolled out ### media a more positive place | | The algorithms that feed young girls toxic | across 18 markets – bringing the issue to | | --- | --- | --- | | | beauty advice show parents completely | light across the world and igniting millions | | OFFER | different content on the same platforms. | of conversations between parents and | | COMMUNICATIONS, | As part of Dove’s Self-Esteem Project, Ogilvy | their daughters. | | TECHNOLOGY | was tasked with spotlighting the issue of | | toxic advice for parents who are unaware AGENCY of what their daughters see online. | OGILVY, UK | | 99% | 115.5m | | --- | --- | --- | --- | | | | positive campaign | organic views | | CLIENT | The creative idea was to use deepfake | | | sentiment ### DOVE (UNILEVER) technology to put the words of toxic influencers – words heard every day | by teenage girls – into the mouth of the | 3.1bn | Awards | | --- | --- | --- | | one person they trust most in the world: | earned impressions | 2022 Cannes Gold Lion, | | their mother. | | Entertainment | | | 1 Dove Toxic Beauty Report, 2022 | | 3WPP ANNUAL REPORT 2022 STRATEGIC REPORT BUSINESS HIGHLIGHTS ## BUSINESS HIGHLIGHTS ## WPP is the creative transformation company. Our purpose is to build better ## futures for our people, planet, clients and communities, and we made strong ## progress towards our goals in 2022 ### BUILDING BETTER ## FUTURES FOR 115,000 40% 33,000+ ### OUR PEOPLE people employed in over 100 women in executive technology partner 1 countries across the globe leadership roles accreditations and Investing in our (2021: 109,000) (2021: 39%) certifications awarded people's futures to our people (2021: 30,000+) ### BUILDING BETTER ## FUTURES FOR 0.22 tCO₂e 83% A- ### OUR PLANET carbon emissions electricity purchased CDP scorecard, ranking WPP 2 per person from direct from renewable sources highly on climate change Including our industry-leading operations (Scope 1 and 2) (2021: 74%) (2021: A-) commitment to reduce carbon (2021: 0.32 tCO 2 e) emissions from our own operations to net zero by 2025, and across our supply chain by 2030 ### BUILDING BETTER | FUTURES FOR | 307 | | $5.9bn | | | --- | --- | --- | --- | --- | | OUR CLIENTS | | | | 3 | | | of the Fortune Global 500 | | net new billings | | | | are WPP clients, reflecting | Creative Company of the Year, | (2021: $8.7bn) | | Delivering transformational demand for our services 2022 (second year in a row) results for our clients among the world's leading companies ### BUILDING BETTER | FUTURES FOR OUR | Leader | 100% | $16.2m | | --- | --- | --- | --- | | COMMUNITIES | in the Bloomberg | in the Human Rights Campaign | committed to racial equity | | | Gender-Equality Index | Foundation Corporate Equality | and inclusion programmes | Helping to bring about Index for LGBTQ+ communities since 2020 as part of our change for the better (2021: 100%) commitment to invest $30m in society 4 over three years KEY These metrics were subject to independent limited assurance procedures by 1 Executive leadership roles are defined by WPP as the agency board and executive leadership PricewaterhouseCoopers LLP (‘PwC’) for the year ended 31 December 2022. For the results population as reported through WPP’s financial reporting system | of PwC’s 2022 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2022’, | 2 Full-time equivalent (FTE) employee | | --- | --- | | see our 2022 Sustainability Report | 3 Billings as defined in the Glossary on page 232 | | | 4 Figure excludes 2022 investments | WPP ANNUAL REPORT 20224 FINANCIAL HIGHLIGHTS STRATEGIC REPORT ## FINANCIAL HIGHLIGHTS ## Over the course of 2022 we were able to grow our business, improve ## profitability, maintain a strong balance sheet and reward shareholders ### CONTINUED STRONG 1 ## REVENUE GROWTH £14.4bn £11.8bn revenue revenue less We are on track to achieve (2021: £12.8bn) pass-through costs our goal of 3-4% growth in (2021: £10.4bn) revenue less pass-through +12.1 costs over the medium term -8.2 2 ### IMPROVING ## PROFITABILITY 14.8% £375m headline operating transformation programme We are on track to meet 2 | | margin | gross savings since 2019 | | | | --- | --- | --- | --- | --- | | our goal of headline | | | 2022 | 14.8 | | | (2021: 14.4%) | (2021: £245m) | | | | 15.5-16.0% operating | | | 2021 | 14.4 | margin over the 2020 12.9 medium term ### MAINTAINING LOW ## LEVELS OF NET DEBT £2.5bn 1.5x x) adjusted net debt ratio of adjusted net debt We remain in line with our | | at year end | to headline EBITDA | | | | --- | --- | --- | --- | --- | | leverage target of 1.5-1.7x | | | 2022 | 1.5 | | | (2021: £0.9bn) | (2021: 0.9x) | | | average adjusted net debt/ 2021 0.9 3 headline EBITDA 2020 1.6 ### REWARDING ## 39.4p £807m p) ### SHAREHOLDERS dividends per share returned to shareholders Our dividends per share grew (2021: 31.2p) through share buybacks 26% over the last year and 2022 39.4 (2021: £729m) represent 40% of our headline 2021 31.2 EPS, which is in line with our target pay-out policy. We also bought back some of our shares to provide additional value to shareholders 1 Like-for-like growth as defined in the Glossary on page 232 2 Headline operating profit of £1,742m, as a percentage of revenue less pass-through costs of £11,799m. Reported profit before tax was £1,160m (2021: £951m) 3 See definitions in the Glossary on page 232 HEADLINE OPERATING MARGIN REVENUE LESS PASS-THROUGH AVERAGE ADJUSTED NET DIVIDENDS PER SHARE % COSTS GROWTH DEBT/HEADLINE EBITDA ( % ( 2022 AVERAGE ADJUSTED NET | REVENUE LESS PASS-THROUGH | | | 5WPP ANNUAL REPORT 2022 | | --- | --- | --- | --- | | 2021 DEBT/HEADLINE EBITDA | 1 | 2 | | | DIVIDENDS PER SHARE HEADLINE OPERATING MARGIN COSTS GROWTH | | | | | (x) 2020 2021 39.4 | | | | | 2020 1.5 2021 +6.9 2022 +6.9 14.8 2021 2020 (p) % % 2020 2020 | 24.0 | | | STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT ## CHIEF EXECUTIVE’S ## STATEMENT Leading companies turn to us not just for support in building their brands and selling their products, but also in understanding and leveraging their data, harnessing the potential of new technologies like AI, and transforming their businesses for the future. Our performance in 2022 reflected the success of our own transformation, as we saw like-for-like organic growth across all our major creative, media, public relations and specialist agencies. Since 2019 our like-for-like revenue less pass-through costs has grown by 10%, headline operating profit is 15% higher and headline EPS is up 26%. Our adjusted net debt has been reduced to sustainable levels, while over £3.4 billion has been returned to shareholders. The reshaping of our Company over the last four years means we now provide every service required for success in ## It was a year of strong demand for our contemporary marketing, fully integrated and at a global scale. ## services and strong growth for WPP and Our future-facing offer demonstrated its ## our agencies power as we won net new billings of $5.9 billion in 2022, including new assignments with a range of major brands from Audible, Danone and SC Johnson to Nationwide and | Investing in communications, customer | Verizon. We grew relationships with existing | | --- | --- | | experience, commerce, data and technology | clients and our unprecedented global | | remained a priority for our clients in 2022. | partnership with The Coca-Cola Company | continued to expand. As a result, it was a year of strong demand ### for our services and strong growth for WPP EXTRAORDINARY WORK and our agencies – despite global economic The quality of our work and the talent of turbulence and uncertainty. our people were recognised not only by our clients, but by the industry as a whole. | Some might see this growth as | At the Cannes Lions Festival WPP was named | | --- | --- | | counterintuitive given the economic | Creative Company of the Year for the second | | situation. However, the marketing world | year running while Ogilvy was recognised | | is fast-changing and increasingly complex, | as Network of the Year, an award it last won | | with new platforms like TikTok emerging, | in 2016. | and existing platforms like Netflix taking | advertising for the first time. Clients need | Our agencies were responsible for some | | --- | --- | | modern, trusted partners such as WPP to | of the most innovative and impactful work | | help them navigate this new landscape. | of 2022. As with so much of what we do | today, that work often challenged traditional expectations of our industry’s output and services. WPP ANNUAL REPORT 20226 CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT ## IN 2022 WE EssenceMediacom, as part of our WPP EXCEPTIONAL TALENT Open X team for The Coca-Cola Company, The exceptionally talented people behind ## CONTINUED launched a global music platform for Sprite this work are what sets us apart, and in ## TO INVEST IN which included livestreaming festivals to 2022 we continued to invest in attracting, ## ATTRACTING, | | nearly 10 million people. | engaging and developing the best in our | | --- | --- | --- | | ENGAGING AND | | industry. Our Company is made up of the | | | Ogilvy helped Sainsbury’s launch the | world’s best media planners and buyers, | ## DEVELOPING SmartShop app, which enables customers creatives, strategists, data scientists, ## THE BEST IN to shop, scan and checkout autonomously. technologists, public relations professionals, ## OUR INDUSTRY” designers, client leaders and more. The To mark Nike’s 50th anniversary AKQA used diversity of this talent and their ability to Mark Read machine learning to stage a virtual showdown co-operate to produce ideas is why clients Chief Executive Officer between the Serena Williams who won her come to us. first Grand Slam in 1999, and the Serena who won her last in 2017. In a rapidly changing industry, ongoing personal development is critical, and in Wunderman Thompson built an AI system for September we launched the WPP Future global paint manufacturer Sherwin-Williams Readiness Academies, our first global that allowed customers to produce unique learning programme to help everyone colour palettes based on the spoken word. in the Company develop the skills and knowledge needed to thrive in today’s AI was also at the heart of a collaboration technology-driven world. between Microsoft and WPP for Haleon (with Grey leading the creative execution) We know that an inclusive culture attracts that helps blind and low-vision people the best people and allows creativity to access information on healthcare packaging. blossom. This year we were named in the Bloomberg Gender-Equality Index for the VMLY&R, Hill+Knowlton Strategies and fifth consecutive year. We received a top Makerhouse helped Ford to tackle score in the Human Rights Campaign’s homophobia by giving the new Raptor a Corporate Equality Index, and were featured ‘very gay’ digital paint job, while the brilliant among the best places to work for LGBTQ+ Reality Flag campaign (also from VMLY&R, equality for the second time. plus BCW, Wavemaker and Hogarth) highlighted the freedoms denied to LGBTQ+ We also know that diversity is most lacking people in 29 American states. at the most senior levels of our industry. The proportion of our executive leaders | Mindshare created the first sustainability-led, | across the Company who are women was | | --- | --- | | ad-funded programme in the UK to raise | 40%  in 2022 (2021: 39%), and within this | | awareness of the scale of food waste, for | the proportion of women on the Executive | | Unilever brand Hellmann’s. | Committee grew from 35% to 40%. In the | FTSE Women Leaders Review we climbed And FGS Global helped Bayer inspire action from ninth to sixth in the FTSE 100. to address the global water crisis through integrated stakeholder engagement, media In the United States, our largest market, relations and digital campaigning. the proportion of our senior and executive managers who are non-white has risen from There are more examples of our agencies’ 14% in 2019 to 22% in 2022. genre-defying work throughout this report. These metrics were subject to independent limited assurance procedures by PricewaterhouseCoopers LLP (‘PwC’) for the year ended 31 December 2022. For the results of PwC’s 2022 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2022’, see our 2022 Sustainability Report 7WPP ANNUAL REPORT 2022 STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT | FUTURE-FACING CAPABILITIES | To meet client demand for more integrated | | --- | --- | | During 2022 we enhanced our capabilities | solutions and to continue to simplify our | | through a number of acquisitions that | own organisation, we announced the | | expanded our offer in experience, commerce | creation of EssenceMediacom, which | | and technology, and built our presence in | combines Essence’s skills in performance, | | strategically important regions. | data, analytics and creative technology | with MediaCom’s multichannel audience These included influencer marketing agency planning and strategic media expertise. Village Marketing in North America; Latin | American ecommerce agency Corebiz; | Following the merger of Finsbury Glover | | --- | --- | | Bower House Digital, a leading marketing | Hering and Sard Verbinnen at the end of | | technology services provider in Australia; | 2021, the combined FGS Global business | | Montreal-based commerce specialist Diff; | had a very strong 2022, ending the year | | and New York digital transformation agency | at the top of the Mergermarket M&A tables. | Fēnom Digital. Our industry-leading strategic partnerships | JEREMY BULLMORE | We also invested organically to support | with established and emerging technology | | --- | --- | --- | | | long-term growth opportunities, integrate | companies enable us to build our own | | We started 2023 with the sad news that | and accelerate our data capabilities, embed | expertise, gain unique insights and develop | | our dear friend and colleague Jeremy | AI into our workflows and drive innovation. | differentiated services for clients. | Bullmore had passed away, aged 93. As the examples I shared earlier During the year we launched new Jeremy was one of the most admired and demonstrate, WPP agencies are at the partnerships with Epic Games, the company cherished people in our industry. He forefront of pairing human creativity with behind Fortnite, and with Instacart, the began his career at J. Walter Thompson the growing suite of generative AI tools to leading online grocery platform in North London in 1954 as a copywriter and left in produce new content, experiences and America. Early in 2023 we announced 1987 as chairman, before serving on the campaigns for our clients – all with greater partnerships with payments solutions Board of WPP and in other roles with us efficiency and speed. vendor Stripe, and with BigCommerce, for another 30-plus years. a leading ecommerce platform. | He not only helped to launch countless | Choreograph, our data company, continued | | | --- | --- | --- | | brands and careers, he also elevated the | to develop its products and services while | These partnerships strengthen our existing | | business of advertising as a whole with | delivering innovative work for clients | leadership position in key growth areas such | | his insight, forensic analysis and always- | including Ford, Unilever and Bayer. Since | as digital commerce. Today we have over | | original commentary. | its inception in 2021 it has played a central | 13,500 commerce specialists within WPP, | | | role in client growth and retention, as well | and we manage more than $40 billion of | No time spent with Jeremy was ever as assignment wins including The Coca-Cola GMV (gross merchandise value) for clients. wasted. Whenever you went to see him Company and Verizon. in his office, he would make you think, make you laugh, and make you In 2022 we launched GroupM Nexus as the challenge whatever assumption you performance engine for our media agencies. had gone in with. This brought together 9,000 practitioners in When Campaign magazine described addressable TV, AI, retail media and him as “adland’s greatest philosopher”, commerce, programmatic, search and it was no exaggeration. He was without social – a depth and breadth of expertise question among the most influential in digital channels and platforms unrivalled figures in modern advertising, and his in our industry. passing is a loss to the entire industry. We will miss him terribly. Read the best of Jeremy’s work at: www.bestofbullmore.com WPP ANNUAL REPORT 20228 CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT | BEYOND BUSINESS | The need to tackle climate change becomes | trained Allies across our agencies whose role | | --- | --- | --- | | WPP’s purpose is to use the power of | ever more urgent. Following our industry- | is to encourage open conversations about | | creativity to build better futures for our | leading commitment in 2021 to reach net | mental health in the workplace and to guide | | people, planet, clients and communities. | zero across our value chain by 2030, GroupM | colleagues to help and resources. We plan to | | You can find detailed information in our | last year launched a global framework for | extend the programme into India and Brazil | | Sustainability Report on our progress in | media decarbonisation, with the support | in 2023. | | each area, but I wanted to highlight some | of a coalition of leading clients. Hogarth is | | | of the ways in which our people and | addressing the same challenge in production. | We also launched an initiative called Making | | agencies made a difference in 2022. | | Space, beginning with a global, Company- | | | Our agencies have long been required to | wide two-day additional holiday to give | | It was a year in which devastating events | follow rigorous standards of truthfulness, | everyone the chance to refresh and recharge. | | in many parts of the world directly impacted | fairness and accuracy in their work for | The initiative will continue through a range of | | our people, their families and their | clients and the responsibility to meet those | programmes and events designed to ensure | | communities – from the war in Ukraine and | standards – in a world where disinformation | our people have the space to look after their | | the terrible flooding in Pakistan to ongoing | is rife – has never been more important than | physical, mental and emotional wellbeing. | | racially motivated discrimination and violence | it is today. | | | in the United States and beyond. This year, | | In closing, I would like to thank my leadership | | of course, has brought the horrific aftermath | In 2022 we launched a Green Claims Guide, | team for their tremendous contribution to | | of the earthquakes in Turkey and Syria. | informed by guidance from regulators such | our success, not least our Chief Financial | | | as the UK Competition & Markets Authority | Officer John Rogers as he moves on to seek | | At WPP we try, whenever we can, to match | and US Federal Trade Commission, and | new challenges. I have appreciated his | | words with actions. In addition to direct | underpinned by legal compliance advice. | partnership during the last three years and | | support for our people in Ukraine we formed | The guide is designed to help our people | wish him all the best in his future endeavours. | | a partnership with UNHCR, the UN’s refugee | make honest, material environmental claims | | | agency, and launched an employee match- | on behalf of clients and to avoid content | Our people are the reason I have such | | funding campaign that raised $1.34 million. | that could be misleading in any way. | confidence in the future of WPP. Their skills | | We have run similar campaigns with | | and talent are what make us tick, and their | | UNHCR for the relief efforts in Pakistan, | To bring greater structure to decision-making | curiosity and optimism are what keep us | | Turkey and Syria. | at an operational level, and in line with our | at the forefront of change in our industry. | | | commitment to acting ethically in all aspects | Technology and complexity were once seen | | We were the first in our industry to announce | of our business, we established a revised | as a threat to companies like WPP; today | | our exit from Russia, and we supported the | Assignment Acceptance Policy and | they make our services crucial for clients | | Ukrainian government through a pro bono | Framework to help our agencies review | as they reinvent their own businesses. | | initiative to encourage inward investment | new client work. The framework looks at all | | | and help revitalise the country’s economy. | sectors but we have developed a specific set | WPP’s performance ultimately relies on the | | | of principles for working with and assessing | collective passion, creativity and commitment | | As the three-year anniversary of the killing | new assignments from energy clients, given | of our people, and the trust our clients place | | of George Floyd approaches, one of the | their central role in the energy transition (see | in us as a result. As ever, I am very grateful to | | cornerstones of WPP’s response, our Racial | page 31 of the 2022 Sustainability Report). | each and every one of them. | Equity Programme, is delivering material ### outcomes in communities across the world. MAKING SPACE FOR OUR PEOPLE Many of the events of 2022, as the world | The programme funded a number of | emerged from the pandemic, placed | | | --- | --- | --- | | initiatives in 2022. The Detroit Experience | significant strain on our people and their | | | Studio offered a free, 10-week immersive | wellbeing. While they responded with | Mark Read | | experience for Black and Brown young | immense professionalism, resilience and | Chief Executive Officer | | people to explore creative careers; | dedication to their colleagues and clients, | 23 March 2023 | | Health4Equity’s work included campaigns | it was important that we did all we could | | | to empower Black mothers and mothers-to- | to support them. | | be and to drive early prostate cancer | screening for Black men; and RGBlack helped | We continued to expand our Mental Health | | --- | --- | | to mitigate the impacts of coded bias in | Allies programme with roll-outs in the United | | AI-powered tools to create more equitable | States and Singapore, following its successful | | work. More details of these and other projects | pilot in the UK. We now have more than 550 | can be found in our Sustainability Report. 9WPP ANNUAL REPORT 2022 STRATEGIC REPORT WPP ANNUAL REPORT 202210 STRATEGIC REPORT ## NEVER DONE ## EVOLVING ### There’s only one Serena Williams. ### But what if there were two? OFFER ### TECHNOLOGY, EXPERIENCE AGENCY ### AKQA CLIENT ### NIKE Even as winner of the most Grand Slam titles in tennis history, Serena Williams always finds new ways to shatter expectations. In celebration of its 50th anniversary, Nike wanted to showcase the power of her game and how it has evolved over time. Harnessing advanced AI, Nike and AKQA created a match between 1999 Serena, when she won her first Grand Slam title, and the Serena who won the 2017 Australian Open. Machine learning modelled each era’s playing style: decision-making, shot selection, reaction time, recovery and agility, based on archive footage. Models were brought to life by re-rendering them into an entirely new scene and having them appear to be playing and responding to each other. The remarkable result was seeing both Serenas play each other for 130,000 games and 5,000 matches, enough to stream for an entire year if played back-to-back. The simulated games aren’t just a chance to look back at historic accomplishments; they exhibit Serena’s decade-after-decade determination to never stop evolving. ## 1.7m YouTube viewers watched the grand final 11WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## KEY EVENTS ## OF THE YEAR ## Investment in talent and new capabilities helped us 1 ## attract new business and win recognition in 2022 APRIL FEBRUARY – WPP appoints Kyoko – WPP acquires influencer Matsushita as Chief JUNE marketing agency Village ExecutiveOfficer in Japan – WPP wins industry’s Most Marketing – MediaCom wins digital Creative Company at Cannes – WPP and Instacart Skyremitin the UK Lions Festival JANUARY partnership announced – WPP appoints Rose – Ogilvy named Network of Herceg as President – Dyson appoints Mindshare the Year and LATAM Regional inAustralia and China as its media agency Network of the Year NewZealand JANUARY MARCH MAY JUNE – WPP recognised – WPP leads WARC – Wavemaker wins Amazon's – WPP appoints Michael inBloomberg rankings of marketing Audible globalmedia account Houston as President Gender-Equality Index excellence ofitsUnited States business – WPP named among best places to work for LGBTQ+ equality by the – WPP discontinues – Ogilvy appointed Audi’snew Human Rights Campaign operations in Russia creative agency of record Foundation – WPP announces | 1 Timeline includes events announced in 2022 | | acquisition of marketing | | --- | --- | --- | | | – WPP and Epic Games partner | technology leader | | | to accelerate innovation for | BowerHouse Digital | clients in the metaverse – Danone consolidates its global media account with Wavemaker WPP ANNUAL REPORT 202212 KEY EVENTS OF THE YEAR STRATEGIC REPORT OCTOBER DECEMBER – WPP acquires branding agency – WPP acquires Diff, a Passport Brand Design leading commerce JULY agency in Canada – GroupM introduces global – Ogilvy named lead framework for media agency for Verizon's decarbonisation AUGUST B2B business – WPP named a Leader – WPP acquires leading among Global Marketing ecommerce agency Service Providers by – WPP appoints Juan Pedro Corebiz Forrester Moreno as President of its Spanishbusiness JULY SEPTEMBER NOVEMBER DECEMBER – WPP creates Design – Devika Bulchandani becomes – WPP announces appointment – WPP maintains CDP Bridgeand Partners CEO of Ogilvy and joins WPP of new CFO, Joanne Wilson A- ESG rating Executive Committee – GroupM publishes This Year Next Year global end-of-year advertising forecasts – Frank-Michael Schmidt – Karen Blackett OBE appointed President – WPP launches Making appointed President ofWPP in Germany Space wellbeing initiative ofWPP in the UK – SC Johnson consolidates – WPP acquires – WPP acquires ecommerce global creative account Fēnom Digital, a – TheFinancial Times consultancy Newcraft with Ogilvy and VMLY&R fast-growing digital consolidates all its media Commerce transformation agency planning and buying with Essence – WPP acquires leading communications agency JeffreyGroup 13WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## OUR BUSINESS MODEL ## WPP is the creative transformation company ## OUR OFFER ### Our offer to clients covers four areas that are critical to modern marketing: ### communications, experience, commerce and technology ### COMMUNICATIONS EXPERIENCE COMMERCE TECHNOLOGY We create powerful ideas based We bring brands to life through We help our clients sell We build and optimise on deep insights to connect engaging, unexpected and wherever and however their technology and data solutions brands with audiences at the interactive experiences. This consumers want to buy. to fit our clients’ needs. Services right moment and in the right includes customer-facing We advise on, build, run and include enterprise systems work channels. This includes paid platforms, such as websites, activate ecommerce and – architecture design, systems advertising campaigns and applications and stores, as physical channels, from direct- implementation, managed public relations well as broader touchpoints like to-consumer websites and services and data analytics – and product design and packaging stores to marketplaces and platforms such as CRM, content social commerce and experience management, and data management To support our future growth, during 2022 we invested in new strategic acquisitions and partnerships – and in our existing operations – 1 to further modernise our offer, strengthen the capabilities of our agencies and serve clients in new and better ways ### A P A M Village Marketing, an industry A partnership with Epic Games, the Corebiz, a Latin American Finecast, Xaxis and GroupM Services leader in influencer marketing and interactive entertainment company, ecommerce agency specialising combined to form GroupM Nexus, the creator economy partnerships in to help WPP agencies deliver a new in VTEX, one of the largest world’s leading media performance North America era of digital experiences for brands enterprise digital commerce organisation in the metaverse platforms in the region ### A M A A JeffreyGroup, one of the most The merger of Design Bridge and Newcraft, a data-first European Bower House Digital, a marketing respected independent corporate Superunion to create a single, ecommerce consultancy based technology services agency based communications, public affairs and world-leading design company, in the Netherlands in Australia marketing firms in Latin America Design Bridge and Partners ### A A A Passport, a leading brand design Diff, a commerce agency based Fēnom Digital, one of the fastest- agency based in California in Canada, providing tailor-made growing digital transformation commerce solutions agencies in North America ### P A partnership with Instacart in North America, offering advertising solutions and measurement tools for CPG brands 1 In 2022, Village Marketing, Newcraft, Diff, and Fēnom Digital joined Wunderman Thompson; KEY A Acquisition P Partnership M Merger Corebiz and Passport Brand Design joined VMLY&R; Bower House Digital joined Ogilvy; and JeffreyGroup joined Hill+Knowlton Strategies WPP ANNUAL REPORT 202214 OUR BUSINESS MODEL STRATEGIC REPORT ## OUR CAPABILITIES ### Our success depends on strong talent across all marketing disciplines, dynamic client ### relationships, the scale and breadth of our offer, and our data and technology skills ### THE TALENT OF OUR PEOPLE – Strong creative reputation reflected by industry awards including Cannes Lions, WARC and ## many others 115,000 – Excellence in media planning and buying people – Continuing to attract top talent to WPP and our agencies – Deep understanding of culture, consumers and brands | OUR RELATIONSHIPS | – Strong and enduring CEO, CMO and CIO relationships | | | --- | --- | --- | | WITH THE WORLD’S MOST | – Global Client Leaders, providing easy access to the | | | | breadth and depth of WPP's offer | 307 | ### SUCCESSFUL COMPANIES | – Unique partnerships with leading technology | of the Fortune Global 500, | | --- | --- | | companies, providing us with preferential access | 60 of the FTSE 100, and all | | to training, new product development and joint | 30 of the Dow Jones 30 are | | go-to-market programmes | our clients | | HOME TO MANY OF | – The number one global media buying organisation, | | | --- | --- | --- | | THE INDUSTRY’S MOST | GroupM, and its industry-leading agencies | | | | – Iconic creative brands: including AKQA, Ogilvy, | $5.9bn | ### POWERFUL AND RESPECTED 1 ### AGENCY BRANDS VMLY&R and Wunderman Thompson of net new billings in 2022 – Leading public relations agencies, such as BCW, Hill+Knowlton Strategies and FGS Global – Integrated agency model, combined with global reach and scale | THE TECHNOLOGY AND DATA | – Capability in modern marketing areas of commerce, | | | --- | --- | --- | | SKILLS AND PLATFORMS | experience, data and technology, as well as | | | | traditional communications | 13,500+ | ### TO DELIVER MODERN ### MARKETING SOLUTIONS – Deep innovation capabilities: including WPP Open, people delivering commerce our common data and technology platform; GroupM services globally Nexus, our media performance organisation; and Choreograph, our data company 1 Billings as defined in the Glossary on page 232 15WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR BUSINESS MODEL ## OUR AGENCIES ### We provide services to clients through integrated creative agencies, ¹ ### media agencies, public relations agencies and specialist agencies ### GLOBAL INTEGRATED AGENCIES Our creative services include advertising, marketing and brand strategies and campaigns across all media. We are increasing our share in 17,000 15,000 13,000 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, 2 6,000 5,000 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 GroupM Nexus, and data and technology 42,000 3 (including the GroupM agencies below) 4 10,000 7,000 10,000 500 ### PUBLIC RELATIONS AGENCIES Our PR firms help clients communicate with their stakeholders, from consumers and investors to governments and NGOs. Purpose, reputation, sustainability and digital 4,000 3,000 1,000 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 5 | | | 850 | 1,000 | 1,000 | | --- | --- | --- | --- | --- | | | 1 These agencies represent 95% of WPP's revenue less pass-through costs and employees | | | | | | 2 Includes employees in AKQA and Grey | | | | | KEY | 3 Includes employees in GroupM and its agencies: Mindshare, EssenceMediacom, Wavemaker, M/Six, and other smaller agencies not | | | | listed here Employees 4 In January 2023 the GroupM agencies Essence and MediaCom merged to form EssenceMediacom 5 In January 2023 Superunion and Design Bridge merged to form Design Bridge and Partners WPP ANNUAL REPORT 202216 OUR BUSINESS MODEL STRATEGIC REPORT ## OUR OPERATING MODEL ### We meet our clients’ needs through collaboration on a global scale. This drives our revenue ### while keeping costs down, funding further investment for the benefit of our agencies, clients, ### people and shareholders The work we do for clients helps them market their brands, WPP CLIENTS services and products across a range of digital and traditional media channels. We assign Global Client Leaders to many of our clients to ensure they have easy access to the breadth The core WPP team supports and depth of WPP. Our client portfolio is highly diversified our agencies and the work they and covers every business sector. Our top 30 clients do for our clients. It develops account for 30% of revenue less pass-through costs and executes the strategy of the Company, allocates capital to best meet client needs and drive Revenues are principally derived from fixed-fee contracts, our growth, and provides a range REVENUE retainer agreements and commissions on media placements. of support functions in areas Some engagements include performance incentives linking such as finance, people, legal revenue to quantitative and qualitative goals. Our revenues and compliance, strategy, tend to vary with the economic environment and client communications, marketing and demand, but our broad geographic reach, diverse client growth, operations, sustainability base and increased focus on high-growth areas of and technology experience, commerce and technology are driving greater resilience in our business Most of our costs are variable in nature. 65% of our total COSTS headline costs are staff costs; 21% are pass-through costs; 10% are general and administrative costs; and 4% are AGENCIES 1 establishment 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 Our agencies provide a broad directly to clients. Pass-through costs are predominantly range of marketing communications media and data collection costs services. Our segments are: global integrated agencies, covering media planning and buying and creative Our profit and cash generation has historically been strong agencies, which represent 82% of PROFIT AND CASH and we expect this to continue, supported by our goal of revenue less pass-through costs; annual gross cost savings of around £600 million by 2025. public relations agencies, which This in turn will enable us to continue to invest in our people, account for 10%; and specialist technology infrastructure, campuses and standardised agencies, representing 8% systems for our people and clients. We intend to grow the dividend annually and to pay out approximately 40% of Read more on page 16 headline earnings per share REINVESTMENT PEOPLE CAPABILITIES PLATFORMS 1 Total headline costs comprise costs of services and general and administrative costs DIVIDENDS excluding losses/(gains) on disposal of investments and subsidiaries, goodwill impairment, amortisation and impairment of acquired intangible assets, intangible asset impairment, restructuring and transformation costs, restructuring costs in ACQUISITIONS relation to Covid-19, property-related costs, gains on remeasurement of equity interests arising from a change in scope of ownership and litigation settlement 17WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## WHERE WE ARE ## COUNTRIES ## WPP companies operate in more than ## 100 countries, providing unrivalled global North America 38% ## reach and scale United Kingdom 14% Western Continental Europe 20% ROW (AP, LA, AME, CEE) 28% | NORTH AMERICA | | UNITED KINGDOM | | WESTERN | | | CENTRAL & | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | CONTINENTAL EUROPE | | | EASTERN EUROPE (CEE) | | | PEOPLE PEOPLEREVENUE | | | REVENUE | PEOPLE | | REVENUE | PEOPLE REVENUE | | | | | | | | | | 4,000 | £0.2bn | | | | 13,000 | £2.0bn | | | £2.9bn | | | | | 24,000 | | | | 23,000 | | | | £5.5bn Our 20 largest markets 1 USA UK Germany Greater China 2 India Australia Brazil Canada France Italy Spain Singapore LATIN AMERICA (LA) AFRICA & MIDDLE EAST (AME) ASIA PACIFIC (AP) Netherlands PEOPLE REVENUE PEOPLE REVENUE PEOPLE REVENUE Denmark Dubai South Africa 5,000 £0.4bn 15,000 £0.7bn £2.7bn Belgium REVENUE BY REGION 31,000 Mexico (2022) Japan Poland 1 Rank: revenue less pass-through costs 2 Including Hong Kong and Taiwan WPP ANNUAL REPORT 202218 STRATEGIC REPORT ## WHERE WE ARE ## CAMPUSES Campuses put into practice our commitment to support people, planet, clients and communities. They are also key to our transformation programme, unlocking considerable savings through the consolidation of less efficient buildings. WPP campuses bring our agencies together in one inspiring, collaborative workspace. They are designed to encourage flexible and hybrid working, and to give clients access to the breadth and depth of WPP talent in one location. Every campus is built to the highest sustainability standards. Our Düsseldorf Campus provides 34,000 square metres of working space plus 3,700 square metres of green space, and is powered by 100% Our new Toronto Campus brings together 2,000 people from different WPP agencies renewable electricity. It even has its own beehives to supply WPP honey. As with every WPP campus across the world, its policy is not to provide single-use ## BRINGING OUR PEOPLE plastic items. ## TOGETHER IN CAMPUSES ## In 2022 we added five new campuses: ALLOWS US TO BE MORE Brussels, Düsseldorf, Santiago, Tokyo and ## SUSTAINABLE, MORE CREATIVE Toronto. In January 2023 we opened a new ## AND MORE COLLABORATIVE. campus in Guangzhou, China, taking the ## total to 37, accommodating around half THAT DRIVES BETTER RESULTS ## our people. We plan to open additional FOR OUR CLIENTS” campuses including Atlanta, Paris and Manchester later in 2023. Jennifer Remling Chief People Officer, WPP We remain on track to achieve our goal ## 65+ to deliver a global network of at least 65 campus buildings, accommodating 85,000 campuses to be people, by 2025, eventually replacing all our completed by 2025 smaller offices across the globe and reducing our overall need for space by 15-20%. | | Amsterdam | Guangzhou | Madrid | San Francisco | | --- | --- | --- | --- | --- | | | Beijing | Gurugram | Mexico City | Santiago | | | Bogota | Hamburg | Milan | Shanghai | | | Brisbane | Helsinki | Montevideo | Singapore | | 37 | Brussels | Hong Kong | Mumbai | Tok yo | | | Bucharest | Jakarta | NYC 200 5th | Toronto | campuses opened | to date | Chicago | Kansas City | NYC 3CC | Warsaw | | --- | --- | --- | --- | --- | | | Detroit | Lisbon | NYC 3WTC | | | | Düsseldorf | London Rose Court | Prague | | | | Frankfurt | London Sea Containers | Rome | | 19WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## FORD: VERY ## GAY RAPTOR ### Redefining tough to drive out ### discrimination OFFER ### COMMUNICATIONS AGENCY ### HILL+KNOWLTON STRATEGIES, ### MAKERHOUSE, VMLY&R CLIENT ### FORD EUROPE In summer 2021, Ford Europe celebrated the 25th anniversary of Ford Pride, its LGBTQIA+ Employee Resource Group. At the same time, Ford launched its new Ranger Raptor utility truck. So when a homophobic comment from a Ford fan describing its latest ‘badass truck’ as ‘very gay’ was spotted on Ford’s YouTube channel, Ford couldn’t let it go unchecked. Instead of recommending a ‘typical’ brand response, Ford, in consultation with Ford Pride members and WPP, decided not only to call out the comment, but to use it as a way to show its support to its LGBTQIA+ employees and customers – by re-editing the online film to give the Ranger Raptor a new digital rainbow paint job, and reposting it across Ford’s social channels. “Very Gay was a compliment, right?” The response was phenomenal but mixed – with some threatening to boycott the brand but others calling for Ford to make the Very Gay Raptor real. Ford created a one-of-a-kind Very Gay Raptor to act as a symbol of LGBTQIA+ allyship, a core pillar of its company values, which was proudly unveiled at the Christopher Street Day Pride parade in Cologne. #VeryGayRaptor became Ford Europe’s most successful organic social media post ever and ignited a mission to redefine tough and drive out discrimination. ## 92% 96m positive-neutral media reach social sentiment | 10.6m | Awards | | --- | --- | | social media | 12 industry awards including | | impressions | Cannes Lions Gold for Media | (Automotive) WPP ANNUAL REPORT 202220 STRATEGIC REPORT 21WPP ANNUAL REPORT 2022 STRATEGIC REPORT # STAKEHOLDER ENGAGEMENT We rely on active engagement with our stakeholders to drive a healthy business We engage with openness, optimism and a commitment to extraordinary work For more on how the Board engages with our stakeholders, please see pages 109 to 111. And to find out how we engage on sustainability, please see the 2022 Sustainability Report As a Jersey incorporated company, WPP is not subject to UK legislation. However, as a matter of good governance and in order to comply with the provisions of the 92th of Congress Governance Code, the Board considers the matters described in Section 172 of the Companies Act 2004 in its decision-making. 22 WPP ANNUAL REPORT 2022 ## SHAREHOLDERS Our shareholders provide the capital to invest in the business and support the valuation and liquidity of WPP shares. Shareholders benefit from the Board acting in the best interests of the Company and investing for long-term value generation ## CLIENTS, PARTNERS AND SUPPLIERS 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 We have global partnerships with 28 leading technology companies 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 optimise our own environmental impact, but recognise that our greatest contribution 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, as do many of our stakeholders, that acting responsibly is both the right thing to do and in our long-term interests STAREHOLDER ENGAGEMENT STRATEGIC REPORT HOW WE ENGAGE WITH STAREHOLDERS HOW WE REACT TO STAREHOLDERS # 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 Regulatory News Service announcements - We continued our series of webinars in 2022, providing investors and analysts with deeper insight into individual agencies, products and services within WPP - The 2022 AGM was live streamed via a webcast hosted by the Chairman and Chief Executive, enabling shareholders to participate remotely, if they chose - In 2022, total cash to shareholders through dividends and share buybacks exceeded £1.1 billion (2021: £1.0 billion) # CLIENTS, PARTNERS 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 - Our technology partnership with Epic Games resulted in more than 4,700 colleagues being trained in the bespoke Metaverse Academy, the first partnership and training programme of its kind - We established a revised Assignment Acceptance Policy and Framework to help our agencies review new client work. See page 77 for details - We aim to support our clients in delivering lasting positive impact through their brands. Against this background we were pleased to achieve a Likelihood to Recommend score for Diversity, Equity and Inclusion of 8.2 out of 10 from our clients in 2022 # 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 2022, we contributed £1.5 billion in taxes to public finances (2021: £1.4 billion) - We participated in consultations associated with ESG disclosure requirements and regulation, and supported efforts to increase ESG standardisation and alignment # 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 - To help us better support our people, we relaunched our all-staff survey in 2022, achieving our highest ever engagement levels with 72,700 employees taking part. See page 36 for more details - We continue to link our DESI goals to leaders' compensation and performance reviews - In 2022, we invested £31.3 million in learning and development opportunities for our people (2021: £29.7 million) # 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 2022, GroupM created a client coalition of leading advertisers – collectively representing $10 billion in global advertising investment – with a shared commitment to accelerate the decarbonisation of the world's media supply chain - We launched a new Green Claims Guide, supported by training sessions, to help equip our people with principles and practical tips to make accurate, authentic and material environmental claims and avoid misleading claims # 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 India - In June 2020, we committed to invest $30 million over three years in internal and external initiatives to advance racial equity. Since then, we have committed $16.2 million to inclusion programmes, excluding amounts invested in 2022 which we intend to report later in the year - To support those affected by events in Ukraine, we formed a partnership with UNHCR, including a staff match-funding appeal that raised $1.34 million, and ran similar campaigns for those impacted by floods in Pakistan and the earthquakes in Turkey and Syria - Our total social contribution in 2022 was £35.5 million (2021: £41.0 million) Including problems work for NGOs and charities, negotiating how media space on behalf of the three clients, and cash donations to charities WPP ANNUAL REPORT 2022 23 STRATEGIC REPORT ## INVESTMENT CASE ## We benefit from global scale, ## UNRIVALLED GLOBAL REACH UNRIVALLED GLOBAL REACH AND SCALE ### 1 ## 100+ #1 – A global network of leading agencies, providing the broadest geographic reach ## exposure to growth markets, a AND SCALE countries in our home to GroupM, the – Home to GroupM, the number one media buying operation worldwide, responsible for global network leading global media ## deep understanding of clients’ over $60 billion of global media billings 1 investment company – Present in countries worldwide, providing deep in-market expertise ## needs, leading capabilities and ## a strong financial foundation ## ATTRACTIVE AND GROWING ATTRACTIVE AND GROWING ADDRESSABLE MARKETS ### 2 ## 8.4% 13.1% – Extended our offer in high-growth areas of experience, commerce and technology ## ADDRESSABLE MARKETS estimated growth estimated growth – Repositioned traditional communications offer to faster-growth digital communications in global digital in global retail media – Well positioned to serve the faster-growth digital segments of retail media and WPP delivered strong growth in 2022, advertising spend advertising spend connected TV 2,3 2,3 reflecting the priority placed by our clients in 2022 in 2022 – Strong exposure to structurally faster-growth economies such as China, India and Brazil on investing in communications, customer experience, commerce, data and technology. ## DEEP CLIENT RELATIONSHIPS WITH DEEP CLIENT RELATIONSHIPS WITH LEADING GLOBAL BUSINESSES ### 3 ## We are entering 2023 in a strong position, 90% 8.0 – Our clients are some of the world’s largest companies, including over 300 of the Fortune ## LEADING GLOBAL BUSINESSES with a compelling client offer and good of our top 50 clients average client Global 500 momentum from new business wins, and work with five or satisfaction score – Strong and enduring CEO, CMO and CIO relationships a robust balance sheet. more of our agencies (out of 10) – Global Client Leaders provide easy access to the breadth and depth of WPP for our largest clients We remain confident in our ability to deliver our medium-term targets as a result of the ## actions we have taken to broaden and STRENGTHS IN TECHNOLOGY SIGNIFICANT STRENGTHS IN TECHNOLOGY AND DATA ### 4 ## strengthen our services, to increase our 10,000+ 8,000+ – Scaled global partnerships with 28 leading technology companies ## AND DATA exposure to attractive industry segments data practitioners creative technologists – Deep specialisation in technical capabilities in advertising and marketing technology and to leverage our global scale. – WPP Open, our common data and technology platform for sharing innovations across WPP and its strategic technology partners, agencies and clients FINANCIAL TARGETS AND PERFORMANCE – GroupM Nexus, our media performance organisation, the industry leader in digital ## Leader channels and platforms across search, social, programmatic, AI, cross-channel WPP is ranked a leader | | | Average | optimisation, and data-driven technologies and software | | | | --- | --- | --- | --- | --- | --- | | Revenue less | Headline | adjusted | | among global marketing | | | pass-through | operating | net debt/ | – Choreograph, our data company, ranked a Strong Performer in Customer Data Strategy | | 5 | services providers costs growth margin¹ EBITDA and Activation Services by Forrester⁴ 2022 actual 6.9% 14.8% 1.46x 2 | 2023 targets 3-5% around 15.0% | 1.5-1.75x | | | | | | --- | --- | --- | --- | --- | --- | | Medium-term | | | A STRONG FINANCIAL POSITION A STRONG FINANCIAL POSITION | | | | targets 3-4% 15.5-16.0% 1.5-1.75x | | 5 | | | | | | | | | 14.8% | 1.5x | – Broad-based revenue across a wide geographic footprint and diverse client portfolio, headline operating average adjusted net covering all business sectors, providing resilient revenue streams Read more about our outlook 6 margin⁶ debt/headline EBITDA – Predominantly variable cost structure, which protects profitability during a downturn and guidance on page 65 – Attractive margin, with scope to improve through our transformation programme | 1 See Glossary on page 232 for definitions | | – Low ratio of net debt to EBITDA and over £4 billion of liquidity | | --- | --- | --- | | 2 Excluding the impact of foreign exchange | | | | | VALUE CREATION FROM | VALUE CREATION FROM STRATEGIC PLANS TO ACCELERATE GROWTH | ### 6 ## £375m 39.4p – Investment in acquisitions to enhance growth, by bringing in new capabilities, client ## STRATEGIC PLANS TO transformation dividends per share relationships and talent ## ACCELERATE GROWTH programme gross (+26% on 2021) – Transformation programme gross cost savings of around £375 million against a 2019 savings since 2019 base, and on track to reach target of £600 million by 2025, to fund reinvestment of £400 million into talent, technology and incentives to drive growth, and £200 million benefit to profitability – Intention to grow dividend annually with a pay-out ratio around 40% of headline EPS | 1 COMvergence, 2021 data, September 2022 | | --- | | 2 GroupM, This Year Next Year: Global End-Of-Year Forecasts, December 2022 | | 3 Excluding US political advertising | | 4 Forrester Wave, Customer Data Strategy and Activation Services, Q2 2022 | | 5 Forrester Wave, Global Marketing Services Providers, Q3 2022 | | 6 See definitions in the Glossary on page 232 | WPP ANNUAL REPORT 202224 INVESTMENT CASE STRATEGIC REPORT ## UNRIVALLED GLOBAL REACH UNRIVALLED GLOBAL REACH AND SCALE ### 1 ## 100+ #1 – A global network of leading agencies, providing the broadest geographic reach ## AND SCALE countries in our home to GroupM, the – Home to GroupM, the number one media buying operation worldwide, responsible for global network leading global media over $60 billion of global media billings 1 investment company – Present in countries worldwide, providing deep in-market expertise ## ATTRACTIVE AND GROWING ATTRACTIVE AND GROWING ADDRESSABLE MARKETS ### 2 ## 8.4% 13.1% – Extended our offer in high-growth areas of experience, commerce and technology ## ADDRESSABLE MARKETS estimated growth estimated growth – Repositioned traditional communications offer to faster-growth digital communications in global digital in global retail media – Well positioned to serve the faster-growth digital segments of retail media and advertising spend advertising spend connected TV 2,3 2,3 in 2022 in 2022 – Strong exposure to structurally faster-growth economies such as China, India and Brazil ## DEEP CLIENT RELATIONSHIPS WITH DEEP CLIENT RELATIONSHIPS WITH LEADING GLOBAL BUSINESSES ### 3 ## 90% 8.0 – Our clients are some of the world’s largest companies, including over 300 of the Fortune ## LEADING GLOBAL BUSINESSES of our top 50 clients average client Global 500 work with five or satisfaction score – Strong and enduring CEO, CMO and CIO relationships more of our agencies (out of 10) – Global Client Leaders provide easy access to the breadth and depth of WPP for our largest clients ## STRENGTHS IN TECHNOLOGY SIGNIFICANT STRENGTHS IN TECHNOLOGY AND DATA ### 4 ## 10,000+ 8,000+ – Scaled global partnerships with 28 leading technology companies ## AND DATA data practitioners creative technologists – Deep specialisation in technical capabilities in advertising and marketing technology – WPP Open, our common data and technology platform for sharing innovations across WPP and its strategic technology partners, agencies and clients – GroupM Nexus, our media performance organisation, the industry leader in digital ## Leader channels and platforms across search, social, programmatic, AI, cross-channel WPP is ranked a leader optimisation, and data-driven technologies and software among global marketing – Choreograph, our data company, ranked a Strong Performer in Customer Data Strategy 5 services providers and Activation Services by Forrester⁴ ## A STRONG FINANCIAL POSITION A STRONG FINANCIAL POSITION ### 5 ## 14.8% 1.5x – Broad-based revenue across a wide geographic footprint and diverse client portfolio, headline operating average adjusted net covering all business sectors, providing resilient revenue streams 6 margin⁶ debt/headline EBITDA – Predominantly variable cost structure, which protects profitability during a downturn – Attractive margin, with scope to improve through our transformation programme – Low ratio of net debt to EBITDA and over £4 billion of liquidity ## VALUE CREATION FROM VALUE CREATION FROM STRATEGIC PLANS TO ACCELERATE GROWTH ### 6 ## £375m 39.4p – Investment in acquisitions to enhance growth, by bringing in new capabilities, client ## STRATEGIC PLANS TO transformation dividends per share relationships and talent ## ACCELERATE GROWTH programme gross (+26% on 2021) – Transformation programme gross cost savings of around £375 million against a 2019 savings since 2019 base, and on track to reach target of £600 million by 2025, to fund reinvestment of £400 million into talent, technology and incentives to drive growth, and £200 million benefit to profitability – Intention to grow dividend annually with a pay-out ratio around 40% of headline EPS | 1 COMvergence, 2021 data, September 2022 | | --- | | 2 GroupM, This Year Next Year: Global End-Of-Year Forecasts, December 2022 | | 3 Excluding US political advertising | | 4 Forrester Wave, Customer Data Strategy and Activation Services, Q2 2022 | | 5 Forrester Wave, Global Marketing Services Providers, Q3 2022 | | 6 See definitions in the Glossary on page 232 | 25WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## THE MARKET ## IN 2022 ## Resilient, growing and complex | ADVERTISING MARKET | TELEVISION | COUNTRY TRENDS | | --- | --- | --- | | The global marketing and advertising | TV continued its recovery to pre-pandemic | By geography, 2022 saw healthy growth in | | industry demonstrated great resilience as | levels, as advertisers valued the medium’s | most major markets. The United States, the | | brands continued to invest in marketing, | effectiveness in satisfying reach and | world’s largest ad market representing 39% | | despite turbulence in the global economy. | frequency goals, with an expected global | of total spend, is estimated to have grown | 1,2 | According to GroupM estimates, | global | growth rate of 1.7% in 2022. The robustness | 7.1% in 2022, led by digital and connected | | --- | --- | --- | --- | | advertising spend grew 6.5% in 2022. The | | in TV spend reflects the growing demand | TV. China, the world’s second-largest market | | total market value was around $800 billion | | for connected TV services such as YouTube | (with 90% driven by digital spend), declined | | and comprised three key media channels | | and Netflix, offsetting declines in traditional | 0.6% due to Covid-related lockdowns. The | | that advertisers utilise to reach consumers | | TV viewership. | UK market remained robust, growing 8.9%, | | – digital channels (internet, video and digital | | | driven by digital advertising. In the other | | display), television, and other services | | OTHER SERVICES | major mature countries of Germany, France | | (out-of-home, audio, cinema and print). | | Growth in out-of-home advertising (for | and Canada growth was strong with 5%, | | | | example on billboards) in 2022 was estimated | 7.6% and 5.8% respectively, supported by | | DIGITAL | | at 2.2%, or 18.1% excluding China, the largest | nominal GDP growth, digital spend and | | Digital advertising is the largest segment | | out-of-home market, which faced numerous | connected TV growth. In the less-mature | | of the industry, accounting for 67% of total | | lockdowns due to Covid-19. Audio was | markets of Brazil and India, growth was 9% | | advertising spend in 2022. It was also one | | projected to grow 3.8% globally in 2022, | and 15.8% respectively, again led by digital | | of the fastest growing. GroupM estimated | | supported by double-digit growth in digital | advertising and strong real GDP growth. | | that global digital ad spend grew by 9.3% | | audio channels. Demand for traditional print | | | in 2022, following unprecedented 31.9% | | services (newspapers and magazines) fell | | | growth in 2021 due to the pandemic. The | | 7.4% in 2022, as publishers continued to | | | market has also become more complex as | | diversify their offerings and revenue streams. | | ## 67% the number of scaled advertising platforms 1 of the global ad market is digital across social media and connected TV increased, providing clients with more choice, in turn requiring the advice and 1 GroupM, This Year Next Year, December 2022 expertise of agencies. 2 Excluding United States political advertising 16 15 14 9.3 15.8 22 20 19 6.5 AD MARKET GROWTH BY MAJOR COUNTRY GLOBAL AD MARKET BY MEDIA CHANNEL GLOBAL AD MARKET GROWTH 65 67 62 | | | 8.9 | | 9.0 | | --- | --- | --- | --- | --- | | (2022, %) % (2022, %) | | | | | | | 7.1 | | 7.6 | | 5.8 5.0 1.7 0.7 -0.6 Digital ● TV ● Other China France Brazil IndiaUKUS CanadaGermany Total ● Digital ● TV ● Other WPP ANNUAL REPORT 202226 AD MARKET GROWTH BY MAJOR COUNTRY GLOBAL AD MARKET GROWTH GLOBAL AD MARKET BY MEDIA CHANNEL (2022, %) ● ● ● (2022, %) % ● 2020 2022 2020 2022 2021 2021 THE MARKET STRATEGIC REPORT ## MARKET OUTLOOK GroupM forecasts global ad demand to WPP is well exposed to the growth areas, grow nearly 6% in 2023, driven by stronger reflecting increased investment, both ## 5.9% gains in connected TV, retail media and organically and through acquisitions, in global advertising expenditure fast-growing markets such as India. Beyond experience, commerce and technology predicted growth in 2023 | this, demand is expected to expand by | services. Today these areas represent | | --- | --- | | 6% annually until 2027, mainly driven by | around a quarter of our revenue less | | continued growth in digital services | pass-through costs | Growth driver OUTLOOK WHY WPP IS WELL POSITIONED DIGITAL According to GroupM, digital communications are expected to grow 8.4% – 48% of GroupM’s media billings are digital, in 2023, rising to 73% of global ad spend by 2027. Retail media, which is demonstrating our modern offer, up from advertising revenue accruing to a retail-based company, is one of the fastest 43% in 2021 growing segments, expected to grow 10% in 2023. This reflects shifts in – In April 2022, we launched GroupM Nexus, | offline to online retail advertising, as well as budgets from other media | bringing together 9,000 practitioners globally | | | --- | --- | --- | | | in addressable TV (Finecast), | 3 | | owners towards retail media networks | | AI, retail media | and commerce, programmatic (Xaxis), search We see great potential for innovation and growth in connected TV as brands and social, across digital channels and platforms increasingly focus more of their budgets on delivering cross-channel digital performance, and traditional TV budgets continue to follow audiences on to new platforms offering better addressability and measurement. GroupM expects connected TV to grow 18% globally in 2023, and to account for nearly a third of all United States TV advertising by 2027 EXPERIENCE Experience is a rapidly growing area driven by the increasing number of people – WPP named a Leader in the Forrester Wave 5 online and the hybrid blend of physical and digital channels. We believe that Global Digital Experience Services rankings customer experience sits at the heart of creative transformation and growth. – WPP named a Leader in IDC MarketScape Our analysis shows brands that deliver superior customer experience have Worldwide Adobe Experience Cloud 4 five times the revenue growth of those that don’t Professional Service Providers, 2022 ### COMMERCE Growth in commerce demand is being driven by the shift to digital and – We manage over $40 billion of gross omnichannel commerce, including the adaptation of physical commerce merchandise value over WPP-built ecommerce post Covid-19. Based on a study by Wunderman Thompson, 60% of shoppers platforms for clients say they will increase their usage of digital shopping channels in the future,⁶ – We acquired several leading commerce and according to GroupM, global ecommerce will make up 19% of global businesses in 2022 to enhance our capabilities, 7 retail sales in 2022, growing to 25% by 2027 including Corebiz in Latin America and Diff in Toronto. See page 14 for more details TECHNOLOGY Growth in technology services continues due to demand for data and – We enhanced our capabilities with 33,000+ analytics, and managed services offerings with lengthier contracts. For technology accreditations and certifications example, the global customer relationship management market is seeing from strategic partners strong demand aimed at transforming customer engagement and business – We also announced new strategic technology outcomes, and is projected to grow from $64 billion in 2022 to $146 billion partnerships including Instacart, Stripe and 8 by 2029, at a CAGR of 12.5% BigCommerce. See page 14 for more details PURPOSE, There are many issues we face as a society such as climate change, diversity, – Successful formation of FGS Global, a racial equity, privacy and data ethics. Companies are responding accordingly, powerhouse in strategic communications, ### ENVIRONMENT 9 and are increasingly focused on ensuring that the pledges they make in ranked number one in global M&A tables ### AND relation to purpose and the environment translate into tangible change. For – GroupM, our media investment business, ### REPUTATION example, 78% of our top 50 clients have set science-based climate reduction launched a media decarbonisation framework targets. This has led to a growing focus on strategic communications and for measuring and reducing ad-based carbon reputational advice for clients emissions, supported by a client coalition of leading brands 1 GroupM, This Year Next Year, End-Of-Year Forecasts, December 2022 5 Forrester, Global Digital Experience Services, Q2 2022 2 Excluding United States political advertising 6 Wunderman Thompson, The Future Shopper Report 2022 3 The accuracy of Finecast’s reach-frequency audience calculations in the UK and our 7 GroupM, This Year Next Year: Ecommerce & Retail Media Forecasts, September 2022 processes for delivering addressable (targeted) advertising to those audiences has 8 The CRM Forrester Wave™ Evaluations - And How To Use Them, August 2022 been subject to independent verification by PwC 9 Mergermarket, January 2023 4 WPP, Winning the Future of Experience Playbook, January 2022 27WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## CREATIVITY HAS THE ## CREATIVITY ## POTENTIAL TO ADDRESS ## THE BIGGEST CHALLENGES ## OF OUR TIME” Rob Reilly Global Chief Creative Officer, WPP ## WPP’s single biggest ## competitive advantage Every day we are asked to engage hard-to- the only agency to secure top rankings on creating a virtual version of Los Angeles reach audiences, enhance brand reputations both WARC’s Creative 100 and Effective 100. under pressure of extreme weather events. or increase sales. Our answer? Creativity. The | solution to both commercial problems and | VMLY&R was recognised by Forrester as a | We also kept it real (world). Off the coast of | | --- | --- | --- | | some of society’s most complex challenges. | leader in Marketing Creative and Content | Sweden, Carlsberg’s underwater bar warned | | And creativity doesn’t just apply in our | Services, while AKQA secured two Grand | boat drivers of the dangers of drinking and | | creative agencies – it’s vital for our media | Clio awards and Wunderman Thompson | driving. And alongside Ford, we created an | | and public relations work too. | won the inaugural Creative B2B Grand Prix | unashamedly Very Gay Raptor (see page 20). | | | at Cannes. Liz Taylor, who returned to Ogilvy | Not everyone liked it. But Ford wanted | | DIVERSITY MATTERS | in 2021, topped D&AD’s 2022 Chief Creative | change, and we delivered it – creatively. | | Creativity flourishes when we invest in and | Officer rankings. | | | celebrate the diversity of our people, which | | WPP’s purpose also helps us inspire | | is why we introduced diverse candidate | Investing in key acquisitions also brings | powerful social change. We created an | | slate policies in the UK, United States and | fresh new ideas and highly rated creative | emotionally bold campaign with Amnesty | | Asia-Pacific. We enrolled more women | expertise to the WPP family. Our 2022 | International in which Portuguese TV, radio | | on development programmes including | acquisition of Passport – a leading California- | and cinema ads were interrupted with an air | | the Elevate sponsorship plan, designed to | based brand design agency that works | raid siren every time a real one went off in | | support Black women in their career growth, | across a range of consumer categories and | Ukraine. We created Morning After Island | | and launched free VisibleStart training in the | global markets spanning Australia, Asia and | in the sea near Honduras so women could | | UK for women over 45 who want to enter or | North America – will help us deliver | legally access the morning-after pill – | | rejoin the industry. We also nurtured | exceptional strategic positioning and creative | something they were forbidden to do within | | early-career talent via NextGen Leaders and | execution that will greatly benefit our clients. | the country’s jurisdiction. And in partnership | | The Update, both of which aim to build a | | with Google Fonts, we imagined an entirely | | diverse pipeline. | TECH + CREATIVITY = INNOVATION | new font to change the way the world reads, | | | Our focus on ground-breaking technology | helping 780 million people worldwide born | | Read more about how we’re investing | allows us to throw away the creative rule | with dyslexia. | | in diversity on page 36 | book, sparking into life bold, innovative, | | | | new ideas. In 2022 Speaking in Colour, | CREATIVE RECOGNITION | | Creativity extends to our physical spaces | a voice-activated AI tool produced for paint | Changes brought about by Covid-19 meant | | too. People need modern and dynamic | manufacturer Sherwin-Williams, changed the | we had to think differently over the last two | | workspaces that encourage creative | way we visualise colour (see page 50). | years, and the creativity this has engendered | | collaboration on the next client pitch or | | has been revolutionary – and widely | | challenge. Our state-of-the-art campuses | Alongside Coca-Cola, ITC (one of India’s | recognised by consumers and industry | | will, by 2025, house 85,000 of our people – | foremost FMCG companies) and Wavemaker | alike. Awards are not why we do the work, | | in net zero buildings running on electricity | created the first metaverse wedding, while | but we love it when our talented teams get | | from renewable sources. | Burger King entered the gaming world with | recognition for their ground-breaking ideas. | Burger Glitch, playfully poking fun at in-game | TALENT AND TEAMWORK | glitches while achieving record numbers of | We were honoured to be awarded the | | --- | --- | --- | | Our focus on hiring exceptional creative | app downloads. | overall title of Most Creative Company of | | talent resulted in some great wins in 2022. | | the Year at the 2022 Cannes Lions Festival, | | Devika Bulchandani was promoted to Global | Apps including Instagram, Waze and TikTok | where WPP agencies collected a total of | | CEO of Ogilvy and drove the agency’s most | supported a data-rich Australian road safety | 176 Lions including one Titanium, four Grand | | successful creative year yet: Ogilvy was | initiative encouraging young drivers to | Prix, 36 Gold, 47 Silver and 88 Bronze, with | | named Network of the Year at both the | take breaks on long road trips, resulting | winners representing 40 different countries. | | Cannes Lions Festival and The One Show, | in a 70% reduction in young driver claims. | WPP also topped WARC’s 2023 global | | and by Campaign magazine. It also became | And we helped Greenpeace press home | agency rankings in all three categories: | | | their message within Grand Theft Auto, | Creative, Media and Effectiveness. | WPP ANNUAL REPORT 202228 OUR STRATEGY STRATEGIC REPORT ## LEADING ## THE FIELD ## Our creative drive is to meet client needs Most Creative Company ## – we don’t do it for awards, but winning of the Year ### (second year in a row) ## them tells us we’re doing things right and ## recognises the talent of our teams around ## the world. Here are some 2022 highlights ## CREATIVE | NETWORK OF | | LEADER IN | WORLD-CHANGING | | INAUGURAL | | GOLD | | --- | --- | --- | --- | --- | --- | --- | --- | | THE YEAR | | MARKETING | | IDEAS AWARD | CREATIVE B2B | Marketing Excellence | | | Cannes Lions | | CREATIVE AND | | Fast Company | GRAND PRIX | | Awards | | | CONTENT SERVICES | | | | Cannes Lions | | | Forrester ## MEDIA | HOLDING COMPANY | | #1 MEDIA AGENCY | | GLOBAL AGENCY OF | | AGENCY NETWORK | | MOST INNOVATIVE | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | OF THE YEAR | | WARC | | THE YEAR | | OF THE YEAR | | AGENCY OF | | | MediaPost | | | | Adweek | | M&M Global | | THE YEAR | Digiday ## PR AND SPECIALIST AGENCIES | OUTSTANDING | | UK AND MIDDLE EAST | | | | #1 GLOBAL | | BEST IN SHOW | | 22 GOLDS | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | AGENCY PRACTICE | | | CONSULTANCY OF | | M&A COMMUNICATIONS | | | Art Directors Club | Transform Awards | | | | PRWeek | | | THE YEAR | | ADVI | SOR | of New York | | | | | | | PRovoke SABRE | | | Mergermarket | | | | | Awards EMEA 29WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY CREATIVITY WPP ANNUAL REPORT 202230 OUR STRATEGY STRATEGIC REPORT ## SHEBA: ## HOPE REEF ### Fish are only sustainable if their ### environment is too OFFER ### COMMUNICATIONS AGENCY ### ESSENCEMEDIACOM, GLOBAL CLIENT ### SHEBA (MARS PETCARE) Over 50% of the world’s coral has been lost since 1950, with 90% of reefs facing extinction within just 20 years. As a commitment to going beyond simply sourcing sustainable ingredients for its cat food, Sheba wanted to actively restore ocean health. Working with Mars Petcare and partners including AMV BBDO, Google and Freuds, EssenceMediacom helped develop the Hope Reef campaign. Located off the coast of Indonesia, Hope Reef restored a barren site that had been blasted with explosives by fishermen. Using the reef star system to create the perfect environment for coral to thrive, Sheba’s marine biologists regrew the coral to form the word Hope, a living testament to Sheba’s commitment to sustainability. EssenceMediacom’s high-impact paid media campaign across 11 markets helped showcase the visual of Hope Reef alongside its coordinates, driving people to Google Maps to view it for themselves and ‘swim it’ on underwater Streetview. Over one million people explored the reef on Google Maps. EssenceMediacom also invited the world to play a part in reef restoration via a YouTube video that gained 20 million views and raised enough funds for a new crowdfunded reef. Today Hope Reef is thriving, with 70% coral coverage and a 300% increase in fish abundance. ## 308% 2.5bn return on investment earned media impressions | 5 | Awards | | --- | --- | | countries adopted | Cannes Lions Grand | | Sheba’s reef system | Prix: Media, and | Industry Craft 31WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY ## DATA AND TECHNOLOGY ## The backbone of our success | WPP harnesses the power of data and | Our data and technology platforms have | In addition, our partnership with Epic Games | | --- | --- | --- | | technology to augment our creative, media | been central to winning some of our most | resulted in more than 4,700 colleagues being | | and public relations skills, and design | exciting client mandates in recent years. | trained in the bespoke Metaverse Academy, | | award-winning, ground-breaking digital | We built The Coca-Cola Company’s new | the first partnership and training programme | | moments. Whether it’s how the work is | marketing operating system on WPP Open, | of its kind. | | made, data and tech being the idea, or | and also won the opportunity to build SC | | | deriving ideas from tech culture, technology | Johnson’s marketing operating system and | Nearly 3,000 colleagues achieved Meta’s | | drives our creative success. | deploy proprietary tools from WPP Open. | Blueprint Certification, a 67% increase over | 2021, and more than 6,300 colleagues earned | ACCELERATED STRATEGY | PARTNERSHIPS DRIVE RESULTS | TikTok Academy badges. We also launched | | --- | --- | --- | | The last few years have brought evolving | We have key strategic partnerships | a Creative Technology Apprenticeship | | client needs into sharp focus: in particular, | with 28 of the world’s largest technology | scheme, which saw a diverse cohort of | | an increasing desire for expert guidance | companies. At the heart of each partnership | young people begin an exacting, year-long | | on what data is valuable and accessible, | is a joint business plan covering product | experience across a range of agencies. | | and where it fits into clients’ overall purpose. | development, preferential access to data | | | In response we accelerated delivery of our | and technology, training programmes and | LEADING THE INDUSTRY | | data and tech strategy, focusing on three | joint go-to-market approaches. | This year WPP and its agencies were named | | key areas: our platforms, partners and | | a Leader in three Forrester Waves: WPP | | people. This strategy revolves around a | In 2022 we partnered with Epic Games to | for Global Marketing Services and for Digital | | forward-looking approach to data that | deliver a new era of digital experiences for | Experience, and VMLY&R for Content and | | empowers clients, focuses on connection | clients in the metaverse. This was brought to | Creativity Services. Choreograph was named | | not collection, prioritises consumer privacy, | life with the pioneering launch of the Give Me | a Strong Performer in the Forrester Wave | | and emphasises data’s ethical and purposeful | The Future Experience with the band Bastille. | for Customer Data Strategy and Activation | | use to improve performance. | | Services, while the International Data | | | We also partnered with NVIDIA’s Omniverse | Corporation (IDC) recognised WPP’s | | These are also the principles on which our | platform to reinvent the way content is made | leadership position in its Adobe Experience | | data company, Choreograph, was founded. | and captured, replacing traditional location- | Cloud Services MarketScape. WPP agencies | | Industry analysts Forrester recognised this | based production with virtual tech including | won a Grand Prix, 11 Gold, six Silver and eight | | approach, stating that Choreograph “has | high-end CGI and 360° photography. Teams | Bronze awards at the Digital Media Awards | | a differentiated vision of a future where | around the world can now collaborate | (DMAs) this year – a testament to the | | personal information isn’t the only solution | effortlessly, producing more effective | creativity that is being driven by data | | for marketing and a thoughtful, above-par | work with lower investment, lower carbon | and technology across our business. | 1 roadmap.” footprint and faster speed to market. For more information on our approach to data ethics please see page 84 | INNOVATIVE PLATFORMS | INSPIRING OUR PEOPLE | | --- | --- | | We believe that the best technology | Over the past year our people achieved | | tools and solutions originate closest to | more than 33,000 different technical | | our clients, in our agencies – something we | accreditations and certifications from our | | call distributed innovation. To maximise the | technology partners, reflecting WPP’s | | impact of these innovations we integrate | commitment to outstanding learning | | them into WPP Open, a platform that shares | opportunities and world-class technology | the best technology and data innovations from across the Company, so that all clients can access the best data and products from anywhere in our business. 1 Source: Forrester Customer Data Strategy and Activation Wave, Q2 2022 WPP ANNUAL REPORT 202232 OUR STRATEGY STRATEGIC REPORT ## A NEW GLOBAL ## PARTNERSHIP ### TECHNOLOGY WPP works closely with Epic to learn how to build next-generation interactive experiences leveraging Unreal Engine, an advanced real-time ## WPP partners with the world’s leading tech 3D creation tool used across a range of industries including games, film, ## companies because we believe brands have a architecture, fashion, automotive, ## unique opportunity to unlock unlimited creativity music and live events ## within the spaces created by new technology ### In 2022 we announced our partnership ### with Epic Games, the interactive ### JOINT SOLUTION ### entertainment company and developer ### DEVELOPMENT ### of Fortnite and Unreal Engine, to help ### WPP agencies with training and The Epic Games partnership has ### resources to deliver a new era of digital already produced pioneering ### experiences for brands in the metaverse work including the launch of the Give Me The Future Experience with the band, Bastille. Using Epic Games’ Unreal Engine, we created the world’s first hybrid physical/virtual concert ### SKILLS ### DEVELOPMENT Over 4,700 WPP creatives and technologists have been trained to create custom brand experiences in Fortnite and to use Unreal Engine ### GO-TO-MARKET for real-time 3D creation and ### INITIATIVES virtual production The partnership inspired WPP’s own metaverse incubator programme, offering WPP clients the opportunity to work with agencies to build imaginative worlds inside Fortnite, one of the world’s most popular online games 33WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY DATA & TECHNOLOGY ## GIGAFAST ## WITH SKY ## BROADBAND ### Launching Sky into the metaverse OFFER ### COMMUNICATIONS, EXPERIENCE AGENCY ### HOGARTH AND ### ESSENCEMEDIACOM, UK CLIENT ### SKY Fast, reliable internet has become an essential utility in the modern world. Sky wanted to drive awareness of its new game-changing fibre optic broadband product, Gigafast. Partnering with SuperAwesome (an Epic Games company), Hogarth and EssenceMediacom proposed a takeover of a new level in Fortnite, plus a virtual race for gamers where the winner would have the unique prize of racing a famous YouTuber in the final. The agencies pushed every creative element of the game, ensuring that the Sky brand was accurately represented and adding new features never seen before. For it to resonate with gamers, it was crucial that Sky’s involvement added real value to the Fortnite community. The branded integration provided a truly enhanced speed experience in-game. To help keep the experience authentic and credible, the agencies partnered with top YouTuber, Ali A, who amplified the challenge to 18m+ followers live across YouTube and TikTok. Sky saw overall sales increase by 27% throughout the campaign period, with Gigafast sales increasing by 26% in the first two weeks alone. | 41% | 1.8m | | --- | --- | | over-delivery on | views on YouTube | | target reach | and TikTok | | 50k | Awards | | --- | --- | | likes on Twitter, | Digiday, Best Multi | | YouTube and TikTok | Channel Distribution | Strategy Award WPP ANNUAL REPORT 202234 OUR STRATEGY STRATEGIC REPORT 35WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY ## PEOPLE ## We’re a people business | We’re exceptionally proud of the talented | and mobility opportunities across some of | The proportion of women in executive | | --- | --- | --- | | people at WPP – they are the key to our | the most exciting, creative agencies in the | leadership roles globally was 40% | | creativity. That’s why we put bold initiatives | world. On average 7,000 roles per month | (2021: 39%), while 54% of senior management | | in place to attract, engage and develop the | were advertised to employees in 2022, and | positions were occupied by women | | best in the industry. | network-wide mobility has increased 80% | (2021: 52%). This year, we were named in | | | since 2020. | the Bloomberg Gender-Equality Index for the | | EMPLOYEE ENGAGEMENT | | fifth year in a row, and 18 leaders across WPP | | To unleash the creative potential of every | In September we launched WPP’s Future | were named in INvolve and Yahoo Finance’s | | individual across WPP, we need to hear | Readiness Academies, a first-of-its-kind, | Heroes Women Role Model lists for their | | what’s important to them. In 2022 we | global learning programme to help everyone | work in championing women in business | | launched the refreshed All In staff survey | across the Company develop the skills and | and nurturing a more gender-diverse and | | to help us better support employees, hold | knowledge needed to thrive in a digital | inclusive workplace. | | ourselves accountable, and create a culture | world. To date we’ve had over 12,000 people | | | that is inclusive and empowering for all. | sign up from across the globe (see page 39). | INCLUSION AND INSPIRATION | Inclusion is a passion at WPP. We embrace | We achieved our highest-ever engagement | Our third series of NextGen Leaders, a | all types of creative talent, which helps | | --- | --- | --- | | levels with 72,700 employees taking part, | virtual learning experience for those starting | us build strong teams and strengthen our | | a 65% increase in engagement from 2021. | out or new to the industry, welcomed 2,663 | relationships with clients. Diverse and | | The results revealed that people care most | participants across 71 countries (up from | vibrant employee spaces have been created | | about career growth, belonging and feeling | 800 participants in 54 countries at launch). | across WPP by individuals keen to make | | valued. We were pleased to see our | Ninety-two percent said they were likely | a difference. For example, WPP Unite | | Company-wide eNPS score (for ‘how likely | to join or continue their career at WPP. | celebrates our LGBTQ+ community, WPP | | are you to recommend WPP as a place to | | Stella inspires women across the Company | | work?’) increase 14 points from 2021. | DIVERSE LEADERSHIP | to maximise their potential, and WPP | | | Creativity thrives in a diverse culture. | Roots champions greater ethnic and | | FULFILLING CAREERS AND | That’s why we make it our business to | cultural diversity. | | GLOBAL EXPERIENCES | encourage and inspire a diversity of | | | We want WPP to be the employer of choice, | talent throughout WPP. | Since 2020, our Racial Equity Programme | 1 | an organisation where people have the | | has committed $16.2 million | to a variety of | | --- | --- | --- | --- | | chance to grow their career. We offer a | In 2022 we continued to invest in | projects to help combat racial injustice and | | | number of ways for people to learn, develop | programmes such as Walk the Talk and | support Black and ethnically marginalised | | | and go places they didn’t think possible. | Fast Forward, propelling women to | talent (for an example, see page 38). 