WPP PLC

LSE:WPP

Earnings Call Transcript 2018-Q1

[Roberto Quarta, Executive Chairman]

Well, good morning, and welcome. My name is Roberto Quarta, and I'd like to make a few brief introductory remarks. Paul and Mark and Andrew will present trading update, and Lindsay will take questions regarding clients. But before we do that, I'd just like to thank Sir Martin for his huge contribution to the business that he created more than -- some 30 years ago. And thanks to him we are building on a very strong foundation as we move forward with WPP. Now a word about succession and the process. As you may have read in the press and some of the statements that we've made and some of my comments in annual reports since I've been Chairman, succession was a long-standing contingency plan in the event that there might be a sudden departure of the CEO, which is I think best practice and good governance. That could be caused by illness, accident or others. And therefore, we always thought of it in 2 very different ways. One is in the event of a certain departure and one at a point in time when the CEO would have -- or the board decided that the CEO should be resigning or stepping down.The -- so having done that over the period I've been Chairman, we've had the opportunity to meet all of the senior managers of the group several times at various events and board meetings. And with Mark, himself, and I and the board, we're clear that if something should happen, Mark and Andrew should be appointed as co-COO, and that's exactly what we did. And let's be clear that they are fully empowered to run the business and to help develop and implement a strategy as approved by the board. There's -- there will be no standing still during this period. And if anything, the pace of change will increase. Now at the same time, we will be looking at internal and external candidates, and that process has begun. I think you've seen speculation in the press that we have brought on board an outside consultant to help us. They've been doing a desktop exercise for us previous to that. But obviously, such a search externally could not begin until there was a definite timing on the Chief Executive stepping down. We will hope to conclude this search quickly and efficiently, but we need to do it thoroughly and properly.Now over the last couple of weeks, I've spent quite a bit of time on speaking to investors. And I have to say that once we were able to clear some of the, perhaps, misunderstanding or things that people have been reading in the press, they have been very supportive of the steps that we've taken so far. I also have to say that we participated with a number of calls with the senior leadership together with Mark and Andrew. And internally, everyone is certainly rallying around Mark and Andrew and moving forward. Also had the opportunity to speak directly with clients. Mark certainly has done much more of that and he'll speak to it, I'm sure, a bit later. And they're saying that business as usual and they say that because we believe that we have very strong management throughout our businesses.So the message I'm getting from them is that there's widespread recognition that WPP is indeed a strong business with great assets and great people. And yes, we are facing a challenging environment. And once again, I want to reiterate that Mark and Andrew have mine and the board's full backing to review the strategy, make recommendations to the board and then execute. But I'll let them talk a bit more about how we are thinking about it. But there is one thing that I would like to make very clear. We will be keeping an open mind and will always go where value is for shareholders. But the starting point is not a breakup. And also, it is much too early to speculate about specific asset sales. So in summary, we have full confidence in management to take this business forward. There will be an increased pace of change, no slowdown or pause during this period. And we will get back to you at the half year with much more detail. And now I will hand over to Paul -- or to -- yes, Paul.

[Paul W. G. Richardson, Group Finance Director & Executive Director]

Good morning. Thank you, Roberto. So now to give you the financial section of the first quarter trading update, which, again, just to remind you is really on revenues and balance sheet. It's not a full P&L analysis. And I have to just remind you that we have a Safe Harbor statement as is customary in all public companies in terms of their announcements. So the reported revenues were down 4% at GBP 3.55 billion for the quarter. Currency headwinds were minus 6%, which left constant currency growth of up 2% on revenues.Reported revenue less pass-through costs, previously known as net sales, was down on a reported basis 5.1% at GBP 2.948 billion. Currency headwinds, likewise, were down -- or up 6.1%, leaving constant currency reported revenue less pass-through costs up 1%.On a like-for-like basis, revenues were up 0.8% and on a like-for-like basis, revenue less pass-through costs were down 0.1%, almost flat. United Kingdom, Asia Pacific and Latin America were up strongly offset by declines in North America and Western Continental Europe, which was very marginal in Western Continental Europe as you'll see later.Media investment management, public relations & public affairs and Specialist Communications including direct, digital and interactive performed well, advertising and data investment management was more difficult. On a constant-currency basis, our net debt at the 31st of March 2018 was GBP 5.2 billion, up GBP 350 million more on the same date last year. And on an average basis, a similar change of up GBP 357 million at GBP 4.77 billion for the first quarter average compared to the same period last year but down from the full year average last year of GBP 5.1 billion.In the quarter, there were net new business billings equivalent one of $1.73 billion, just below last year's first quarter rate of around $2 billion achieved first quarter 2017.So in terms of the implementation of IFRS 15, which we have applied from the 1st of January 2018, we have restated the revenues for last year, adding about approximately GBP 107 million, which was in line with what I said on a full year basis, expecting to add around GBP 500 million to the revenues. Net sales, a very minor adjustment, adding GBP 7 million to net sales on a historic basis. So really very little effect on net sales but a more significant effect on the revenues, really through our production businesses now being regarded as having revenues in their top line.So in terms of a summary, the buildup of the like-for-like through reported growth, looking at revenues less pass-through costs column, so on a like-for-like basis, we were down 0.1%. Acquisitions in the quarter adding 1.1%, leading to constant currency growth of 1%. Foreign exchange was minus 6.1%. So on a reported basis, we were minus 5.1%. Currency, as you know, last year added around 4% to 5%, as you can see there. In the first quarter, we are down 6%. And using what we produce as pound-dollar at $1.40 and pound-euro at EUR 1.14 for the remaining 9 months of the year, we're expecting a full year headwind of minus 5%, slightly up where it was 2 months ago. I said it's between 4% and 5%. So it's around 5%, although the pound has weakened against the dollar since we ran this.So in terms of geographic analysis of the revenue less pass-through costs per region, taking North America, which is 36% of the group, which had a revenue less pass-through costs of GBP 1,055,000,000, on a like-for-like basis, the decline was 2.4% in quarter 1 this year. Slightly better than the decline in quarter 4 of last year of minus 3.4% and is still difficult in advertising, data investment management and health care in the U.S.A., but stronger good performance in media, direct, digital and interactive in the U.S.A.In the United Kingdom, representing around 14% of the business, all revenues less pass-through costs of GBP 405 million. Like-for-like growth was 1.6% in the quarter following a very strong 2017 end to the year, where we were growing around 9%. All sectors, except branding and consulting, were doing well in the U.K.In Western Continental Europe, which is around 21% of the group, revenues less pass-through costs of GBP 626 million, was basically flat or minus 0.2% for the quarter. Similar to where we were at the final quarter of last year of minus 0.8%. It was impacted by Germany, which was negative this quarter of minus 5.7%, following a very strong comparative a year ago where it was up 10%. We had good performances in Holland, Italy, Scandinavia, Spain and Turkey in Western Continental Europe. In Asia Pacific, Latin America, Africa and the Middle East, Central and Eastern Europe, where we were disappointed by the fourth quarter performance last year, which was down 3.1%, we've had a good turnaround, and in the first quarter of this year growing at 2.3%. And I break it out on a chart behind in terms of the subregions of that geography.So turning to that now, looking at the revenue less pass-through costs growth by region, I think I'll first point out that when I look at the mature versus faster-growing markets definition, where last year mature markets were down 0.9% for the year, the faster-growing markets were down similarly, minus 0.8%. So last year, overall, we were down 0.9% for the year. This quarter, mature markets is still challenging, being down 1%. And the faster-growing markets have improved to growth of 2.3%. That's, as you can see from the chart here, very strong growth in Latin America, which was also quite strong last year for us. Better growth in Asia Pacific overall. Strong growth coming through from China, Japan, Thailand and Vietnam. And as you can see up above in Central and Eastern Europe, good growth of 5.6%. Still somewhat challenging in Africa and Middle East, flat overall in Western Continental Europe and, as I've mentioned, the U.K. and North America before. But at least the