22% of | | | | leadership positions. We also expanded | our senior leaders and executive managers | | | In 2022 we invested £31.3 million into | Elevate, the United States-based sponsorship | in the United States, our largest market, are | | | learning and development opportunities | programme for mid-level Black women, | non-white, which is an improvement on 2021 | | | for our employees, a 5% increase from 2021. | into the UK, providing tools to support | – but clearly we still have work to do to make | | | We’re pleased to say that over the course | their career growth, personal development | our business a more diverse workplace. | | | of 2022, WPP employees earned more than | and wellbeing. | | | For more information on ethnic 33,000 accreditations and certifications from diversity at WPP, please see our 2022 leading technology partners including And we appointed a new Chief Talent and Sustainability Report Adobe, Meta, Microsoft and TikTok. Inclusion Officer, LJ Louis, who will oversee global initiatives to foster a workplace | | | 1 Excludes 2022 investments | | --- | --- | --- | | Career Explorer, our online jobs platform, | grounded in inclusion, equity, belonging and | | | unlocks the value of being part of a global | growth. LJ will also act as an advisor on | | | network, showcasing open roles and | global DE&I strategy to WPP’s leadership | | | encouraging employees to discover growth | team. For more on employee diversity, | | please see the 2022 Sustainability Report. WPP ANNUAL REPORT 202236 OUR STRATEGY STRATEGIC REPORT ### DIVERSITY EMPLOYEES BY GENDER ● Female 56% ● Male 44% | 54% | 22% | | --- | --- | | of senior managers across | of senior and executive managers | | WPP are women | in the US, our largest market, are | non-white ### PEOPLE COMMUNICATIONS | 1.8 million | 5,900 | 72,700 | | --- | --- | --- | | unique opens of CEO all-staff emails | average attendance at CEO | employees worldwide completed | | | virtual townhalls | refreshed All In staff survey | In 2022, WPP received a top score of 100 in the Corporate Equality Index, and was again named among the Best Places to Work for LGBTQ+ equality. Over the course of the year, we rolled out our Mental Health Allies programme in the United States and Singapore, building on a successful pilot in the UK. We now have over 550 Allies who help to ensure colleagues stay healthy, supported and safe by encouraging open conversations about mental health in the workplace and directing them to resources and assistance when they need it. We also introduced Making Space, an initiative focused on giving people space Our new Guangzhou Campus is a creative hub that brings together over 500 people across different WPP agencies to look after their wellbeing. ### And we have developed our benefits A NEW WAY OF WORKING The Guangzhou Campus was built with programmes to make them more inclusive, The last two-and-a-half years have flexibility and collaboration in mind, and including enhanced fertility cover in the brought lasting changes to the way we is well placed to support and contribute United States, a suite of family and parental work at WPP. We’ve embraced greater to China’s thriving start-up sector. policies in the UK, and improvements to flexibility in how and where we do our LGBTQ+ partner and spouse cover in China, jobs, and found that can deliver better We also continued to exploit new ways India, Philippines, Singapore and Thailand. outcomes for ourselves and our business. to connect. Our virtual global CEO townhall series, in which Mark Read and Our success continues to rely on leaders from across WPP discuss topics These metrics were subject to independent limited assurance collaboration, culture and talent. Being from sustainability to Super Bowl ads, procedures by PricewaterhouseCoopers LLP (‘PwC’) for the year ended 31 December 2022. For the results of PwC’s 2022 together, in person, helps us mentor and was well attended. An average of 5,900 Limited Assurance report and the ‘WPP Sustainability develop the many people starting their participants joined each event, up Reporting Criteria 2022’, see our 2022 Sustainability Report | | | careers with us, build and maintain our | 40% from 2021. CEO all-staff emails | | --- | --- | --- | --- | | | | culture, do our best work for clients, | accumulated over 1.8 million unique | | | | and find the right balance between our | opens over the year, a 64% increase, | | GREAT PLACES TO WORK | | personal and working lives. Our hybrid | while our global internal newsletter, | | | | approach – with time spent working in | The Weekly, had over 1.8 million unique | | | | our campuses and remotely – has been | opens, an increase of 34% year-on-year. | | – AKQA was named as The Dots Best | | adopted across the Company. | | | | Company to Work For in 2022 for | | Finally, recognising the contribution | | | the third year in a row | As the recovery from the pandemic | of our people during the challenges of | | – VMLY&R won Best Place to Work: | | continues, the occupancy rate of our | recent years, we invested in supporting | | | Network, and top Global Diversity | campuses rose to over 40% in 2022, from | colleagues’ wellbeing through the | | | and Inclusion Initiative in Campaign’s | around 30% in 2021. We opened our third | Making Space initiative, which kicked | | | Global Agency of the Year awards | state-of-the-art campus in Greater China, | off with a four-day weekend for all | | – CMI Media Group made the top 50 | | in Guangzhou, at the start of 2023. | employees to take time out to recharge, | | | Ad Age Best Places to Work 2023 | | reset and refresh. | 37WPP ANNUAL REPORT 2022 ● STRATEGIC REPORT OUR STRATEGY PEOPLE ## WE LOVE YOU ## TO HEALTH ### Advocating for better maternal ### care for Black mothers OFFER ### COMMUNICATIONS AGENCY ### WUNDERMAN THOMPSON, USA CLIENT ### BLACK HEALTH MATTERS AND ### CALIFORNIA BLACK HEALTH ### NETWORK At WPP, we believe in combatting racial injustice and supporting Black and ethnically marginalised talent. That’s why in 2020, as part of our anti-racism commitments, we launched a three-year Racial Equity Programme with $30 million of funding. As part of this, we invited our agencies to apply for funding for innovative and impactful campaigns to advance racial equity. An initiative launched by Wunderman Thompson, Health4Equity, prioritised three health inequities, including Black maternal health. Its mission is to use the combined power of data, human insights, medical expertise, tech and creativity to speed progress towards equity for all in the health sector. In 2022 Health4Equity delivered We Love You to Health, a campaign aimed at reducing the high rate of mortality among Black mothers. To research the project, Wunderman Thompson interviewed a range of Black mothers and mothers-to-be, as well as doulas, nurses and midwives. The findings indicated that the key role of doulas could help protect maternal health. The team launched a campaign on social channels during Black Maternal Health Week, focused on directly connecting Black mothers with local doulas through the website doulamatch.net. The campaign drove nearly six times greater traffic to the doulamatch.net site compared to other external sources, successfully reaching the target audience. | 3x | 60% | | --- | --- | | women of colour are | of Black mothers’ | | three times more likely | deaths are preventable | to die in childbirth | 800k | 50% | | --- | --- | | clickthroughs to | impressions from | | doulamatch.net | Black women in | target age range WPP ANNUAL REPORT 202238 OUR STRATEGY STRATEGIC REPORT ## INVESTING IN ## OUR PEOPLE ### Industry-leading technology skills ### for tomorrow’s digital world Inspiring dynamic growth for brands takes ## FUTURE dynamic, skilled people to make it happen. That’s why we encourage curiosity, self-development and a thirst for learning throughout WPP. ## READINESS We provide an extensive programme of learning ## and development for our people worldwide in ACADEMIES subjects as diverse as commercial competence and TikTok. The Future Readiness Academies, the latest phase of our industry-leading digital learning programmes, launched in September 2022. The Academies form a unique global learning programme, based on the four pillars of WPP’s offer – communications, experience, commerce and technology – to help everyone across the Company become confident and conversant in the digital world of the future. We kicked things off with Metaverse and More, a 12-episode podcast featuring WPP expert talent. Discussions ranged from the future of media in Web3 to philosophical debates on whether the metaverse exists or not. You can listen to series one of Metaverse and More by scanning the QR code below. We are building out the Academies curriculum through 2023 to offer our people in-depth understanding of where the industry is moving, across a broad range of digital subject areas. ## 12k+ 10k+ enrolments lessons completed Scan to access the Metaverse and More podcast 39WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGYSTRATEGIC REPORT ## CLIENTS ## World-class creative ideas and ## execution drive client growth | We believe in the power of big ideas and | INDUSTRY SECTORS | CLIENT SATISFACTION | | --- | --- | --- | | brilliantly executed communications to | Our broad client portfolio covers all major | Client satisfaction, measured by our industry- | | inspire our clients and grow their businesses. | industries. By sector, we saw continued | leading platform Vantage, held strong in | | Our creativity, media expertise, unrivalled | momentum from clients in the technology, | 2022, with Likelihood to Recommend | | resources and integrated offer across all | healthcare and pharma and consumer | consistently scoring 8 out of 10 over the last | 2 | marketing disciplines help us deliver | packaged goods sectors, which together | year. | Vantage also now features a key metric | | --- | --- | --- | --- | | transformative outcomes for some of | represent 55% of our revenue less pass- | on our ability to deliver world-class creativity | | | the world’s best-known brands. | through costs. These sectors recorded | for clients. We analyse over 22,000 open- | | | | like-for-like growth of 8.6%, 7.0% and 11.9% | ended verbatim comments from clients a | | | WORLDWIDE REACH | respectively. | year, and 2022 saw a 15% increase in positive | | | In 2022, our agencies worked with clients | | sentiment towards creativity since 2020. | | | including 307 of the Fortune Global 500, | NEW BUSINESS | | | | all 30 of the Dow Jones 30 and 60 of the | We continued to win new clients and | We also created two additional metrics that | | | FTSE 100. We saw widespread evidence | assignments, with $5.9 billion of net new | align to our purpose as WPP: | | | of clients investing in marketing for growth, | business in 2022. Key wins included Audible, | | | | with 14 out of our top 30 clients in 2022 | Danone, Migros, SC Johnson, Nationwide | – How well we support our clients’ diversity, | | | showing double-digit growth (versus | and Verizon. And we continued to retain key | equity and inclusion goals – earning a | | | estimated global advertising industry | clients, including leading companies such as | score of 8.2 out of 10 across 2022 | | 1 | growth of 6.5%). | This was despite the | Sony Playstation, Tesco, Mars Wrigley and | – How well we support our clients’ | | --- | --- | --- | --- | | macro challenges, reflecting the priority | | MasterKong. However, we operate in a | sustainability goals – earning a score of | | placed by our clients on their investments | | competitive market, resulting in some | 7.9 across the second half of 2022 | | in communications, customer experience, | | account losses including PepsiCo and | | | commerce, data and technology. | | L’Oréal’s United States media account. | We’re focused on ensuring every agency and | client leader across the WPP network uses | GLOBAL CLIENT LEADERS | Following our success in the pitch for The | Vantage effectively to continually optimise | | --- | --- | --- | | It is becoming increasingly important for | Coca-Cola Company account in 2021, this | our client relationships. By the end of 2022, | | our clients to be able to access numerous | global partnership of unprecedented scale | agencies across 79 markets were reaping the | | different agencies and capabilities – 90% | has been onboarded at pace, with | benefits, with use of our real-time reporting | | of our top 50 clients now work with five or | expectations for further growth in 2023. | dashboard increasing year-on-year to a high | | more of our agencies. Key to making this | | of just over 80,000 visits in 2022. | | work is our talented team of 40 Global Client | AWARD-WINNING CLIENT WORK | | | | | 1 GroupM, This Year Next Year: Global End of Year Forecasts, | | Leaders, each a highly experienced industry | Creative excellence remains central to our | | December 2022 leader who supports our largest clients client relationships, and we continue to do 2 Includes Kantar, excludes Russia and Smollan | with their most difficult challenges. Every | our best work with our biggest clients: of | | --- | --- | | leader’s performance is measured on a | Unilever’s 18 Cannes Lions awards, 14 were | | simple combination of metrics including | from WPP agencies. Our Grand Prix in the | | cross-WPP collaboration, creativity and | Pharma category at Cannes Lions featured | | client satisfaction, alongside revenue. | two of our top clients – Dell and Intel – with | I Will Always Be Me, and our Titanium Grand | In addition, Key Client Leaders provide a single | Prix was also for a top client – Mondelēz | | --- | --- | | point of contact for the remainder of our top | International – with Shah Rukh Khan My Ad | | 100 clients, ensuring streamlined access to | for Cadbury Celebrations. | talent across the WPP portfolio, connecting the dots between agencies and workstreams, and sharing insight from across WPP as we seek to grow our clients’ businesses. WPP ANNUAL REPORT 202240 STRATEGIC REPORTOUR STRATEGY ## DELIVERING FOR ## OUR CLIENTS ## WPP works with many of the world's ## most successful companies | TOP 20 | Among our top 20 clients, we have some | | | --- | --- | --- | | CLIENTS | of the largest firms by market capitalisation | | | CONSUMER PACKAGED GOODS | | 8.0 | client satisfaction as measured by Likelihood to Recommend score out of 10 TECHNOLOGY AUTOMOTIVE TELECOM, MEDIA & ENTERTAINMENTHEALTHCARE AND PHARMA | NEW BUSINESS | 2022 was another strong year for new business | | --- | --- | | WINS AND | wins and retentions across our media and | | RETENTIONS | creative businesses | ## $5.9bn new business billings 1 (2021: $8.7bn) 1 Billings as defined in the Glossary on page 232 41WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY CLIENTS ## I WILL ALWAYS ## BE ME ### The book that banks your voice OFFER ### COMMUNICATIONS, TECHNOLOGY AGENCY ### VMLY&R, US CLIENT ### DELL TECHNOLOGIES, INTEL Motor neurone disease (MND) is a terminal illness. But before it takes your life, it takes your voice. Voice banking can help those with MND create a digital copy of their voice, so they can continue sounding like themselves after losing the ability to speak. But voice banking is a demanding task that involves reading a long list of random words – often resulting in a disappointingly robotic voice. Small wonder only 12% of those with MND ever used the technology. Created by VMLY&R in partnership with Dell Technologies, Intel, the Motor Neurone Disease Association and Rolls-Royce, I Will Always Be Me is a book reading experience that can create a digital voice with just a 30-minute recording. VMLY&R worked with best-selling author Jill Twiss and illustrator Nicholas Stevenson to create a story that contains every sound and syllable needed to accurately bank a person’s voice as they read. The story, written in the form of a letter from a person diagnosed with MND to their loved ones, is a touching reminder that the person will always be themselves on the inside, no matter what changes the future may bring. | +50% | 1.7bn | | --- | --- | | growth in people | impressions from | | banking their voice | PR and earned media | in the three months after launch ## Awards Cannes Lions Grand Prix, Pharma Cannes Lions Gold, Brand Experience and Activation WPP ANNUAL REPORT 202242 STRATEGIC REPORTOUR STRATEGY OUR STRATEGY 43WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY ## COMPANIES ## Making WPP easier to manage ## and simpler to navigate | Following a series of mergers, business | RECENT BUSINESS COMBINATIONS | Shopify expertise to our roster of well- | | --- | --- | --- | | combinations and disposals over the last | During 2022 we announced several business | established technology partnerships; | | five years, and the creation of common | combinations that became effective in early | Corebiz, a leading ecommerce agency, to | | business platforms, we now have a strong, | 2023, to further simplify our operations. | strengthen the digital commerce capabilities | | dynamic portfolio of streamlined agencies | | of VMLY&R Commerce in Latin America; | | providing our clients with a full suite of | We formed EssenceMediacom by fusing | marketing technology services agency | | integrated marketing solutions. This makes | two strategically complementary agencies | Bower House Digital, to join Ogilvy’s global | | it easier for our leaders to manage our | – bringing together the digital and data- | network and further strengthen its ability to | | operations, and simpler for our clients to | driven capabilities of Essence with the | deliver technology-driven marketing solutions | | access the best of our services. | scaled multichannel audience planning | for clients; and Village Marketing, an industry | | | and strategic media expertise of MediaCom. | leader in influencer marketing and creator- | | SIMPLIFYING OUR OFFER | Clients can now leverage an expanded | economy partnerships, to join the | | We have taken significant steps to reduce | global organisation of 10,000 employees | Wunderman Thompson network. | | complexity and ensure our clients can access | across 120 offices. | | | the best resources from across the Company. | | CROSS-AGENCY WORKING AND | | This includes simplifying 25 different agency | Finecast, Xaxis and GroupM Services | COMMON PLATFORMS | | networks into five large, integrated networks | were brought together to form GroupM | During 2022 we continued to enhance our | | (GroupM, AKQA, Ogilvy, Wunderman | Nexus, the world’s leading media | common business platforms, which provide | | Thompson and VMLY&R), which between | performance organisation. GroupM Nexus | services to all our agencies. | | them accounted for 80% of revenue less | is home to 9,000 talented people around | | | pass-through costs in 2022 (compared to | the globe, combining leading media skills, | Building on our appointment as The | | 70% in 2018). These integrated agency | digital services excellence, cutting-edge | Coca-Cola Company’s Global Marketing | | models provide clients with simple solutions | AI technology and unique scaled | Network Partner in 2021, we developed | | not only in communications but also in | partnerships within a new cross-channel | WPP Open X in 2022, a bespoke internal | | experience, health, ecommerce, data and | performance organisation. | team dedicated to the client globally. WPP | | technology. As part of this process, we have | | Open X provides a new integrated agency | | halved the number of individual brands | Mindshare’s 10,000 media specialists have | model, combining our various agencies and | | within WPP from over 500 in 2019. | been integrated with 1,200 digital-first | capabilities into a single, custom-made entity | | | experts at global performance agency | and point of contact in a simple partnership | | | Neo, providing clients with a broader | format, for one of our largest clients. | range of transformative media services. And following our appointment as strategic Finally, Design Bridge and Superunion have communications partner for Swiss retailer been merged to create Design Bridge and Migros Fachmarkt AG, we created Team Partners, a world-leading design company. Connect to bring together talent and expertise from across our agencies in ### STRENGTHENING OUR CAPABILITIES Switzerland, including Ogilvy and During the year we acquired several new Wunderman Thompson. Team Connect companies to complement our existing also leverages capabilities from other WPP agencies and enhance our capabilities in agencies, including integrated production specific markets. These included commerce capabilities through Hogarth, retail expertise agency Diff, to boost Wunderman from Scholz & Friends Commerce in Germany Thompson’s commerce and technology and data specialists from Choreograph. ecosystem across North America, bringing WPP ANNUAL REPORT 202244 STRATEGIC REPORTOUR STRATEGY ## CREATING A ## SIMPLER OFFER ## During 2022 we further simplified our media operations, building on the 2021 formation ## of our data company, Choreograph, by creating the data-driven and scaled media agency ## EssenceMediacom and the media performance organisation, GroupM Nexus Wunderman Thompson creative data specialists GroupM media GroupM data specialists Services ### These three organisations form part ### of GroupM, the world’s leading ### media investment company, ### responsible for more than $60 billion ### in annual media investment 45WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY COMPANIES ## ANTI-LOOK ## QR CODE ### The life-saving QR code design ### that stops people gawking at ### accident sites OFFER ### TECHNOLOGY, COMMUNICATIONS AGENCY ### SCHOLZ & FRIENDS (VMLY&R) CLIENT ### JOHANNITER-UNFALL-HILFE In Germany, the standard is that an ambulance should arrive within eight minutes of an emergency call. But today, every second emergency response in Germany is delayed. The reason? People filming with their smartphones. With the omnipresence of digital devices, onlookers have become a huge issue. These ‘civilian paparazzi’ take photos of victims and impede life-saving rescue operations. Scholz & Friends designed a campaign that turned smartphones from problem into problem- solvers – by developing an innovative digital pattern that functions like a camouflaged QR code. Ambulances, paramedics’ uniforms and equipment have been covered with the digital pattern, with the QR code uniquely adapted to each. When an onlooker tries to capture a rescue operation with their smartphone, a message will pop up on the display – confronting the onlooker with the impact of what they’re doing and educating them about proper behaviour at accident scenes. Today, the design is in use throughout the country via Johanniter-Unfall-Hilfe, one of Germany’s largest rescue organisations, with 65,000 employees and 750,000 rescue missions per year. The innovative design will soon be extended to other emergency organisations throughout Europe. | 68% | x2 | | --- | --- | | of people consider the | increase in job | | idea ‘very helpful’ | applications at | Johanniter-Unfall-Hilfe ## Awards Epica Grand Prix, London International Awards Grand Prix, Cannes Lions Bronze (Media), Effie Gold WPP ANNUAL REPORT 202246 STRATEGIC REPORT 47WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY ## COUNTRIES ## Global reach. Local expertise | We continue to strengthen our global | COUNTRY LEADERS | | | --- | --- | --- | | reach while leveraging our expertise in | Our broad global reach is complemented | | | local markets – investing in talent, skills and | by deep local market expertise. We have | ● US 37% | | capabilities to deliver transformational work | 19 Country Leaders worldwide, covering | ● UK 13% | | for clients. | the majority of our larger markets. Country | ● Germany 7% | | | Leaders are responsible for landing WPP’s | ● Greater China 5% | | GLOBAL STRENGTH | strategy in their local markets, connecting | ● India 3% | | We currently operate in more than 100 | our agencies to deliver growth for clients. | ● Australia 3% | | countries globally. This gives us a significant | | ● Brazil 2% | | presence in the largest markets in the world, | In 2022, we were pleased to welcome five | ● Canada 2% | | such as the United States and the UK, as well | new Country Leaders: Kyoko Matsushita | ● France 2% | | as in faster-growing economies such as India | (Japan), Rose Herceg (Australia and New | ● Italy 2% | | and Brazil. | Zealand), Michael Houston (United States), | ● Other markets 24% | Juan Pedro Moreno (Spain) and Frank-Michael | Our five largest markets account for nearly | Schmidt (Germany). | | | --- | --- | --- | | two-thirds of revenue less pass-through | | In 2022 we added five new campuses in | | costs. During 2022, our overall revenue less | CONNECTING RESOURCES | Brussels, Düsseldorf, Santiago, Tokyo and | | pass-through costs growth of 6.9% was | Country Leaders work collaboratively at | Toronto. Early in 2023 we opened a further | | underpinned by strong performance in | a local level and globally across the entire | campus in Guangzhou, China, taking the total | | four of these five – the United States, the | WPP network. | to 37. We plan to have opened more than | | UK, Germany and India – offset by a slight | | 65 campuses by 2025. | | decline in China, where performance was | In India, where 70% of our top 30 clients | | | affected by several Covid-19 lockdowns | work with more than three WPP agencies, | We also announced the construction of our | | over the year. | the Country Leader team plays a key role | first campus in São Paulo, Brazil, a state-of- | | | in giving clients the best of WPP, not just | the-art space that connects WPP directly to | | This scale and reach is significant for our | individual agency experiences. In 2022 the | local communities and brings our agency | | large global clients such as The Coca-Cola | team helped GroupM India to co-ordinate | networks together under one roof. | | Company, for whom our work will span their | 110 technical creatives from across WPP | | | own 200-plus markets and nine geographical | to develop close to 80 activations and | DELIVERING FOR COMMUNITIES | | operating units. | workshops – all in the metaverse. | Supporting local communities is central | to our purpose across the globe. In 2022, | | For WPP’s work with multinational clients, | the WPP India Foundation was announced | | --- | --- | --- | | RUSSIA | Country Leaders coordinate with both | as CSR Foundation of the Year at the CSR | | After the invasion of Ukraine, we made | Global Client Leaders and local agencies | Impact Awards, having provided over 15,000 | | the decision to discontinue our | to support delivery in the market. | underprivileged local children with education, | | operations in Russia in March 2022. | | training and social support since 2015. In | | Later in the year we transferred | CAMPUSES | Australia, we joined the Reconciliation Action | | ownership to local management, | Campuses are key to building our strengths | Plan programme in support of Aboriginal and | | providing continuity for our colleagues | in individual markets, physically bringing | Torres Strait Islander peoples, and were | | in the country who had been valued | agencies together to facilitate collaboration, | named one of the most inclusive employers | | members of WPP. | fuel creativity, and give clients access to the | in the country. | breadth and depth of WPP talent in one inspiring location. And in the UK, we partnered with the One Club for Creativity to launch the One School, designed to support Black British creatives 1 Please see Glossary on page 232 for definitions entering the industry with a free, 16-week portfolio and mentoring programme. WPP ANNUAL REPORT 202248 | REVENUE LESS PASS-THROUGH COSTS REVENUE LESS PASS-THROUGH COSTS | | | --- | --- | | | 1 1 | | (2022) (2022) | | ● STRATEGIC REPORTOUR STRATEGY ## COUNTRIES IN ACTION ## We combine our global reach with local expertise ## to drive growth for clients, while supporting our ## people and the communities in which we operate ## – below are some highlights from 2022 ### INDIA, AUSTRALIA ### AND NEW ZEALAND GERMANY Commitment to inclusion Investing in our workspaces WPP Unite, which celebrates We opened our campus in our LGBTQ+ community, Düsseldorf, encouraging closer expanded from the UK and US to collaboration and creativity India, Australia and New Zealand ## 2,500 ## 5 people based in new campus countries with Unite groups ### PEOPLE CAMPUSES ### CLIENTSACQUISITIONS ### BRAZIL INDIA Strengthening our Innovative AI solutions commerce capabilities Our data-driven campaign We acquired Corebiz, a for Cadbury (Mondelēz) with leading Latin American Bollywood legend Shah Rukh ecommerce agency Khan won an ‘industry Oscar’ ## 600 1 employees Titanium Cannes Lion 49WPP ANNUAL REPORT 2022 STRATEGIC REPORT OUR STRATEGY COUNTRIES ## SPEAKING ## IN COLOUR ### Unlock a world of colour using ### only your voice OFFER ### EXPERIENCE, TECHNOLOGY AGENCY ### WUNDERMAN THOMPSON, USA CLIENT ### SHERWIN-WILLIAMS COIL ### COATINGS The human eye can detect over one million colours, and yet colour is more than what we see. Colour is informed by our unique experiences and means something different to everyone. So how do you find that one colour that’s as unique as you are, that you and only you can see? To answer this question, Wunderman Thompson designed Speaking in Colour – the first-ever AI voice-controlled tool that produces colours based on human inspiration. Users say a word or phrase and Speaking in Colour instantly analyses millions of images through a search algorithm and optical recognition to create a personalised colour palette. For example, you can describe ‘crystal clear Caribbean ocean’, and fine-tune it to your custom colour palette by inputting ‘more turquoise’ or ‘dappled sun’ to find the hue that fits your vision. The campaign is providing insights into the cultural and geographical influences of individual hues to create the largest data set of colour attribution in the world. ## Awards Cannes Grand Prix & Silver, Creative B2B WPP ANNUAL REPORT 202250 STRATEGIC REPORTOUR STRATEGY 51WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## KEY PERFORMANCE ## INDICA TORS ### We track our performance against We have made good progress this year: delivering for our clients, investing in ### strategic, operational, financial, talent and capabilities, and reducing our ### societal and environmental factors. environmental impact. Our transformation ### Each indicator allows our Board, programme remains on track to drive ### management and stakeholders to efficiency and free up funds for reinvestment, supporting our future growth and profitability ### compare our performance against ### our goals ALIGNING PERFORMANCE MEASUREMENT WITH STRATEGY Performance measurements 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 Client satisfaction score Digital % of media billings (GroupM) Share of revenue less pass-through costs from experience, commerce and technology 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 2 pass-through costs growth 2 Headline operating profit margin Like-for-like revenue less pass-through 2 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 2 For definitions see Glossary on page 232 WPP ANNUAL REPORT 202252 STRATEGIC REPORTKEY PERFORMANCE INDICATORS ## OPERATIONAL | Client satisfaction score | | Digital % of media | | | --- | --- | --- | --- | | | 8.0 | | 48 | | (out of 10) | | billings (GroupM) | | ### Our operational KPIs measure ### strategic progress towards a ### dynamic, contemporary offer to | meet the needs of modern marketing | 2022 | 8.0 | 2022 | | 48 | | --- | --- | --- | --- | --- | --- | | and our clients’ future success | 2021 | 8.1 | 2021 | 43 | | | | 2020 | 8.1 | 2020 | 41 | | ### We continue to develop our ### operational KPIs. Accordingly, data Description and rationale Description and rationale This measures how satisfied our clients Billings comprise our clients’ spend on ### is not available for some periods, and 2 are with our services, based on 29,000 media, plus our fees. We measure the ### is shown for the years it is available | | clients’ Likelihood to Recommend score | | digital mix as digital media accounts for | | --- | --- | --- | --- | | | out of ten. Our ability to retain satisfied | | the majority of the media market (67%) | | Read more on strategic progress | | 1 | | | | clients is a key driver of our revenue | | and to ensure we are staying relevant | on pages 1 to 51 to our clients | Targets and performance | Targets and performance | | --- | --- | | In 2022 we scored 8 out 10 overall, with | GroupM’s digital billings increased to 48% | | Quality of Work at 8.1, and DE&I at 8.2, | in 2021, compared with 43% in 2020, | | maintaining the high levels achieved in | driven by the rapid growth in demand | | 2021, and showing an improvement over | from clients for digital commerce | | 2018-2020. We aim to maintain top- | services, including connected TV and | | quartile performance | retail media | | Proportion of revenue less | | Gross annual savings | | | --- | --- | --- | --- | | | 39 | | 375 | | pass‑through costs from | | from our transformation | | | experience, commerce and | | programme (£m) | | ### technology³ (%) | 2022 | 39 | 2022 | | | 375 | | --- | --- | --- | --- | --- | --- | | 2021 | 38 | 2021 | | 245 | | | 2020 | | 2020 | Not available | | | | Description and rationale | | Description and rationale | | | | | Experience, commerce and technology | | Our transformation programme is | | | | | are attractive faster-growth areas of the | | designed to simplify WPP, build greater | | | | | market, where client spend is forecast to | | collaboration, drive efficiency and free | | | | | grow at 5-15% annually, compared with | | up funds for reinvestment in growth. | | | | | 2-3% annually for traditional | | Our goal is to achieve £600 million of | | | | | communications | | annual cost savings against a 2019 base | | | | by 2025 | | Targets and performance | Targets and performance | | --- | --- | --- | | | Revenue less pass-through costs growth | We remain on target to achieve our goal. | | | in the areas of experience, commerce and | By the end of 2022 we delivered around | | | technology was an estimated 9% in 2022. | £375m of gross annual savings against a | | | The share of these areas in the business | 2019 base, ahead of planned savings of | | | mix of our global integrated agencies, | £300m, reflecting cost savings mostly | | | excluding GroupM, increased to 39% in | in property, procurement and ways of | | | 2022. Our goal is to further increase the | working | | 1 Includes Kantar | | | | 2 | proportion in these areas | | For a full description see Glossary on page 232 3 Share of global integrated agencies, excluding GroupM 43 53WPP ANNUAL REPORT 2022 375 8.0 43 48 39 2021 2021 2021 2021 2020 2020 2020 2020 Not available STRATEGIC REPORT KEY PERFORMANCE INDICATORS ## PEOPLE | | Proportion of women | | | Employees in | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 40 | | 2 | 54,500 | | | in executive leadership | | | shared campuses | | | | People KPIs assess progress against | | 1 | | | | | ### roles ### our aims of ensuring every WPP ### (%) ### workplace is open, inclusive and | collaborative, in order to allow | 2022 | 40 | 2022 | | | 54,500 | | --- | --- | --- | --- | --- | --- | --- | | our people to do their best work | 2021 | 39 | 2021 | | 47,500 | | | | 2020 | 40 | 2020 | 34,200 | | | Read more on: campuses on page 19 and women in leadership on pages 36 and 70 Description and rationale Description and rationale We believe that diversity powers our Campuses are key to building our creativity and growth as a business. strengths in individual markets, physically We continue to focus on driving greater bringing agencies together to make gender balance throughout the Company collaboration easy and inspirational, and, in particular, at the most senior supporting flexible and hybrid working, levels. We aim to achieve equal and giving clients access to the breadth representation of women at the and depth of WPP talent in one location Board and all other levels | Targets and performance | | Targets and performance | | --- | --- | --- | | In 2022, the proportion of women in | | In 2022, 54,500 of our people were based | | executive leadership roles increased | | in campuses. We expect this to rise to | | to 40% | (2021: 39%). Across the broader | 85,000 in at least 65 campuses by 2025, | | workforce we increased the proportion | | providing an opportunity to replace all | | among senior management positions | | our smaller offices and lower our | | to 54%, up from 52% in 2021 | | environmental footprint | ## SUSTAINABILITY | Carbon emissions | | Share of electricity | | | --- | --- | --- | --- | | | 0.22 | | 83 | | per person from our | | purchased from | | ### We have made a series of ### owned operations renewable sources ### commitments to be a sustainable ### (tCO 2 e, Scope 1 and 2) (%) ### business and play our part in | protecting the planet. These | | 2022 | 0.22 | | 2022 | | | 83 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | KPIs measure progress towards | | 2021 | | 0.32 | 2021 | | 74 | | | reducing our environmental impact | | 2020 | | | 2020 | 65 | | | | | Read more on our actions to tackle | Description and rationale | | | Description and rationale | | | | | | the climate crisis on pages 74 to 76 | We support urgent action to tackle | | | To support our carbon reduction targets | | | | | | | the climate crisis through the Paris | | | we are a member of RE100, a global | | | | | | | Climate Agreement. We measure carbon | | | initiative bringing together businesses | | | | | | | emissions per employee, as headcount | | | committed to 100% renewable electricity | | | | | | | is closely linked to levels of business | | | to accelerate change towards zero | | | | | | | activity, and this allows us to reflect | | | carbon grids at scale | | | | the impact of acquisitions and disposals without needing to adjust our baseline 1 Executive leadership roles are defined by WPP as the Targets and performance Targets and performance agency board and executive leadership population as We are committed to achieving net zero During 2022, we purchased 83% of reported through WPP's financial reporting system 2 emissions across our owned operations our electricity from renewable sources Defined as employees and freelancers in campuses These metrics were subject to independent limited by 2025 and across our supply chain compared with 74% in 2021, reflecting assurance procedures by PricewaterhouseCoopers LLP by 2030. In 2022 carbon emissions per good progress towards our target of (‘PwC’) for the year ended 31 December 2022. For the employee fell 32% compared with 2021 100% by 2025 results of PwC’s 2022 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2022’, see our 2022 and by 73% since our 2019 baseline Sustainability Report WPP ANNUAL REPORT 202254 40 54,500 0.22 83 2021 2021 2021 2021 2020 2020 2020 2020 0.52 KEY PERFORMANCE INDICATORS STRATEGIC REPORT ## FINANCIAL | Like‑for‑like revenue | | Headline operating | | | --- | --- | --- | --- | | | 6.9 | | 14.8 | | less pass‑through | | profit margin¹ | | ### Our financial targets allow us to ### costs growth¹ (%) ### track the health of WPP as a whole, ### (%) ### analysing our market performance | as well as setting remuneration | | 6.9 | | 2022 | | | --- | --- | --- | --- | --- | --- | | targets and financial guidance | | | 12.1 | 2021 | 14.4 | | for investors | -8.2 | | | 2020 | | 12.9 | Read more on our financial | Description and rationale | Description and rationale | | --- | --- | --- | | performance on pages 56 to 65 | This is the main measure of our strategic | This is a key indicator of our profitability. | | | goal to return WPP to growth. Like-for-like | It comprises profit on trading activities, | | | revenue growth excludes the impact of | excluding certain one-off or exceptional | 4 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 | | --- | --- | | We delivered strong growth across all key | In 2022, our headline operating margin | | WPP agencies, resulting in overall revenue | increased to 14.8% due to revenue growth | | less pass-through costs growth of 6.9% in | and cost savings from the transformation | | 2022. Looking ahead, our targets are 3-5% | programme. In 2023, we expect the | 2 growth in 2023, and 3-4% annual growth margin to improve to around 15% and to over the medium-term reach 15.5-16.0% over the medium term | Organic revenue | | Dividends per share | | | --- | --- | --- | --- | | | (0.5) | | 39.4 | | growth versus | | (pence) | | 3 ### competitors ### (percentage points) | | -0.5 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 0.8 | 2021 | | 31.2 | | | | 0.4 | | 2020 | 24.0 | | | 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 1 Reconciliations from reported revenue to revenue Targets and performance Targets and performance less pass-through costs and subsequently like-for-like In 2022, WPP’s growth rate was 0.5 The Board aims to grow the dividend revenue less pass-through costs, and from reported profit before tax to headline operating profit margin, percentage points below the average annually and to pay out approximately are included on pages 216 to 217. For a full description of our main peers, reflecting our greater 40% of headline earnings per share. The see Glossary on page 232 2 exposure to the economic and lockdown- Board is proposing a final dividend for Includes 0.5-1.0pt annually of M&A contributions 3 Organic revenue growth is defined as like-for-like related pressures in Europe and China. 2022 of 24.4p which, together with the revenue less pass-through costs growth. Omnicom Our goal is to grow at a faster rate than interim dividend paid in 2022, gives a data is based on revenue. This chart shows data the industry average full-year dividend of 39.4p, up 26% over the last 12 months. Competitor data sourced from publicly disclosed results 4 For a full description see Glossary on page 232 14.8 2022 2022 55WPP ANNUAL REPORT 2022 2021 2021 14.8 2022 6.9 2022 -0.5 39.4 39.4 2021 2021 2021 2021 2020 2020 2020 2020 2020 2020 STRATEGIC REPORT ## CHIEF FINANCIAL ## OFFICER’S STATEMENT ## A business in good shape for the future In line with our capital allocation policy, we continued to invest in our business during 2022, both organically and with targeted M&A, and returned more than £800 million of excess capital to shareholders via share buybacks. As we enter 2023 our financial position is strong, with an average adjusted net debt to EBITDA ratio in the 12 months to 31 December 2022 of 1.46x, slightly below our target range of 1.5-1.75x. ### TRANSFORMATION PROGRAMME The five-year transformation programme announced in 2020 is designed to simplify WPP, build greater collaboration, drive efficiency and free up funds for reinvestment in growth. We made further progress against that plan in 2022, delivering around £375 million of gross annual savings against a 2019 base, ahead of the planned £300 million, with savings across property, procurement and our operating model. The transformation of our property estate continues, with a further five campuses opened in 2022 (Brussels, Düsseldorf, Santiago, Tokyo, Toronto) and another in Guangzhou, China, in January, taking the global total to 37. These campuses now ## AS WE ENTER 2023 We delivered strong top-line growth in 2022, accommodate around half our people with margin expansion, an increase in the around the world, and the programme has ## OUR FINANCIAL annual dividend of over 26%, and the return driven significant savings. We plan to open ## POSITION IS of more than £800 million of excess capital to additional offices including Atlanta, Paris ## STRONG” shareholders in share buybacks. and Manchester in 2023. John Rogers 2022 was another strong year for WPP, with We continue to implement a new Chief Financial Officer | like-for-like revenue less pass-through costs | procurement operating model leveraging | | --- | --- | | growth of 6.9%, against our original guidance | our global scale, aligned around categories | | (set in February 2022) of around 5%. This | and consolidating suppliers. As part of this | | performance reflects the priority placed by | programme we launched an initiative in 2022 | | our clients on investing in marketing, despite | to optimise our use of our freelance talent | | economic and geopolitical turbulence, and | across the Company. | the relevance of our offer across all our major agencies, with each contributing towards The transformation of IT, finance and HR overall growth in the year. made further progress as we consolidate and modernise our use of IT in these areas. | We continued to make progress against our | In Enterprise Resource Planning, Workday | | --- | --- | | strategic plan with improved profitability, | Financial Management is operational in | | increasing our headline operating margin | Wunderman Thompson North America after | | by 0.4 points to 14.8%, supported by the | some delays in implementation due to the | | benefits of our transformation programme, | complexity of process and system design. | | which I discuss in more detail below. | We are now in the process of refining the | capabilities of this core enterprise system and how it aligns to optimised agency processes. We successfully rolled out Maconomy in several Asia Pacific markets, and plan rollouts in Latin America in 2023. WPP ANNUAL REPORT 202256 CHIEF FINANCIAL OFFICER’S STATEMENT STRATEGIC REPORT | In the UK we rolled out the first instance of | As part of our long-term strategy, we | FAREWELL | | --- | --- | --- | | Workday HCM, with plans for more rollouts | continued to target acquisitions that will | After three years in this role my decision to | | to come. We also established 24x7 IT service | bring new strengths and capabilities to our | move on to explore new career opportunities | | capabilities for the Company, moving over | agencies. In 2022 Wunderman Thompson | outside WPP was announced in November. | | 1,000 people from agency roles into WPP | was joined by marketing agency Village | Following the announcement of the | | and establishing global hubs in Bucharest, | Marketing, commerce agencies Newcraft | Company’s 2023 First Quarter Trading | | Chennai, Kuala Lumpur and Mexico. | and Diff, and digital agency Fēnom Digital. | Update, Joanne Wilson, who is currently the | | | VMLY&R enhanced its offering with the | CFO of Britvic plc, will take over as WPP’s | | We remain comfortably on target to | addition of Corebiz and Passport Brand | CFO. I will remain with WPP for a short time | | achieve our goal of £600 million annual cost | Design, while Ogilvy was boosted by the | thereafter to ensure a smooth transition. | | efficiencies against a 2019 base by 2025. | acquisition of Bower House Digital, a | | | | marketing technology services agency. | I wish Joanne the greatest of success at | | SIMPLIFICATION | Global revenue less pass-through costs from | what is a wonderful, passionately creative | | WPP benefits from having a number of | experience, commerce and technology | organisation, and I’m sure she will continue | | distinct and strong agency brands, but as we | grew 9%, in line with expected market | to build on the substantial progress made | | look to simplify our organisation and respond | growth of 5-15%. | over the last three years. | to our clients’ needs for integrated solutions, | we have taken the opportunity to bring | DIVIDENDS, EXCESS CAPITAL AND | | | --- | --- | --- | | brands together to streamline and | LEVERAGE TARGET | | | strengthen our offer. During 2022 we | We take a disciplined approach to capital | | | announced the merger of two GroupM | allocation based around the policy we set | John Rogers | | agencies, Essence and MediaCom, and the | out in December 2020. After making organic | Chief Financial Officer | | formation of GroupM Nexus. In our specialist | investments, paying our regular dividend at | 23 March 2023 | | design agencies we announced the merger | our target level of around 40% of headline | | | of Design Bridge and Superunion to create a | EPS, and completing targeted acquisitions, | | | single leading design company, Design | we will continue to review our capital needs | | | Bridge and Partners. | relative to our leverage target of 1.5-1.75x | | average adjusted net debt/EBITDA. When ### TARGETED INVESTMENT we have excess capital, we will return it to We continued to make organic investments shareholders, typically via share buybacks. to drive significant long-term growth | opportunities, with a particular focus on | For 2022, the Board proposes a final dividend | | --- | --- | | unifying and accelerating our data, digital | of 24.4p, which together with the interim | | and AI capabilities. You can see several | dividend of 15.0p paid in November 2022, | | examples of our work related to these areas | would represent a full-year dividend for | | earlier in this report. | 2022 of 39.4p, up 26%. In turn this would | represent around 40% of headline EPS, in Choreograph, our data company, continues line with our policy. to invest in its data offer, allowing brands to | predict relevance and drive deeper customer | Over £1.1 billion was returned to shareholders | | --- | --- | | connections, with recent innovative work for | in 2022, comprising £807 million of share | | Ford and Bayer. Choreograph continues to | buybacks completed and £365 million of | | play a central role in key client assignment | dividends paid. Since 2019, over £3.4 billion | | wins and retention. | has been returned to shareholders (£1.5 | billion in buybacks and the rest in dividends), | In April 2022 we launched GroupM Nexus, | while our net debt has been reduced to | | --- | --- | | bringing together 9,000 practitioners | sustainable levels with leverage at the end | | globally across addressable TV (Finecast), | of 2022 just below the bottom end of our | | AI, retail media and commerce, programmatic | leverage target. | (Xaxis), search and social to be the performance engine for GroupM’s agencies. Finecast added 150 new clients in 2022 and grew strongly. 57WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## TRANSFORMATION ## PROGRAMME ## Our transformation programme aims to unlock cost savings, ## creating a more efficient operating platform for our agencies ## and enabling reinvestment in growth ### We aim to achieve annual gross savings of around £600 million by 2025 by improving the effectiveness of our ### support functions and shared services, generating efficiencies in procurement and real estate, and through ### simplifying our operating model ### APPROXIMATE PHASING OF GROSS COST SAVINGS TARGET ### (£m) ## £600m ANNUAL SAVINGS FROM 2025 ### 600 Savings already achieved By the end of 2022 we ### 525 delivered around £375m of gross annual savings against ### 450 a 2019 base, ahead of planned ### 375 savings of £300m, driven ### 245 by efficiencies in property, procurement and ways of working ### 2021 20232022 2024 2025 ## Efficiency savings enable us to reinvest £400m ## and improve margins by £200m, for the benefit £400m £200m REINVESTMENT MARGIN IMPROVEMENT ## of our people, clients and investors ## PEOPLE CLIENTS INVESTORS Improved and simplified day-to-day Seamless working across agencies, Efficiency savings reinvested to drive experiences, consolidating and to provide a joined-up offer to clients growth, improve operating margin modernising the tools used by our and enhance shareholder returns people across WPP | 24x7 | ~50% | £375m | | --- | --- | --- | | global IT hubs | of employees are in | gross annual efficiency | | in four markets | shared‑agency campuses | savings to date | WPP ANNUAL REPORT 202258 STRATEGIC REPORT ## WE REMAIN COMFORTABLY ON TARGET ## TO ACHIEVE OUR GOAL OF £600 MILLION ## ANNUAL COST EFFICIENCIES AGAINST A ## 2019 BASE BY 2025” John Rogers Chief Financial Officer PROGRESS TO DATE ### Improve effectiveness • We are modernising the tools used by our people by consolidating ### in support functions multiple financial systems into fewer, modern platforms ### and shared services • Finance shared services are now live in 20 markets, providing efficient ### scaled resources ### • We have established 24x7 IT services through four global hubs in ### Bucharest, Chennai, Mexico and Kuala Lumpur ### Efficiencies in • We continue to implement a new procurement operating model ### procurement leveraging our global scale, using a category-led model and ### and property consolidating suppliers ### • We launched an initiative in 2022 to optimise our use of freelance ### talent across the Company ### • A further five multiple-agency campuses opened in 2022 (Brussels, ### Düsseldorf, Santiago, Tokyo and Toronto). In early January 2023, ### we opened a campus in Guangzhou, China, taking the total ### to 37, accommodating around half our people ### Simplifying our • We have merged more of our businesses to simplify our organisation. ### operating model Within GroupM we announced the merger of Essence and MediaCom ### to form EssenceMediacom, and the formation of GroupM Nexus which ### brings together Finecast, Xaxis and GroupM Services to create the ### world’s leading media performance organisation ### • In our specialist design agencies we announced the merger of Design ### Bridge and Superunion to create a single leading design company, ### Design Bridge and Partners 59WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## BURGER ## GLITCH ### Glitches in the gaming world are ### annoying. Until you get rewarded ### for finding them OFFER ### TECHNOLOGY, EXPERIENCE AGENCY ### DAVID (OGILVY), BRAZIL CLIENT ### BURGER KING Gamers the world over agree there’s nothing more annoying than glitches, when the game does unexpected things due to coding errors. But what happens if you embrace glitches and turn them into something good? That's what Burger King and DAVID did with Burger Glitch. To appeal to gamers, Burger King placed glitches in its own app, inviting users to find them, with a reward for doing so. The promise of rewards for finding hidden glitches not only compelled people to download the chain’s mobile app, but also to explore and familiarise themselves with its loyalty features. The coupons gamified the reward experience, pushing the user to make a purchase and potentially encourage future app use. Every face of Burger King’s social channels was altered with Burger Glitch interactions and buggy elements. Self-service kiosks in all Burger King stores were ‘glitched’, as well as outdoor advertising in several Brazilian cities. To tie the real world to the virtual one, Burger King produced ‘glitched’ versions of its own burgers, for example with too many patties or extra ingredients. These ‘glitched’ menu items were passed around in stores and delivered to major Brazilian game streamers. The gaming world went crazy for the concept, taking Burger King to a whole new level. ## 144m Awards impressions Cannes Gold Lion, Brand Activation & Retail Cannes Gold Lion, Retail & Mobile WPP ANNUAL REPORT 202260 STRATEGIC REPORT ## FINANCIAL ## REVIEW | REVIEW OF RESULTS | OPERATING PROFITABILITY | The Group’s headline operating profit | | --- | --- | --- | | Reported revenue was up 12.7% at £14.4 | Reported profit before tax was £1.2 billion, | margin¹ is after charging £44 million of | | billion. Reported revenue on a constant | compared to a profit of £1.0 billion in 2021, | severance costs, compared with £42 million | | currency basis was up 7.0% compared with | reflecting the strong operating performance. | in 2021 and £424 million of incentive² | | last year. Net changes from acquisitions and | | payments, compared to £592 million in 2021. | | disposals had a positive impact of 0.3% | Reported profit after tax was £0.8 billion | | | on growth. | compared to a profit in 2021 of £0.7 billion. | The average number of people in the Group | in 2022 was 114,129 compared to 104,808 | Like-for-like revenue growth for 2022 | Headline EBITDA (including IFRS 16 | in 2021. The total number of people | | --- | --- | --- | | excluding the impact of currency, | depreciation) for 2022 was up 14.5% to | at 31 December 2022 was 115,473 compared | | acquisitions and disposals, and the other | £2.0 billion, compared to £1.8 billion the | to 109,382 at 31 December 2021. | | adjustments, was 6.7%. | previous year. Headline operating profit | | Notes was up 16.6% to £1.7 billion. The significant 1 Headline operating profit as a percentage of revenue less Revenue less pass-through costs was up growth in profitability year-on-year reflects pass-through costs 13.5%, and up 7.6% on a constant currency revenue growth and the progress on our 2 Short- and long-term incentives and the cost of share-based incentives | basis. Excluding the impact of acquisitions | transformation programme, with £375 million | | --- | --- | | and disposals and the other adjustments, | of gross savings towards our 2025 annual run | | like-for-like growth was 6.9%. In the fourth | rate target of £600 million. | quarter, like-for-like revenue less pass-through costs was up 6.4%. Headline operating profit margin was up 40 basis points to 14.8%, and up 40 basis points like-for-like. Staff costs pre-incentives were a 240 basis points drag on margin, reflecting the tight labour market and inflationary backdrop. Personal costs were a 50 basis points drag as travel and in-person meetings recommenced. Offsetting tailwinds were staff incentives (210 basis points), establishment costs (50 basis points), IT costs (30 basis points) and other operating costs (40 basis points). FINANCIAL HIGHLIGHTS 2022 | £14.4bn | 6.9% | 14.8% | | --- | --- | --- | | revenue | like‑for‑like revenue less | headline operating margin | | (2021: £12.8bn) | pass‑through costs growth | (2021: 14.4%) | (2021: 12.1%) This Strategic Report should be read in conjunction with the Corporate Governance report on pages 100 to 157 and pages 220 to 231. The Group’s key performance indicators are discussed on pages 52 to 55. 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 216 and 217 and are defined in the Glossary on pages 232 and 233. 61WPP ANNUAL REPORT 2022 STRATEGIC REPORT FINANCIAL REVIEW | ADJUSTING ITEMS | EARNINGS AND DIVIDEND | BUSINESS SECTOR REVIEW | | --- | --- | --- | | The Group incurred a net loss from adjusting | Reported profit before tax was up 22.0% to | During 2022, we have reallocated a number | | items of £341 million in 2022. This comprises | £1.2 billion. Headline profit before tax was | of businesses between Global Integrated | | the Group’s share of adjusting items from | up 17.3% to £1.6 billion, and headline profit | Agencies and Specialist Agencies. Prior year | | associates (£134 million), restructuring and | attributable to share owners was £1.1 billion. | figures have been re-presented to reflect | | transformation costs (£219 million) and other | | the reallocation. | | net gains from adjusting items (£12 million). | Reported diluted earnings per share were | | | Restructuring and transformation costs | 61.2 pence, compared to 52.5 pence in the | Global Integrated Agencies reported | | mainly comprise severance and property- | prior period. Headline diluted earnings per | revenue was up 18.7% in the final quarter. | | related costs arising from the continuing | share were up 25.5% to 98.5 pence. | Like-for-like revenue less pass-through | | structural review of parts of the Group’s | | costs was up 6.6% in the final quarter, and | | operations, investments in IT and ERP | The Board is proposing a final dividend for | up 9.8% on a three-year basis. GroupM, | | systems as part of our transformation | 2022 of 24.4 pence per share, which | which represented 37% of WPP’s revenue | | programme. This compares with a net loss | together with the interim dividend paid in | less pass-through costs in the fourth | | from adjusting items in 2021 of £270 million. | November 2022 gives a full-year dividend | quarter, was up 8.8% like-for-like. The other | | | of 39.4 pence per share. The record date for | integrated agencies all recorded broadly | | INTEREST AND TAXES | the final dividend is 9 June 2023, and the | similar levels of growth. For the full year, | | Net finance costs (excluding the revaluation | dividend will be payable on 7 July 2023. | like-for-like revenue less pass-through costs | | and retranslation of financial instruments) | | for the segment was up 6.9%, and up 9.5% | | were £214 million, a decrease of £1 million | | over three years. | year-on-year. The reported tax charge was £384 million (2021: £230 million). The headline tax rate (measured on headline profit before tax, including associate income) was 25.5% (2021: 24.0%). Given the Group’s geographic mix of profits and the changing international tax environment, the tax rate is expected to be around 27.0% in 2023, and to continue to increase in the next few years. REVENUE LESS PASS-THROUGH COSTS GROWTH VERSUS 2021 % | ike-for-like | | | 6.9 | | | --- | --- | --- | --- | --- | | cquisitions | 0.7 | | | | | X | | 5.9 | | | | eported | | | | 13.5 | L A F WPP ANNUAL REPORT 202262 5.9 R Like-for-like 13.5 0.7 STRATEGIC REPORTFINANCIAL REVIEW | Public Relations reported revenue was up | REVENUE ANALYSIS | | | | | --- | --- | --- | --- | --- | | 30.1% in the final quarter. Like-for-like revenue | | +/(‑) % | +/(‑) % | | | | £ million 2022 2021 | reported | | LFL 1 | less pass-through costs was up 6.5% in the Global Integrated Agencies 12,191 10,890 11.9 6.9 final quarter, and up 17.5% on a three-year Public Relations 1,228 959 28.1 9.4 basis. All agencies continued to grow well, Specialist Agencies 1,010 952 6.1 1.9 with Hill+Knowlton Strategies growing Total Group 14,429 12,801 12.7 6.7 strongly. During the period we launched FGS Global, the new name and branding for the REVENUE LESS PASS-THROUGH COSTS ANALYSIS merger of Finsbury Glover Hering and Sard | | | +/(‑) % | +/(‑) % | | | --- | --- | --- | --- | --- | | Verbinnen. For the full year, like-for-like | £ million 2022 2021 | reported | | LFL | | revenue less pass-through costs for the | Global Integrated Agencies 9,742 8,683 12.2 6.9 | | | | | segment was up 8.2%, and up 15.9% over | Public Relations 1,157 910 2 7.1 8.2 | | | | | three years. | Specialist Agencies 900 804 11.9 5.6 | | | | Total Group 11,799 10,397 13.5 6.9 Specialist Agencies reported revenue was HEADLINE OPERATING PROFIT ANALYSIS up 19.3% in the final quarter. Like-for-like | revenue less pass-through costs was up | £ million 2022 % margin | * | 2021 % margin | * | | --- | --- | --- | --- | --- | | 4.4% in the final quarter, and up 8.7% on a | Global Integrated Agencies 1,432 14.7 1,222 14.1 | | | | | three-year basis. For the full year, like-for-like | Public Relations 191 16.5 143 15.7 | | | | | revenue less pass-through costs for the | Specialist Agencies 119 13.2 129 16.0 | | | | | segment was up 5.6%, and up 13.8% over | Total Group 1,742 14.8 1,494 14.4 | | | | | three years. | * Headline operating profit as a percentage of revenue less pass-through costs | | | | Note 1 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions, disposals and other adjustments REVENUE LESS PASS-THROUGH COSTS BY BUSINESS VERSUS 2021 % +12.2% ublic Relations +27.1% +11.9% otal +13.5% Global Integrated Agencies P Specialist Agencies 63WPP ANNUAL REPORT 2022 T Total +27.1% +12.2% +11.9% STRATEGIC REPORT FINANCIAL REVIEW | REGIONAL REVIEW | REVENUE ANALYSIS | | | | | | --- | --- | --- | --- | --- | --- | | North America reported revenue was up | | +/(‑) % | +/(‑) % | | | | | £ million 2022 2021 | reported | | LFL | 1 | 30.6% in the final quarter. Like-for-like revenue N. America 5,550 4,494 23.5 7.8 less pass-through costs was up 3.4% in the United Kingdom 2,004 1,867 7.3 6.3 final quarter, and up 8.6% on a three-year W. Cont. Europe 2,876 2,786 3.2 4.8 basis. The United States continued to grow 2 AP, LA, AME, CEE 3,999 3,654 9.5 7.0 at a high-single-digit rate, led by Ogilvy, Total Group 14,429 12,801 12.7 6.7 Hogarth and GroupM. On a full-year basis, like-for-like revenue less pass-through costs REVENUE LESS PASS-THROUGH COSTS ANALYSIS in North America was up 6.6%, and up 10.2% +/(‑) % +/(‑) % over three years. £ million 2022 2021 reported LFL N. America 4,688 3,849 21.8 6.6 | United Kingdom reported revenue was up | United Kingdom 1,537 1,414 8.7 7.6 | | --- | --- | | 24.3% in the final quarter. Like-for-like revenue | W. Cont. Europe 2,319 2,226 4.2 5.5 | | less pass-through costs was up 12.0% in the | AP, LA, AME, CEE 3,255 2,908 11.9 8.0 | Total Group 11,799 10,397 13.5 6.9 final quarter, and up 14.0% on a three-year basis. GroupM and Hogarth were the HEADLINE OPERATING PROFIT ANALYSIS strongest performers. On a full-year basis, like-for-like revenue less pass-through costs £ million 2022 % margin * 2021 % margin * was up 7.6%, and up 10.8% over three years. N. America 771 16.4 656 17.0 United Kingdom 187 12.3 181 12.8 | Western Continental Europe reported | W. Cont. Europe 301 13.0 289 13.0 | | --- | --- | | revenue was up 12.7% in the final quarter. | AP, LA, AME, CEE 483 14.8 368 12.7 | | Like-for-like revenue less pass-through costs | Total Group 1,742 14.8 1,494 14.4 | | was up 8.7% in the final quarter, and up | * Headline operating profit as a percentage of revenue less pass-through costs | | 12.7% on a three-year basis. Spain was the | Notes | | strongest performer in the quarter, up | 1 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals and | other adjustments 38.6% driven by good growth from Ogilvy 2 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe and Wunderman Thompson. France declined 12.2% in the quarter and 18.7% over three years, reflecting the full-year impact of client losses in 2021. On a full-year basis, like-for-like revenue less pass-through costs in the region was up 5.5%, and up 11.0% over three years. In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, reported revenue was up 10.4% in the final quarter. Like-for-like revenue less pass-through costs was up 5.9% in the final quarter, and up 8.7% on a three-year basis. REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION VERSUS 2021 % | orth America | | | +21.8% | | --- | --- | --- | --- | | nited Kingdom | | +8.7% | | | estern Continental Europe | +4.2% | | | N sia Pacific, Latin America, Africa & iddle East and Central & Eastern Europe +11.9% U otal 13.5% W A M WPP ANNUAL REPORT 202264 T Total +21.8% +8.7% +11.9% +4.2% STRATEGIC REPORTFINANCIAL REVIEW | In Latin America growth benefited from a | exchange rates. On 31 December 2022 | – We also anticipate mergers and | | --- | --- | --- | | strong performance in Brazil and very strong | adjusted net debt was £2.5 billion, against | acquisitions will add 0.5-1.0% to revenue | | growth in Argentina, while Asia Pacific | £0.9 billion on 31 December 2021, an | less pass-through costs growth | | continued to be negatively impacted by | increase of £1.4 billion at 2022 exchange | – Headline income from associates is | | Covid-related restrictions in China. On a | rates. The higher adjusted net debt figure | expected to be around £40 million* | | full-year basis, like-for-like revenue less | mainly reflects the £1,172 million returned to | – Effective tax rate (measured as headline | | pass-through costs was up 8.0%, and up | shareholders in 2022 comprising £807 million | tax as a % of headline profit before tax) of | | 8.8% over three years. | of share buybacks completed and £365 million | around 27.0% | | | of dividends paid. | – Capex £300 million | | The decline of like-for-like revenue less | | – Restructuring costs of around £180 million | | pass-through costs in China in Q4 reflected | We spent £863 million on share purchases | – Trade working capital expected to be | | widespread Covid-related lockdowns | during the year, of which £807 million related | broadly flat year-on-year with operational | | during the quarter. Policy changes and the | to share buybacks. | improvement offsetting increased client | | subsequent re-opening late in the quarter is | | focus on cash management | | expected to benefit WPP later in 2023 with | Around £50 million of share repurchases | – Average adjusted net debt/EBITDA within | | media and programmatic business recovering | planned for 2023 are continuing to offset | the range of 1.5x-1.75x | | first, followed by creative activities. | dilution from share-based payments. | | ### MEDIUM-TERM GUIDANCE | CASH FLOW HIGHLIGHTS | Our bond portfolio at 31 December 2022 had | We remain confident in our ability to deliver | | --- | --- | --- | | In 2022, net cash outflow was £1,398 million, | an average maturity of 6.4 years. | annual revenue less pass-through costs | | compared to a £256 million outflow in 2021. | | growth of 3-4% and headline operating profit | | The main driver of the cash flow performance | The average adjusted net debt to EBITDA | margin of 15.5-16%, as a result of the actions | | year-on-year was the £328 million adverse | ratio in the 12 months to 31 December 2022 | we have taken to broaden and strengthen | | movement in trade working capital lapping | is 1.46x, which excludes the impact of IFRS | our services, to increase our exposure to | | positive movement in the prior year, driven | 16. This is slightly below our target range | attractive industry segments and to leverage | | by year-end mix and timing factors. The | of 1.5-1.75x average adjusted net debt | our global scale. | | £519 million adverse movement in other | to EBITDA. | | * Kantar associate income - In accordance with IAS 28: receivables, payables and provisions was Investments in Associates and Joint Ventures, once an ### driven by a reduction in staff incentives OUTLOOK investment in an associate reaches zero carrying value, the payable, prepayments and year-end mix WPP is entering 2023 with a compelling Group does not recognise any further losses, nor income, until the cumulative share of income returns the carrying value to and timing factors associated with VAT, client offer, good momentum from new above zero. At the end of 2022 WPP’s cumulative reported growth in the dividend and the increase business wins, and a robust balance sheet. share of losses in Kantar has reduced the carrying value of the in the share buyback. investment to zero. This means that we expect that around £40-50 million of Kantar headline income will not be recognised Our guidance for 2023 is as follows: in our headline income from associates during 2023 ### BALANCE SHEET HIGHLIGHTS | As at 31 December 2022 we had cash and | – Like-for-like revenue less pass-through | | --- | --- | | cash equivalents of £2.0 billion and total | costs growth of 3-5% | | liquidity, including undrawn credit facilities | – Further margin improvement reflecting | | of £4.1 billion. Average adjusted net debt | continued operating leverage to deliver a | | in 2022 was £2.9 billion, compared to | headline margin of around 15% (excluding | | £1.6 billion in the prior period, at 2022 | the impact of FX) | ADJUSTED NET DEBT £ million 2,479 1,540 4,017 901 696 2019 2020 2021 2022 For more information on our strategy see pages 1 to 55 65WPP ANNUAL REPORT 2022 2018 2022 2,479 STRATEGIC REPORT ## SUSTAINABILITY ## Creativity can address ## some of the world’s ## biggest issues ## WPP’s purpose – to use Our industry connects with many of the most We aim to use our creativity for good, urgent issues we face as a society – diversity, delivering work that makes sustainable ## the power of creativity racial equity, privacy, data ethics and, of lifestyles more desirable and seeks to solve course, climate change. What we do and the some of society’s most pressing issues. In ## to build better futures judgements we make are critically important. 2022 we produced £9.6 million worth of pro Tackling these issues is no longer just a ‘nice bono work for a variety of causes including ## for our people, planet, to have’. It is integral to how we do business. environmental issues, LGBTQ+ equality and ## clients and communities women’s rights. As one of the major players in our industry, ## – helps us focus on the we can use our scale to help bring about We also explored the unprecedented change. That’s why we set strong, time- potential within AI and new technology to ## wider impact we have bound targets to reach net zero both within produce never-before-seen solutions for our organisation and throughout our supply health and wellbeing, and to support ## on the world around us chain. It’s a big task, but we firmly believe underrepresented communities. it’s possible. By putting in place strong DE&I policies | It’s also why, in 2022, GroupM launched | and programmes that create spaces and | | --- | --- | | its media decarbonisation programme, | opportunities for people and communities | | advocating for standardised emissions | who are too often overlooked, we can create | | measurement across the industry (see | engaged, diverse, vibrant workplaces to | | page 76). This is a vital first step to tackling | attract the people who will help drive our | | 50% of our supply chain carbon footprint. | agenda forward. | | Our campuses are built to high sustainability | That way, we can work together to create | | standards, where everything from the type | the fairer, more sustainable future we all | | of flooring materials used to encouraging | want to see. | wildlife at each site is carefully considered. WPP ANNUAL REPORT 202266 STRATEGIC REPORTSUSTAINABILITY ## MORNING ## AFTER ## ISLAND ### Fighting the clampdown ### on women’s rights OFFER ### COMMUNICATIONS AGENCY ### OGILVY, HONDURAS CLIENT ### GRUPO ESTRATÉGICO PAE Honduras is the only Latin American country to ban the morning after pill: any woman found taking it faces up to six years in prison. Since the ban was introduced in 2009, 350,000 underage Honduran girls have given birth. Women’s rights advocates Grupo Estratégico PAE and Ogilvy Honduras came together to create Morning After Island, a floating safe space in international waters outside Honduran jurisdiction where women could access the pill without fear of prosecution. As weekly boat trips took women to the island, Ogilvy created a video campaign encouraging people to sign a petition for change. It gained more than 800,000 signatures in less than six months. Hundreds of media outlets across 14 countries covered it and, eventually, Honduran President Xiomara Castro invited Grupo Estratégico to a public meeting. Castro called on congress to draft legislation defending the sexual, reproductive and civil rights of three million Honduran women. This proposal was eventually converted into law, allowing for the legal use of the pill for the first time in 13 years. ## 1 2m law changed signatures to repeal the ban ## 269m Awards organic impressions Cannes Lions Gold, Health & Wellness 67WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY ## SUSTAINABILITY AND OUR STRATEGY ## Our sustainability strategy sets out how we use Our sustainability commitments are not just the right thing to do, they add meaning for ## the power of creativity to build better futures for our people, who want to work for a company that shares their values, and our clients, who ## our people, planet, clients and communities look to us to help them find and scale solutions to achieve their own goals and ### It supports all elements of our corporate strategy (see table, page 69). deliver positive impact. ## WPP IS THE CREATIVE TRANSFORMATION COMPANY COMMS EXPERIENCE COMMERCE TECH ### How we implement change to build better futures for our people, planet, clients and communities ### DELIVERED THROUGH OUR SUSTAINABILITY STRATEGY ### ENSURING TRUST, DRIVING DIVERSITY, ACCELERATING ### FAIRNESS AND EQUITY AND THE SUSTAINABLE ### GOVERNANCE INCLUSION ECONOMY GOALS AND METRICS PEOPLE Become the employer of choice for all A culture where everyone Ensuring an inclusive Growing sustainability skills – Proportion of women in senior leadership positions is treated with dignity working environment with and knowledge across – Proportion of non-white employees in senior leadership and respect fair representation our industry positions – Continued improvement of diversity data disclosure – Employee participation in listening and engagement programmes – Number of participants in sustainability or DE&I training programmes – Sustainability strategy embedded in executive remuneration PLANET Maximise our positive impact on the planet | Developing common carbon | Building campuses which | Reaching net zero across | – Progress towards net zero carbon emissions in our | | --- | --- | --- | --- | | metrics as we move to | make a positive contribution | our supply chain by 2030 | operations by 2025 (Scope 1 and 2) and in our supply chain | | integrated reporting | to local communities | | by 2030 (Scope 3) | – Progress towards 100% renewable electricity – Phase out single-use plastics in our offices CLIENTS Enable our clients on their sustainability journeys Ensuring fairness and high Ensuring our client work is Supporting our clients – Roll out diversity evaluation scores to track progress in privacy and data ethics inclusive and accessible to reduce their emissions inclusive marketing standards in our work and deliver their – Building common standards to measure carbon emissions sustainability goals in media and production COMMUNITIES Use the power of our creativity and voice to support healthy and vibrant communities | Buying responsibly and | Advancing equity and | Working with partners, | – Investment in pro bono work and free media space | | --- | --- | --- | --- | | building a diverse | inclusion through our work, | social enterprises and clients | – Progress towards investing $30 million over three years | | supplier network | external partnerships | to drive sustainability | through our Racial Equity Programme | and initiatives WPP ANNUAL REPORT 202268 SUSTAINABILITY STRATEGIC REPORT ### Our sustainability strategy is aligned to all elements of our corporate strategy. STRATEGIC ELEMENT SUSTAINABILITY STRATEGY VISION & OFFER SUSTAINABILITY AT THE HEART OF OUR Clients, see page 77 OFFER FOR CLIENTS | A growing number of clients are embracing | Our commitment to responsible and sustainable | Transparency and | | --- | --- | --- | | inclusion, diversity and sustainability and looking | business practices helps us to broaden and | trust, see page 81 | | to articulate the purpose and impact of their | deepen these partnerships, and to meet the | | | brands. They look for partners who share their | growing expectations and sustainability | | | sustainability values and aspirations. | requirements in client procurement processes. | | | CREATIVITY SOCIAL INVESTMENT | | | Communities, | | --- | --- | --- | --- | | | Our pro bono work can make a significant | Pro bono work benefits our business too, providing | see page 79 | | | 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 agencies. | | DIVERSE, EQUITABLE AND INCLUSIVE TEAMS People, see pages Diversity and difference power creativity. We We want all of our people to feel valued and able 70-72 foster an inclusive culture across WPP: one that to fulfil their potential, regardless of background, is equitable and respectful of diverse thoughts lived experience, sex, gender, race and ethnicity, and individual expression. thinking style, sexual orientation, age, religion, disability, family status and so much more. | DATA & | DATA ETHICS AND PRIVACY | | Data ethics, privacy, | | --- | --- | --- | --- | | TECHNOLOGY | Data – including consumer data – can play an | We have a responsibility to look after this data | and security, see | | | essential role in our work for clients. Data security | carefully, to collect data only when needed and | page 84 | | | and privacy are increasingly high-profile topics for | with consent where required, and to store and | | | | regulators, consumers and our clients. | transfer data securely. | | | SIMPLER | CAMPUSES | | Planet, see pages | | --- | --- | --- | --- | | STRUCTURE | Our work to simplify our structure and consolidate | offer modern, world-class workspaces. By 2025, | 74 and 75 | | | our office space is driving a positive impact on our | we expect 85,000 of our people will work in at | | | | energy use and carbon footprint. | least 65 net zero campuses powered by | | renewable electricity. We continue to move employees into campuses, closing multiple smaller sites and replacing them with fewer, larger, more efficient buildings that | PEOPLE & CULTURE SHARED VALUES ACROSS OUR BUSINESS | | | People, see pages | | --- | --- | --- | --- | | | AND SUPPLY CHAIN | | 70-72 | | | 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 83 | | | need to serve our clients in all disciplines across | reputation. | | our locations. 69WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY ## PEOPLE ## We aim to create a stimulating place of work where ## everyone feels supported, involved and encouraged ## to be their best. People make WPP, and here’s why | HELPING OUR PEOPLE TO PLAY | Update, the proportion of women on the | ETHNICITY | | --- | --- | --- | | THEIR PART | Board will be 46%. However, our ambition | As part of our commitments to advance | | We know a growing number of employees | for Board gender diversity remains to reach | racial equity, we began publishing our | | want to work for a company that is willing | parity. We are proud to have been named in | workforce diversity data in the United States | | to stand up for the issues they care about. | the Bloomberg Gender-Equality Index for the | and UK in 2020. | fifth year in a row. For information on our workforce We have partnered with the UNHCR to run diversity data, see our 2022 employee match-funding appeals for disaster We are a committed signatory of the Sustainability Report relief. Our people have given generously to Women’s Empowerment Principles, a guide support those impacted by the conflict in for businesses on how to empower women in ### DISABILITY Ukraine, the floods in Pakistan and, in the workplace, marketplace and community. With more than one billion people February 2023, the devastating earthquakes To read about our work with UN Women, worldwide estimated to experience in Turkey and Syria. see page 79 2 disability, designing for accessibility and inclusion is not only the right thing to do, it ### DIVERSITY, EQUITY AND INCLUSION ### LGBTQ+ helps create better products for everyone. We strive to create fair, inclusive places to WPP Unite celebrates our Company-wide WPP is a proud member of The Valuable 500, work across WPP globally. We put in place LGBTQ+ community. In 2022 the community a global business collective made up of 500 policies to prioritise fairness and equity, with launched in India, and Australia and New CEOs and their companies, innovating the aim of building a culture in which our Zealand. Unite advises on policies that together for disability inclusion. As part of people have the opportunity to thrive and impact on LGBTQ+ talent across WPP and our commitment, we established a centre differences are celebrated. our agencies to ensure diverse thinking and of excellence for inclusive design to help creativity thrive within WPP’s workplaces our clients make their customer experiences Our Code of Business Conduct sets out our and within our work. disability-inclusive and accessible. commitment to select and promote our people without discrimination or concern In 2022, Unite consulted on WPP’s Reality We recruit, select and promote our people for factors such as sex, gender, race and Flag campaign with the Human Rights on the basis of their qualifications, relevant ethnicity, sexual orientation, age, religion, Campaign, which was awarded the Most experience and merit, without discrimination disability or family status. This Code applies Effective Integrated Marketing Campaign or concern for disability. Candidates are to all our people. at The Drum Awards. A cross-agency assessed objectively against the requirements collaboration between VMLY&R, BCW, of the job, taking account of any reasonable ### GENDER BALANCE Wavemaker, Hogarth and Unite, adjustments that may be required for We aim to reach gender parity at all levels the campaign is designed to rally public candidates with a disability. For people who of our business. Over half (54%) of our senior support for The Equality Act, landmark develop a disability during their employment, managers are women (2021: 52%). The federal legislation that would guarantee we make adjustments to their working proportion of women in executive leadership explicit and consistent non-discrimination environment or other employment 1 roles is 40% (2021: 39%). The proportion of protections for LGBTQ+ people in key arrangements wherever possible, within a women on the Executive Committee areas of life across the United States. reasonable time frame and in consultation increased to 40%  , compared to 35% in the with the employee. previous year. At Board level, the proportion In 2022, WPP received a top score of 100 in of women is 38% (2021: 43%). When Joanne the Corporate Equality Index, and was again Wilson succeeds John Rogers as CFO named among the Best Places to Work for following the announcement of the LGBTQ+ equality. Company’s 2023 First Quarter Trading 1 Executive leadership roles are defined by WPP as the agency board and executive leadership population as reported through WPP’s financial reporting system 2 World Bank, Disability Inclusion Overview, April 2022 WPP ANNUAL REPORT 202270 SUSTAINABILITY STRATEGIC REPORT | | | | | LISTENING AND ENGAGING | We aim to select, design and run our | | --- | --- | --- | --- | --- | --- | | | | | | In 2022 we launched the refreshed All In | offices in a way that promotes sustainability | | | | | | staff survey to help us listen to our people | and wellbeing. In 2022, with our architecture | | 40% (1,432) | | 60% (2,121) | 2022 | | | | | | | | and continue to create a culture that is | firm BDG, we created a new ESG building | | | | | | inclusive and empowering to all. Two-thirds | assessment tool to help us identify | | | | 61% (2,395) | 202139% (1,552) | | | | | | | | of employees took part, with ‘belonging’ | opportunities to support employees’ | | | | | | and ‘feeling valued’ coming out as two of | wellbeing needs and reduce energy | | | 54% (11,401) | 46% (9,781) | 2022 | the top reasons for working for WPP. | use, optimise resource use and create | opportunities for circular business models | 52% (9,630) | 48% (8,784) | 2021 | | | | --- | --- | --- | --- | --- | | | | | We continue to build on new ways to | in our materials use (for example, as we refit | | | | | connect. Our virtual global CEO townhall | offices to meet changing business needs). | series, where Mark Read and WPP leaders | 57% (50,979) | 43% (38,237) | 2022 | | | | --- | --- | --- | --- | --- | | | | | discuss issues important to our colleagues, | SUSTAINABILITY ENGAGEMENT | | 57% (49,104) | 43% (36,730) | 2021 | had an average 5,900 participants tuning in, | So our employees can fully engage in our | | | | | up 40% from the year before. We kicked off | commitment to reach net zero, in 2022 we: | 2023 with a sustainability-focused townhall 56% (63,812) 44% (50,138) 2022 which attracted an audience of over 8,500. – Launched a new Green Claims Guide and associated training to help equip people | | 56% (60,286) | 44% (47,910) | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | A NEW WAY OF WORKING | with principles and practical tips for | | | | | | | The last two-and-a-half years have brought | making effective environmental claims | | Female | ● Male | | | | | | | | | | | | lasting changes to the way we work at WPP. | and avoiding misleading the public | | | | | | | We’ve embraced greater flexibility in how | – Rolled out sustainability fundamentals | | | | | In 2022, | | and where we do our jobs, and found that | training in GroupM across the UK, which | | | | | | | can deliver better outcomes for ourselves | in 2023 will be accessible to all employees | | | | | | | and our business. | across WPP | – Delivered tailored sustainability reporting | | | We continue to move our people into | training for finance and risk teams | | --- | --- | --- | --- | | | | modern, more energy-efficient and dynamic | – Partnered with Google Cloud to run | | GENDER DIVERSITY | ● 19 or under <1% | | | | | | workspaces that facilitate learning, | sustainability training for IT teams | | Board and executive | ● 20-29 34% | | | | | | encourage creative collaboration, and give | – Rolled out targeted tools and resources | ● 30-39 38% clients access to the breadth and depth of to eliminate single-use plastics across our ● 40-49 19% ● 50-59 7% WPP talent in one inspiring location. offices (see page 75) ● 60 and over 2% | Senior managers | | By 2025, we will have at least 65 net zero | And we continue to offer training through | | --- | --- | --- | --- | | | | campuses running on electricity from | programmes such as AdGreen, an initiative to | | | | renewable sources. Our strategy also focuses | unite the advertising industry in eliminating | | | In 2022, this accounted | on repurposing old, iconic buildings where | the negative environmental impacts of | | | | we reuse as much of the structure and fittings | production, and through the Change the | All other employees as we can to retain embodied carbon and Brief Alliance, training creatives and AGE DIVERSITY limit impact. strategists to drive consumer behaviour change and sustainability. Total employees These metrics were subject to independent limited assurance procedures by PricewaterhouseCoopers LLP (‘PwC’) for the year ended 31 December 2022. For the results of PwC’s 2022 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2022’, see our 2022 Sustainability Report ● 71WPP ANNUAL REPORT 2022 | Age diversity figures exclude a small proportion where Gender diversity figures exclude a small proportion | | --- | | age is unknown or undisclosed. where gender is unknown or undisclosed. | | AGE DIVERSITY for 1% of total headcount. this accounted for less than 1% of total headcount. | | GENDER DIVERSITY 2022 2022 2022 2022 43% (38,237) 44% (50,138) 46% (9,781) 60% (2,121) 43% (36,730) 44% (47,910) 48% (8,784) 61% (2,395) ● | STRATEGIC REPORT SUSTAINABILITY PEOPLE ### Across our offices and agencies, a growing HEALTH, SAFETY AND WELLBEING network of ‘green teams’ are connecting Work-related stress is one of our main – 3.8 sustainability enthusiasts to embed and growing – health and safety hazards. 3.5 3.3 sustainability and drive change through 3.0 events, training, innovative initiatives and We are committed to creating mentally 400,617 employee activation. healthy workplaces. In 2022 we became a 330,696 325,676 founding member of the Global Business | In Sydney, we partnered with My Net Zero | Collaboration for Better Workplace Mental | | | | | --- | --- | --- | --- | --- | | to provide personalised sustainability plans | Health, the first global business-led initiative | | | | | for our people. In Belgium and Prague, our | designed to advocate for – and accelerate – | | | | | bike-to-work schemes are fostering health | positive change for mental health in the | 19 2021 | 2020 | 2022 | | and wellbeing alongside a low-emissions | workplace. | | | | Days lost due to sickness commute. And in Paris and London, we Days lost per person hosted vegan takeovers in campus cafés. Over the course of the year, we expanded our Mental Health Allies programme to the | VMLY&R grew its active ‘green team’ | United States and Singapore, building on a | | | --- | --- | --- | | network to more than 130 across North | successful pilot in the UK. We now have 550 | LABOUR RELATIONS | | America, Ogilvy hosted sustainability | Allies who work to ensure colleagues stay | We support the rights of our people to join | | deep-dives as part of its annual Learning Day, | healthy, supported and safe by encouraging | trade unions and to bargain collectively, | | Landor & Fitch continued to support | open conversations about mental health in | although trade union membership is not | | members of its 450+ strong ‘Good Squad’ | the workplace and guiding people to help | particularly widespread in our industry. | | in sustainable brand innovation, and | and resources. | | | Wunderman Thompson launched a | | In 2022, around 4% of our employees were | | sustainable travel guide for | We also introduced Making Space, an | either members of a trade union or covered | | global colleagues. | initiative focused on giving people space | by a collective bargaining agreement | | | to look after their wellbeing and inspiring | (2021: 4%). We held 220 consultations with | | We will continue to inspire, equip and | creativity, which kicked off with a four-day | works councils, mainly in Europe (2021: 268). | | empower our people to put sustainability | weekend for all employees to take time out | | | into practice in 2023. | to recharge, reset and refresh. | We have made around 3,300 redundancies, | largely as part of our transformation | Our Employee Assistance Programme | programme and as we merged and | | --- | --- | | covers all our people around the world, and | restructured some agencies. We consulted | | is designed to help employees manage and | with our employees as appropriate and | | prevent challenges so they can stay healthy | supported affected people through our | | in their work and personal life. The | Employee Assistance Programme which | | programme is a 24/7 service for employees | includes outplacement in appropriate cases. | | and eligible family members that provides | Through our internal talent marketplace we | | access to free confidential counselling and | try to ensure any open roles are filled by | DAYS LOST DUE TO SICKNESS support, as well as resources on topics such employees who have the right skills before as managing stress, dealing with loss and recruiting for those roles externally. referrals to local financial or legal help. 404,381 20 WPP ANNUAL REPORT 202272 400,617 DAYS LOST DUE TO SICKNESS 2022 3.5 SUSTAINABILITY STRATEGIC REPORT ## ZOTERIA ### A digital solution that raises ### awareness of LGBTQ+ hate crime OFFER ### TECHNOLOGY AGENCY ### POTATO (AKQA) CLIENT ### VODAFONE FOUNDATION New research by Vodafone found that 68% of LGBTQ+ respondents had been victims of hate crime in the last year. Motivated by this shocking statistic – and the fact that three-quarters didn’t report it – Vodafone Foundation, in partnership with Stonewall and Galop, wanted to develop an app to provide an easy and effective way to report abusive incidents and offer support. After in-depth research to hear the community’s needs, Potato designed a mobile app that’s fast, reassuring and instantly connects victims with the best support available, empowering members of the community to safely report hate crime. Zoteria will also be able to provide a far more accurate view of the extent of hate crimes across the UK. Anonymised data will be available to local authorities so they can better understand the issue within their region and put in place strategies to address it. Data will also help highlight the issues faced by LGBTQ+ people from ethnic minorities, with recent UK studies suggesting this group faces specific, intersectional barriers to equality. The app provides access to other vital support services, including LGBTQ+ advice, mental health and sexual health services, and information on local LGBTQ+ events to help people stay connected with their local communities. Read Beyond the Rainbow, WPP Unite and Choreograph’s joint study into the future of LGBTQ+ marketing 73WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY ## PLANET ## It is everyone’s responsibility to ## help tackle the climate crisis | Our planet needs everyone, everywhere to | In 2022 we launched a new Green Claims | REDUCING SCOPE 2 EMISSIONS | | --- | --- | --- | | take the climate crisis seriously. The public | Guide, supported by training sessions, | Scope 2 market-based emissions were | | demands it, our clients demand it and we | to help equip our people with principles | 11,096 tCO2e  (2021: 21,840 tCO2e), a 49% | | demand it of ourselves. As one of the world’s | and practical tips for making fair and | reduction from 2021. Scope 2 location-based | | biggest marketing services companies, we | accurate environmental claims and avoiding | emissions were 50,867 tCO2e  (2021: 55,990 | | are committed to driving positive change | misleading the public (see page 77). | tCO2e), a 9% reduction from 2021. | across the industry and beyond. WPP is a member of RE100, the global ### REDUCING SCOPE 1 EMISSIONS corporate renewable energy initiative, and ### OUR CLIMATE STRATEGY Our Scope 1 emissions for 2022 were we have committed to sourcing 100% of our In 2021, we set near-term science-based 14,105 tCO 2 e (2021: 13,292 tCO 2 e), of which electricity from renewable sources by 2025. targets and committed to reach net zero a subtotal 10,051 tCO 2 e  (71% of our total In 2022, we bought 83%    of our electricity across our own operations (Scope 1 and 2) Scope 1 emissions footprint) has been from renewable sources (2021: 74%). by 2025, and our supply chain (Scope 3) by subject to independent limited assurance 2030. These targets include emissions from procedures by PwC. The Scope 1 emissions ### REDUCING SCOPE 3 EMISSIONS media buying (more than half of our total not subject to assurance procedures relate Our supply chain makes up the overwhelming footprint) – an industry first. Read about our to locally contracted company cars, for 1 majority (98%) of our total emissions. We aim 2022 performance in the charts on page 75. which emissions have been estimated. to halve our Scope 3 emissions by 2030 (2019 baseline year). We are in the process of developing We continue to move our people into detailed roadmaps to reduce Scope 1, 2 modern, energy-efficient and dynamic ### MEDIA DECARBONISATION and 3 emissions, and we will publish our workspaces that facilitate learning, With over $60 billion in advertising placed first formal transition plan in 2023 aligned encourage creative collaboration and annually on behalf of clients, WPP is the to the recommendations of the Transition give clients access to the breadth and world’s largest investor in media advertising. Plan Taskforce. depth of WPP talent in one location. As the first company to account for media Our investment in campuses around the emissions (more than half our supply chain Collaboration with clients and suppliers world will, by 2025, bring 85,000 of our 1 emissions) in our science-based reduction is critical to delivering against our targets people together in at least 65 net zero targets, WPP and GroupM are rapidly and promoting low-carbon and regenerative campuses running on electricity from identifying risks and opportunities to support living at the scale needed to address the renewable sources. the industry and our clients to reduce climate crisis. Of our 50 largest clients, emissions in this highly complex space. 78% have set or are committed to setting Company cars accounted for 64% of science-based reduction targets through our Scope 1 emissions. We aim to reduce In 2022, GroupM developed and released the Science Based Targets initiative (SBTi), emissions by shifting company cars to electric a methodology for calculating emissions up from 62% in 2021. These clients look to us and hybrid vehicles in all markets where from media and launched a coalition of to help them find and scale solutions (for an infrastructure makes it feasible to do so. leading advertisers – representing $10 billion example, see page 78). Through GroupM, In 2022, 30% of centrally leased company in global advertising investment – with a we are working with industry trade bodies cars were electric or hybrid vehicles, commitment to advocate for shared industry to agree a consistent and transparent compared to 24% in the prior year. standards and accelerate the decarbonisation methodology for calculating emissions from of the world’s media supply chain. In media placement (see page 76 for more). February 2023, we launched a new media omnichannel carbon calculator for clients, 1 Data from 2019 baseline enabling clients for the first time to factor These metrics were subject to independent limited assurance channel-level carbon emissions data into procedures by PricewaterhouseCoopers LLP (‘PwC’) for the year ended 31 December 2022. For the results of PwC’s 2022 their media planning (see page 76). Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2022’, see our 2022 Sustainability Report WPP ANNUAL REPORT 202274 SUSTAINABILITY STRATEGIC REPORT ## WPP IS A PROUD SIGNATORY TO BOTH THE UN GLOBAL ## COMPACT’S BUSINESS AMBITION FOR 1.5°C, WHICH AIMS ## TO GALVANISE BUSINESS SUPPORT FOR STRONG CLIMATE ## ACTION, AND THE UNFCCC’S RACE TO ZERO CAMPAIGN ### TARGETS AND COMMITMENTS | 84% | | 50% | | Net zero | 100% | | --- | --- | --- | --- | --- | --- | | absolute Scope 1 and 2 greenhouse | | absolute Scope 3 GHG emissions | | across own operations (Scope 1 | electricity from renewable | | gas (GHG) emissions reduction by | | reduction by 2030 from a 2019 base | | and 2) by 2025 and across entire | sources by 2025 | | | 2 | | 2 | | | | 2025 from a 2019 base year | | year, | including media buying – an | supply chain (Scope 3) by 2030 | | industry first | PRODUCTION | Within our own operations, we remain | We are working to include the portion of | | --- | --- | --- | | The carbon emissions generated by the | committed to phasing out plastics that | unassured Scope 1 data relating to locally | | production of the films and other content | cannot be reused, recycled or composted | managed company cars, and the proportion | | we create on behalf of clients are responsible | across our campuses and offices worldwide. | of unassured locally managed air travel | 1 | for 14% of our supply chain carbon footprint. | In 2022, as office occupancy increased, | emissions data, in scope for limited external | | --- | --- | --- | | Hogarth, our production agency, continues | we redoubled our efforts. All campuses | assurance in future years. As we refine our | | to develop virtual production capabilities, | completed a plastics audit, looking at what | methodologies and improve data quality, we | | partnering with key industry innovators to | they buy and how they dispose of plastics. | will apply these to prior years and restate | | create a compelling alternative to traditional | At year-end all campuses had plastic | data if a material gap is identified. | | production methods. | recycling facilities in place. But we still have | | | | work to do. In 2023, with sponsorship from | From production to media investment, | | TECHNOLOGY | our agency Chief Finance Officers, we will | we support the development of more | | The technology we use – from data centres | continue to drive progress beyond our | robust protocols to measure emissions | | to the emails we send – generates 6% of our | campuses and across all products purchased | across the industry. | 1 Scope 3 footprint. As we increase our use of by our agencies. For more information, see the cloud infrastructure, powered by renewable planet section of our 2022 ### electricity, we will reduce our energy DATA QUALITY Sustainability Report consumption and our carbon emissions, A significant challenge for reducing carbon as well as drive down waste. emissions is being able to measure them with confidence. We are working to improve the ### AIR TRAVEL quality and coverage of our emissions data. Business travel accounts for around 3% 1 of our supply chain carbon footprint. To ### offset the resulting emissions, we have been 2022 PERFORMANCE purchasing high-quality carbon credits since 2007, which are charged to each of our agencies to create an internal carbon cost. CO 2 e EMISSIONS ### OFFSETTING 0.82 The first step to limiting emissions must 0.52 always be to reduce the total footprint of any product or service as far as possible. 