faster-growing markets are beginning to perform. As we saw in the budgets, it is actually turning through into the results of the first quarter.So in terms of the U.S.A., we have spoken about it, it follows, again, last year's performance where we were down 3.2%, first quarter we're down 2.2%. It is one area of focus where we need to improve our performance overall. United Kingdom, strong year last year, growth of 4.8%, growing at 1.6% this quarter. Germany, as I mentioned, disappointing really in last year overall at minus 1.3%. Did have a very strong quarter 1 last year of plus 10%, so in part, the comparators are quite challenging. We are expecting growth, overall, in Germany for the full year of around 2%. Greater China last year actually did get off to a weak start of minus 7%. It was quite a weak year for us at minus 3%. But pleasingly, I think we have turned around 1 of the 2 businesses -- or both the businesses actually that were causing us challenges last year, and actually we're seeing growth of 2.1% from Greater China. Australia and New Zealand we can't comment at this stage because it's a listed company. And in France, we continue modest positive performance that we've seen for the last couple of years actually, with 0.4% last year and 0.7% quarter 1 this year. If I do take the BRIC markets, again, we've had a slightly better performance in Mainland China, which is encouraging at 3.6%, compared to Greater China, which includes Hong Kong and Taiwan of 2.1%. Brazil, which was strong last year, with good growth, growing at 6%. This quarter, I'm expecting a good full year performance in 2018 from Brazil. India, a little disappointing at the end of last year, overall growth only 1.1%. It started strong at 9.5% a year ago. So it's basically trending flat with that good growth last year, expecting a pretty strong high single-digit number for the full year in India for 2018.Russia, again, a bit choppy last year, a very strong start last year at over 8%, ending minus 15% and lapping the plus 8% quarter 1 '17. So we're basically flat with that compared to a year ago. So really quite a tough comparator for Russia, but it has been rather choppy in the last 15 months. Taking a look at the revenue less pass-through costs by sector, advertising and media investment management is our most challenging sector in the fourth quarter last year, where we were down 3.8%. It's 43% of the business, and the like-for-like growth in the first quarter is minus 0.9%. Data investment management, again fourth quarter last year was minus 0.3%. It's 15% of the business. In the first quarter of this year, it's minus 1.7%. Strength in LATAM, Asia and the U.K. but weakness still continues in the U.S.A. and Continental Europe. Public relations & public affairs was slightly weak in the final quarter last year at minus 1%. It has improved and seen top line growth of 1.1% in the first quarter this year. It's around 9% of the business. In branding, consulting, Health & Wellness and Specialist Communications had a relatively strong quarter 4 last year, growing at 1.8%, represented a total 33% of our business growing at 1.5% in the first quarter this year. Particular strength coming out the direct, digital and interactive businesses. And again, I think we do footnote here below, overall, when you take that category across all the 4 disciplines overall, representing around 42% of the business, it's around 3% growth of organic net sales.In terms of trade estimates of major new business wins, and we have underlined those since the 1st of April, actually, a modest amount of new wins and new losses reported so far year-to-date. We don't particularly need to go through them all. Two recently, since the 1st of April, being Sky, a win by MediaCom, retention and an increased scope to be fair; and Altice, a win by Y&R and Wavemaker. And there have been 3 losses in the year-to-date so far published.In terms of uses of free cash flow, again, just comparing to our historic targets and how we've done. So on the right-hand side, you do have the full year 2017. Our target for new acquisitions has been GBP 300 million to GBP 400 million. Last year, we spent GBP 326 million, but we had significant disposal proceeds from the disposal at the time of our 20% interest in ADK that came through in December last year. That was around GBP 250 million. So hence, last year, the net acquisition spend was only GBP 30 million. Similarly in the first quarter of this year, we've had investments and new acquisitions around GBP 80 million, proceeds received of GBP 44 million, so net costs around GBP 36 million in quarter 1 this year. Share buybacks have continued, buying in 0.9% of the share capital at around GBP 145 million, and the average price around GBP 12.60, I think it is. That compared to 0.8% of share buybacks last year, costing GBP 180 million.Strong headroom in terms of our undrawn facilities. And average net debt, as I mentioned, at GBP 4.77 billion, up compared to a year ago but down compared to year-end. Given our current outlook, we have decided to revise the target range of our average net debt-to-EBITDA from what was previously 1.5x to 2x to now 1.5x to 1.75x. That will require in the order of GBP 750 million to be generated from additional cash generation or, as Andrew will talk about, the scenarios we're looking at on the balance sheet as well. So that's our target to achieve in the next 12 to 18 months.So in terms of outlook, the financial guidance remains unchanged for 2018, which was reaffirmed by our quarter 1 preliminary revised forecasts, showing a slightly stronger second half at revenues less pass-through costs; show flat both on the revenues and revenue less pass-through costs for the year; and the revenue less pass-through costs margin, again, is flat on a constant-currency basis with last year. And with that, I'll hand over to Mark.