0.32 0.22 Our Environment Policy, introduced in 2022, 55,662 sets out how we manage the cost and MARKET BASED SCOPE 1 AND 2 CARBON 51,962 quality of the carbon credits we buy to | EMISSIONS PROGRESS | offset emissions we cannot avoid. | 35,132 | | | | | --- | --- | --- | --- | --- | --- | | | | | 25,201 | 23,325 | | | CARBON EMISSIONS FROM AIR TRAVEL | | | | | 11,421 | ### CIRCULAR ECONOMY TONNES Moving from a ‘take-make-dispose’ 2019 2020 2021 2022 2020 2021 2022 122,967 economy to a circular economy where 87,585 waste is eliminated, resources are circulated ● Scope 1 and 2 (tCO 2 e) and nature is regenerated could create Scope 1 and 2 per person (tCO 2 e/person) $4.5 trillion in annual economic output by | | Our Scope 1 and 2 market-based emissions for 2022 | 1 Data from 2019 baseline | | --- | --- | --- | | 2030. WPP can contribute to this transition | | 2 | | | were 0.22 tCO₂e/person, a 32% reduction from 2021 | Target verified by SBTi in line with ambition to limit climate | | through the work we do for our clients | and 73% reduction from our 2019 baseline. | change to 1.5°C from pre-industrial levels | | (see example on page 78). | Our carbon intensity per £1 million revenue was | | 1.75 tCO₂e, a 36% reduction since 2021 75WPP ANNUAL REPORT 2022 CARBON EMISSIONS FROM AIR TRAVEL MARKET BASED SCOPE 1 AND 2 CARBON 2019 25,201 55,662 TONNES CO EMISSIONS PROGRESS 2022 2022 0.22 2 e EMISSIONS STRATEGIC REPORT SUSTAINABILITY PLANET | | GroupM is the world’s largest media buyer, | To push for the biggest change in the | | --- | --- | --- | | C A L C ULAT IN G | placing more than $60 billion each year on | shortest timeframe, GroupM formed a | | | behalf of clients. In line with WPP’s | client coalition to bring together leading | | | commitment to halve supply chain carbon | advertisers, collectively representing | ## MEDI A | | emissions by 2030 (from a 2019 baseline), | $10 billion in global advertising investment. | | --- | --- | --- | | | in 2022 GroupM launched an ambitious and | The coalition will advocate for shared | | EMISSIONS | bold new strategy to decarbonise media | industry standards and advance efforts to | | | advertising. | reduce the amount of carbon created by | the placement of advertising. ### Decarbonising the media industry Working with independent carbon | measurement specialists, and with input from | In February 2023, GroupM launched an | | --- | --- | | clients, industry partners and third parties, | omnichannel version of its carbon calculator, | | GroupM developed and launched a global | enabling clients for the first time to factor | | carbon measurement framework that makes | channel-level carbon emissions data into | | it possible, for the first time, to measure | their media planning. | carbon consistently across different media channels. To help drive industry-wide progress and work towards a common Scan to access measurement system for emissions from the research media buying, GroupM made the framework open source. ## WE INTRODUCED OUR ## GLOBAL FRAMEWORK ## WITH A GOAL OF UNITING ## THE INDUSTRY. WE KNOW ## WE CAN ACHIEVE MORE, ## TOGETHER, THAN WE CAN ## WITH SEPARATE AND ## DISPARATE ACTION” Christian Juhl Chief Executive Officer, GroupM WPP ANNUAL REPORT 202276 SUSTAINABILITY STRATEGIC REPORT ## CLIENTS ## From strategy and consulting to delivery and flawless ## execution, we offer dynamic support and expertise to ## help clients meet their sustainability and diversity, ## equity and inclusion goals | WORK WITH IMPACT | Beyond the Rainbow, a survey of over | In 2022 we launched a Green Claims Guide, | | --- | --- | --- | | Businesses and consumers alike are feeling | 7,500 people in the United States, UK and | informed by guidance from regulators such | | the effects of inflation, climate change, | Canada that provides data on how queer | as the UK Competition & Markets Authority | | geopolitical uncertainty and rising social | communities view themselves as depicted | and US Federal Trade Commission, and | | inequality. Businesses are looking for solutions | in advertising and marketing. | underpinned by legal compliance advice. | | that unlock growth, while also addressing | | The guide is designed to equip our people | | their environmental and social impact. | ACTING ETHICALLY AND | with principles and practical tips for making | | | WITH INTEGRITY | effective green claims that are not | | As the creative transformation company, | Our work has the power to bring about | misleading in any way. | | we want to help our clients and society find | change – it regularly changes attitudes, | | | and scale these solutions through work that | opinions and the way people behave. As it is | ACCEPTING NEW ASSIGNMENTS | | is creative, credible and actionable. | critical that these changes are for the better, | Each of our agencies has a global Risk | | | we are committed to acting ethically in all | Committee, chaired by its respective | | Our Sustainability Playbook, updated | aspects of our business, and to maintaining | CEO, to ensure that leadership has a full | | in 2022, showcases the diversity of our | the highest standards of honesty and integrity. | understanding of the risks across businesses | | sustainability capability and innovative | | and markets (see Risk Governance | | work (see the clients chapter in our 2022 | We will not undertake work that is intended | Framework on page 86). | | Sustainability Report). | or designed to mislead or deceive. We work | | | | hard to maintain strong compliance in areas | During the year we put in place a revised | | WPP is a founding member of the | such as ethics, human rights, privacy and | Assignment Acceptance Policy and | | #ChangeTheBrief Alliance, which scales an | data security. All of this is covered in our | Framework that WPP subsidiaries need to | | initiative that originated at Mindshare and | Code of Business Conduct and in our | follow when taking on new business. This | | aims to harness the creative power of our | mandatory online ethics training. | applies to all client sectors and provides | | industry to promote more sustainable | | guidance to our leaders and people about | | choices and behaviours. | We require that all work our agencies | how to conduct additional due diligence | | | produce for clients complies with all relevant | in relation to clients and any work they | | AN OPEN AND INCLUSIVE FUTURE | legal requirements, codes of practice and | are asked to undertake. It requires various | | People are complex and intersectional, and | marketing standards. Our agencies have | categories of work to be considered by | | so are their needs. How we communicate | policies and processes to mitigate against | our agencies’ risk committees or escalated | | with people depends upon how they | online advertising appearing on sites with | to WPP for review. | | define themselves. | illegal, illicit or unsuitable content. | | Our agencies have copy-checking and | Our Inclusive Marketing Playbook and | There are occasional complaints made about | clearance processes for the legal team | | --- | --- | --- | | resource library, updated in 2022, embeds | campaigns we have worked on, and some | to review campaigns before publication. | | inclusive marketing principles in everything | of these are upheld by marketing standards | These processes have strict requirements | | we do, and our Diversity Review Panel | authorities. Our agencies take action where | in highly regulated sectors such as | | provides a forum to escalate and address | needed to prevent a recurrence. | pharmaceutical marketing. | concerns around potentially offensive or For more information, see the ### culturally insensitive work. ENVIRONMENTAL CLAIMS planet section of our 2022 Regulators and the general public are holding Sustainability Report | In 2022, we launched the Consumer Equality | environmental claims made by businesses | | --- | --- | | Equation report, exploring the relationship | and brands to ever-higher standards of | | between ethnicity and the consumer | fairness and objectivity. This means it is more | | experience in the UK. And Unite, WPP’s | important than ever that any claims we make | | company-wide LGBTQ+ community, | on behalf of clients are authentic, material | | partnered with Choreograph to publish | and matched by real action. | 77WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY CLIENTS If global food waste were considered a | | | 500% | 40k+ | | --- | --- | --- | --- | | HELLMANN’S: | country, it would be the third largest emitter | | | | | | increase in traffic | recipe books | of greenhouse gases in the world. Hellmann’s to Hellmann’s website downloaded is on a mission to raise awareness of how UK ## COOK households are major contributors to the | | food waste issue. | 3.4m | 32% | | --- | --- | --- | --- | | CLEVER, | | people tuned in to | of viewers said they | | | Mindshare and Hellmann’s co-created a | watch Cook Clever, | would re-use leftovers | | | | Waste Less | in future | four-part TV series, Cook Clever, Waste Less, ## WASTE LESS featuring top UK cook and self-proclaimed queen of leftovers, Prue Leith, and NHS ### Say no to waste and yes to taste GP and food expert Dr Rupy Aujla. The programme educated four households on how to minimise food waste, sharing OFFER practical tips and money-saving advice ### COMMUNICATIONS such as the benefits of meal planning, AGENCY batch cooking and re-using leftovers. ### MINDSHARE, UK To extend reach, Mindshare created and CLIENT promoted a host of digital assets across ### HELLMANN’S (UNILEVER) social and online video throughout the campaign period. The agency also promoted a downloadable recipe book, created by Hellmann’s, that meant people had a long-lasting resource to help combat their waste at home. WPP ANNUAL REPORT 202278 SUSTAINABILITY STRATEGIC REPORT ## COMMUNITIES ## We aim to use the power of our creativity and voice ## to support healthy and vibrant communities | The work we do with our clients and partners | And we shared insights and data with the | EMPLOYEE GIVING | | --- | --- | --- | | has the power to inspire widespread social | global network on issues including body | AND VOLUNTEERING | | change. Good communications are essential | autonomy and the Consumer Equality | Our people around the world donated | | to bring about the shift in attitudes and | Equation, a study into the relationship | $670,000, which WPP matched, to the | | behaviour needed to end extreme poverty, | between ethnicity and the consumer | UNHCR appeal to support those forced | | inequality and climate change, contributing | experience in the UK. | to flee their homes in Ukraine. We continue | | towards the UN Sustainable Development | | to partner with the UNHCR to run employee | | Goals (SDGs). | ADVANCING RACIAL EQUITY | match-funding appeals for disaster relief. | In June 2020, we committed to invest | AMPLIFYING VOICES | $30 million over three years in initiatives | We also encourage our people to volunteer | | --- | --- | --- | | We can help amplify the impact of charities | to advance racial equity. Since then, we | their time. In France we launched We Care | | and non-governmental organisations by | have committed $16.2 million to inclusion | & We Act, a new volunteering programme | | providing marketing and creative services, | programmes. This does not include amounts | to match employee talent, skills and interests | | often on a pro bono basis (for little or no fee). | invested in 2022, which we intend to report | with requests for volunteer support. | later in the year. | This work is mutually rewarding: it is often | | VMLY&R gave more than 13,000 employees | | --- | --- | --- | | worth more than an equivalent cash donation | We aim to fund initiatives that will deliver | the opportunity to support causes and | | for the beneficiary, helping to increase | immediate results while also laying the | non-profit organisations of their choice | | donations, recruit members, change | foundation for meaningful and sustainable | when the agency closed its offices around | | behaviour and achieve campaign goals, while | change. We held two funding rounds in | the world on 29 September to mark its | | also giving our colleagues the chance to | 2022. Applicants were assessed for their | Foundation Day. | | work on fulfilling, impactful and sometimes | commitment to advance racial equity, | | | award-winning campaigns that build their | measurable impact on a specified target | WHAT WE GAVE IN 2022 | | skills and knowledge and raise the profile | audience, and sustainable design. | Our pro bono work was worth £9.6 million | | of our agencies. | | (2021: £7.6 million) for clients including UN | | | ACTION IN LOCAL COMMUNITIES | Women. We also made cash donations to | | IMPACT THROUGH COLLABORATION | We encourage our people to use their | charities of £5.2 million (2021: £4.8 million). | | We can scale our impact through multi- | creativity and expertise to support the | This resulted in a total social investment | | stakeholder alliances. Common Ground is a | local causes they are passionate about, and | of £14.8 million (2021: £12.4 million), | | collaboration between the world’s six largest | we have a long tradition of pro bono work | equivalent to 1.3% of headline profit | | advertising groups and the United Nations, | covering a range of issues from the arts to | before tax (2021: 0.9%). | | created to support the SDGs. WPP’s | conservation, health and human rights. | | | focus is on gender equality (SDG 5). | | WPP media agencies negotiated free media | | | The WPP India Foundation was named CSR | space worth £20.8 million on behalf of pro | | As a founding member of the Unstereotype | Foundation of the Year, having supported | bono clients (2021: £17.3 million). Our total | | Alliance, we partner with UN Women to work | over 15,000 underprivileged children with | social contribution, taking into account cash | | towards eradicating harmful stereotypes | education, training and social support | donations, inclusion programmes, pro bono | | from all advertising and media, and to drive | since 2015. In Australia, we joined the | work, in kind contributions and free media | | positive social change. In 2022 we engaged | Reconciliation Action Plan programme | space, was £35.5 million (2021: £41.0 million). | | locally in Australia, Brazil, India, Kenya, South | in support of Aboriginal and Torres Strait | | For more information, see the Africa, Turkey and the UK. Islander peoples, and were named one of communities section of our 2022 the most inclusive employers in the country. Sustainability Report And in the UK we partnered with the One Read the Consumer Club of Creativity to launch the One School, Equality Equation report designed to support Black British creatives entering the industry. 79WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY COMMUNITIES Life-threatening diseases such as dengue Maxx Flash, a mosquito coil brand that helps ## THE KILLER and malaria were on the rise in certain areas fight mosquitoes inside homes, wanted to of India. Unusually, this wasn’t just in wet stamp out the mosquito menace at these season – even in dry season, cases were breeding grounds. To answer the brief, ## PACK climbing upwards. VMLY&R created The Killer Pack. The 100% biodegradable packaging was lined and ### A pack that kills mosquito While people were using mosquito printed with active ingredients that kill ### larvae at source repellents to fight mosquitoes inside the mosquito larvae in the places they breed home, disease control authorities were most, such as garbage dumps, dustbins, alarmed by new breeding grounds popping ponds, stagnant water or stormwater drains. OFFER up outside homes at rubbish collection A clever but long-lasting solution to a ### EXPERIENCE | | points. These dumps were providing optimal | deadly issue. | | | --- | --- | --- | --- | | AGENCY | conditions for mosquitoes to lay their eggs, | | | | VMLY&R, INDIA | creating an explosion in numbers. | | | | CLIENT | | 61% | Awards | | MAXX FLASH | | average reduction in | Cannes Lion Grand Prix, | | | | dengue-causing larvae | Health & Wellness | where distributed WPP ANNUAL REPORT 202280 STRATEGIC REPORTSUSTAINABILITY ## TRANSPARENCY AND TRUST | We set clear standards, policies and | MANAGEMENT AND COMPLIANCE | ASSOCIATES, AFFILIATES AND | | --- | --- | --- | | procedures to ensure high levels of | Our Group Chief Counsel oversees our | ACQUISITIONS | | transparency and trust matching our values | approach to ethics and compliance. Senior | We expect associate companies (those in | | throughout our business. | managers in all our agencies and our business | which we hold a minority stake) and affiliate | | | and supplier partners are asked to sign a | companies (preferred partners to whom | | OUR CODE OF BUSINESS CONDUCT | copy of the WPP Code of Business Conduct | we may refer business) to adopt ethical | | Our policy framework and training set | each year to confirm they will comply with | standards that are consistent with our own. | | clear ethical standards for our people and | its principles. Our Board-level Sustainability | | | agencies. We want to embed a culture of | Committee and our Executive Committee | Our due diligence process for acquisitions | | integrity and transparency where our people | provide additional oversight and guidance | and expansion into new markets includes a | | make the right decisions automatically | on any ethical issues that may arise. | review of ethical risks including those relating | | and instinctively. | | to bribery and corruption, human rights or | | | Our people can report concerns or suspected | ethical issues associated with client work. | | The WPP Code of Business Conduct | cases of misconduct confidentially (and, | | | applies to everyone at WPP. It sets out our | if they wish, anonymously) through our | We identify any specific human rights | | responsibilities to our people, partners and | independently managed Right to Speak | risks associated with different countries | | shareholders to act ethically, legally and | facility, which is overseen by our business | of operation, using sources such as the | | with integrity. | integrity team and is available via phone or | Transparency International Corruption Index, | | | email in local languages. We publicise the | Human Rights Watch country reports and | | It is underpinned by more detailed policies on | facility in induction packs, on our intranet | government guidance. | | topics including anti-bribery and corruption | and external website, in offices, in the WPP | | | (ABC), hospitality and gifts, facilitation | Policy Book and via our mandatory ethics | Acquired businesses must adopt our | | payments, the use of third-party advisors, | training. Our people can also speak directly | policies and their people must undertake | | human rights and sustainability. In January | to our business integrity team who receive | our ethics training within a month of joining | | 2022, we updated the WPP Sustainability | reports through emails, calls, texts and | WPP. This is agreed in an integration plan | | Policy and introduced a new Environment | in-person appointments. | before the acquisition is finalised, and we | | Policy to reflect our climate commitments. | | monitor progress. | Every report received from a whistleblower | Our people are required to take our online | is investigated and reported into the Audit | INSTITUTE OF BUSINESS ETHICS | | --- | --- | --- | | ethics training promptly upon joining and | Committee by WPP’s business integrity | WPP is a member of the Institute of Business | | then on an annual basis thereafter. Topics | function (see page 88). In general, there | Ethics (IBE) and considers it an important | | include diversity, human rights, conflicts of | has been a steady increase in the number | partner and support for the approach that | | interest and avoiding misleading work. For | of reports received over the past few years, | the Company takes to business integrity, | | the training period ending in 2022, more | though they fell year-on-year in 2022. In 2020 | sustainability and ethics. As set out more | | than 130,000 employees, freelancers and | and 2021 there were particular spikes | fully in the Risk Governance Framework on | | contractors completed the training. | reflecting concerns connected with Covid-19 | page 86 and Business Integrity Programme | | | and lockdowns. In 2022, a total of 372 | on page 87, we want to champion and | | Our online training on anti-bribery and | reports were received from whistleblowers | facilitate a culture where our people feel | | corruption covers the requirements of the | (2021: 494; 2020: 408; 2019: 361), 328 of which | that acting with honesty and integrity is an | | Foreign Corrupt Practices Act and UK Bribery | were through the Right to Speak hotline. | expected metric for success and this is also | | Act, including issues such as hospitality and | The most commonly raised concerns were | the IBE’s ethos. | | gifts, facilitation payments and the use of | about respect in the workplace and | | | third-party advisors. | protection of WPP’s assets. | The IBE shares knowledge and good practice | as well as advice on the development and Part of WPP’s Code of Business Conduct embedding of relevant policies through is making sure that our people have the networking events, regular publications and confidence to speak up and know how to training sessions, research and benchmarking raise concerns through various channels reports. The IBE is a registered charity without fear of retaliation. Our approach funded by corporate and individual donations. to this is described under Whistleblowing on page 88. 81WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY ## PUBLIC POLICY | Business can make a valuable contribution | We will not undertake work that is intended | POLITICAL CONTRIBUTIONS | | --- | --- | --- | | to public policy debate. To protect the | to mislead, and always seek to identify the | WPP agencies are not permitted to make | | public interest, it is important to conduct | underlying client before taking on work. | direct cash donations. Other political | | all lobbying with integrity and transparency. | In 2022, we introduced the Assignment | donations can only be made with the prior | | | Acceptance Policy and Framework and the | written approval of a WPP Executive Director. | | Most of our public policy activity is work | Green Claims Guide to provide further | | | that our public affairs businesses carry out | guidance to our leaders and people about | Donations must be reported to WPP’s legal | | for clients, including direct lobbying of | how to conduct additional due diligence in | function before they are made, to confirm | | public officials and influencing public | relation to clients and any work we are asked | they comply with this policy and to obtain | | opinion. On occasion, we also advocate | to undertake. | the necessary approvals. | on issues that affect our business, people | and wider stakeholders. | Our Group Chief Counsel has responsibility | POLITICAL ACTION COMMITTEES | | --- | --- | --- | | | for developing and implementing our | In countries where it is consistent with | | Our companies engaged in public affairs | political activity policy and public reporting | applicable law, individuals working at WPP | | include BCW, FGS Global and Hill+Knowlton | procedures. Agency CEOs and CFOs in each | agencies may make personal voluntary | | Strategies. The majority of their work takes | country or region are responsible for | political contributions directly to candidates | | place in the United States, the UK and the | implementing the Political Activities and | for office. | | EU, although many clients are multinational | Engagement Policy at the local level. | | | businesses operating in many countries. | | BCW and FGS Global also maintain political | | | Any third parties conducting political | action committees (PACs), which accept | | OUR STANDARDS | activities on behalf of WPP or its agencies | voluntary donations from their people to | | Our Code of Business Conduct and Political | must comply with the policy. Third parties | support political candidates. In 2022, these | | Activities and Engagement Policy govern our | are required to complete the WPP mandatory | PACs made disbursements worth $118,912 | | political activities, and both are available on | ethics training or equivalent within their | (data from fec.gov). | | our website. These documents commit us to | own organisation. | | | acting ethically in all aspects of our business, | | MEMBERSHIP OF TRADE ASSOCIATIONS | | and to maintaining the highest standards of | LOBBYING AND POLITICAL ADVOCACY | WPP and our agencies are members of | | honesty and integrity. Political activities in | We occasionally directly contribute to the | industry groups, business associations and | | particular should be conducted legally, | debate on public policy issues relevant to | other membership organisations with robust | | ethically and transparently and all related | our business, people and wider stakeholders. | governance processes. We actively support | | communication should be honest, factual | For example, we are part of the Race to Zero | trade associations’ initiatives and projects | | and accurate. Our policies apply to all | campaign managed by the United Nations | that align with our values and priorities such | | agencies and employees at all levels. | Framework Convention on Climate Change. | as the Global DEI Census, Ad Net Zero and | | | Karen Blackett OBE, WPP’s UK President, | the Global Alliance for Responsible | | Many of our agencies are members of | served as a non-executive director of the | Marketing. | | professional organisations and abide by | Board of the UK’s Cabinet Office from 2019 | | | their codes of conduct. Examples include | to 2022. | WPP agencies must nominate a senior | | the UK Association of Professional Political | | manager to manage and oversee trade | | Consultants (APPC) and the European Public | We also support clients’ advocacy on a | association relationships. | | Affairs Consultancies’ Association (EPACA). | wide range of issues including LGBTQ+ | | | | rights, through both pro bono work | At a WPP level, our memberships include: | | WPP agencies comply with all applicable | (including The Reality Flag with the Human | 30% Club, the American Benefits Council, | | laws and regulations governing the disclosure | Rights Campaign and NYC Says Gay in | Business Disability Forum, Business in the | | of public affairs activities. In the United States, | partnership with the Mayor of New York City) | Community, CBI, Champions of Change | | this includes the Lobby Disclosure Act and | and paid work. | Coalition, China Britain Business Council, | | the Foreign Agent Registration Act, which | | Institute of Business Ethics, RE100, UN | | are designed to achieve transparency on | Our agencies contribute to public policy | Global Compact, The Valuable 500, | | client representation and require lobbying | debate in areas where they have expertise | Women on Boards, and Partnership for | | firms to register the names of clients on | and a special interest, such as privacy, data | Global LGBTIQ+ Equality. | | whose behalf they contact legislators or | protection and AI issues. | | | executive branch personnel. A number | | In our markets, our agencies are often | | of our agencies are listed on the EU | WPP agencies must implement clear | members of local advertising, PR, public | | Transparency Register of lobbying activities. | procedures for employing serving or former | affairs and market research industry | | Our agencies in the United States whose sole | politicians, including a six-month ‘cooling-off’ | associations, as well as national chambers | | or primary business is lobbying have | period for people joining WPP from public | of commerce and business councils. | | representatives of both major political | office or the public sector. | | parties among senior management. WPP ANNUAL REPORT 202282 STRATEGIC REPORTSUSTAINABILITY ## SUPPLY NETWORK | WPP is committed to creating an inclusive, | SUPPLIER DIVERSITY | Our most direct impact on human rights | | --- | --- | --- | | sustainable, ethical and diverse network of | We are committed to including Certified | is as a major employer. We recognise the | | business-enabling suppliers. | Diverse Suppliers (CDS) in our purchasing | rights of our people, including those | | | lifecycle, both internally and for the benefit | relating to freedom of association and | | The wide range of services we offer and | of our clients. | collective bargaining, and we do not tolerate | | our organisational structure means we | | harassment or any form of forced, compulsory | | have a complex and dynamic supply chain | In 2022 we expanded our responsible | or child labour. Human rights are included in | | ecosystem to manage. We work with more | procurement team, refreshed our supplier | the mandatory ethics training completed on | | than 68,000 parent companies across our | diversity programme which encourages | joining and then annually by all employees. | | supply network. | WPP and our agencies to buy from CDS, | | | | and partnered with a third party to provide | We work with clients to manage any human | | Our suppliers fall into two main categories: | improved data for reporting. | rights risks from marketing campaigns, for | | those providing goods and services | | example by protecting children’s rights in | | used to run our agencies – such as IT, | Through the Global Supplier Diversity | relation to marketing. We will not undertake | | telecommunications, travel, facilities | Alliance, with memberships in Australia, | work that is intended to mislead on human | | management, people services and real | the UK and the United States, we have | rights or any other issue. | | estate; and those used in client work – | access to global directories of CDS, so we | | | such as advertising and marketing services, | can actively search and include them in our | MODERN SLAVERY | | production and media. | RFPs and client tender responses. Through | We do not tolerate any form of modern | | | the UK chapter we sponsor the UK’s first | slavery or human trafficking in any part of | | RISK ASSESSMENT | integrated supply chain accelerator | our business or supply chain. | | We continually assess supply chain risk based | programme to help minority-owned | | | on country, industry sector, categories of | businesses become supply-chain ready. | WPP recognises the prevalence of modern | | goods and services and individual suppliers. | | slavery across all countries. We aim to | | This is combined with a pre-engagement | GroupM’s media inclusion initiative aims to | implement appropriate measures to mitigate | | supplier due diligence questionnaire covering | direct investment in, and create opportunities | the risk of it occurring, either in our own | | governance, compliance, sustainability, | for, diverse media companies and content | operations or those of our partners. | | human rights and labour standards. | creators with an initial focus on Black-owned | | | | media in the United States. | Our global Supplier Agreement includes a | | SUPPLIER SELECTION | | specific clause relating to modern slavery | | We have established due diligence | HUMAN RIGHTS | compliance. WPP reserves the right to | | processes to help us select suppliers that | Respect for human rights is a fundamental | terminate its contract with any supplier | | meet our responsible sourcing standards. | principle for WPP. In our business activities | found to breach or fail to comply with any | | Contracted suppliers are required to sign | we aim to prevent, identify and address | legislation relating to modern slavery. | | WPP’s Business Code of Conduct – Supplier | negative impacts on human rights and | | Read more at wpp.com/sustainability/ Version, confirming they will comply with we look for opportunities to promote and policies-and-resources our standards or adequately demonstrate support human rights, including children’s to WPP that they have the equivalent rights, through our business activities standards in place within their own business. and in areas such as our pro bono work. These standards include requirements relating to labour practices (such as WPP agencies must comply with our Human anti-harassment and discrimination, and Rights Policy Statement which reflects health and safety), human rights (including international standards and principles, modern slavery issues such as child, forced including the International Bill of Human or bonded labour), social impacts (such as Rights, the UN Guiding Principles on Business anti-bribery and corruption) and other and Human Rights, the International Labour sustainability issues. Organization’s Declaration on Fundamental Principles and Rights at Work and the Our Code of Conduct requires suppliers Children’s Rights and Business Principles. to apply similar standards to companies within their own supply chains, including We are a member of the United Nations evidencing diversity and social responsibility Global Compact and report progress against in their cultures, behaviours and attitudes. its ten principles annually. We are also a committed signatory of the Women’s 1 We define Certified Diverse Suppliers as minority-owned, WPP also includes a right-to-audit provision Empowerment Principles, a guide for women-owned, veteran-owned, LGBTQ-owned, service in the supplier documentation and/or businesses on how to empower women in disabled veteran-owned, historically underutilised businesses standard terms and conditions of contract. the workplace, marketplace and community. and small businesses 83WPP ANNUAL REPORT 2022 STRATEGIC REPORT SUSTAINABILITY ## DATA ETHICS, PRIVACY AND SECURITY ### INFORMING OUR PEOPLE The WPP data and AI hub provides practical By considering technologies in this way, Data and artificial intelligence present huge resources to help stay ahead of new we can identify strengths, ethical concerns, opportunities for the creative and marketing developments. This year we launched tips weaknesses, frictions and opportunities. industry, from content creation to developing and principles for the metaverse and This can help us solve problems better and code to reducing production time. generative AI. build a framework for a safe and ethical future for AI. From ethics to culture, see WPP’s latest As technology evolves, we need to be thinking on how organisations can aware of the potential risks and ensure it is In February 2023, WPP hosted Stream effectively and responsibly use data being used and applied appropriately and Metaverse, a new one-day lite Stream event and AI at wpp.com/data-and-ai responsibly, both in our own agencies format bringing together clients, partners and on behalf of our clients. and WPP specialists to discuss a range of ### SUPPORTING CLIENTS topics including the future of Web3, virtual To help clients understand how best to We are developing skilled, knowledgeable reality, augmented reality, cryptocurrency, harness the power of AI as a force for good, teams who are inspired about the potential and inclusivity in the metaverse. we have developed a framework of six types of data and AI and proud of the extraordinary of deployment. These are: ### capabilities that WPP has to offer our clients. DEVELOPING FUTURE TALENT Data and AI will power almost every industry 1. Task automation: new technologies have The WPP Demystifying Data & AI Academy of the future, but the UK faces a skills allowed us to carry out tasks better and is designed to help anyone across WPP shortage. To help close this gap, WPP faster and replace specific tasks with understand the latest trends and technologies launched the Creative Data School to teach simple algorithms in data and AI, and develop the skills and essential technical skills to more than 6,000 2. Content Generation: also known as knowledge they need to navigate them. people aged 10-25 across the UK. ‘Generative AI ’, this category involves the automatic generation of images, videos, Our new Generative AI training, launched in The programme aims to inspire the next text, code and voice February 2023, explores how the technology generation and build their confidence in 3. Human representation: using can be used and introduces principles to data and AI, while equipping them with skills technologies such as avatars, deepfakes identify and manage the key legal, ethical including coding with Python, applications and natural language models to mimic the and privacy risks. of machine learning, and using data to inform behaviour of humans decision-making. 4. Extracting complex insights: machine To help business leaders develop the learning and advanced analytics to find knowledge and skills to lead in the age Eligible participants will be invited to apply correlations that humans could not of AI, we launched an executive diploma for work experience and internships at WPP, 5. Human performance enhancement: using in Artificial Intelligence in Business at the opening pathways to careers in data and AI technology as an extension of ourselves University of Oxford Saïd Business School. in the creative industry and beyond. 6. Complex decision making: using AI to Thirty students participated in the make better decisions through expert inaugural class. systems, optimisation or decision trees | PRIVACY AND SECURITY | – The WPP Data Privacy and Security Charter | – Choreograph, our data company, epitomises | | --- | --- | --- | | Through our expertise, governance, policies and | sets out core principles for responsible data | our data philosophy: that clients should own | | direct engagement, we demonstrate that we are | management through our Data Code of | their own data to minimise risk, meet | | a trusted partner for our clients, suppliers and | Conduct, our technology, privacy and social | consumer privacy expectations and | | associates. | media policies, and our security standards | future-proof their businesses | | | (based on ISO 27001) | – Through our active engagement in industry | | – The WPP Risk Subcommittee is responsible | – Safer Data training, which includes content | bodies including the Advertising Association | | for reviewing and monitoring the Group’s | on data protection, security and privacy, | in the UK and the 4As and Network | | data ethics, privacy and security risk, as well | must be completed by all new and current | Advertising Initiative in the United States, | | as its approach to regulatory and legal | employees, as well as consultants. | we are able to monitor and influence the | | compliance in relation to these | Throughout the year, agency and subject | changing regulatory landscape | | – Our Group Chief Privacy Officer leads our | matter-specific training is provided across | – Our annual Data Health Checker provides us | | work on privacy, supported by our Global | the Group, and in 2022 included a focus on | with insight into how data is used, stored and | | Data Protection Officer. Together, they | new data privacy regulations such as the | transferred and helps to identify any parts of | | provide practical guidance and support | California Privacy Rights Act | the business that need further support on | | to our agencies, promote best practices and | – Our privacy teams have established direct | data practices. In 2022, the average risk | | ensure that privacy risks are well understood | relationships with their client counterparts | score was 1.6 out of five (2021: 1.6), where five | | | to ensure alignment and engagement | is the maximum score possible and indicates | maximum risk WPP ANNUAL REPORT 202284 STRATEGIC REPORTSUSTAINABILITY ## OUR APPROACH TO SUSTAINABILITY | EMBEDDING SUSTAINABILITY | STAKEHOLDER ENGAGEMENT | ABOUT OUR REPORTING | | --- | --- | --- | | IN OUR AGENCIES | Dialogue with our stakeholders, including | Sustainability data included in this Annual | | WPP sets sustainability policy, with every | our people, clients and shareholders, | Report is for the calendar year 2022 and | | agency responsible for implementation. | provides valuable feedback and insight into | covers all subsidiaries of the Company. The | | | sustainability risks and opportunities, for | selected ESG performance metrics marked | | The Board is responsible for the overall | our Company and our clients. | with the symbol  throughout this report | | long-term success of WPP and for setting | | have been subject to independent limited | | the Company’s purpose, values and | Most stakeholder engagement takes place in | assurance procedures by | | culture and strategic direction, including | the course of doing business. We work with | PricewaterhouseCoopers LLP (PwC) for | | on sustainability. | clients on sustainability issues (see page 77). | the year ending 31 December 2022 in | | | Information on employee engagement, | accordance with International Standard on | | The Sustainability Committee supports | including a global sustainability-focused | Assurance Engagements 3000 (revised) and | | the Board in its oversight of corporate | townhall hosted by CEO Mark Read, is on | in respect of greenhouse gas emissions | | responsibility, sustainability, environmental, | page 71. During the year, WPP and agencies | data, International Standard on Assurance | | social and governance (ESG) and related | including GroupM, H+K Strategies, Landor & | Engagements 3410, issued by the International | | reputational matters. It reviews and | Fitch and Ogilvy Consulting developed | Auditing and Assurance Standards Board. | | monitors implementation of the Company’s | training and tools to equip our people with | A copy of PwC’s report and our methodology | | sustainability strategy and reviews policy | knowledge on the science of climate change | is available at wpp.com/ | | statements on environmental and social | and give them practical tools with which to | sustainabilityreport2022. | | matters. The Committee meets a minimum | respond. This remains a priority in 2023. | | | of four times a year (see pages 128 and 129). | | The majority of our data is collected locally, | | | INVESTOR ENGAGEMENT | and a common challenge is reconciling | | The WPP Executive Committee sets the | We believe the more we behave in line | inconsistencies in calculations and data | | sustainability strategy and oversees the | with our purpose, the better our business | capture. This prevented us from obtaining | | approach across agencies in its | will perform, thereby maximising | independent limited assurance over certain | | implementation, ensuring consistent | shareholder returns. | metrics including waste, and health and | | execution and embedding of the Company’s | | safety data. We aim to include these in | | culture and values. Our Chief Sustainability | We regularly engage with investors on ESG | scope for assurance in the future. | | Officer – a new role created in 2022 – has | topics, and in 2022 we engaged with rating | | For further information on data quality, operational responsibility for sustainability. agencies and benchmarking organisations see page 75 on sustainability, including: Bloomberg | We have a clear policy framework through | Gender-Equality Index; Ecovadis; Ethibel; | | --- | --- | | our Code of Business Conduct, Sustainability | Equileap; Vigeo Eiris; FTSE Russell; ISS; | | Policy (updated in January 2022 and | Moody’s; MSCI Research Inc.; Tortoise | | reviewed annually by the Sustainability | Responsibility 100; Sedex; and Sustainalytics. | ### NON-FINANCIAL Committee of the Board), Supplier Code of We are included in the FTSE4Good Index ### INFORMATION STATEMENT Conduct, Data Privacy and Security Charter, and participate in the CDP climate change Human Rights Policy Statement and other benchmark, receiving a rating of A- in 2022. policies included in the WPP Policy Book. This section provides information required ### In 2022, we put in place revised Assignment OUR MATERIALITY PROCESS by regulation in relation to: Acceptance Policy and Framework that We use a materiality process to ensure our subsidiaries need to follow when taking on sustainability strategy, investments and – Environmental matters (pages 74 and 75) new business (see page 77). Our agencies are reporting focus on the issues of greatest and TCFD statement (pages 220 to 226) | required to comply with our Sustainability | importance and relevance to our business | – Our people (pages 36 and 37, and 70 to 72) | | --- | --- | --- | | Policy, and report performance to WPP on | and our stakeholders. Our most recent | – Social matters (page 79) | | an annual basis. | assessment was completed in January 2023 | – Human rights (page 83) | | | (see our 2022 Sustainability Report). | – Corruption and bribery (page 88) | Our sustainability team works to ensure In addition, other related information can be ### consistent implementation of our standards. UNITED NATIONS SUSTAINABLE found as follows: ### In 2022, this included a programme of DEVELOPMENT GOALS (SDGS) training covering ESG reporting and controls, We support the UN SDGs as a framework – Business model (from page 14) our Green Claims Guide, and capability for government agencies, civil society, the – Principal risks and how they are managed | building across central functions and our | private sector and citizens to work together | (from page 91) | | --- | --- | --- | | agencies relating to our net zero strategy. | to create a more sustainable future. We have | – Non-financial key performance indicators | | | analysed the 17 Global Goals and the 169 | (from page 52) | targets that sit behind them to identify those which are most relevant for our business (see our 2022 Sustainability Report). 85WPP ANNUAL REPORT 2022 STRATEGIC REPORT ## ASSESSING AND ## MANAGING OUR RISKS ### The success of our strategic objectives RISK GOVERNANCE FRAMEWORK for the accurate and timely monitoring as discussed in this report depends to a A key element of our risk governance of exposures and certain risk types of significant extent on how we identify and framework is our Risk Committees. Each importance); compliance policies and address the current and emerging risks and network has a global Risk Committee chaired practices; and risks that present themselves uncertainties we face as a business. The by the CEO and with key senior managers throughout each network. This agenda is Board, assisted by the Audit Committee, participating to ensure that leadership is framed by our business integrity programme has oversight and responsibility for our proactively identifying (including through and internal control environment. approach to risk management which is risk assessments and horizon scanning) and structured through our three lines of defence understanding the current, new, evolving In order to carry out their duties model and driven by our risk governance and emerging risks across businesses and comprehensively, each Risk Committee has framework, business integrity programme, the remediation steps required from time to secure access to an increasing central pool culture based upon the principles set out time in certain markets. We also have a WPP of data from, or with the potential to affect, in our Code of Business Conduct and our Risk Committee which has oversight of all their network. This data is crucial to their internal control framework. network Risk Committees and itself reports ability to recognise and monitor a full risk into the Audit Committee. We also have two and compliance picture and the impact of The Board has reviewed the design and sub-committees to focus on the detail of actions taken as a result; this includes effectiveness of this system during the year risks relating to data privacy, security and internal audit reports, internal controls over and up to the date of this report, and carried ethics and to controls at both WPP and financial reporting (ICFR) results, general out a robust assessment of the principal risks network levels. computing controls results, corroborated that could impact our business. information from whistleblowers, findings The agenda of the Risk Committees is to from investigations, responses from our The system of controls described below review, monitor and advise on: compliance annual risk mapping process and the results is designed to manage and mitigate, but with laws, regulations, internal procedures, of our annual assessment of business may not eliminate, the risk of failure to and industry standards, including anti-bribery integrity risks. achieve our strategic objectives and is not and corruption matters; the implementation an absolute assurance against material of our compliance framework (including misstatement or loss. setting clear standards and reporting lines ### PP’S RISK GOVERNANCE FRAMEWORK BUSINESS INTEGRITY PROGRAMME ### W WPP Risk Committee INTERNAL AUDIT KEY RISK CERTIFICATIONS WHISTLEBLOWERS BUSINESS ENTERPRISE FINDINGS AND SOX INDICATOR (KRI) AND AND INTEGRITY RISK RISK MAPS TEST RESULTS DATA FEEDS DISCLOSURES INVESTIGATIONS ASSESSMENT Network Risk Committees INTERNAL CONTROLS WHISTLEBLOWERS WPP ANNUAL REPORT 202286 CERTIFICATIONS INTERNAL AUDIT KEY RISK BUSINESS AND FINDINGS AND SOX INDICATOR (KRI) INVESTIGATIONS INTEGRITY RISK AND ENTERPRISE ### WPP’S RISK GOVERNANCE FRAMEWORK DISCLOSURES TEST RESULTS ASSESSMENT DATA FEEDS BUSINESS INTEGRITY PROGRAMME INTERNAL CONTROLS RISK MAPS STRATEGIC REPORTASSESSING AND MANAGING OUR RISKS ### POLICIES, PROCEDURES AND CULTURE ### BUSINESS INTEGRITY PROGRAMME – In respect of systems, advising on Our business integrity programme is central the implementation of WPP’s policies, The quality and competence of our people, to ensuring that the policies, procedures procedures and controls (including around their integrity, ethics and behaviour, and the and control environment set by the Board internal reporting and approvals) and culture embedded within our businesses are are understood and adhered to across all providing a compliance lens for the design all vital to our system of internal control, which geographies and markets. It is produced by and structure of our enterprise resource is maintained and reviewed in accordance mapping resources, systems and processes planning (ERP) environment (including with the UK Corporate Governance Code, against WPP’s risk appetite (which the promoting the leverage of its functionality FRC guidance on risk management and business integrity team, sitting within WPP’s to restrict access to key transactions to internal controls, and the COSO framework. legal function, helps the Board and WPP Risk appropriate parties and to ensure adequate Committee to set), governance requirements segregation of duties and assets) In order to help our people make the right and regulator expectations and then crafting – In terms of processes, conducting an decisions, we provide a number of tools. actions from the results for both the business annual assessment of business integrity The baseline reference of our policies and integrity team and the Risk Committees. risks (which is constantly evolved in terms procedures are set out in our Policy Book, of which risks are within scope, the nature internal control bulletins, business integrity Actions for the business integrity team focus of assessment and the reporting and booklets and accounting guidelines. To help on tackling root causes of risk and include: recommendations that emanate from the our people understand the ethical and work), monitoring dynamic data feeds business objectives set out in the WPP Policy – In respect of resources, championing and (including our financials, internal audit Book, WPP has a mandatory online training enhancing messages and examples from findings and ICFR results), proactive programme that all our people (including global, regional and local leadership with management of self-certifications and freelancers working for more than four communications, training sessions, disclosures from our people, reviewing weeks) are required to complete on an townhalls and practical guidance, and investigating whistleblowing reports annual basis. The programme comprises knowhow and resources for our people and tracking remediation efforts five modules: How We Behave, Business and providing ‘on the ground’ support for Integrity, Safer Data, Sustainability and day-to-day queries from our networks Belonging. In addition, WPP’s business integrity team organises in-person and video call training sessions throughout the year on topics thought necessary or relevant such as Ethics and Integrity, Respect in the Workplace and The ABCs of ABC (anti-bribery and corruption). This top-up programme is designed and scheduled in response to data collected and reviewed and scheduled by WPP’s business integrity team, including from concerns raised and corroborated through investigations and our annual RESOURCES assessment of business integrity risks. – Our people – everyone is accountable It is underpinned with daily support on the – Leadership ### WPP’S BUSINESS INTEGRITY PROGRAMME ground from our regional compliance and – Communications, training and guidance – ‘On the ground’ support ethics directors and managers. SYSTEMS The core of our Policy Book is our Code OUR RISK APPETITE – ERP environment of Business Conduct, which is regularly – Policies and controls reviewed by the Board and sets out the GOVERNANCE REQUIREMENTS – Financial reporting – Internal reporting and approvals principal obligations of all of our people. REGULATOR EXPECTATIONS As a company and as individuals we have PROCESSES a collective responsibility to behave in the – Business integrity risk assessment right way, to live up to our values and to – Identifying and monitoring dynamic conduct our business with integrity. Our data feeds – Whistleblowing and investigations Code outlines the commitments we make – Internal and external due diligence to each other, our business partners, and – Certifications and disclosures others with a stake in what we do; equally – Remediation – and focus on root causes therefore it is mirrored in our Supplier Code – Disciplinary measures including impact on compensation of Conduct, which all vendors are required – Enterprise risk maps to sign up to before being onboarded. 87WPP ANNUAL REPORT 2022 ### WPP’S BUSINESS INTEGRITY PROGRAMME GOVERNANCE REQUIREMENTS REGULATOR EXPECTATIONS OUR RISK APPETITE STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS | The principles of the Code are embedded in | Breaches are investigated by our business | Every report received from a whistleblower | | --- | --- | --- | | our training courses and our senior managers | integrity team sitting within WPP’s legal | is investigated and reported into the Audit | | are required to certify compliance with the | function and, where appropriate, external | Committee by WPP’s business integrity | | Code on an annual basis. In 2023, WPP’s | advisors. | function. In general, there has been a steady | | business integrity team is working to fully | | increase in the number of reports received | | digitise the certification and disclosure | WPP’s business integrity team has a | over the past few years, though they fell | | process around Code compliance, with a | mandate to make recommendations | year-on-year in 2022. In 2020 and 2021 there | | particular focus on conflicts of interest and | to realign and support WPP’s networks | were particular spikes in numbers reflecting | | related-party transactions. | where required to manage and reduce risk. | concerns raised and connected with Covid-19 | | | Recommended remediation can include | and lockdowns. In 2022, a total of 372 reports | | Our Anti-Bribery and Corruption Policy | disciplinary action, changes to systems, | were received from whistleblowers (2021: 494; | | prohibits any form of bribery across WPP | controls, approvals or functions, monitoring | 2020: 418; 2019: 361), 328 of which were through | | and is supported by the Advisor Payment | and training sessions. This approach is | the Right to Speak hotline. The most commonly | | Policy which restricts the use of advisors | formalised through WPP’s Whistleblowing | raised concerns were about respect in the | | and details the due diligence that must be | Protocol and Investigations Protocol. | workplace and protection of WPP’s assets. | undertaken and approvals needed in the | limited cases where advisors may be used. | WPP’s performance rewards continue to | RISK IMPACT FROM WHISTLEBLOWER | | --- | --- | --- | | | support the risk management and internal | REPORTS 2022 | | Our Gifts and Hospitality Policy sets limits | control systems, reinforced by the WPP Risk | All whistleblower reports received by the | | on values that may be given or received, | Committee and the Compensation | Group Chief Counsel and General Counsel, | | supported in each company by a gift | Committee. | Corporate Risk, which includes all Right | | register. In 2023, WPP’s business integrity | | to Speak reports, are handled in line with | | team is undergoing a review of the | WHISTLEBLOWING | WPP’s Whistleblowing and Investigations | | implementation of this policy and providing | WPP’s Code of Business Conduct sets | Protocols and logged, investigated and | | recommendations including around the | out our responsibilities to our people, | tracked through to a conclusion including | | policy itself, controls, training and related | partners and shareholders to act ethically | any remediation or follow-up actions | | practicalities to the Audit Committee. | and legally. We want to encourage a culture | that might be required. Recommended | | | of integrity and transparency where our | remediation can include disciplinary action, | | As noted above, our Code of Conduct for | people make the right decisions | changes to systems, controls and processes | | suppliers replicates all of these obligations | automatically and instinctively. | or wider review and monitoring for a | | in our supply chain. Our Policy Book also | | particular time period. | | includes required practices in many | Part of this culture is making sure that our | | | operational, tax, legal and human | people have confidence and know how | Reports are also analysed for risk impact | | resource areas. | to speak up and raise concerns with their | and root causes. Learnings generated | | | managers or supporting teams, through | from this analysis are converted into | | The application of our policies and | their employee forums, WPP’s business | recommendations including for training | | procedures is monitored within each | integrity team or by calling our Right to | sessions and practical resources by WPP’s | | company and by the internal audit, legal | Speak hotline (which is confidential and | business integrity team and implemented | | (in particular, the business integrity team), | allows for anonymity) if they experience | together with the support and input of the | | and risk and controls functions. | or hear about behaviour which is at odds | Risk Committees. WPP’s business integrity | | | with the principles stated in our Code. | team also merges these learnings with other | TOTAL NUMBER OF REPORTS RISK IMPACT FROM WHISTLEBLOWER REPORTS FROM WHISTLEBLOWERS % 82.0% 418 361 372 7.1% 3.7% 2.8% 2.7% 1.7% 2019 2020 2021 2022 People 494 Legal and Regulatory Financial Clients Operational WPP ANNUAL REPORT 202288 Data Privacy, Security and Ethics 2022 372 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT | data feeds (both internal such as revenue | In addition, our companies must maintain | To add to this, the WPP Risk Committee, | | | --- | --- | --- | --- | | source and breakdown or margin patterns, | and update documentation on their internal | supported by the business integrity team, | | | and external such as Transparency | controls and processes. This documentation | has evolved our enterprise-wide risk | | | International’s Corruption Perception | incorporates an analysis of business risks, | management process through the design | | | Index) to identify and focus on potential | detailed control activities and monitoring, | and build of a risk analytics platform. This sits | | | risk concerns. | together with IT and financial controls and | over data feeds and alongside refreshed risk | | | | controls over security of data and the | appetite statements and tolerances, and | | | The nature of each report, action taken and | provision of timely and reliable information | incorporates our internal risk management | | | outcome is reported to the Audit Committee | to management. | framework including around policies, | | | and the approach and process are reviewed | | controls and reporting (whether through | | | by the auditors. WPP is committed to | The information collated feeds up to each | disclosures, monitoring, audit work, | | | providing a safe and confidential way for | network’s Risk Committee which uses it to | investigation work or internal reporting | | | people with genuine concerns to raise them, | assess and monitor current risk exposures, | processes). The resulting dashboard analysis | | | and to do so without fear of reprisals. WPP | identify new risk types and set future risk | allows risks to be monitored and tracked | | | does not tolerate any retaliatory behaviour | strategy as well as to compile it into | across all businesses and markets and will | | | against individuals reporting concerns | reporting and insights for the WPP Risk | feed into the regular risk discussions of | | | and is equally committed to preserving | Committee and executive management. | executive management, the Audit | | | the anonymity of an individual who makes | | Committee and the Board. | | | a report and does not wish to have their | 2. EXECUTIVE MANAGEMENT REVIEWS | | | | identity revealed. | The network reviews are formally | In addition, the Risk and Controls Group | | | | communicated to executive management | remains focused on driving continuous | | | The consequences of misconduct or | in monthly reports and quarterly review | improvement in WPP’s internal control | | | retaliation range from individual performance | meetings and, in turn, to the Board. At | environment, looking at the design and | | | management, training for a business or an | each Board meeting, the management team | implementation of internal financial controls | | | office and one-on-one training or coaching | presents a business review of each of the | as well as controls that support WPP’s risk | | | for an individual through to staff relocation | operations, including an assessment of the | framework and transformation programmes. | | | and staff dismissal. | risks in each business and details of any | | | | | change in the risk profile since the last | 3. INTERNAL AUDIT AND AUDIT | | | RISK MANAGEMENT | Board meeting. | | COMMITTEE OVERSIGHT | | We use a ‘three lines of defence’ model in | | The internal audit function, with Audit | | | relation to risk management. | The business review includes: the possibility | Committee oversight and external resource | | | | of winning or losing major business; | as required, provides an independent review | | | 1. COMPANY REVIEWS | succession and the addition or loss of a key | of risk management and internal control via | | | Each network undertakes monthly and | employee; regulatory changes; sustainability, | internal audits and management of the | | | quarterly procedures and day-to-day | including risks relating to marketing ethics, | testing programme for ICFR. | | | management activities to review its | privacy, diversity and employment; political | | | | operations and business risks, supported | instability; and changes in accounting or | | | | by our policies, training and guidance on | corporate governance practice. | | | required internal controls over financial reporting and monitoring controls and reviews within its network. ### 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 89WPP ANNUAL REPORT 2022 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS | VIABILITY STATEMENT | – The changes taking place in our industry | GOING CONCERN | | --- | --- | --- | | RISK ASSESSMENT | – The long-term impact of technological | The Group’s business activities, together | | ASSESSMENT OF PROSPECTS | disruption | with the factors likely to affect its future | | An understanding of the Group’s business | – The ongoing simplification of the Group | development, performance and position | | model and strategy detailed on pages 14 and | structure and improving integrated service | are set out in the Financial Review on pages | | 28 is central to understanding its prospects. | offering to clients | 61-65 and Principal Risks and Uncertainties | on pages 91-97. The financial position of the | The Directors assess the Group’s prospects | In testing the viability of the Company, | Group, its cash flows, liquidity position and | | --- | --- | --- | | on a regular basis through the financial | we have undertaken a robust scenario | borrowing facilities are described in the | | reporting and planning process, agency | assessment of the principal risks which | financial statements and the notes to the | | reviews at each Board meeting, quarterly | could threaten the viability or existence | financial statements include: the Company’s | | reviews of the agencies by the executive | of the Company. The ongoing impact of | objectives, policies and processes for | | team and ongoing reviews of the Group’s | the Russian invasion of Ukraine has been | managing its capital; its financial risk | | profitability, cash flows and funding | considered. In the scenario modelling of the | management objectives; details of its financial | | requirements. The Board reviews the | principal risks, we have stress-tested our | instruments and hedging activities; and its | | longer-term risks and opportunities for the | forecast cash flows to reflect the potential | exposures to credit risk and liquidity risk. | | Group discussed in the Strategic Report | impact of one or more of the Group’s principal | The Company’s forecasts and projections, | | and considered these in greater depth at | risks occurring and leading to client loss, loss | taking account of (i) reasonably possible | | a Board strategy session in 2022, which | of reputation, contract breach, our inability | declines in revenue less pass-through | | covered changes in the macro-economic | to win new business, and the impact of | costs and (ii) remote declines in revenue less | | environment, the potential impact of data, | revenue less pass-through costs decline. | pass-through costs for stress-testing purposes | | commerce and AI upon clients’ marketing | The Company’s forecasts and projections | compared to 2022, considering the Group’s | | activities, technological disruption and the | took account of (i) reasonably possible | bank covenant and liquidity headroom | | Group’s working culture, the impact of | declines in revenue less pass-through costs; | taking into account the suspension of | | climate change and increased regulation. | and (ii) remote declines in revenue less | share buybacks, dividends and acquisitions, | | The Board has also considered the ongoing | pass-through costs for stress-testing | and cost mitigation actions which are and | | economic and geopolitical impacts of the | purposes; and considered the Group’s bank | which could be implemented, show that the | | Russian invasion of Ukraine. | covenants and liquidity headroom including | Company and the Group would be able to | | | the suspension of share buybacks, dividends | operate with appropriate liquidity and within | | VIABILITY STATEMENT | and acquisitions. | its banking covenants and be able to meet | | The Directors’ assessment of the Group’s | | its liabilities as they fall due. The ongoing | | viability has been made over a three-year | The Company modelled a range of revenue | impact of the Russian invasion of Ukraine has | | period. This period has been chosen as it | less pass-through cost declines up to a | been considered. The Company modelled | | aligns with the period in which we believe | decline of 28% compared with the year | a range of revenue less pass-through cost | | our principal risks tend to develop, and is in | ended 31 December 2022, followed by a | declines up to 28% compared with the year | | line with the structure of long-term | small rebound in growth for 2024 (1.9% | ended 31 December 2022. The Directors | | management incentives and the outputs | above plan) and at previously expected | therefore have a reasonable expectation that | | from the long-range business planning cycle. | levels from 2025 to 2026. In the most | the Company and the Group have adequate | | | extreme scenarios tested, the Directors have | resources to continue in operational existence | | The Directors’ assessment has been made | considered the further actions that could be | for the foreseeable future. Thus they | | with reference to: | taken to mitigate negative cash flow impact | continue to adopt the going concern basis | | | and ensure additional liquidity, including | of accounting in preparing the financial | | – The Company’s principal risks and how | cost mitigations of 70% of the decline in net | statements. | | these are managed and the impact of a | sales and the suspension of share buybacks | | | principal risk materialising | and dividends. The Directors have assumed | | | – The impact on the Group of epidemics | that the Company will be able to refinance | | | or pandemics including restrictions on | existing bonds and, as a result, the Company | | | businesses, social activities and travel, | will continue to operate in accordance with | | | and the resulting impact on the economies | its bank covenants. However, the long-term | | | in which the Group operates, our clients | viability of the Company could be impacted | | | and demand for our services | by other as yet unforeseen risks and the | | | – The ongoing reviews, short-term notice | mitigating actions that have been put in | | | periods or assignment nature of many | place in respect of the principal risks could | | | of the client engagements | turn out to be less effective than intended. | | – The volatility of global economic conditions as a consequence of the ongoing Having assessed the current position of the economic and geopolitical impacts of the Company, its prospects and principal risks Russian invasion of Ukraine and taking into account the assumptions – The Group’s current financial position, above, the Board has determined that it has prospects and strategy a reasonable expectation that the Company – The ongoing transformation programme will be able to continue in operation and updated in this report meet its liabilities as they fall due over a period of three years from 1 January 2023. WPP ANNUAL REPORT 202290 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT KEY ## PRINCIPAL RISKS AND Increased risk No change from last year ## UNCERT AINTIES Reduced risk 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 2022 and up to the date of this report – including any adverse effects of the pandemic and the geopolitical situation following the Russian invasion of Ukraine – which are described in the table on the following pages. HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### ECONOMIC RISK Adverse economic conditions, Economic conditions, including inflation and Our account teams work proactively with our clients to including those caused by the increasing interest rates, among others, have a direct understand the challenges they are facing, determine pandemic, the conflict in Ukraine, impact on our business, results of operations and general trends in marketing spend and develop plans in severe and sustained inflation in key financial position. advance to help us prepare, redeploy resources and markets where we operate, supply manage costs accordingly. In the past, clients have responded to weak chain issues affecting the distribution economic and financial conditions by reducing or Our client portfolio is diverse, consisting of organisations of our clients’ products and/or shifting their marketing budgets which are easier operating in different industry sectors and across a broad disruption in credit markets, pose to reduce in the short term than their other geographical spread which further helps mitigate the a risk our clients may reduce, operating expenses. impact of any specific challenges individual clients or suspend or cancel spend with us markets might be facing. or be unable to satisfy obligations. ### GEOPOLITICAL RISK Growing geopolitical tension and Actual or threatened geopolitical tension and We work closely with our in-country teams, third-party conflicts continue to have a conflicts lead to greater uncertainty, economic advisors, clients and other agencies in monitoring the level destabilising effect in our markets instability and a general lack of confidence for many and nature of geopolitical issues, events and developments and across geographical regions. of our clients who are inclined to scale back, delay or across all markets and regions. cancel their marketing plans and budgets. This rise in geopolitical activity Our primary focus is the safety and security of our continues to have an adverse people, and for extreme events or periods of disruption effect upon the economic we have developed a series of crisis and response plans outlook, the general erosion of with clear lines of escalation to the Board and Executive trust and an increasing trend of Committee that focuses upon the wellbeing of our people national ideology and regional and their families. convergence over global We have detailed operational and financial plans, cooperation and integration. developed through the consideration of a range of Such factors and economic potential scenarios and outcomes that are continuously conditions may be reflected in our monitored and, if required, used to make interventions and clients’ confidence in making support decision making over our operations, investments longer-term investments and and advice to clients. commitments in marketing spend. ### PANDEMIC The impact of a pandemic on our A pandemic and any new variants and the measures A strong balance sheet, supported further by action to business will depend on numerous to contain its spread may have an adverse effect on maintain liquidity including, if needed, the suspension of factors that we are not able to our business, revenues, results of operations and share buybacks, dividends and acquisitions, cost reduction accurately predict, including the financial condition and prospects. and cash conservation measures, savings on property and duration and scope of a pandemic, IT capex. Constant monitoring of working capital position. any existing or new variants, government actions to mitigate the effects of a pandemic and the continuing and long-term impact of a pandemic on our clients’ spending plans. 91WPP ANNUAL REPORT 2022 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### STRATEGIC PLAN The failure to successfully A failure or delay in implementing or realising the Board oversight of the implementation of the strategic | complete the strategic plan | benefits from the transformation plan and/or | plan and regular briefings on the Group’s response to the | | --- | --- | --- | | updated in December 2020 to | returning the business to sustained growth may have | pandemic and the economic and geopolitical consequences | | simplify our structure, continue | a material adverse effect on our market share and our | of the invasion of Ukraine by Russia. | | to introduce market-leading | business, revenues, results of operations, financial | | The Executive Committee regularly reviews progress products and services, identify condition or prospects. against the strategic plan and actions required to deliver cost savings and successfully against the plan and convenes regularly to discuss the integrate acquisitions, may have Group’s response to and implementation of the measures a material adverse effect on the highlighted above to mitigate the impact of the pandemic Group’s market share and its and the economic and geopolitical consequences of the business revenues, results of invasion of Ukraine by Russia on the Group’s operations, operations, financial condition people, clients and financial condition. or prospects. 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. ### IT TRANSFORMATION We are undertaking a series of IT Any failure or delay in implementing the IT The Board and management team provides oversight and transformation programmes to transformation programmes may have a material governance of the most important change transformation support the Group’s strategic plan. adverse effect upon the overall strategic plan and initiatives the business is pursuing. The programme has been devised the realisation of key targeted benefits and savings. Detailed plans have been prepared for each major so that it prioritises the most critical Disruption and unavailability of critical system transformation initiative and overall progress, challenges changes necessary to support availability may lead to disruption in our operations and risks to the initiative are monitored as part of our the overall strategic plan whilst and client service delivery. project management processes and discussed in dedicated maintaining the operational steering committees who also agree upon any corrective performance and security of action that may be required. core systems. Progress reports are also completed as part of regular The Group is reliant on third parties briefings that the Board receives on the overall for the performance of a significant implementation of the strategic plan. portion of our worldwide information technology and operations functions. A failure to provide these functions could have an adverse effect on our business. ### CLIENT LOSS We compete for clients in a highly The competitive landscape in our industry The transformation plan updated in December 2020 competitive industry which has is constantly evolving and the role of more places emphasis on providing faster, more agile and more been evolving and undergoing traditional services and operators in our sector who effectively integrated solutions that are data and technology structural change. have not successfully diversified is being challenged. led for our clients as part of a continuous improvement of Competitors include multinational advertising and our creative capability and reputation of our businesses. Client net loss to competitors marketing communication groups, marketing or as a consequence of client The plan is also delivering a simplification of our services companies, database marketing information consolidation, insolvency or a organisational structure by reducing the number of legal and measurement and professional services and reduction in marketing budgets entities in the Group, the disposal of non-core minority consultants and consulting internet companies. due to a geopolitical change or holdings and more collaborative working through the shift in client spending would have Client contracts can generally be terminated on launch of further campus co-locations including in Brazil a material adverse effect on our 90 days’ notice or are on an assignment basis and and Canada. market share, business, revenues, clients put their business up for competitive review The Board is focused on the importance of a positive and results of operations, financial from time to time. inclusive culture across our business to attract and retain condition and prospects. The ability to attract new clients and to retain or talent and clients. Work continues on diversity and inclusion increase the amount of work from existing clients across the Group including focus from the work of the WPP may be impacted if we fail to react quickly enough Global Inclusion Council. to changes in the market and to evolve our structure, Continuous improvement of our creative capability and and by loss of reputation, and may be limited by reputation of our businesses. The development and clients’ policies on conflicts of interest. implementation of senior 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. WPP ANNUAL REPORT 202292 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### CLIENT CONCENTRATION We receive a significant portion of A relatively small number of clients contribute a Increased flexibility in the cost structure (including our revenues from a limited number significant percentage of our consolidated revenues. incentives, consultants and freelancers). of large clients and the net loss of Our ten largest clients accounted for 18% of revenue Business review at every Board meeting and regular one or more of these clients could less pass-through costs in the year ended 31 engagement at executive level with our clients. have a material adverse effect on December 2022. our prospects, business, financial A monthly ‘new and existing business’ tracker is reviewed Clients can reduce their marketing spend, terminate condition and results of operations. by the Executive Committee on a monthly basis with contracts or cancel projects on short notice. The regular updates provided to the Board. 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. ### REPUTATION Increased reputational risk As consumer consciousness around climate Our climate crisis training seeks to ensure that our people associated with working on change rises, our sector is seeing increased scrutiny recognise the importance of our sector’s role in addressing client briefs perceived to be of its role in driving consumption. Our clients seek the climate crisis. It is part of a broader sustainability environmentally detrimental expert partners who can give recommendations that training programme being run in multiple markets with and/or misrepresenting take into account stakeholder concerns around localised content in key regions. environmental claims. climate change. We have developed internal tools to help our people Additionally, WPP serves some clients whose identify environmentally harmful briefs. These tools embed business models are under increased scrutiny, climate-related issues within existing content review for example, energy companies or associated procedures across the organisation. The misrepresentation industry groups. This creates both a reputational and of environmental issues is governed by our Code of related financial risk for WPP if we are not rigorous in Conduct. We also ensure our policies reduce the risk that our content standards as we grow our sustainability- any client brief undermines the implementation of the Paris related services. Agreement. In 2022, we introduced the revised Assignment Acceptance Policy and Framework and the Green Claims Guide to provide further guidance about how to conduct additional due diligence in relation to clients and any work we are asked to undertake. ### PEOPLE, CULTURE AND SUCCESSION Our performance could be We are highly dependent on the talent, creative Our incentive plans are structured to provide retention adversely affected if we do not abilities and technical skills of our people as well value, for example, by paying part of annual incentives in react quickly enough to changes as their relationships with clients. shares that vest two years after grant date. in our market and fail to attract, We are vulnerable to the loss of people to We are working across the businesses to embed develop and retain key creative, competitors (traditional and emerging) and collaboration and investing in training and development commercial, technology and clients, leading to disruption to the business. to retain and attract talented people. The investment in management talent, or are unable co-located campus properties is increasing the co- to retain and incentivise key and operation across our companies and provides extremely diverse talent, or are unable to attractive and motivating working environments. adapt to new ways of working by balancing home and office working. Focus on the mental health of our people by providing access to wellbeing resources, the establishment of support networks, funded events, discussion forums and additional time off. All In survey completed by two-thirds of our people in 2022, providing an opportunity for the Board, Executive Committee and senior leaders across the business to understand the general sentiment, views, opinions and concerns of employees. Findings from the survey highlighted general and local views on cultural, wellbeing and other matters, which have formed the basis of people change projects and further plans for remediation. 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 is identified in emergency and planned scenarios. The Compensation Committee provides oversight for the Group’s incentive plans and compensation. Our real estate teams work closely with people teams across the business to consider how space is being utilised to support collaboration and innovation. 93WPP ANNUAL REPORT 2022 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### CYBER AND INFORMATION SECURITY The Group has in the past and We may be subject to investigative or enforcement We monitor and log our network and systems and keep may in the future experience a action or legal claims or incur fines, damages or raising our people’s security awareness through our WPP cyber attack that leads to harm costs and client loss if we fail to adequately Safer Data training and mock phishing attacks. or disruption to our operations, protect data. Heightened focus on monitoring our network and systems systems or services. A system breakdown or intrusion could have a and raising awareness of the potential for phishing and Such an attack may also affect material adverse effect on our business, revenues, other cyber attacks during the period of remote working suppliers and partners through the results of operations, financial condition or prospects and the geopolitical situation and an increased focus on unauthorised access, manipulation, and have an impact on long-term reputation and lead our control environment. corruption or the destruction to client loss. of data. The imposition of sanctions following the ongoing conflict in Ukraine has triggered an increase in cyber attacks generally. ### CREDIT RISK | We are subject to credit risk | We are generally paid in arrears for our services. | Evaluating and monitoring clients’ ongoing | | --- | --- | --- | | through the default of a client or | Invoices are typically payable within 30 to 60 days. | creditworthiness and in some cases requiring credit | | other counterparty. | | insurance or payments in advance. | We commit to media and production purchases on Challenging economic conditions, behalf of some of our clients as principal or agent We are working closely with our clients during this period heightened geopolitical issues, depending on the client and market circumstances. of economic uncertainty to ensure timely payment for shocks to consumer confidence, If a client is unable to pay sums due, media and services in line with contractual commitments and with disruption in credit markets and production companies may look to us to pay those vendors to maintain the settlement flow on media. challenges in the supply chain amounts and there could be an adverse effect on Our treasury position and compliance with lending disrupting our client operations can our working capital and operating cash flow. covenants is a recurring agenda item for the Audit lead to a worsening of the financial Committee and Board. strength and outlook for our clients who may reduce, suspend or cancel Increased management processes to manage working spend with us, request extended capital and review cash outflows and receipts. payment terms beyond 60 days or be unable to satisfy obligations. WPP ANNUAL REPORT 202294 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 Our performance could be Failure to ensure that our businesses have robust Transparency and contract compliance are embedded adversely impacted if we failed to control environments, or that the services we through the networks and reinforced by audits at a WPP ensure adequate internal control provide and trading activities within the Group are and network level. procedures are in place. compliant with client obligations, could adversely Regular monitoring of key performance indicators for impact client relationships and business volumes We have previously identified trading are undertaken to identify trends and issues. and revenues. material weaknesses in our internal An authorisation matrix on inventory trading is agreed control over financial reporting. As previously disclosed, for the year ended 31 with the Company and the Audit Committee. If we failed to properly remediate December 2020, we identified certain material these material weaknesses or new weaknesses in our internal control over financial In 2021, our then new controls function continued to review material weaknesses are identified, reporting. During 2021, we finished implementing and enhance controls across the Group, under the direction they could adversely affect our previously reported plans to remediate such material of our Global Director of Risk and Controls. As part of this results of operations, investor weaknesses and concluded that as at 31 December effort, we significantly enhanced the staffing, capabilities confidence in the Group and the 2021, such material weaknesses had been and resources of our technical accounting function, market price of our ADSs and remediated. We have also concluded that our which supported the retrospective review efforts and ordinary shares. internal control over financial reporting is again will continue to provide ongoing support in regards to effective as of 31 December 2022, as disclosed in complex accounting matters and judgment and changes our Form 20-F. in accounting standards. If the remedial measures were ultimately insufficient Management is committed to maintaining a strong internal to address the material weaknesses, or if additional control environment, with appropriate oversight from our material weaknesses in internal control are Audit Committee. We have made significant enhancements discovered or occur in the future, our ability to to our controls through the implementation of the accurately record, process and report financial remediation and continue to evaluate further opportunities information and, consequently, our ability to prepare to improve our control environment. We have engaged financial statements within required time periods, an independent valuation specialist, on an ongoing basis could be adversely affected. with oversight by management, to assist us as an integral part of the discount rate and cash flow determination In addition, the Group may be unable to maintain process in the impairment assessment of intangible assets compliance with the federal securities laws and NYSE and goodwill. listing requirements regarding the timely filing of periodic reports. Any of the foregoing could cause This has included such items as: updating our discount investors to lose confidence in the reliability of our determination methodology for a current market participant financial reporting, which could have a negative approach; enhancing the level of review and controls effect on the trading price of the Group’s ADSs and related to the selection of the variables underpinning the ordinary shares. discount rate calculation, the discount rate methodology and annual refresh; and implementing additional validation controls and additional reviews of the selection of cash flow periods and net working capital assumptions. In the case of complex accounting matters and hedging arrangements, we performed a comprehensive retrospective review of our controls and procedures and implemented enhanced periodic controls 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. 95WPP ANNUAL REPORT 2022 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### DATA PRIVACY We are subject to strict data We may be subject to investigative or enforcement We develop principles on privacy and data protection protection and privacy legislation action or legal claims or incur fines, damages, or and compliance with local laws. We also monitor pending in the jurisdictions in which we costs and client loss if we fail to adequately protect changes to regulations and identify changes to our operate and rely extensively on data or observe privacy legislation in every instance: processes and policies that would need to be implemented. information technology systems. In the case of data transfers, we also identify alternative – The Group has in the past and may in the future We store, transmit and rely on approaches, including using other permitted transfer experience a system breakdown or intrusion that critical and sensitive data such mechanisms, in order to limit any potential disruption could have a material adverse effect on our as strategic plans, personally (for example, SCCs instead of Privacy Shield following business, revenues, results of operations, financial identifiable information and the CJEU Schrems II decision). condition or prospects trade secrets: – Restrictions or limitations on international data We implemented extensive training ahead of GDPR and – Security of this type of data is transfers could have an adverse effect on our CPPA implementation and the roll-out of toolkits to assist exposed to escalating external business and operations our people to prepare for implementation and will do the threats that are increasing in same as new legislation is adopted in other markets. sophistication, as well as internal A Chief Privacy Officer and Data Protection Officer are data breaches appointed at the Company and Data Protection Officers – Data transfers between our are in place at a number of our companies. global operating companies, clients or vendors may be Our people must take Privacy & Data Security Awareness interrupted due to changes in training and understand the WPP Data Code of Conduct law (for example, EU adequacy and WPP policies on data privacy and security. decisions, CJEU Schrems II decision) The Data Health Checker survey is performed annually to understand the scale and breadth of data we collect so the level of risk associated with this can be assessed. ### TAXATION | We may be subject to regulations | Changes in local or international tax rules, for | We actively monitor any proposed regulatory or statutory | | --- | --- | --- | | restricting our activities or effecting | example, as a consequence of the financial support | changes and consult with government agencies and | | changes in taxation. | programmes implemented by governments during | regulatory bodies where possible on such proposed | | | the Covid-19 pandemic, the OECD/G20 Inclusive | changes. | Framework on Base Erosion and Profit Shifting, and Biannual briefings to the Audit Committee of significant changes arising from the application of existing rules, changes in tax laws and their application and regular or challenges by tax or competition authorities, may briefings to executive management. We engage advisors expose us to significant additional tax liabilities or and legal counsel to obtain opinions on tax legislation impact the carrying value of our deferred tax assets, and principles. which would affect the future tax charge. ### REGULATORY We are subject to strict anti- We operate in a number of markets where the Online and in-country ethics, anti-bribery, anti-corruption corruption, anti-bribery and corruption risk has been identified as high by groups and anti-trust training on a Group-wide basis to raise anti-trust legislation and such as Transparency International. awareness and seek compliance with our Code of enforcement in the countries Conduct and the Anti-Bribery & Corruption Policy. Failure to comply or to create a culture opposed to in which we operate. corruption or failing to instil business practices that A continuously evolving business integrity function to prevent corruption has previously and could expose ensure compliance with our codes and policies and us to civil and criminal sanctions. 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. WPP ANNUAL REPORT 202296 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES ### SANCTIONS We are subject to the laws of the Failure to comply with these laws could expose us to Online training to raise awareness and seek compliance United States, the EU, the UK and civil and criminal penalties including fines and the and updates for our companies on any new sanctions. other jurisdictions that impose imposition of economic sanctions against us and Regular briefings to the Audit Committee and constant sanctions and regulate the supply reputational damage and withdrawal of banking monitoring by the WPP legal team with assistance from of services to certain countries. facilities which could materially impact our results. external advisors of the sanctions regimes. Executive The Russian invasion of Ukraine Committee briefed and working with the WPP legal team has caused the adoption of to ensure compliance with escalating sanctions as a comprehensive sanctions by, consequence of the Russian invasion of Ukraine. among others, the EU, the United We have taken a number of actions as a consequence of States and the UK, which restrict the invasion. We have announced the discontinuance of a wide range of trade and our operations in Russia and ensured compliance with all financial dealings with Russia sanctions as they impact any clients, suppliers or financial and Russian persons. arrangements. ### ENVIRONMENT REGULATION AND REPORTING | The Group could be subject to | We could be subject to increased costs to comply | We are developing a net zero roadmap to deliver against | | --- | --- | --- | | increased costs to comply with | with potential future changes in environmental laws | our net zero commitments and aim to disclose more details | | the potential future changes in | and regulations and increasing carbon offset pricing | of that roadmap in 2023. | | environmental law and regulations. | to meet our net zero commitments. | | As part of this plan and through our work to decarbonise Carbon emission accounting for marketing and media and media supply chains, we are exploring media is in its infancy and methodologies continue to opportunities to improve accounting for emissions evolve. This is particularly the case for emissions from media. associated with digital 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 we are further developing our offsetting strategy as part of our net zero roadmap. ### EMERGING RISKS The Group’s operations could This includes storms, flooding, wildfires and water Co-locating our people in fewer, higher-capacity be disrupted by an increased and heat stress which can damage our buildings, campus buildings means we can centralise emergency frequency of extreme weather and jeopardise the safety and wellbeing of our people preparedness procedures and deploy climate mitigation climate-related natural disasters. and significantly disrupt our operations. measures more efficiently. Climate-related risk is considered when we invest in new campus buildings. In 2023 we will pilot a new ESG scorecard to assess building performance across a number of climate-related metrics. Our hybrid working approach, which incorporates new ways of working adopted during the pandemic, provides additional resilience by enabling fully remote working – provided employees and their families are in safe locations – during extreme weather events. The Employee Assistance Programme is activated in response to climate-related extreme weather events. | A failure to manage the complexity | Increased investment required in building renovation, | In 2023, we will publish our first net zero transition plan | | --- | --- | --- | | in carbon emission accounting for | electrification and supplier engagement to meet | which will outline further details on how we intend to | | marketing and media or to consider | targets, including developing internal ESG capacity | deliver against our net zero targets. | | scope 3 emissions in new | and capabilities. | | The Board Sustainability Committee was formed in 2019 technology and business model Offset prices would likely rise, increasing the overall to give increased focus on sustainability (see page 128). innovation across the supply chain expenditure to meet our net zero commitments. In 2022, we updated our Sustainability Policy, and released could have an adverse effect on our first Environmental Policy which included policy our business and reputation. guidance around offsetting. Environment, Social and Governance KPIs are included as part of the scorecard that determines the short-term incentive rewards for WPP’s CEO, CFO and some key members of the Executive Committee. This includes WPP’s performance against carbon reduction targets. 