[Mark Read, CEO & Executive Director]

Here around. Thank you, Paul. So together with Andrew, we're going to talk a little bit about what we've been doing the last 2 weeks, how we see the world and share obviously some very preliminary thoughts on the future strategy of the group. We're 2 weeks into this role. I think the starting place is that Andrew and I have very clear roles. The board have empowered us to run the company, and frankly, that's what we're getting on doing. I'm focused on our clients, our companies and our people; and Andrew is really focused on the commercial management of the group and thinking about how we can might optimize our portfolio. I spent the last 2 weeks really focusing on our clients, I talked personally to the CEO or the CMO of all of our top 20 clients. I'd say, universally, they've reassured us of their relationship with WPP and see no reason to change that relationship as a result of Martin's departure. That's not to say they didn't have universal appreciation for what Martin has built, but their relationship with the group is really with their operating companies and with our people, and they see no reason for that to change. And I think we should take that into account. Those top 20 clients are around 23% of our revenue. And we have 52 global client leads across WPP, each of them has spoken to their teams. I had one client say, "We've had too many people call us." So there's a lot of communication from people across the group with clients. And I'd say, universally, the message is business as usual and we should continue to deliver, and they're confident that we will do. We're not complacent, but the business can continue to run as we are. We also spent a lot of time talking to our people. We sent a note out, Andrew and I, last week saying how we saw the world and the confidence we have in the group's future, and we're continuing to work with the operating company leadership who are doing their own communications. And I'd say, I spent time in our agencies, it's very much people getting on with their jobs as you would expect. And then Roberto has been talking to -- really focusing on our shareholders and he's spoken to date to all of our top 20 shareholders, around 35% of our shareholder base. That's really what we've been focused on. And we can take more of that in our Q&A. I think the starting points that while growth has been challenging for WPP, there were very strong elements to our business. You see in our Q1 results, a strong performance in our media business, in our digital businesses, in our public relations businesses. And geographically, in the U.K. I'm particularly pleased with how we've done in our -- the faster-growing markets, where we've improved from Q4 negative to Q1 positive. So we need to remind ourselves of the strengths we have in the business, the talent we have across the group and we need to build on that. That's not to say we don't need to do better and the focus needs to be on growth. But I think as we think about our strategy, it's helpful to think about how we see the world. And as we're positive about the assets we've built, we're positive about the continued growth in demand from our clients for the type of work that WPP does. I think it's important to realize that we're facing a period of structural change, not one of structural decline. And if we can shift the group's portfolio and focus and activities to the faster-growing parts of our business, there's no reason why we shouldn't return to growth more in line with our peers, and that's really what our focus is going to be on in the future. Now our companies help clients drive top line growth. They help them manage and build direct customer relationships in an era of Amazon and disintermediation, that's more important. Building new customer experiences and selling in the new omnichannel of Amazon. As I talked to you before in my old role running digital for WPP and running Wunderman, this is the growth area for our business. And I think that's where we need to focus our efforts in the future. Having said that, I think we need to recognize the challenges facing the industry, and to some extent, part of those are moved beyond into what we are going to do to address them. And I think we've been quite clear that there are structural rather than cyclical shifts in the market. So if there's pressure on our clients from activists, investors or others, that's going to lead to a permanent change in the way they market and the way they evaluate their marketing. They're not all going to bounce back when things get better, we're clear about that. And I think what's happened is really accelerated the change in how clients view their marketing. Secondly, WPP and the consulting businesses, companies like Accenture and Deloitte, are increasingly starting to compete. We don't compete in everything, but I think we are competing for the growth opportunities in our market. We need to understand that and we need to combine our traditional strengths in creativity, our relationships with marketers, understanding how companies build relationships with our clients, with new skills in data and technology. And I've no doubt that we can increase and do that in the future. We talked about that in the last meeting and I think you can see from some of the work that we do, we can compete successfully against those companies and, given the growth in the market, that should be another opportunity for WPP. I think the last sort of element of how we see the world that may be somewhat different is how we want to work with Amazon, Facebook, Google, the Chinese equivalents. They are competing for us for talent, they are competing for attention for clients and, in some cases, they are building more direct relationships with our customers. We have to retain the best people to spend time with those companies, and we have to demonstrate to our clients how working with WPP can help them get better results from those organizations. And we need to work very closely with them to do that. I have no doubt that we can do that. Again, the stuff around Cambridge Analytica, data, privacy, YouTube, shows I think that clients need an independent source of advice in how to navigate this new digital environment. And we have many talented people at WPP who can do that. So if that's how we see the world, what's our focus? What's the path to growth at WPP? Now obviously, too early. Two weeks in the job to outline the strategy. So I think we're just going to give you a sort of a preview of the areas that will be working on. Roberto and the board have been very clear that Andrew and I are -- looking at the strategy, we need to take a fresh look and come back to the board with recommendations in due course about what we want to do. But I think the path to growth has to start with focusing on our clients. So all of the clients I've spoken to over the last 2 weeks, and in a way it's a strange opportunity to talk fresh to our largest clients, have said they value what we do, we need to be faster, more agile, more integrated, closer to them, more data-driven, more technology-driven. So I think the needs or what our clients want is clear. And if we focus on what our clients want, I think we'll do well. We want to look at our offering and focus our investments in the faster-growing parts of our business. So I think you should expect to see more investments in the digital, data, technology areas of our business. And we need to focus on the underperforming parts of our business much more carefully. And then we need to continue to simplify organizations. We've made some changes in how we're structured internally. We merged Burson-Marsteller and Cohn & Wolfe just before the results, that you can expect to see some more gradual simplification of the portfolio. I don't think you should expect to see -- and we should continue to accelerate what we've been doing, but I think that's sort of a continuation of the simplification that we've already started. We need to do that to make it easier for clients to access the people in the group and what we do. And frankly, also, to make it easier to manage the business in the future. So this is a simplification process within our organization. We need to embed data and technology much more deeply into the offer in the way we work. I think that creativity, in particular our differentiation versus consulting companies, that's clear from the conversations we have with clients. Consumers need ideas and inspiration to react. It's not just a simple matter of connecting the pipes and connecting the dots. So I think the breadth of our offer and our ability to combine an understanding of consumers and understanding what motivates them with an understanding of technology and what -- and how technology works is important. And then we need to invest more in talent that represents our changing world. We have to be -- WPP has to be a destination for people in a diverse and inclusive sense and we need to be positive about that. So that's really the focus we're going to take strategically. I'm sure you'll have a lot of questions. Part of the challenge is how we manage that commercially and financially, and I think Andrew can take you through a little bit about how we're seeing that over the next few months. Andrew?

[Andrew Grant Balfour Scott, Chief Operating Officer]

So thanks, Mark. So as Mark said, we're both on the same page in terms of the strategic evolution that we think we should go through and the direction of travel. My focus is going to be managing the commercial side of the business and looking at how we shape our portfolio really with the objective of positioning the group for sustainable long-term growth. I think as Mark said, we're 2 weeks in. So WPP's run in a very financially disciplined way, strong track record of margins. We're not going to come in, turn the model upside down. So it's a question of are there any sort of small but important changes you can make to the commercial model, how do we evolve it, making sure that, that sort of -- the focus on margin doesn't come at the expense of investment and delivering sustainable revenue growth in the growing parts of our business. We'll look at the decision-making processes, can we make them more agile, more client-focused, more local? How do we look at the empowerment versus central control balance? So we'll be looking at those areas. We're also going to look at the sort of underperforming areas of the business going forward. You're aware of where -- the group's got many different businesses with quite a different margin and growth profile, so we'll focus on some areas and what actions we think needs to take place in those businesses to try and improve things. And I think as part of that, there's a lot of -- the company's organized into some major groups, but there's a lot of sub-brands and businesses around the world. We may have a look at what's -- in the past, we've sort of resolutely managed every element of every group, however large or small around the world. Should we sort of look at some of that decision-making through a different lens to try and help them -- the growth and margin profile of the business? And you've seen some of our competitors sort of actively doing that in the last 2 or 3 years. I think in terms of the cross-group initiatives, we're going to look at sort of the co-locations, which has been a very -- we're sort of early days into co-locations around the world. You've seen, in Shanghai, we've sort of got 4,000 people in Shanghai. It works very well. It works very well for efficiency, but frankly, for growth. Our client -- in terms of giving an integrated offer to our clients, people being in the same building, working closely together, has real, real benefit. So we've seen great positive from that. So I think we're going to look at that and look at the -- do we accelerate the pace of those initiatives? I would say the same about shared services. We've, I would say, made a good start on shared services, but we're kind of at the foothills of the opportunity there. We've maybe rolled it out to 10% of our business. Can we take a more sort of strategic and scaled approach to what we do there? I think there are opportunities. And then we're going to look across the -- we've done a very good job on production, print and digital production with Hogarth, are there other areas of the business where we can take sort of vertically positioned businesses and make them available, good businesses that we have in areas of marketing automation and roll them out to -- across the group? So we'll look at those initiatives. And then on the portfolio, I mean, as Roberto said, we're going to sort of look at the portfolio with an open mind, with a focus on shareholder value, long-term sustainable growth. And depending on where we get on that, we'll make recommendations to the board and go forward. We've said publicly we don't think a sort of breakup of the group into pieces makes sense. Our clients want an integrated offer from us, and we need to have a portfolio that is capable of delivering that.In terms of the -- we do think -- I mean, Paul's outlined the sort of GBP 750 million in terms of the target from a leverage perspective. One area we will look at is the minority and associates portfolio. As you know from our accounts, there's a sort of value of about GBP 1.5 billion in market terms in the minorities portfolio. There's $1.5 billion in the associate portfolio in terms of carrying value. We've had some very successful investments in that area. We've tended not to proactively sort of make an exit decision except it being forced upon us by an IPO or a sale. So I think there's an opportunity we've done well. There's an opportunity to look at. Is there an opportunity -- opportune moment to sort of realize some value in some of those investments, and that will definitely be a focus going forward. But we're not going to be in a rush to do it. And it's not the end of the investment in the area of the business. We see it as an important area, so it's just a question of balance as with all of our approach in this area. Thanks.