97WPP ANNUAL REPORT 2022 # CORPORATE GOVERNANCE | Chairman's letter | 100 | | --- | --- | | Governance at a glance | 103 | | Our Board | 104 | | Our Executive Committee | 107 | | How our Board engages with stakeholders | 109 | | Division of responsibilities | 112 | | Board activities | 116 | | Composition, succession and evaluation | 118 | | Nomination and Governance Committee report | 118 | | Audit Committee report | 122 | | Sustainability Committee report | 128 | | Compensation Committee report | 130 | | Statement of Directors' responsibilities | 137 | 98 WFP ANNUAL REPORT 2022 CORPORATE GOVERNANCE 99WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE ## CHAIRMAN’S ## LETTER As the role of technology, data and digital communications grows and shifts rapidly, and the adoption of AI in particular increases exponentially, clients place a high value on WPP’s expertise in helping brands and organisations capture the opportunities. Investment in high-growth sectors of the Company’s proposition has paid dividends. Ecommerce and commerce media have been especially strong. GroupM’s commerce billings, for example, increased 18% in 2022. This growing demand for WPP’s capabilities in developing areas sits alongside sustained client spending on more traditional forms of marketing communications, where WPP has long been an industry leader. The reshaping of WPP’s offer to drive growth for the Company and its shareholders was a principal theme of our Board strategy day during 2022, which provided an opportunity for the Board to hear from and engage with leaders across WPP on the Company’s plans ## IT IS CLEAR THAT In 2022 the Company once again successfully for the future. negotiated external challenges while ## CLIENTS NOW SEE WPP delivering growth for its people, clients As well as looking at how data, commerce ## AND ITS AGENCIES AS and shareholders. and AI are revolutionising our clients’ ## BUSINESS-CRITICAL marketing activities, the Board discussed ## PARTNERS IN TODAY’S The publication in February of WPP’s the ways in which technology will shape our full-year results for 2022 brought widespread own business, including through our global ## COMPLEX MARKETING recognition of the progress the Company IT strategy. Other important topics were ## ENVIRONMENT” has made in recent years, the resilience of client leadership, DE&I, our transformation its business model and the successful programme, growth plans for China, our modernisation and diversification of its campus programme and – last but certainly offer to clients. not least – our working culture. The executive team deserves great credit for the turnaround in the Company’s performance and reputation since 2018. It is clear that clients now see WPP and its agencies as business-critical partners in today’s complex marketing environment. WPP ANNUAL REPORT 2022100 CORPORATE GOVERNANCECHAIRMAN’S LETTER | A PEOPLE BUSINESS | In the FTSE Women Leaders Review, WPP | The Company is working to embed | | --- | --- | --- | | One of the foundational pillars of the | moved up from ninth to sixth in the FTSE 100. | sustainability at every level of its operating | | Company’s strategy is a culture that prizes | Forty-six percent of Executive Committee | model and across the organisation. This is | | wellbeing, inclusion and a sense of belonging | members and their direct reports were | not primarily an exercise in compliance or | | for all. | women in 2022, against a FTSE 100 average | risk-mitigation, but an opportunity to create | | | of 34%. | value. Emphasising and acting in line with | | In my letter last year I said that our people | | our purpose helps to attract and retain talent | | strategy would be a primary focus for the | To drive further change, WPP has linked | and develop our relationships with clients. | | Board and executive team in 2022. As Mark | performance in this area to remuneration, | | You can read more about our sustainability notes in his introduction to the Annual Report, with diversity, equity and inclusion goals strategy and commitments from page 68, WPP is a business that relies on its people included in senior executives’ incentive and in our 2022 Sustainability Report for its performance, and there is no greater plans since 2021. priority than ensuring our employees feel ### MANAGING RISK welcomed, engaged, inspired, recognised The Company has also increased its As well as supporting the Company as it for their contribution and supported in investment in leadership development seeks to capture opportunities, the Board their development. programmes for people of colour, as well also identifies, monitors and addresses risks. as in inclusive management training, in order The Board was therefore pleased that WPP’s to work systematically towards a more During 2022 we continued to review the 2022 people survey showed significant diverse leadership succession pipeline. structure and effectiveness of our risk improvements year-on-year. The Company management model, and assess the principal achieved its highest ever engagement levels, Looking to the year ahead, priorities will risks that could impact our business. More and its employee net promoter score include expanding succession planning to information about our approach is available increased by 14 points. Inclusion, feeling the top 300 in the Company, launching a from page 86. valued and career growth were areas self-ID campaign to augment our diversity of particular strength. data, next steps for WPP’s Racial Equity Against the backdrop of challenging Programme, supporting and expanding macroeconomic conditions and disruptive The Company’s Making Space wellbeing Employee Resource Groups and embedding geopolitical events, the Board also worked initiative, which drew a tremendous reaction inclusion training for leaders. to ensure the Company was well prepared from our people, had the full support of You can read more about WPP’s people both strategically and operationally for any the Board, along with programmes such strategy on pages 36 and 70 downturns in its major markets. as the growing community of WPP Mental Health Allies. This included reviewing strategies for cost ### CREATING VALUE THROUGH reduction, pricing, supply chain finance ### Making sure the Company has a strong SUSTAINABILITY management, the ongoing simplification leadership pipeline is one of the Board’s Since being established in 2019, the Board’s of the Company’s organisational structure most important responsibilities. In 2022 we Sustainability Committee has played a key and its transformation programme, cash reviewed the Company’s plans for executive role in supporting WPP’s pursuit of its ESG management and capital allocation, with development and succession, and for objectives. As the sustainability agenda an overall focus on diligent and disciplined building leadership behaviours. grows in importance, the Committee’s management of the balance sheet. contribution has evolved accordingly. The For the pipeline and existing leadership skillsets and experience of its members have to be considered truly strong, it must be been invaluable as the Company considers a diverse. Plenty of work remains to be done range of complex and interconnected issues. to achieve parity at all levels of the business, | but we have made good progress. When | During 2022 there were deep dives into | | --- | --- | | Joanne Wilson succeeds John Rogers as CFO | topics on which WPP has taken leadership | | following the announcement of the Company’s | positions such as media decarbonisation and | | 2023 First Quarter Trading Update, the | single-use plastics, regulatory developments | | proportion of women on the Board will be | such as TCFD reporting, improved internal | | 46% (2021: 43%). We exceed the targets set | processes such as the revised Assignment | | by the Parker Review, with three Directors | Acceptance Policy and Framework and new | | from an ethnic minority background. | Green Claims Guide, and support for our | people and communities in response to events such as the war in Ukraine. 101WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE CHAIRMAN’S LETTER | BOARD COMPOSITION AND | Tarek Farahat will also not put himself | The Company has continued to grow, | | --- | --- | --- | | EFFECTIVENESS | forward for re-election to the Board at | exploited the potential of new technologies, | | We announced in November that our | the 2023 AGM due to other commitments. | transformed its offer and maintained strong | | Chief Financial Officer John Rogers would | I would like to thank Tarek for his contribution | demand for its services from the world’s | | step down from the Board to pursue | during his long service to the Board. WPP | leading organisations and brands. | | broader executive opportunities beyond | has greatly benefited from his knowledge | | | the Company. | and experience of global FMCG businesses | It has also continued to attract outstandingly | | | over the years and he has been a valued | talented people, drawn by the strong culture | | John, who will step down as a Director | member of the Audit Committee. | of its agencies, its sense of purpose and its | | following the announcement of the | | ambition to become the most creative | | Company’s 2023 First Quarter Trading | As always, we gave significant time to | company in the world. | | Update, has made an important contribution | succession planning and proactively | | | to WPP in his three years with us, including | reviewing our non-executive membership | Alongside the Company’s robust balance | | helping the Company navigate the | in 2022, to ensure the Board continues | sheet and compelling client offer, that talent | | pandemic and laying the foundations of | to have the appropriate composition to | is the foundation of our positive outlook for | | its transformation programme. He leaves | support the executive team and review | WPP. On behalf of the Board, I would like | | with our thanks and very best wishes for | the Company’s strategy. | to extend my thanks to all our people | | the future. | | worldwide for their commitment to their | | | We also reviewed the governance | work and our clients in 2022 and beyond. | | John will be succeeded as Chief Financial | architecture of the Board’s Committees on | | | Officer by Joanne Wilson. Joanne is currently | an ongoing basis, and made adjustments | | | Chief Financial Officer of Britvic plc, having | as required. You can read the Committee | | | previously held the same role at dunnhumby, | Chairs’ reports from page 118. | | a global leader in customer data science that | is part of the Tesco group. We look forward | Nicole Seligman, as part of our continuous | Roberto Quarta | | --- | --- | --- | | to welcoming her to the Board when she | assessment of Board effectiveness, | Chairman | | joins on 19 April 2023. | conducted an evaluation exercise to | 23 March 2023 | review the performance of the Board and its | As I mentioned last year, Nicole Seligman, | Committees. The results, which can be found | | --- | --- | | our Senior Independent Director, has | on page 116, confirmed that the Board and its | | completed a nine-year tenure on the Board | Committees continue to operate effectively. | and will not stand for re-election at the 2023 | Annual General Meeting. On behalf of my | A POSITIVE OUTLOOK | | --- | --- | | Board colleagues, I would like to thank | We move into 2023 with confidence in the | | Nicole for her dedicated service to WPP and | future growth prospects of WPP as it | | her exceptional contribution to the Board | continues to execute its strategy. | during a period of profound change for the Company. I am pleased that Angela Ahrendts WPP, along with the wider marketing has agreed to be appointed as the new services sector, has confounded the Senior Independent Director. Angela will lead expectations of some commentators in succession planning for WPP’s next Chair. recent years as concerns about structural challenges facing the industry have receded. WPP ANNUAL REPORT 2022102 CORPORATE GOVERNANCE ## GO VERNANCE ## AT A GLANCE ## HIGHLIGHTS COMPLIANCE WITH THE CODE During the year ended 31 December 2022, the Company was compliant with the provisions of good governance contained in the 2018 UK Corporate Governance Code (‘the Code’), except for the fact that Provision 38 of the Code was met ## 46% part way through the year by the alignment of the CEO’s pension with the female Board wider workforce. For more detail see page 145. The table below shows where representation following shareholders can find further information on how the Company has applied the the announcement of the principles of the Code. The Company’s American Depositary Shares are listed on Company’s 2023 First the New York Stock Exchange (NYSE) and the Company is therefore subject to the Quarter Trading rules of the NYSE as well as to the US securities laws and the rules of the Securities 1 Update and Exchange Commission (SEC) applicable to foreign private issuers. As the Exceeded Parker Review Company follows UK corporate governance standards, differences from the diversity target NYSE governance standards are summarised in the Company’s Form 20-F filing. ## 5th 1. BOARD LEADERSHIP AND COMPANY PURPOSE READ MORE consecutive year recognised in – Long-term value and sustainability Page 114 Bloomberg Gender- 2 Equality Index – Culture Page 114 – Shareholder and other stakeholder engagement Page 109 Discontinued operations in Russia – Conflicts of interest Page 120 in March 2022 2. DIVISION OF RESPONSIBILITIES ## 1 new Executive – Role of the Chairman and Chief Executive Officer Page 112 Director appointment – Non-Executive Directors Page 112 announced in 2022 Named among best 3. COMPOSITION, SUCCESSION AND EVALUATION places to work for 3 LGBTQ+ equality – Appointment and succession planning Page 119 – Skills and experience Page 115 ## Top 10 FTSE Women Leaders – Evaluation Page 116 Review for gender – Diversity Page 116 representation among Executive Committee 4 and direct reports 4. AUDIT, RISK AND INTERNAL CONTROL | – Integrity of financial statements | Page 123 | | --- | --- | | – Fair, balanced and understandable | Page 123 | | – Internal controls and risk management | Page 124 | | – External auditor | Page 125 | | – Principal and emerging risks | Pages 91-97 | 5. REMUNERATION | | – Policies and practices | Pages 130-156 | | --- | --- | --- | | 1 Joanne Wilson will succeed John Rogers as CFO immediately following the | | | | announcement of the Company’s 2023 First Quarter Trading Update | – Alignment with purpose, values and long-term strategy | Pages 130-156 | | 2 Bloomberg Gender-Equality Index 2023 | | | | 3 Corporate Equality Index 2022, Human Rights Campaign | – Independent judgement and discretion | Pages 130-156 | | 4 FTSE Women Leaders Review 2022 | | | 103WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE ## OUR BO ARD Appointed: 1 January 2015 (Chairman 9 June 2015) External appointments: Nationality: Italian and American Chairman, Smith & Nephew plc; 1 Partner, Clayton, Dubilier & Rice; Chairman, Skills and experience: Clayton, Dubilier & Rice Europe; Roberto has extensive experience in corporate governance and global commerce, Independent Non-Executive Director, having served on the boards of a number of UK and international companies. His Gulf Capital. career in private equity brings valuable experience to WPP, particularly when evaluating acquisitions and new business opportunities. Roberto is Chairman of Smith & Nephew plc, a Partner of Clayton, Dubilier & Rice, ROBERTO QUARTA and Chairman of Clayton, Dubilier & Rice Europe. He is an Independent CHAIRMAN Non-Executive Director of Gulf Capital. Previously he was Chief Executive and then Chairman of BBA Group plc, Chairman of Rexel SA, Chairman of IMI plc and 1 Roberto will step down as Chairman of a Non-Executive Director at BAE Systems plc, Equant NV, Foster Wheeler AG and Smith & Nephew plc in September 2023 PowerGen plc. Appointed: 3 September 2018 Nationality: British External appointments: Trustee, Natural History Museum. Skills and experience: Mark has held multiple leadership positions at WPP since joining in 1989. As CEO of WPP Digital he was responsible for WPP’s first moves into technology. In 2015, he became Global CEO of Wunderman, which he transformed into one of the world’s leading agencies. Mark was voted the industry’s Most Influential Person 2019 in Econsultancy’s Top 100 Digital Agencies, and in 2022 was recognised as a Champion of Women in Business for the fifth consecutive year. Mark was awarded a Fellowship for outstanding services to the industry in the IPA’s 2021 New Year’s Honours. MARK READ CHIEF EXECUTIVE OFFICER Mark has an economics degree from Trinity College, Cambridge, was a Henry Fellow at Harvard University, and has an MBA from INSEAD. Appointed: 3 February 2020, Chief Financial Officer from 1 May 2020 1 External appointments: Nationality: British Member, The Prince’s Advisory Council for Accounting for Sustainability; Skills and experience: Member, Retail Sector Council; John has extensive finance, strategy, digital, property and retail experience. He Independent Non-Executive Director, joined WPP from J Sainsbury plc where he was CEO of Sainsbury’s Argos, and was Grab Holdings Limited. previously CFO of J Sainsbury plc, responsible for business strategy, new business development, Sainsbury’s Online and Sainsbury’s Bank, in addition to its core finance functions. 1 It was announced in November 2022 that John Rogers would step down from the JOHN ROGERS John is a member of The Prince’s Advisory Council for Accounting for Sustainability Company and be succeeded by Joanne CHIEF FINANCIAL OFFICER and sits on the Retail Sector Council, which acts as a point of liaison between the UK Wilson, which will take effect immediately government and retail sector. John is an Independent Non-Executive Director of following the announcement of the Company’s Grab Holdings Limited, a technology company listed on NASDAQ. 2023 First Quarter Trading Update INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed: 1 January 2014 1 Nationality: American External appointments: Non-Executive Director, Paramount Skills and experience: Global; Non-Executive Director, Nicole is a global business leader and an internationally recognised lawyer. She MeiraGTx Holdings plc; Non-Executive brings to the Board analytical skills, in-depth knowledge of public company Director, Far Peak Acquisition corporate governance and a comprehensive understanding of media and business Corporation; Vice Chair and Officer, issues. Nicole was previously President of Sony Entertainment, Inc. and global Schwarzman Animal Mexican Center. 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. NICOLE SELIGMAN SENIOR INDEPENDENT DIRECTOR, She is a Magna Cum Laude graduate of both Harvard College and Harvard Law School. 1 Nicole will retire from the Board at the NON-EXECUTIVE DIRECTOR 2023 AGM | COMMITTEE | NON-EXECUTIVE DIRECTOR TENURE | Director retirements during the year: | | --- | --- | --- | | MEMBERSHIP KEY | AS AT 31 DECEMBER 2022 | Jacques Aigrain retired from the Board | | Audit | | on 24 May 2022 | | Compensation | | Sally Susman retired from the Board | | Nomination and Governance | | on 24 May 2022 | Sustainability Committee Chair 0-3 years 5 3-6 years 3 6-9 years 3 9+ years 0 WPP ANNUAL REPORT 2022104 OUR BOARD CORPORATE GOVERNANCE # INDEPENDENT NON-EXECUTIVE DIRECTORS ![img-0.jpeg](img-0.jpeg) ANGELA AHRENDTS DBE NON-EXECUTIVE DIRECTOR Appointed: 1 July 2020 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, Renal, at Apple Inc., where she integrated and redesigned the physical and digital global consumer experience. Angela was CEO of Burberry from 2006 to 2014, where she repositioned the brand as a luxury high-growth company and created the Burberry Foundation. Prior to Burberry, Angela was Executive Vice President at La Claiborne, Inc. and President of Donna Karan International, Inc. Angela was a member of the UK Home 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, Imagine and The Actor Institute for Society; Member of the Global Leadership Council of the Oxford University Solid Business School and British American Business International Advisory Board. ![img-1.jpeg](img-1.jpeg) SIMON DINGEMANS NON-EXECUTIVE DIRECTOR Appointed: 31 January 2022 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. He was previously CFO of GlaxoSmithKline plc. Prior to GSK, Simon worked in investment banking at SIX Warburg and then Goldman Sachs, where he was Managing Director and Partner for 10 years as a leader of its European M&A business and Head of UK Investment Banking. Simon is Chairman of Genomics plc and previously served as Chairman of the Financial Reporting Council and as Chairman of the IOS Group. Simon has a master's degree in geography from Oxford University. External appointments: Chairman, Genomics plc; Senior Advisor, The Carlyle Group. ![img-2.jpeg](img-2.jpeg) SANDRINE DUPOUR NON-EXECUTIVE DIRECTOR Appointed: 1 February 2020 Nationality: French Skills and experience: Sandrine brings substantial financial expertise gained in global companies and strong strategic capability to the Board. Sandrine is currently CFO of UCB, a global pharmaceutical company. Previously she was CFO of Proximus. She held a number of leadership roles at Vivendi in France and the US across its entertainment and telecommunications business, and has an enthusiasm for cultural, technological and business transformation. Sandrine began her career as a financial analyst at BHP 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. ![img-3.jpeg](img-3.jpeg) TAREK FARAMAT NON-EXECUTIVE DIRECTOR Appointed: 9 October 2018 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 35 years, where his last position was President of Procter & Gamble Latin America and member of the Global Leadership Council. Tarek was previously Chairman of JBS S.A. and a board member of Pilgrim's Pride Corporation and Albergatta. Tarek is currently a strategic advisor, consultant and partner for companies in the consumer goods, fintech 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 Pontor e. Tarek will also serve from the Board following the nomination of the Company's 2020 Annual General Meeting ![img-4.jpeg](img-4.jpeg) TOM ILUBE CBE NON-EXECUTIVE DIRECTOR Appointed: 5 October 2020 Nationality: British Skills and experience: Tom brings a wealth of expertise as a technology entrepreneur and has extensive experience of the UK technology sector. He is Chair of the Rugby Football Union (RFU) and CEO of Crossword Cybersecurity plc. Tom was previously Managing Director of Consumer Markets at Callicredit Information Group. Prior to Callicredit, Tom founded and was CEO of Garlik, an identity protection company. Tom has honorary doctorates from City, University of London, Coventry University, Portsmouth University and the University of Wolverhampton, and is an Honorary Fellow of both Seca College and St Anne's College, Oxford. In 2017 Tom topped the Powerful cooking of the most influential people of African or African Caribbean heritage in the UK. External appointments: Founder and CEO, Crossword Cybersecurity plc; Chair, Yemal Limited (previously known as Deathio Ltd); Founder and Chair, African Gifted Foundation; Chair, The Rugby Football Union (RFU). WFP ANNUAL REPORT 2022 115 CORPORATE GOVERNANCE OUR BOARD INDEPENDENT NON-EXECUTIVE DIRECTORS Appointed: 1 April 2019 Nationality: British and American External appointments: Chief Operating Officer, Microsoft Skills and experience: Global Enterprise; Advisory Board Cindy has extensive experience as a leader in the technology and media sectors, Member, Imperial College Business and brings exceptional knowledge of the role technology plays in business School in London and McLaren. transformation. She was appointed Chief Operating Officer for Microsoft Global Enterprise in March 2023. Prior to this, Cindy was President of Microsoft Western Europe, and also CEO of Microsoft UK. She has also held the roles of Managing Director of the UK consumer division at Vodafone and Executive Director of Digital Entertainment at Virgin Media. She spent 15 years at The Walt Disney Company, CINDY ROSE OBE ultimately as Senior Vice President and Managing Director of Disney Interactive NON-EXECUTIVE DIRECTOR Media Group. Cindy is a graduate of Colombia University and New York Law School. Appointed: 1 November 2019 Nationality: British External appointments: Non-Executive Director, J Sainsbury plc; Skills and experience: Trustee Director, Business in the Keith has a wealth of experience as a marketing and digital leader, and a deep Community; Board Trustee, Grange understanding of the ways in which technology is transforming businesses. Keith Park Opera; President, Royal was previously Chief Marketing and Communications Officer at Unilever, a role that Horticultural Society; Board Trustee, included creating and leading Unilever’s sustainability programme. Keith was named Leverhulme Trust; Senior Advisor, Bain the World’s Most Influential Chief Marketing Officer by Forbes in 2017, 2018 and 2019, Capital, Alix Partners; Advisory Board and Global Marketer of the Year 2017 by the World Federation of Advertisers. Member, i-Genie and McLaren. KEITH WEED CBE He received The Drum’s Lifetime Achievement Award in 2018 and was inducted into NON-EXECUTIVE DIRECTOR the Marketing Hall of Fame in 2019. Keith is a Non-Executive Director of J Sainsbury plc. Appointed: 1 September 2019 Nationality: British and Swiss External appointments: Chair of the Board, Travis Perkins plc; Skills and experience: Non-Executive Director, Standard Jasmine’s experience spans marketing, technology, finance, media, Chartered plc; 1 Non-Executive Director, telecommunications, and not-for-profit organisations. Alongside this breadth of Compagnie Financière Richemont SA; perspective she brings knowledge of many of WPP’s client sectors to the Board. Visiting Fellow, Oxford University. 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 Oxfam and Save the Children, JASMINE WHITBREAD including as the first Chief Executive of Save the Children International from 1 Jasmine will step down as Non-Executive NON-EXECUTIVE DIRECTOR 2010 to 2015. She was CEO of London First from 2016 to 2021, and was Director of Standard Chartered plc at its previously a Non-Executive Director of BT Group plc. 2023 AGM Appointed: 1 January 2021 Nationality: American External appointments: Non-Executive Director, AsiaInfo Skills and experience: Technologies Limited and ChinaSoft Ya-Qin is a world-renowned technologist, scientist and entrepreneur with a International Limited; Chair Professor, particular understanding of the changing consumer technology landscape in China. AI Science and Founding Dean, Institute He was President of Baidu Inc., the global internet services and AI company, for AI Industry Research, Tsinghua between 2014 and 2019. Prior to joining Baidu, he held several positions during his University. 16-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 AsiaInfo Technologies Limited and ChinaSoft International Limited. He is DR. YA-QIN ZHANG also Chair Professor of AI Science at Tsinghua University and the founding Dean of NON-EXECUTIVE DIRECTOR the Institute for AI Industry Research. Appointed: 27 April 2020 External appointments: None. 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 GlaxoSmithKline plc (GSK), leading on engagement with ESG-focused investors, and before that held company secretarial roles at GSK, Lastminute.com, Royal & Sun Alliance and Segro plc. BALBIR KELLY-BISLA COMPANY SECRETARY DIRECTOR APPOINTMENT ANNOUNCED IN 2022 Appointment: 19 April 2023 1 Nationality: Irish External appointments: Non-Executive Director, Informa plc. Skills and experience: Joanne has extensive experience both in the UK and internationally in a variety of financial and commercial roles. She joins WPP from Britvic where she is currently 1 Joanne Wilson will join the Board and Chief Financial Officer. Prior to this, Joanne had a successful career at Tesco where, become CFO designate on 19 April 2023 and at the time of leaving, she held the position of Chief Financial Officer of dunnhumby, succeed John Rogers as CFO immediately a global leader in customer data science. following the announcement of the Company’s | | | Joanne began her career at KPMG, where she qualified as a Chartered Accountant | 2023 First Quarter Trading Update | | --- | --- | --- | --- | | JOANNE WILSON | | and spent three years in Hong Kong. | | | CHIEF FINANCIAL OFFICER | 1 | | | WPP ANNUAL REPORT 2022106 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 agency networks and ## central corporate functions Other Executive Committee members during the year: Andy Main retired from the Executive Committee on 7 September 2022. | MARK READ | JOHN ROGERS | AJAZ AHMED | | --- | --- | --- | | CHIEF EXECUTIVE OFFICER | CHIEF FINANCIAL OFFICER | CHIEF EXECUTIVE OFFICER, | | Biography can be found on page 104. | Biography can be found on page 104. | AKQA | Ajaz is the CEO of AKQA, which also includes Grey. Recognised as a creative pioneer, AKQA has won over 75 Agency of the Year awards. | DEVIKA BULCHANDANI | JON COOK | ANNAMARIA DESALVA | | --- | --- | --- | | GLOBAL CHIEF EXECUTIVE OFFICER, | GLOBAL CHIEF EXECUTIVE OFFICER, | CHAIRMAN AND CEO, | | OGILVY | VMLY&R | HILL+KNOWLTON STRATEGIES | | Devika was appointed Global CEO of | Jon has led VMLY&R since its formation | AnnaMaria rejoined Hill+Knowlton in | | Ogilvy in 2022. She joined Ogilvy as | in 2018 as WPP’s global brand and | 2019 after leading global corporate | | CEO of North America in 2021. Prior to | customer experience agency. He was | affairs at DuPont and serving as Senior | | Ogilvy, Devika spent 26 years at McCann | formerly Global CEO of VML, which he | Advisor to the CEO of DowDuPont. | | in various leadership positions. | joined in 1996. | She previously worked in transformation | roles at Pfizer. Currently she serves on governance boards in the industrials sector and in higher education. | MEL EDWARDS | LAURENT EZEKIEL | JANE GERAGHTY | | --- | --- | --- | | GLOBAL CHIEF EXECUTIVE OFFICER, | CHIEF MARKETING | GLOBAL CHIEF EXECUTIVE OFFICER, | | WUNDERMAN THOMPSON | & GROWTH OFFICER | LANDOR & FITCH | | Mel was appointed as CEO of the newly | Laurent became WPP’s first Chief | Jane was appointed Landor & Fitch’s | | formed Wunderman Thompson in 2018, | Marketing & Growth Officer in 2019. | Global CEO in 2017, having previously | | having previously been the Global CEO | He joined from Publicis where he was | been President of EMEA. She has | | of Wunderman. She joined Wunderman | President of Digitas North America and | held senior positions at Naked | | as UK CEO in 2012. | International, and Global Client Leader | Communications, ITV, Ogilvy New York, | | | for GSK. | McCann-Erickson and Saatchi & Saatchi. | 107WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE OUR EXECUTIVE COMMITTEE | ADAM GERHART | RICHARD GLASSON | ANDREA HARRIS | MICHAEL HOUSTON | | --- | --- | --- | --- | | GLOBAL CHIEF EXECUTIVE OFFICER, | GLOBAL CHIEF EXECUTIVE OFFICER, | GROUP CHIEF COUNSEL | WPP COUNTRY PRESIDENT, US | | MINDSHARE | HOGARTH | | Michael became WPP’s first Country | | Adam was appointed Global CEO of | Richard was appointed CEO of Hogarth | Andrea was appointed as Group Chief | President for the United States in 2022. | | Mindshare in January 2021, having | Worldwide in 2016, having joined the | Counsel in 2005 having joined WPP | Prior to this he held key positions at | | previously been its US CEO. He joined | company in 2011. Prior to this he was | in 1996. Andrea is Chair of the Risk | WPP agencies Young & Rubicam and | | the agency 20 years ago as a media | CEO of Gyro, the B2B marketing | Committee. | Landor and, most recently, creative | | planner and has worked across the | specialist. | | agency Grey Group where he served | | globe in a variety of roles and | | | as Global CEO from 2017 to 2022. | leadership positions. | DONNA IMPERATO | CHRISTIAN JUHL | LINDSAY PATTISON | STEPHAN PRETORIUS | | --- | --- | --- | --- | | GLOBAL CHIEF EXECUTIVE OFFICER, | GLOBAL CHIEF EXECUTIVE OFFICER, | CHIEF CLIENT OFFICER | CHIEF TECHNOLOGY OFFICER | | BCW | GROUPM | | | | Donna became CEO of BCW, one of | GroupM is the world’s largest media | Lindsay became Chief Client Officer | Stephan was appointed as WPP’s first | | the world’s largest earned-first creative | investment group and home to WPP’s | of WPP in 2018. Prior roles include | CTO in 2018. Before that he was UK | | communications agencies, in 2018. | media agencies. Formerly Global CEO | Chief Transformation Officer of WPP | Group CEO and Global CTO of | | Before leading BCW, Donna was Global | of Essence, Christian was appointed | and Global CEO of Maxus, which she | Wunderman, having joined the | | CEO of Cohn & Wolfe for 15 years. In | CEO of GroupM in 2019. | joined as UK CEO in 2009. | agency in 2016. | January 2023 it was announced that Donna will retire as CEO during 2023 and step down once her successor is appointed. | ROB REILLY | JENNIFER REMLING | ANDREW SCOTT | | --- | --- | --- | | GLOBAL CHIEF CREATIVE OFFICER | GLOBAL CHIEF PEOPLE OFFICER | CHIEF OPERATING OFFICER | | Rob joined in 2021 from McCann | Jennifer was appointed Global Chief | Andrew joined WPP in 1999 as Director | | Worldgroup where he was Global | People Officer in October 2021, joining | of Corporate Development. He held a | | Creative Chairman, after spending a | from GroupM where she held the same | number of other senior roles including | | decade at Crispin, Porter + Bogusky. | role. Jennifer has worked in senior | Chief Operating Officer for Europe | | In 2022, he led WPP to being named | positions across the industry, | before being appointed COO in 2018. | | Creative Company of the Year at the | including at Essence, R/GA, AKQA, | | | Cannes Lions Festival of Creativity. | 360i and Sapient. | | WPP ANNUAL REPORT 2022108 CORPORATE GOVERNANCE ## HOW OUR BOARD ENGAGES ## WITH STAKEHOLDERS | OUR APPROACH TO ENGAGEMENT | interests and any potential impact as part | As a Jersey incorporated company, WPP is | | --- | --- | --- | | Our stakeholders are central to our strategy | of the decision-making process. | not subject to UK legislation. However, as a | | and critical to the long-term success of our | | matter of good governance and in order to | | business. The Board oversees our approach | Our stakeholder engagement processes | comply with the provisions of the 2018 UK | | to engagement as we seek feedback and | enable our Board to understand what | Corporate Governance Code, the Board | | make decisions for the long-term benefit of | matters to stakeholders most, consider | considers the matters described in Section | | WPP. For each matter that comes before the | carefully all relevant factors and select the | 172 of the Companies Act 2006 in its | | Board for decision, the Board considers the | course of action that best delivers long-term | decision-making. Section 172 factors are | | likely consequences of any decision in the | value for our stakeholders and protects their | not only considered at Board level – they | | long term, identifies stakeholders who may | interests, reflecting what are referred to as | are part of our culture and help drive our | | be affected, and carefully considers their | Section 172 factors. | business. Illustrations of this can be found | throughout the Strategic Report. ### ENGAGEMENT IN ACTION DURING 2022 The table below illustrates direct and indirect Board engagement with various stakeholders. Additional detail on how we have engaged with each of these stakeholder groups on an operational level can be found on page 22 within the Strategic Report. 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 2022, the Board oversaw the return | | --- | --- | --- | --- | | Our shareholders provide | Chief Financial Officer hosted quarterly | views, particularly from the Chairman, | of £1.1 billion (2021: £1.0 billion) in | | capital to invest in the | results presentations and took | Chair of the Compensation Committee, | cash to shareholders through | | business and support the | questions from investors and analysts. | Chief Executive Officer and Chief | dividends and share buybacks. | | valuation and liquidity | | Financial Officer. | | | | The Chairman, Chairs of the Board | | Feedback from shareholders in | of WPP shares. Committees and Executive Directors Monthly reports to the Board detailing respect to potential changes to Shareholders benefit met regularly with institutional investor relations activities, key themes the Directors’ Compensation Policy from the Board acting in investors to discuss the business of interest from investors and share helped to inform the Compensation the best interests of the and to respond to any concerns. register composition and movements. Committee’s final decision to not Company and investing make any significant changes to the for long-term value In 2022, the Chair of the Compensation Analyst and broker briefings and Policy at this time. Shareholders are generation. Committee consulted with key reports of meetings with major being asked to approve an updated shareholders in respect of potential shareholders. Additionally, the Board Policy which includes only minor changes to the Directors’ received communications from major amendments. For more detail see Compensation Policy. For more shareholders, including in respect of page 134. detail see page 134. voting practices. The 2022 AGM was live-streamed via a webcast hosted by the Chairman. Shareholders were able to watch the presentations and ask questions in advance and during the meeting. ### GOVERNMENTS As a listed global company, engagement Reports to the Board and its In 2022 we contributed £1.5 billion with listing authorities and financial Committees on regulatory changes in taxes to public finances (2021: ### AND REGULATORS regulators. from the Group Chief Counsel, Group £1.4 billion). Governments receive the Company Secretary and external tax contributions we The Chief Executive Officer met with Participated in consultations auditor. make to public finances, government representatives and associated with ESG disclosure enabling them to invest regulators around the world, including Received reports from the Chief requirements and regulation, and in public services. through attendance at the World Sustainability Officer on regulatory supported efforts to increase ESG Economic Forum Annual meeting changes with regards to ESG. standardisation and alignment. Governments and in Davos. Received reports from the Chief regulators determine the Responded to government Privacy Officer and Global Data policy frameworks that consultations, such as the Parker Review. Protection Officer on changing affect us and our regulatory landscapes with regards to stakeholders. data protection, security and privacy as well as data ethics and artificial intelligence. 109WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE HOW OUR BOARD ENGAGES ### ENGAGEMENT IN ACTION DURING 2022 CONTINUED STAKEHOLDER GROUP DIRECT BOARD ENGAGEMENT INDIRECT BOARD ENGAGEMENT IMPACT OF ENGAGEMENT ### CLIENTS, Engaged with clients on issues Received updates on WPP’s client With respect to client satisfaction, including strategy, changes taking satisfaction scores. we consistently achieved a Likelihood ### PARTNERS AND | | place in our market and understanding | | to Recommend score of 8.0 (out of | | --- | --- | --- | --- | | SUPPLIERS | | Received reports from operating | | | | the changes taking place in our clients’ | | 10) over the last year, including a DE&I | | Our clients come from | | companies, which included | | | | and suppliers’ markets. | | score of 8.2. | | businesses across every | | GroupM’s global framework for | | | sector. The work we do | Through our Chief Executive Officer, | media decarbonisation to support | The Company developed a revised | | for clients provides our | engaged with suppliers in joint | the commitment to decarbonise its | Assignment Acceptance Policy and | | revenue and helps them | product development, skills | media supply chain. | Framework to help our agencies | | to grow their businesses, | development and joint go-to-market | | review potentially sensitive new | Received deep-dive updates at each build relationships with programmes. client work. For more detail see Board meeting from Global Client their customers and page 77. Board engagement with key partners Leaders on key clients. ready themselves for and clients, including site meetings in future success. WPP’s Modern Slavery Act Statement, various locations. available on our website, is reviewed Our suppliers range by the Sustainability Committee each from small businesses year and recommended to the Board to the world’s largest for approval. For more detail on how technology partners. the Company manages modern slavery They provide us with the risk, see our website at wpp.com/ products and services sustainability/modern-slavery-act- we need to meet our statement clients’ needs. ### PEOPLE Cindy Rose, our Workforce Formal reports to the Board from the To align management with We depend on the Engagement Non-Executive Director, Chief Executive Officer and Chief employees and shareholders, senior talent, creativity and attended meetings of the Workforce People Officer included: executives are being held to account technology skills of our Advisory Panel (WAP), in addition to on ESG metrics. DE&I goals continue – Updates on new ways of working and people. And we want our the United States and India People to be included in incentive plans for WPP’s new Making Space campaign employees to embrace Forums where possible, and updated senior executives, and carbon (for more detail see page 9) our purpose, culture and the Board on matters discussed. reduction targets were included in – Updates on talent, career | values. In return, our | | | incentive plans for Executive | | --- | --- | --- | --- | | | The Chief Executive Officer hosted | development and succession | | | people receive salaries, | | | Directors in 2022. | | | 10 townhalls and various leadership | planning | | pension contributions, events, which gave him the chance to – Reports on employee mental health To help us better support our people, employee benefits, speak to our people directly and to and wellbeing we launched the refreshed All In staff career development hear from attendees in return. – In-depth reviews of the people survey in 2022, achieving our and training. strategy, people risk and workforce highest-ever engagement levels The Board engaged with senior engagement with 72,700 employees taking part. managers at the Board strategy – Progress on DE&I initiatives See page 36 for more details. meeting and wider WPP management – Results of various employee at the September 2022 leadership In 2022, we invested £31.3 million engagement and culture monitoring event. in learning and development surveys undertaken through the year opportunities for our people. and actions taken to address employee feedback WPP’s Global Inclusion Council met throughout the year to support the delivery of our diversity, equity and inclusion commitments. Reports at each Audit Committee meeting were received on issues raised via Right to Speak channels. WPP ANNUAL REPORT 2022110 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 launched a new Green We are committed a range of ESG topics, including media Committee included progress updates Claims Guide, supported by training to responsible and decarbonisation. on the Company-wide sustainability sessions, to help equip its people sustainable business strategy and industry-leading net zero with principles and practical tips to Professor Dr Johan Rockström, the practices. We take steps carbon reduction commitments; make effective environmental claims expert on climate change and to optimise our own progress on WPP’s single-use plastics and avoid misleading claims. For sustainable development, engaged environmental impact, commitment, including adjusted more detail see page 77. with and presented to the Board on but recognise that our commitment timescales; performance climate-related issues. To support delivery of its science- greatest contribution to against science-based carbon based carbon reduction targets, the planet is through our The Board and Sustainability reduction targets and sustainability the Company launched a programme work with clients, which Committee reviewed climate-related KPIs including renewable energy; to accelerate the decarbonisation of can shift attitudes and risks and opportunities as part of their and stakeholder engagement and the world’s media supply chain (see change behaviours to review and approval of WPP’s Task feedback. For more detail see page 76). | build a sustainable future | Force on Climate-related Financial | page 128. | | | --- | --- | --- | --- | | and a more inclusive | Disclosures statement on page 220, | | The Company made progress | | society. | in addition to including climate-related | | towards its commitment to phase out | | | risks as an emerging risk. For more | | single-use plastics across campuses. | | | detail see page 97. | | Monitoring progress beyond | campuses will remain a priority for the Sustainability Committee in 2023. | COMMUNITIES | The Board received updates on | The Sustainability Committee oversaw | To support those affected by | | --- | --- | --- | --- | | We can help boost the | progress against the 2020 commitment | the work on the sustainability strategy | events in Ukraine, we formed a | | impact of charities and | to spend $30 million over three years | and the progress made on embedding | partnership with UNHCR, which | | non-governmental | to fund internal and external racial | Group-wide sustainability targets tied | raised $1.34 million, and provided | | organisations by | equity programmes. For more detail | to the WPP purpose statement. | similar support for those impacted | | providing marketing and | on how we are investing in our | | by floods in Pakistan and the | Reports to the Sustainability Committee creative services, often communities, see page 79. earthquakes in Turkey and Syria. included updates on a new partnership on a pro bono basis, with UNHCR to support those affected Since 2020, we have committed enabling them to raise by events in Ukraine, the floods in $16.2 million to racial equity and awareness and funds, Pakistan and the earthquakes in Turkey inclusion programmes as part of recruit members, and and Syria. WPP’s commitment to invest achieve campaign $30 million over three years. This objectives. We believe, Updates received from the business excludes amounts invested in 2022 and so do many of our on elements of the Group’s operations which we intend to report later in stakeholders, that acting which impact the wider community, the year. | responsibly is both the | including the Group’s tax strategy. | | | --- | --- | --- | | right thing to do and in | | Our total social contribution in 2022 | | our long-term interests. | | was £35.5 million (2021: £41 million). | 111WPP ANNUAL REPORT 2022 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 CHAIR 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 Chair and – Oversees the execution of the strategy acts as an intermediary for the other Directors and 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 Chair present) when necessary and at least the Company, representing the Company to once a year to appraise the Chair’s performance The Matters Reserved for the Board are clients, employees, partners, suppliers, and communicates the results to the Chair available on our website, wpp.com governments and other stakeholders – Develops the strategic direction for COMPANY SECRETARY consideration by the Board – Ensures the Board operates in accordance with – Sets the tone at the top with regard to culture the corporate governance framework and that and values there are good information flows between the – Ensures there are effective processes for Board and Committees engaging with and listening to employees – Advises the Board on matters of corporate and other stakeholders 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 2022112 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 Chair, 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 122 Read more on page 118 Read more on page 130 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 128 ### 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. 113WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE # BOARD ACTIVITIES The key areas of focus considered by the Board during 2022 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 - Reviewed the Company's financial results, earnings guidance, investor materials and related announcements - Considered performance against the 2021-2022 budget and agreed on the 2022-2023 budget - Confirmation of the viability statement and going concern assessment - Monitored progress of the transformation programme and received deep dives on component parts ### STRATEGY & PURPOSE - Board strategy meeting held 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 particular focus on key market trends, clients, culture, OG&I, creativity, key markets, data and commerce as well as broader themes in areas of geopolitics, innovation and ESG - Regional review meeting held in Berlin to deep dive into WPP's European businesses with a focus on geopolitical environment, European innovation, and opportunities and challenges in the market - Received presentations from the agencies on their work to support WPP's strategy and updates on key clients - Simplification activities, including: the merger of Essence and MediaCom to form EssenceMediacom and the formation of GroupM Nexus; the opening of new WPP campuses in Brussels, Düsseldorf, Santiago, Tokyo and Toronto in 2022 and Guangzhou, China (in 2023); and legal entity rationalisation - Reviewed TCFD disclosures and climate-related physical and transition risks and opportunities - Considered the timeline and approach for a net zero transition plan ### PEOPLE & CULTURE - Considered how the people strategy would enable the overall business strategy and foster the best possible culture - Prioritised return to work initiatives. Received regular updates from the Chief People Officer on talent management, learning and development, succession planning and employee engagement, with a particular focus on driving greater diversity and inclusion supported by data and insights - Endorsed implementation of Making Space, which began with a Company-wide break focused on giving people space to look after their wellbeing and inspire creativity - Reviewed Company-wide All in survey results. For more details see page 56 - Received regular updates from the designated NEO on the Workforce Advisory Panel and other People Forums - Reviewed progress against the set of commitments and actions announced to advance racial equity ### GOVERNANCE ### & COMPLIANCE - Received reports from Board Committees and the external auditor - Reviewed and approved the 2021 Annual Report, Form 2017 and Sustainability Report - Reviewed the 2022 Modern Slavery Act Statement and approved it for publication on the Company website - Reviewed Annual General Meeting arrangements and approved the 2022 Notice of Annual General Meeting - Undertook and considered the output of an internally facilitated evaluation of the Board's effectiveness, the effectiveness of each committee and individual directors. For more details see page 119 - Continued focus on the Board's composition, diversity and succession plans, resulting in the appointment of a new Chief Financial Officer and new Senior Independent Director - Reviewed the risk management and internal controls approach across the Group. For more details see page 136 - Carried out a robust assessment of the principal and emerging risks and uncertainties affecting the Group and the markets we operate in and broader reputational risks, as well as strategic risk reviews, including cyber and information security WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE # COMPOSITION, SUCCESSION AND EVALUATION BOARD ATTENDANCE TABLE: 2022 | | Board | Audit Committee | Compensation Committee | Nomination and Governance Committee | Sustainability Committee | | --- | --- | --- | --- | --- | --- | | Total number of scheduled meetings | 6 | 9 | 5 | 4 | 5 | | Members | Attended | Attended | Attended | Attended | Attended | | Roberto Quarta | 6 | | 5 | 4 | | | Mark Read | 6 | | | | | | John Rogers | 6 | | | | | | Angela Ahrendts' | 6 | | | 3(3) | 5 | | Simon Dingemans - appointed on 31 January 2022 | 6 | 8(8) | | | | | Sandrine Dufour | 6 | 9 | 5 | | | | Tarek Farahat | 6 | 8 | | | | | Tom Hake | 6 | 9 | 5 | 4 | | | Cindy Rose | 6 | 8 | 5 | | | | Nicole Seligman | 6 | | 5 | 4 | 3 | | Keith Weed | 6 | | | | 5 | | Jasmine Whitbread | 6 | | 5 | | 5 | | Dr. Ya-Qin Zhang' | 6 | | | | 3(3) | | Former Directors who served for part of the year | | | | | | | Jacques Aigrain - retired on 26 May 2022 | 3(3) | 4(4) | 3(3) | | | | Sally Susman - retired on 26 May 2022 | 3(3) | | | 0(1) | 3(3) | | Number of ad hoc meetings | 5 | 0 | 5 | 0 | 1 | For Directors who served for part of the year, the numbers indicated above the number of meetings the Directors were eligible to attend 1. Awards Amounts should be Nomination and Governance Committee in March 2022 2. Dr. Ya-Qin Zhang joined the Sustainability Committee in March 2022 ## BOARD COMPOSITION As at the date of this report, our Board comprised 10 independent Non-Executive Directors, the Chairman and two Executive Directors. The aim is to ensure the balance of the Board reflects the needs of the Company, is culturally diverse and is able to consider matters from a broad perspective, 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 deliberations. Further details, including the external appointments held by Board members and their Committee membership, can be found on pages 10s-10s. Further detail on the responsibilities of the Chairman and members of the Board can be found on pages 112-113. The chart opposite details those skills and experience of our Board which are identified as being particularly important to the execution of the Company's strategy. OUR BOARD - A DIVERSE MIX OF SKILLS, EXPERIENCE AND KNOWLEDGE ![img-5.jpeg](img-5.jpeg) GEOGRAPHICAL EXPERIENCE ![img-6.jpeg](img-6.jpeg) WPP ANNUAL REPORT 2022 115 CORPORATE GOVERNANCE COMPOSITION, SUCCESSION AND EVALUATION | DIVERSITY | RE-ELECTION OF DIRECTORS | BOARD EVALUATION | | --- | --- | --- | | WPP believes that diversity and difference | The Chairman, Senior Independent Director | Each year, WPP completes a review of the | | power creativity. We foster an inclusive | and Non-Executive Directors are appointed | Board and its Committees to monitor their | | culture across WPP – one that is equitable | for a three-year term, subject to annual | effectiveness and identify improvement | | and respectful of diverse thoughts and | re-election by the shareholders at the AGM. | opportunities. Progress against the outcomes | | individual expression – and the same | With only specific exceptions to ensure | of the 2021 evaluation conducted by Nicole | | principle applies to the composition of our | Board continuity, Non-Executive Directors | Seligman, Senior Independent Director, are | | Board. The Board has a diverse range of | shall not stand for re-election after they have | set out in the table shown overleaf. | | experience by way of expertise, business | served for the period of their independence, | | | sector background and length of tenure on | as determined by applicable UK and United | 2022 BOARD EVALUATION | | the Board. Our Non-Executive Directors | States’ standards, which is nine years. | The 2022 evaluation was internally | | demonstrate expertise from a range of | | facilitated by the Senior Independent | | industries including tech, marketing, financial | Nicole Seligman and Tarek Farahat will not | Director. The review comprised a | | services, FMCG and pharma, representative | stand for re-election at the AGM in 2023. | questionnaire and discussions with each | | of our customer base. The chart on page 115 | With the exception of Joanne Wilson, who | member of the Board based on a number of | | illustrates the range of skills across the | is standing for election for the first time, | themes, including the Board’s leadership, | | Board, with the new appointments in | all other Directors will stand for re-election | development and effectiveness and how the | | 2022-2023 bringing additional expertise | at the AGM with the support of the Board. | Board was working as a whole, performance | | in M&A, corporate governance and ESG. | The Non-Executive Directors’ letters of | and strategy including key challenges, risks | | | appointment are available for inspection | and opportunities for WPP over the longer | | The Board’s Diversity Policy reinforces the | at the Company’s registered office. | term and alignment of leadership skills, | | Board’s ongoing commitment to all aspects | | experience and expertise against them, | | of diversity and supports the principles of | INDUCTION PROGRAMME | stakeholder insights and broader additional | | the FTSE Women Leaders and Parker reviews | To ensure that they are able to effectively | areas of future focus. | | on gender and ethnic diversity. The Policy | contribute to discussion and decision-making, | | | was reviewed during the year and | all Directors participate in an induction | The conclusions of the 2022 review were | | recommended updates were approved by | programme on joining the Board. Each | positive, confirming that the Board continues | | the Board in February 2023. As part of Board | induction programme is tailored to the | to operate effectively with strong leadership | | discussions, recognition was given to the | individual Director, based on their personal | and a continual enhancement of skills and | | importance and benefits of greater diversity | experience and background, including | experience. The relationships among the | | throughout the organisation. The targets of | matters specific to their role as a member | Chairman, the Senior Independent Director, | | the policy and an update against each of | of the Committees upon which they sit. | Non-Executive Directors and the Executive | | them can be found on page 121, in addition | | Directors remained of a high quality. Previous | | to a breakdown of the Board and Executive | Each induction programme includes | evaluation recommendations had been | | Committee by gender and ethnicity. A copy | meetings with members of the Executive | implemented effectively and the Board’s | | of the Board Diversity Policy is available on | Committee, senior management and external | strategic stewardship of key matters | | the Company’s website at wpp.com/ | advisors including the external auditor and | remained strong. | | investors/corporate-governance. | the Company’s corporate brokers. New | | | | Directors will also receive a Board induction | Key areas of focus in 2023 will be: | | Diversity, equity and inclusion is also | pack, which is devised to assist with building | | | integrated across workforce policy and | an understanding of the Company and to | – Briefings/deep-dives: enhance depth | | the Board is provided with regular updates | introduce the Company’s key stakeholders, | of Board operational and commercial | | covering a range of metrics and measures, | as well as explain the commercial and | knowledge through deep-dive sessions | | including trends around gender and ethnic | regulatory environment in which the | outside scheduled meetings on key | | diversity. This year we were named in the | Company operates. Access to key industry | themes and component parts of the | | Bloomberg Gender-Equality Index for the | bodies and publications is also provided. | strategy including technology, key | 1 fifth consecutive year and in the FTSE markets, key agency businesses and ### Women Leaders Review, WPP moved up INDEMNIFICATION OF DIRECTORS transformation workstreams 2 from ninth to sixth in the FTSE 100. Liability insurance and third-party indemnity – Stakeholder engagement and insights: provisions are in force for the benefit of continue to identify and create For more information see page 37 | | Directors and officers who held office during | opportunities to engage with the | | --- | --- | --- | | | the year and up to the approval of the | Company’s broader stakeholder groups | | 1 Gender-Equality Index 2022, Bloomberg | | | | 2 FTSE Women Leaders Review 2022 | Annual Report. | (internal and external) and receive | insights on their views and expectations of the Company WPP ANNUAL REPORT 2022116 COMPOSITION, SUCCESSION AND EVALUATION CORPORATE GOVERNANCE | – Succession planning and talent | CHAIRMAN’S PERFORMANCE REVIEW | At the Board strategy meeting in October, | | --- | --- | --- | | development: as well as continuing to | The Senior Independent Director met with | members of the senior management team, | | review the optimal composition and | the Non-Executive Directors during the year | together with the Board, had an opportunity | | skills of the Board, greater focus and time | to appraise the performance of the Chairman. | to review WPP’s strategy for performance, | | to be spent on WPP’s senior leadership | | data and transformation. | | succession and talent development, | BOARD TRAINING AND DEVELOPMENT | | | reviewing key criteria and skillsets | To assist the Board in undertaking its | The Group Chief Counsel and the Group | | required for senior leadership positions to | responsibilities, ongoing training is provided | Company Secretary provide regular updates | | support the longer-term prospects of the | to all Directors and training needs are | on current legal and governance matters | | Company, as well as engaging with the | assessed as part of the induction programme | relevant to WPP, with external counsel | | talent bench and hearing their views on | and Board evaluation process. In 2022, the | providing briefings on the wider landscape. | | key strengths, weaknesses, opportunities | Board programme included regular | The Board activities schedule on page 114 | | and threats for the organisation | presentations from the management teams | sets out further detail on topics covered | | – Longer-term strategy and performance: | of our businesses on developments in WPP’s | during the year. | | continue to focus on long-term strategy | sector and operating environment, | | | and organic and inorganic opportunities | particularly focused on financial and IT | The Board is asked to complete a | | for margin enhancement and oversee key | transformation, metaverse, ESG and key | programme of training covering How We | | deliverables under the transformation | emerging risks. | Behave, Business Integrity, Safer Data and | | programme | | Sustainability, which are connected to the | ethical and business objectives set out in our Code of Conduct. As part of our ongoing KEY RECOMMENDATIONS FOR 2022 WHAT WE HAVE DONE IN 2022 commitment to create more open and inclusive workplaces, the Board is also asked STRATEGY AND PERFORMANCE The agendas delivered at the Board regional to complete a dedicated Company-wide Create further engagement opportunities review and strategy meetings in particular inclusion module – Belonging at WPP. with stakeholders to receive insights and ensured there was a mixture of internal and enhance visibility of the emerging and external insights shared, including on external All Directors have access to the advice and evolving landscape. Ensure there is continued market perception, digital transformation and and dedicated focus on the transformation innovation in response to the changing services of the Group Chief Counsel and the programme including performance of the landscape and future trends. The Board Group Company Secretary. The Board also component parts received deep-dives on key transformation obtains advice from professional advisors, workstreams at each Board meeting as and when required, and Directors may, as required, obtain external advice at the SUCCESSION PLANNING Leadership talent and development and expense of the Company. Continue to strengthen leadership, talent, succession remained a focus through the diversity and succession for key senior year with the Board being kept apprised of ### TIME COMMITMENT management positions, and consider future initiatives in place to strengthen and support Board and committee composition key talent In addition to attending Board and Committee meetings, each of the Non- RISK/RISK APPETITE A full review of enterprise risk across the Executive Directors devotes sufficient Further align approach to risk appetite across organisation and external risk factors was time to the Company to ensure that their the organisation to support the longer-term conducted. Key aspects of the strategy and responsibilities are met effectively. When strategy and inform key decisions. Monitor operations across the organisation are making new appointments, the Board takes cyber risk and resilience across the organisation continually tracked and monitored from a risk into account other demands on Directors’ perspective, including emerging risks. IT and time. Prior to appointment, significant cyber risk updates were regularly shared with both the Audit Committee and Board, and a commitments are disclosed by Directors summary dashboard was introduced to to the Board. Any additional external monitor progress, including on infrastructure appointments are not undertaken by any and cyber capabilities and ongoing of the Directors without prior approval assessments of aged technology, cyber from the Board. vulnerabilities and business continuity risk MEETING AGENDAS Presenters received guidance on both the Improve the balance between presentation content and format of presentations, final and discussion at meetings to create more versions of which were reviewed by the CEO time for debate or CFO to ensure they covered the salient points and were succinct enough to allow more time for discussion. Presenters were encouraged to focus on areas where the Board’s input would be particularly valuable 117WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE ## NOMINA TION AND ## GOVERNANCE COMMITTEE REPORT Any decisions relating to the appointment Committee members of Directors are made by the entire Board - Roberto Quarta (Chair) based on the merits of the candidates and - Nicole Seligman the relevance of their background and - Tom Ilube CBE experience, measured against objective - Angela Ahrendts DBE criteria, with care taken to ensure that (appointed 15 March 2022) appointees have enough time to devote to our business. Detail of the Committee’s The Company Secretary is Secretary to the | Committee and attends all meetings. | | review of the Board Diversity Policy and | | --- | --- | --- | | | ROBERTO QUARTA | its assessment of progress against it can | | Key responsibilities: | CHAIR OF THE NOMINATION AND GOVERNANCE | be found on pages 120-121, alongside | | - Reviewing the composition of the Board | COMMITTEE | | gender identity and ethnic background including the balance of skills, knowledge information, which has been presented in and expertise, experience and diversity ### DEAR SHAREHOLDER accordance with FCA Listing Rules on an - In conjunction with the Board, considering As Chair of the Nomination and Governance early adoption basis. succession planning for Non-Executive Committee, I am pleased to present the Directors, Executive Directors and senior Committee’s 2022 report. The Committee also considered the management | - Making recommendations to the Board | | findings of the 2022 Board evaluation | | --- | --- | --- | | for the appointment or reappointment | During the year, the Committee continued | which was conducted internally by | | of Directors | to focus on near- to medium-term succession | Nicole Seligman in her capacity as Senior | | - Considering other significant commitments | planning, with a particular focus on | Independent Director. I am pleased that | | of prospective directors and reviewing the | appointing a new Senior Independent | the review concluded that the Committee | external commitments of Directors Director. As noted in last year’s report, and the Board are operating effectively. - Monitoring external governance Nicole Seligman will retire from the Board developments and bringing any issues at the 2023 AGM having completed her Lastly, the Committee continued to review to the attention of the Board | | nine-year tenure. The Committee, with | action taken to comply with the Code and | | --- | --- | --- | | Attendance at Committee meetings during | the initial assistance of Russell Reynolds, | other legal, governance and regulatory | | the year can be found on page 115. | led the search process based on agreed | obligations during the year. | criteria and I am delighted that Angela | Ahrendts has agreed to be appointed as | I would like to thank Nicole both personally | | --- | --- | | Senior Independent Director with effect | and on behalf of the Board for her outstanding | | from the conclusion of the 2023 AGM. | commitment and invaluable contribution to | | Angela will bring deep knowledge and | the Board and its committees throughout her | | insight to this important role and lead the | tenure. I should also like to thank the other | | process for my successor. | Committee members for their dedication | and support throughout the year. The The Committee, with further assistance sections that follow provide more detail on from Russell Reynolds, also led the search the work undertaken by the Committee process for a Chief Financial Officer to during the year. succeed John Rogers following his decision to step down from the Company. Following a formal, inclusive and extensive selection | process, the Board appointed Joanne Wilson | Roberto Quarta | | --- | --- | | to succeed John as Chief Financial Officer, | Chair of the Nomination | | which will take effect immediately following | and Governance Committee | | the announcement of the Company’s 2023 | 23 March 2023 | First Quarter Trading Update. More detail on the appointment process is set out overleaf. Joanne is a highly regarded CFO and leader, and we look forward to welcoming her to WPP this year. WPP ANNUAL REPORT 2022118 NOMINATION AND GOVERNANCE COMMITTEE REPORT CORPORATE GOVERNANCE | BOARD AND COMMITTEE CHANGES | and took into account the balance of skills, | CHIEF FINANCIAL OFFICER | | --- | --- | --- | | As mentioned in last year’s report, Simon | knowledge, independence, diversity and | APPOINTMENT PROCESS | | Dingemans was appointed on 31 January | experience of the Board, together with an | | The Committee engaged Russell 2022 and Jacques Aigrain and Sally Susman assessment of the time commitment Reynolds and agreed a search did not stand for re-election at the AGM in expected. The preferred candidate met STEP 1 specification and preferred | 2022. Nicole Seligman and Tarek Farahat | with the Chair and other members of the | attributes, relevant skills, experience | | --- | --- | --- | | will not be standing for re-election at the | Committee and Board, following which | and expertise. | | AGM in 2023. It was announced in November | the Committee recommended to the Board | | The Chair and other members of the 2022 that John Rogers had decided to step the appointment of Angela Ahrendts. Committee and Board met with the STEP 2 down from the Company and would be shortlisted candidates. Following succeeded by Joanne Wilson, which will Joanne Wilson will stand for election at the the interviews, the Nomination and take effect immediately following the AGM. All other Directors, with the exception Governance Committee members met to discuss feedback. announcement of the Company’s 2023 of Nicole Seligman and Tarek Farahat, will First Quarter Trading Update. stand for re-election. The Committee was unanimous in its final selection and recommended STEP 3 to the Board that Joanne Wilson be We also made a number of changes to The Committee will continue to review and appointed as Chief Financial Officer. Committee membership in early 2022, as refresh the composition and size of the Board The Compensation Committee disclosed in last year’s report. In addition, as and its Committees to ensure we have the approved the terms and conditions announced on 15 March 2023, Cindy Rose will right balance of skills and attributes and STEP 4 relating to Joanne Wilson’s step down as a member of the Compensation fresh perspectives, to support the next remuneration arrangements. Committee and will join the Nomination and stage of the Company’s growth and long- Joanne Wilson’s appointment as Governance Committee with effect from the term strategy. The Committee recommended Chief Financial Officer was approved conclusion of the 2023 AGM. that given the current size of the Board, STEP 5 by the Board and announced on future appointments should be made on 8 November 2022 and will take | SUCCESSION PLANNING | a needs basis. | | effect immediately following the | | --- | --- | --- | --- | | The Committee, with the assistance of | | | announcement of the Company’s | | Russell Reynolds, who are independent of | The Committee supported the Board on | | 2023 First Quarter Trading Update. | | the Company and all the Directors, led the | succession plans for senior management | | | | search for a new Chief Financial Officer to | and Executive Committee members to | | | | succeed John Rogers following his decision | ensure a diverse pipeline of potential | statement on the AGM section of our website | | | to step down from the Company. A formal | successors to continue to support the | at wpp.com. The Board is satisfied that all | | | selection process that was inclusive and | longer-term prospects of the business. | Directors, including Jasmine, continue to | | | extensive was followed by an interview | | make effective and valuable contributions to | | | process which gave the Non-Executive | INDEPENDENCE OF NON-EXECUTIVE | the Board and continue to devote sufficient | | | Directors the opportunity to meet the | DIRECTORS | time to discharging their responsibilities as | | | shortlisted candidates. The Non-Executive | The Committee assessed the independence | Directors of WPP. | | | Directors were kept well informed | of all the Non-Executive Directors pursuant | | | | throughout the process and the Chair | to the Code and concluded that all are | 2022 BOARD EVALUATION | | | received support from the Global Chief | considered independent and continue | The Committee considered the findings | | | People Officer and the Company Secretary. | to make independent contributions and | of the 2022 Board evaluation. | | effectively challenge management. The | Board succession planning, from the | Committee was satisfied with the | The performance of the Committee was | | --- | --- | --- | | perspective of addressing diversity and | contributions and time commitment of all | considered as part of the 2022 Board | | governance requirements, following the | the Non-Executive Directors during the year. | evaluation process, which concluded that | | planned Senior Independent Director | | the Committee is operating effectively and | | departure at the 2023 AGM, also formed | 2022 AGM VOTING OUTCOMES | continues to successfully plan for and ensure | | a key area of focus this year. | At the Company’s AGM in 2022 some | Board composition is aligned to strategy | | | shareholders expressed concerns with | and governance requirements, and reflects | | The Committee, having considered the | the number of directorships of listed | greater diversity and an enhanced mix of | | criteria, relevant skills, experience and | companies held by Jasmine Whitbread, | skills and expertise. Further details on the | | expertise needed on the Board, with the | and the potential impact on her time | process and output of the Board evaluation | | initial assistance of Russell Reynolds, led | commitment to WPP. The Board believes | are set out on page 116. | | the search for a new Senior Independent | that Jasmine has brought and continues to | | | Director with business leadership expertise | bring considerable business experience and | | | as well as strong facilitation and engagement | knowledge of the client sectors that WPP | | | skills. The Committee considered a list of | serves and makes a valuable contribution | | | potential internal and external candidates | to the work of the Board, as set out in the | | 119WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE NOMINATION AND GOVERNANCE COMMITTEE REPORT | GOVERNANCE | The Chief Executive Officer and the Chief | FOCUS FOR 2023 | | --- | --- | --- | | The Committee has responsibility for | People Officer provided frequent people | The Committee, in conjunction with the | | overseeing the effective governance of the | updates to the Board, including results on | Board, will continue to review succession | | Board and its Committees and for making | various employee engagement and culture | plans both at the Board, Executive | | recommendations to the Board to ensure | monitoring surveys undertaken throughout | Committee and senior management level | | arrangements are consistent with emerging | the year on a range of topics from career | to develop a strong and diverse talent | | best practice. During the year, the Committee | growth and development to engagement, | pipeline. In particular, the Committee, led | | reviewed action taken to comply with the | belonging and wellbeing. In addition, the | by the Senior Independent Director, will | | Code and other legal, governance and | Global Inclusion Council met throughout | focus on the search for a new Non-Executive | | regulatory obligations. The Committee | the year to support the delivery of the | Chair, in addition to building an induction | | also reviewed and recommended for | Company’s diversity, equity and inclusion | and training programme to support the | | Board approval the Directors External | commitments. For more information on | appointment process. | | Appointments Policy in December 2022. | initiatives to engage with our people and | | | | actions taken, please see page 36. | The Committee will also continue to monitor | | WORKFORCE ENGAGEMENT | | external governance developments likely to | | Cindy Rose continued to fulfil the position of | CONFLICTS OF INTEREST | impact the operation of the Board. | | designated Non-Executive Director for WPP’s | The Committee and the Board are satisfied | | | established UK Workforce Advisory Panel | that the external commitments of the | TERMS OF REFERENCE | | (WAP). As noted in last year’s report, similar | Non-Executive Directors and of me, your | The Committee’s terms of reference are | | People Forums were established during 2021 | Chairman, do not conflict with our duties | reviewed annually by the Committee and | | in the United States and India to enable | and commitments as Directors of the | adopted by the Board, most recently on | | further engagement with the Company’s | Company, and that each Non-Executive | 1 February 2023. A copy of the Committee’s | | global employee base. | Director is able to dedicate sufficient time | terms of reference is available on the | | | to the Company’s affairs. | Company’s website at wpp.com/investors/ | | Cindy regularly attends the WAP meetings | | corporate-governance. | | and where possible, the United States and | Directors have a duty to avoid a situation | | | India People Forums, and presents updates | in which they have, or may have, a direct | BOARD DIVERSITY POLICY | | on issues discussed at Board meetings as | or indirect interest that conflicts, or might | In February 2023, the Committee reviewed | | well as engaging with and hearing from our | conflict, with the interests of the Company. | the Board Diversity Policy and associated | | people on a broad range of topics. Agendas | This duty is in addition to the existing duty | targets. The review recommended policy | | for the WAP meetings are set by WAP | owed to the Company to disclose to the | changes and proposed new diversity | | members, views and insights from the | Board any interest in a transaction or | targets, which the Board approved on | | various forums are shared directly with the | arrangement under consideration by the | 1 February 2023. As part of Board | | Board, and the Board’s feedback on how | Company. Our Directors must: report any | discussions, recognition was given to the | | the insights have informed decision making | changes to their commitments to the | importance and benefits of greater diversity | | is presented back. During 2022, Jasmine | Committee; immediately notify the Company | throughout the organisation. The targets of | | Whitbread, Chair of the Compensation | of actual or potential conflicts or a change | the policy and an update against each of | | Committee, the WPP Chief People Officer | in circumstances relating to an existing | them are set out overleaf. A copy of the | | and the Global Head of Reward attended | authorisation; and complete an annual | Board Diversity Policy is available on the | | WAP meetings as guests to engage with | conflicts questionnaire. Any conflicts or | Company’s website at wpp.com/investors/ | | members on remuneration and the impact | potential conflicts identified are considered | corporate-governance. | | of remuneration policy and outcomes. Issues | and, as appropriate, authorised by the Board | | | raised at the WAP meetings and People | in accordance with the Company’s Articles | | | Forums included: return to office plans; cost | of Association. A register of authorised | | | of living concerns; employee retention; and | conflicts is also reviewed periodically. | | diversity and inclusion. During the financial year, no actual or potential conflicts were identified. WPP ANNUAL REPORT 2022120 NOMINATION AND GOVERNANCE COMMITTEE REPORT CORPORATE GOVERNANCE ### BOARD DIVERSITY POLICY – TARGETS 1 PREVIOUS POLICY TARGETS PROGRESS AGAINST TARGETS POLICY TARGETS POSITION AGAINST TARGETS 2 | | | FOR 2023/2024 | FOR 2023/2024 | | --- | --- | --- | --- | | 33% female share of Board | As at 31 December 2022, | To maintain a minimum of 40% | As at the date of this report, women | | Directors by 2020 | women represented 38% of the | female share of Board Directors | represent 38% of the Board | Board, as shown in the below gender identity table The Board recognises that it may fall short of the policy’s stated aim for periods of time while the Board is refreshed. When Joanne Wilson succeeds John Rogers as CFO following the announcement of the Company’s 2023 First Quarter Trading Update, the proportion of women on the Board will be 46%. Our ambition for Board gender diversity remains to reach parity | Minimum of one Board Director | As at 31 December 2022, three | To maintain a minimum of 10% | As at the date of this report, there | | --- | --- | --- | --- | | from a minority ethnic | Board Directors were from a | share of Board Directors from | continues to be three Board Directors | | background by 2021 | minority ethnic background, | an ethnic minority background | from an ethnic minority background, | | | as shown in the below ethnic | | equating to a 23% share | background table N/A N/A To maintain at least one female As at the date of this report, one in the senior Board positions senior Board member is a woman of Chair, Senior Independent Director, Chief Executive Officer When Joanne Wilson succeeds or Chief Financial Officer John Rogers as CFO following the announcement of the Company’s 2023 First Quarter Trading Update, two senior Board members will be women 1 Previously recommended by the Hampton-Alexander Review and Parker Review 2 Further information on Board composition and diversity can be found on pages 115-116 ### TABLES PRESENTED WITH REFERENCE TO LISTING RULE 9.8.6, AS AT 31 DECEMBER 2022 ### GENDER IDENTITY Number of senior positions on the Number in Percentage of Number of Percentage Board (CEO, CFO, executive executive Board members of the Board SID and Chair) management management Men 8 62% 3 12 60% Women 5 38% 1 8 40% Not specified/prefer not to say - - - - - ### ETHNIC BACKGROUND Number of senior positions on the Number in Percentage of Number of Percentage Board (CEO, CFO, executive executive Board members of the Board SID and Chair) management management White British or other white (including minority-white groups) 10 77% 4 16 80% Mixed/multiple ethnic groups 1 8% - 1 5% Asian/Asian British 1 8% - 1 5% Black/African/Caribbean/Black British - - - - - Other ethnic group, including Arab 1 8% - - - Not specified/prefer not to say - - - 2 10% 121WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE ## AUDIT COMMITTEE ## REPORT - Reviewing headline cyber security risks Committee members and vulnerability management capabilities - Sandrine Dufour (Chair) - Overseeing initial audit transition - Tarek Farahat activities, following the Board’s decision, - Cindy Rose OBE subject to shareholder approval, to - Tom Ilube CBE appoint PricewaterhouseCoopers LLP - Simon Dingemans (PwC) as external auditor from the (appointed 31 January 2022) Company’s 2024 financial year onwards The Company Secretary is Secretary to the - Ongoing monitoring of the business Committee and attends all meetings. SANDRINE DUFOUR integrity programme, including oversight The entire Board is invited to attend the CHAIR OF THE AUDIT COMMITTEE of whistleblower reports Committee meetings and typically the Chair of - Monitoring progress against the internal the Board and the Senior Independent Director audit plan and reviewing the effectiveness attend. Other regular attendees include the ### DEAR SHAREHOLDER of the internal audit function 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 2022 to extend the share buyback programme Chief Counsel, the Group Finance Director, the report, my first having taken over the role of Group Finance Controller, the Global Director | Risk and Controls, the General Counsel | Chair from Jacques Aigrain during the year. | Other reviews undertaken in 2022 by the | | --- | --- | --- | | Corporate Risk, the Director of Internal Audit, | I would like to thank Jacques for his valuable | Committee included: | | and the external auditor. | contributions to the Committee and smooth | | | | handover. In the following pages of this | - Group tax strategy, performance and | The Board has determined that Sandrine Dufour report, we have set out an overview of the drivers of the Group effective tax rate; is the Audit Committee financial expert as | defined by the Sarbanes-Oxley Act 2002 | activities undertaken or overseen by the | - Reports on any actual or potential | | --- | --- | --- | | and, together with Tarek Farahat and Simon | Committee during the year. | material litigation | | Dingemans, has recent and relevant financial | | - Group Treasury performance and risk | | experience for the purposes of the 2018 UK | The Committee has discharged its important | management | Corporate Governance Code. The members oversight role, in accordance with its terms - Reports on UK corporate reporting and of the Committee have been determined of reference, to monitor the integrity of the audit reform initiatives to be independent within the meaning of the Company’s financial reporting and the - Supply chain finance applicable NYSE listing standards and rules of effectiveness of internal control and risk - Enterprise risk management and the the Securities Exchange Act 1934, as amended. management systems on which it has risk management framework The Committee has, as a whole, competence relevant to the sectors in which the Company reported to the Board. - Procurement organisational design operates. - Reports on data protection and Key areas of focus for the Committee in data privacy Key responsibilities 2022 included: - Monitoring the integrity of financial information provided to shareholders, The Chief Financial Officer and Chief including the review of significant financial - Continuing to provide oversight of the Information Officer provided regular reporting judgements financial reporting process and integrity updates directly to the Board on the IT and - Reviewing the integrity, adequacy and of the financial statements finance components of the transformation effectiveness of the Company’s internal - Monitoring the role and performance of programme, as well as deep-dives on financial controls and the internal control the Risk and Controls Group against its other parts. The Board also established and risk management systems, including objectives, including for the continuous a Transformation Board sub-Committee the risk management framework and related improvement of the control environment to oversee programme aspects in compliance activities and the assessment - Considering the identification and review greater depth. of principal and emerging risks | - Monitoring and reviewing the Company’s | of emerging risks, including ongoing | | | --- | --- | --- | | internal audit function effectiveness and | macroeconomic uncertainty, global | During 2023 the Committee will provide | | activities | climate change and sustainability and | oversight of the CFO transition including | | - Reviewing the selection and appointment | associated impacts to the regulatory | transformation programme responsibilities | | of the external auditor | landscape | following the appointment of Joanne Wilson, | - Reviewing the effectiveness of the external who will succeed John Rogers as Chief audit process and reviewing and monitoring Financial Officer. the independence and objectivity of the external auditor Attendance at Committee meetings during the year can be found on page 115. WPP ANNUAL REPORT 2022122 AUDIT COMMITTEE REPORT CORPORATE GOVERNANCE | The annual Board effectiveness evaluation | FINANCIAL REPORTING | FAIR, BALANCED AND | | --- | --- | --- | | assessed the performance of the Committee | The Committee is responsible for reviewing | UNDERSTANDABLE | | and I am pleased that this concluded that | the quarterly, half yearly and annual financial | To support the Board’s confirmation that | | the Committee operates effectively and the | results, including the Annual Report, with | the Annual Report and Accounts, taken as | | Board takes reassurance from the quality of | management, focusing on the integrity of | a whole, is considered to be fair, balanced | | the Committee’s work. The Board is satisfied | the financial reporting process, compliance | and understandable, and provides the | | that the Committee members bring a | with relevant legal and financial reporting | information necessary for shareholders to | | wide range and depth of financial and | standards and application of accounting | assess the Company’s position, performance, | | commercial experience and, in addition | policies and judgements. | business model and strategy, the Committee | | to those members designated to have | | oversaw the process by which the Annual | | recent and relevant financial experience | During the year, the Committee considered | Report and Accounts were prepared. | | for the purposes of the 2018 UK Corporate | management’s application of key accounting | | | Governance Code (the ‘Code’), Tom Ilube | policies, compliance with disclosure | The Committee received a summary of | | and Cindy Rose bring extensive subject | requirements and relevant information | the approach taken by management in | | matter and process expertise including on | presented on significant matters of | the preparation of the Annual Report and | | emerging technologies and cyber security | judgement to ensure the adequacy, clarity | Accounts, and considered in particular: the | | to the Committee’s membership. | and completeness of half yearly and annual | accuracy, integrity and consistency of the | | | financial results announcements. The | messages conveyed in the Annual Report; | | The sections that follow provide a more | Committee undertook a detailed review | the appropriateness of the level of detail in | | detailed explanation of the work of the | before recommending to the Board that | the narrative reporting; and that a balance | | Committee undertaken during the year. | the Company continues to adopt the going | had been sought between describing | | | concern basis in preparing the annual | potential challenges and opportunities. | financial statements. The Committee therefore recommended | Sandrine Dufour | The Committee also reviewed various | to the Board (which the Board subsequently | | --- | --- | --- | | Chair of the Audit Committee | materials to support the statements in the | approved) that, taken as a whole, the 2022 | | 23 March 2023 | Annual Report on risk management and | Annual Report and Accounts is fair, balanced | | | internal control and the assessment of the | and understandable and provides the | | | Company’s long-term viability - see page 90 | necessary information for shareholders | | | for more details. | to assess the Company’s position and | performance, business model and strategy. 123WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT | INTERNAL AUDIT | RISK MANAGEMENT AND | INTERNAL CONTROLS OVER | | --- | --- | --- | | The Internal Audit team, which reports | INTERNAL CONTROL | FINANCIAL REPORTING | | functionally to the Audit Committee, | The Board has overall responsibility for | The Committee carried out in-depth reviews | | provides independent assurance over the | setting the Company’s risk appetite and for | of the Group’s internal controls over financial | | Company’s risk management and internal | ensuring there is effective risk management. | reporting, with a focus on monitoring and | | controls processes via internal audits and the | The Committee supports the Board in the | compliance with Section 404 of the | | testing programme for the Sarbanes-Oxley | management of risk and, in 2022, was | Sarbanes-Oxley Act. | | Act. The Internal Audit team has unrestricted | responsible for monitoring and reviewing | | | access to all Group documentation, premises, | the effectiveness of the Company’s | During 2022, the Committee monitored the | | functions and employees to enable it to | approach to risk management and the | effectiveness of the internal financial controls | | perform its work. | internal control framework. | and internal control system of the Group. | This primarily consisted of reviewing | The Committee Chair met regularly with | Under the overall supervision of the | assurance reports from internal audit on | | --- | --- | --- | | the Director of Internal Audit during the year | Committee, the WPP Risk Committee, | the effectiveness of the internal controls | | without executive management present to | an executive committee supported by Risk | and being provided frequent updates of the | | discuss risk matters and the nature of internal | Committees in each network, identifies and | status of and reviewing the conclusions of | | audit findings in more depth. The Director | assesses emerging and principal risks and | management’s assessment of internal control | | of Internal Audit formally reports to each | oversees and manages day-to-day risk in | over financial reporting. Management’s | | Committee meeting on the key internal | the business. The General Counsel, | assessment was based on the internal audit | | audit findings, together with the status | Corporate Risk provides regular updates | testing plan reviewed by the Committee in | | of management’s implementation of | to the Committee on risk matters including | early 2022, which used the criteria for | | recommendations. On a quarterly basis this | emerging risks, adherence to the Company’s | effective internal control reflected in the | | includes key themes from internal audit’s | business integrity programme (including | Internal Control - Integrated Framework | | work. Significant issues identified were | mitigating and remediation actions) and the | (2013) issued by the Committee of | | discussed in detail by the Committee along | monitoring and evolution of the Company’s | Sponsoring Organizations of the Treadway | | with the remediation plans to resolve them. | four risk modules: governance, culture, | Commission (COSO). Management evaluated | | | appetite and management. | all internal control deficiencies identified | | The annual internal audit plan includes | | throughout the Group both individually | | assurance over the Group’s transformation | An overview of how our risks are assessed | and in the aggregate, to conclude on the | | activities, other key projects and initiatives, | and managed and how these were reviewed | effectiveness of the Group’s internal control | | and audits of key business risks and | to assess the Company’s viability can be | framework and reported these conclusions | | operating companies. It was approved by | found on pages 86 to 89, together with an | to the Committee. | | the Committee and progress against the | assessment of the principal risks and | | | plan was monitored throughout the year | uncertainties facing the Company on pages | | | with any changes to the plan noted and | 91 to 97. | | approved by the Committee. The team | continued to operate successfully remotely | In fulfilling its responsibilities, the Committee | | --- | --- | | and have recommenced limited international | received reports throughout 2022 to enable | | travel in some regions to deliver audit work. | evaluation of the control environment and | risk management framework. We are satisfied that the scope, extent and effectiveness of internal audit work are appropriate for the Group and that there is an appropriate plan in place to sustain and continually improve this. WPP ANNUAL REPORT 2022124 AUDIT COMMITTEE REPORT CORPORATE GOVERNANCE | BUSINESS INTEGRITY | AUDIT TENDER | EFFECTIVENESS AND INDEPENDENCE | | --- | --- | --- | | During the year, the Committee reviewed | In last year’s report, we advised shareholders | OF THE EXTERNAL AUDITOR | | the adherence to, and evolution of, the | that after the conclusion of a competitive | In 2022, the Committee evaluated the | | business integrity programme. The Company | audit contract tender and for purposes of | effectiveness of the external audit process | | has established procedures by which all | compliance with applicable auditor rotation | through its ongoing review of the external | | employees may, in confidence (and, if they | rules, the Board appointed, upon the | audit planning process and discussions with | | wish, anonymously) report any concerns and | Committee’s recommendation, | key members of the Company’s finance team. | | more information on this can be found on | PricewaterhouseCoopers LLP (PwC) as | | | page 87. The Committee received regular | the Company’s new independent auditor | The Committee also considered: | | updates on the Company’s systems and | commencing with the audit of the Company’s | | | controls for ethical behaviour, which included | 2024 financial year. PwC’s appointment | - A report from Deloitte confirming it | | matters reported on the Company’s Right to | remains subject to shareholder approval to | maintains appropriate internal safeguards | | Speak helpline and investigations and actions | be obtained at the Company’s 2024 AGM. | in line with applicable professional | | undertaken in response. The Committee | Deloitte was re-elected at our 2022 AGM, | standards to remain independent, and | | received regular reports on the total number | will be proposed for re-election at our 2023 | mitigation actions to safeguard Deloitte’s | | and nature of reports from whistleblowers | AGM, and will continue in office until they | independence such as the operation of | | and investigations by region and by network | complete the audit for the financial year | the Non-Audit Services Policy | | both for substantiated and unsubstantiated | ending 31 December 2023. | - The Audit Quality Review’s 2021/22 Audit | | cases. During the year the Committee was | | Quality Inspection Report on Deloitte and | | satisfied that the Right to Speak helpline | A transition governance group (Governance | the actions taken by Deloitte to address | | arrangements are effective and facilitate the | Group) was established during 2021. It is led | the findings in that report | | proportionate and independent investigation | by the Group Finance Director and includes | | | of reported matters and allow appropriate | representation from WPP, PwC and Deloitte. | | | follow-up action. | Ten workstream teams, consisting of | | members from both WPP and PwC, have | TERMS OF REFERENCE | coordinated during 2022 to ensure all | | --- | --- | | The Committee’s terms of reference are | aspects of the transition are proactively | | reviewed annually by the Committee and | managed. The workstreams have provided | | adopted by the Board, most recently on | regular updates to the Governance Group, | | 1 February 2023. A copy of the Committee’s | which in turn provided quarterly updates | | terms of reference is available on the | to the Committee. This has supported the | | Company’s website at wpp.com/investors/ | Committee in overseeing the initial audit | | corporate-governance. | transition activities from Deloitte to PwC | to ensure that: ### EXTERNAL AUDITOR The Committee has primary responsibility - Deloitte continues to discharge its for overseeing the relationship with auditing responsibilities effectively the external auditor, including assessing to the end of its time in office its performance, effectiveness and - PwC takes the necessary steps to ensure independence annually prior to making a that it is independent of the Company and recommendation to the Board in respect fully mobilised by the time it begins audit of its reappointment or removal. planning activities (including shadowing Deloitte’s 2023 audit) at an appropriate The Company has complied with the juncture in 2023. It is anticipated that PwC Competition and Markets Authority’s will be independent by early Q2 2023 Statutory Audit Services Order 2014 for the financial year under review in respect The Committee looks forward to further to audit tendering and the provision of updating shareholders on discharging the non-audit services. activities associated with this transition in the Company’s 2023 Annual Report. 125WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT ### AUDIT/NON-AUDIT SERVICES APPOINTMENT OF EXTERNAL AUDITOR ### £m AT ANNUAL GENERAL MEETING The Committee has recommended to the 2022 Board, and the Board has approved, that 2021 33.7 Deloitte should be reappointed as auditor. Resolutions will be put to the 2023 Audit fees (2022: 36.9, 2021: 31.9) Annual General Meeting proposing the Non-audit fees (2022: 1.1, 2021: 1.8) reappointment of Deloitte and to authorise the Audit Committee to determine the Deloitte attended all Committee meetings auditor’s remuneration. in 2022 and met the Committee at least once ### without executive management present. NON-AUDIT SERVICES To preserve objectivity and independence, Overall, the Committee concluded that: Deloitte is not asked to provide other services unless it is in the best interests - It continues to be satisfied with the of the Company, in accordance with the performance of the external auditor and Non-Audit Services Policy that sets out the with the policies and procedures in place circumstances and financial limits within to maintain its objectivity and which Deloitte is permitted to provide independence certain non-audit services. - Deloitte possesses the skills and | experience required to fulfil its duties, | All fees are summarised periodically for the | | --- | --- | | there was constructive challenge and | Committee to assess the aggregate value of | | appropriate scepticism where necessary | non-audit fees against audit fees. During the | | to ensure balanced reporting and the | year, Deloitte received £36.9 million in fees | | audit for the year ended 31 December | for work relating to the audit services it | | 2022 was effective | provides to the Company. Non-audit related | work undertaken by Deloitte amounted to fees of £1.1 million this year, which amounted to 3% of the total audit fees paid. 38.0 WPP ANNUAL REPORT 2022126 38.0 CORPORATE GOVERNANCEAUDIT 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 ACTIONS TAKEN/CONCLUSION CRITICAL JUDGEMENTS AND ESTIMATES 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 Committee considered management’s assumptions, in particular in relation to the level of central tax The estimates and judgements made in respect provisions, and believes that the level of central tax provisions is reasonable of tax 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 ERP system and other ongoing transformation projects, including IT transformation, shared service centres and campus co-locations and right-of-use asset impairments. 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 the likelihood of declines of over 28% of revenue less pass-through costs compared to 2022 was remote. viability statement The Committee has considered and concurs with management’s going concern, viability and forecasting assumptions, as set out on page 90 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 the valuations and agreed that these were appropriate based on the information available to the Group 127WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE SUSTAINABILITY COMMITTEE REPORT ## SUSTAINABILITY ## C OMMITTEE REPOR T Throughout the year, the Committee has | Committee members | supported management in the development | | --- | --- | | - Keith Weed CBE (Chair) | of a revised Assignment Acceptance Policy | | - Angela Ahrendts DBE | and Framework, detailed on page 77, that | - Jasmine Whitbread subsidiaries are expected to follow when - Dr. Ya-Qin Zhang taking on new business. For work that may (appointed 15 March 2022) present an ethical risk, such as work for government clients or work relating to Regular attendees include the Chief Executive Officer, the Chief Financial sensitive products, all potential new Officer, the Senior Independent KEITH WEED CBE assignments need to be considered by our Director, the Group Chief Counsel, CHAIR OF THE agencies’ risk committees or escalated to the Chief People Officer, the Chief SUSTAINABILITY COMMITTEE WPP for review. Sustainability Officer and the Director of Communications and Corporate Affairs. ### DEAR SHAREHOLDER CLIMATE CRISIS As the Chair of the Committee, I am pleased The Committee had regular in-depth The Company Secretary is Secretary to to present the Committee’s 2022 report. progress reviews on the Company’s the Committee and attends all meetings. ambitious commitments to reach net zero | Key responsibilities | In 2022, the Committee continued to place | carbon emissions. In July, the Committee | | --- | --- | --- | | - Understanding the sustainability | increased focus on sustainability for the Board | received an update on GroupM’s media | | risks and opportunities for the | and the Company, monitoring sustainability | decarbonisation programme (page 76) and | | Company | performance as we strive to meet the | in December the Committee conducted its | | - Assisting the Board in its oversight | expectations of our stakeholders as well as | annual review of climate-related risks and | of corporate responsibility, ensuring we are managing our risks and opportunities. The planet section on pages sustainability, health and safety taking advantage of opportunities. 74 and 75 sets out the Company’s net zero and reputation matters taking into commitments and performance. In 2023, the account the Company’s purpose, The ongoing impacts of the war in Ukraine, Committee will receive regular updates as strategy and culture - Assessing the Company’s current energy security, inflation, social unrest, the Company develops a formal transition sustainability footprint, reviewing political division and climate-related plan to deliver against these commitments. sustainability targets and disasters around the globe continue to commitments and materiality drive a focus on environmental, social and Recognising the growing urgency of the - Reviewing and considering the governance (ESG) matters, with significant climate crisis, in September the Board Company’s Modern Slavery risks and opportunities for our business and welcomed Professor Dr Johan Rockström, Statement and sustainability-related our clients. Director of the Potsdam Institute for Climate policies, including the Environment Impact Research and Professor in Earth Policy, for approval by the Board | | A large focus for the Committee and the | System Science at the University of Potsdam, | | --- | --- | --- | | Attendance at Committee meetings | Company in 2022 has been the impact these | to engage with and present to the Board on | | during the year can be found on page 115. | different pressures have on our people, who | climate-related issues. Several members of | | | want to work for a company that is willing | the Committee are also active members of | | | to stand up for the issues they care about. | Chapter Zero, an online community of | | | The Committee has received updates on a | non-executive directors which aims to | | | wide range of topics throughout the year, | equip NEDs to lead crucial UK boardroom | | | ranging from the launch of our new Green | discussions on the impacts of climate change. | Claims Guide to equip our people to make effective environmental claims that are not misleading in any way (page 77), to support for our people in Ukraine and the generosity of our people around the world who donated $670,000 (matched by WPP to bring the total to $1.34 million) to the UNHCR Ukraine appeal, and, more recently, the response to the earthquakes in Turkey and Syria. WPP ANNUAL REPORT 2022128 SUSTAINABILITY COMMITTEE REPORT CORPORATE GOVERNANCE | HEALTH, SAFETY AND WELLBEING | TRANSPARENCY AND ENGAGEMENT | The Committee continues to support | | --- | --- | --- | | The Committee assists the Board in its | Measuring and monitoring sustainability | management’s engagement strategy on | | oversight of health and safety-related matters, | KPIs is critical to delivering against our | sustainability. Employee engagement remains | | and, during the year, received updates on | sustainability strategy and targets. In 2021, | a high priority and this report highlights a | | the Company’s investment in mental health | WPP strengthened its approach to data | number of initiatives, from encouraging | | and wellbeing, including on WPP’s new | assurance: the Committee participated | volunteering (page 79) and taking a stand | | Making Space campaign - an initiative | in the selection process to appoint | on the issues that matter to our people to | | focused on giving people space to look after | PricewaterhouseCoopers LLP (PwC) as | building ESG capability (page 71). In January | | their wellbeing (see page 72) - and regular | independent limited assurance provider | 2023, a sustainability-focused CEO townhall | | updates on new ways of working as office | over selected ESG metrics disclosed in this | attracted an audience of over 8,500. During | | occupancy levels increased. Employee | report. In May 2022 PwC presented their first | the year, I also enjoyed engaging with key | | mental health and wellbeing will be a | management report to the Committee, and | investors on ESG topics and look forward | | continued area of focus for the Board and | throughout the year management provided | to continued dialogue in 2023. | | the Committee in 2023. | regular updates to the Committee on | | | | progress in addressing the weaknesses | TERMS OF REFERENCE | | Throughout the year, the Committee, | identified by PwC in the first year of their | The Committee’s terms of reference are | | alongside the Board, received regular updates | assurance programme. The ‘sustainability | reviewed annually by the Committee and | | on WPP’s response to disasters including the | governance and management’ section of this | adopted by the Board most recently on | | Colorado wildfires, the war in Ukraine and, in | report on page 85 outlines work undertaken | 1 February 2023. | | February 2023, the devastating Turkey-Syria | during the year to strengthen data quality, | | | earthquakes, including support for | including new ESG data controls, training | A copy of the Committee’s terms of | | employees directly impacted, support | and work to centralise data. | reference is available on the Company’s | | through WPP’s Employee Assistance | | website at wpp.com/investors/ | | Programme (page 72) and employee | Throughout this report, selected content | corporate-governance. | | match-funding run in partnership with the | highlighted with the symbol  was subject | | | UNHCR. Further details can be found on | to independent limited assurance | I would like to thank the members of the | | page 79. | procedures by PwC for the year ended | Committee and the management team for | | | 31 December 2022. For the details and | their commitment throughout the year and | | The Committee will continue to monitor | results of the limited assurance, see our | look forward to continuing our work in 2023. | | how well prepared WPP agencies and | 2022 Sustainability Report. | | people are to recognise and respond to | existing and emerging disruptive events, | The Committee will continue to monitor | | | --- | --- | --- | | including the social and economic impacts | sustainability KPIs. The Committee welcomes | Keith Weed | | of climate change. | the significant progress made during the | Chair of the | | | year towards the Company’s commitment | Sustainability Committee | | | to phase out single-use plastics across its | 23 March 2023 | offices and notes there is still work to do to meet this target. Monitoring progress on single-use plastics will remain a priority for the Committee in 2023. Progress against our strategy also relies on accountability. Diversity, equity and inclusion goals are included in our incentive plans for senior executives and we have also included carbon-reduction targets in incentive plans for Executive Directors from 2021. 129WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE ## COMPENSATION COMMITTEE REPORT The Committee applied the existing Directors' | Committee members | Compensation Policy and the terms of his | | --- | --- | | – Jasmine Whitbread (Chair) | employment contract in determining his | | – Jacques Aigrain (retired 24 May 2022) | compensation arrangements. John will | – Sandrine Dufour receive salary, benefits allowance and – Tom Ilube CBE pension allowance for the duration of his – Roberto Quarta notice period. He was eligible to receive a – Cindy Rose OBE 2022 STIP award (cash and ESA), full details – Nicole Seligman of which are disclosed on pages 144-147. | Attendees | JASMINE WHITBREAD | No EPSP awards will be granted in respect | | --- | --- | --- | | Other attendees at the Committee meetings | CHAIR OF THE | of 2023. He will not receive a STIP or other | | were: | COMPENSATION COMMITTEE | | incentive award for the 2023 financial year. – Chief Executive Officer Any outstanding ESA awards will vest on a ### – Chief Financial Officer DEAR SHAREHOLDER pro rata basis and unvested EPSP awards – Chief People Officer On behalf of the WPP Board, I am pleased will lapse on his departure. – Global Reward Director to present the Compensation Committee – Committee advisor (WTW) report for the financial year ended The Board has appointed Joanne Wilson 31 December 2022. In this report, I include to succeed John as CFO, and she will join The Chief Executive Officer, Chief Financial my introductory letter which summarises during 2023. The Committee determined Officer and Chief People Officer are not present when matters relating to their own compensation the main changes proposed to the Directors’ that her compensation should be set broadly or contracts are discussed and decided. Compensation Policy, an At a Glance summary in line with the current CFO. Joanne will of compensation, the proposed updated receive fixed pay comprising a base salary The Company Secretary is Secretary to the Directors’ Compensation Policy ('the Policy') of £740,000, a benefits allowance of £30,000 Committee and attends all meetings. for shareholders’ consideration and the and a pension allowance of 10% of base Annual Report on Compensation setting out salary. Joanne will participate in the STIP Key responsibilities the implementation of the existing Policy in with a maximum award of 200% of base – Setting the Compensation Policy and the 2022. The report also sets out the proposed salary, and the EPSP with a maximum terms and conditions for the Chairman of implementation for 2023. award of 300% of base salary. Joanne will the Board, Executive Committee and | Company Secretary | | also be granted cash and share awards | | --- | --- | --- | | – Designing and monitoring incentive | CONTINUED GROWTH AND STRONG | to compensate for incentives forfeited at | | arrangements including setting targets | PERFORMANCE IN 2022 | her previous employer. The Committee | | and assessing performance | WPP has delivered another year of strong | | considered the value and form of the awards – Maintaining an active dialogue with performance driven by growth across all being forfeited to ensure that the buyout shareholders and ensuring WPP practice key agencies despite the macroeconomic awards will be no more generous in amount aligns with corporate governance standards | | challenges faced. As always, WPP's success is | or deferral schedule. Full details will be | | --- | --- | --- | | | underpinned by the strength of our work and | disclosed in the Compensation Committee | | | the talent of our people. | Report for the relevant year. | | | The Committee recognises the role that | COMPENSATION IN 2022 | | THE COMMITTEE'S | compensation plays in the global competition | STIP 2022 | | | for talent within senior leadership and across | The Executive Directors participated | ## DECISIONS DURING the wider business, and that retention and in the 2022 STIP, which was based on a ## THE YEAR REFLECT incentivisation is key to ensure WPP continues combination of financial and non-financial ## CONSIDERATION to deliver value to clients and shareholders. measures aligned to the delivery of the ## OF EXECUTIVE Company strategy and purpose. This is the The Committee believes that the decisions second year that this structure has been in ## PERFORMANCE made in respect of fixed compensation, the place for all senior leadership, incorporating ## WITHIN THE WIDER annual Short-Term Incentive Plan (STIP) and an element of bonus based on WPP financial ## ENVIRONMENT” long-term Executive Performance Share performance as well as the performance of Plan (EPSP) reflect the efforts and strong individual agency brands. Certain employees Jasmine Whitbread performance of the Executive Directors across the wider workforce are eligible to Chair of the Compensation Committee during 2022. participate in alternative annual bonus plans. The financial measures, which determined ### CFO TRANSITION 75% of the award, were like-for-like headline As announced on 8 November 2022, Chief operating profit growth, headline operating Learn more at Financial Officer (CFO) John Rogers decided margin improvement and like-for-like revenue wpp.com/about/ corporate-governance to step down from the Board and leaves the less pass-through costs. WPP showed strong Company during 2023. WPP ANNUAL REPORT 2022130 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE | performance in 2022 with like-for-like headline | EPSP | DIRECTORS' COMPENSATION | | --- | --- | --- | | operating profit growth performance | In 2020, the structure of the EPSP was | POLICY REVIEW | | achieving maximum, and headline operating | amended from a performance period | The WPP Directors' Compensation | | margin improvement and like-for-like revenue | spanning five years to a more typical | Policy was last reviewed and approved by | | less pass-through costs performance | three-year plan with a two-year holding | shareholders in 2020. During the last year, | | between target and maximum. This resulted | period. As a result, there are overlapping | the Committee reviewed this Policy to | | in an outcome of 66.56% of the 75% maximum | award cycles for two financial years. Both the | determine whether any amendments should | | in respect of the financial element of the STIP. | 2018 EPSP and the 2020 EPSP completed their | be considered. The Committee took into | | See page 146 for further detail on performance | performance periods on 31 December 2022. | account the existing incentive structure and | | against targets. The Committee felt this was | | opportunity, market practice within the | | an accurate reflection of performance and | The 2018 EPSP has a five-year performance | FTSE 100 and our media sector peer group, | | has made no adjustments to the outcome. | period with performance assessed against | and the challenges and needs of the business | | | three measures: relative total shareholder | at the current time. The Committee concluded | | In 2022 we continued the use of a balanced | return (TSR), average return on equity (ROE) | that whilst the existing compensation | | scorecard to assess performance against | and headline earnings per share (EPS) | structure and incentive model remained fit | | non-financial measures, which determined | growth. This is a legacy plan in which targets | for purpose, the quantum limits presented | | the remaining 25% of the award. The | were set prior to the CEO's appointment, | challenges from a retention and compression | | scorecard is based on four categories: | Covid-19 and the launch of the strategy. | perspective within the senior leadership | | clients; people and diversity, equity and | Consistent with prior award cycles, the | team of the business. | | inclusion (DE&I); purpose and reputation; | Committee did not feel it was appropriate | | | and strategic priorities. | to adjust the targets during the performance | We undertook an extensive shareholder | | | period. As a result, performance over the | consultation to seek feedback on potential | | The Committee considers performance | five-year period fell below threshold levels | Policy changes, for which I would like to | | against all four categories to be strong. | for each of the three performance measures | thank those who participated for their | | From a client perspective, client satisfaction | resulting in no vesting in respect of the 2018 | considered views and constructive | | remains strong having maintained the high | EPSP awards. This was the third EPSP cycle | discussions. Views were varied but a | | Likelihood to Recommend scores achieved | in which the CEO has experienced nil to | common theme of the conversations was the | | in the prior year. From a people and DE&I | minimal vesting of an LTIP based on legacy | uncertain macroeconomic environment and | | perspective, we continue to see progress | targets set prior to 2020. | the experience of stakeholders including | | in diversity and an increased focus on | | investors and the wider workforce. The | | programmes and initiatives to promote | The 2020 EPSP has a three-year performance | process helped to inform the Committee's | | diversity and inclusion at WPP. We also | period with performance assessed against | final decision to not make any significant | | launched our most comprehensive | three measures: TSR, return on invested | changes to the existing Policy at this time, | | engagement survey in 2022 with | capital (ROIC) and adjusted free cash flow | and to keep this under review as the | | 72,700 participants and we saw our | (AFCF). Performance was above maximum | landscape evolves. Shareholders are being | | Company-wide eNPS score (how likely you | for both ROIC and AFCF but below the | asked to approve an updated Policy which | | are to recommend WPP as a place to work) | threshold required for TSR resulting in a | includes only minor adjustments, further | | improve by 14 points. | formulaic vesting of 66.67%. Prior to | details of which are included on page 136. | confirming the vesting of any EPSP award, | With respect to purpose and reputation, | the Committee considers whether there | CONCLUSION | | --- | --- | --- | | WPP has made excellent progress on the | is a compelling rationale to change the | I would like to thank the leadership team | | carbon reduction targets set in 2021 (see | formulaic outcome. For the awards vesting in | for its continued superior contribution and | | pages 74 and 75 for further detail). WPP was | 2023 the Committee was especially mindful | performance despite the macroeconomic | | awarded Most Creative Company of the | of investor concerns around the potential risk | challenges it faced. | | Year at Cannes Lions in 2022 for the second | of windfall gains for awards made in 2020 | | | year in a row, a testament to the creative | following volatility in global stock markets as | Jacques Aigrain retired from the | | talent of our people and their ability to help | a result of the emerging Covid-19 pandemic. | Compensation Committee and the Board | | clients succeed. WPP continued to make | | at the AGM in 2022. I would like to express | | good progress against strategic priorities, | The Committee considered a number of | my thanks to him for his experienced | | expanding capabilities in high-growth areas | factors including share price movement and | contributions to the Committee as well | | of experience, commerce and technology | volatility on an absolute and relative basis, | as to the rest of the Committee for their | | and delivering significant cost efficiencies | underlying financial performance, historical | continuing valued input and commitment. | | through the transformation programme. | award and vesting levels, and absolute | | award value in the context of total | Full details of non-financial performance | compensation as well as wider stakeholders | | | --- | --- | --- | | are included on pages 146 and 147. | (see page 148 for further detail). The | Jasmine Whitbread | | | Committee noted that the 2020 EPSP award | Chair of the | | The Committee considered the Executive | was made in November 2020, more than six | Compensation Committee | | Directors' non-financial performance under | months after the lowest point of the market | 23 March 2023 | | each of the four categories. An overall | dip at a time when the share price had | | | assessment of 22% for Mark Read and 20% | increased more than 50%. Having reviewed | | | for John Rogers out of a maximum of 25% | these factors, the Committee determined | | | was determined by the Committee, resulting | that the share price increase during the | | | in a total bonus of 88.56% of maximum for | performance period reflects the strong | | | Mark Read and 86.56% of maximum for | underlying performance of the Company | | | John Rogers. | and that no adjustment to the formulaic | | vesting is required. 131WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT # **2022 PERFORMANCE OUTCOMES** The information below summarises the 2022 STIP and EPSP performance outcomes for our Executive Directors. Full details of financial and non-financial performance are included on pages 165 to 169. # **STIP PERFORMANCE** | | WEIGHTING | | Target | | Maximum | | OUTCOME ACHIEVED | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Threshold (0% payable) | (50% payable) | (50% payable) | (100% payable) | | Mark Read | John Rogers | | Like for like headline operating profit growth | 25% | 0.0% | 5.0% | 10.0% | 10.0% | | 25.00% | 25.00% | | Headline operating margin improvement | 25% | 0.0% | 0.25% | 0.4% | 0.5% | | 20.00% | 20.00% | | Like for like revenue less pass through costs growth | 25% | 0.0% | 6.0% | 6.9% | 8.0% | | 21.56% | 21.56% | | Non-financial performance | 25% | See pages 166 and 167 for performance against non-financial measures for both Mark Read and John Rogers | | | | | 20.00% | 20.00% | | **Total** | **100%** | | | | | | **88.56%** | **86.56%** | # **2018 EPSP PERFORMANCE** The performance measures for the 2018 EPSP grant were: - Average ROE - Headline EPS growth - Relative TSR (based on both common and local currency) Performance over the five-year performance period was below threshold for all three measures, resulting in no vesting for the 2018 EPSP award. For further detail of metrics and performance, see page 168. # **2020 EPSP PERFORMANCE** | | WEIGHTING | | Maximum | | OUTCOME ACHIEVED | | | --- | --- | --- | --- | --- | --- | --- | | | | Threshold (20% payable) | (100% payable) | (100% payable) | | | | Average return on invested capital (ROIC) | 1/3 | 11.0% | 12.5% | 16.8% | | 1/3 | | Cumulative adjusted free cash flow (APCF) | 1/3 | £2,200m | £5,100m | £4,083m | | 1/3 | | Relative TSR (common currency) | 1/3 | Below threshold | Median | Upper decile | | 0 | | Relative TSR (local currency) | 1/3 | Below threshold | Median | Upper decile | | | | **Total** | **100%** | | | | | **66.67%** | Actual STIP performance / Actual EPSP performance / indicates a scale is best 122 WPP ANNUAL REPORT 2022 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE TOTAL COMPENSATION 2022 £000 Mark Read John Rogers | (maximum) | | | | | | | (maximum) | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 8,145 | | | | | | 4,872 | | | | 2022 | | | | | | | 2022 | | | | | | | | (target) | | | | | | | (target) | | | | | | | | | | | 5,106 | | | | | | 3,100 | | | | | | 2022 | | | | | | | 2022 | | | | | | | | (actual) | | | | | | | (actual) | | | | | | | | | | | | 6,682 | | | | | | 4,392 | | | | | 2021 | | | | | | | 2021 | | | | | | | | (actual) | | | | | | | (actual) | | | | | | | | | | 3,799 | | | | | | | | | 4,776 | | | | | 0 2,000 | 4,000 | 6,000 8,000 10,000 | | | | | 0 2,000 | 4,000 | | | 6,000 8,000 10,000 | fixed compensation, consisting of base salary, benefits and pension (as set out in the single figure on page 144) short-term incentives (STIP) long-term incentives (EPSP) 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 as an Executive Director, as required by the Policy. John Rogers has achieved his shareholding requirement and will be obligated to maintain this following his departure (see page 137 for further details of the post-employment shareholding policy). Their shareholding as at 31 December 2022 and previous years is shown 1 below as a percentage of base salary. The Executive Directors have not sold shares during the year in excess of those required to settle tax obligations; the reduction in shareholding as a percentage of salary for the CEO is a result of a lower average share price than the prior year. Mark Read John Rogers Appointed to the Board 3 September 2018 Appointed to the Board 3 February 2020 121% 2019 215% | 2020 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | | | 305% | | | 77% | | | 2021 | | | 2021 | | | | | | 538% | | | 402% | 2022 2022 439% 418% | | Target | | Target | | | --- | --- | --- | --- | --- | | | | 600% | | 300% | | 1 The share price used for the calculation is the average share price for the last two months of the relevant financial year | | | | | PENSIONS As set out in our 2020 report, Mark Read’s pension contribution has been reduced to 10% on a phased basis to align executive pensions with the wider workforce in the UK. The chart below shows the contribution levels at the end of each year of the Policy period. John Rogers’ pension contribution has been aligned at 10% of base salary since appointment. 17.6% 2020 15% 2021 12% 2022 10% John Rogers Appointed to the Board 3 February 2020 2018 2022 2022 2019 2022 2022 133WPP ANNUAL REPORT 2022 John Rogers | (maximum) | (maximum) 2022 2022 2022 2022 | | --- | --- | | Appointed to the Board 3 February 2020 305% 8,145 5,106 4,872 3,100 4,392 6,682 215% 17.6% 121% 402% 439% 418% 12% 15% | 538% 77% | | 2022 2022 2022 | (actual) (actual) (target) (target) | CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ## DIRECTORS’ COMPENSATION POLICY This section of the report sets out the proposed new Directors’ Compensation Policy ('the Policy'). The Policy will take effect from the date of the 2023 AGM, subject to approval by shareholders. ### REVIEW OF EXISTING POLICY During the year the Committee undertook an extensive review of the existing Directors’ Compensation Policy, which was approved by shareholders at the AGM in 2020. The Committee considered the extent to which the existing compensation structure and performance- related pay remain fit for purpose, as well as how appropriate the compensation opportunity is, from both a market competitive and internal relativity basis. The Committee concluded that, whilst the existing compensation structure and incentive model remain appropriate, as a global business operating in a competitive talent market, achieving competitive market positioning in respect of our executives and senior leadership team is more challenging. The Committee is mindful of both retention of top talent and the increasing compensation compression at leadership levels. ### CONSULTATION WITH SHAREHOLDERS The Committee Chair consulted with a significant number of our largest shareholders to seek their views on potential changes to the Policy. This was a valuable exercise in which shareholders provided thoughtful views and opinions which allowed for a useful and constructive conversation around the challenges and possible solutions. Whilst there were differing views among the shareholder group involved in the consultation, a common theme of the conversations related to the uncertain macro-economic environment and the experience of stakeholders, including the investors and wider workforce. ### CHANGES TO DIRECTORS' COMPENSATION POLICY The Committee considered these views and determined that it would not propose significant changes to the Policy at this time. The Policy will be kept under review and the Committee will undertake further consultation with shareholders if changes to the Policy are proposed. This section of the report sets out an updated Directors’ Compensation Policy which shareholders will be asked to approve at the 2023 AGM. This Policy includes only minor changes with no changes to compensation structure or incentive opportunity. ### HOW THE POLICY ADDRESSES THE FACTORS SET OUT IN THE UK CORPORATE GOVERNANCE CODE The table below summarises how our Directors' Compensation Policy and practices support the expectations of Provision 40 of the 2018 UK Corporate Governance Code. Clarity Our Policy, how it is implemented and the decisions the Committee makes are transparent and clearly disclosed. The Committee engages with shareholders on key compensation matters to ensure the rationale for any proposed decisions is clearly communicated and understood. Simplicity The performance measures used in our incentive plans are aligned with our strategy and are transparent to stakeholders and participants. We have a simple compensation structure that is familiar to stakeholders comprising the following elements: fixed pay – base salary, a benefits allowance and pension; short-term variable pay – an annual bonus with a combination of financial and non-financial metrics paid partly in cash and partly in deferred shares; and long-term variable pay – a three-year Executive Performance Share Plan subject to the achievement of stretching performance conditions. Risk The Directors' Compensation Policy includes elements designed to mitigate any risks including: deferral and additional holding period; malus and clawback provisions on all incentive plans; shareholding requirements including post- employment requirements; and Committee discretion to adjust the formulaic outcome of incentive plans. Predictability Target payouts and maximum available opportunity, including potential share price appreciation, have been considered by the Committee and are disclosed in the scenario charts. Proportionality The Committee has a pay-for-performance philosophy. A large proportion of Executive Directors' compensation is variable and linked to the achievement of stretching performance conditions based on a combination of financial and strategic non-financial measures. Alignment to culture The incentive schemes are designed to underpin the Company's culture and strategy, using measures that are aligned to our overall purpose and WPP's values of being open, optimistic and extraordinary. The inclusion of both financial measures and a scorecard of non-financial strategic measures enables us to ensure alignment. WPP ANNUAL REPORT 2022134 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### GUIDING PRINCIPLES Our Directors’ Compensation Policy is designed in the context of the UK Corporate Governance Code to attract and retain best-in-class talent and incentivise Directors to deliver growth, creativity and outstanding performance, thereby producing long-term value for shareholders. The WPP Directors’ Compensation Policy is determined by the following guiding principles: ### 1 2 3 4 ### PERFORMANCE-DRIVEN COMPETITIVENESS LONG-TERM ALIGNMENT ALIGNMENT TO WPP ### REWARD Director compensation is WITH SHAREHOLDER STRATEGY AND VALUES ### Our compensation structure designed to attract and INTERESTS Our incentive plans contain has a high proportion retain best-in-class talent Executive Directors have a large metrics linked to WPP strategy of performance-based portion of their compensation and values. These measures variable compensation paid in the form of shares as are regularly reviewed by well as significant share the Committee to ensure ownership requirements both continued performance in STIP / 26% during and post-employment line with strategy EPSP / 50% Value of CEO's compensation package at target ### ALIGNING COMPENSATION WITH STRATEGY Performance measures are selected to align to our business strategy and include a range of financial and non-financial measures. Non-financial measures are set out in a scorecard based on role and accountabilities of the Executive. There are 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, 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 Vision Creativity Data & Simpler People Financial measures & offer technology structure Like-for-like headline operating profit growth Headline operating profit margin improvement Like-for-like revenue less pass-through costs growth Short-term Non-financial scorecard incentive plan (STIP) Client People and DE&I Purpose and reputation Strategic priorities Return on invested capital Long-term incentive plan Adjusted free cash flow (EPSP) Relative TSR Fixed pay / 24% 135WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT DIRECTORS’ COMPENSATION POLICY ### REMUNERATION POLICY TABLE The table below summarises the new proposed Policy. Whilst no significant changes have been made to the existing Policy, some minor adjustments have been made to the core elements of compensation and to the Executive Director appointment and loss of office provisions to ensure alignment with the wider workforce and good governance. These changes include: updating the default base salary review period for Executive Directors and Executive Committee to be annual to align to the wider workforce cycle; clarification on buy-out policy; inclusion of the ability to provide one-off benefits on appointment; inclusion of a payment in lieu of notice provision to align with executive contracts; clarification of incentive treatment for leavers including full vesting of the deferred element of the STIP (ESA) and aligning the Policy around Good Leaver treatment for EPSP awards to the updated EPSP rules (approved by shareholders at the 2022 AGM). ### FIXED ELEMENTS ### BASE SALARY Purpose and To maintain package competitiveness and reflect skills and experience; to enable recruitment and retention. link to strategy Operation Base salary is typically reviewed annually to align with the wider workforce. The Committee may realign base salary over a phased period for new Board appointees who start on a below-market salary. Salary levels and increases take into consideration: – Salary increases awarded across the Group – Individual performance – Levels in other companies of similar size, scope and complexity Opportunity Increases for Executive Directors will usually be aligned to the wider workforce which will reflect the performance of the Company, the individual and local economic factors. Increases above the normal level may be made to take into account special circumstances such as: – Increase in nature and scope of the role – To reflect development in a role such as in the case of an Executive Director appointed at a below-market salary ### BENEFITS Purpose and Provide an annual fixed and non-itemised allowance, to enable the Executive Director to ensure their wellbeing and security. link to strategy Operation The fixed annual allowance will be reviewed periodically by the Committee. The allowance is set with regard to the individual concerned and the role they undertake. Should the Executive Director be required to move to a different country, a relocation benefit may be provided in addition to the usual benefit allowance over and above the maximum stated opportunity. Opportunity Maximum opportunity: the maximum fixed annual benefit allowance payable is £50,000 (excluding relocation benefit). ### PENSIONS Purpose and To enable provision for retirement benefits. link to strategy Operation Pension is provided by way of a contribution to a defined contribution retirement arrangement, a cash allowance or a combination of the two. Determined as a percentage of base salary. Opportunity Maximum opportunity: Executive Director: 10% of base salary. WPP ANNUAL REPORT 2022136 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### VARIABLE ELEMENTS ### SHORT-TERM INCENTIVE PLAN (STIP) The STIP is an incentive plan designed to reward annual performance. The plan makes awards in cash and Executive Share Awards (ESA) Purpose and To drive the achievement of strategic priorities for the financial year and to motivate, retain and reward executives over the short and link to strategy medium term; the ESA element of the incentive aligns executives with shareholder interests. Operation Targets are set early in the year. The Committee determines the extent to which these targets have been achieved at the end of the year based on the performance and has discretion to adjust the formulaic outcome both upwards and downwards (including to zero) to ensure the outcome reflects underlying Company performance and value creation for shareholders. At least 40% of the STIP pay-out is delivered in the form of conditional deferred shares (ESA) which will be released after a period of two years. STIP is subject to the malus and clawback policy as may be amended from time to time. Opportunity Maximum opportunity: 250% of base salary. Target opportunity: 50% of the maximum opportunity. Dividends will accrue on the ESA during the deferral period. Performance Performance measures and targets are reviewed and set annually to ensure continued strategic alignment. Financial measures represent a minimum of 75% of the award; individual strategic or non-financial objectives may represent up to 25% of the award. These might include Company-wide priorities tied to ESG, individual performance goals and/or other individual or Company-wide non-financial objectives. ### LONG-TERM INCENTIVE PLAN – EXECUTIVE PERFORMANCE SHARE PLAN (EPSP) The EPSP is an incentive plan that rewards long-term performance. Awards are made in shares which vest subject to the achievement of certain metrics over a three-year period Purpose and To drive the achievement of long-term strategic priorities, to aid retention and to align Executive Director and shareholder interests over the link to strategy long term. Operation The EPSP comprises a grant of performance share awards which will vest subject to the achievement of performance conditions. The Committee has the discretion to adjust the formulaic outcome of the award to ensure that vesting reflects underlying Company performance and value creation for shareholders. The EPSP has a performance period of three years, followed by a two-year holding period of the vested shares. EPSP is subject to the malus and clawback policy as may be amended from time to time. Opportunity Maximum opportunity: 400% of base salary. Less than the maximum opportunity may be applied to Executive Directors. Dividends will accrue on awards during the performance period. Performance Vesting of the EPSP is subject to the achievement of stretching performance targets. Performance measures and targets are reviewed and set annually by the Committee to ensure continued strategic alignment. These may be a mix of market, financial and non-financial measures. Threshold performance will produce an award of 20% of the award granted and increase on a sliding scale to 100% for maximum performance achievement. Full details of the awards are in the Annual Report on Compensation. ### SHAREHOLDING REQUIREMENTS Purpose and To align the interests of Executive Directors with shareholders. link to strategy Operation Executive Directors and other members of the senior management team are subject to share ownership requirements which seek to reinforce the WPP principle of alignment of management's interests with those of shareholders. Executive Directors are required to hold 100% of their shareholding requirement, or their shareholding at the date of departure, for a period of one year following cessation of employment, reducing to 50% for a second year. If an Executive Director fails to achieve the required level of share ownership, the Committee will decide what remedial action or penalty is appropriate. This may involve a reduction in future share awards or requiring the Executive Director to purchase shares in the market to meet the ownership requirements. If an Executive Director fails to maintain their shareholding requirement post-employment, this may result in a reduction of outstanding awards. Opportunity Chief Executive Officer: 600% of base salary; Chief Financial Officer: 300% of base salary; minimum for any other new Executive Director appointed to the Board: 200% of base salary. Executive Directors will be permitted a period of seven years from the date of their appointment to achieve the required level. 137WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT DIRECTORS’ COMPENSATION POLICY | NOTES TO THE POLICY TABLE | EPSP | Stock Plan 2018 | | --- | --- | --- | | Plan rules | The EPSP performance measures are | The WPP plc Stock Plan 2018 is used to satisfy | | Copies of the various plan rules are available | selected to complement the annual STIP | awards under the short-term incentive plans | | for inspection at the Company’s registered | measures and capture the longer-term | (including ESAs) as well as to grant awards | | office and head office. | performance of the Company. | to management under the WPP Leadership | Award programme. In this programme, | The Directors’ Compensation Policy table | When setting targets, the Committee takes | awards are made to participants that vest | | --- | --- | --- | | for Executive Directors provides a summary | into account a combination of factors | three years after grant, provided the | | of the key provisions relating to their | including internal forecasts, analysts' | participant is still employed within the Group. | | ongoing operation. | expectations and historical performance | | | | relative to budgets. | Executive Directors, and other senior | | The Committee has the authority to ensure | | management employees, may receive part | | that any awards being granted, vested or | Cascade to WPP Group pay policy | of their annual bonus entitlement as a | | lapsed are treated in accordance with the | As well as setting the policy for the Executive | deferred share award (ESA) under the Stock | | plan rules which are more extensive than | Directors, the Committee is also responsible | Plan 2018. Executive Directors are ineligible | | the summary set out in the table. | for managing the compensation of the | to participate in any other aspect of the | | | Executive Committee and the Company | management share award programme, other | | Selection of performance measures | Secretary. | than in relation to awards granted prior to | | Performance measures are selected by the | | appointment or in relation to awards granted | | Committee based on their alignment with | Compensation packages for these individuals | to buy-out previous awards on appointment. | | strategic priorities and the key metrics used | are typically reviewed annually to align | | | across the business. | with the Executive Directors and the wider | Share Option Plan 2015 | | | workforce. As is the case for Executive | The WPP plc Share Option Plan 2015 is an | | STIP | Directors, the WPP Group pay policy | all-employee plan that makes annual grants | | STIP measures are reviewed annually by | ensures a clear and direct link between | of stock options to employees with two | | the Committee taking into account business | the performance of the Group or relevant | years of service who work in wholly-owned | | performance and priorities. The performance | operating company and compensation. | subsidiaries. This plan replaced the legacy | | targets for the STIP are set to incentivise and | Substantial use of performance-driven | Worldwide Ownership Plan. | | reward strong, sustainable performance. The | compensation not only ensures the continued | | | Committee is of the view that the targets for | alignment of the interests of shareholders and | The WPP plc Share Option Plan 2015 has | | the STIP are commercially sensitive and it | senior individuals within the Group, but also | the capability to make grants of executive | | would be detrimental to the Company to | enables the Group to attract, retain and | share options. | | disclose them in advance of or during the | motivate the talented people upon whom | | | relevant performance period. The Committee | its success depends. | | will disclose these targets at the end of the relevant performance period in that year’s Annual Report, if these targets are no longer commercially sensitive. ### ILLUSTRATIONS OF TOTAL COMPENSATION The charts below provide an illustration of the potential future total remuneration of the Executive Directors. Four scenarios of potential outcomes are provided based on the assumptions set out in the notes on the following page. The charts are reflective of the Policy that is being presented for approval at the 2023 AGM. COMPENSATION SCENARIO £000 Mark Read Joanne Wilson (incoming CFO announced 8 November 2022) | Fixed | | | | | Fixed | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 100% | 1,225 | | | | 100% | 844 | | | | pay | | | | | pay | | | | | | Target | 24% | 26% | 50% | 5,108 | Target | 29% | 25% | 46% | 2,916 | | Maximum | 15% | 33% | 52% | 8,147 | | Maximum | 18% | 33% | 49% | 4,544 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Maximum | | | | | | Maximum | | | | | | | including | | | | | | including | | | | | | | | 12% 21% | 26% | 41% | | 10,256 | | 15% 20% | 26% | 39% | | 5,654 | | share price | | | | | | share price | | | | | | appreciation Fixed, consisting of base salary, benefits and pension Short-term incentives (STIP) Long-term incentives (EPSP) 50% share price appreciation WPP ANNUAL REPORT 2022138 appreciation 5,108 2,916 8,147 4,544 844 1,225 10,256 5,654 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### NOTES TO THE COMPENSATION SCENARIO CHARTS The scenarios in the charts on the previous page have been calculated based on the following assumptions: Fixed pay Consists of base salary, benefits and pension Base salary as at 1 January 2023 (or date of appointment if later) Pension at 10% of base salary Target Assumes STIP of 50% of maximum Assumes EPSP vesting of 60% of maximum Maximum excluding any share price growth Assumes maximum STIP and maximum EPSP Maximum including 50% share price growth Assumes maximum STIP, maximum EPSP and 50% share price appreciation on the EPSP element of the package ### HOW WE WILL IMPLEMENT OUR PROPOSED COMPENSATION POLICY IN 2023 On the assumption that the proposed Policy is approved at the 2023 AGM, the table below demonstrates how we plan to implement the Policy specifically for 2023. Policy 2023 2024 2025 2026 2027 Implementation for 2023 Base salary Typically reviewed annually to align with the Mark Read: £1,081,600 wider workforce. John Rogers: £784,400 Joanne Wilson: £740,000 Salary levels may be reviewed in 2023 | Benefits Provide an annual fixed and non-itemised | | Mark Read: £35,000 | | --- | --- | --- | | | allowance, to enable the Executive Director | John Rogers: £30,000 | | | to ensure their wellbeing and security. | Joanne Wilson: £30,000 | Pension Pension is provided by way of a contribution All Executives: 10% to a defined contribution arrangement, or a cash allowance, or a combination of the two. Determined as a percentage of base salary. | Short-term | – 75%-100% financial | Cash Deferred shares Mark Read: 0-250% | | | --- | --- | --- | --- | | incentives | – 0%-25% individual strategic objectives | | John Rogers: N/A | | | – One-year performance period | | Joanne Wilson: 0-200% | – At least 40% delivered in the form of deferred shares released after a period 75% financial and 25% of two years non-financial targets 60% cash/40% deferred shares | Long-term | – Performance measures may be a mix | Performance period Holding period Mark Read: 0-390% | | | --- | --- | --- | --- | | incentives | of market, financial and non-financial | | John Rogers: N/A | | | measures | | Joanne Wilson: 0-300% | – Three-year performance period – Two-year holding period Performance measures: TSR, ROIC and AFCF 139WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT DIRECTORS’ COMPENSATION POLICY | APPOINTMENTS TO THE BOARD | ONGOING VARIABLE COMPENSATION | SERVICE CONTRACTS | | --- | --- | --- | | This section sets out details with respect to | The Committee will seek to pay only that | The following terms will apply for any new | | the appointment of a new Executive Director | level of reward necessary to recruit the | Executive Director role appointed to the | | to the Board of WPP, whether it is an external | exceptional talent needed to lead such a | Board in the future: | | or internal appointment. | broad and diverse global group. The actual | | | | level of incentive offered will be in | – Executive Directors will normally be | | FIXED COMPENSATION | accordance with the Policy limits and will be | appointed on a notice period of up to | | Base salary will be set considering a range | dependent on the role and existing package | 12 months from both parties | | of factors, including the profile and prior | of the candidate. | – Remuneration terms include base salary, | | experience of the candidate, internal | | benefits allowance, pension, holidays and | | relativities, cost and external market data. | The Committee retains the discretion to | participation in the short and long-term | | If base salary is set at a lower initial level, | make awards on recruitment, within the | incentive plans | | contingent on individual performance, the | Policy limits, to provide an immediate | – At the Committee’s discretion, the | | Committee retains the discretion to realign | alignment with the interests of shareholders. | Executive Director’s employment may be | | the base salary over a phased period of | | terminated by making a payment in lieu | | one to three years following appointment, | BUY-OUT AWARDS | of notice of fixed compensation (base | | which may result in an exceptional rate of | In addition to the above (and outside the | salary, benefits and pension) either in | | annualised increase in excess of that set | Policy limits) the Committee may consider | a lump sum or by monthly instalments | | out in the Policy table. | buying-out compensation entitlements that | rather than as a lump sum. The Committee | | | the individual has had to forfeit by accepting | has the discretion to reduce or stop the | | Other elements of fixed pay will be set | the appointment. The structure and value | monthly instalment payments if alternative | | in accordance with the Policy table. The | of the awards will generally be made on a | employment is taken up or other | | Committee may also provide one-off | like-for-like basis and will be informed by the | remuneration is received for the provision | | benefits such as reasonable relocation | structure and value of those entitlements | of services during the period when | | expenses and assistance with visa | being forfeited, unless the Committee | monthly instalments are due. Current | | applications. Short-term benefits, such as | consider it not to be practical or appropriate. | Executive Directors' contracts align to | | accommodation following appointment and | The performance targets, time horizon and | the above | | tax filing assistance may also be provided. | method of payment will be set in an | – More detail on the loss of office provisions | | | appropriate manner at the discretion of the | are included on page 141 | Committee and may or may not reflect the ### vesting, deferral and holding requirements in TERMS SPECIFIC TO INTERNAL ### the Policy. APPOINTMENTS The Committee can honour any pre-existing commitments if an internal candidate is appointed to the Board. | SERVICE CONTRACTS | Name Effective from Notice period | | --- | --- | | Executive Directors’ service contracts are on | Mark Read 3 September 2018 12 months | | a rolling basis without a specific end date. | John Rogers 27 January 2020 12 months | The Executive Directors’ service contracts are available for inspection at the Company’s registered office and head office. The effective dates and notice periods under Joanne Wilson's contract also includes a 12 months' notice period that will be effective from her commencement of employment. the current Executive Directors’ service contracts are shown in this table: WPP ANNUAL REPORT 2022140 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### LOSS OF OFFICE PROVISIONS FIXED COMPENSATION ELEMENTS As noted on page 140, the service contracts of Executive Directors provide for notice to be given on termination. The fixed compensation elements of the contract will continue to be paid in respect of any notice period. Alternatively, a payment in lieu of notice (as described on page 140 under 'Service Contracts') may be made at the Committee’s discretion. If an Executive Director is placed on garden leave, the Committee retains the discretion to settle benefits in the form of cash. The Executive Directors are entitled to compensation for any accrued and unused holiday although, to the extent it is possible and in shareholder interests, the Committee will encourage Executive Directors to use their leave entitlements prior to the end of their notice period. Except in respect of any remaining notice period, no aspect of any Executive Director’s fixed compensation is payable on termination of employment. ### VARIABLE COMPENSATION ELEMENTS The table below summarises the policy on short-term and long-term incentives in certain leaver scenarios. As noted on page 138, the Committee has the authority to ensure that any awards that vest or lapse are treated in accordance with the plan rules, which are more extensive than the summary set out in the table below. STIP – The Executive Directors are entitled to receive their short-term incentive (cash element and/or ESA element) for any particular year provided they are employed on the last date of the performance period. If they are not employed they will not receive it unless the Committee decides to award a pro rata bonus in respect of the period worked ESA (unvested – Provided the Executive Director is a Good Leaver, awards will vest in full on existing awards) the normal vesting date subject to their terms. If the Executive Director is not a Good Leaver, unvested awards will lapse. Good Leaver for these purposes includes leaving on retirement, ill health, injury or disability, as a result of death in service and other circumstances determined by the Committee. In exceptional circumstances, the Committee may determine that an award will vest on a different basis EPSP – Provided the Executive Director is a Good Leaver, awards will vest subject to performance to the end of the performance period and (unless the Committee decides otherwise) time pro-rating. Awards will vest on the normal date. If the Executive Director is not a Good Leaver, unvested awards will lapse. Good Leaver for these purposes includes leaving on retirement, ill health, injury or disability, as a result of death in service and other circumstances determined by the Committee – Generally, awards will vest on the date of death, having regard to the extent to which any performance conditions have been achieved and any holding period will come to an end (and subject to time pro-rating unless the Committee decides otherwise) – Awards will vest immediately on a change of control subject to performance and time pro-rating will be applied (unless the Committee decides otherwise) unless the outstanding shares are exchanged for equivalent new awards – In exceptional circumstances, the Compensation Committee may determine that an award will vest on a different basis ### OTHER COMMITTEE DISCRETIONS NOT SET OUT ABOVE Leaver status: the Committee has the discretion to determine an Executive Director’s leaver classification considering the guidance set out within the relevant plan rules. Settlement agreements: the Committee is authorised to reach settlement agreements with departing Executive Directors, informed by the default position set out above. 141WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT DIRECTORS’ COMPENSATION POLICY ### EXTERNAL APPOINTMENTS Executive Directors are permitted to serve as non-executives on the boards of other organisations. If the Company is a shareholder in that organisation, non-executive fees for those roles are waived. However, if the Company is not a shareholder in that organisation, any non-executive fees can be retained by the office holder. ### PAYMENTS IN EXCEPTIONAL CIRCUMSTANCES In unforeseen and exceptional circumstances, the Committee retains the discretion to make emergency payments which might not otherwise be covered by this Policy. The Committee will not use this power to exceed the recruitment policy limit, nor will awards be made in excess of the limits set out in the Directors’ Compensation Policy table. An example of such an exceptional circumstance could be the untimely death of a Director, requiring another Director to take on an interim role until a permanent replacement is found. ### DIRECTORS’ COMPENSATION POLICY TABLE – CHAIR AND NON-EXECUTIVE DIRECTORS The following table sets out details of the ongoing compensation elements for WPP’s Chair and Non-Executive Directors. No element of pay is performance-linked. Base fees The Chair and Non-Executive Directors receive a 'base fee' in connection with their An overall cap on all non-executive To reflect the skills, appointment to the Board. fees, excluding consultancy fees, experience and time will apply consistent with the Fees are typically reviewed annually and consider the skills, experience and time required required to undertake prevailing and shareholder- to undertake the role, as well as fee levels in similarly-sized UK companies. the role. approved limit in the Articles of Association. Additional fees Non-Executive Directors are eligible to receive additional fees in respect of serving as: An overall cap on all non-executive To reflect the additional time fees, excluding consultancy fees, – Senior Independent Director required in any additional will apply consistent with the – Chair of a Board Committee duties for the Company. prevailing and shareholder- – Member of a Board Committee approved limit in the Articles – Consultancy fees in respect of other work that falls outside the remit of their role for of Association. the Company Consultancy fees will be set on a discretionary basis, taking account of the nature of the role and time required. Benefits and allowances The Company will reimburse the Chair and Non-Executive Directors for all reasonable and Benefits and allowances for the To enable the Chair and properly documented expenses incurred in performing their duties of office. Chair and Non-Executive Directors Non-Executive Directors to will be set at a level that is The Company may provide additional allowance to facilitate the operation of the Board undertake their roles. appropriate for the performance such as a travel allowance for attendance at international meetings. of the role. In the event that the reimbursement of these expenses gives rise to a personal tax liability for the Chair or Non-Executive Director, the Company retains the discretion to meet this cost (including, where appropriate, costs in relation to tax advice and filing). While not currently offered, the Company retains the discretion to pay additional benefits to the Chair including, but not limited to, use of car, office space and secretarial support. | OTHER CHAIR AND NON-EXECUTIVE | APPOINTMENTS TO THE BOARD | SHAREHOLDING | | --- | --- | --- | | DIRECTOR POLICIES | Letters of appointment will be consistent | Non-Executive Directors are encouraged to | | LETTERS OF APPOINTMENT FOR THE | with the current terms as set out in this | hold shares in the Company. The ownership | | CHAIR AND NON-EXECUTIVE | Annual Report. The Chair and Non-Executive | guideline is to reach a shareholding equal to | | DIRECTORS | Directors are not eligible to receive any | 1 x annual base fee within a three-year | | Letters of appointment have a one- to | variable pay. Fees for any new Non-Executive | period. | | two-month notice period and there are | Directors will be consistent with the | | | no payments due on loss of office. | operating policy at their time of appointment. | | In respect of the appointment of a new Chair, the Committee has the discretion to set fees considering a range of factors including the profile and prior experience of the candidate and external market data. WPP ANNUAL REPORT 2022142 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ## ANNUAL REPORT ## ON COMPENSATION | This section of the report sets out details | Executive Officer, Chief Financial Officer, the | DIRECTOR CHANGES DURING | | --- | --- | --- | | of how the Directors’ Compensation Policy | Company Secretary, the Chief People Officer | THE YEAR | | was implemented in 2022. | (who are not present when matters relating | As referenced in the Committee Chair's letter, | | | to their own compensation or contracts | it was announced in 2022 that John Rogers | | Payments have been made in accordance | are discussed and decided) and the Global | would step down as Chief Financial Officer. | | with the current Directors’ Compensation | Reward Director. The latter two individuals | Mr Rogers will be succeeded by Joanne | | Policy, approved by shareholders at the 2020 | provide a perspective on information | Wilson, following the announcement of the | | AGM. The information included in this section | reviewed by the Committee and are a | Company’s 2023 First Quarter Trading Update. | | has been audited where stated. | conduit for requests for information and | | | | analysis from the Committee’s external | John Rogers will be treated in accordance | | GOVERNANCE IN RELATION | advisors. | with WPP’s shareholder-approved Directors’ | | TO COMPENSATION | | Compensation Policy for the remaining term | | During 2022, there were five scheduled and | EXTERNAL ADVISORS | of his employment. He was eligible to | | five unscheduled Compensation Committee | The Committee retains WTW to act as | receive a STIP award (cash and ESA) for the | | meetings. A table of Board and Committee | independent advisor. WTW provides advice | 2022 financial year, details of which are | | attendance can be found on page 115 and | to the Compensation Committee and works | included on page 145. He will not receive a | | the detail of key activities discussed is set | with management on matters related to our | STIP or other incentive award for the 2023 | | out below. | compensation policy and practices. WTW is | financial year. Any outstanding ESA awards | | | a member of the Remuneration Consultants | will vest on a pro rata basis. All long-term | | The Committee members have no personal | Group and has signed the code of conduct | incentive (EPSP) awards which are unvested | | financial interest (other than as a shareholder | relating to the provision of advice in the UK. | at the point that John leaves WPP will lapse | | as disclosed on page 154) in the matters | Considering this, and the level and nature of | in full. No further EPSP awards will be granted. | | to be decided by the Committee, potential | the service received, the Committee remains | John will be subject to post-employment | | conflicts of interest arising from cross- | satisfied that the advice is objective and | shareholding requirements as set out in | | directorships, or day-to-day involvement | independent. WTW provides limited other | the Policy. | | in running the Company’s businesses. The | services at a Group level and some of our | | | terms of reference for the Compensation | operating companies engage WTW as | A summary of Joanne Wilson’s compensation | | Committee are available on the Company’s | advisor at a local level. In 2022, WTW | arrangements is included in the press | | website. | received fees of £147,570 in relation to the | release of 8 November 2022. Further | | | provision of advice to the Committee. The | detail will be disclosed in next year’s | | ADVISORS TO THE COMPENSATION | Committee receives external legal advice, | Compensation Committee Report following | | COMMITTEE | where required, to assist it in carrying out | her appointment in 2023. | | The Committee invites certain individuals | its duties. | | to attend meetings, including the Chief ### 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. 2022 Q1 Q3 – Determined performance outcomes for 2017-2021 EPSP – Received an update on the wider workforce providing an overview of the – Consideration of 2021 STIP in the context of performance during the year diversity demographics and compensation of employees at WPP – Setting targets for 2022 EPSP – Continued review of Directors’ Compensation Policy – Reviewed and approved 2021 Compensation Committee Report Q2 Q4 – Reviewed the CEO and CFO's salaries – Shareholders’ consultation in respect of proposed changes to Directors’ – Reviewed and approved proposed changes to Executive Committee Compensation Policy | salaries and compensation structure | – Reviewed outcome of consultation and finalised proposed Policy changes | | --- | --- | | – Set targets for 2022 STIP | – Agreement of terms for CFO transition | | – Directors’ Compensation Policy review | – Corporate governance update | To learn more, see wpp.com/about/corporate-governance 143WPP ANNUAL REPORT 2022 ANNUAL REPORT ON COMPENSATIONCORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ### STATEMENT OF SHAREHOLDER VOTING The result of the shareholder vote at the Company’s 2022 AGM in respect of the 2021 Compensation Committee Report is set out below along with the result of the most recent vote on the Directors’ Compensation Policy at the 2020 AGM: Voting outcome for 2021 Compensation Committee Report (at 2022 AGM) Votes for Votes against Votes cast Votes withheld Resolution Number % Number % Number Number To approve the 841,723,026 93.41 59,344,966 6.59 901,067,992 137,14 3 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 ### 2022 COMPENSATION The decisions made with respect to 2022 compensation were made in line with the 2020 Directors’ Compensation Policy, approved by shareholders at the AGM in 2020. ### EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED) Single total figure of compensation | Base | | | Total | Short-term incentive £000 | Long-term | | Total | Total annual | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | salary | Benefits | Pension | fixed | | incentive | | variable | compensation | | | £000 | £000 | £000 | £000 | | | £000 | £000 | | £000Cash Deferred | Mark Read 2022 1,061 36 125 1,222 1,437 958 3,065 5,460 6,682 2021 1,013 37 149 1,199 1,560 1,040 0 2,600 3,799 1 John Rogers 2022 762 32 76 870 917 611 1,994 3,522 4,392 2021 740 32 74 846 999 666 2,265 3,930 4,776 1 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 of 2021 Annual Report and Accounts for further details WPP ANNUAL REPORT 2022144 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE ### FIXED ELEMENTS OF COMPENSATION (AUDITED) ### BASE SALARY Base salary | | Annual base | | received in | | | --- | --- | --- | --- | --- | | | | salary | | 2022 | | Effective date | | | | £000 | Mark Read 1 July 2022 £1,081,600 £1,061 John Rogers 1 July 2022 £784,400 £762 The CEO and CFO’s salaries were reviewed in 2022 in line with a salary review which took place throughout the organisation. When reviewing executive salaries in 2022, the Committee took into consideration the external market in the UK as well as the global advertising and media sector; performance in role; time since previous review; and salary increases across the wider workforce during the year. For the CEO, the Committee agreed an increase of 4.0% to £1,081,600. This is in line with average annual salary increases in the UK of around 3.6%. The CFO’s salary has not been reviewed since his appointment in January 2020 and the Committee agreed an increase of 6.0% to reflect performance and the 30-month period since appointment without review. ### BENEFITS In addition to the allowance received, the values 2022 Benefits disclosed include the value of expenses related directly £000 to attendance at Board meetings. The expenses for Mark Read 36 Mark Read and John Rogers were £1,347 and £2,169 John Rogers 32 respectively (£2,431 for both Executive Directors in 2021). These values include the grossed-up cost of UK income tax and national insurance paid by the Company on behalf of the Directors. ### PENSION | | | | Contractual | | 2022 | | --- | --- | --- | --- | --- | --- | | In line with the plan to reduce Mark Read's pension to | | | | pension | Pension | | ensure alignment with the wider workforce by the end | | (% of base salary) | | | £000 | | of the policy period, the final reduction was made to | Mark Read 10 125 | | | | | | reduce his pension to 10% during 2022. | John Rogers 10 76 | | | | | ### SHORT-TERM INCENTIVE (AUDITED) ### 2022 STIP OUTCOME Maximum bonus 2022 STIP 2022 STIP 2022 STIP (% of salary) (% of maximum) (% of base salary) (£000) Mark Read 250 88.56 221.40 2,395 John Rogers 225 86.56 194.76 1,528 In accordance with the 2020 Directors’ Compensation Policy, 60% of the total STIP was paid in cash and 40% deferred into an ESA. 145WPP ANNUAL REPORT 2022 ANNUAL REPORT ON COMPENSATIONCORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ### PERFORMANCE AGAINST 2022 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 0.0% 5.0% 10.0% 10.0% 25.00% | | | | | | | | | | Headline operating margin improvement | | | 1 /3 0.0% 0.25% 0.5% 0.4% 20.00% | | | | | | | | | | Like-for-like revenue less pass-through costs growth | | | 1 /3 0.0% 4.0% 8.0% 6.9% 21.56% | | | | | | | | | Total achieved 66.56% ### PERFORMANCE AGAINST 2022 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 Director's non-financial performance and determined an award of 22% for Mark Read and 20% for John Rogers, out of a maximum of 25%. NON-FINANCIAL PERFORMANCE APPLICABLE TO BOTH EXECUTIVE DIRECTORS Category Area 2022 performance Purpose and reputation Progress on – Carbon reduction targets: We have reduced our total market-based Scope 1 and 2 carbon emissions by 28% – Aligned to the carbon year-on-year and by 71% versus our 2019 baseline, driven by energy savings from our campus programme and Company's reduction increased purchasing of renewable electricity (see pages 74 and 75 for further detail) sustainability strategy, – Media decarbonisation: GroupM developed and released a methodology for calculating emissions from media, the management of launched a coalition of leading advertisers – $10 billion in global advertising investment – with a shared governance and commitment to accelerate the decarbonisation of the world’s media supply chain, and in February 2023 controls as well as launched a new media carbon calculator for clients industry achievements – See pages 74 and 75 for further detail on carbon reduction progress and awards Creative – WPP awarded Most Creative Company of the Year in 2022 at the Cannes Lions International Festival of reputation Creativity, for the second year in a row – WPP agencies collected a total of 176 Lions including one Titanium, four Grand Prix, 36 Gold, 47 Silver and 88 Bronze, with winners representing 40 different countries. Ogilvy was recognised as Network of the Year Governance and – SOX testing improvements have continued across 2022, with enhanced key financial controls tests finding controls reductions in deficiencies from 2021 – ESG data controls have been built into the Group's Risk and Control matrix and rolled out to leaders to embed – Software Development Lifecycle controls were introduced into the control framework in 2022 Strategic priorities Focus on high- – Expanded our offer in experience, commerce and technology through a number of acquisitions and – In relation to our growth areas partnerships (see page 14 for further detail) growth strategy – Revenue less pass-through costs growth in experience, commerce and technology was an estimated 9% in and Group-wide 2022, increasing their share of our global integrated agencies, excluding GroupM, business mix to 39% in 2022 transformation Transformation – Delivered £375m of gross annual savings against a 2019 base, ahead of the planned £300m with savings in programme property, procurement and our operating model MARK READ – NON-FINANCIAL PERFORMANCE Category Area 2022 performance Client Client – The high client satisfaction levels achieved in 2021 have remained high with an average Likelihood to – Relating to satisfaction Recommend of 8.0 overall in 2022, with Quality of Work at 8.1 and DE&I at 8.2. See page 53 for further detail new business and New business – New business performance continues to be strong at $5.9billion of net new billings in 2022, including new client satisfaction assignments with a range of major brands from Audible, Danone and SC Johnson to Nationwide and Verizon. We grew relationships with existing clients and our unprecedented global partnership with The Coca-Cola Company continued to expand WPP ANNUAL REPORT 2022146 COMPRIVATION COMMITTEE REPORT CORPORATE GOVERNANCE | People and DE&I - Improvements in relation to diversity and delivery of our people strategy | Inclusive culture | - Continued improvements in our journey to achieve greater gender balance throughout the Company, particularly at the senior leadership level. Women represent ±5.8% of our Executive Committee and Direct Reports (±3.9% in 2022) as reported in the FTSE Women Leaders Review - Continued to develop a number of initiatives to foster an open and inclusive culture - Additional details on the diversity of our leadership and our inclusion initiatives are included on pages 36-37 | | --- | --- | --- | | | Employee engagement | - In 2022 we launched the refreshed 4B in survey, an engagement survey which helps us better support staff, hold ourselves accountable and create an inclusive culture - We achieved our highest ever participation levels, with 72,700 employees taking part, an increase of 65% from 2021. We were pleased to see our Company-wide eNPS score (how likely you are to recommend WPP as a place to work) increase by 14 points from 2021 (see page 36 for more details) | | Strategic priorities - In relation to our growth strategy and Group-wide transformation | Continued simplification of WPP | - Announced several business combinations in 2022: fusion of two agencies to create Ioann+Hediacom with 10,000 employees in over 100 offices, brought together three agencies to create Group/H Novus, merged two agencies to create a new design company, Design Bridge and Partners | # JOHN ROGERS - NON-FINANCIAL PERFORMANCE | Category | Area | 2022 performance | | --- | --- | --- | | Client - Relating to new business and client satisfaction | Commercial insights | - A focus on supporting client commercial insights with the roll-out of Quantum technology tool across top 20 markets in a global integrated agency, providing leading indicators data | | People and DE&I - Improvements in relation to diversity and delivery of our people strategy | Inclusive culture | - Continuing focus on diversity in the finance leadership team with development a priority. Over 60% of the female leaders in the finance function (representing 30% of the leadership team) are new in role | | | Employee engagement | - Engagement in the finance team was 85% favourable, with an eNPS of 18, which reflected strong engagement in the finance team | | | Campus programme | - The transformation of our property estate continues, with a further five campuses opened in 2022 (Brussels, Düsseldorf, Santiago, Tokyo, Toronto) and another in Guangzhou, China, in January, taking the global total to 37. These campuses now accommodate around half our people around the world | | Strategic priorities - In relation to our growth strategy and Group-wide transformation | Continued simplification of WPP | - Shared services roll-out continued with operation rolled out in five locations across APAC and the Americas. Finance shared services are now five in 20 markets, providing efficient scaled resources - Successful roll out of Maconomy Finance tool to over 20,000 people in several Asia-Pacific markets, with further planned rollouts in Latin America in 2023. - Established 24/7 global IT services capabilities for the Group, with global hubs in Bucharest, Chennai, Kuala Lumpur and Mexico | # SHORT-TERM INCENTIVE WEIGHTINGS AND MEASURES FOR 2023 The Committee has reviewed the performance objectives for 2023 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 has been done in previous years. WPP ANNUAL REPORT 2023 167 ANNUAL REPORT ON COMPENSATIONCORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ### LONG-TERM INCENTIVES (AUDITED) ### VESTING OF 2018-2022 EPSP AWARDS Vesting of the 2018 legacy 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, weighted by their respective market capitalisation) – Compound annual growth in headline EPS – Average ROE The targets were set prior to the CEO's appointment, Covid-19 and the launch of the strategy. Consistent with prior award cycles, the Committee did not feel it was appropriate to adjust the targets during the performance period. As a result, 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 | | | 27% | | | | | | 1 /3 | | | | | | | | | | | | | | | group | | | group | | | | | | 0% outperformed outperformed Relative TSR (local currency) 26% Headline EPS growth 1 /3 7.0 14.0 -3.9% 0% Average ROE 1 /3 15.0 18.0 14.6% 0% Total vesting (% of maximum) 0% | | | | Additional | | | | | Value of vested | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | shares in respect | | | | | | | 2018-2022 | | | | Number of | | of dividend | | | Number of | Share price | | EPSP awards | | | shares awarded | | | | accrual | shares vesting | | on vesting | | | £000 | Mark Read 396,617 0 0 n/a 0 ### VESTING OF 2020-2022 EPSP AWARDS Vesting of the 2020 EPSP award was dependent on performance against three measures, all assessed over a three-year period: – WPP’s relative TSR, measured in common and local currency, against a custom group of WPP’s comparators (Dentsu, Interpublic, Omnicom, Publicis and the FTSE 100 index). Each comparator carries an equal weighting – Cumulative AFCF – Average ROIC The performance against ROIC and AFCF was above maximum for the performance period, resulting in maximum vesting for those elements of the award. The relative TSR was below threshold on both a local and common currency basis resulting in zero vesting for the TSR element and a total formulaic vesting of 66.7% for the award. The Committee is mindful of investor concerns around windfall gains for awards made in 2020 following reductions in share price across the market as a result of the emerging Covid-19 pandemic. The Committee undertook a review of the extent to which the gain over the performance period was due to a market recovery rather than Company performance. The Committee considered share price movement and volatility on an absolute basis and compared to peers and the market, underlying financial performance, historic award and vesting levels, and absolute award value in the context of total compensation as well as wider stakeholders. The Committee deferred making the EPSP awards in March 2020 due to the uncertainty surrounding the emerging Covid-19 pandemic. The awards were made in November 2020 following a consultation with key shareholders concerning the definition and quantum of the EPSP targets. By this point the share price had shown signs of recovery having increased c.50% since mid-March 2020. Vesting of the EPSP awards in recent years has been at or close to zero and the Committee has not adjusted these historic awards to take account of the economic situation at the time to allow for a higher vesting. Having reviewed these factors, the Committee determined that the gain generated during the performance period is a fair reflection of performance and that a consistent approach of making no adjustment to the formulaic vesting of the 2020 EPSP is required. WPP ANNUAL REPORT 2022148 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE | | | Threshold | | Maximum | | | Actual | | % of maximum | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Performance measure Weighting | | | % | | % | | | % | | achieved | | Relative TSR (common currency) | | | | | | Below median 0% | | | | | | | 1 /3 Median Upper decile | | | | | | | | | | Relative TSR (local currency) Below median 0% AFCF 1 /3 £2,300m £3,100m £4,081m 100% ROIC 1 /3 11.5% 12.9% 16.8% 100% Total vesting (% of maximum) 66.67% Value of vested | | | Additional shares | | | | | | 2020-2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Number of shares | | | in respect of | | Number of | Share price | | EPSP awards | | | | awarded | dividend accrual | | shares vesting | | on vesting | 1 | | £000 | Mark Read 460,464 21,637 328,628 £9.3278 3,065 John Rogers 299,554 14,075 213,787 £9.3278 1,994 1 The share price increased 25.86% between the grant and vest dates for this award. £629,914 and £409,787 of the total value of vested shares for the CEO and CFO respectively is attributable to share price appreciation ### GRANTING OF 2022-2024 AWARDS In 2022, the Executive Directors were granted awards under the EPSP as approved by shareholders in 2020. 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 149WPP ANNUAL REPORT 2022 ANNUAL REPORT ON COMPENSATIONCORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT The table below summarises the awards granted and the performance conditions against which participants will be measured. Basis and level of award Number of Face value at date of grant 1 Awards granted in 2022 (% of salary) shares awarded £000 Mark Read 390 384,746 4,056 2 | John Rogers | 300 210,586 2,220 | | --- | --- | | 1 Awards were granted on 25 March 2022. Face value is calculated based on the five-day average share price preceding the date of award (£10.5421) | | | 2 Awards for John Rogers will lapse on leaving the Company | | 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 2022 to 31 December 2024 ### EPSP MEASURES AND TARGETS FOR 2023 The table below shows the targets against which performance will be measured for the awards granted in 2023. 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 £3,500m-£4,500m 17.5%-19.5% 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 2023 to 31 December 2025 Holding period 1 January 2026 to 31 December 2027 A 2023 award will not be made to John Rogers. Joanne Wilson is eligible for a 2023 EPSP award upon commencement of employment at the first available opportunity. In 2022, an increased EPSP award was made to Mark Read of 390% of base salary following consultation with shareholders. The award was within the range approved by shareholders under the 2020 Policy. The Committee considered performance, the competitive nature of the global talent market and the interests of wider stakeholders and determined that the award will remain at 390% of salary. WPP ANNUAL REPORT 2022150 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 link 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 2022. TSR is rebased to £100 from 1 January 2012 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. 1 ### HISTORICAL TSR PERFORMANCE £184 150 £134 100 50 WPP 0 FTSE 100 20172016201520142012 2013 2019 2021 20222018 2020 Source: S&P Capital IQ. 2018 2018 2013 2014 2015 2016 2017 MSS 3 MR 3 2019 2020 2021 2022 2 CEO total compensation (£000) 29,846 42,704 70,409 48,148 13,930 3,085 965 2,594 1,136 3,799 6,682 Short-term incentive award against maximum (%) 82 72 86 60 0 0 30 55 0 100 89 | Long-term incentive award against | 2018: 0 | | --- | --- | | maximum (%) 87 100 100 100 73 33 33 15 5 0 | 2020: 67 | | 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 trading day values. | | Source: CapIQ 2 Calculated based on the methodology used for disclosing compensation in the single figure of compensation table 3 Sir Martin Sorrell (MSS) left the company on 14 April 2018; Mark Read (MR) was appointed as Chief Executive Officer from 3 September 2018 250 200 151WPP ANNUAL REPORT 2022 £134 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION # **NON-EXECUTIVE DIRECTORS' FEES** 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: | | 2022 | | --- | --- | | Chairman | 525 | | Non-Executive Director | 85 | | Senior Independent Director | 60 | | Chair of Audit or Compensation Committee | 60 | | Chair of Nomination and Governance Committee^{1} | 15 | | Chair of Sustainability Committee^{2} | 60 | | 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 in transit by Roberto Quarta as part of his role as Chairman. He additional fees is as of 1 July 2021. The Committee has been appointed by Committee has been re-elected with each Chair receiving a fee of $10,000. 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 2022 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 2022 | | Benefits 2022 | | Total 2022 | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | | Roberto Quarta | 525 | 525 | 32 | 33 | 557 | 558 | | Angela Ahrendts^{1} | 122 | 93 | 62 | 1 | 143 | 94 | | Jacques Aigrain, retired 24 May 2022 | 58 | 145 | 9 | 3 | 67 | 148 | | Simon Dingemans, appointed 31 January 2022 | 97 | n/a | 4 | n/a | 103 | n/a | | Sandrine Dufour^{1} | 140 | 125 | 6 | 0 | 146 | 125 | | Tarek Farahat | 105 | 105 | 18 | 0 | 123 | 105 | | Tom Gabe | 155 | 123 | 7 | 5 | 142 | 138 | | Cindy Rose | 155 | 123 | 5 | 6 | 150 | 139 | | Nicole Seligman | 155 | 147 | 24 | 0 | 179 | 147 | | Sally Susman, retired 24 May 2022 | 62 | 107 | 18 | 0 | 57 | 107 | | Keith Weed | 155 | 114 | 7 | 8 | 123 | 123 | | Jasmine Whitbread | 120 | 125 | 5 | 6 | 140 | 141 | | Dr. Ya-Gin Zhang | 93 | 85 | 20 | 0 | 118 | 85 | $^{1}$ Angela Ahrendts served the Nomination and Governance Committee in March 2022; Dr. Ya-Gin Zhang served the Sustainability Committee in March 2022. Sandrine Dufour back on the role of Chair of the Audit Committee during 2022. 153 WFP ANNUAL REPORT 2022 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 2022, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 1,211,974 shares in the Company (5,803,641 in 2021). 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 2022 566,060 109,220 1,951,164 2,060,384 600% 4 At 16 March 2023 739,923 109,220 1,094,083 1,203,303 John Rogers At 31 December 2022 391,715 69,943 750,373 820,316 300% 4 At 16 March 2023 391,715 69,943 450,819 520,762 1 Shares due pursuant to the 2021 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, reduced by the maximum due under the 2018 EPSP award, which lapsed on 15 March 2023, and the 2020 EPSP, which vested on 15 March 2023 (full details can be found on page 149) 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 Executive 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 2022, the Chief Executive Officer held shares to the value of 439% of his base salary. At the same date, the Chief Financial Officer held shares to the value of 418% 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 2022. 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 10.05.22 n/a £9.522 109,220 10.03.2024 | | | | | | | | | EPSP | 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 25.03.22 01.01.22-31.12.24 £10.542 384,746 15.04.2025 John Rogers ESA 10.05.22 n/a £9.522 69,943 10.03.2024 EPSP 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 25.03.22 01.01.22-31.12.24 £10.542 210,586 15.04.2025 153WPP ANNUAL REPORT 2022 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 2022 | Total interests at 16 March 2022 | | --- | --- | --- | | Roberto Quarta | 87,500 | 87,500 | | Angela Ahrendts | 10,571 | 10,571 | | Jacques Aigrain, retired 24 May 2022 | 14,000 | n/a | | Simon Dingemans, appointed 31 January 2022 | 6,000 | 6,000 | | Sandrine Dufour | 15,000 | 15,000 | | Tarek Farahat | 3,775 | 3,775 | | Tom Tube | 6,335 | 6,335 | | Cindy Rose | 8,000 | 8,000 | | Nicole Seligman | 8,750 | 8,750 | | Sofa Susman, retired 24 May 2022 | 5,000 | n/a | | Keith Weed | 8,424 | 8,424 | | Jeanine Whitbread | 8,735 | 8,735 | | Dr. Ya-Gin Zhang | 0 | 10,000 | \* On an date of retirement if it entered during the year \*\* Total benefit from interests calculated at the last year's date 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 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 120. The Committee also receives regular updates on compensation for the wider workforce to ensure that pay for Executive Directors is set against this backdrop. In 2022, the Committee was particularly mindful of the challenges faced by employees as a result of increased inflation in many parts of the world, and the resulting actions taken including making more funds available for annual salary review budgets and importance of wider programmes to support our people in areas such as financial education and mental wellbeing. The Committee also noted the comprehensive support offered throughout 2022 to colleagues in Ukraine since the war began in February 2022. This has included financial support packages, medical and wellbeing care, relocation support and other practical resources. # **RELATIVE IMPORTANCE OF SPEND ON PAY** The following table sets out the percentage change in total staff costs, headcount, dividends and share buybacks. | | 2022 | 2021 | % change | | --- | --- | --- | --- | | Total staff costs (continuing operations) | 68,365.8m | 67,366.7m | 15.9 | | Headcount - average over year | 114,139 | 104,808 | 8.9 | | Dividends and share buybacks | 61,038.1m | 61,133.0m | 8.4 | # **ANNUAL PERCENTAGE CHANGE IN COMPENSATION OF DIRECTORS AND EMPLOYEES** The table overleaf shows the annual change in each individual Director's pay for 2022 and 2021. 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 and John Rogers received salary increases of 4.0% and 6.0% respectively, effective 1st July 2022 (see page 145 for further detail). The difference between this and the increase disclosed in the table on the following page reflects the timing of salary reviews for Executive Directors. 154 WPP ANNUAL REPORT 2022 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE Directors are reimbursed for expenses that directly relate to attendance at Board meetings, including the grossed-up cost of UK income tax and national insurance paid by the Company on behalf of the Directors. Directors returned to travel in 2022 to attend Board meetings in WPP key locations following a reduction in travel during the Covid-19 pandemic. This has resulted in increased benefits for some Directors. Other than travel-related expenses, no additional benefits were provided. Year-on-year change in pay 2021-2022 2020–2021 2019–2020 | Base salary/ | | | | | | Base salary/ | | | | | | Base salary/ | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Fees | Benefits | Annual bonus | | | | Fees | Benefits | Annual bonus | | | | Fees | Benefits | Annual bonus | | | % change | | % change | | % change | 1 | % change | | % change | | % change | 2 | % change | | % change | | % change | Executive Directors 3 Mark Read 4.7 (2.9) ( 7.9) 11.3 4.0 – (6.7) 0.0 (100) 4 John Rogers 3.0 (0.8) (8.2) 15.1 8.1 – n/a n/a n/a Non-Executive Directors Roberto Quarta 0.0 (3.0) 7.1 19.6 (2.0) (51.9) 5 Angela Ahrendts 8.4 4,100.0 131.2 n/a n/a n/a 5 Jacques Aigrain (60.0) 200.0 7.1 53.1 (6.9) (73.3) 5 Simon Dingemans n/a n/a n/a n/a n/a n/a 5 Sandrine Dufour 12.0 – 40.1 (48.4) n/a n/a Non-Executive Non-Executive Non-Executive Tarek Farahat 0.0 – 7.1 (65.0) (6.7) (57.2) | | | | Directors do | | Directors do | | Directors do | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 5 | | not receive | | not receive | | not receive | | | Tom Ilube | | 1.5 40.0 554.5 429.6 n/a n/a | | | | | | | | | | | | variable | | variable | | variable | Cindy Rose 1.6 (16.7) 25.6 21.5 24.1 113.8 compensation compensation compensation Nicole Seligman 5.4 – 8.7 (78.6) (6.9) 47. 2 5 Sally Susman (60.7) – 4.4 (71.3) 5.1 135.3 Keith Weed 9.6 (12.5) 22.2 40.2 4 47.1 820.9 Jasmine Whitbread 0.0 (16.7) 14.5 21.6 218.9 1,318.1 5 Dr. Ya-Qin Zhang 9.4 – n/a n/a n/a n/a Average UK head office 6 employees 6.0% 0.0% 316.3% 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 2022 compared to the financial year ended 31 December 2021 for Executive Directors, and by reference to cash bonus payments received during the financial year ended 31 December 2022 in comparison to the financial year ended 31 December 2021 for the UK head office employees. Non-Executive Directors do not receive variable compensation 2 As the Executives did not receive a bonus in respect of the financial year ended 31 December 2020, it is not possible to calculate a percentage change 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 three years, explains the changes shown between 2020 and 2021. Mark Read received a salary increase of 4.0% in 2022 (see page 145) 4 John Rogers joined the Company on 27 January 2020 and his salary and benefits in 2020 were prorated accordingly. Changes between 2020 and 2021 were 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. John Rogers received a salary increase of 6.0% during 2022 (see page 145) 5 Jacques Aigrain and Sally Susman retired from the Board on 24 May 2022. Simon Dingemans was appointed 31 January 2022. 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 316.3% reflects the change between the bonus paid in respect of 2021 performance (paid in 2022) and 2020 performance (paid in 2021) and is therefore not directly comparable to Executive Director bonus awards made in respect of 2022 performance (paid in 2023) and 2021 performance (paid in 2022) ### 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 2022 is described below. WPP STOCK PLAN 2018 (WSP) The WPP Leader programme made awards under the WSP to around 1,900 of our key leaders in 2022. 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 2022, the WPP Share Option Plan 2015 was used to make awards to over 43,500 employees. By 31 December 2022, options under this plan, and its predecessor, the Worldwide Ownership Plan, had been granted to approximately 215,500 employees over 110.5 million shares since March 1997. 155WPP ANNUAL REPORT 2022 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION While the Share Option Plan provides the authority to make executive option awards, in addition to all employee awards, no awards were granted in 2022. The Executive Directors do not participate in this plan. # 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 164) 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 | | --- | --- | --- | --- | --- | --- | | 2022 | Total compensation | Option B | 154.1 | 118.1 | 81.1 | | 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 | 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. In prior years, the CEO has not received significant value from the vesting of long-term incentive plans due to legacy targets that were set prior to the CEO's appointment, Covid-19 and the launch of the strategy. This year the 2020 EPSP, the first of the newly structured EPSP awards more closely aligned with the strategy, vested at 66.67% resulting in an increase in the CEO's total compensation compared with the prior year, reflecting WPP's pay-for-performance philosophy and focus on rewarding long-term performance. At the 25th, 50th and 75th percentile employee level, variable compensation carries a much smaller weighting. As a result, the CEO pay ratio has increased since 2021. 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 | | --- | --- | --- | --- | --- | --- | | 2022 | Salary | Option B | £19,292 | £91,985 | £74,250 | | | Total pay and benefits | Option B | £43,417 | £56,440 | £82,551 | | 2021 | Salary | Option B | £32,067 | £44,250 | £61,500 | | | Total pay and benefits | Option B | £37,606 | £48,295 | £68,585 | | 2020 | Salary | Option B | £30,000 | £45,000 | £71,000 | | | Total pay and benefits | Option B | £31,800 | £46,800 | £75,840 | | 2019 | Salary | Option B | £31,000 | £44,739 | £70,000 | | | Total pay and benefits | Option B | £32,636 | £46,975 | £77,416 | Given 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 2022. 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, 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 2022 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. # SHARE INCENTIVE DILUTION FOR 2012 TO 2022 The share incentive dilution level, measured on a ten-year rolling basis, was at 3.2% at 31 December 2022 (2021: 2.9%). 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 23 March 2023 156 WPP ANNUAL REPORT 2022 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 in accordance with applicable law and regulations. The Directors to have taken, as a Director, in order to make himself or herself aware have elected to prepare financial statements for the Group in of any relevant audit information and to establish that the Company’s accordance with International Financial Reporting Standards auditors are aware of that information. (IFRS) as issued by the International Accounting Standards Board (IASB) as they apply to the financial statements of the Group for the In accordance with the principles of the UK Corporate Governance year ended 31 December 2022. Under company law the Directors Code, the Board has established arrangements to evaluate whether must not approve the accounts unless they are satisfied that they the information presented in the Annual Report is fair, balanced and give a true and fair view of the state of affairs of the Company and understandable; these are described on page 125. of the profit 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 Directors’ In virtually all circumstances, a fair presentation will be achieved by report, which also includes the Strategic Report and Corporate compliance with all applicable IFRSs. Directors are also required to: 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 Company Secretary – Make an assessment of the Company’s ability to continue as a 23 March 2023 going 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. 157WPP ANNUAL REPORT 2022 ## FINANCIAL ## STATEMENTS Accounting policies 160 Consolidated financial statements 166 Notes to the consolidated financial statements 171 Company financial statements 203 Notes to the Company financial statements 206 Independent auditor’s report 208 Reconciliation to non-GAAP 216 measures of performance WPP ANNUAL REPORT 2022158 FINANCIAL STATEMENTS 159WPP ANNUAL REPORT 2022 FINANCIAL STATEMENTS WPP ANNUAL REPORT 2022160 ACCOUNTING POLICIES The consolidated financial statements of WPP plc and its subsidiaries (the Group) for the year ended 31 December 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as they apply to the financial statements of the Group for the year ended 31 December 2022. BASIS OF PREPARATION The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments. The financial statements have been prepared using the going concern basis of accounting. The principal accounting policies are set out below. BASIS OF CONSOLIDATION The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. The results of subsidiary undertakings acquired or disposed of during the period are included or excluded from the consolidated income statement from the effective date of acquisition or disposal. NEW IFRS ACCOUNTING PRONOUNCEMENTS The Group has elected to adopt the hedge accounting requirements of IFRS 9 Financial Instruments from 1 January 2022. The IFRS 9 hedge accounting requirements are applied prospectively, and all hedge arrangements in place at the point of transition are regarded as continuing hedging relationships under IFRS 9. Accordingly, prior year financial information is not required to be restated and remains as reported under IAS 39. Management has elected not to take the 'cost of hedging' approach, and instead the currency basis risk has been designated in the hedge relationships. There has been no significant impact on the financial statements as a result of the adoption of the hedge accounting requirements of IFRS 9, both at the point of transition and in the year ended 31 December 2022. The Group has applied the following amendments for the first time for their annual reporting period commencing 1 January 2022: – Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 – Onerous Contracts – Cost of Fulfilling a Contract – Amendments to IAS 37 – Annual Improvements to IFRS Standards 2018-2020 – Reference to the Conceptual Framework – Amendments to IFRS 3 The amendments listed above did not have any impact on the amounts recognised in prior periods, did not have a significant impact on the amounts recognised in the current period, and are not expected to significantly affect the future periods. At the date of authorisation of these financial statements, there were a number 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 does not consider that any of these standards or amendments to standards in issue but not yet effective will have a significant impact on the financial statements. GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets comprise goodwill, certain acquired separable corporate brand names, acquired customer relationships, acquired proprietary tools and capitalised computer software not integral to a related item of hardware. Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, defined as the higher of fair value less costs of disposal and value in use. The net present value of future cash flows, to determine value in use, is derived from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection period, a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed. Corporate brand names, customer relationships and proprietary tools acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group. Certain corporate brands of the Group are considered to have an indefinite economic life because of the institutional nature of the corporate brand names, their proven ability to maintain market leadership and profitable operations over long periods of time and the Group’s commitment to develop and enhance their value. The carrying value of these intangible assets is reviewed at least annually for impairment and adjusted to the recoverable amount if required. Amortisation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its estimated useful life as follows: – brand names (with finite lives) – 10-20 years – customer-related intangibles – 3-10 years – other proprietary tools – 3-10 years – other (including capitalised computer software) – 3-5 years C ONTINGENT CONSIDERATION Contingent consideration is accounted for in accordance with IFRS 3 Business Combinations. Contingent consideration only applies to situations where contingent payments are not dependent on future employment of vendors and any such payments are expensed when they relate to future employment. Future anticipated payments to vendors in respect of contingent consideration (earnout agreements) are initially recorded at fair value which is the present value of the expected cash outflows of the obligations. The obligations are dependent on the future financial performance of the interests acquired (typically over a four- to five-year period following the year of acquisition) and assume the operating companies improve profits 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. Subsequent adjustments to the fair value are recorded in the consolidated income statement within revaluation and retranslation of financial instruments. The effect of any revisions to fair value adjustments that had been determined provisionally at the immediately preceding balance sheet date are accounted for as revisions to goodwill, as permitted by IFRS 3 Business Combinations. FINANCIAL STATEMENTSACCOUNTING POLICIES 161WPP ANNUAL REPORT 2022 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are shown at cost less accumulated depreciation and any provision for impairment with the exception of freehold land which is not depreciated. The Group assesses the carrying value of its property, plant and equipment to determine if any impairment has occurred. Where this indicates that an asset may be impaired, the Group applies the requirements of IAS 36 Impairment of Assets in assessing the carrying amount of the asset. This process includes comparing its recoverable amount with its carrying value, where the recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its estimated useful life, as follows: – freehold buildings – 50 years – leasehold land and buildings – over the term of the lease or life of the asset, if shorter – fixtures, fittings and equipment – 3-10 years – computer equipment – 3-5 years INTERESTS IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influence. In certain circumstances, significant influence may be represented by factors other than ownership and voting rights, such as representation on the Board of Directors. The Group’s share of the profits less losses of associate undertakings net of tax, interest and non-controlling interests is included in the consolidated income statement and the Group’s share of net assets is shown within interests in associates and joint ventures in the consolidated balance sheet. The Group’s share of the profits less losses and net assets is based on current information produced by the undertakings, adjusted to conform with the accounting policies of the Group. The Group assesses the carrying value of its associate undertakings to determine if any impairment has occurred. Where this indicates that an investment may be impaired, the Group applies the requirements of IAS 36 in assessing the carrying amount of the investment. This process includes comparing its recoverable amount with its carrying value. The recoverable amount is defined as the higher of fair value less costs of disposal and value in use. The Group accounts for joint venture investments under the equity method which is consistent with the Group’s treatment of associates. OTHER INVESTMENTS Certain equity investments are designated as either fair value through other comprehensive income or fair value through profit or loss. Movements in fair value through profit or loss are recorded in the consolidated income statement within revaluation and retranslation of financial instruments. The Group generally elects to classify equity investments as fair value through other comprehensive income where the Group forms a strategic partnership with the investee. NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, where certain conditions are met, an asset or disposal group that is for sale 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 sale transaction rather than through continuing use. For this to be the case, 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 for disposal, 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. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The profit or loss from a discontinued operation is shown as a single amount on the face of the income statement and the comparatives and related notes restated accordingly. This represents 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 of disposal, as well as the post-tax loss on sale of the disposal group. Assets and liabilities classified as held for sale are shown as a separate line on the balance sheet. ACCRUED AND DEFERRED INCOME Accrued income is a contract asset, within the scope of IFRS 9 Financial Instruments, and is recognised when a performance obligation has been satisfied but has not yet been billed. Contract assets are transferred to receivables once the right to consideration becomes unconditional and billed per the terms of the contractual agreement. In certain cases, payments are received from customers or amounts are billed with an unconditional right to receive consideration prior to satisfaction of performance obligations and recognised as deferred income. These balances are considered contract liabilities and are typically related to prepayments for third-party expenses that are incurred shortly after billing. TRADE RECEIVABLES AND WORK IN PROGRESS Trade receivables are stated net of loss allowances. Work in progress includes outlays incurred on behalf of clients, including production costs, and other third-party costs that have not yet been billed and are considered receivables under IFRS 15 Revenue from Contracts with Customers. EXPECTED CREDIT LOSSES The Group has applied the simplified approach to measuring expected credit losses, as permitted by IFRS 9 Financial Instruments. This has been applied to trade receivables, contract assets and lease receivables. Under this approach, the Group utilises a provision matrix based on the age of the trade receivables and historical loss rates to determine the expected credit losses. The Group also considers forward-looking information. Therefore, the Group does not track changes in credit risk, but recognises a loss allowance based on the financial asset's lifetime expected credit loss. For all other assets, the general approach has been applied and a loss allowance for 12-month expected credit losses is recognised. Under IFRS 9, 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. Given the short-term nature of the Group’s trade receivables, work in progress and accrued income, which are mainly due from large national or multinational companies, the Group's assessment of expected credit losses includes provisions for specific clients and receivables where the contractual cash flow is deemed at risk. The Group considers that the credit risk increased significantly since initial recognition when the credit rating changes, the debtor has significant financial difficulty or if there was a breach of contract. For balances that are beyond 180 days overdue it is presumed to be an indicator of a significant increase in credit risk. Financial assets are written off when there is evidence indicating that the debtor is in severe financial difficulty and the Group has no realistic prospect of recovery. Receivables written off are still subject to enforcement activity and pursued by the Group. Further details on expected credit losses are provided in note 18. FINANCIAL STATEMENTS ACCOUNTING POLICIES WPP ANNUAL REPORT 2022162 FOREIGN CURRENCY AND INTEREST RATE HEDGING The Group’s policy on interest rate and foreign exchange rate management sets out the instruments and methods available to hedge interest and currency risk exposures and the control procedures in place to ensure effectiveness. The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. At inception of the hedge relationship, the Group documents the relationship between hedging instruments and hedged items, including whether changes in the cash flows of the hedging instruments are expected to offset changes in the fair values or cash flows of hedged items. Furthermore the Group documents its risk management objectives and its strategy for undertaking various hedge transactions. Note 26 contains details of the fair values of the derivative instruments used for hedging purposes. 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 any changes in the fair value of the hedged items that are attributable to the hedged risk. The effective portion of changes in the fair value of derivatives that are 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 to the ineffective portion is recognised immediately in profit or loss. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or 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 the asset or liability. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the period. Derivatives embedded in other financial liabilities or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the consolidated income statement. LIABILITIES IN RESPECT OF OPTION AGREEMENTS Option agreements that allow the Group’s equity partners to require the Group to purchase a non-controlling interest are treated as derivatives over the Group's own equity instruments and are recorded in the consolidated balance sheet initially at the present value of the redemption amount in accordance with IAS 32 Financial Instruments: Presentation and subsequently, the financial liability is measured in accordance with IFRS 9 Financial Instruments. On initial recognition, the corresponding amount is recognised against the equity reserve, which is subsequently reversed on derecognition, either through exercise or non-exercise of the option agreement. Changes in the measurement of the financial liability due to the unwinding of the discount or changes in the amount that the Group could be required to pay are recognised in profit or loss within revaluation and retranslation of financial instruments in the consolidated income statement. DERECOGNITION OF FINANCIAL LIABILITIES In accordance with IFRS 9 Financial Instruments, a financial liability of the Group is only removed from the statement of financial position when the underlying legal obligation is extinguished. DEBT Interest-bearing debt is recorded at the proceeds received, net of direct issue costs. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank and in hand and short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, including bank deposits and money market funds. The Group's overdrafts are included in cash and cash equivalents where they are repayable on demand, are components 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. BORROWING COSTS Finance costs of borrowing are recognised in the consolidated income statement over the term of those borrowings. REVENUE RECOGNITION The Group is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services. Contracts often involve multiple agencies offering different services in different countries. As such, the terms of local, regional and global contracts can vary to meet client needs and regulatory requirements. Consistent with the industry, contracts are typically short-term in nature and tend to be cancellable by either party with 90 days' notice. The Group is generally entitled to payment for work performed to date. The Group is generally paid in arrears for its services. Invoices are typically payable within 30 to 60 days. Revenue comprises commissions and fees earned in respect of amounts billed and is stated exclusive of VAT, sales taxes and trade discounts. Pass-through costs comprise fees paid to external suppliers when they are engaged to perform part or all of a specific project and are charged directly to clients, predominantly media costs. As the contracts are generally short-term in nature, the Group has applied the practical expedient permitted by IFRS 15 to expense costs to obtain a contract as incurred, where applicable. In most instances, promised services in a contract are not considered distinct or represent a series of services that are substantially the same with the same pattern of transfer to the customer and, as such, are accounted for as a single performance obligation. However, where there are contracts with services that are capable of being distinct, are distinct within the context of the contract, and are accounted for as separate performance obligations, revenue is allocated to each of the performance obligations based on relative stand-alone selling prices. Revenue is recognised when a performance obligation is satisfied, in accordance with the terms of the contractual arrangement. Typically, performance obligations are satisfied over time as services are rendered. Revenue recognised over time is based on the proportion of the level of service performed. Either an input method or an output method, depending on the particular arrangement, is used to measure progress for each performance obligation. For most fee arrangements, costs incurred are used as an objective input measure of performance. The primary input of substantially all work performed under these arrangements is labour. There is normally a direct relationship between costs incurred and the proportion of the contract performed to date. In other circumstances relevant output measures, such as the achievement of any project milestones stipulated in the contract, are used to assess proportional performance. For our retainer arrangements, we have a stand-ready obligation to perform services on an ongoing basis over the life of the contract. The scope of these arrangements is broad and generally not reconcilable to another input or output criteria. In these instances, revenue is recognised using a time-based method resulting in straight-line revenue recognition. FINANCIAL STATEMENTSACCOUNTING POLICIES The amount of revenue recognised depends on whether we act as an agent or as a principal. Certain arrangements with our clients are such that our responsibility is to arrange for a third party to provide a specified good or service to the client. In these cases we are acting as an agent as we do not control the relevant good or service before it is transferred to the client. When 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) are excluded from revenue and recorded as work in progress until billed. The Group acts as principal when we control the specified good or service 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 gross amount billed. Billings related to out-of-pocket costs such as travel are also recognised at the gross amount billed with a corresponding amount recorded as an expense. Further details on revenue recognition are detailed by sector below. 163WPP ANNUAL REPORT 2022 GLOBAL INTEGRATED AGENCIES Revenue is typically derived from integrated product offerings including media placements and creative services. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue or a combination of the three, as agreed upon with each client. Revenue for commissions on purchased media is typically recognised at the point in time the media is run. The Group receives volume rebates from certain suppliers for transactions entered into on behalf of clients that, based on the terms of the relevant contracts and local law, are either remitted to clients or retained by the Group. If amounts are passed on to clients they are recorded as liabilities until settled or, if retained by the Group, are recorded as revenue when earned. Variable incentive-based revenue typically comprises both quantitative and qualitative elements. Incentive compensation is estimated using the most likely amount and is included in revenue up to the amount that is highly probable not to result in a significant reversal of cumulative revenue recognised. The Group recognises incentive revenue as the related performance obligation is satisfied. PUBLIC RELATIONS AND SPECIALIST AGENCIES Revenue for these services is typically derived from retainer fees and fees for services to be performed subject to specific agreement. Most revenue under these arrangements is earned over time, in accordance with the terms of the contractual arrangement. DISCONTINUED OPERATIONS (DATA INVESTMENT MANAGEMENT) Revenue for market research services is typically recognised over time based on input measures. For certain performance obligations, output measures such as the percentage of interviews completed, percentage of reports delivered to a client and the achievement of any project milestones stipulated in the contract are used to measure progress. While most of the studies provided in connection with the Group’s market research contracts are undertaken in response to an individual client’s or group of clients’ specifications, in certain instances a study may be developed as an off-the-shelf product offering sold to a broad client base. For these transactions, revenue is recognised when the product is delivered. When the terms of the transaction provide for licensing the right to access a product on a subscription basis, revenue is recognised over the subscription period, typically on a straight-line basis. TAXATION Corporate taxes are payable on taxable profits at current rates. The tax expense represents the sum of the tax currently payable and deferred tax. The Group is subject to corporate taxes in a number of different jurisdictions and judgement is required in determining the appropriate provision for transactions where the ultimate tax determination is uncertain. In such circumstances, the Group recognises liabilities for anticipated taxes based on the best information available and where the anticipated liability is both probable and able to be estimated, liabilities are classified as current. Any interest and penalties accrued are included in corporate income taxes both in the consolidated income statement and balance sheet. Where the final outcome of such matters differs from the amount recorded, any differences may impact the income tax and deferred tax provisions in the period in which the final determination is made. The tax laws that apply to the Group’s subsidiaries may be amended by the relevant tax authorities. Such potential amendments are regularly monitored and adjustments are made to the Group’s tax liabilities and deferred tax assets and liabilities where necessary. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible 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 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 recognised within 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, which can require the use of accounting estimation and the exercise of judgement. 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 taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable 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 intends to settle its current tax assets and liabilities on a net basis. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on enacted or substantively enacted legislation. FINANCIAL STATEMENTS ACCOUNTING POLICIES # **RETIREMENT BENEFIT COSTS** The Group accounts for retirement benefit costs in accordance with IAS 19 Employee Benefits. For defined contribution plans, contributions are charged to the consolidated income statement as payable in respect of the accounting period. For defined benefit plans the amount charged to operating profit are the current service costs, past service costs, administrative expenses and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the consolidated income statement when the related plan amendment occurs. Net interest expense is calculated by applying the discount rate to the recognised overall surplus or deficit in the plan. Actuarial gains and losses are recognised immediately in other comprehensive income. Where defined benefit plans are funded, the assets of the plan are held separately from those of the Group, in separate independently managed funds. Pension plan assets are measured at fair value and liabilities are 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 corporate bond of equivalent currency and term to the plan liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. Recognition of a surplus in a defined benefit plan is limited based on the economic gain the Group is expected to benefit from in the future by means of a refund or reduction in future contributions to the plan, in accordance with IAS 19. # **PROVISIONS FOR LIABILITIES AND CHARGES** Provisions comprise liabilities where there is uncertainty about the timing of 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. # **LEASES** The Group leases most of its offices in cities where it operates. Other lease contracts include office equipment and motor vehicles. At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred, less any lease incentives received. The assets are depreciated over the term of the lease using the straight-line method. The lease term includes periods covered by an option to extend if the Group is reasonably certain to exercise that option. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate for the same term as the underlying lease. Lease payments included in the measurement of lease liabilities comprise fixed payments less any lease incentives receivable and variable lease payments that depend on an index or a rate as at the commencement date. Lease modifications result in remeasurement of the lease liability. Depreciation is recognised in both costs of services and general and administrative costs and interest expense is recognised under finance costs in the consolidated income statement. The Group has elected to use the exemption not to recognise right-of-use 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 35,000). The payments associated with these leases are recognised as cost of services and general and administrative costs within the consolidated income statement on a straight-line basis over the lease term. The Group assesses at the reporting date whether there are any indicators of impairment and performs an impairment test when an impairment 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 which generates independent cash flows or it is vacant with minimal to no continued utility for the Group. When a right-of-use asset is tested as a stand-alone asset, an impairment loss is recognised when the carrying amount of the right-of-use asset exceeds its recoverable amount. The recoverable amount of a right-of-use asset is estimated mainly based on the present value of the estimated sublease income, discounted using the property yield rates. The property held by the Group as right-of-use assets to earn rentals is classified as investment property. The Group measures its investment property applying the cost model. # **TRANSLATION OF FOREIGN CURRENCIES** Foreign currency transactions arising from normal trading activities are recorded at the rates in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year-end are translated at the year-end exchange rate. Foreign currency gains and losses are credited or charged to the consolidated income statement as they arise. The income statements of foreign subsidiary undertakings are translated into pounds sterling at average exchange rates and the year-end net assets of these companies are translated at year-end exchange rates. Exchange differences arising from retranslation of the opening net assets and on foreign currency borrowings (to the extent that they hedge the Group's investment in such operations) are reported in the consolidated statement of comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. # **HYPERINFLATION IN ARGENTINA AND TURKEY** During 2002, 2021 and 2020, Argentina was designated as a hyperinflationary economy. In 2002, Turkey was designated as a hyperinflationary economy. The financial statements of the Group's subsidiaries in Argentina and Turkey 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 2022, this resulted in an increase in goodwill of £82.6 million (2021: £23.9 million, 2020: £22.6 million), an increase in other intangibles of £16.3 million (2021: £7.6 million, 2020: £5.3 million), and an increase in property, plant and equipment of $14.5 million (2021: £20.3 million, 2020: £19.3 million). A consumer price index (CPI) of 1,156.6 was used at 31 December 2022 (2021: 562.5, 2020: 383.8) for Argentina. For Turkey, a CPI of 1,128.5 was used at 31 December 2022. The impact on other non-monetary assets and liabilities and the impact on the Group's income statement in the year were immaterial. 96 WFP ANNUAL REPORT 2022 FINANCIAL STATEMENTSACCOUNTING POLICIES 165WPP ANNUAL REPORT 2022 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 23 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. GOVERNMENT SUPPORT In reaction to the Covid-19 pandemic, certain governments have introduced measures to assist companies. A reduction to operating costs is recorded in relation to government subsidies/schemes where these amounts will never have to be repaid. Further details of such amounts are included in note 3. In other cases, this involves the deferral of certain tax payments in order to stimulate the economy. The deferral of payments does not impact the income statement and these are charged as normal in the period they are incurred. 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 area of estimation uncertainty is: – Goodwill: the discounted cash flow methodology employed by the Group when testing for goodwill impairment requires estimates regarding operating margins and discount rates. Further details of the methodology, discount rates and estimates used in relation to the goodwill impairment, and sensitivities to these estimates are set out in note 14 FINANCIAL STATEMENTS # CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2022 | | Notes | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | --- | | Continuing operations | | | | | | Revenue | 3 | 16,438.7 | 13,801.1 | 15,002.8 | | Costs of services | 3 | (11,890.1) | (10,597.5) | (9,987.9) | | Gross profit | | 2,330.6 | 2,203.6 | 2,016.9 | | General and administrative costs | 3 | (1,180.4) | (976.6) | (6,995.0) | | Operating profit/(loss) | | 1,358.2 | 1,329.0 | (2,278.1) | | Gross/earnings from associates - after interest and tax | 6 | (60.4) | 33.8 | (156.0) | | Profit/(loss) before interest and taxation | | 1,297.8 | 1,252.8 | (2,474.1) | | Finance and investment income | 6 | 145.4 | 69.4 | 82.7 | | Finance costs | 6 | (309.4) | (253.6) | (312.5) | | Revaluation and retranslation of financial instruments | 6 | 76.0 | (87.8) | (147.2) | | Profit/(loss) before taxation | | 1,159.8 | 910.8 | (2,790.4) | | Taxation | 7 | (384.4) | (230.0) | (127.1) | | Profit/(loss) for the year from continuing operations | | 775.4 | 720.7 | (2,997.7) | Discontinued operations | Profit for the year from discontinued operations | 12 | - | - | 16.4 | | --- | --- | --- | --- | --- | | Profit/(loss) for the year | | 775.4 | 720.7 | (2,901.5) | Attributable to | Equity holders of the parent: | | | | | --- | --- | --- | --- | | Continuing operations | 682.7 | 637.7 | (2,971.6) | | Discontinued operations | - | - | 6.5 | | | 682.7 | 637.7 | (2,965.1) | | Non-controlling interests: | | | | | Continuing operations | 92.7 | 83.0 | 53.9 | | Discontinued operations | - | - | 9.9 | | | 92.7 | 83.0 | 43.8 | | | 775.4 | 720.7 | (2,901.5) | Earnings per share from continuing and discontinued operations | Basic earnings per ordinary share | 9 | 62.2p | 53.4p | (242.5p) | | --- | --- | --- | --- | --- | | Diluted earnings per ordinary share | 9 | 61.2p | 52.5p | (242.5p) | Earnings per share from continuing operations | Basic earnings per ordinary share | 9 | 62.2p | 53.4p | (243.0p) | | --- | --- | --- | --- | --- | | Diluted earnings per ordinary share | 9 | 61.2p | 52.5p | (243.0p) | Note: The accompanying notes form an integral part of the consolidated income statement 166 WPP ANNUAL REPORT 2022 FINANCIAL STATEMENTS # CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Profit/(loss) for the year | 775.6 | 720.7 | (2,901.3) | | Items that may be reclassified subsequently to profit or loss | | | | | Foreign exchange differences on translation of foreign operations | 624.3 | (163.0) | 75.4 | | (Loss)/gain on net investment hedges | (161.5) | 63.5 | 9.7 | | Cash flow hedges: | | | | | Fair value gain/(loss) arising on hedging instruments | 38.5 | (38.0) | (5.9) | | Less: (loss)/gain reclassified to profit or loss | (38.5) | 38.0 | 5.9 | | Share of other comprehensive income/(loss) of associate undertakings | 91.2 | 15.5 | (41.5) | | Exchange adjustments recycled to the income statement on disposal of discontinued operations | - | - | (20.4) | | | 533.9 | (84.0) | 3.0 | | Items that will not be reclassified subsequently to profit or loss | | | | | Movements on equity investments held at fair value through other comprehensive income | (22.3) | (35.5) | (127.7) | | Actuarial gain on defined benefit pension plans | 16.6 | 14.3 | 2.0 | | Deferred tax on defined benefit pension plans | (7.6) | (3.0) | 7.4 | | | (33.5) | (24.2) | (118.5) | | Other comprehensive income/(loss) for the year | 520.8 | (108.2) | (115.3) | | Total comprehensive income/(loss) for the year | 1,096.2 | 612.5 | (3,016.6) | | Attributable to | | | | | Equity holders of the parent: | | | | | Continuing operations | 988.3 | 539.8 | (1,063.9) | | Discontinued operations | - | - | (12.6) | | | 988.3 | 539.8 | (3,076.5) | | Non-controlling interests: | | | | | Continuing operations | 107.9 | 72.7 | 50.5 | | Discontinued operations | - | - | 9.4 | | | 107.9 | 72.7 | 50.9 | | | 1,096.2 | 612.5 | (3,016.6) | Notes The accompanying notes form an integral part of this consolidated statement of comprehensive income. Sources for the year ended 31 December 2021 and 31 December 2020 have been re-presented following a reclassification between the Hedging Reserve and Translation Reserve of US$ 0 million and US$ 9 million, respectively. See note 26. WPP ANNUAL REPORT 2022 67 FINANCIAL STATEMENTS # CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2022 | | Notes | 2022 Est. | 2021 Est. | 2020 Est. | | --- | --- | --- | --- | --- | | Net cash inflow from operating activities | 11 | 700.9 | 2,029.0 | 2,050.4 | | Investing activities | | | | | | Acquisitions | 11 | (336.2) | (382.3) | (376.2) | | Disposal of investments and subsidiaries | 11 | 37.7 | 28.3 | 275.3 | | Purchases of property, plant and equipment | | (208.6) | (265.5) | (218.5) | | Purchases of other intangible assets (including capitalised computer software) | | (34.9) | (29.9) | (54.4) | | Proceeds on disposal of property, plant and equipment | | 12.9 | 8.7 | 11.2 | | Net cash outflow from investing activities | | (608.9) | (638.6) | (663.6) | | Financing activities | | | | | | Repayment of lease liabilities | | (309.6) | (320.7) | (320.1) | | Share option proceeds | | 1.2 | 4.4 | - | | Cash consideration received from non-controlling interests | 11 | - | 39.5 | - | | Cash consideration for purchase of non-controlling interests | 11 | (84.2) | (135.0) | (80.6) | | Share repurchases and buybacks | 11 | (802.7) | (818.5) | (290.2) | | Proceeds from issue of bonds | 11 | - | - | 915.5 | | Repayment of borrowings | 11 | (220.6) | (287.1) | (202.7) | | Financing and share issue costs | | (0.2) | (0.6) | (7.1) | | Equity dividends paid | | (365.4) | (316.7) | (322.0) | | Dividends paid to non-controlling interests in subsidiary undertakings | | (69.5) | (114.5) | (83.5) | | Net cash outflow from financing activities | | (1,911.0) | (2,037.0) | (250.5) | | Net (decrease)/increase in cash and cash equivalents | | (1,499.0) | (666.6) | 1,636.7 | | Translation of cash and cash equivalents | | 66.3 | (130.1) | (99.2) | | Cash and cash equivalents at beginning of year | | 3,540.6 | 6,337.1 | 2,799.6 | | Cash and cash equivalents at end of year | 11 | 1,985.8 | 3,540.6 | 6,337.1 | Notes This accompanying notes form an integral part of the consolidated cash flow statement. • Contract payments in excess of the amount determined at acquisition are recorded as operating activities. Prior year excess amounts were recorded as investing activities and have been re-presented as operating activities. See note 11. 168 WPP ANNUAL REPORT 2022 FINANCIAL STATEMENTS # CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2023 | | Notes | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Intangible assets: | | | | | Goodwill | 14 | 8,453.4 | 7,612.3 | | Other | 14 | 1,431.9 | 1,304.5 | | Property, plant and equipment | 15 | 1,000.7 | 894.4 | | Right-of-use assets | 15 | 1,928.8 | 1,193.1 | | Interests in associates and joint ventures | 16 | 309.1 | 412.9 | | Other investments | 16 | 369.8 | 318.3 | | Deferred tax assets | 17 | 322.1 | 341.5 | | Corporate income tax recoverable | | 74.1 | 64.6 | | Trade and other receivables | 18 | 218.6 | 152.6 | | | | 13,704.2 | 12,535.2 | | **Current assets** | | | | | Corporate income tax recoverable | | 107.1 | 92.4 | | Trade and other receivables | 18 | 12,499.7 | 11,562.3 | | Cash and short-term deposits | | 2,491.5 | 2,082.9 | | | | 15,098.3 | 15,335.6 | | **Current liabilities** | | | | | Trade and other payables | 19 | (10,834.9) | (10,252.2) | | Corporate income tax payable | | (423.0) | (386.2) | | Short-term lease liabilities | 13 | (282.4) | (279.7) | | Bank overdrafts, bonds and bank loans | 21 | (1,169.0) | (567.2) | | | | (17,708.3) | (16,685.6) | | **Net current liabilities** | | (2,610.0) | (1,149.8) | | **Total assets less current liabilities** | | 11,114.2 | 11,383.6 | | **Non-current liabilities** | | | | | Bonds and bank loans | 21 | (3,801.8) | (4,216.8) | | Trade and other payables | 20 | (690.9) | (619.9) | | Deferred tax liabilities | 17 | (330.8) | (312.5) | | Provision for post-employment benefits | 24 | (157.5) | (134.6) | | Provisions for liabilities and charges | 22 | (244.6) | (268.5) | | Long-term lease liabilities | 13 | (1,928.2) | (1,782.1) | | | | (6,953.8) | (7,316.4) | | **Net assets** | | 4,160.4 | 4,069.0 | | **Equity** | | | | | Called-up share capital | 27 | 114.1 | 122.6 | | Share premium account | | 575.9 | 574.7 | | Other reserves | 28 | 285.3 | (335.0) | | Own shares | | (1,034.1) | (1,172.1) | | Retained earnings | | 3,739.7 | 4,367.3 | | **Equity shareholders' funds** | | 3,680.8 | 3,616.6 | | Non-controlling interests | | 479.6 | 432.6 | | **Total equity** | | 4,160.4 | 4,069.0 | Note: The accompanying notes form an integral part of this consolidated balance sheet. The financial statements were approved by the Board of Directors and authorised for issue on 23 March 2023. Signed on behalf of the Board: Mark Read Mark Read Chief Executive Officer John Rogers John Rogers Chief Financial Officer WPP ANNUAL REPORT 2022 109 FINANCIAL STATEMENTS ## CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 Total | Called-up | | | Share | | | | | | equity | | Non- | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | share | premium | | Other | Own | Retained | | shareholders’ | | controlling | | | | | capital | account | | reserves | shares | earnings | | 1 | funds | interests | | Total | | | £m | | £m | £m | £m | | £m | | £m | | £m | £m | Balance at 1 January 2021 1 2 9. 6 570. 3 191. 2 (1 ,1 1 8 . 3) 4 ,9 5 9. 2 4,732. 0 3 1 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 2 Foreign exchange differences on translation of foreign operations − − (132 .7) − − (132 . 7) (10. 3) (14 3 .0) Gain on net investment hedges − − 4 5.5 − − 4 5.5 − 4 5.5 2 Cash flow hedges: Fair value loss arising on hedging instruments − − (3 8 .0) − − (3 8. 0) − (38 .0) Less: gain reclassified to profit or loss − − 38 .0 − − 3 8.0 − 38.0 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 − − − − (35 .5) (35. 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) − (18 .0) (97 .9) (10. 3) (1 08 . 2) Total comprehensive (loss)/income − − (7 9.9) − 61 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) Recognition/derecognition of liabilities in respect of put options − − (2 42. 7) − 1 .1 (2 41 . 6) − (2 41 . 6) 3 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 − − − − (1 80. 3) (1 80. 3) 1 76 . 3 (4.0) Balance at 31 December 2021 122. 4 5 74 . 7 (3 3 5.9) (1 ,11 2 .1) 4 , 3 67. 3 3,61 6.4 4 52. 6 4 ,0 6 9. 0 Ordinary shares issued − 1.2 − − − 1.2 − 1.2 Share cancellations (8 . 3) − 8.3 − (8 07. 4) (8 0 7. 4) − (8 0 7. 4) Treasury share allocations − − − − − − − − Profit for the year − – – – 682 .7 682. 7 92. 7 7 75.4 Foreign exchange differences on translation of foreign operations − – 4 0 9. 0 – – 4 0 9. 0 15. 2 424 .2 Loss on net investment hedges − – (141 . 5) – – (141 . 5) – (141 . 5) Cash flow hedges: Fair value gain arising on hedging instruments − – 38 .5 – – 38.5 – 38.5 Less: loss reclassified to profit or loss − – (3 8. 5) – – (38 .5) – (3 8. 5) Share of other comprehensive income of associate undertakings − – 31 .9 – 1 9. 3 51.2 – 51 .2 Movements on equity investments held at fair value through other comprehensive income − – – – (2 2. 3) (2 2. 3) – (2 2. 3) Actuarial gain on defined benefit pension plans − – – – 16.6 16.6 – 16.6 Deferred tax on defined benefit pension plans − – – – (7. 4) (7. 4) – ( 7. 4) Other comprehensive income – – 2 9 9. 4 – 6.2 305.6 15. 2 320.8 Total comprehensive income – – 2 9 9. 4 – 6 8 8 .9 988 .3 1 0 7. 9 1,096. 2 Dividends paid – – – – (3 65 . 4) (3 6 5 . 4) (6 9. 5) (4 3 4 .9) Non-cash share-based incentive plans (including share options) – – – – 122 .0 12 2.0 – 122 .0 Tax adjustment on share-based payments – – – – (9. 2) (9. 2) – (9. 2) Net movement in own shares held by ESOP Trusts – – – 58 .0 (113 .3) (55. 3) – (55. 3) Recognition/derecognition of liabilities in respect of put options – – 101.7 – (4 0. 3) 61 . 4 – 61. 4 3 Share purchases – close period commitments – – 211.7 – – 211 .7 – 211 .7 Share of other equity movements of associates – – – – – – – – 4 Acquisition of subsidiaries – – – – (8 2 .9) (8 2 .9) (11 . 4) (94 . 3) Balance at 31 December 2022 1 14 .1 575 .9 285.2 (1 ,0 5 4 .1) 3,75 9 .7 3,6 80.8 4 7 9. 6 4 ,16 0. 4 Notes The accompanying notes form an integral part of this consolidated statement of changes in equity. 1 Accumulated losses on existing equity investments held at fair value through other comprehensive income are £330. 8 million at 31 December 2022 (2021: £308 .5 million) 2 Balances for the year ended 31December 2021 and 31December 2020 have been re-presented following a reclassification between the Hedging Reserve and Translation Reserve of £38 .0million and £5.9million, respectively. See note 28 3 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. After the close period ended on 18 February 2022, the liability was settled and the amount in other reserves was reclassified to retained earnings 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 WPP ANNUAL REPORT 2022170 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 1. GENERAL INFORMATION WPP plc is a company incorporated in Jersey. The address of the registered office is 13 Castle Street, St Helier, Jersey, J0 1155 and the address of the principal executive office is See Containers, 95 Upper Ground, London, United Kingdom, SE1 9DL. 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. FPIS 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. Reported contributions were as follows: | Income statement | Revenue* £m | Revenue less pass through costs* £m | Headline operating profit* £m | | --- | --- | --- | --- | | 2023 | | | | | Global Integrated Agencies | 12,191.0 | 9,740.8 | 1,432.4 | | Public Relations | 1,338.3 | 1,157.0 | 190.8 | | Specialist Agencies | 1,009.6 | 899.5 | 118.6 | | | 16,638.7 | 11,799.3 | 1,741.8 | | 2021^{1} | | | | | Global Integrated Agencies | 10,890.5 | 8,683.1 | 1,021.8 | | Public Relations | 959.0 | 909.7 | 143.1 | | Specialist Agencies | 951.6 | 804.4 | 128.6 | | | 12,801.1 | 10,397.2 | 1,693.5 | | 2020^{1} | | | | | Global Integrated Agencies | 10,329.0 | 8,267.8 | 1,070.3 | | Public Relations | 892.9 | 804.4 | 161.3 | | Specialist Agencies | 780.9 | 659.8 | 48.9 | | | 12,032.8 | 9,762.0 | 1,260.5 | Notes 1. From your figures have been represented on reflect the reallocation of a number of its revenues less capitalised in the United Kingdom and Specialist Agencies. 2. Intersegment sales have not been adjusted to the listed as they are not material 3. Revenue less pass through costs is defined on page 213 4. A total margin from profit before question is reached by operating profit is provided on page 214 WPP ANNUAL REPORT 2023 171 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | Other information | Share-based payments $m | Capital additions $m | Depreciation and amortization^{1} $m | Goodwill impairment $m | Loss/(earnings) from results of associates $m | Interests in associates and joint ventures $m | | --- | --- | --- | --- | --- | --- | --- | | **2022** | | | | | | | | Global Integrated Agencies | 100.3 | 195.8 | 372.9 | - | 10.8 | 80.1 | | Public Relations | 14.7 | 11.0 | 36.7 | 2.7 | 0.5 | 0.1 | | Specialist Agencies | 6.8 | 18.5 | 45.4 | 34.2 | (71.7) | 224.9 | | | 122.0 | 223.3 | 451.0 | 37.9 | (60.4) | 305.1 | | **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 | | Specialist Agencies | 2.5 | 22.3 | 43.1 | 1.8 | (0.6) | 289.7 | | | 99.6 | 293.1 | 444.0 | 1.8 | 23.8 | 412.9 | | **2020** | | | | | | | | Global Integrated Agencies | 61.3 | 224.2 | 449.7 | 2,355.1 | 19.0 | 158.4 | | Public Relations | 8.0 | 15.5 | 32.8 | 161.5 | 1.3 | 6.4 | | Specialist Agencies | 5.1 | 22.9 | 59.4 | 306.3 | (156.3) | 163.9 | | | 74.4 | 272.6 | 541.9 | 2,822.9 | (156.0) | 330.7 | Notes: $^{1}$ Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalized computer software). $^{2}$ Depreciation of property, plant and equipment, depreciation of right-of-use assets and amortization of other intangible assets. Contributions by geographical area were as follows: | | 2022 £m | 2021 £m | 2020 £m | | 2022 £m | 2021 £m | | --- | --- | --- | --- | --- | --- | --- | | **Revenue^{1}** | | | | | | | | North America^{2} | 5,549.5 | 4,494.2 | 4,464.9 | North America^{2} | 5,896.4 | 5,073.6 | | United Kingdom | 2,003.8 | 1,844.9 | 1,637.0 | United Kingdom | 1,556.2 | 1,562.4 | | Western Continental Europe | 3,876.2 | 2,786.3 | 2,441.6 | Western Continental Europe | 2,797.9 | 2,618.8 | | Asia-Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | 3,999.2 | 3,653.7 | 3,459.5 | Asia-Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | 3,581.0 | 3,953.6 | | | 14,428.7 | 12,801.1 | 12,062.8 | | 13,445.5 | 12,193.2 | | **Revenue less pass-through costs^{2}** | | | | | | | | North America^{2} | 4,688.1 | 3,849.2 | 3,743.4 | **Notes** | | | | United Kingdom | 1,537.2 | 1,414.3 | 1,232.2 | | | | | Western Continental Europe | 3,318.5 | 3,225.4 | 3,096.4 | | | | | Asia-Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | 3,332.2 | 2,958.3 | 2,765.4 | | | | | | 11,799.2 | 10,397.2 | 9,762.0 | | | | | **Headline operating profit^{3}** | | | | | | | | North America^{2} | 770.4 | 693.7 | 671.9 | **Notes** | | | | United Kingdom | 187.0 | 180.9 | 157.7 | | | | | Western Continental Europe | 301.2 | 283.6 | 198.7 | | | | | Asia-Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | 485.0 | 366.3 | 312.2 | | | | | | 1,761.8 | 1,493.5 | 1,260.5 | | | | Notes: $^{1}$ One-segment sales from the lower separately disclosed as they are not material. $^{2}$ North America includes the United States with revenue of $5,238.9 million (2021: $4,534.8 million, 2020: $4,276.1 million), revenue less pass-through costs of $4,485.0 million (2021: $3,397.6 million, 2020: $3,524.8 million) and headline operating profit of $7,916 million (2020: $6,953.8 million, 2020: $6,661.7 million). $^{3}$ Revenue less pass-through costs and headline operating profit are defined on page 133. 172 WFP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # 3. COSTS OF SERVICES AND GENERAL AND ADMINISTRATIVE COSTS | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Costs of services | 15,890.1 | 15,397.5 | 9,987.9 | | General and administrative costs | 1,188.6 | 876.6 | 6,393.0 | | | 15,070.5 | 15,372.1 | 14,280.9 | Costs of services and general and administrative costs include: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Staff costs (note 5) | 8,365.8 | 7,166.7 | 6,356.5 | | Establishment costs | 536.0 | 539.0 | 638.5 | | Hedda pass-through costs | 1,905.7 | 1,845.5 | 1,500.2 | | Other costs of services and general and administrative costs | 2,443.0 | 2,201.1 | 3,500.7 | | | 15,070.5 | 15,372.1 | 14,280.9 | Included within costs of services and general administrative costs are the following: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Goodwill impairment (note 16) | 37.9 | 1.8 | 2,823.9 | | Amortisation and impairment of acquired intangible assets | 43.1 | 97.8 | 89.1 | | Investment and other impairment charges/interests | 68.0 | (62.6) | 396.3 | | Intangible asset impairment | 39.0 | - | - | | Restructuring and transformation costs | 203.7 | 165.5 | 80.7 | | Restructuring costs in relation to Covid-19 | 15.1 | 29.9 | 232.5 | | Property related costs | 18.0 | - | - | | Losses/(gains) on disposal of investments and subsidiaries | 36.3 | 10.6 | (7.9) | | Oains on remeasurement of equity interests arising from a change in scope of ownership | (66.5) | - | (0.6) | | Litigation settlement | - | 21.3 | 25.6 | | Amortisation of other intangible assets | 21.9 | 19.9 | 35.3 | | Depreciation of property, plant and equipment | 166.9 | 151.2 | 176.8 | | Depreciation of right-of-use assets | 262.2 | 272.9 | 331.9 | | (Gains)/losses on sale of property, plant and equipment | (6.6) | (1.3) | 0.3 | | Net foreign exchange (gains)/losses | (8.7) | 4.4 | 3.9 | | Short-term lease expense | 20.2 | 18.0 | 36.7 | | Low-value lease expense | 1.9 | 2.3 | 2.3 | Note: 1. Other costs of services and general and administrative costs include £753.7 million (2021: £236.6 million, 2020: £465.0 million) of other pass-through costs. In 2022, operating profit includes credits totaling £29.3 million (2021: £19.3 million, 2020: £44.5 million) relating to the release of provisions and other balances established in respect of acquisitions completed prior to 2021. Further details of the Group's approach to acquisition reserves, as required by IFRS 5 Business Combinations, are given in note 29. The goodwill impairment charge of £37.9 million in 2022 (2021: £1.8 million, 2020: £2,803.9 million) relates to a number of businesses in the Group where the impact of increases in discount rates and current, local economic conditions and trading circumstances is sufficiently severe to indicate impairment to the carrying value. The goodwill impairment charge of £2,823.9 million in 2022 reflects the adverse impacts of Covid-19 on a number of businesses in the Group at that time. Amortisation and impairment of acquired intangible assets of £62.1 million (2021: £97.8 million, 2020: £89.1 million) includes an impairment charge in the year of £1.6 million (2021: £67.9 million, 2020: £21.6 million) in regard to certain brand names that are no longer in use. The investment and other impairment charges of £68.0 million (2021: reversal of £62.4 million, 2020: £296.2 million) relate to the same macro-economic factors noted above. The reversal in the prior year for investments primarily relates to the partial reversal of a £265.6 million impairment taken in 2020 relating to imagine, an associate in Spain. Intangible asset impairment of £29.0 million in 2022 (2021: nil, 2020: nil) relates to the write-off of capitalised configuration and customisation costs related to a software development project. Restructuring and transformation costs of £203.7 million (2021: £140.5 million, 2020: £80.7 million) include £136.5 million (2021: £94.2 million) in relation to the Group's IT transformation programme. This programme will allow technology to become a competitive advantage in the market as our clients, and their clients, move to an ever-increasing digital world. It includes costs of £96.8 million (2021: £62.2 million, 2020: nil) in relation to the rollout of a new ERP system in order to drive efficiency and collaboration throughout the Group. The remaining restructuring and transformation costs of £69.3 million (2021: £51.3 million) relates to the continuing restructuring plan. As part of that plan, restructuring actions have been taken to right size under-performing businesses, address high-cost severance markets and simplify operational structures. Restructuring costs in relation to Covid-19 of £15.1 million (2021: £29.9 million, 2020: £232.5 million) primarily relate to property costs which the Group undertook in response to the Covid-19 pandemic. Property related costs include further right-of-use asset impairments taken for properties that were previously impaired due to challenging conditions in the subletting market. In 2022, £18.0 million (2021: nil, 2020: nil) were incurred. Losses on disposal of investments and subsidiaries of £56.3 million in 2022 primarily includes a loss of £63.1 million on the divestment of our Russian interests which completed in May 2022. This was partially offset by gains on other disposals during the period including Ras Publica for £17.7 million and Mutual Mobile for £9.6 million with the remaining gains/losses due to individually insignificant transactions. Losses on disposal of investments and subsidiaries of £10.6 million in 2021 includes a loss of £6.9 million on the disposal of SHRT in China, which completed in September 2021. Oains on remeasurement of equity interests arising from a change in scope of ownership of £66.5 million (2021: £41, 2020: £16.6 million) comprises a gain in relation to the reclassification of the Group's interest in imagina in Spain from interests in associates to other investments. In 2022, the Group received £8.3 million (2021: £5.3 million, 2020: £77.1 million) of aid from governments around the world in relation to the Covid-19 pandemic, which is included as a credit in other staff costs. Other impairment charges included in restructuring costs of £63.3 million (2021: £39.2 million, 2020: £196.7 million) consists of £7.1 million (2021: £17.6 million, 2020: £167.6 million) within restructuring costs in relation to Covid-19 and £36.2 million (2021: £21.6 million, 2020: £49.1 million) within restructuring and transformation costs and property related costs. These impairment charges include £53.5 million (2021: £19.3 million, 2020: £117.0 million) in relation to right-of-use assets, £9.8 million (2021: £9.8 million, 2020: £79.7 million) of related property, plant and equipment and £nil (2021: £10.1 million, 2020: £nd) of other intangibles, arising from the Group's reassessment of its property requirements as a result of effective remote working practices during the Covid-19 pandemic and continued focus on campuses. Auditors' remuneration: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Fees payable to the Company's auditors for the audit of the Company and Group's annual accounts | 8.4 | 7.1 | 6.4 | | Fees payable for the audit of the Company's subsidiaries | 38.5 | 34.8 | 22.9 | | Fees payable to the auditors pursuant to legislation | 36.9 | 31.9 | 29.3 | | Audit-related services* | 0.6 | 0.6 | 0.6 | | Other services* | 0.6 | 1.6 | 0.7 | | Tax compliance services | 0.1 | - | 0.1 | | Total other fees | 1.1 | 1.0 | 1.2 | | Total fees | 38.0 | 33.7 | 30.3 | Notes: 1. Less than fees in respect of the audit of internal construction financial reporting. * Audit-related assurance services are in respect of the review of the interim financial information. 2. Other services include audits for earnings, business and other agreed upon procedures. WFP ANNUAL REPORT 2022 93 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # **4. (LOSS)/EARNINGS FROM ASSOCIATES - AFTER INTEREST AND TAX** Loss/(Earnings from associates - after interest and tax was a loss of £60.4 million in 2022, earnings of £25.8 million in 2021, and loss of £136.0 million in 2020). Loss/(Earnings from associates - after interest and tax includes £75.8 million (2021: £38.8 million, 2020: £54.3 million) of amortisation and impairment of acquired intangible assets as well as restructuring and one-off transaction costs of £54.8 million (2021: £18.8 million, 2020: £89.3 million) within Kantar. # **5. OUR PEOPLE** Our staff numbers averaged 114,109 for the year ended 31 December 2022 against 124,808 in 2021 and 104,163 in 2020. Their geographical distribution was as follows: | | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | North America | 23,740 | 21,764 | 21,324 | | United Kingdom | 12,490 | 10,995 | 10,670 | | Western Continental Europe | 22,707 | 21,314 | 21,201 | | Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | 55,182 | 50,535 | 50,408 | | | 114,109 | 104,808 | 104,163 | Their reportable segment distribution was as follows: | | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | Global Integrated Agencies | 97,288 | 89,701 | 88,406 | | Data Investment Management | - | - | 1,341 | | Public Relations | 8,105 | 7,101 | 6,892 | | Specialist Agencies | 8,716 | 7,986 | 7,606 | | | 114,109 | 104,808 | 104,163 | At the end of 2022, staff numbers were 115,475 (2021: 109,382, 2020: 99,830). Staff costs include: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Wages and salaries | 5,731.0 | 4,797.2 | 4,781.0 | | Cash-based incentive plans | 292.6 | 430.2 | 192.7 | | Share-based incentive plans (note 20) | 122.0 | 99.6 | 74.4 | | Social security costs | 689.4 | 630.1 | 570.8 | | Pension costs (note 26) | 204.8 | 177.7 | 171.7 | | Severance | 44.2 | 41.8 | 48.2 | | Other staff costs/ | 1,091.8 | 965.1 | 779.6 | | | 8,165.8 | 7,066.7 | 6,556.9 | Note Reserves and temporary staff costs are included in other staff costs Compensation for key management personnel includes: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Short-term employee benefits | 28.7 | 28.0 | 27.8 | | Pensions and other post-retirement benefits | 1.1 | 0.9 | 1.0 | | Share-based payments | 29.8 | 14.4 | 10.3 | | | 80.6 | 43.0 | 29.0 | Key management personnel comprises the Board and the Executive Committee. Further details of compensation for the Board are disclosed on pages 150 to 156. # **6. FINANCE AND INVESTMENT INCOME, FINANCE COSTS AND REVALUATION AND RETRANSALATION OF FINANCIAL INSTRUMENTS** Finance and investment income includes: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Income from equity investments | 24.3 | 17.9 | 8.7 | | Interest income | 120.9 | 51.5 | 74.0 | | | 140.4 | 69.4 | 82.7 | Finance costs include: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Net interest expense on pension plans | 2.2 | 1.8 | 2.9 | | Interest on other long-term employee benefits | 3.7 | 2.4 | 3.1 | | Interest expense and similar charges/ | 257.0 | 188.5 | 205.0 | | Interest expense related to lease liabilities | 92.7 | 90.9 | 101.0 | | | 228.4 | 283.6 | 312.0 | Revaluation and retranslation of financial instruments include: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Movements in fair value of treasury instruments | 0.5 | 9.1 | 15.4 | | Premium on the early repayment of bonds | - | (15.0) | - | | Revaluation of investments held at fair value through profit or loss | 23.1 | (7.5) | 8.0 | | Revaluation of out options over non-controlling interests | 27.9 | (40.6) | 12.3 | | Revaluation of payments due to vendors (earnout agreements) | 24.2 | (68.7) | 15.4 | | Retranslation of financial instruments | (1.7) | 22.9 | (196.3) | | | 74.0 | (87.0) | (147.2) | Note Interest expense and similar charges are payable on back control (15), bonds and bank loans held at amortised cost The majority of the Group's long-term debt is represented by 21,063 million of US dollar bonds at an average interest rate of 4.26%, 102,350 million of Eurobonds at an average interest rate of 2.25% and 8,650 million of Sterling bonds at an average interest rate of 3.21%. Average borrowings under the US Dollar Revolving Credit Facilities (note 10) amounted to nil (2021: nil). Average borrowings under the Australian Dollar Revolving Credit Facilities amounted to nil (2021: 4,552 million at an average rate of 1.89%). Average borrowings under the US Commercial Paper Programme for 2022 amounted to 2,195 million at an average interest rate of 2.54% inclusive of margin (2021: nil). Average borrowings under the Euro Commercial Paper Programme for 2022 amounted to £34 million at an average interest rate of 1.95% inclusive of currency swaps (2021: nil). # **7. TAXATION** In 2022, the effective tax rate on reported profit/(loss)/before taxation was 35.1% (2021: 24.2%, 2020: -4.6%). The tax charge comprises: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | **Corporation tax** | | | | | Current year | 435.8 | 404.0 | 307.8 | | Prior years | (53.2) | (61.4) | (82.2) | | | 370.3 | 362.6 | 234.6 | | **Deferred tax** | | | | | Current year | 9.4 | (21.0) | (80.2) | | Prior years | 4.7 | (1.5) | (17.3) | | | 16.1 | (132.5) | (97.5) | | **Tax charge** | 384.4 | 250.1 | 121.1 | WFP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The corporation tax credit for prior years in 2022, 2021 and 2020 primarily comprises the release of a number of provisions following the resolution of tax matters in various countries. The tax charge for the year can be reconciled to profit/loss) before taxation in the consolidated income statement as follows: | | 2022 $m | 2021 $m | 2020 $m | | --- | --- | --- | --- | | Profit/(loss) before taxation | 1,150.8 | 950.8 | (2,790.6) | | Tax at the corporation tax rate of 10.0% | 238.4 | 180.7 | (530.0) | | Tax effect of earnings from associates | 17.4 | (13.3) | 16.2 | | Irrecoverable withholding taxes | 33.9 | 32.3 | 49.4 | | Tax effect of items that are not deductible in restructuring taxation profits | 66.7 | 29.3 | 67.0 | | Tax effect of non-deductible goodwill impairment | 7.2 | 0.6 | 342.4 | | Effect of different tax rates in subsidiaries operating in other jurisdictions | 94.3 | 81.2 | 92.7 | | Origination and reversal on unrecognised temporary differences | (1.1) | (36.5) | (29.3) | | Tax losses not recognised or utilised in the year | 9.8 | 7.4 | 21.1 | | Utilisation of tax losses not previously recognised | (8.4) | (3.5) | (1.7) | | Net release of prior year provisions in relation to acquired businesses | (2.8) | (1.5) | (1.7) | | Other prior year adjustments | (68.0) | (41.8) | (98.8) | | Impact of deferred tax rate change | - | (23.8) | - | | Tax charge | 384.4 | 230.1 | 127.1 | | Effective tax rate on profit/loss) before tax | 83.1% | 24.2% | (4.6%) | Note: - As the Group is subject to the tax rates of more than one country, it has chosen to present its reconciliation of the tax charge using the UK corporation tax rate of 10.0% (2021: 10.0%, 2020: 10.0%). # FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS The tax charge may be affected by the impact of acquisitions, disposals and other corporate restructurings, the resolution of open tax issues, and the 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 support programmes implemented by governments during the Covid-19 pandemic, the OECD/G20 Initiative Framework on Base Exhibit and Profit Shifting, and changes arising from the application of existing rules or challenges by tax or competition authorities, may expose the Group to additional tax liabilities or impact the carrying value of deferred tax assets, which could affect the future tax charge. Liabilities relating to open and judgemental matters are based upon an assessment of whether the tax authorities will accept the position taken, after considering external advice where appropriate. Where the final tax 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. The Group does not currently consider that judgements made in assessing tax liabilities have a significant risk of resulting in any material additional charges or credits in respect of these matters, within the next financial year, beyond the amounts already provided. Following the enactment in 2021 of an increase in the UK corporation tax rate from 9% to 25% from 1 April 2023, the Group remeasured UK deferred tax balances accordingly and recognised a tax credit of 823.8 million in the prior period. # TAX RISK MANAGEMENT We look to maintain open and transparent relationships with the tax authorities in the jurisdictions in which we operate and relevant government 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. # 8. ORDINARY DIVIDENDS Amounts recognised as distributions to equity holders in the year: | | 2022 | 2021 | 2020 | 2021 | 2020 | 2021 | | --- | --- | --- | --- | --- | --- | --- | | For share | Pretax per share | | | $m | $m | $m | | 2021 Final dividend | 18.70p | 14.00p | | 203.5 | 187.7 | - | | 2022 Interim dividend | 15.00p | 12.50p | 10.00p | 181.9 | 167.0 | 123.0 | | | 33.70p | 26.50p | 10.00p | 265.4 | 214.7 | 123.0 | | | 2022 | 2021 | 2020 | 2021 | 2020 | 2021 | | For ADR* | Cents per ADR | | | $m | $m | $m | | 2021 Final dividend | 128.65£ | 89.85£ | - | 280.0 | 215.3 | - | | 2022 Interim dividend | 92.72£ | 85.99£ | 44.18£ | 300.1 | 202.3 | 154.6 | | | 221.55£ | 175.83£ | 44.18£ | 480.1 | 437.5 | 154.6 | Proposed final dividend for the year ended 31 December 2022: | | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | For share | Pretax per share | | | | Final dividend | 24.40p | 18.70p | 14.00p | | | 2022 | 2021 | 2020 | | For ADR* | Cents per share | | | | Final dividend | 150.85£ | 128.65£ | 89.85£ | Note: These figures have been translated for convenience purposes only, using the approximate average rate for the year of 1/31/2023 (2021: 1/31/2022, 2021: 1/31/2022). The conversion rate of net tax on income at a rate more than that the annual earnings amounts actually measured, as we do not remember this. (All dollars at the rates indicated) The payment of dividends will not have any tax consequences for the Group. Final dividends are paid in the subsequent year to which they relate. # 9. EARNINGS PER SHARE BASIC EPS The calculation of basic reported and headline EPS is as follows: | Continuing operations | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | Reported earnings' ($m) | 683.7 | 637.7 | (2,971.6) | | Headline earnings' ($m) (page 21d) | 1,100.2 | 956.5 | 762.3 | | Weighted average shares used in basic EPS calculation (m) | 1,097.9 | 1,196.1 | 1,223.0 | | Reported EPS | 40.3p | 33.4p | (241.0p) | | Headline EPS | 100.2p | 79.9p | 60.3p | | Discontinued operations | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | Reported earnings' ($m) | - | - | 6.3 | | Weighted average shares used in basic EPS calculation (m) | - | - | 1,223.0 | | Reported EPS | - | - | 0.3p | | Continuing and discontinued operations | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | Reported earnings' ($m) | 683.7 | 637.7 | (2,963.1) | | Weighted average shares used in basic EPS calculation (m) | 1,097.9 | 1,196.1 | 1,223.0 | | Reported EPS | 40.3p | 33.4p | (242.1p) | Note: - Reported earnings is equivalent to profit/loss) for the year attributable to equity holders of the parent. WFP ANNUAL REPORT 2022 175 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS WPP ANNUAL REPORT 2022176 9. EARNINGS PER SHARE CONTINUED DILUTED EPS The calculation of diluted reported and headline EPS is as follows: Continuing operations 2022 2021 2020 Diluted reported earnings (£m) 682.7 6 3 7. 7 (2,971.6) Diluted headline earnings (£m) 1,100.2 954.5 742.5 Weighted average shares used in reported diluted EPS calculation (m) 1 1,116.4 1,215.3 1,223.0 Weighted average shares used in headline diluted EPS calculation (m) 1,116.4 1,215.3 1,236.0 Diluted reported EPS 61.2p 52.5p (243.0p) Diluted headline EPS 98.5p 78.5p 60.1p Discontinued operations 2022 2021 2020 Diluted reported earnings (£m) – – 6.5 Weighted average shares used in diluted EPS calculation (m) 1 – – 1,223.0 Diluted reported EPS – – 0.5p Continuing and discontinued operations 2022 2021 2020 1 Diluted reported earnings (£m) 682.7 6 3 7. 7 (2,965.1) Weighted average shares used in diluted EPS calculation (m) 1 1,116.4 1,215.3 1,223.0 Diluted reported EPS 61.2p 52.5p (242.5p) Note 1 The weighted average shares used in the basic EPS calculation for 2020 have also been used for reported diluted EPS due to the anti-dilutive effect of the weighted average shares calculated for the reported diluted EPS calculation Diluted EPS has been calculated based on the diluted reported and diluted headline earnings amounts above. At 31 December 2022, options to purchase 19.7 million ordinary shares (2021: 7.2 million, 2020: 14.2 million) were outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the Group’s shares and, therefore, their inclusion would have been accretive. A reconciliation between the shares used in calculating basic and diluted EPS is as follows: 2022 m 2021 m 2020 m Weighted average shares used in basic EPS calculation 1,097.9 1,194.1 1,223.0 Dilutive share options outstanding 0.7 1.3 – Other potentially issuable shares 17.8 19.9 13.0 Weighted average shares used in diluted EPS calculation 1,116.4 1,215.3 1,236.0 At 31 December 2022 there were 1,141,427,296 (2021: 1,224,459,550, 2020: 1,296,080,242) ordinary shares in issue, including 70,489,953 treasury shares (2021: 70,489,953, 2020: 70,748,100). 10. SOURCES OF FINANCE The following table summarises the equity and debt financing of the Group, and changes during the year: Analysis of changes in financing Shares Debt 2022 £m 2021 £m 2020 £m 2022 £m 2021 £m 2020 £m Beginning of year 697.1 699.9 703.1 4,441.7 5,032.7 4,272.9 Ordinary shares issued 1.2 4.4 – – – – Share cancellations (8.3) (7.2) (3.2) – – – Net (decrease)/increase in drawings on bank loans and corporate bonds – – – (220.6) (397.1) 632.8 Amortisation of financing costs included in debt – – – 7.0 8.1 7.5 Changes in fair value due to hedging arrangements – – – – (2.5) (1.4) Other movements – – – (0.2) (0.4) (7.1) Exchange adjustments – – – 237.2 (199.1) 128.0 End of year 690.0 697.1 699.9 4,465.1 4,441.7 5,032.7 The table above excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash flow statement. Other liabilities from financing activities including lease liabilities and derivatives used for hedging debts are disclosed in note 13 and note 26, respectively. SHARES At 31 December 2022, the Company's share base was entirely composed of ordinary equity share capital and share premium of £690.0 million (2021: £697.1 million, 2020: £699.9 million), further details of which are disclosed in note 27. DEBT US$ bonds The Group has in issue $750 million of 3.75% bonds due September 2024, $93 million of 5.125% bonds due September 2042 and $220 million of 5.625% bonds due November 2043. Eurobonds The Group has in issue €750 million of 3.0% bonds due November 2023, €500 million of 1.375% bonds due March 2025, €750 million of 2.25% bonds due September 2026, €750 million of 2.375% bonds due May 2027, and €600 million of 1.625% bonds due March 2030. In March 2022, €250 million of Floating Rate Notes carrying a coupon of 3m EURIBOR +0.45% were repaid. Sterling bonds The Group has in issue £250 million of 3.750% bonds due May 2032 and £400 million of 2.875% bonds due September 2046. Revolving Credit Facility The Group has a five-year Revolving Credit Facility of $2.5 billion due March 2026, signed in November 2021. The Group’s borrowings under these facilities, which are drawn down predominantly in pounds sterling, averaged nil in 2022 (2021: nil, 2020: nil). 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 Credit Facility due August 2023. The Group's borrowings under the Australian dollar facilities, which were drawn down in Australian dollars and New Zealand dollars, averaged the equivalent of nil in 2022 (2021: A$52 million, 2020: A$151 million). The Group had available undrawn committed credit facilities of £2,069.0 million at 31 December 2022 (2021: £1,847.5 million, 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. During 2022, all covenants have been complied with and based on current forecasts it is expected that such covenants will continue to be complied with for the foreseeable future. FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 177WPP ANNUAL REPORT 2022 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 2022 was $195 million (2021: nil, 2020: $2 million). The average Euro commercial paper outstanding in 2022 was €34 million (2021: nil, 2020: nil) inclusive of the effect of currency swaps, where applicable. There was no US or Euro commercial paper outstanding at 31 December 2022. The following table is an analysis of future anticipated cash flows in relation to the Group’s debt, on an undiscounted basis which, therefore, differs from the fair value and carrying value: 2022 £m 2021 £m 2020 £m Within one year (791.6) (326.8) (182.2) Between one and two years (724.3) (745.4) (725.6) Between two and three years (524.2) (646.5) (795.7) Between three and four years (740.3) (492.8) (649.1) Between four and five years (719.9) (698.0) (528.2) Over five years (1,963.7) (2,546.3) (3,387.1) Debt financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes (5,464.0) (5,455.8) (6,267.9) Short-term overdrafts – within one year (505.7) (342.3) (8,562.0) Future anticipated cash flows (5,969.7) (5,798.1) (14,829.9) Effect of discounting/financing rates 998.9 1,014.1 1,235.2 Debt financing (4,970.8) (4,784.0) (13,594.7) Cash and short-term deposits 2,491.5 3,882.9 12,899.1 Adjusted net debt (2,479.3) (901.1) (695.6) Analysis of fixed and floating rate debt by currency including the effect of cross-currency swaps: 2022 £m Fixed rate 1 Floating basis Period (months) 1 Currency $ – fixed 1,379.5 4.18 n/a 60 £ – fixed 1,094.1 2.97 n/a 143 € – fixed 2,080.6 2.21 n/a 55 – floating – n/a EURIBOR – Other (89.1) n/a n/a n/a 4,465.1 2021 £m Fixed rate 1 Floating basis Period (months) 1 Currency $ – fixed 1,231.8 4.18 n/a 72 £ – fixed 1,094.1 2.97 n/a 155 € – fixed 1,976.0 2.04 n/a 69 – floating 210.2 n/a EURIBOR 3 Other (70.4) n/a n/a n/a 4,441.7 2020 £m Fixed rate 1 Floating basis Period (months) 1 Currency $ – fixed 1,585.1 4.06 n/a 70 £ – fixed 1,094.1 3.21 n/a 167 € – fixed 2,104.6 2.20 n/a 79 – floating 223.9 n/a EURIBOR 15 Other 25.0 n/a n/a n/a 5,032.7 Note 1 Weighted average The following table is an analysis of future undiscounted anticipated cash flows in relation to the Group’s financial derivatives, which include interest rate swaps, forward contracts and other foreign exchange swaps assuming interest rates and foreign exchange rates as at 31 December: Financial liabilities Financial assets 2022 Payable £m Receivable £m Payable £m Receivable £m Within one year 1,186.3 1,126.2 3 47.1 345.7 Between one and two years – – 11.6 6.2 Between two and three years – – 449.8 461.8 1,186.3 1,126.2 808.5 813.7 Financial liabilities Financial assets 2021 Payable £m Receivable £m Payable £m Receivable £m Within one year 185.8 173.7 581.1 582.5 Between one and two years 551.4 521.1 30.0 30.4 Between two and three years 11.6 6.0 – – Between three and four years 449.8 445.6 – – 1,198.6 1,146.4 611.1 612.9 Financial liabilities Financial assets 2020 Payable £m Receivable £m Payable £m Receivable £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 – – 716.6 709.9 569.3 573.0 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 10. SOURCES OF FINANCE CONTINUED # ANALYSIS OF CHANGE IN FINANCING ACTIVITIES (INCLUSIVE OF LEASES) The table below details changes arising from financing activities, including both cash and non-cash changes. | | Opening balance (m) | Cash flow (m) | Acquisition of subsidiaries (m) | Foreign exchange (m) | Interest and Other (m) | Closing balance (m) | | --- | --- | --- | --- | --- | --- | --- | | **2022** | | | | | | | | Borrowings (excluding lease liabilities) (note 10, 11, 21 and 26)^{1} | 4,443.7 | (293.6) | - | 257.2 | 6.8 | 4,443.1 | | Derivatives (note 18, 19 and 20) | 50.6 | - | - | 6.6 | (6.7) | 50.3 | | Lease liabilities (note 10)^{2} | 2,063.8 | (602.0) | 0.1 | 165.8 | 626.9 | 2,210.6 | | Share repurchase commitments (note 10)^{3} | 211.7 | (211.7) | - | - | - | - | | **Liabilities from financing activities** | **6,743.8** | **(854.3)** | **0.1** | **389.6** | **427.0** | **6,728.0** | | Cash and short-term deposits (note 11 and 26) | (3,882.9) | 1,494.6 | (38.8) | (64.2) | - | (2,691.5) | | Bank overdrafts | 342.3 | 165.6 | - | - | - | 503.7 | | | **3,203.2** | **833.5** | **(38.7)** | **333.2** | **627.0** | **6,762.2** | | **2023** | | | | | | | | Borrowings (excluding lease liabilities) (note 10, 11, 21 and 26)^{1} | 3,032.7 | (397.5) | - | (199.3) | 5.2 | 4,441.7 | | Derivatives (note 18, 19 and 20) | 3.2 | - | - | 47.0 | 0.6 | 50.6 | | Lease liabilities (note 10)^{2} | 2,766.3 | (409.1) | 34.2 | (23.3) | 283.7 | 2,045.8 | | Share repurchase commitments (note 10)^{3} | - | - | - | - | 211.7 | 211.7 | | Liabilities from financing activities | 7,192.2 | (856.2) | 34.2 | 373.4) | 501.0 | 6,745.8 | | Cash and short-term deposits (note 11 and 26) | (12,899.5) | 8,883.8 | 2.3 | 130.1 | - | (3,882.9) | | Bank overdrafts | 8,562.0 | (8,219.7) | - | - | - | 342.3 | | | 2,833.1 | (162.1) | 34.5 | (65.3) | 501.0 | 3,203.2 | Notes 1. Borrowings includes: leases and bank loans. The interest and other amounts within borrowings comprises: amortization of capitalized borrowing costs. 2. Repayment of lease liabilities includes 2022 in effect 2023. 2023 in effect of interest paid on lease liabilities recognized within net cash flows from operating activities (note 10, shares) and other within lease liabilities comprises: interest on leases as well as the lease liability liabilities and disposals authorized in note 10. 3. The cash flow of 2012 million related to these repurchase commitments is included within the 2022.7 million of total share repurchase and to place to (note 10) 78 WFP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # 11. ANALYSIS OF CASH FLOWS The following tables analyse the items included within the main cash flow headings on page 166. Net cash from operating activities: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Profit/(loss) for the year | 775.4 | 720.7 | (2,921.3) | | Taxation | 284.4 | 230.1 | 129.3 | | Revaluation and retranslation of financial instruments | (74.0) | 87.8 | 147.2 | | Finance costs | 339.4 | 283.6 | 192.3 | | Finance and investment income | (143.4) | (69.4) | (82.8) | | Loss/(earnings) from associates - after interest and tax | 60.4 | (23.8) | 156.0 | | Gain on sale of discontinued operations | - | - | (10.0) | | Attributable tax expense on sale of discontinued operations | - | - | 1.9 | | Operating profit/(loss) of continuing and discontinued operations | 1,358.2 | 1,259.0 | (3,267.4) | | Adjustments for | | | | | Non cash share-based incentive plans (including share options) | 122.0 | 99.6 | 76.4 | | Depreciation of property, plant and equipment | 164.9 | 151.2 | 176.8 | | Depreciation of right-of-use assets | 262.2 | 272.9 | 231.9 | | Impairment charges included within restructuring costs | 73.3 | 39.2 | 196.7 | | Goodwill impairment | 37.0 | 1.8 | 2,822.9 | | Amortisation and impairment of acquired intangible assets | 42.1 | 97.8 | 89.1 | | Amortisation of other intangible assets | 31.9 | 19.9 | 35.3 | | Investment and other impairment charges/ (reversals) | 68.0 | (48.4) | 296.3 | | Losses/(gains) on disposal of investments and subsidiaries | 24.5 | 10.6 | (7.8) | | Gain on remeasurement of equity interests arising from a change in scope of ownership | (64.3) | - | (0.4) | | (Gains)/losses on sale of property, plant and equipment | (6.4) | (1.3) | 0.3 | | Operating cash flow before movements in working capital and provisions | 2,716.9 | 1,878.3 | 1,765.7 | | Increase)/decrease in trade receivables and accrued income | (698.6) | (458.9) | 585.3 | | Increase in trade payables and deferred income | 170.6 | 777.8 | 195.0 | | Increase)/decrease in other receivables | (154.1) | (120.0) | 155.3 | | (Decrease)/increase in other payables - short-term | (338.6) | 347.0 | 256.6 | | Decrease in other payables - long-term | (67.0) | (11.0) | (64.3) | | (Decrease)/increase in provisions | (38.0) | (33.9) | 15.6 | | Cash generated by operations | 1,508.2 | 1,580.3 | 2,583.9 | | Corporation and overseas tax paid | (390.9) | (391.1) | (371.5) | | Payment on early settlement of bonds | - | (15.0) | - | | Interest and similar charges paid | (210.2) | (173.7) | (173.9) | | Interest paid on lease liabilities | (92.4) | (88.4) | (98.5) | | Interest received | 88.9 | 67.5 | 73.6 | | Investment income | 24.3 | 17.8 | 8.7 | | Dividends from associates | 37.6 | 53.4 | 52.5 | | Earnout payments recognised in operating activities | (24.8) | (3.8) | (6.2) | | Net cash inflow from operating activities | 700.9 | 2,039.0 | 2,050.6 | Notes: Impairment charges included within restructuring costs includes impairments for right-of-use assets, property, plant and equipment and other intangible assets. Earnout payments in excess of the price of determined at acquisition are recorded as operating activities. Prior operations amounts were recorded as investing activities and have been re-answered as operating activities. Acquisitions and disposals: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Initial cash consideration | (318.3) | (227.6) | (32.8) | | Cash and cash equivalents acquired | 38.8 | (2.3) | - | | Earnout payments | (64.4) | (53.2) | (111.0) | | Purchase of other investments (including associates) | (10.1) | (99.2) | (30.4) | | Acquisitions | (234.3) | (582.3) | (176.3) | | Proceeds on disposal of investments and subsidiaries | 50.1 | 51.9 | 320.0 | | Cash and cash equivalents disposed | (12.4) | (23.6) | (47.7) | | Disposals of investments and subsidiaries | 37.7 | 28.3 | 272.3 | | Cash consideration received from non-controlling interests | - | 39.5 | - | | Cash consideration for purchase of non-controlling interests | (84.2) | (133.0) | (85.6) | | Cash consideration for non-controlling interests | (84.2) | (95.5) | (85.6) | | Net acquisition payments and disposal proceeds | (283.7) | (449.5) | 17.5 | Notes: Earnout payments in excess of the amount determined at acquisition are recorded as operating activities. Prior year excess amounts were recorded as investing activities and have been re-answered as operating activities. Proceeds on disposal of investments and subsidiaries includes return of capital from investments in associates. Share repurchases and buybacks: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Purchase of own shares by ESOP Trusts | (83.3) | (89.2) | (1.1) | | Shares purchased into treasury for cancellation | (807.4) | (729.3) | (285.1) | | Net cash outflow | (863.7) | (818.3) | (290.2) | Proceeds from issue of bonds: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Proceeds from issue of €750 million bonds | - | - | 665.3 | | Proceeds from issue of £250 million bonds | - | - | 210.0 | | Net cash inflow | - | - | 915.5 | Repayment of borrowings: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Decrease in drawings on bank loans | (11.3) | (36.3) | (39.6) | | Repayment of $500 million bonds | - | (560.8) | - | | Repayment of $250 million bonds | (559.3) | - | (232.1) | | Net cash outflow | (320.6) | (387.5) | (282.7) | Cash and cash equivalents: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Cash at bank and in hand | 2,271.6 | 2,776.6 | 10,075.0 | | Short-term bank deposits | 219.9 | 1,106.3 | 2,824.1 | | Overdrafts | (501.7) | (562.3) | (8,162.2) | | | 1,985.8 | 3,560.6 | 4,337.1 | Note: Basic 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. WFP ANNUAL REPORT 2022 179 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 12. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 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, consisting of approximately 91% of the Kantar group, with consideration of £2,463.2 million after tax and disposal costs. The sale involved the Group disposing of the Kantar business and holding 65% equity states post transaction which are treated as associates. This generated a pre-tax gain of £73.8 million, tax charge of £107.6 million and goodwill impairment of £96.5 million for the Group. In 2020, the remaining stages of the transaction completed with total consideration of £206.1 million after tax and disposal costs. This generated a pre-tax gain of £10.0 million and a tax charge of £1.9 million. The Kantar group is classified as a discontinued operation in 2020 under IFRS 5, as it forms a separate major line of business and there was a single co-ordinated plan to dispose of it. Results of the discontinued operations, which have been included in profit for the year, were as follows: | | 2020 £m | | --- | --- | | Revenue | 107.6 | | Costs of services | 192.5 | | Gross profit | 15.1 | | General and administrative costs | (6.4) | | Operating profit | 10.7 | | Profit before interest and taxation | 10.7 | | Finance and investment income | 0.1 | | Finance costs | (0.5) | | Profit before taxation | 10.3 | | Attributable tax expense | (2.3) | | Profit after taxation | 8.3 | | Gain on sale of discontinued operations | 10.0 | | Attributable tax expense on sale of discontinued operations | (1.8) | Net gain attributable to discontinued operations 16.6 | Attributable to | | | --- | --- | | Equity holders of the parent | 6.3 | | Non-controlling interests¹ | 9.2 | | | 16.6 | Note In 2020, non-controlling interests includes £8.3 million recognized on the disposal of Kantar within WPP (congenial, a 50% owned subsidiary of the Group) For the year ended 31 December 2020, the Kantar group contributed £30.8 million to the Group's net operating cash flows, paid £0.9 million in respect of investing activities and paid £0.7 million in respect of financing activities. The gain on sale of discontinued operations disposed by 31 December 2020 is calculated as follows: | | 2020 £m | | --- | --- | | Intangible assets (including goodwill) | 162.3 | | Property, plant and equipment | 15.1 | | Right-of-use assets | 27.2 | | Interests in associates and joint ventures | 6.6 | | Deferred tax assets | 6.1 | | Corporate-income tax recoverable | 16.9 | | Trade and other receivables | 170.3 | | Cash and cash equivalents | 32.2 | | Trade and other payables | 744.6 | | Corporate-income tax payable | (5.4) | | Lease liabilities | (23.2) | | Deferred tax liabilities | (1.3) | | Provisions for post-employment benefits | (7.9) | | Provisions for liabilities and charges | (0.6) | | Net assets | 256.7 | Non-controlling interests 16.1 Net assets excluding non-controlling interests 248.6 | Consideration received in cash and cash equivalents | 240.9 | | --- | --- | | Transaction costs | (6.5) | | Deferred consideration¹ | 1.6 | | Total consideration received | 238.0 | Loss on sale before exchange adjustments 110.4 Exchange adjustments recycled to the income statement 30.6 Gain on sale of discontinued operation 10.0 Note Deferred consideration in 2020 is made up of £76.6 million expected to be received in future periods on the satisfaction of certain conditions and the defense of £78.0 million consideration against services the Group will supply to Kantar on favor statements in the future. The conditions expected to be met in the future include the settlement of ongoing legal cases, resolution of the value of certain investments and the utilisation of certain tax levies and allowances. There was a company at the date of disposal to request to the Chinese resolution of these items and estimates of amounts due to be received were required to be made. Other services individually material estimates. This is services provided by the Group to market areas through the negotiation of Transition Service Arrangements, as a summary for a disposal of this magnitude. The Group will support Kantar for a period of up to four years, primarily in the area of IT, on entry which are favourable to the disposal group. As such, an element of consideration has been deferred and will be recognized as the services are provided. 60 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # 13. LEASES The movements in 2022 and 2021 were as follows: | | Land and buildings | Plant and machinery | Total | | --- | --- | --- | --- | | High-of-use assets | (m) | (m) | (m) | | 1 January 2021 | 1,461.8 | 63.7 | 1,504.5 | | Additions | 264.6 | 17.5 | 285.8 | | Transfers to net investment in subleases | (26.9) | — | (26.9) | | Disposals | (33.6) | (1.5) | (34.9) | | Depreciation of right-of-use assets | (254.7) | (18.2) | (272.9) | | Impairment charges included within restructuring costs | (18.8) | (0.6) | (19.5) | | Other revenues | 6.8 | — | 6.8 | | Exchange adjustments | (22.1) | (1.9) | (24.0) | | 31 December 2021 | 1,357.0 | 38.1 | 1,399.1 | | Additions | 563.8 | 23.8 | 587.6 | | Transfers to net investment in subleases | (7.0) | — | (7.0) | | Disposals | (42.2) | (0.8) | (43.0) | | Depreciation of right-of-use assets | (245.3) | (16.0) | (262.2) | | Impairment charges included within restructuring costs | (33.5) | (0.2) | (33.5) | | Exchange adjustments | 89.2 | 2.3 | 91.5 | | 31 December 2022 | 1,482.2 | 46.2 | 1,528.5 | Note The five years ended 31 December 2022 and 2021, the Company has 318.3 million and 0.06.0 million of right-of-use assets that are classified as investment property, respectively. | Lease liabilities | Land and buildings (m) | Plant and machinery (m) | Total (m) | | --- | --- | --- | --- | | 1 January 2021 | 2,771.8 | 66.5 | 3,056.5 | | Additions | 277.0 | 16.1 | 293.7 | | Interest expense related to lease liabilities | 89.7 | 1.2 | 90.9 | | Disposals | (64.2) | (1.9) | (66.1) | | Repayment of lease liabilities (including interest) | (280.6) | (18.5) | (439.1) | | Exchange adjustments | (21.5) | (2.3) | (23.5) | | 31 December 2021 | 2,002.3 | 39.3 | 2,041.8 | | Additions | 353.4 | 22.7 | 377.3 | | Interest expense related to lease liabilities | 94.2 | 1.5 | 95.7 | | Disposals | (66.0) | (1.9) | (68.0) | | Repayment of lease liabilities (including interest) | (285.6) | (18.4) | (422.0) | | Exchange adjustments | 143.6 | 2.2 | 145.8 | | 31 December 2022 | 2,362.2 | 48.4 | 2,210.6 | The following table shows the breakdown of the lease-expense between amounts charged to operating profit and amounts charged to finance costs: | | 2022 (m) | 2021 (m) | 2020 (m) | | --- | --- | --- | --- | | Depreciation of right-of-use assets | | | | | Land and buildings | (248.5) | (254.7) | (312.1) | | Plant and machinery | (16.9) | (18.2) | (19.8) | | Impairment charges | (33.5) | (12.5) | (125.1) | | Short-term lease expense | (26.0) | (36.0) | (36.7) | | Low-value lease expense | (3.9) | (2.3) | (2.3) | | Variable lease expense | (87.5) | (56.2) | (85.4) | | Sublease income | 18.6 | 17.3 | 25.3 | | Charge to operating profit | (356.5) | (344.6) | (526.1) | | Interest expense related to lease liabilities | (95.7) | (80.0) | (101.0) | | Charge to profit before taxation for leases | (650.2) | (635.5) | (657.1) | Variable lease payments primarily include real estate taxes and insurance costs. The maturity of lease liabilities at 31 December 2022 and 2021 were as follows: | | 2022 (m) | 2021 (m) | | --- | --- | --- | | Within one year | 379.1 | 369.7 | | Between one and two years | 337.7 | 321.9 | | Between two and three years | 295.0 | 273.7 | | Between three and four years | 252.3 | 239.1 | | Between four and five years | 234.8 | 199.1 | | Over five years | 1,928.5 | 1,557.1 | | | 2,825.4 | 2,600.6 | | Effect of discounting | (616.8) | (576.8) | | Lease liability at end of year | 2,310.6 | 2,041.8 | | Short-term lease liability | 282.4 | 279.7 | | Long-term lease liability | 1,926.3 | 1,762.1 | The total committed future cash flows for leases not yet commenced at 31 December 2022 is 6,620.0 million. The Group does not face a significant liquidity risk with regard to its lease liabilities. Refer to note 25 for management of liquidity risk. # 14. INTANGIBLE ASSETS GOODWILL The movements in 2022 and 2021 were as follows: | | (m) | | --- | --- | | Cost | | | 1 January 2021 | 10,807.3 | | Additional | 233.8 | | Disposals | (5.6) | | Exchange adjustments | (166.7) | | 31 December 2021 | 10,991.0 | | Additional | 262.6 | | Disposals | — | | Exchange adjustments | 891.0 | | 31 December 2022 | 12,166.6 | Accumulated impairment losses and write-downs | 1 January 2021 | 3,418.5 | | --- | --- | | Impairment losses for the year | 1.8 | | Exchange adjustments | (14.6) | | 31 December 2021 | 3,378.7 | | Impairment losses for the year | 37.9 | | Exchange adjustments | 376.6 | | 31 December 2022 | 3,691.2 | Net book value | 31 December 2022 | 8,453.4 | | --- | --- | | 31 December 2021 | 7,612.3 | | 1 January 2021 | 7,188.8 | Note Additions represent goodwill arising on the acquisition of subsidiary undertakings including the effect of any revisions to be made adjustments that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 2 Business Combinations. The effect of such revisions was not material to either year concerned. WPP ANNUAL REPORT 2022 91 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 16. INTANGIBLE ASSETS CONTINUED # OTHER INTANGIBLE ASSETS The movements in 2022 and 2021 were as follows: | | Brands with an indefinite useful life mn | Acquired intangibles mn | Other mn | Total mn | | --- | --- | --- | --- | --- | | Cost | | | | | | 1 January 2021 | 1,071.9 | 1,568.7 | 300.2 | 2,960.9 | | Additions | - | - | 29.9 | 29.9 | | Disposals | - | (7.5) | (44.4) | (51.9) | | New acquisitions | - | 97.7 | - | 97.7 | | Other movements | - | - | 3.9 | 3.9 | | Exchange adjustments | (4.4) | (19.7) | (1.4) | (21.7) | | 31 December 2021 | 1,047.3 | 1,444.6 | 288.1 | 2,999.8 | | Additions | - | - | 16.9 | 16.9 | | Disposals | - | (6.7) | (58.0) | (63.0) | | New acquisitions | - | 66.5 | 1.3 | 67.7 | | Other movements | - | 9.3 | 0.8 | 10.1 | | Exchange adjustments | 98.7 | 131.6 | 34.7 | 265.0 | | 31 December 2022 | 1,144.0 | 1,827.1 | 280.5 | 3,373.6 | Amortisation and impairment | 1 January 2021 | 12.8 | 1,329.2 | 310.6 | 1,552.6 | | --- | --- | --- | --- | --- | | Change for the year | 63.8 | 53.5 | 19.9 | 117.6 | | Impairment charges included within restructuring costs | - | - | 10.1 | 10.1 | | Disposals | - | (5.5) | (24.5) | (28.0) | | Other movements | - | - | (1.5) | (1.5) | | Exchange adjustments | 0.2 | (8.2) | (2.1) | (10.0) | | 31 December 2021 | 56.8 | 1,371.0 | 312.5 | 1,640.3 | | Change for the year | - | 61.9 | 21.9 | 83.8 | | Intangible asset impairment | - | - | 29.0 | 29.0 | | Disposals | - | (4.4) | (59.6) | (65.8) | | Exchange adjustments | 3.8 | 109.9 | 16.7 | 132.4 | | 31 December 2022 | 62.6 | 1,538.6 | 220.7 | 1,821.7 | Net book value | 31 December 2022 | 1,103.6 | 288.7 | 50.8 | 1,650.8 | | --- | --- | --- | --- | --- | | 31 December 2021 | 1,010.5 | 273.6 | 75.6 | 1,339.5 | | 1 January 2021 | 1,038.1 | 260.5 | 89.7 | 1,389.3 | Note: Other movements in acquired intangibles include accounts for fair value adjustment in arising on the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 2 Business Control values. Cash-generating units (CDUs) with significant goodwill and brands with an indefinite useful life as at 31 December are: | | Goodwill | | Brands with an indefinite useful life | | | --- | --- | --- | --- | --- | | | 2022 mn | 2021 mn | 2022 mn | 2021 mn | | Group M | 3,178.3 | 2,982.5 | - | - | | Wunderman Thompson | 1,210.8 | 997.3 | 442.0 | 420.1 | | Ogilvy | 849.8 | 786.6 | 223.8 | 205.0 | | VM-15A | 776.0 | 675.6 | 207.6 | 189.8 | | Burson Cohn & Wolfe | 846.0 | 583.7 | 140.5 | 128.4 | | ARGA Group | 658.7 | 570.2 | - | - | | FGS Global | 631.8 | 393.2 | - | - | | Landor Group | 104.5 | 97.1 | 55.7 | 50.7 | | Other | 695.5 | 526.3 | 34.8 | 31.3 | | | 8,453.4 | 7,612.3 | 1,103.4 | 1,010.5 | 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. Acquired intangible assets at net book value at 31 December 2022 include brand names of £162.3 million (2021: £157.6 million), customer-related intangibles of £150.5 million (2021: £150.6 million), and other assets (including proprietary tools) of £26.1 million (2021: £25.6 million). The total amortisation and impairment of acquired intangible assets of £61.9 million (2021: £97.3 million) includes an impairment charge in the year of £1.6 million (2021: £67.9 million) in regards to certain brand names in the Global Integrated Agencies segment that are no longer in use. In 2021, £63.8 million of the impairment charge related to brands with an indefinite useful life. In 2021, £63.1 million of the impairment charge related to the Global Integrated Agencies segment and £0.8 million related to the Specialist Agencies segment. In addition, the total amortisation and impairment of acquired intangible assets includes £0.2 million (2021: £0.5 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 £57.9 million (2021: £1.8 million) was recognised during the year due to a number of underperforming businesses in the Group. This year, £56.2 million of the impairment charge related to the Specialist Agencies segment and £3.7 million related to the Public Relations segment. 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 IFRS, 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 of disposal 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 2022 and/or 2023, nil growth rate thereafter (2021: nil) and a conservative pre-tax discount rate of 15.3% (2021: 15.5%). The pre-tax discount rate of 15.3% was above the rate calculated for the global networks of 14.5% (2021: 15.5%). For smaller CGUs that operate primarily in a particular region subject to higher risk, the higher of 15.5% 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% (2021: 2.0%, 2022: 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 2022, we have assessed long-term industry trends based on recent historical data and assumed a long-term growth rate of 2.0% (2021: 2.0%, 2022: 2.0%). 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 (CAFM) 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. 92 WFP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The pre-tax discount rate applied to the cash-flow projections for the COUs that operate globally was 14.5% (2021: 12.5%). We developed a global discount rate that takes into account the diverse nature of the operations, as these COUs operate with a diverse range of clients in a range of industrial throughout the world, hence are subject to similar levels of market risks. The pre-tax discount rates applied to the COUs that have more regional specific operations ranged from 14.0% (2021: 11.3%) to 22.6% (2021: 18.4%). Our approach in determining the recoverable amount utilizes 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 COU'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 COU 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. 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 recognized. The average operating margins used in the five-year projection period for COUs with significant goodwill and brands with an indefinite useful life ranged from 12.8% to 23.4%. Wunderman Thompson's recoverable amount exceeded its carrying value by $165.5 million and a the only COU with significant goodwill and brands with an indefinite useful life that is sensitive to changes in the key assumptions used in determining the recoverable amount. Holding other assumptions constant, the carrying value would be greater than its recoverable amount if the average operating margin decreased by 0.8% or the discount rate increased by 0.7%. Wunderman Thompson is not sensitive to a reasonably possible change in revenue less pass-through costs growth. 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, 62,832.9 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, 62,353.7 million of the impairment charge related to Global Integrated Agencies, 350.5 million related to Public Relations and 630.6.3 million related to Specialist Agencies. 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. In developing the cash flows for the 2020 impairment tests, we considered the 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 accordingly. For the remaining years in the projection period, we assessed when the cash flows would recover to 2019 levels as representative of pre-Covid-19 revenue less pass-through costs and operating margins. For many of our COUs, recovery to 2019 levels by 2023 was estimated with some COUs using alternative recovery profiles as considered appropriate. The pre-tax discount rate applied to the cash-flow projections for the COUs that operate globally was 12.5%. The pre-tax discount rates applied to the COUs that have more regional specific operations ranged from 12.8% to 18.4% for the 30 June 2020 test, 12.5% to 14.0% for the 30 September 2020 test, and 11.2% to 15.6% for the 31 December 2020 test. As part of the overall effort to simplify operations and become more client-centric, certain operations were realigned between the various networks. These realignments were reflected in the COUs being tested. The most significant of these for the 30 June 2020 test included the treatment of Landor and Fitch as a single COU given the collaboration of the two brands from both a management and client perspective; the shift of certain European operations into VMLY&R; and the transfer of certain Asian operations from VMLY&R to Ogilvy in order to improve the operational synergies and offer in the respective regions. Subsequent realignments to improve the operational synergies and regional offers were reflected in the September and December tests including the shift of certain Latin American and European operations between Wunderman Thompson, VMLY&R and GroupH; and the transfer of certain Asian operations to VMLY&R that previously operated independently from a network. The transfers of carrying value between COUs were determined on a relative value basis. These realignments did not have a significant impact on the impairment figures recognized. The COUs with significant impairments of goodwill as at 31 December 2020 are set out in the below table with the recoverable amount determined as of the December 2020 test. | | Operating factor | Recoverable amount 2020 (£) | Goodwill impairment charge 2020 (£) | | --- | --- | --- | --- | | Wunderman Thompson | Global Integrated Agencies | 1,956.8 | 1,207.5 | | VMLY&R | Global Integrated Agencies | 1,075.7 | 506.9 | | Bunson Collin & Wolfe | Public Relations | 790.2 | 166.8 | | Geometry Global | Global Integrated Agencies | 166.6 | 505.8 | | Landor & Fitch | Specialist Agencies | 177.6 | 185.6 | | Other | | 1,609.5 | 485.5 | | | | 3,574.2 | 2,822.9 | WFP ANNUAL REPORT 2022 103 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 15. PROPERTY, PLANT AND EQUIPMENT The movements in 2022 and 2021 were as follows: | | Land buildings (m) | Freehold buildings (m) | Leasehold buildings (m) | Fixtures, fittings and equipment (m) | Computer equipment (m) | Total (m) | | --- | --- | --- | --- | --- | --- | --- | | Cost | | | | | | | | 1 January 2021 | 36.3 | 59.6 | 1,032.5 | 169.3 | 381.7 | 1,697.6 | | Additions | 16.3 | 8.9 | 136.3 | 31.5 | 74.0 | 263.3 | | New acquisitions | - | - | 1.5 | 1.3 | 1.0 | 4.0 | | Disposals | (0.1) | (0.6) | (108.3) | (60.0) | (56.6) | (205.6) | | Exchange adjustments | (5.3) | 13.5 | (5.3) | (12.6) | (8.7) | (18.3) | | 31 December 2021 | 63.2 | 61.6 | 1,075.0 | 169.3 | 391.8 | 1,720.9 | | Additions | 13.8 | 0.1 | 75.8 | 32.1 | 86.6 | 208.6 | | New acquisitions | - | - | 0.5 | 0.2 | 0.6 | 1.3 | | Disposals | (0.1) | (8.5) | (62.1) | (40.0) | (72.1) | (182.6) | | Exchange adjustments | (16.5) | 20.5 | 84.7 | 23.0 | 39.8 | 126.8 | | 31 December 2022 | 60.0 | 90.5 | 1,178.9 | 166.8 | 468.7 | 1,922.9 | Depreciation and impairment | 1 January 2021 | - | 2.3 | 510.4 | 106.9 | 286.9 | 936.5 | | --- | --- | --- | --- | --- | --- | --- | | Charge for the year | - | 1.0 | 66.5 | 27.8 | 56.1 | 151.5 | | Impairment charges included within restructuring costs | - | - | 7.1 | 1.8 | 0.9 | 9.8 | | Disposals | - | - | (108.3) | (55.8) | (55.1) | (239.2) | | Exchange adjustments | - | (0.6) | (6.3) | (8.5) | (8.5) | (23.8) | | 31 December 2021 | - | 2.7 | 469.6 | 71.9 | 280.3 | 824.5 | | Charge for the year | - | 0.7 | 76.0 | 26.5 | 65.7 | 166.9 | | Impairment charges included within restructuring costs | - | - | 9.1 | 0.6 | 0.1 | 9.8 | | Disposals | - | (1.7) | (65.5) | (26.7) | (71.1) | (173.0) | | Exchange adjustments | - | 0.3 | 63.3 | 17.5 | 53.0 | 94.0 | | 31 December 2022 | - | 2.0 | 532.4 | 79.8 | 308.0 | 922.3 | Net book value | 31 December 2022 | 60.0 | 90.5 | 646.5 | 85.0 | 138.7 | 1,000.7 | | --- | --- | --- | --- | --- | --- | --- | | 31 December 2021 | 63.2 | 58.7 | 605.4 | 77.6 | 111.3 | 896.6 | | 1 January 2021 | 36.3 | 57.3 | 562.1 | 80.6 | 94.8 | 790.9 | At 31 December 2022, capital commitments contracted, but not provided for in respect of property, plant and equipment, were £128.2 million (2021: £107.3 million). # 16. INTERESTS IN ASSOCIATES, JOINT VENTURES AND # OTHER INVESTMENTS The movements in 2022 and 2021 were as follows: | | Interests in associates and joint ventures (m) | Other investments (m) | | --- | --- | --- | | 1 January 2021 | 330.7 | 387.3 | | Additions | 10.6 | 5.9 | | Earnings from associates - after interest and tax | 23.8 | - | | Share of other comprehensive income of associate undertakings | 13.5 | - | | Dividends | (53.6) | - | | Other movements | (0.2) | - | | Exchange adjustments | (22.5) | - | | Disposals | (4.8) | (31.9) | | Reclassification from subsidiaries | 4.2 | - | | Revaluation of other investments through profit or loss | - | (7.5) | | Revaluation of other investments through other comprehensive income | - | (35.5) | | Amortisation of other intangible assets | (0.5) | - | | Reversal of write-downs | 28.5 | - | | 31 December 2021 | 412.9 | 318.3 | | Additions | 6.6 | 5.1 | | Loss from associates - after interest and tax | (60.6) | - | | Share of other comprehensive income of associate undertakings | 51.2 | - | | Dividends | (37.6) | - | | Other movements | 3.9 | - | | Exchange adjustments | 17.1 | - | | Disposals | (9.6) | (16.0) | | Reclassification to subsidiaries | (5.9) | - | | Reclassification from associates to other investments | (22.5) | 61.6 | | Revaluation of other investments through profit or loss | - | 23.1 | | Revaluation of other investments through other comprehensive income | - | (22.3) | | Amortisation of other intangible assets | (0.2) | - | | Write-downs | (67.2) | - | | 31 December 2022 | 305.1 | 349.8 | Interests in joint ventures are immaterial and none of the Group's associates are individually material at 31 December 2022. 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. 96 WFP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # AGGREGATE INFORMATION OF ASSOCIATES THAT ARE NOT INDIVIDUALLY MATERIAL The following table presents a summary of the aggregate financial performance of the Group's associate undertakings and joint ventures. | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | (Loss)/earnings from associates - after interest and tax (note 4) | (80.4) | 33.8 | (106.0) | | Share of other comprehensive income/(loss) of associate undertakings | 55.2 | 13.5 | (61.5) | | Share of total comprehensive (loss)/income of associate undertakings | (8.2) | 37.5 | (107.5) | The application of equity accounting is ordinarily discontinued when the investment is reduced to zero and additional losses are not provided for unless the Group has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. As at 31 December 2021, the cumulative share of unrecognised losses in relation to Imagina, an associate in Spain with the investment carrying value reduced to zero, were £23.0 million. In 2022, the Group partially disposed of its investment in Imagina in Spain resulting in its reclassification from interests in associates to other investments (within the scope of IFRS 9) designated as fair value through other comprehensive income. Refer to note 26 for further details on financial instruments held at fair value though other comprehensive income. In the year ended 31 December 2022, share of losses of £20.5 million for the US and £13.6 million for the Rest of World were not recognised in relation to Kantar as the investment was reduced to zero. At 31 December 2022, capital commitments contracted, but not provided for, in respect of interests in associates and other investments were £3.2 million (2021: £5.6 million). WPP ANNUAL REPORT 2022 95 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # **17. DEFERRED TAX** The Group's deferred tax assets and liabilities are measured at the end of each period in accordance with IAS 15 Income Taxes. The recognition of deferred tax assets is determined by reference to the Group's estimate of recoverability, using models where appropriate to forecast future taxable profits. Deferred tax assets have only been recognised for territories where the Group considers that it is probable that all or a portion of the deferred tax assets will be realised. The main factors that we consider include: - 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 - the nature of the income that can be used to realise the deferred tax asset If it is probable that some portion of these assets will not be realised, no asset is recognised in relation to that portion. If market conditions improve and future results of operations exceed our current expectations, our existing recognised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions deteriorate further or future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realisable. As a result, all or a portion of the deferred tax assets may need to be reversed. 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: | | Gross 2022 £m | Offset 2022 £m | As reported 2022 £m | Gross 2022 £m | Offset 2021 £m | As reported 2021 £m | | --- | --- | --- | --- | --- | --- | --- | | Deferred tax assets | 588.8 | (266.7) | 323.1 | 565.0 | (223.5) | 341.5 | | Deferred tax liabilities | (67.5) | 266.7 | (255.8) | (536.0) | 223.5 | (312.5) | | | (28.7) | | (28.7) | 29.0 | - | 29.0 | The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2022 and 2021 | | Deferred compensation £m | Accounting provisions and accruals £m | Retirement benefit obligations £m | Property, plant and equipment £m | Tax losses and credits £m | Share-based payments £m | Restructuring provisions £m | Other temporary differences £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **1 January 2021** | 69.5 | 109.5 | 57.9 | 80.9 | 92.5 | 21.6 | 56.6 | 11.6 | 677.5 | | Acquisition of subsidiaries | - | - | - | - | - | - | - | 0.9 | 0.9 | | Credit/Change to income | 58.3 | 0.3 | 1.3 | (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 | (6.6) | 3.9 | (5.2) | | **31 December 2021** | 108.5 | 106.2 | 53.4 | 68.0 | 110.5 | 43.5 | 61.1 | 13.8 | 565.0 | | Acquisition of subsidiaries | - | - | - | - | - | - | - | 1.1 | 1.1 | | (Charge)/credit to income | (38.7) | 3.3 | (2.9) | (10.0) | 5.0 | 1.3 | 21.2 | (14.2) | (35.0) | | Charge to other comprehensive income | - | - | (7.0) | - | - | - | - | - | (7.0) | | Charge to equity | - | - | - | - | - | (15.5) | - | - | (15.5) | | Exchange differences and other movements | 6.5 | 10.6 | 6.5 | 63.6 | 7.0 | 3.0 | 2.5 | 6.7 | 80.2 | | **31 December 2022** | **76.3** | **120.1** | **68.0** | **101.6** | **122.5** | **33.3** | **86.6** | **3.6** | **588.8** | Other temporary differences comprise a number of items, none of which is individually significant to the Group's consolidated balance sheet. At 31 December 2022 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 2022 and 2021: | | Brands and other intangibles £m | Associate earnings £m | Goodwill £m | Property, plant and equipment £m | Financial instruments £m | Other temporary differences £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | **1 January 2021** | 326.8 | 58.0 | 123.1 | - | 35.8 | 23.0 | 568.7 | | Acquisition of subsidiaries | 22.3 | - | - | - | - | - | 22.3 | | (Credit)/charge to income | (19.5) | (21.6) | 8.2 | - | (35.5) | 16.8 | (51.6) | | Exchange differences and other movements | (6.7) | 0.3 | 1.9 | - | (0.5) | (0.7) | (3.6) | | **31 December 2021** | 325.1 | 36.8 | 123.2 | - | - | 60.9 | 536.0 | | Acquisition of subsidiaries | 15.1 | - | - | - | - | - | 15.1 | | (Credit)/charge to income | (12.6) | (5.5) | 19.7 | (14.2) | - | (10.5) | (20.9) | | Charge to other comprehensive income | - | - | - | - | - | 0.6 | 0.6 | | Exchange differences and other movements | 24.8 | 2.2 | 22.5 | 37.2 | - | 1.2 | 86.9 | | **31 December 2022** | **352.6** | **36.5** | **173.6** | **23.0** | - | **32.0** | **617.5** | Other temporary differences comprise a number of items none of which is individually significant to the Group's consolidated balance sheet. At 31 December 2022 the balance related to temporary differences in relation to unremitted earnings of subsidiaries, unremitted earnings of associates and other temporary differences. 186 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS At the balance sheet date, the Group has gross tax losses and other temporary differences of £7,667.4 million (2021: £8,961.4 million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £3,259.7 million (2021: £3,259.2 million) of such tax losses and other temporary differences. No deferred tax asset has been recognised in respect of the remaining £3,651.7 million (2021: £4,705.2 million) of losses and other temporary differences as the Group considers that there will not be enough taxable profits in the entities concerned such that any additional asset could be considered recoverable. Included in the total unrecognised temporary differences are losses of £60.3 million (2021: £63.8 million) that will expire within one to ten years, and £3,186.1 million (2021: £4,457.3 million) of losses that may be carried forward indefinitely. 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 not been recognised was £1,946.1 million (2021: £1,585.3 million). No liability 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 the Group considers that it is probable that such differences will not reverse in the foreseeable future. ### 18. TRADE AND OTHER RECEIVABLES The following are included in trade and other receivables: | | 2022 £m | 2021 £m | | --- | --- | --- | | Amounts falling due within one year | | | | Trade receivables (net of loss allowance) | 7,603.9 | 6,600.5 | | Work in progress | 355.4 | 354.0 | | VAT and sales taxes recoverable | 448.1 | 350.3 | | Prepayments | 236.6 | 215.3 | | Accrued income | 3,448.3 | 3,433.7 | | Fair value of derivatives | 8.1 | 2.5 | | Other debtors | 585.3 | 506.0 | | | 12,499.7 | 11,362.3 | The ageing of trade receivables and other financial assets by due date is as follows: | | Carrying amount of | | Days past due | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 December 2022 £m | Net past due £m | 0-30 days £m | 31-90 days £m | 91-180 days £m | 181 days 1 year £m | Greater than 1 year £m | | 2022 | | | | | | | | | Gross trade receivables | 7,475.4 | 6,386.5 | 706.4 | 507.1 | 66.8 | 23.5 | 45.1 | | Loss allowance | (71.5) | (1.6) | (5.8) | (6.6) | (6.6) | (13.3) | (37.6) | | | 7,403.9 | 6,384.9 | 700.6 | 260.5 | 60.2 | 10.2 | 7.5 | | Gross accrued income | 3,483.6 | 2,027.0 | 603.8 | 450.5 | 376.8 | 27.5 | - | | Loss allowance | (17.8) | (0.3) | (0.2) | (0.0) | (16.9) | - | - | | | 3,448.3 | 2,026.9 | 603.6 | 450.4 | 339.9 | 27.5 | - | | Other financial assets | 412.0 | 538.8 | 31.2 | 4.1 | 1.0 | 4.2 | 28.7 | | | 11,484.3 | 8,950.6 | 1,335.4 | 697.0 | 431.1 | 43.9 | 36.2 | | | Days past due | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Carrying amount of 31 December 2021 £m | Net past due £m | 0-30 days £m | 31-90 days £m | 91-180 days £m | 181 days 1 year £m | Greater than 1 year £m | | 2021 | | | | | | | | | Gross trade receivables | 6,671.0 | 5,755.4 | 589.8 | 194.4 | 64.0 | 10.4 | 56.6 | | Loss allowance | (70.5) | (2.3) | (0.3) | (1.9) | (7.5) | (4.9) | (53.7) | | | 6,600.5 | 5,733.3 | 589.6 | 192.5 | 56.5 | 5.7 | 2.9 | | Gross accrued income | 3,449.6 | 1,947.6 | 619.4 | 448.1 | 307.7 | 126.8 | - | | Loss allowance | (15.9) | (1.8) | (1.0) | (0.8) | (4.2) | (6.0) | - | | | 3,435.7 | 1,945.8 | 618.4 | 447.5 | 305.4 | 120.8 | - | | Other financial assets | 496.3 | 432.1 | 15.2 | 2.7 | 3.0 | 2.7 | 50.6 | | | 10,532.5 | 8,122.2 | 1,255.2 | 442.5 | 343.9 | 129.2 | 53.5 | Other financial assets are included in other debtors. Past due amounts are not impaired where collection is considered likely. | | 2022 £m | 2021 £m | | --- | --- | --- | | Amounts falling due after more than one year | | | | Prepayments | 3.9 | 3.0 | | Fair value of derivatives | 0.4 | 0.5 | | Other debtors | 234.1 | 148.1 | | | 218.6 | 152.6 | The Group has applied the practical expedient permitted by IFRS 15 to not disclose the transaction price allocated to performance obligations unsatisfied (or partially unsatisfied) as of the end of the reporting period as contracts typically have an original expected duration of a year or less. Other debtors falling due after more than one year for 31 December 2022 included £15.4 million in relation to pension plans in surplus. The corresponding figure for 31 December 2021 is included in provision for post employment benefits. | | 2022 £m | 2021 £m | | --- | --- | --- | | Less allowance | | | | At beginning of year | 70.5 | 112.5 | | New acquisitions | - | 3.7 | | Charged to the income statement | 29.1 | 17.2 | | Released to the income statement | (8.4) | (27.9) | | Exchange adjustments | 3.1 | (1.7) | | Utilisations and other movements | (24.8) | (33.3) | | At end of year | 71.5 | 70.5 | The loss allowance is equivalent to 1.0% (2021: 1.7%) of gross trade accounts receivables. Impairment losses on work in progress, accrued income and other debtors were immaterial for the years presented. The Group considers that the carrying amount of trade and other receivables approximates their fair value. WPP ANNUAL REPORT 2022 167 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # **18. TRADE AND OTHER RECEIVABLES CONTINUED** **EXPECTED CREDIT LOSSES** Given the short-term nature of the Group's trade receivables, work in progress and accrued income, which are mainly due from large national or multinational companies, the Group's assessment of expected credit losses includes provisions for specific clients and receivables where the contractual cash flow is deemed at risk. Considerations include the current economic environment, and the level of credit insurance the Group has along with historical and forward-looking information. Additional provisions are made based on the assessment of recoverability of aged receivables over one year where sufficient evidence of recoverability is not evident. # **19. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR** The following are included in trade and other payables falling due within one year: | | 2022 £m | 2021 £m | | --- | --- | --- | | Trade payables | 15,182.3 | 12,596.9 | | Deferred income | 1,599.0 | 1,234.0 | | Payments due to vendors (earnout agreements) | 62.0 | 85.6 | | Liabilities in respect of put option agreements with vendors | 18.8 | 58.4 | | Fair value of derivatives | 58.0 | 6.6 | | Share repurchases - close period commitments^{1} | - | 210.7 | | Other creditors and accruals | 3,914.8 | 2,939.3 | | | **19,834.9** | **15,252.2** | **Note** 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 all voting rules. The commitment resulting from this agreement constituted a liability of 31 December 2021 and was recognised as a movement in other reserves in the year ended 31 December 2021. After the close period ended on 15 February 2022, the liability was settled and the amount in other reserves was reclassified to retained earnings. The Group considers that the carrying amount of trade and other payables approximates their fair value. In all material respects, deferred income at 31 December 2021 was recognised as revenue during the year. Other than business as usual movements, and deferred income acquired on the acquisition of subsidiaries, there were no other significant changes in contract liability balances during the year. # **20. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR** The following are included in trade and other payables falling due after more than one year: | | 2022 £m | 2021 £m | | --- | --- | --- | | Payments due to vendors (earnout agreements) | 98.1 | 111.1 | | Liabilities in respect of put option agreements with vendors | 323.3 | 333.1 | | Fair value of derivatives | - | 47.2 | | Other creditors and accruals | 69.5 | 138.3 | | | **490.9** | **609.9** | The Group considers that the carrying amount of trade and other payables approximates their fair value. The following table sets out payments due to vendors, comprising contingent consideration and the Directors' best estimates of future earnout-related obligations: | | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 62.0 | 85.6 | | Between one and two years | 19.5 | 24.0 | | Between two and three years | 37.6 | 35.7 | | Between three and four years | 28.6 | 31.4 | | Between four and five years | 22.4 | - | | | **160.1** | **186.7** | 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: | | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 18.8 | 58.4 | | Between one and two years | 9.2 | 10.1 | | Between two and three years | 76.6 | 16.4 | | Between three and four years | 99.5 | 99.0 | | Between four and five years | 74.8 | 76.6 | | Over five years | 47.5 | 128.0 | | | **342.1** | **391.3** | # **21. BANK OVERDRAFTS, BONDS AND BANK LOANS** Amounts falling due within one year: | | 2022 £m | 2021 £m | | --- | --- | --- | | Bank overdrafts | 505.7 | 342.3 | | Corporate bonds and bank loans | 663.3 | 206.9 | | | **1,169.0** | **547.2** | The Group considers that the carrying amount of bank overdrafts approximates their fair value. Amounts falling due after more than one year: | | 2022 £m | 2021 £m | | --- | --- | --- | | Corporate bonds and bank loans | 3,801.8 | 4,216.8 | The Group estimates that the fair value of corporate bonds is 66,068.1 million at 31 December 2022 (2021: 66,790.3 million). The fair values of the corporate bonds are based on quoted market prices and is within Level 1 of the fair value hierarchy. The Group considers that the carrying amount of bank loans of 6x1 (2021: 614.7 million) approximates their fair value. 188 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The corporate bonds, bank loans and overdrafts included within liabilities fall due for repayment as follows: | | 2008 £m | 2007 £m | | --- | --- | --- | | Within one year | 1,169.0 | 567.2 | | Between one and two years | 818.0 | 429.3 | | Between two and three years | 640.2 | 550.4 | | Between three and four years | 658.8 | 478.8 | | Between four and five years | 665.1 | 623.6 | | Over five years | 1,422.4 | 1,954.8 | | | 4,970.8 | 4,784.0 | ## 22. PROVISIONS FOR LIABILITIES AND CHARGES The movements in 2002 and 2021 were as follows: | | Property £m | Other £m | Total £m | | --- | --- | --- | --- | | 1 January 2021 | 76.7 | 229.6 | 306.3 | | Charged to the income statement | 25.2 | 55.8 | 61.0 | | Acquisitions¹ | - | 7.3 | 7.3 | | Utilised | (7.0) | (69.9) | (76.9) | | Released to the income statement | (18.3) | (23.0) | (43.3) | | Other movements | (5.2) | 18.9 | 13.7 | | Exchange adjustments | (0.8) | 1.2 | 0.4 | | 31 December 2021 | 70.6 | 197.9 | 268.5 | | Charged to the income statement | 8.1 | 6.4 | 16.5 | | Acquisitions¹ | - | 1.3 | 1.3 | | Utilised | (12.8) | (37.2) | (50.0) | | Released to the income statement | (3.2) | (22.2) | (25.4) | | Other movements | (6.8) | 17.8 | 15.0 | | Exchange adjustments | 4.9 | 17.8 | 22.7 | | 31 December 2022 | 63.8 | 181.8 | 266.6 | Note: Acquisitions include £12 million (2021: £7.5 million) of provisions arising from its construction use adjustments related to the acquisition of subsidiary undertakings that had been determined previously at the immediately preceding balance sheet date as permitted by PFC (Business Combinator). The Company and various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims will have a material adverse effect on the Group's financial position or on the results of its operations. The utilisation of "Other" provisions in 2021 is primarily driven by litigation settlements. ## 23. SHARE-BASED PAYMENTS Charges for share-based incentive plans were as follows: | | 2008 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Share-based payments | 122.0 | 99.6 | 76.6 | Share-based payments comprise charges for stock options and restricted stock awards to employees of the Group. As of 31 December 2022, there was £200.7 million (2021: £205.6 million) of total unrecognised compensation cost related to the Group's restricted stock plans. Further information on stock options is provided in note 27. ### RESTRICTED STOCK PLANS The Group operates a number of equity-settled share incentive schemes, in most cases satisfied by the delivery of stock from one of the Group's ESOP Trusts. The most significant current schemes are as follows: #### EXECUTIVE PERFORMANCE SHARE PLAN (EPSP) This scheme is intended to reward and incentivise the most senior executives of the Group. The performance period is three or five complete financial years, commencing with the financial year in which the award is granted. The vest date will usually be in the March following the end of the performance period. Vesting is conditional on continued employment throughout the vesting period. The 2020, 2021 and 2022 EPSP awards are subject to three equally weighted performance conditions: three year average Return on Invested Capital (ROIC), cumulative Adjusted Free Cash Flow (APCF), and relative Total Shareholder Return (TSR). Achieving the threshold performance requirement will result in a vesting opportunity of 20% for that element. The vesting opportunity will increase on a straight line basis to 100% of the award for maximum performance. The Compensation Committee has an overriding discretion to determine the extent to which the award will vest. The 2019 EPSP awards are subject to a relative TSR performance condition, with a ROIC underpin. TSR performance will be compared to companies representing the most relevant, listed global competitors, with performance below median resulting in zero vesting. Performance between median and upper-decile provides for a vesting opportunity of between 15% and 100%. The awards will vest subject to a ROIC underpin of an average of 7.5% over the performance period. The Compensation Committee has an overriding discretion to determine the extent to which the award will vest. For EPSP awards granted between 2017 and 2018 there are three performance 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 15% vesting of the part of the award dependent on TSR. The maximum vest of 100% will arise if performance relies in the 90th percentile, with a sliding scale of vesting for performance between threshold and maximum. - (ii) Headline diluted earnings per share. The performance range is 7% to 14% compound annual growth. Threshold performance will result in 15% vesting, maximum performance will result in 100% vesting. There is a sliding vesting scale in between threshold and maximum. - (iii) Return on equity (ROE). Average annual ROE is defined as headline diluted EPS divided by the balance sheet value per share of shareholders' equity. The performance range is 15% - 18% average annual ROE. Threshold performance will result in 15% vesting, maximum performance will result in 100% vesting. There is a sliding vesting scale in between threshold and maximum. WPP ANNUAL REPORT 2022 99 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # **33. SHARE-BASED PAYMENTS CONTINUED** **PERFORMANCE SHARE AWARDS (PSA)** Conditional stock awards made under the PSA are dependent upon annual performance targets, typically based on one or more of: operating profit, profit before taxation and operating margin. Grants are made in the year following the year of performance measurement, and vest two years after grant date provided the individual concerned is continually employed by the Group throughout this time. # **LEADERSHIP SHARE AWARDS** WPP Leadership Awards are conditional stock awards made to around 1,900 of our key executives. Awards vest three years after grant, provided the participant is still employed within the Group. # **VALUATION METHODOLOGY** For all of these schemes, the valuation methodology is based upon fair value on grant date, which is determined by the market price on that date or the application of a Black-Scholes model, depending upon the characteristics of the scheme concerned. The assumptions underlying the Black-Scholes model are detailed in note 27, including details of assumed dividend yields. Market price on any given day is obtained from external, publicly available sources. # **MARKET/NON-MARKET CONDITIONS** Most share-based plans are subject to non-market performance conditions, such as margin or growth targets, as well as continued employment. EPSP is subject to a number of performance conditions, including TSR, a market-based condition. For schemes without market-based performance conditions, the valuation 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 estimate of the likely number of shares expected to vest. For schemes with market-based performance conditions, the probability of satisfying these conditions is assessed at grant date through a statistical model (such as the Monte Carlo model) and applied to the fair value. This initial 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 cessation of employment, the cumulative charge taken to date is reversed. Movement on ordinary shares granted for significant restricted stock plans: | | Non-vested 1 January 2022 number m | Granted number m | Forfeited number m | Vested number m | Non-vested 31 December 2022 number m | | --- | --- | --- | --- | --- | --- | | Executive Performance Share Plan (EPSP) | 16.7 | 6.1 | (2.2) | (0.3) | 20.4 | | Performance Share Awards (PSA) | 3.1 | 4.0 | (0.2) | (2.8) | 4.1 | | Leadership Share Awards | 10.4 | 4.9 | (1.2) | (2.8) | 15.5 | # **Weighted average fair value (pence per share)** | Executive Performance Share Plan (EPSP) | 900p | 1,025p | 1,035p | 415p | 924p | | --- | --- | --- | --- | --- | --- | | Performance Share Awards (PSA) | 604p | 911p | 798p | 519p | 952p | | Leadership Share Awards | 922p | 767p | 881p | 795p | 899p | | | Non-vested 1 January 2021 number m | Granted number m | Forfeited number m | Vested number m | Non-vested 31 December 2021 number m | | --- | --- | --- | --- | --- | --- | | Executive Performance Share Plan (EPSP) | 15.0 | 6.1 | (2.2) | (0.3) | 16.7 | | Performance Share Awards (PSA) | 4.3 | 0.4 | (0.3) | (1.4) | 3.1 | | Leadership Share Awards | 11.0 | 3.6 | (1.1) | (2.1) | 10.4 | # **Weighted average fair value (pence per share)** | Executive Performance Share Plan (EPSP) | 943p | 951p | 1,289p | 833p | 900p | | --- | --- | --- | --- | --- | --- | | Performance Share Awards (PSA) | 675p | 666p | 534p | 839p | 604p | | Leadership Share Awards | 831p | 990p | 853p | 709p | 923p | The total fair value of shares vested for all the Group's restricted stock plans during the year ended 31 December 2022 was $65.4 million (2021: $66.1 million, 2020: $71.6 million). 90 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS ### 34. PROVISION FOR POST-EMPLOYMENT BENEFITS Companies within the Group operate a large number of pension plans, the forms and benefits of which vary with conditions and practices in the countries concerned. The Group's pension costs are analysed as follows: | | 2020 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Defined contribution plans | 191.3 | 162.8 | 157.8 | | Defined benefit plans charge to operating profit | 13.5 | 14.9 | 13.9 | | Pension costs (note 5) | 204.3 | 177.7 | 171.7 | | Net interest expense on pension plans (note 6) | 2.2 | 1.8 | 2.9 | | | 207.0 | 179.5 | 174.4 | ### DEFINED BENEFIT PLANS The pension costs are assessed in accordance with the advice of local independent qualified actuaries. The latest full actuarial valuations for the various pension plans were carried out at various dates in the last three years. These valuations have been updated by the local actuaries to 31 December 2022. The majority of plans provide final salary benefits, with plan benefits typically based either on mandatory plans under local legislation, termination indemnity benefits, or on the rules of WPP sponsored supplementary plans. The implications of IRBC 14 have been allowed for where relevant, in particular with regard to the asset ceiling/irrecoverable surplus. The Group's policy is to close existing defined benefit plans to new members. This has been implemented across a significant number of the pension plans. Contributions to funded plans are determined in line with local conditions and practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2022 amounted to 624.0 million (2021: £16.7 million, 2020: £20.3 million). Employer contributions and benefit payments in 2023 are expected to be approximately £20.0 million. ### (A) ASSUMPTIONS There are a number of areas in pension accounting that involve estimates made by management based on advice of qualified advisors. These include establishing the discount rates, rates of increase in salaries and pensions in payment, inflation, and mortality assumptions. The main weighted average assumptions used for the actuarial valuations at 31 December are shown in the following table: | | 2022 % pa | 2021 % pa | 2020 % pa | 2019 % pa | | --- | --- | --- | --- | --- | | **UK** | | | | | | Discount rate^{1} | 5.1 | 1.8 | 1.3 | 2.0 | | Rate of increase in pensions in payment | 4.4 | 4.5 | 4.4 | 4.4 | | Inflation | 3.0 | 3.2 | 2.8 | 2.6 | | **North America** | | | | | | Discount rate^{1} | 5.2 | 2.6 | 2.0 | 3.0 | | Rate of increase in salaries^{2} | n/a | n/a | 3.0 | 3.0 | | **Western Continental Europe** | | | | | | Discount rate^{1} | 4.1 | 1.3 | 0.9 | 1.2 | | Rate of increase in salaries | 3.5 | 2.3 | 2.2 | 3.2 | | Rate of increase in pensions in payment | 2.0 | 1.8 | 1.8 | 1.8 | | Inflation | 2.0 | 1.7 | 1.7 | 1.7 | | **Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe** | | | | | | Discount rate^{1} | 6.4 | 5.3 | 4.2 | 4.6 | | Rate of increase in salaries | 5.7 | 5.6 | 5.2 | 6.1 | | Inflation | 5.4 | 3.7 | 3.7 | 3.7 | Notes $^{1}$ Discount rates are based on high quality corporate bond yields. In countries where there is no direct 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 of years were known. Active participants will not receive additional benefits for future services under these plans. For the Group's pension plans, the plans' assets are invested with the objective of being able to meet current and future benefit payment needs, while controlling balance sheet volatility and future contributions. Pension plan assets are invested with a number of investment managers, and assets are diversified among equities, bonds, insured annuities, property and cash or other liquid investments. The primary use of bonds as an investment class is to 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 risk characteristics and are of equivalent currency and term to the plan liabilities. Various insurance policies have also been bought historically to provide a more exact match for the cash flows, including a match for the actual mortality of specific plan members. These insurance policies effectively provide protection against both investment fluctuations and longevity risks. The strategic target allocation varies among the individual plans. Management considers the types of investment classes in which the pension plan assets are invested. The types of investment classes are determined by economic and market conditions and in consideration of specific asset class risk. Management periodically commissions detailed asset and liability studies performed by third-party professional investment advisors and actuaries that generate probability-adjusted expected future returns on those assets. These studies also project the estimated future pension payments and evaluate the efficiency of the allocation of the pension plan assets into various investment categories. At 31 December 2022, the life expectancies underlying the value of the accrued liabilities for the main defined benefit pension plans operated by the Group were as follows: | Years life expectancy after age 65 | All plans | North America | UK | Western Continental Europe | Other | | --- | --- | --- | --- | --- | --- | | Current pensioners (at age 65) - male | 22.3 | 21.9 | 23.6 | 21.0 | 12.7 | | Current pensioners (at age 65) - female | 24.0 | 23.3 | 25.1 | 24.0 | 15.5 | | Future pensioners (current age 45) - male | 24.0 | 23.3 | 25.6 | 23.2 | 12.7 | | Future pensioners (current age 45) - female | 25.7 | 24.7 | 27.1 | 25.9 | 15.5 | Note $^{1}$ Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe The life expectancies after age 65 at 31 December 2021 were 22.3 years and 24.0 years for male and female current pensioners (at age 65) respectively, and 24.1 years and 25.8 years for male and female future pensioners (current age 45), respectively. In the determination of mortality assumptions, management uses the most up-to-date mortality tables available in each country. WPP ANNUAL REPORT 2022 191 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table provides information on the weighted average duration 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. | | All plans | North America | UK | Western Continental Europe | Other | | --- | --- | --- | --- | --- | --- | | Weighted average duration of the defined benefit obligation (years) | 8.5 | 7.5 | 10.0 | 9.7 | 5.9 | | Expected benefit payments over the next ten years (£m) | | | | | | | Written 12 months | 46.6 | 21.7 | 12.7 | 5.8 | 6.4 | | In 2024 | 43.5 | 21.1 | 12.7 | 6.1 | 3.6 | | In 2025 | 44.5 | 20.6 | 13.4 | 6.0 | 4.3 | | In 2026 | 46.4 | 21.2 | 13.4 | 6.4 | 5.4 | | In 2027 | 46.2 | 21.1 | 12.0 | 6.2 | 4.9 | | In the next five years | 215.2 | 95.5 | 56.5 | 53.9 | 29.5 | Note 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe The following table presents a sensitivity analysis for each significant actuarial assumption showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at the balance sheet date. This sensitivity analysis applies to the defined benefit obligation only and not to the net defined benefit pension liability in its entirety, the measurement of which is driven by a number of factors including, in addition to the assumptions below, the fair value of plan assets. The sensitivity analyses are based on a change in one assumption while holding all other assumptions constant so that interdependencies between the assumptions are excluded. The methodology applied is consistent with that used to determine the recognised defined benefit obligation. The sensitivity analysis for inflation is not shown as it is an underlying assumption to build the pension and salary increase assumptions. Changing the inflation assumption on its own without changing the salary or pension assumptions will not result in a significant change in pension liabilities. | | (Decrease)/Increase in benefit obligation | | | --- | --- | --- | | Sensitivity analysis of significant actuarial assumptions | 2000 £m | 2001 £m | | Discount rate | | | | Increase by 20 basis points: | | | | UK | (3.6) | (7.6) | | North America | (4.4) | (6.6) | | Western Continental Europe | (2.0) | (3.4) | | Other | (0.5) | (0.6) | | Decrease by 20 basis points: | | | | UK | 3.8 | 8.0 | | North America | 4.6 | 6.6 | | Western Continental Europe | 2.1 | 3.6 | | Other | 0.6 | 0.6 | | Rate of increase in salaries | | | | Increase by 20 basis points: | | | | Western Continental Europe | 0.5 | 0.8 | | Other | 0.5 | 0.5 | | Decrease by 20 basis points: | | | | Western Continental Europe | (0.5) | (0.8) | | Other | (0.5) | (0.5) | | Rate of increase in pensions in payment | | | | Increase by 20 basis points: | | | | UK | 0.7 | 0.9 | | Western Continental Europe | 1.1 | 1.7 | | Decrease by 20 basis points: | | | | UK | (0.6) | (0.9) | | Western Continental Europe | (1.0) | (1.7) | | Life expectancy | | | | Increase in longevity by one additional year: | | | | UK | 6.8 | 13.3 | | North America | 4.3 | 5.3 | | Western Continental Europe | 3.6 | 4.2 | Note 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 192 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # 34. PROVISION FOR POST-EMPLOYMENT BENEFITS CONTINUED (B) ASSETS AND LIABILITIES 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 following table: | | 2022 £m | % | 2021 £m | % | 2020 £m | % | | --- | --- | --- | --- | --- | --- | --- | | Equities | 26.7 | 6.3 | 31.8 | 5.8 | 41.6 | 8.7 | | Bonds | 208.8 | 48.5 | 339.7 | 47.0 | 384.3 | 48.1 | | Insured annuities | 160.2 | 36.7 | 322.5 | 40.3 | 332.8 | 41.0 | | Property | 1.4 | 0.3 | 1.0 | 0.2 | 0.7 | 0.1 | | Cash | 18.1 | 4.2 | 15.3 | 2.8 | 16.7 | 2.6 | | Other | 26.3 | 6.1 | 21.8 | 3.9 | 22.6 | 3.7 | | Total fair value of assets | 630.3 | 100.0 | 932.1 | 100.0 | 616.6 | 100.0 | | Present value of liabilities | (883.6) | | (888.5) | | (772.7) | | | Deficit in the plans | (122.5) | | (136.6) | | (156.1) | | | Irrecoverable surplus | - | | (0.2) | | (0.6) | | | Net liability^{1} | (122.5) | | (136.6) | | (156.7) | | | Plans in surplus^{2} | 15.4 | | 30.1 | | 27.2 | | | Plans in deficit | (137.5) | | (166.7) | | (185.9) | | Notes: 1 The revised deferred tax asset is also used in notes 17. 2 The net asset related to plans in surplus of 0.5 m (plus for 31 December 2021) is recorded in the consolidated balance sheet within other debtors. The corresponding figures for 31 December 2021 and 31 December 2020 are recorded in practice for post-employment benefits. All plan assets have quoted prices in active markets with the exception of insured annuities and other assets. The value of insured annuities is equal to the value of the pension benefits covered by the annuities. | Surplus/(deficit) in plans by region | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | UK | 2.3 | 0.4 | 0.7 | | North America | (37.9) | (28.1) | (37.9) | | Western Continental Europe | (53.6) | (74.0) | (85.9) | | Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | (36.7) | (36.7) | (33.0) | | Deficit in the plans | (122.5) | (136.6) | (156.1) | 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 unfunded plans, the benefit payments are made as and when they fall due. Pre-funding of these plans would not be typical business practice. The following table shows the split of the deficit at 31 December between funded and unfunded pension plans. | | 2022 Surplus/ Deficit/ £m | 2022 Present value of liabilities/ £m | 2021 2022 Deficit/ £m | 2021 Present value of liabilities/ £m | 2020 2022 Surplus/ Deficit/ £m | 2020 Present value of liabilities/ £m | | --- | --- | --- | --- | --- | --- | --- | | Funded plans by region | | | | | | | | UK | 2.3 | (155.5) | 0.4 | (231.9) | 0.7 | (262.7) | | North America | 4.1 | (208.5) | 20.1 | (237.9) | 17.6 | (271.8) | | Western Continental Europe | (39.1) | (67.0) | (63.1) | (87.6) | (38.6) | (86.3) | | Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | (6.1) | (35.4) | (6.6) | (25.7) | (5.8) | (24.1) | | Deficit/liabilities in the funded plans | (26.8) | (457.3) | (31.0) | (383.1) | (26.3) | (642.9) | | Unfunded plans by region | | | | | | | | North America | (61.2) | (61.2) | (68.2) | (68.2) | (55.3) | (55.3) | | Western Continental Europe | (25.5) | (25.5) | (28.9) | (28.9) | (47.5) | (47.5) | | Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe | (20.6) | (20.6) | (28.5) | (28.5) | (27.2) | (27.2) | | Deficit/liabilities in the unfunded plans | (95.3) | (95.3) | (103.6) | (103.6) | (139.8) | (139.8) | | Deficit/liabilities in the plans | (122.5) | (882.6) | (136.6) | (688.5) | (156.1) | (772.7) | In accordance with IAS 19, plans that are wholly or partially funded are considered funded plans. # (C) PENSION EXPENSE The following tables show the breakdown of the pension expense between amounts charged to operating profit and amounts charged to finance costs: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Service cost^{1} | 10.4 | 12.6 | 12.0 | | Administrative expenses | 3.1 | 2.3 | 1.9 | | Charge to operating profit | 13.5 | 16.9 | 13.9 | | Net interest expense on pension plans | 2.2 | 1.8 | 2.9 | | Charge to profit before taxation for defined benefit plans | 15.7 | 16.7 | 16.8 | Note: 1 Includes current service cost, past service costs related to plan amendments and (gain) fees on settlements and in malinents. The following table shows the breakdown of amounts recognised in other comprehensive income (OCI): | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Return on plan assets (excluding interest income) | (137.6) | (29.1) | 57.2 | | Changes in demographic assumptions underlying the present value of the plan liabilities | 0.6 | (3.6) | 3.8 | | Changes in financial assumptions underlying the present value of the plan liabilities | 163.0 | 31.1 | (36.0) | | Experience (loss)/gain arising on the plan liabilities | (0.1) | 15.7 | (4.6) | | Change in irrecoverable surplus | 0.2 | 0.4 | (0.6) | | Actuarial gain recognised in OCI | 16.6 | 16.3 | 2.0 | WFP ANNUAL REPORT 2022 95 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED 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: | | 2003 £m | 2002 £m | 2001 £m | | --- | --- | --- | --- | | Plan liabilities at beginning of year | 688.3 | 772.7 | 767.5 | | Service cost | 10.4 | 12.6 | 12.0 | | Interest cost | 15.5 | 12.0 | 17.0 | | Actuarial (gain)/loss: | | | | | Effect of changes in demographic assumptions | (0.4) | 3.6 | (3.8) | | Effect of changes in financial assumptions | (163.5) | (31.5) | 54.0 | | Effect of experience adjustments | 0.1 | (15.7) | 4.4 | | Benefits paid | (53.0) | (59.5) | (59.6) | | Loss/(gain) due to exchange rate movements | 40.4 | (6.5) | (4.2) | | Settlement payments | (8.7) | (5.3) | (17.0) | | Other* | 2.5 | 0.3 | 2.4 | | Plan liabilities at end of year | 502.6 | 688.5 | 772.7 | Notes: * Includes current service cost, paid service costs related to plan amendments and (gain)/loss on settlements and outpatients. Other includes acquisitions, disposals, plan participants' contributions and reclassifications. The reclassification represent certain of the Group's defined benefit plans which are included in the data 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: | | 2003 £m | 2002 £m | 2001 £m | | --- | --- | --- | --- | | Fair value of plan assets at beginning of year | 553.1 | 616.4 | 608.5 | | Interest income on plan assets | 15.5 | 12.2 | 9.1 | | Return on plan assets (excluding interest income) | (137.6) | (29.3) | 17.2 | | Employer contributions | 24.0 | 16.7 | 20.3 | | Benefits paid | (53.0) | (59.5) | (59.6) | | Gain/(loss) due to exchange rate movements | 31.5 | (2.4) | (6.8) | | Settlement payments | (8.7) | (5.3) | (17.0) | | Administrative expenses | (3.0) | (1.8) | (1.0) | | Other* | 1.0 | 0.1 | 1.8 | | Fair value of plan assets at end of year | 420.5 | 552.1 | 616.4 | | Actual return on plan assets | (114.5) | (19.0) | 21.2 | Notes: * Other includes acquisitions, disposals, plan participants' contributions and reclassifications. The reclassification represent certain of the Group's defined benefit plans which are included in the data 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 (including cross currency swaps) at 31 December 2022 were primarily made up of $1,667 million, $1,094 million and €2,350 million (2021: $1,667 million, $1,094 million and €2,600 million). The Group's average gross debt during the course of 2022 was $1,667 million, $1,094 million and €2,404 million (2021: $1,194 million, $1,094 million and €2,600 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 4.18% for an average period of 60 months; 100% of the sterling debt is at a fixed rate of 3.97% for an average period of 143 months; and 100% of the euro debt is at fixed rates averaging 3.31% for an average period of 55 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 2022 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 28% in 2022. 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 revenue less pass-through costs 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 expenditures 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. 96 WIP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # 3B. RISK MANAGEMENT POLICIES CONTINUED At 31 December 2022, the Group has access to 66.6 billion of committed facilities with maturity dates spread over the years 2023 to 2046 as illustrated below: | | 2022 £m | 2021 £m | 2020 £m | 2019 £m | 2018 £m | | --- | --- | --- | --- | --- | --- | | £ bonds £400m (2.875% 2046) | 400.0 | | | | 400.0 | | US bond £500m (1.625% 2045) | 181.9 | | | | 181.9 | | US bond £90m (1.125% 2042) | 76.8 | | | | 76.8 | | £ bonds £250m (3.75% 2032) | 250.0 | | | | 250.0 | | Eurobonds €400m (1.625% 2030) | 531.2 | | | | 531.2 | | Eurobonds €750m (2.375% 2027) | 666.0 | | | | 666.0 | | Eurobonds €750m (2.25% 2026) | 666.0 | | | 666.0 | | | Bank receiver (22,000m 2026) | 2,049.0 | | | 2,049.0 | | | Eurobonds €500m (1.375% 2025) | 442.7 | | 442.7 | | | | US bond £750m (3.75% 2026) | 620.7 | | 620.7 | | | | Eurobonds €750m (2.5% 2025) | 666.0 | 666.0 | | | | | Total committed facilities available | 6,566.3 | 666.0 | 620.7 | 642.7 | 2,722.0 | | Drawn down facilities at 31 December 2022 | 6,695.3 | 666.0 | 620.7 | 642.7 | 666.0 | | Undrawn committed credit facilities | 2,069.0 | | | | | | Drawn down facilities at 31 December 2022 | 4,693.3 | | | | | | Net cash at 31 December 2022 | (1,985.8) | | | | | | Other adjustments | (30.3) | | | | | | Adjusted net debt at 31 December 2022 | 2,679.3 | | | | | 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 maximising 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 6% of total trade receivables as at 31 December 2022 or 31 December 2021. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are high rated (AAA) funds, banks with high credit ratings assigned by international credit rating agencies or banks that have been financed by their government. WPP ANNUAL REPORT 2022 95 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # EFFECTS OF HEDGE ACCOUNTING ON THE FINANCIAL POSITION AND PERFORMANCE The effects of the hedging instruments on the Group's financial position and performance are as follows: | | 2003 | 2002 | | --- | --- | --- | | **(1) Cash flow hedges of foreign currency risk** | | | | Carrying amount of derivative hedging instruments^{1} | (84.6m) | (64.0m) | | Notional amount of hedged items | €1,000.0m | €1,000.0m | | Notional amount of hedging instruments | €1,000.0m | €1,000.0m | | Maturity date | 2003/2008 | 2003/2009 | | Hedge ratio | 1:1 | 1:1 | | Change in value of hedged item used to determine hedge effectiveness | €38.0m | (€38.0m) | | Change in value of hedging instrument used to determine hedge effectiveness | (€41.4m) | €35.5m | | Hedge ineffectiveness (evaluation and retranslation of financial instruments) | €3.9m | €0.5m | | Weighted average hedged rate for the year | 3.2% | 3.2% | | **(2) Net investment hedges of foreign currency risk** | | | | Carrying amount of derivative hedging instruments^{1} | (€44.9m) | €0.7m | | Carrying amount of non-derivative hedging instruments (bonds and bank loans) | (€679.5m) | (€679.5m) | | Notional amount of hedging instruments | €1,666.8m | €1,666.8m | | Notional amount of hedged net assets | €1,666.8m | €1,666.8m | | Hedge ratio | 1:1 | 1:1 | | Change in value of hedged item used to determine hedge effectiveness | (€161.5m) | €65.5m | | Change in value of hedging instrument used to determine ineffectiveness | €161.5m | (€65.5m) | | Hedge ineffectiveness (evaluation and retranslation of financial instruments) | - | - | | Weighted average hedged rate for the year (USD/GBP) | 1.2083 | 1.1532 | **Note:** This amount is presented in trade and other receivables, cash trade and other payables. The use of these values may entail a derivative transaction qualifying for more than one hedge type designation under IFRS 9. Therefore, the carrying amount is are provided on by hedged type, whereas they are presented at an instrument level in the balance sheet. # 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 impacts on the income statement and equity, 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. | | Impact on income statement | | Impact on equity | | | --- | --- | --- | --- | --- | | | 2003 £m | 2002 £m | 2003 £m | 2002 £m | | US dollar | (174.6) | 0.7 | 34.4 | 44.0 | | Euro | 78.9 | 17.6 | (11.3) | (68.9) | # 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 2022 would increase profit before tax by approximately £19.9 million (2021: £55.5 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. Note that in practice, the Group has a cyclical cash profile throughout the year. # 24. FINANCIAL INSTRUMENTS CURRENCY DERIVATIVES The Group utilises currency derivatives to hedge significant future transactions and cash flows and the exchange risk arising on translation of the Group's 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 instruments purchased are primarily denominated in the currencies of the Group's principal markets. The Group designates foreign currency denominated debt as hedging instruments against the exposure to movements in the spot translation rates associated with the translation of its foreign operations. The Group also designates certain cross currency swaps as hedging instruments in cash flow hedges to manage its exposure to foreign exchange risk and interest rate risk on its borrowings. Contracts due in November 2023 have receipts of €500.0 million and payments of $604.2 million. Contracts due in March 2025 have receipts of €500.0 million and payments of $444.1 million. Critical terms of hedging instruments and hedged items are transacted to match on a 1:1 ratio by notional values. Hedge ineffectiveness can nonetheless arise from inherent differences between derivatives and non-derivative instruments and other market factors including credit, correlations, supply and demand, and market volatilities. In addition, hedge ineffectiveness can arise as a result of the currency basis being included in the hedge designation. Hedge accounting is discontinued when a hedging relationship no longer qualifies for hedge accounting. At 31 December 2022, the fair value of the Group's currency derivatives is estimated to be a net liability of approximately £52.7 million (2021: £66.7 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £0.6 million (2021: £0.5 million) assets included in trade and other receivables and £55.3 million (2021: £67.3 million) liabilities included in trade and other payables. The fair value of currency derivatives is based on the present value of contractual cash flows using foreign currency and interest rate forward market curves at the balance sheet date. The amounts taken to and deferred in equity during the year for currency derivatives that are designated and effective hedges was a debit of €163.5 million (2021: credit of €65.5 million) for net investment hedges and a credit of €36.5 million (2021: debit of €38.0 million) for cash flow hedges. For cash flow hedge arrangements, amounts of a credit of £36.5 million (2021: debit of £38.0 million) representing the effective portion of the gain or loss on the hedging instrument were taken to equity, and reclassified to profit or loss in the same period when the related foreign exchange impact on the associated hedged item affected profit or loss. Changes in the fair value relating to the ineffective portion of the currency derivatives that are designated hedges amounted to £2.7 million (2021: £2.5 million) which is included within revaluation and retranslation of financial instruments in the income statement. At the balance sheet date, the total nominal amount of outstanding forward foreign exchange contracts not designated as hedges was £1,004.8 million (2021: £764.9 million). The Group estimates the fair value of these contracts to be a net asset of £0.6 million (2021: net liability of £3.9 million). As at 31 December 2022, the Group had designated its $93 million bond, $700 million bond, $220 million bond, and $604 million leg of its cross-currency swap, as the hedging instruments in a net investment hedge relationship. The Group has designated its €500 million leg of its cross-currency swap as the hedging instrument in a cash flow hedge. Possible sources of ineffectiveness include any impairments to the Group's net investment in US dollars. The hedges are documented and are assessed for effectiveness on an ongoing basis. Both hedge relationships were effective during the year. These arrangements are designed to address significant exchange exposure and are renewed on a revolving basis as required. 96 WFP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS An analysis of the Group's financial assets and liabilities by accounting classification is set out below: | | Derivatives in designated hedge relationships | held at fair value through profit or loss | held at fair value through other comprehensive income | Amortized cost | Carrying value | | --- | --- | --- | --- | --- | --- | | **2022** | | | | | | | Other investments | - | 233.7 | 116.1 | - | 369.8 | | Cash and short-term deposits | - | - | - | 2,691.5 | 2,691.5 | | Bank overdrafts, bonds and bank loans | - | - | - | (1,169.0) | (1,169.0) | | Bonds and bank loans | - | - | - | (3,801.8) | (3,801.8) | | Trade and other receivables: amounts falling due within one year | - | - | - | 11,538.0 | 11,538.0 | | Trade and other receivables: amounts falling due after more than one year | - | - | - | 146.2 | 146.2 | | Trade and other payables: amounts falling due within one year | - | - | - | (11,283.0) | (11,283.0) | | Trade and other payables: amounts falling due after more than one year | - | - | - | (0.9) | (0.9) | | Derivative assets | 0.6 | 3.1 | - | - | 3.7 | | Derivative liabilities | (53.3) | (6.7) | - | - | (58.0) | | Payments due to vendors (earnout agreements) | - | (160.1) | - | - | (160.1) | | Liabilities in respect of put options | - | (362.1) | - | - | (362.1) | | | **(32.7)** | **(246.1)** | **116.1** | **(2,279.0)** | **(2,462.7)** | | | Derivatives in designated hedge relationships | held at fair value through profit or loss | held at fair value through other comprehensive income | Amortized cost | Carrying value | | --- | --- | --- | --- | --- | --- | | **2021** | | | | | | | Other investments | - | 238.3 | 90.0 | - | 218.3 | | Cash and short-term deposits | - | - | - | 3,882.9 | 3,882.9 | | Bank overdrafts, bonds and bank loans | - | - | - | (367.2) | (367.2) | | Bonds and bank loans | - | - | - | (4,216.8) | (4,216.8) | | Trade and other receivables: amounts falling due within one year | - | - | - | 10,448.0 | 10,448.0 | | Trade and other receivables: amounts falling due after more than one year | - | - | - | 86.5 | 86.5 | | Trade and other payables: amounts falling due within one year | - | - | - | (10,676.8) | (10,676.8) | | 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 | (1,046.9) | (1,365.4) | WPP ANNUAL REPORT 2022 107 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # **36. FINANCIAL INSTRUMENTS CONTINUED** The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices); Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). | | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | | --- | --- | --- | --- | --- | | **Derivatives in designated hedge relationships** | | | | | | Derivative assets | - | 0.6 | - | 0.6 | | Derivative liabilities | - | (53.3) | - | (53.3) | | **Held at fair value through profit or loss** | | | | | | Other investments | 0.6 | - | 255.3 | 255.7 | | Derivative assets | - | 5.1 | - | 5.1 | | Derivative liabilities | - | (6.7) | - | (6.7) | | Payments due to vendors (earnout agreements) | - | - | (160.1) | (160.1) | | Liabilities in respect of put options | - | - | (363.1) | (363.1) | | **Held at fair value through other comprehensive income** | | | | | | Other investments | 10.8 | - | 103.3 | 106.1 | | | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | | --- | --- | --- | --- | --- | | **Derivatives in designated hedge relationships** | | | | | | Derivative assets | - | 0.5 | - | 0.5 | | Derivative liabilities | - | (67.2) | - | (67.2) | | **Held at fair value through profit or loss** | | | | | | Other investments | 0.6 | - | 227.9 | 228.3 | | Derivative assets | - | 2.5 | - | 2.5 | | Derivative liabilities | - | (8.4) | - | (8.4) | | Payments due to vendors (earnout agreements) | - | - | (196.7) | (196.7) | | Liabilities in respect of put options | - | - | (291.5) | (291.5) | | **Held at fair value through other comprehensive income** | | | | | | Other investments | 37.9 | - | 62.1 | 90.0 | There have been no transfers between these levels in the years presented. Reconciliation of level 3 fair value measurements: | | Payments due to vendors (earnout agreements) | Liabilities in respect of put options £m | Other investments £m | | --- | --- | --- | --- | | **1 January 2021** | | | | | Losses recognised in the income statement | (56.7) | (60.4) | (7.7) | | Losses recognised in other comprehensive income | - | - | (63.8) | | Exchange adjustments | 1.0 | 1.3 | - | | Additions | (81.7) | (267.7) | 5.9 | | Disposals | - | - | (32.0) | | Cancellations | - | 0.8 | - | | Settlements | 37.0 | 3.4 | - | | **31 December 2021** | **(96.7)** | **(191.5)** | **292.0** | | Gains recognised in the income statement | 26.2 | 27.9 | 23.1 | | Losses recognised in other comprehensive income | - | - | (5.3) | | Exchange adjustments | (36.3) | (39.9) | - | | Additions | (66.7) | (5.0) | 66.7 | | Disposals | - | - | (16.0) | | Cancellations | - | 11.0 | - | | Settlements | 71.6 | 93.4 | - | | **31 December 2022** | **(160.1)** | **(342.1)** | **358.5** | **Note** 1. During 2021, the Group merged Products (Street Making and Sand Harkness & Curta Borne leading global strategic communications firm, Aira part of the transaction, certain arrangement acquisition shares in the Company, and a put option was granted which others the equity partners to require the Group to purchase these shares. This resulted in additions to liabilities in respect of put options in the year of 2021 in yellow. The fair values of financial assets and liabilities are based on quoted market prices where available. Where the market value is not available, the Group has estimated relevant fair values on the basis of available information from outside sources. There have been no movements between level 3 and other levels. # **PAYMENTS DUE TO VENDORS AND LIABILITIES IN RESPECT OF PUT OPTIONS** Future anticipated payments due to vendors in respect of contingent consideration (earnout agreements) are recorded at fair value, which is the present value of the expected cash outflows of the obligations. Liabilities in respect of put option agreements are initially recorded at the present value of the redemption amount in accordance with IAS 35 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 2022, 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 £40 to £256 million (2021: £40 to £126 million) and £40 to £495 million (2021: £40 to £595 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. 198 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS At 31 December 2022, the weighted average growth rate in estimating future financial performance was 12.4% (2021: 16.7%). The weighted average of the risk adjusted discount rate applied to these obligations at 31 December 2022 was 7.6% (2021: 6.9%). A one percentage point increase or decrease in the growth rate in estimated future financial performance would increase or decrease the combined liabilities due to aerosol agreements and put options by approximately $9.1 million (2021: $6.0 million) and $6.9 million (2021: $6.6 million), respectively. A 0.5 percentage point increase or decrease in the risk adjusted discount rate would decrease or increase the combined liabilities by approximately $7.3 million (2021: $5.6 million) and $7.4 million (2021: $5.9 million), respectively. An increase in the liability would result in a loss in the revaluation of financial instruments, while a decrease would result in a gain. # OTHER INVESTMENTS The fair value of other investments included in level 1 is based on quoted market prices. Other investments included in level 3 are unlisted securities, 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 appropriate valuation technique, including all external funding rounds, revenue and EBITDA multiples, the share of fund net asset value and discounted cash flows. The sensitivity to changes in unobservable inputs is specific to each individual investment. A change to one or more of these unobservable inputs to reflect a reasonably possible alternative assumption would not result in a significant change to the fair value. During the year, Imagina stepped down from interests in associates to other investments and this investment has been designated as fair value through other comprehensive income. The fair value of Imagina as at 31 December 2022 was $10.6 million. # 37. AUTHORISED AND ISSUED SHARE CAPITAL | | Equity ordinary shares | Nominal value (m) | | --- | --- | --- | | Authorised | | | | 1 January 2021 | 1,750,000,000 | 175.0 | | 31 December 2021 | 1,750,000,000 | 175.0 | | 31 December 2022 | 1,750,000,000 | 175.0 | Issued and fully paid | 1 January 2021 | 1,298,085,242 | 129.6 | | --- | --- | --- | | Exercise of share options | 534,800 | - | | Share cancellations | 172,106,492 | (7.3) | | At 31 December 2021 | 1,324,438,550 | 102.6 | | Exercise of share options | 125,700 | - | | Share cancellations | (83,157,956) | (8.3) | | At 31 December 2022 | 1,140,427,296 | 116.1 | # COMPANY'S OWN SHARES The Company's holdings of own shares are stated at cost and represent shares held in treasury and purchases by the Employee Share Ownership Plan (ESOP) trusts of shares in the Company for the purpose of funding certain of the Group's share-based incentive plans, details of which are disclosed in the Compensation Committee report on pages 150 to 156. The trustees of the ESOP purchase the Company's ordinary shares in the open market using funds provided by the Company. The Company also has 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 2022 was 1,311,976 (2021: 5,803,643) and $9.9 million (2021: $65.0 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2022 was 70,689,953 (2021: 70,689,953) and £576.2 million (2021: £709.1 million) respectively. # SHARE OPTIONS # WPP WORLDWIDE SHARE OWNERSHIP PROGRAMME (WWOP) As at 31 December 2022, unexercised options over ordinary shares of $97,900 and unexercised options over ADRs of 148,235 have been granted under the WPP Worldwide Share Ownership Programme as follows: | Number of ordinary shares under option | Exercise price per share ($) | Exercise dates | | --- | --- | --- | | 696,975 | 13.145 | 2017-2024 | | 3,625 | 13.145 | 2018-2024 | | 196,675 | 13.005 | 2018-2023 | | 620 | 13.025 | 2017-2023 | | Number of ADRs under option | Exercise price per ADP ($) | Exercise dates | | 90,265 | 102.670 | 2017-2024 | | 67,960 | 110.760 | 2018-2023 | # WPP SHARE OPTION PLAN 2018 (WSOP) As at 31 December 2022, unexercised options over ordinary shares of 13,567,625 and unexercised options over ADRs of 1,566,280 have been granted under the WPP Share Option Plan as follows: | Number of ordinary shares under option | Exercise price per share ($) | Exercise dates | | --- | --- | --- | | 10,125 | 7.344 | 2023-2027 | | 2,065,000 | 7.344 | 2023-2030 | | 7,875 | 8.373 | 2021-2025 | | 1,017,925 | 8.372 | 2021-2028 | | 232,625 | 8.684 | 2020-2029 | | 3,150,375 | 8.684 | 2023-2032 | | 9,375 | 9.600 | 2022-2024 | | 1,616,875 | 9.600 | 2022-2029 | | 2,581,000 | 11.065 | 2023-2030 | | 8,250 | 13.085 | 2020-2024 | | 1,141,850 | 13.085 | 2020-2027 | | 802,475 | 13.150 | 2018-2025 | | 4,375 | 13.150 | 2019-2025 | | 6,750 | 17.055 | 2019-2025 | | 930,330 | 17.055 | 2019-2026 | | Number of ADRs under option | Exercise price per ADP ($) | Exercise dates | | --- | --- | --- | | 226,670 | 48.950 | 2023-2030 | | 366,420 | 52.600 | 2023-2032 | | 136,260 | 53.160 | 2021-2028 | | 189,600 | 62.390 | 2022-2029 | | 284,270 | 73.780 | 2023-2030 | | 121,040 | 88.260 | 2020-2027 | | 111,770 | 105.490 | 2020-2026 | | 90,250 | 110.960 | 2018-2025 | WPP ANNUAL REPORT 2022 99 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 37. AUTHORISED AND ISSUED SHARE CAPITAL CONTINUED The aggregate status of the WPP Share Option Plans during 2022 was as follows: MOVEMENTS ON OPTIONS GRANTED (REPRESENTED IN ORDINARY SHARES) | | 1 January 2023 | Granted | Exercised | Forfeited | Outstanding 31 December 2022 | Exercisable 31 December 2021 | | --- | --- | --- | --- | --- | --- | --- | | WPP | 6,741 | - | - | (8,743) | - | - | | WWOP | 2,049,299 | - | (2,575) | (407,699) | 1,630,025 | - | | WSOP | 19,608,350 | 5,224,050 | (123,725) | (3,410,050) | 21,399,025 | 3,988,675 | | | 31,664,390 | 5,224,050 | (123,725) | (3,824,490) | 22,938,050 | 3,988,675 | | | 1 January 2022 | Granted | Exercised | Forfeited | Outstanding 31 December 2021 | Exercisable 31 December 2020 | | WPP | 6,741 | - | - | - | 6,741 | 6,741 | | WWOP | 2,499,674 | - | (14,050) | (396,325) | 2,049,299 | 186,124 | | WSOP | 17,960,725 | 5,755,800 | (140,750) | (3,037,625) | 19,608,350 | 16,282,525 | | | 30,447,360 | 5,755,800 | (134,800) | (3,403,950) | 31,664,390 | 16,478,390 | WEIGHTED AVERAGE EXERCISE PRICE FOR OPTIONS OVER | | 1 January 2022 | Granted | Exercised | Forfeited | Outstanding 31 December 2022 | Exercisable 31 December 2021 | | --- | --- | --- | --- | --- | --- | --- | | Ordinary shares (E) | | | | | | | | WPP | 9,355 | - | - | 9,355 | - | - | | WWOP | 12,923 | - | 8,658 | 11,565 | 13,224 | - | | WSOP | 10,834 | 8,684 | 8,357 | 11,530 | 10,336 | 7,344 | | ADRs (S) | | | | | | | | WWOP | 101,693 | - | - | 85,706 | 106,379 | - | | WSOP | 72,228 | 52,600 | 53,270 | 71,674 | 67,910 | 48,950 | | | 1 January 2021 | Granted | Exercised | Forfeited | Outstanding 31 December 2021 | Exercisable 31 December 2020 | | Ordinary shares (E) | | | | | | | | WPP | 9,355 | - | - | - | 9,355 | 9,355 | | WWOP | 12,631 | - | 7,304 | 11,803 | 13,923 | 8,658 | | WSOP | 10,596 | 11,065 | 8,372 | 10,116 | 10,834 | 9,323 | | ADRs (S) | | | | | | | | WWOP | 98,509 | - | 49,313 | 89,225 | 101,693 | 67,490 | | WSOP | 70,365 | 73,780 | 53,248 | 66,257 | 72,228 | 61,479 | OPTIONS OVER ORDINARY SHARES | Outstanding | Range of exercise prices | Weighted average exercise price £ | Weighted average contractual life months | 2022 | 2021 | 2020 | | --- | --- | --- | --- | --- | --- | --- | | | 7.34e-17.053 | 10.534 | 86 | For value of UK options (shares) | 177.0p | 220.0p | | | | | | For value of US options (ADRs) | $11.48 | $14.89 | | OPTIONS OVER ADRs | | | | | | | | Outstanding | Range of exercise prices | Weighted average exercise price £ | Weighted average contractual life months | Weighted average assumptions | | | | | 68.95d-105.94d | 71.07b | 80 | UK risk-free interest rate 3.92% U.S risk-free interest rate 4.09% Expected life (months) 48 Expected volatility 32% Dividend yield 3.9% | | | As at 31 December 2022 there was £11.1 million (2021: £10.2 million) of total unrecognised compensation costs related to share options. The cost is expected to be recognised over a weighted average period of 20 months (2021: 21 months). Share options are satisfied out of newly issued shares. The weighted average fair value of options granted in the year calculated using the Black-Scholes model was as follows: | | 2022 | 2021 | 2020 | | --- | --- | --- | --- | | Fair value of UK options (shares) | 177.0p | 220.0p | 126.0p | | Fair value of US options (ADRs) | $11.48 | $14.89 | $8.93 | | Weighted average assumptions | | | | | UK risk-free interest rate | 3.92% | 0.63% | -0.02% | | US risk-free interest rate | 4.09% | 1.16% | 0.31% | | Expected life (months) | 48 | 48 | 48 | | Expected volatility | 32% | 34% | 34% | | Dividend yield | 3.9% | 3.4% | 4.2% | 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 2022 was £9.13 (2021: £9.64, 2020: £6.90) and the average ADR price for the same period was £56.80 (2021: £66.44, 2020: £44.56). The average share price of the Group for year ended 31 December 2022 approximates the weighted average share price during the periods of exercise throughout the year. 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. 200 WPP ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS # TERMS OF SHARE OPTION PLANS In 2015, the Group introduced the Share Option Plan 2015 to replace both the "all-employees" Worldwide Share Ownership Plan and the discretionary Executive Stock Option Plan. Two kinds of options over ordinary shares can be granted, both with a market value exercise price. Firstly, options can be 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 may be granted on a discretionary basis subject to the satisfaction of performance conditions. The Worldwide Share Ownership Programme was open for participation to employees with at least two years' employment in the Group. It was not available to those participating in other share-based incentive programmes or to Executive Directors. The vesting period for each grant is three years and there are no performance conditions other than continued employment with the Group. The Executive Stock Option Plan has historically been open for participation to WPP Group Leaders, Partners and High Potential Group. It is not currently offered to Parent Company Executive Directors. The vesting period is three years and performance conditions include achievement of various TSR (Total Shareholder Return) and EPS (Earnings Per Share) objectives, as well as continued employment. The terms of these stock options are such that if, after nine years and eight months, the performance conditions have not been met, the stock option will vest automatically. The Group grants stock options with a life of ten years, including the vesting period. # 28. OTHER RESERVES Other reserves comprise the following: | | Capital redemption reserve (£m) | Equity reserve (£m) | Hedging reserve (£m) | Translation reserve (£m) | Total other reserves (£m) | | --- | --- | --- | --- | --- | --- | | Balance at 1 January 2021 | 6.4 | (102.3) | (5.9) | 103.0 | 191.3 | | Reclassification between Hedging reserve and Translation reserve* | - | - | 5.9 | (5.9) | - | | Re-presented balance at 1 January 2021 | 6.4 | (102.3) | - | 102.1 | 191.3 | | Foreign exchange differences on translation of foreign operations* | - | - | - | (102.7) | (102.7) | | Gain on net investment hedges | - | - | - | 45.5 | 45.5 | | Cash flow hedges: | | | | | | | Fair value loss arising on hedging instruments | - | - | (38.0) | - | (38.0) | | Less: gain reclassified to profit or loss | - | - | 38.0 | - | 38.0 | | Share of other comprehensive income of associate undertakings | - | - | - | 7.3 | 7.3 | | Share cancellations | 7.3 | - | - | - | 7.3 | | Recognition/denecognition 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) | - | 227.2 | (335.9) | | Foreign exchange differences on translation of foreign operations | - | - | - | 409.0 | 409.0 | | Loss on net investment hedges | - | - | - | (161.5) | (161.5) | | Cash flow hedges: | | | | | | | Fair value gain arising on hedging instruments | - | - | 38.5 | - | 38.5 | | Less: loss reclassified to profit or loss | - | - | (38.5) | - | (38.5) | | Share of other comprehensive income of associate undertakings | - | - | - | 31.9 | 31.9 | | Share cancellations | 8.3 | - | - | - | 8.3 | | Recognition/denecognition of liabilities in respect of put options | - | 101.7 | - | - | 101.7 | | Share purchases - close period commitments | - | 211.7 | - | - | 211.7 | | Balance at 31 December 2022 | 31.9 | (343.3) | - | 536.6 | 585.3 | Note: * Balances for this year ended 31 December 2021 and 31 December 2022 have been re-presented following a reclassification between the hedging reserve and translation reserve of 536.0 million and 41.9 million, respectively. The capital redemption reserve relates entirely to share cancellations. 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 recognized as a movement in the equity reserve in the year ended 31 December 2021. After the close period ended on 18 February 2022, the liability was settled and the amount in other reserves was reclassified to retained earnings. The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedges less amounts reclassified to profit or loss. The translation reserve contains the accumulated gains/losses on currency translation of foreign operations arising on consolidation. The translation reserve comprises: | | 2022 (£m) | 2021 (£m) | | --- | --- | --- | | Balance relating to continuing net investment hedges | (143.8) | (2.3) | | Balance relating to discontinued net investment hedges | (85.0) | 185.0 | | Balance related to foreign exchange differences on translation of foreign operations* | 755.4 | 314.5 | | | 536.6 | 227.2 | Note: * Balances for this year ended 31 December 2021 and 31 December 2022 have been re-presented following a reclassification between the hedging reserve and translation reserve of 536.0 million and 41.9 million, respectively. WPP ANNUAL REPORT 2022 001 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # **39. ACQUISITIONS** The Group accounts for acquisitions in accordance with IFRS 3 Business Combinations. IFRS 3 requires the acquirer's identifiable assets, liabilities and contingent liabilities (other than non-current assets or disposal groups held for 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 where the fair value of an asset or liability may be contingent on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the consolidated income statement or as an adjustment to goodwill as appropriate under IFRS 3. The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date. | | Book value at acquisition date | Fair value adjustments in £m | Fair value for Group A/B | | --- | --- | --- | --- | | Intangible assets | 1.2 | 48.3 | 67.7 | | Property, plant and equipment | 1.3 | - | 1.3 | | Cash and cash equivalents | 38.8 | - | 38.8 | | Trade receivables due within one year | 27.0 | - | 27.0 | | Other current assets | (5.1) | 1.1 | 14.2 | | **Total assets** | **81.4** | **47.4** | **129.0** | | Current liabilities | (49.4) | (5.3) | (54.7) | | Trade and other payables due after one year | (10.3) | (27.3) | (37.4) | | Deferred tax liabilities | (0.1) | (12.4) | (12.5) | | Long-term lease liabilities | (0.1) | - | (0.1) | | Provisions | (0.1) | (1.3) | (1.3) | | **Total liabilities** | **(40.0)** | **(44.2)** | **(106.2)** | | **Net assets** | **21.4** | **1.4** | **22.8** | | Non-controlling interests | | | (2.1) | | Fair value of equity stake in associate undertakings before acquisition of controlling interest | | | (9.0) | | Goodwill | | | 269.3 | | Consideration | | | 261.0 | | Consideration satisfied by: | | | | | Cash | | | 238.3 | | Payments due to vendors | | | 42.7 | Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients. Goodwill that is expected to be deductible for tax purposes is 642.7 million. Non-controlling interests in acquired companies are measured at the non-controlling interests' proportionate share of the acquiree's identifiable net assets. These continues to be no subsidiaries with non-controlling interests that are individually material to the Group. The contribution to revenue and operating profit of acquisitions completed in the year was not material. There were no material acquisitions completed between 31 December 2022 and the date the financial statements have been authorised for issue. # **30. RELATED PARTY TRANSACTIONS** The Group enters into transactions with its associate undertakings. The Group has continuing transactions with Kantar, including sales, purchases, the provision of IT services, subleases and property related items. In the year ended 31 December 2022, revenue of 688.3 million (2021: £117.2 million) was reported in relation to Compax, an associate in the USA, and revenue of 642.7 million (2021: £11.3 million) was reported in relation to Kantar. All other transactions in the years presented were immaterial. The following amounts were outstanding at 31 December: | | 2022 £m | 2021 £m | | --- | --- | --- | | **Amounts owed by related parties** | | | | Kantar | 56.1 | 30.3 | | Other | 63.4 | 43.7 | | | **66.5** | **74.0** | | **Amounts owed to related parties** | | | | Kantar | (10.5) | (4.2) | | Other | (60.3) | (37.4) | | | **(75.7)** | **(57.6)** | # **31. EVENTS AFTER THE REPORTING PERIOD** There are no material events after the reporting period that require an adjustment or a disclosure within the financial statements. 202 WPP ANNUAL REPORT 2022 FINANCIAL STATEMENTS # COMPANY PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2022 | | Notes | 2022 Est. | 2021 Est. | | --- | --- | --- | --- | | Turnover | | - | - | | Operating income | | 17.0 | 1.8 | | Operating profit | | 17.0 | 1.8 | | Dividend income | | 2,033.4 | - | | Interest receivable and similar income | | 8.0 | 8.1 | | Interest payable and similar charges | 33 | (1651) | (91.9) | | Profit/(loss) on ordinary activities before taxation | | 1,916.3 | (82.0) | | Taxation on profit/(loss) on ordinary activities | 35 | - | - | | Profit/(loss) for the year | | 1,916.3 | (82.0) | 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 2022 203 FINANCIAL STATEMENTS # COMPANY BALANCE SHEET AS AT 31 DECEMBER 2023 | | Notes | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investments | 35 | 13,533.3 | 13,603.1 | | | | 13,533.3 | 13,603.1 | | **Current assets** | | | | | Debtors due within one year | 36 | 563.0 | 1,992.5 | | | | 563.0 | 1,992.5 | | **Current liabilities** | | | | | Creditors: amounts falling due within one year | 37 | (7,891.3) | (10,845.8) | | **Net current liabilities** | | (7,528.3) | (8,853.3) | | **Total assets less current liabilities** | | 5,996.9 | 4,249.8 | | Creditors: amounts falling due after more than one year | 38 | (395.9) | (25.4) | | **Net assets** | | 5,401.0 | 4,324.4 | | **Capital and reserves** | | | | | Called-up share capital | | 114.1 | 122.4 | | Share premium account | | 575.9 | 576.7 | | Other reserves | 39 | (10.0) | (221.7) | | Capital redemption reserve | | 31.9 | 15.6 | | Own shares | | (1,041.6) | 2,041.6 | | Profit and loss account | | 5,060.7 | 5,077.0 | | **Equity shareholders' funds** | | 5,401.0 | 4,324.4 | Note The accompanying notes form an integral part of this balance sheet. The financial statements were approved by the Board of Directors and authorised for issue on 25 March 2023. ![img-7.jpeg](img-7.jpeg) Mark Read Chief Executive Officer John Rogers Chief Financial Officer Registered Company Number: 11776 WFP ANNUAL REPORT 2022 FINANCIAL STATEMENTS ## COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 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 2021 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) 5,07 7.0 4,524.4 Ordinary shares issued − 1.2 − − − − 1.2 Share cancellations (8.3) − − 8.3 − (807. 4) (807. 4) Treasury share allocations − − − − − − − Income for the year − − − − − 1,914.5 1,914.5 Dividends paid − − − − − (365.4) (365.4) Non-cash share-based incentive plans (including share options) − − − − − 122.0 122.0 Reversal of share purchases – close period commitments − − 211.7 − − − 211.7 Balance at 31 December 2022 114.1 575.9 (10.0) 21.9 (1,041.6) 5,940.7 5,601.0 Notes The accompanying notes form an integral part of this statement of changes in equity. 1 Other reserves are analysed in note 39 205WPP ANNUAL REPORT 2022 FINANCIAL STATEMENTS # NOTES TO THE COMPANY FINANCIAL STATEMENTS ### 33. ACCOUNTING POLICIES The principal accounting policies of WPP 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 IFRS 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 90. ### (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 2022, 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 Company 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 WPP plc, the Company has recognised an addition to fixed asset investments of the aggregate amount of these contributions of £125.0 million in 2022 (2021: £99.6 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. The Group considers that the credit risk increased significantly since initial recognition when the credit rate changes, the debtor has significant financial difficulty or if there was a breach of contract. For balances that are beyond 180 days overdue it is presumed to be an indicator of a significant increase in credit risk. 206 WPP ANNUAL REPORT 2022 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: | | 2022 | 2021 | | | | | --- | --- | --- | --- | --- | --- | | | £m | £m | | 2022 | 2021 | | Bank and other interest payable − 1.4 | | | | £m | £m | | Interest payable to subsidiary undertakings 163.1 90.5 | | | Bank overdrafts − − | | | | | 163.1 91.9 | | Amounts due to subsidiary undertakings 7,887.5 10,633.0 | | | Share purchases – close period commitments − 211.7 Other creditors and accruals 3.8 1.1 34. TAXATION ON LOSS ON ORDINARY ACTIVITIES The tax assessed for the year differs from that resulting from applying the 7,89 1 . 3 10,845.8 rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained below: During 2021 the Group converted the majority of its cash pool arrangements to zero-balancing cash pools, whereby the cash and overdrafts within these 2022 2021 cash pools are physically swept to the header accounts on a daily basis. At £m £m 31 December 2022, there are no gross cash or overdraft balances reported by Profit/(loss) on ordinary activities before tax 1,914.5 (82.0) the Company as these now form amounts owed by/to subsidiary undertakings. Tax charge/(credit) at the corporation tax rate of 19.0% thereon 363.8 (15.6) 38. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN Factors affecting tax charge for the year ONE YEAR Losses (claimed)/surrendered for nil consideration 26.2 15.6 The following are included in creditors falling due after more than one year: Items that are (not taxable)/not deductible (390.0) − Current tax charge for the year − − 2022 2021 £m £m Amounts due to subsidiary undertakings 395.9 25.4 35. FIXED ASSET INVESTMENTS The following are included in the net book value of fixed asset investments: Total borrowings are repayable as follows: Subsidiary 2022 2021 undertakings £m £m £m Within one year 7,891.3 10,845.8 Cost Between one and five years − 25.4 1 January 2021 13,305.9 Over five years 395.9 − Additions 99.6 8,287.2 10,871.2 31 December 2021 13,405.5 Additions 122.0 31 December 2022 13,527.5 39. EQUITY SHAREHOLDERS’ FUNDS Other reserves at 31 December 2022 comprise a translation reserve of £10.0 million (2021: £10.0 million) and an equity reserve of £nil Accumulated impairment losses and write-downs (2021: £211.7 million). 1 January 2021 (2.3) Impairment losses for the year (0.1) At 31 December 2022 the Company's distributable reserves amounted to 31 December 2021 (2.4) £5,465.0 million (2021: £4,388.4 million) which, under the Companies (Jersey) Impairment gains for the year 0.1 Law 1991, is total reserves excluding share capital and capital redemption 31 December 2022 (2.3) reserve. Further details of the Company’s share capital are shown in note 27. Net book value 31 December 2022 13,525.2 31 December 2021 13,403.1 1 January 2021 13,303.6 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: 2022 2021 £m £m Amounts owed by subsidiary undertakings 362.8 1,992.3 Other debtors 0.2 0.2 363.0 1,992.5 The amounts owed by subsidiary undertakings are repayable on demand. There was no loss allowance on debtors in the year ended 31 December 2022 (2021: £nil), as these are amounts due from other entities within the Group. Our historical experience of collecting these balances supported by the level of default confirms that the credit risk is low. 207WPP ANNUAL REPORT 2022 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 2022 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" - The financial statements have been properly prepared in accordance with Companies (Jersey) Law, 1999. 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 - The related notes 32 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 (UK) 2020 (UK) 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 is the current year was valuation of goodwill. | | --- | --- | | Materiality | We considered a number of metrics when determining group materiality, including: pre-tax profit; revenue; and headline EBITDA. Our selected materiality represents 5.2% of pre-tax profit (2021: 3.8%), 0.6% of revenue (2021: 0.6%) and 2.6% of Headline EBITDA (2021: 2.7%). | | Scoping | Those entities subject to audit represented 68% of the group's consolidated revenue (2021: 70% of revenue) 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 | There have been no significant changes in our approach in the current year. | 208 WPP ANNUAL REPORT 2022 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, of the going concern basis of accounting in the preparation of the financial were of most significance in our audit of the financial statements of the statements is appropriate. current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters Our evaluation of the directors’ assessment of the group’s and parent included those which had the greatest effect on: the overall audit strategy, company’s ability to continue to adopt the going concern basis of accounting the allocation of resources in the audit; and directing the efforts of the included: engagement team. – Testing controls over management’s going concern model, including the These matters were addressed in the context of our audit of the financial review of the inputs and assumptions used in the model statements as a whole, and in forming our opinion thereon, and we do not – Identifying the key assumptions, including those relating to the current provide a separate opinion on these matters. macroeconomic uncertainty, and evaluating the appropriateness of these assumptions and their consistency with management’s presentations to the Board and Audit Committee – Comparing the forecasts within the going concern model to recent historical financial information – Testing the mechanical accuracy of the going concern model – Testing the covenant compliance calculations and headroom thereof, both under the group’s forecasts and in severe downside scenarios – Confirming the existence and availability of financing facilities – Evaluating the appropriateness of management’s sensitivity analysis modelled under their most severe scenario, including an evaluation of the mitigating actions available to management – 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. 209WPP ANNUAL REPORT 2022 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 Based on our the comparison of the recoverable amount of goodwill to its the discount rates, short-term forecasts and long-term growth procedures, carrying value at the measurement date. The recoverable rates used in the discounted cash flow model to determine the we determined amount is calculated as the higher of fair value less costs of value in use and included the following audit procedures, management’s disposal and value in use. The group used the value in use among others: assumptions used approach, which uses a discounted cash flow model to estimate in the valuation of the recoverable amount of each cash generating unit or group – We tested the effectiveness of controls over management’s goodwill to be of cash generating units and requires management to make estimations of the short-term cash flow forecasts, discount reasonable. significant estimates and assumptions related to discount rates, rates and long-term growth rates used to determine the value short-term cash flow forecasts and long-term growth rates. in use The net book value of goodwill was £8,453 million as at – We assessed the appropriateness of forecasted revenue and 31 December 2022 (31 December 2021: £7,612 million). operating margin growth rates by performing procedures such as comparing to external economic data, including We identified goodwill valuation as a key audit matter because peers, market data and wider economic forecasts, specifically of the significant judgements made by management, which assessing the impact of inflationary pressures and rising consider future impacts of the current economic uncertainty, to interest rates on the forecasts estimate the value in use 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. Estimates of future performance and market – With the assistance of our valuation specialists, we assessed conditions used to arrive at the net present value of future cash the mechanical accuracy of the impairment model and the flows at the relevant assessment date, which is used within the methodology applied by management for consistency with goodwill impairment analysis, are subjective in nature with the requirements of IAS 36 increased uncertainty due to inflationary pressures, rising – With the assistance of our valuation specialists, we evaluated interest rates and global economic uncertainty. Through our risk the appropriateness of the discount rates and long-term assessment procedures, we identified those inputs that were the growth rates used by: most sensitive in determining the value in use, which enabled us – Testing the source information underlying the to design our audit procedures to focus on those estimates that determination of the discount rates and the mathematical are either complex, including the discount rate calculation, or accuracy of the calculation subjective in nature, including the short-term forecasts and – Assessing the methodology applied in the discount rate long-term growth rates. calculation against market practice valuation techniques – Assessing the long-term growth rates against independent 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 2022210 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 | £60 million (2021: £59 million) | £50 million (2021: £27.5 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 5.2% of pre-tax profit, 0.4% of revenue and 2.7% of Headline EBITDA. In 2021, we determined materiality to be £55 million, at 3.6% of pre-tax profit excluding impairment of goodwill and investments in associates, and retranslation of financial instruments, 0.6% of revenue and 2.7% of Headline EBITDA. | The basis for materiality is shareholder's equity. The materiality used is less than 1% of shareholders' equity (2021: less than 1% of shareholders' equity), and is capped at 50% of group materiality (2021: 50%). | | 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. | 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. | The calculation of headline EBITDA is set out on page 210. ![img-8.jpeg](img-8.jpeg) Group materiality below. - Component materiality range 65.6m-100m - Audit Committee reporting threshold 65.6m FST Group materiality WPP ANNUAL REPORT 2022 211 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 | 65% (2021: 60%) of group materiality 65% (2021: 60%) 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% for determining including: of parent company materiality, to align with the group performance performance materiality threshold used. materiality – Our risk assessment and assessment of the Group’s overall control environment, financial processes and systems in the majority of areas of the audit – Our past experience of the audit, including the restatements required during 2020 for the 2018 and 2019 financial statements The increase in the performance materiality percentage in the current period reflects the prior-year remediation of previously identified material weaknesses. 6.3. ERROR REPORTING THRESHOLD Those entities subjected to audit represented 68% of the group’s consolidated We agreed with the Audit Committee that we would report to the Committee revenue (2021: 70% revenue) achieved through a combination of direct testing all audit differences in excess of £2.5 million (2021: £2.0 million), as well as and specified audit procedures, including substantive analytical review differences below that threshold that, in our view, warranted reporting on procedures, performed by the group auditor and component auditors across qualitative grounds. We also report to the Audit Committee on disclosure the world. Component teams performed specified audit procedures on 64 matters that we identified when assessing the overall presentation of the operating units (2021: 62), defined as business locations operating under a financial statements. common control environment. Our audit work on components is executed at levels of materiality appropriate for such components, many of which are local 7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT statutory materiality levels which in all instances are no higher than 50% of 7.1. IDENTIFICATION AND SCOPING OF COMPONENTS group performance materiality. As a result of the disaggregated structure and diversity of the Group, a significant portion of our audit planning effort was ensuring that the scope of In order to support our conclusion that there were no significant risks of work is appropriate in addressing the identified risks of material misstatement. material misstatement of the aggregated financial information of the remaining In selecting the components that are in scope each year, we refresh and components, we tested the consolidation process and performed analytical update our understanding of the group and its environment, including procedures at both the group level and component level for components obtaining an understanding of the group’s system of internal controls, and deemed to be out-of-scope. assessing the risks of material misstatement at the group level, in order to 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 32% misstatement in the most effective manner possible. Revenue 68% Full audit scope Analytical procedures at group level WPP ANNUAL REPORT 2022212 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS 7.2. OUR CONSIDERATION OF THE CONTROL ENVIRONMENT In years when we elect to not visit a component, either physically or WPP plc is reliant on the effectiveness of a number of IT applications and virtually, we: controls to ensure that financial transactions are processed and recorded completely and accurately. As the group files its financial statements in the US, – Include the component audit partner in our team planning meeting the group is required to comply with the US Sarbanes Oxley Act. Accordingly, – Discuss the results of the Group-led risk assessment we perform testing of internal controls, including the general IT controls, over – Review the documentation of the findings from their work and discuss with financial reporting in all areas of the audit. them as needed 7.3. OUR CONSIDERATION OF CLIMATE-RELATED RISKS These are designed so that the Senior Statutory Auditor or a senior member The group identified climate-related risks such as the increased frequency of of the group audit team can have oversight of the work of our component extreme weather and climate-related natural disasters, increased reputational auditors on a regular basis. In addition, we assess the competence of each risk associated with working on environmentally detrimental client briefs, of our component auditors. and/or misrepresenting environmental claims and changes in regulation and reporting standards which could result in climate-related litigation and claims. We also hold quarterly meetings with management at a regional and global The risks are disclosed within the Task Force on Climate-Related Financial level in order to update our understanding of the Group and its environment Disclosures (“TCFD”) statement on pages 220 to 226 of the Annual Report. on an ongoing basis. Our risk assessment procedures in relation to the impact of climate-related 8. OTHER INFORMATION risks involved obtaining an understanding of management’s relevant processes The other information comprises the information included in the annual report, and controls. We further reviewed management’s paper assessing these risks. other than the financial statements and our auditor’s report thereon. The We evaluated these risks to assess whether they were complete and directors are responsible for the other information contained within the annual consistent with our understanding of the entity and our wider risk assessment report. procedures. Our opinion on the financial statements does not cover the other information Our procedures to address our identified risks involved considering the impact and, except to the extent otherwise explicitly stated in our report, we do not of the risks on the financial statements overall, including in the application of express any form of assurance conclusion thereon. individual accounting standards. Such considerations included the impact of the Group’s net zero carbon emission commitments, and changes in regulation Our responsibility is to read the other information and, in doing so, consider and reporting standards. We further reconciled the disclosures made to whether the other information is materially inconsistent with the financial underlying supporting evidence. With the assistance of internal specialists, statements or our knowledge obtained in the course of the audit, or otherwise we assessed the TCFD recommended disclosures within the Annual Report appears to be materially misstated. and considered whether they are 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 and complexity of the entity. The group audit team directs, supervises and evaluates the audit work performed by component audit teams by: We have nothing to report in this regard. – Speaking regularly with teams about the status of their work 9. RESPONSIBILITIES OF DIRECTORS – Reviewing reporting and underlying workpapers where determined to As explained more fully in the statement of directors’ responsibilities, the be necessary directors are responsible for the preparation of the financial statements and – Attending key meetings including close meetings for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of In order to drive consistency and comparability over the audit work performed financial statements that are free from material misstatement, whether due by our component auditors, the group engagement team directly leads the to fraud or error. risk assessment process in all areas of the audit. This process involves workshops with our local audit teams to enhance and confirm the group teams In preparing the financial statements, the directors are responsible for understanding of local processes and risks. After consideration of how the assessing the group’s and the parent company’s ability to continue as a going nature and extent of those operating unit level risks contribute to risk of concern, disclosing as applicable, matters related to going concern and using material misstatement at a group level the group engagement team, in the going concern basis of accounting unless the directors either intend to consultation with the local team, confirms the specific audit procedures liquidate the group or the parent company or to cease operations, or have that component auditors are instructed to perform. no realistic alternative but to do so. 213WPP ANNUAL REPORT 2022 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 statements as a whole are free from material misstatement, whether due to to respond to the risk of management override, including adjustments made fraud or error, and to issue an auditor’s report that includes our opinion. in 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 reasonably regulations that had a direct effect on the determination of material amounts be expected to influence the economic decisions of users taken on the basis of and disclosures in the financial statements. The key laws and regulations we 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 may be fundamental to the group’s ability to operate or to avoid a material OF 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 including consideration of the visibility of management incentive schemes relationships that may indicate risks of material misstatement due to fraud and how they could influence local, regional and global management – Reading minutes of meetings of those charged with governance, reviewing behaviour internal audit reports and reviewing correspondence with relevant tax – The group’s own assessment of the risks that irregularities may occur either authorities as a result of fraud or error that was approved by the board – In addressing the risk of fraud through management override of controls, – Results of our enquiries of management, the group’s general counsel, testing the appropriateness of journal entries and other adjustments, internal audit and the audit committee about their own identification including those made outside of local operational reporting; assessing and assessment of the risks of irregularities, including consideration of the whether the judgements made in making accounting estimates are nature and quantum of matters raised to the group’s Business Integrity team indicative of a potential bias; and evaluating the business rationale of any – Any matters we identified having obtained and reviewed the group’s significant transactions that are unusual or outside the normal course documentation of their policies and procedures relating to: of business – identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance We also communicated relevant identified laws and regulations and potential – detecting and responding to the risks of fraud and whether they have fraud risks to all engagement team members including internal specialists and knowledge of any actual, suspected or alleged fraud significant component audit teams, and remained alert to any indications of – the internal controls established to mitigate risks of fraud or non- fraud or non-compliance with laws and regulations throughout the audit. compliance with laws and regulations – The matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists, including fraud, impairment, tax, valuations, pensions and IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud WPP ANNUAL REPORT 2022214 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 - 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 90 - 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 90 - The directors' statement on fair, balanced and understandable set out on page 107 - The board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 91 to 97 - The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 126 - The section describing the work of the audit committee set out on pages 122 to 127 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 30 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 21 years, covering the years ending 31 December 2002 to 31 December 2003. # 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 ISAs (UK) # 16. USE OF OUR REPORT This report is made solely to the company's members, as a body, in accordance with Article 15.6 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 (DTR) 4.1.1x8, these financial statements will 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 Senior statutory auditor For and on behalf of Deloitte LLP Statutory Auditor London, United Kingdom 23 March 2003 WPP ANNUAL REPORT 2003 175 FINANCIAL STATEMENTS ## RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE 2022 2021 2020 The Group presents alternative performance measures, including headline £m £m £m operating profit, headline operating profit margin, headline profit before interest and tax, headline profit before tax, headline earnings, headline EPS, Headline operating profit 1,741.8 1,493.5 1,260.5 headline EBITDA, revenue less pass-through costs, adjusted net debt and Finance and investment income 145.4 69.4 82.7 adjusted free cash flow. They are used by management for internal Finance costs (excluding interest expense related to lease liabilities) (263.7) (192.7) (211.0) performance analyses; the presentation of these measures facilitates | comparability with other companies, although management’s measures may | | (118.3) (123.3) (128.3) | | | | --- | --- | --- | --- | --- | | not be calculated in the same way as similarly titled measures reported by | | 14.7 | 12.1 | 9.8 | | | Interest cover¹ on headline operating profit | times | times | times | other companies; and these measures are useful in connection with discussions with the investment community. Note 1 Interest expense related to lease liabilities is excluded from interest cover as lease liabilities are In the calculation of headline profit measures, judgement is required by excluded from the Group’s key leverage metrics management in determining which revenues and costs are considered to be significant, non-recurring or volatile items that are to be excluded. Headline operating profit and headline operating margin are metrics that management use to assess the performance of the business. The exclusion of certain adjusting items may result in headline earnings being materially higher or lower than reported earnings, for example when significant Headline operating profit margin before and after earnings from associates: impairments or restructuring charges are excluded but the related benefits are included headline earnings will be higher. Headline measures should not be Margin 2022 Margin 2021 Margin 2020 % £m % £m % £m considered in isolation as they provide additional information to aid the Revenue less pass- understanding of the Group’s financial performance. through costs 11,799.3 10, 397. 2 9,762.0 Headline operating profit 14.8 1,741.8 14.4 1,493.5 12.9 1,260.5 Reconciliation of revenue to revenue less pass-through costs: Earnings from associates (after interest and tax, 2022 2021 2020 excluding adjusting £m £m £m items) 73.9 86.1 10.1 Revenue 14,428.7 12,801.1 12,002.8 Headline PBIT 15.4 1,815.7 15.2 1,579.6 13.0 1,270.6 Media pass-through costs (1,905.7) (1,865.3) (1,555.2) Other pass-through costs (723.7) (538.6) (685.6) Headline PBIT is one of the metrics that management uses to assess the Revenue less pass-through costs 11,799.3 10, 397.2 9,762.0 performance of the business. Pass-through costs comprise fees paid to external suppliers when they are Calculation of headline EBITDA: engaged to perform part or all of a specific project and are charged directly to clients. This includes the cost of media where the Group is buying digital 2022 2021 2020 £m £m £m media for its own account on a transparent opt-in basis and, as a result, the subsequent media pass-through costs have to be accounted for as revenue, Headline PBIT (as above) 1,815.7 1,579.6 1,270.6 as well as billings. Therefore, management considers that revenue less Depreciation of property, plant and equipment 166.9 151.2 174.8 pass-through costs gives a helpful reflection of top-line growth. Amortisation of other intangible assets 21.9 19.9 35.2 Reconciliation of profit/(loss) before taxation to headline operating profit: Headline EBITDA (including depreciation of right-of-use assets) 2,004.5 1,750.7 1,480.6 2022 2021 2020 Depreciation of right-of-use assets 262.2 272.9 331.9 £m £m £m Headline EBITDA 2,266.7 2,023.6 1,812.5 Profit/(loss) before taxation 1,159.8 950.8 (2,790.6) Finance and investment income 145.4 69.4 82.7 Headline EBITDA is a key metric that private equity firms, for example, use for Finance costs (359.4) (283.6) (312.0) valuing companies, and is one of the metrics that management uses to assess the performance of the business. Headline EBITDA (including depreciation of Revaluation and retranslation of financial instruments 76.0 (87.8) (147.2) right-of-use assets) is used in the Group’s key leverage metric. Profit/(loss) before interest and taxation 1,297.8 1,252.8 (2,414.1) Earnings/(loss) from associates – after interest Reconciliation of profit before taxation to headline PBT and headline earnings: and tax 60.4 (23.8) 136.0 2022 2021 2020 Operating profit/(loss) 1,358.2 1,229.0 (2,278.1) £m £m £m Operating profit/(loss) margin % 11.5% 11.8% (23.3%) Profit/(loss) before taxation 1,159.8 950.8 (2,790.6) Goodwill impairment 37.9 1.8 2,822.9 Goodwill impairment 37.9 1.8 2,822.9 Amortisation and impairment of acquired Amortisation and impairment of acquired intangible assets 62.1 97.8 89.1 intangible assets 62.1 97.8 89.1 Investment and other impairment charges/ Investment and other impairment charges/ (reversals) 48.0 (42.4) 296.2 (reversals) 48.0 (42.4) 296.2 Intangible asset impairment 29.0 – – Intangible asset impairment 29.0 − − Restructuring and transformation costs 203.7 145.5 80.7 Restructuring and transformation costs 203.7 145.5 80.7 Restructuring costs in relation to Covid-19 15.1 29.9 232.5 Restructuring costs in relation to Covid-19 15.1 29.9 232.5 Property related costs 18.0 – – Property related costs 18.0 − − Losses/(gains) on disposal of investments Losses/(gains) on disposal of investments and subsidiaries 36.3 10.6 ( 7. 8) and subsidiaries 36.3 10.6 ( 7. 8) Gains on remeasurement of equity interests Gains on remeasurement of equity interests arising from a change in scope of ownership (66.5) – (0.6) arising from a change in scope of ownership (66.5) – (0.6) Litigation settlement − 21.3 25.6 Litigation settlement − 21.3 25.6 Headline operating profit 1,741.8 1,493.5 1,260.5 Share of adjusting items of associates 134.3 62.3 146.1 Headline operating profit margin % 14.8% 14.4% 12.9% Revaluation and retranslation of financial instruments (76.0) 87. 8 147.2 Headline PBT 1,601.7 1,365.4 1,041.3 Headline tax charge (408.8) (327.9) (239.9) Headline non-controlling interests (92.7) (83.0) (58.9) Headline earnings 1,100.2 954.5 742.5 WPP ANNUAL REPORT 2022216 RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE FINANCIAL STATEMENTS Headline PBT and headline earnings are metrics that management use to Adjusted net debt at a period end consists of cash and short-term deposits, assess the performance of the business. bank overdraft, bonds and bank loans due within one year and bonds and bank loans due after one year. Calculation of headline taxation: 2022 2021 2020 Reconciliation of adjusted net debt: | | £m | £m | £m | | 2022 | 2021 | 2020 | | --- | --- | --- | --- | --- | --- | --- | --- | | Headline PBT 1,601.7 1,365.4 1,041.3 | | | | | £m | £m | £m | | Tax charge 384.4 230.1 127.1 | | | | Cash and short-term deposits 2,491.5 3,882.9 12,899.1 | | | | | Tax (charge)/credit relating to gains on | | | | Bank overdraft, bonds and bank loans due | | | | | disposal of investments and subsidiaries (9.0) 31.5 (2.7) | | | | within one year (1,169.0) (567.2) (8,619.2) | | | | | Tax credit relating to restructuring | | | | Bonds and bank loans due after one year (3,801.8) (4,216.8) (4,975.5) | | | | | and transformation costs 41.1 38.4 14.3 | | | | Adjusted net debt (2,479.3) (901.1) (695.6) | | | | Tax credit relating to restructuring and transformation costs in relation to Covid-19 5.4 7. 3 51.2 Average adjusted net debt is calculated as the average daily net borrowings Tax (charge)/credit relating to litigation settlement − (5.4) 5.4 of the Group. Adjusted net debt excludes lease liabilities. Deferred tax impact of the amortisation of acquired intangible assets and other goodwill items (15.4) 5.6 36.0 FUTURE RESTRUCTURING AND TRANSFORMATION COSTS Deferred tax relating to gains on Further restructuring and transformation costs are expected from 2023 to disposal of investments and subsidiaries 2.3 20.4 8.6 2025, with approximately £250 million in relation to the continued rollout of Headline tax charge 408.8 327.9 239.9 the Group’s new ERP system in order to drive efficiency and collaboration Headline tax rate 25.5% 24.0% 23.0% throughout the Group. Costs of between £100 million and £150 million are also expected in relation to other IT transformation projects, shared service centres In 2021 the Group reassessed the measure of headline tax rate, as some and co-locations. associate businesses are classified as US tax partnerships with their related tax forming part of the headline tax charge, and now considers the most CONSTANT CURRENCY AND PRO FORMA (‘LIKE-FOR-LIKE’) appropriate metric is to use the headline tax charge as a percentage of These consolidated financial statements are presented in pounds sterling. headline PBT (that includes the share of headline results of associates). The However, the Group’s significant international operations give rise to headline tax rate on headline PBT including the share of headline results of fluctuations in foreign exchange rates. To neutralise foreign exchange impact associates was 25.5% (2021: 24.0%, 2020: 23.0%). Given the Group’s and illustrate the underlying change in revenue and profit from one year to the geographic mix of profits and the changing international tax environment, the next, the Group has adopted the practice of discussing results in both reportable headline tax rate is expected to increase over the next few years. currency (local currency results translated into pounds sterling at the prevailing foreign exchange rate) and constant currency. Calculation of headline non-controlling interests: 2022 2021 2020 Management also believes that discussing pro forma or like-for-like contributes £m £m £m to the understanding of the Group’s performance and trends because it allows Non-controlling interests 92.7 83.0 53.9 for meaningful comparisons of the current year to that of prior years. Non-controlling interests relating to restructuring costs in relation to Covid-19 − – 5.0 Further details of the constant currency and pro forma methods are given in Headline non-controlling interests 92.7 83.0 58.9 the Glossary on pages 232 and 233. Reconciliation of adjusted free cash flow: Reconciliation of reported revenue less pass-through costs to like-for-like 2022 2021 2020 £m £m £m revenue less pass-through costs: Revenue less Cash generated by operations 1,268.2 2,580.3 2,583.9 pass-through costs £m Plus 2020 9,762.0 Interest received 88.9 47. 5 73.6 Impact of exchange rate changes (487.4) -5.0% Investment income 24.5 17.8 8.7 Impact of acquisition (58.6) -0.6% Dividends from associates 37.6 53.4 32.5 Like-for-like growth 1,181.2 12.1% Share option proceeds 1.2 4.4 – 2021 10,397.2 6.5% Less Impact of exchange rate changes 611.9 5.9% Earnout payments (71.4) (57.0) (115.2) Impact of acquisition 72.8 0.7% Corporation and overseas tax paid (390.9) (391.1) (371.5) Like-for-like growth 717.4 6.9% Interest and similar charges paid (210.2) (173.7) (173.9) 2022 11,799.3 13.5% Interest paid on lease liabilities (92.4) (88.4) (98.5) Repayment of lease liabilities (309.6) (320.7) (300.1) (LOSS)/EARNINGS FROM ASSOCIATES – AFTER INTEREST AND TAX Purchases of property, plant and equipment (208.4) (263.2) (218.3) Management reviews the '(Loss)/earnings from associates – after interest and Purchase of other intangible assets tax' by assessing the underlying component movements including 'share of (including capitalised computer software) (14.9) (29.9) (54.4) profit before interest and taxation of associates', 'share of adjusting items of Dividends paid to non-controlling interests in subsidiary undertakings (69.5) (114.5) (83.3) associates', 'share of interest and non-controlling interests of associates', and Adjusted free cash flow 53.1 1,264.9 1,283.5 'share of taxation of associates', which are derived from the Income Statements of the associate undertakings. The Group bases its internal cash flow objectives on adjusted free cash flow. Management believes adjusted free cash flow is meaningful to investors The following table is an analysis of '(Loss)/earnings from associates – after because it is the measure of the Group’s funds available for acquisition related interest and tax' and underlying component movements: payments, dividends to shareholders, share repurchases and debt repayment. 2022 2021 2020 The purpose of presenting adjusted free cash flow is to indicate the ongoing £m £m £m cash generation within the control of the Group after taking account of the Share of profit before interest and taxation 219.6 208.5 142.5 necessary cash expenditures of maintaining the capital and operating Share of adjusting items (134.3) (62.3) (146.1) structure of the Group (in the form of payments of interest, corporate taxation Share of interest and non-controlling interests (104.7) (83.9) (91.4) and capital expenditure). Share of taxation (41.0) (38.5) (41.0) (Loss)/earnings from associates – after interest and ADJUSTED NET DEBT AND AVERAGE ADJUSTED NET DEBT tax (60.4) 23.8 (136.0) Management believes that adjusted net debt and average adjusted net debt are appropriate and meaningful measures of the debt levels within the Group. Share of adjusting items of £134.3 million (2021: £62.3 million, 2020: £146.1 This is because of the seasonal swings in our working capital generally, and those million) primarily comprise £75.8 million (2021: £38.8 million, 2020 £54.3 million) resulting from our media buying activities on behalf of our clients in particular. of amortisation and impairment of acquired intangible assets as well as restructuring and one-off costs of £54.8 million (2021: £18.8 million, 2020: £89.3 million) within Kantar. 217WPP ANNUAL REPORT 2022 ## ADDITIONAL ## INFORMATION Task Force on Climate-Related 220 Financial Disclosures statement Other statutory information 227 Shareholder information 228 Five-year summary 231 Glossary 232 Where to find us 234 218 WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION 219WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION ## TASK FORCE ON CLIMATE-RELATED ## FINANCIAL DISCLOSURES STATEMENT UK LISTING RULES STATEMENT OF COMPLIANCE GOVERNANCE WPP was an early adopter of the Task Force on Climate-related Financial Our Executive Directors (CEO and CFO) have overall responsibility for Disclosures. WPP’s fifth disclosure, set out below, is structured around the climate-related risks and opportunities and our performance on carbon four TCFD themes of governance, strategy, risk management, and metrics reduction is integrated into their incentive plans. The WPP Executive and targets. We aim to develop our disclosures in line with TCFD’s 11 Committee sets the sustainability strategy and oversees the approach across recommended disclosures set out in June 2017 (see table below). agencies in its implementation. The Chief Sustainability Officer has operational responsibility for assessing and managing climate issues. Progress against We report in line with the FCA Listing Rule LR 9.8.6(8)b, which requires us climate-related metrics and targets is communicated to the business on an to report on a ‘comply or explain’ basis against the TCFD Recommended annual basis. Where appropriate, agencies and functions are informed about Disclosures in respect of the financial year ended 31 December 2022. climate-related issues through targeted briefings. We consider our climate-related financial disclosures to be consistent with nine of the 11 TCFD Recommended Disclosures and we have explained why we The Board is responsible for the overall long-term success of WPP and for are not consistent for the remaining two in the related sections. Therefore our setting the Company’s strategic direction, including in relation to climate disclosures are compliant with Listing Rule 9.8.6(8)b. change. The Board approves the Sustainability Policy and Environment Policy and, where relevant, considers climate-related issues (as Section 172 factors) Some of these recommendations, published in the 2021 TCFD Annex, will take when overseeing major decisions (set out in ‘WPP Matters Reserved for the more time for us to become fully consistent with due to challenges around Board’ on wpp.com). data access. These relate to detailed financial impacts and quantitative scenario analysis of climate-related risks and opportunities. We will continue The Sustainability Committee of the Board is attended by both the CEO and to implement the rest of the 2021 TCFD Annex 1 recommendations over the CFO, as well as experienced Non-Executive Directors (see ‘Our Board’ from course of 2023 and intend to apply these more fully in our future disclosures. page 104) with extensive sustainability expertise, and supports the Board in its oversight of the Company’s net zero strategy. The Sustainability Committee met five times in 2022 and selected a sustainability-related topic to be COMPLIANCE STATUS presented to the Board after each Committee meeting. Climate-related topics | Governance Strategy Risk management Metrics and targets | | | | were discussed at all Committee meetings in 2022. The Committee’s remit | | --- | --- | --- | --- | --- | | a) Board’s | a) Climate-related | a) Processes for | a) Metrics to assess | includes reviewing and monitoring implementation of the Company’s | | oversight of | risks and | identifying | climate-related | sustainability strategy and evaluating performance against climate targets | | climate-related | opportunities | and assessing | risks and | and commitments. | | risks and | over a short, | climate-related | opportunities | | | opportunities | medium and | risks | in line with | | | | long-term | | strategy and risk | As the Company’s clients integrate climate adaptation and mitigation into | | | horizon | | management | their business strategies, the Committee will continue to review the growth | | | | | process | 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. | b) Management’s | b) Impact of | b) Processes for | b) Disclose Scope 1, | | | | --- | --- | --- | --- | --- | --- | | role in assessing | climate-related | managing | Scope 2, and, | | | | and managing | risks and | climate-related | if appropriate, | 2022 Board actions: Next steps: | | | climate-related | opportunities | risks | Scope 3 GHG | | | | risks and | on the business, | | emissions, and | Updated Sustainability Policy and | Annual Board review and approval | | opportunities | strategy and | | the related risks | new Environment Policy approved | of Sustainability and Environment | | | financial | | | by the Board. | Policies. | planning | | | GroupM presented its media | In 2023, the Board Sustainability | | --- | --- | --- | --- | | | | decarbonisation strategy, covering | Committee will monitor the | | c) Resilience of the | c) Identifying, | 55% of WPP’s overall emissions. | development and review the outputs | c) Targets used organisation’s assessing and to manage of WPP’s Net Zero Transition Plan. strategy, managing climate-related considering climate-related risks and Reviewed and commented on different risks, and opportunities, WPP’s climate-related risks and | climate-related | integration | and performance | | | --- | --- | --- | --- | | scenarios, | into overall risk | against targets | opportunities. | | including a 2°C | management | | | or lower Reviewed WPP’s Assignment scenario Acceptance Policy and Framework and Green Claims Guide. Professor Dr Johan Rockström, Director of the Potsdam Institute for Climate Impact Research and Professor in Earth System Science at the University of Potsdam, engaged with and presented to the Board on climate-related issues. Further information on sustainability governance is provided on page 85 of this Annual Report. The Sustainability Committee’s report features on pages 128 and 129 KEY In compliance Partial compliance 220 WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT ADDITIONAL INFORMATION CLIMATE CHANGE STRATEGY Further information on WPP’s sustainability strategy and commitments At WPP we support the aims of the Paris Agreement and believe in the can be found on pages 66 to 85 of this Annual Report urgent need to transition to net zero. 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 climate action, and to the UNFCCC’s Race 2022 actions: Next steps: to Zero campaign. – Time horizons for climate-related – Develop and publish Net Zero WPP’s disclosure of climate-related risks and opportunities provided in this risks and opportunities and Transition Plan, including a first section outlines the impacts we expect to see on our business between now qualitative scenario analysis evaluation of costs associated with and 2030. It includes qualitative disclosure of both the impact on, and the integrated into TCFD disclosures our climate-related risks and resilience of, WPP’s strategy. Details of the time horizons and climate scenarios for the first time. opportunities. considered as part of this assessment are included in the tables below. The process used to determine these risks and opportunities is covered in the Risk – Continue to strengthen climate Management section (page 225). scenario analysis and resilience testing eg factoring into There is no material impact from climate change on our current year financial investment case for new assets reporting. Materiality is described in Our Application of Materiality (page 211). and longer-term (eg 2050) The most significant impacts from the climate-related risks and opportunities impacts. summarised below are expected to be realised on a timeframe that exceeds our current financial planning. At present, we do not provide quantified disclosures of the financial impacts of climate-related risks and opportunities in the context of financial planning. In 2023, we will develop and publish a Net Zero Transition Plan, including an evaluation of the costs associated with our climate-related risks and opportunities. CLIMATE-RELATED RISK AND OPPORTUNITIES DISCLOSURE TIME HORIZONS Time horizon Time period Internal time horizon alignment | Short term | 2022-2023 Annual Reporting periods | | --- | --- | | Medium Term | 2024-2027 Scope 1 and 2 science-based reduction target (2025) and Transformation Programme (2027) | | Long Term | 2027-2030 Scope 3 science-based reduction target (2030) | CLIMATE SCENARIOS Description High carbon (more than 4 o C) Low carbon (less than 2 o C) Very low carbon (less than 1.5 o C) Physical Impacts The physical impacts of climate change are broadly consistent across all three scenarios considered (in line with the RCP and SSP narratives). We are already experiencing increased exposure to extreme weather events. Policy to support Limited policy support. Market-based Support in markets currently advancing Policy support is widespread, decarbonisation solutions are prioritised. policy. This includes the UK, United States accelerating progress towards net zero and EU. Market-based solutions make up a across our value chain. Market-based significant proportion of achieved solutions are still utilised. decarbonisation. Regulation and Limited regulation and reporting Limited to markets currently advancing Widespread regulation and reporting reporting standards standards applicable to our sector. regulation and reporting standards standard applicable to our sector. This No regulation of green claims and applicable to our sector. This includes includes regulation of green claims and carbon-based products. some regulation of green claims and the the advertising of high-carbon products. advertising of high-carbon products. Sustainable Some clients and consumers seek Clients and consumers in many markets Rapid and substantial growth in demand consumption sustainable products and services, but increasingly seek sustainable products for sustainable products and services, the rise in demand is not substantial. and services and are supported by supported by regulation and policy. regulation and policy. Sustainable consumption becomes the norm in many markets. RCP Alignment RCP 8.5- Business as Usual, RCP 2.6- ‘Acceptable Limit’ RCP 1.9- net zero transition, 4-degree Celsius. 2-degree Celsius. 1.5-degree Celsius. IPCC SSP Alignment SSP4- A Road Divided. SSP2- Middle of the Road. SSP1- The Green Road. 221WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT WPP’S CLIMATE-RELATED RISKS AND OPPORTUNITIES POTENTIAL IMPACT HOW IT IS MANAGED RISK OR OPPORTUNITY AND RESILIENCE DESCRIPTION CONSIDERATIONSHIGH CARBON LOW CARBON VERY LOW CARBON PHYSICAL RISKS AND OPPORTUNITIES | Increased frequency of | Our industry is less exposed | Under these two scenarios, WPP’s existing plans for | Campuses (see page 19): | | --- | --- | --- | --- | | extreme weather and | to the costs of physical | campuses, business continuity procedures and employee | Co-locating our people in | | climate-related natural | climate change than others. | support systems would minimise the impact of these. | fewer, higher-capacity | | disasters | | Additional plans would need to be put in place to manage | buildings means we can | | | | the dynamics of issues including climate-related migration. | centralise emergency | As the longer-term physical preparedness procedures impacts under this scenario and deploy climate mitigation are more severe, WPP’s measures more efficiently. campuses, business Climate-related risk is continuity procedures and considered when we invest employee support systems in new campus buildings. In would require additional This includes storms, 2023 we will pilot a new ESG investment above current flooding, wildfires and scorecard to assess building plans to minimise risk to water and heat stress which performance across a number infrastructure and, more can damage our buildings, of climate-related metrics. critically, our people. These jeopardise the safety and would also need to respond wellbeing of our people to increased climate-related Our hybrid working approach, and significantly disrupt migration, for example which incorporates new ways our operations. We consider supporting our people of working adopted during the this risk relevant to all through relocations. pandemic, provides additional operations, however certain resilience by enabling fully geographies (eg coastal remote working – provided cities, especially in Asia) employees and their families are more exposed. are in safe locations – during extreme weather events. Employee Assistance Programme (EAP): Available to 100% of employees, (see page 72) is activated in response to climate-related extreme weather events. TRANSITION RISKS AND OPPORTUNITIES | Delivering net zero | Increased investment would | Markets with less policy | Policy support would | Transition Plan: In 2023, we | | --- | --- | --- | --- | --- | | commitments | be required in building | support and regulation | accelerate the pace | will publish our first net zero | | | renovation, electrification | may require additional | of change, reducing | transition plan which will | | | and supplier engagement | expenditure to meet targets. | investment required | outline further details on how | | | to meet targets, including | | to deliver targets. | we intend to deliver against | | | developing internal ESG | | | our net zero targets. | Moderate demand-led capacity and capabilities. increase in market-price per More rapid decarbonisation tonne of carbon would would reduce pressure on Strong net zero governance Carbon removals offsets increase the cost of carbon the carbon removals offset and policy structures: Delivering WPP’s Scope 3 prices would likely rise, removals required to meet market, and reduce the The Board Sustainability carbon reduction targets increasing the overall our net zero commitments. overall cost associated Committee was formed in 2019 depends upon the adoption required expenditure to with meeting our net zero to place increased focus on of new technologies (some meet our net zero commitment. sustainability (see pages 128 of which have not yet been commitments. and 129). In 2022, the Board conceived or created) and approved an updated business model innovations Sustainability Policy, and new across the supply chain. We Environment Policy which consider this risk relevant includes policy guidance to all geographies, however around offsetting. it is more significant for operations with larger associated carbon emissions Environmental, social and (eg media and production). governance KPIs are included as part of the scorecard that determines the short-term incentive rewards for WPP’s CEO and CFO. This includes WPP’s performance against carbon reduction targets. KEY Risk Opportunity Short term Medium term Long term WPP ANNUAL REPORT 2022222 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT POTENTIAL IMPACT HOW IT IS MANAGED RISK OR OPPORTUNITY AND RESILIENCE DESCRIPTION CONSIDERATIONSHIGH CARBON LOW CARBON VERY LOW CARBON TRANSITION RISKS AND OPPORTUNITIES Changes in regulation and A lack of ESG reporting Additional investment in Additional investment in Emerging regulation and reporting standards regulation and standards internal capability building internal capability building reporting standards: We are could lead to mistrust of (managed at a global level), (with localised expertise to monitoring developments in corporate carbon emissions data capture, reporting support local compliance), legislation relating to ESG data, net zero commitments and assurance would be data capture, reporting reporting and the regulation and the advertising of required to meet the needs and assurance would be of environmental claims and sustainable products and of legislation, including in required to meet the needs investing in internal capability services among consumers the UK, United States and EU of this legislation. building in response. and clients. where legislation addressing WPP could be subject to ESG reporting is currently Media decarbonisation: Media increased costs to comply being enacted. accounts for more than 50% with potential future of WPP's total carbon footprint. changes in environmental Through our global framework laws and regulations and for media decarbonisation, increasing carbon offset launched by GroupM in 2022, pricing to meet its net zero we are exploring opportunities commitments. to improve accounting for emissions from media buying Carbon emission accounting (see page 76). for marketing and media is in its infancy and Offsetting: Our Environment methodologies continue to Policy covers how we manage evolve. This is particularly the cost and quality of carbon the case for emissions credits purchased to offset associated with digital emissions we cannot remove. media. In 2023 we will further develop our offsetting strategy as part of our transition plan. | Increased demand for | Under this scenario we have | Growth in demand would | Growth in demand would | Investment in sustainable | | --- | --- | --- | --- | --- | | sustainable products | assumed that, while some | be steady, and revenue | be rapid, and sustainable | products and services: Our | | and services | clients and consumers will | generated from sustainable | products and services | sustainability strategy (see | | | seek sustainable products | products and services by | would make up a significant | page 68) outlines our | | | and services, the overall rise | 2030 would be material with | proportion of revenues by | commitment to developing | | | in demand is limited. The | some markets and services | 2030 across most markets | products and services which | | | overall impact on Group- | seeing more growth than | and service offerings. | enable our clients to adopt | | | level financial planning | others. Budgets and cash | Budgets and cash flow | leadership positions on climate | | | processes would, therefore, | flow forecasts would likely | forecasts would be likely | change and exceed the | | | be limited. | reflect an investment in | to reflect the required | expectations of consumers. | | Opportunity to grow | | sustainability-related skills, | investment to meet the | | | revenues from products | | as well as new sustainable | opportunity. | | In 2022, investment continued and services which support product and service in virtual advertising production clients as they seek to offerings. Significantly increased capability and GroupM’s media decarbonise their investment in employee decarbonisation programme. businesses. capability required, and We continued to train our growth through acquisition people to deliver net zero This may include developing may be needed to meet products and services through low or net zero marketing, demand. Innovation and programmes such as AdGreen media and ecommerce investment in new products and our new Green Claims services, developing and services would be Guide and associated training, sustainability-focused brand extensive. and to innovate on behalf of strategies and promoting our clients through initiatives sustainable consumption like Change the Brief, now to consumers. This open-sourced across our opportunity is relevant industry through the Change globally. the Brief Alliance. KEY Risk Opportunity Short term Medium term Long term 223WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT POTENTIAL IMPACT HOW IT IS MANAGED RISK OR OPPORTUNITY AND RESILIENCE DESCRIPTION CONSIDERATIONSHIGH CARBON LOW CARBON VERY LOW CARBON TRANSITION RISKS AND OPPORTUNITIES Achieving resource While policy support for A greater level of policy support for decarbonisation would Transition Plan: As we develop efficiencies through cutting decarbonisation may be widen the availability of opportunities to WPP. This would our Net Zero Transition Plan we our carbon footprint and limited under this scenario, accelerate the overall rate at which we could decarbonise are assessing the cost-benefit improving energy efficiency our investment in our net our buildings and value chain, and increase the potential of existing and potential zero strategy would rate of return. Overall, this would lower our reliance on decarbonisation projects still achieve resource removal-based offsetting and reduce the cost associated in order to realise resource efficiencies. However, with meeting our net zero commitments. efficiency in our operations some decarbonisation and value chain. opportunities, including technology-based solutions, Campuses: We have been may not be available Through carbon reduction driving energy efficiency gains without a support policy initiatives we have the by ensuring that all buildings environment. This may opportunity to decrease with a floor space exceeding increase our overall the costs associated 50,000 square feet are certified expenditure on carbon with energy use and limit to advanced sustainability removals and offsets increased costs associated standards eg LEED and required to meet our net with carbon taxation. This BREEAM. By 2025, the majority zero commitment. | relates both to our buildings, | of our people will be based in | | --- | --- | | and to energy-intense | net zero campuses using | | activities such as data | electricity purchased from | | storage. This opportunity | 100% renewable sources. | is relevant globally. Media decarbonisation: Media investment accounts for more than 50% of WPP's total carbon footprint. Our global framework for media decarbonisation, launched by GroupM in 2022, sets out their approach to measuring and reducing carbon emissions associated with media placement (see page 76). | Increased reputational | Government regulation of | Government regulation of | Government regulation of | Internal tools and procedures: | | --- | --- | --- | --- | --- | | risk associated with | environmental advertising | environmental advertising | environmental advertising | We have developed internal | | misrepresenting | and marketing claims is | and marketing claims is | and marketing claims is | tools to help our people | | environmental claims | likely to be limited. We | likely to be centred on | likely to be widespread, in | identify environmentally | | in marketing and | continue to invest in training | markets already advancing | addition to a significant rise | harmful briefs. These tools | | advertising content | to support credible | climate policy, in addition to | in consumer and client | embed climate-related issues | | | environmental claims to | consumer and client | concern around credibility. | within existing content | | | respond to consumer and | concern around credibility. | There is widespread risk of | review procedures across | | | client concerns around | This includes the UK and | litigation and the potential | the organisation. The | | | credibility. There is little | United States. The risk of | for revenue losses should | misrepresentation of | | | risk of litigation. | litigation increases in those | our reputation for credibility | environmental issues is | | | | markets, and increased | be jeopardised. Investment | governed by our Code of | | | | investment in training and | in localised training and | Conduct. We also ensure our | | As consumer consciousness | | capability is required to | capability would be | policies reduce the risk that | | around climate change rises, | | ensure advertising and | required to ensure | any client brief undermines | | our sector is seeing | | marketing content is | advertising and marketing | the implementation of the | | increased scrutiny of our | | compliant. | content is compliant. | Paris Agreement. In 2022, we | | role in driving unsustainable | | | | introduced the Assignment | | consumption. Our clients | | | | Acceptance Policy and | | seek expert partners who | | | | Framework and the Green | | can give recommendations | | | | Claims Guide to provide | | that take into account | | | | further guidance about how | | stakeholder concerns | | | | to conduct additional due | | around climate change. This | | | | diligence in relation to clients | | risk is globally relevant, but | | | | and any work we are asked to | | in the short term is greater | | | | undertake (see page 77). | in geographies with existing or emerging regulation (Australia, EU, UK and United States). KEY Risk Opportunity Short term Medium term Long term WPP ANNUAL REPORT 2022224 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT POTENTIAL IMPACT HOW IT IS MANAGED | RISK OR OPPORTUNITY | | | | AND RESILIENCE | | --- | --- | --- | --- | --- | | DESCRIPTION | | | | CONSIDERATIONSHIGH CARBON LOW CARBON VERY LOW CARBON | | Increased reputational risk | Government regulation of | There is likely to be an | There is a significant | Accepting new assignments: | | associated with working | environmental advertising | increased risk associated | increased risk associated | In 2022, we introduced | | on client briefs perceived | and marketing claims is | with working on client briefs | with working on client briefs | the revised Assignment | | to be environmentally | likely to be limited. We | perceived to be | perceived to be | Acceptance Policy and | | detrimental | continue to invest in training | environmentally detrimental. | environmentally detrimental. | Framework to provide further | | | to support credible | Government regulation in a | Government regulation in | guidance about how to | | | environmental claims to | limited number of markets | a wide number of markets | conduct additional due | | | respond to consumer and | could outline definitions of | may outline definitions of | diligence in relation to clients | | | client concerns around | high-carbon products or | high-carbon products or | and any work we are asked | | | credibility. There is little | services that cannot be | services that cannot be | to undertake (see page 77). | | | risk of litigation. | advertised but this is | advertised and this covers | | | | | restricted to the most | a wider number of instances. | | | WPP serves some clients | | carbon intense instances. | There is widespread risk of | | The reputational risk whose business models are The risk of litigation litigation and the potential associated with working under increased scrutiny, increases in those markets, for revenue losses should on client briefs perceived for example energy and increased investment in our reputation for credibility to be environmentally companies or associated training and capability is be jeopardised. Investment detrimental is likely to be industry groups who are required to ensure in localised training and low, with limited at different stages of the advertising and marketing capability would be government regulation decarbonisation process. content is compliant. required to ensure of the ability to advertise This creates both a advertising and marketing for high-carbon products reputational and related content is compliant. or services. financial risk for WPP if we are not rigorous in our content standards as we grow our sustainability- related services. RISK MANAGEMENT: IDENTIFYING CLIMATE RISK AND OPPORTUNITY Sustainability risks, including climate-related 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 86 to 90 and climate change risk is included as a risk within the principal risks and uncertainties disclosure on page 97. 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 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. WPP’s overall approach to risk management and a summary of our principal risks can be found on pages 86 to 97 of this Annual Report KEY Risk Opportunity Short term Medium term Long term 225WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT METRICS AND TARGETS For the second year, WPP appointed PricewaterhouseCoopers LLP (‘PwC’) Metrics and targets are used by WPP to assess and manage our climate-related to support the expansion of WPP’s assurance programme for the carbon risks and opportunities. As part of the process of preparing this disclosure, we data disclosed in this report. Throughout this report, selected carbon have considered the metrics set out by the TCFD in tables A1.1, A1.2 and A2.1 of metrics highlighted with the symbol were subject to independent limited the TCFD recommendations. assurance by PwC. For the details and results of the limited assurance, see wpp.com/sustainabilityreport2022. 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. WPP risk or opportunity TCFD A2.1 category Metric or target Increased frequency of extreme weather Physical Risks 10% of headcount located in countries at “extreme” risk from the and climate-related natural disasters physical impacts of climate change in the next 30 years (2021: 10%) Changes in regulation and Transition Risks In 2023, assess impact of ESG reporting legislation changes and reporting standards determine a programme of works for implementation 1 Delivering net zero commitments GHG Emissions Achieving net zero in our own operations (Scope 1 and 2) by 2025 and across our supply chain (Scope 3) by 2030, including emissions from media buying – an industry first Reducing absolute Scope 1 and 2 greenhouse gas emissions by 84% by 2025 and absolute Scope 3 emissions – including media buying – by 50% by 2030, both from a 2019 base year Sourcing 100% of our electricity from renewable sources by 2025 Absolute Scope 1 and Scope 2 emissions (see Carbon Emissions Statement – page 227) Scope 1 and 2 carbon emissions per person and per unit of revenue (see Carbon Emissions Statement – page 227) 2 Scope 3 carbon emissions (see 2022 Sustainability Report) 83% electricity purchased from renewable sources (2021: 74%) Capital Deployment Publish net zero transition plan in 2023 Remuneration Integration of performance on Scope 1 and 2 carbon reduction targets in executive remuneration (see Compensation, succession and evaluation – from page 130) | | Internal Carbon Prices | £6.01 per tCO | 2 e associated with business air travel recharged to | | | --- | --- | --- | --- | --- | | | | WPP agencies (2021: £2.03 per tCO | | 2 e) | | Increased demand for sustainable | Climate-Related Opportunities | 78% of our top 50 clients have set or committed to set science- | | | | products and services | | based carbon reduction targets (2021: 62%) | | | | Achieving resource efficiencies through | Climate-Related Opportunities 100% electricity purchased from renewable sources by 2025 | | | | cutting our carbon footprint and 85% of employees in net zero campuses by 2025 improving energy efficiency Increased reputational risk associated Transition Risks In 2023, make Green Claims Guide training available for clients and with misrepresenting environmental claims sectors most exposed to reputational or legal risk in marketing and advertising content Increased reputational risk associated Transition Risks In 2023, make Green Claims Guide training available for clients and with working on client briefs perceived sectors most exposed to reputational or legal risk to be environmentally detrimental 1 For our emissions and energy disclosure, including prior year metrics, see page 227. Additional information on our carbon emissions methodology is included in the ‘WPP Sustainability Reporting Criteria 2022’, see wpp.com/sustainabilityreport2022 KEY 2 Our 2022 Sustainability Report provides additional information on our strategy, targets and commitments. It is referred to where additional detail to that which is included in the 2022 Target Metric Annual Report is required WPP ANNUAL REPORT 2022226 ADDITIONAL INFORMATION ## OTHER STATUTORY INFORMATION EMISSIONS AND ENERGY CO 2 e EMISSIONS BREAKDOWN (TONNES/ENERGY (MWh) 2022 2021 2020 2019 Emissions source UK Non-UK Total Total Total Total | | | | Tonnes | | | Tonnes | | | Tonnes | | Tonnes | | Tonnes | | Tonnes | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Energy | | of | Energy | | of | Energy | | of | | of | | of | | of | | Continuing operations | | MWh | CO | 2 e | MWh | CO | 2 e | MWh | CO | 2 e | CO | 2 e | CO | 2 e | CO | 2 e | | Scope 1 | Natural Gas 7,297 1,476 14,667 2,967 21,964 4,443 5,071 4,069 6,299 | | | | | | | | | | | | | | | | Diesel and Heating Oil 0 0 2,356 698 2,356 698 638 692 541 Company cars (Centrally Contracted) N/A 16 N/A 4,894 N/A 4,910 4,429 Sub-total Scope 1 7,297 1,492 17,023 8,559 24,320 10,051 10,138 17,041 18,175 Company cars (Local Contracts) N /A 17 N/A 4,037 N/A 4,054 3,154 Total Scope 1 7, 297 1,509 17,023 12,596 24,320 14,105 13,292 21,802 25,015 Scope 2 Standard Electricity (location based) 0 0 23,508 10,241 23,508 10,241 20,602 28,984 56,421 Green and renewable electricity (location based) 10,105 1,954 104,314 3 7,41 8 114,419 39,372 34,150 31,671 27,324 Heat and steam 0 0 7,197 1,254 7,197 1,254 1,238 1,177 1,820 Total Scope 2 (location based emissions) 10,105 1,954 135,019 48,913 145,124 50,867 55,990 61,832 85,565 Standard electricity (market based) 0 0 23,508 9,842 23,508 9,842 20,602 28,983 60,750 Green and renewable electricity (market-based) 10,105 0 104,314 0 114,419 0 0 0 0 Heat and steam 0 0 7,197 1,254 7,197 1,254 1,238 1,177 1,820 Total Scope 2 (market based emissions) 10,105 0 135,019 11,096 145,124 11,096 21,840 30,160 62,570 Total Total Scope 1 and 2 (location based) 17, 402 3,463 152,042 61,509 169,444 64,972 69,282 83,634 110,580 Scope | 1 and 2 | Total Scope 1 and 2 (market based) 17,402 1,509 152,042 23,692 169,444 25,201 35,132 51,962 87, 5 85 | | | | | --- | --- | --- | --- | --- | | Scope 3 | Business air travel (Centrally Contracted Flights) | | 34,315 | | | | | N/A N/A N/A | | 11,421 23,325 122,967 | Business air travel (Locally Contracted and Uplifted) 21,347 Total Scope 3 N/A N/A N/A 55,662 11,421 23,325 122,967 | WPP’S CARBON INTENSITY (TONNES OF CO | | 2 e) | | | --- | --- | --- | --- | | Intensity metric | | | UK Non-UK Total 2021 2020 2019 | | Total | Tonnes per full-time employee (market based) N/A 0.12 N/A 0.23 0.22 0.32 0.52 0.82 | | | Scope 1 and 2 Tonnes per £m revenue (market based) N/A 1.75 2.74 4.33 6.62 Scope 3 Tonnes per full-time employee N/A 0.48 0.10 0.23 1.15 Notes 1 Our carbon emissions statement has been prepared in accordance with the Greenhouse Gas Protocol and aligns with the scope 2 market-based emissions methodology guidance. Our reporting incorporates carbon dioxide equivalent emissions from building energy use and business air travel. Emissions data is included for all operations 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. 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, showing in a separate column. 3 Additional information on our carbon emissions methodology is included in our Sustainability Report and Reporting Criteria on our website (wpp.com/sustainability). Indicates the selected metrics have been subject to independent limited assurance procedures by PricewaterhouseCoopers for the year ending 31 December 2022. For PwC’s 2022 Limited Assurance report and the ‘WPP Sustainability Reporting Criteria 2022’, see our 2022 Sustainability Report at www.wpp.com/sustainabilityreport2022 227WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION ## SHAREHOLDER INFORMATION SHARE CAPITAL AND CONTROL MAJOR SHAREHOLDERS Details of our issued share capital and the number of shares held in Treasury The table below shows the holdings of major shareholders in the Company’s as at 31 December 2022 can be found in note 27 to the financial statements. issued ordinary share capital in accordance with the Disclosure Guidance and Transparency Rules (DTRs) notified to the Company as at 31 December 2022 Our ordinary shares are listed on the London Stock Exchange (LSE) and are and 16 March 2023. Information provided to the Company under the DTRs is also quoted on the New York Stock Exchange (NYSE) in the form of American publicly available via the regulatory information services and on the | Depositary Receipts (ADRs). | Company’s website. | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | At 31 December | | | At 16 March | | | | The rights and obligations relating to the ordinary share capital are outlined in | | | | 1 | | | 1 | | | | | 2022 | | | 2023 | | the Articles of Association; there are no restrictions on transfer, no restrictions BlackRock Inc 7. 70% 7.60% on voting rights and no securities carry special voting rights with regard to Silchester International Investors LLP 5.03% 5.03% control of the Company. 1 Percentage as at date of notification At the AGM on 24 May 2022, shareholders passed resolutions authorising the Company, in accordance with its Articles, to allot shares up to a maximum SHAREHOLDERS AS AT 31 DECEMBER 2022 nominal amount of £37,416,459 of which £5,612,469 could be allotted for cash Number of free of statutory pre-emption rights. In the year under review no shares Holding of shares holders % Owners Shareholdings % Outstanding were issued for cash free from pre-emption rights. Details of share capital Up to 1,000 5,093 52 1,228,606 0.1 movements are given in note 27 to the financial statements on pages 199-201. 1,001 to 5,000 1,459 15 3,593,633 0.3 5,001 to 100,000 2,092 22 64,472,673 5.7 AUTHORITY FOR PURCHASE OF OWN SHARES At the AGM on 24 May 2022 shareholders passed a special resolution 100,001 to 1,000,000 850 9 280,111,340 24.5 authorising the Company, in accordance with its Articles of Association, Over 1,000,000 215 2 792,021,044 69.4 to purchase up to 112,249,376 of its own shares in the market. In the year under review, 83,157,954 ordinary shares were purchased. Shareholders by geography % Shareholders by type % UK 30.5 Institutional investors 95.8 United States 3 7. 2 Our people 0.4 Rest of World 32.3 Other individuals 3.8 Total 100 Total 100 WPP ANNUAL REPORT 2022228 SHAREHOLDER INFORMATION ADDITIONAL INFORMATION # SHARE PRICE The closing price of the shares at 31 December was as follows: | | At 16 March 2022 | 2022 | 2021 | 2020 | 2019 | 2018 | | --- | --- | --- | --- | --- | --- | --- | | Ordinary 10p shares | 909.6p | 1020.2p | 1,799.5p | 1,800.0p | 1,066.5p | 846.6p | 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 15 of the Company's Articles of Association. The power under Article 12 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. 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. On 6 March 2022 the Company announced a share buyback programme, with a plan to purchase up to £300 million. On 26 March 2022 the Company announced a further share buyback programme of up to £300 million which would take place during the period commencing 26 March 2022 and ending no later than 26 June 2022. On 8 September 2022 the Company announced a share buyback programme of up to £170 million beginning 8 September 2022, and ending no later than 31 December 2022. As a result of these programmes, the Company bought back £807,383,034 million of shares in 2022. # DIVIDENDS Subject to shareholder approval at the 2023 AGM, the final dividend for 2022 will become due and payable on 7 July 2023 to all holders of ordinary shares on the Register of Members at the close of business on 9 June 2023. The table below sets out the dividend per share ordinary shareholders have received for the last five years. | | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | --- | --- | --- | --- | --- | --- | --- | | Interim dividend per ordinary share | 15.00p | 13.50p | 10.00p | 33.70p | 33.70p | 33.70p | | Final dividend per ordinary share | 24.40p | 18.70p | 14.00p | - | 37.50p | 37.50p | | Total | 39.40p | 31.20p | 24.00p | 33.70p | 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-F 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. Goldress on page 230. Dividends per ADR in respect of each financial year are set out below. | | 2022 | 2021 | 2020 | 2019 | 2018 | | --- | --- | --- | --- | --- | --- | | In 6 sterling | | | | | | | Interim | 63.50p | 50.00p | 113.50p | 113.50p | 113.50p | | Final | 92.50p | 70.00p | - | 184.50p | 184.50p | | Total | 156.00p | 120.00p | 113.50p | 300.00p | 300.00p | In US dollars¹ | Interim | 89.980 | 64.180 | 144.880 | 151.530 | 144.270 | | --- | --- | --- | --- | --- | --- | | Final | 128.430 | 89.850 | - | 248.000 | 240.240 | | Total | 216.410 | 154.030 | 144.880 | 400.530 | 386.410 | ¹ These figures have been translated for convenience purposes only, using the appointment average rate for the year of US$ 2363 (2021 US$ 1772 2021 US$ 1806, US$ 1581 2018, US$ 1581 2018). The conversion should not be severe and you represent either that the you will sterling amounts actually represent, or could be converted into, all 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 2022 209 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 | | | | incentive schemes | page 130-156 | SHAREHOLDER CONTACTS | | 5 Details of Directors’ | | Directors’ compensation report | ORDINARY SHARES | | | waiver of emoluments | page 130-156 | For any queries regarding your shareholding, please contact Computershare: | | 6 Director waiver of future | | Directors’ compensation report | | | | emoluments | page 130-156 | | 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 2023 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 8 June 2023 12 October 2023 Dividend record date 9 June 2023 13 October 2023 By email: citibank@shareholders-online.com Dividend payment date 7 July 2023 3 November 2023 Other key dates: In writing: Citibank N.A., PO Box 43077, Providence, RI 02940–3077, USA 2022 preliminary results 23 February 2023 REGISTERED OFFICE First quarter trading update 27 April 2023 WPP plc Annual General Meeting 17 May 2023 13 Castle Street, St Helier 2023 interim results August 2023 Jersey, JE1 1ES Third quarter trading update October 2023 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 For UK tax years up to and including 6 April 2022 to 5 April 2023, UK resident impact on the environment. Shareholders who have elected for electronic individuals receive a Dividend Allowance in the form of a 0% tax rate on the communication will be sent an email alert containing a link to the relevant first £2,000 of dividend income received. The UK Government has announced documents. We encourage all our shareholders to sign up for this service. that the Dividend Allowance will be cut to £1,000 for the tax year 6 April 2023 You can register for this service at investorcentre.co.uk/je or by contacting to 5 April 2024, and for the 2024/2025 tax year it will be further cut to £500. Computershare by the telephone number provided below. Dividends received by UK resident individuals on or after 6 April 2022, and which are over the Dividend Allowance, are taxed at a rate of 8.75% for WPP’s public website, wpp.com, provides current and historical financial individuals in the basic rate band, at 33.75% for higher rate tax payers and at information, news releases, trading reports and share price information. 39.35% for individuals 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 have only been able to pay cash dividends in to your rights issues have occurred in September 1986, August 1987 and April 1993. For nominated 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. The ordinary shareholders’ register is kept at the offices of the Company’s registrar in Jersey and is available for inspection on request. The address of the CAPITAL GAINS registrar is 13 Castle Street, St Helier, Jersey JE1 1ES. 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 2022230 ADDITIONAL INFORMATION # FIVE-YEAR SUMMARY | | Continuing operations | | | | | | --- | --- | --- | --- | --- | --- | | | 2018 £m | 2017 £m | 2016 £m | 2015 £m | 2014 £m | | Income statement | | | | | | | Billings^{1} | 52,971.4 | 50,606.8 | 46,917.8 | 53,059.0 | 53,259.7 | | Revenue | 14,428.7 | 13,801.1 | 12,002.8 | 13,234.1 | 13,044.7 | | Revenue less pass through costs^{2} | 11,799.5 | 10,397.2 | 9,762.0 | 10,846.5 | 10,875.7 | | Operating profit/(loss) | 1,388.2 | 1,229.0 | (2,276.5) | 1,293.9 | 1,245.5 | | Headline EBITDA^{3} | 2,246.7 | 2,023.6 | 1,812.5 | 2,031.4 | 1,932.5 | | Headline operating profit^{4} | 1,741.8 | 1,493.5 | 1,060.5 | 1,560.6 | 1,651.2 | | Profit/(loss) before taxation | 1,108.8 | 950.8 | (2,790.6) | 1,214.3 | 1,019.3 | | Headline PBT^{5} | 1,601.7 | 1,365.4 | 1,141.3 | 1,343.0 | 1,243.0 | | Profit/(loss) for the year | 773.4 | 750.7 | (2,917.7) | 957.1 | 763.3 | | Headline operating profit margin^{6} | 14.8% | 14.4% | 12.9% | 14.4% | 15.2% | Balance sheet | Non-current assets | 13,724.2 | 12,535.2 | 12,185.4 | 15,856.7 | 17,034.1 | | --- | --- | --- | --- | --- | --- | | Net current (liabilities)/assets | (2,610.0) | (1,149.8) | 754.6 | (298.4) | (649.5) | | Net assets | 4,360.4 | 4,069.0 | 5,050.1 | 8,297.2 | 9,784.3 | | Adjusted net debt | (2,479.5) | (901.1) | (691.6) | (1,539.6) | (4,016.7) | | Average adjusted net debt | (2,928.0) | (1,565.1) | (2,331.0) | (4,282.0) | (4,965.6) | | | 2018 | 2017 | 2016 | 2015 | 2014 | | --- | --- | --- | --- | --- | --- | | Our people | | | | | | | Revenue per employee (£000) | 126.4 | 122.1 | 116.7 | 124.3 | 123.0 | | Revenue less pass through costs per employee (£000) | 103.4 | 99.2 | 94.9 | 101.8 | 102.3 | | Staff cost per employee (£000) | 71.5 | 68.4 | 63.8 | 66.6 | 65.5 | | Average headcount | 114,159 | 104,808 | 102,822 | 106,698 | 106,090 | | Share information | | | | | | | Headline^{7} - basic earnings per share from continuing operations | 100.2p | 79.9p | 60.3p | 77.8p | 92.4p | | - diluted earnings per share from continuing operations | 98.5p | 78.5p | 60.1p | 77.1p | 91.4p | | Reported - basic earnings per share from continuing operations | 65.2p | 55.4p | (243.0p) | 67.8p | 56.0p | | - diluted earnings per share from continuing operations | 61.2p | 55.3p | (243.0p) | 67.3p | 55.4p | | Dividends per share^{8} | 39.40p | 31.20p | 24.00p | 32.70p | 60.00p | | Share price - high | 1,234.0p | 1,109.5p | 1,071.0p | 1,077.5p | 1,471.0p | | - low | 725.8p | 765.8p | 683.3p | 800.4p | 803.0p | | Market capitalisation at year-end (£m) | 8,783.8 | 12,998.7 | 9,802.7 | 13,410.0 | 13,682.6 | Notes: 1. Billings and revenue less pass through costs are defined on pages 222 and 223. 2. The description of headline, response to performance is including Headline EBITDA, headline operating profit, headline operating profit margin and headline PBT (i), ad out on pages 246 and 257. 3. Headline earnings per share is set out in behalf of the financial statements. 4. Dividends are those statements listed under a) designed to request of each year The information on this page is unaudited. WFP ANNUAL REPORT 2022 231 ADDITIONAL INFORMATION ## GLOSSARY Term used in this Annual Report United States’ equivalent or brief description Adjusted free cash flow Adjusted 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 Adjusting items Adjusting items include gains/losses on disposal of investments and subsidiaries, gains/losses on remeasurement of equity interests arising from a change in scope of ownership, investment and other charges/reversals, litigation settlement, restructuring and transformation costs, restructuring costs in relation to Covid-19, goodwill impairment, amortisation and impairment of acquired intangible assets, intangible asset impairment, property related costs and share of adjusting items of associates 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 consists of cash and short-term deposits, bank overdraft, bonds and bank loans due within one year and bonds and bank loans due after one year. Adjusted net 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 2022 exchange rates to local currency reported results for the current and prior year, 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 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 headline non-controlling interests (excluding Covid-19 restructuring costs) Headline EBITDA Profit before finance income/costs and revaluation and retranslation of financial instruments, taxation, gains/losses on disposal of investments and subsidiaries, investment and other charges/reversals, goodwill impairment, amortisation and impairment of acquired intangible assets, intangible asset impairment, 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, property related costs, litigation settlement, share of adjusting items of associates and gains/losses on remeasurement of equity interests arising from a change in scope of ownership 232 WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION GLOSSARY Term used in this Annual Report United States’ equivalent or brief description Headline operating profit Operating profit before gains/losses on disposal of investments and subsidiaries, investment and other charges/(reversals), goodwill impairment, amortisation and impairment of acquired intangible assets, intangible asset impairment, restructuring and transformation costs, restructuring costs in relation to Covid-19, property related costs, litigation settlement, and gains/losses on remeasurement of equity interests arising from a change in scope of ownership 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 income/costs and revaluation and retranslation of financial instruments, taxation, gains/losses on disposal of investments and subsidiaries, investment and other charges/reversals, goodwill impairment, amortisation and impairment of acquired intangible assets, intangible asset impairment, restructuring and transformation costs, restructuring costs in relation to Covid-19, property related costs, litigation settlement, share of adjusting items 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 charges/reversals, goodwill impairment, amortisation and impairment of acquired intangible assets, intangible asset impairment, restructuring and transformation costs, restructuring costs in relation to Covid-19, property related costs, litigation settlement, share of adjusting items 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 charges/reversals, goodwill impairment, restructuring and transformation costs, restructuring costs in relation to Covid-19, litigation settlement, 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 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 businesses to associates in 2022 and the restatement of agency arrangements under IFRS 15 for the commensurate period in the prior year. Both periods exclude results from Russia. 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 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 233WPP ANNUAL REPORT 2022 ADDITIONAL INFORMATION ## WHERE TO FIND US | COMPANY CENTRES | CONTACT POINTS | CORPORATE COMMUNICATIONS | | --- | --- | --- | | WPP NEW YORK | INVESTOR RELATIONS | AND MEDIA RELATIONS | | 3 World Trade Center | Tom Waldron | Chris Wade | | 175 Greenwich Street | Group Investor Relations Director | Director of Communications & Corporate Affairs | | New York NY 10007 | Tel +44 (0)20 7282 4600 | Tel +44 (0)20 7282 4600 | | Tel +1 (212) 632 2200 | tom.waldron@wpp.com | chris.wade@wpp.com | | WPP LONDON | Anthony Hamilton | GLOBAL & EMEA | | Sea Containers | Director Investor Relations | Niken Wresniwiro | | 18 Upper Ground | Tel +44 (0)20 7282 4600 | Tel +44 (0)20 7282 4600 | | London SE1 9GL | anthony.hamilton@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 agencies | jonathan.sanchez@wpp.com | or any of the programmes or initiatives mentioned in this Annual Report, please SUSTAINABILITY visit our website, wpp.com, or email: Hannah Harrison enquiries@wpp.com Chief Sustainability Officer Tel +44 (0)20 7282 4600 hannah.harrison@wpp.com FORWARD-LOOKING STATEMENTS the Company’s ability to attract new clients; the economic and geopolitical In connection with the provisions of the U.S. Private Securities Litigation impact of the Russian invasion of Ukraine; the risk of global economic Reform Act of 1995 (the ‘Reform Act’), the Company may include forward- downturn, slower growth, increasing interest rates and high and sustained looking statements (as defined in the Reform Act) in oral or written public inflation; supply chain issues affecting the distribution of our clients’ products; statements issued by or on behalf of the Company. These forward-looking technological changes and risks to the security of IT and operational statements may include, among other things, plans, objectives, beliefs, infrastructure, systems, data and information resulting from increased threat intentions, strategies, projections and anticipated future economic of cyber and other attacks; the Company’s exposure to changes in the values performance based on assumptions and the like that are subject to risks and of other major currencies (because a substantial portion of its revenues are uncertainties. These statements can be identified by the fact that they do not derived and costs incurred outside of the UK); and the overall level of relate strictly to historical or current facts. They use words such as ‘aim’, economic activity in the Company’s major markets (which varies depending ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘forecast’, ‘guidance’, ‘intend’, 'may', on, among other things, regional, national and international political and ‘will’, ‘should’, ‘potential’, ‘possible’, ‘predict’, ‘project’, ‘plan’, ‘target’, and economic conditions and government regulations in the world’s advertising other words and similar references to future periods but are not the exclusive markets). In addition, you should consider the risks described in Item 3D, means of identifying such statements. As such, all forward-looking statements captioned “Risk Factors”, which could also cause actual results to differ from involve risk and uncertainty because they relate to future events and forward-looking information. In light of these and other uncertainties, the circumstances that are beyond the control of the Company. Actual results forward-looking statements included in this document should not be regarded or outcomes may differ materially from those discussed or implied in the as a representation by the Company that the Company’s plans and objectives forward-looking statements. Therefore, you should not rely on such forward- will be achieved. Neither the Company, nor any of its directors, officers or looking statements, which speak only as of the date they are made, as a employees, provides any representation, assurance or guarantee that the prediction of actual results or otherwise. Important factors which may cause occurrence of any events anticipated, expressed or implied in any forward- actual results to differ include but are not limited to: the impact of, epidemics looking statements will actually occur. The Company undertakes no obligation or pandemics including restrictions on businesses, social activities and travel; to update or revise any such forward-looking statements, whether as a result the unanticipated loss of a material client or key personnel; delays or of new information, future events or otherwise. reductions in client advertising budgets; shifts in industry rates of compensation; regulatory compliance costs or litigation; changes in WEBSITE competitive factors in the industries in which we operate and demand for our WPP’s website wpp.com gives additional information on the Group. products and services; changes in client advertising, marketing and corporate Notwithstanding the references we make in this Annual Report to WPP’s communications requirements; our inability to realise the future anticipated website, none of the information made available on the website constitutes benefits of acquisitions; failure to realise our assumptions regarding goodwill part of this Annual Report or shall be deemed to be incorporated by and indefinite lived intangible assets; natural disasters or acts of terrorism; reference herein. 234 WPP ANNUAL REPORT 2022 Written by WPP Designed and produced by Superunion (Design Bridge and Partners), London designbridge.com ©WPP 2023 This report is printed on Arena Extra White Smooth text and Claro Silk cover which are both made from 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.