[Mark Read, CEO & Executive Director]

Thank you. So questions?

[Mark Read, CEO & Executive Director]

Okay. We'll start with you, Ian, if you like. Put your hand out first. Yes?

[Andrew Grant Balfour Scott, Chief Operating Officer]

Come down the front if you want -- oh, Charles, okay.

[Mark Read, CEO & Executive Director]

Here -- yes? Oh, okay. We'll start in the back, then you get the microphone, okay?

[Charles Bedouelle]

Charles Bedouelle from Exane. I've got a very few questions, so everybody can ask theirs. The first one is when you talk about embedding more deeply data and technology within the assets, does that mean it makes, beyond any further review, the disposal of part or all of Kantar more difficult? Just from a theoretical standpoint. And I guess, the second question is when you look at what's happening with data in the -- sorry, media and advertising, clearly media is doing better as it is for most groups and we see that by definition creativity is probably under a lot of pressure. So can you discuss a little bit what's going on here? And do you think, third question, that there is a risk on how you guys and the whole industry use data in GDPR but maybe more in privacy world?

[Mark Read, CEO & Executive Director]

Yes. So I think on the whole question on sort of data and technology as it relates to Kantar, and Kantar is an important source of data, it's not the only source of data. And I think we have to say to our clients you can get the right data whether from Kantar, or indeed we had a big data business inside Wunderman that has a lot of first-party data. So I think we have to look more broadly at all the sources of data at which Kantar is an important part. I think we would point out that in this new GDPR-compliant world, the first-party data in Kantar is important, but it's not the only source. So on the second question, clearly, the creative parts of our business are the most challenged structurally. I think that's true across all of our groups, and something where we need to focus our effort and define the path for those businesses to growth. I think that growth can come as part of a broader portfolio of how we work together for clients. So I don't think that when you say creativity, it means that creativity is underchallenged or creative is underchallenged. I think the creative parts may be underchallenged and I think creativity is underchallenged. I think businesses need innovation and ideas to grow, and that's the goal of all companies. If you go to Cannes Lion's, there may be fewer people there, but I'm sure there'll be more management consultants there. So [ I don't know if we ] have creative management consultants. But anyway, there'll be a little bit more management consultants than there were the year before, and I think they are very keen to win Cannes Lion. So I think that, that element of our business is important. It's just exactly how we do it and moving it in a more contemporary, faster, more agile way. We have to be more radical in coming back to clients with solutions. They don't want a television commercial that used to cost $1 million to be done for $500,000, they want it to be done for $50,000 or $20,000. So that's the area we need to be more radical. And then I think coming on to the point about GDPR, clearly, it's something that we need to work our way over. We have been working our way through very carefully in Europe. I think those companies that have direct consumer relationships are in a stronger position. The irony of that from a sort of EU versus U.S. tech charge shouldn't be lost on anyone, but I think it's been a source of a lot of concern from our clients [ who spent ] a lot of time working on it. I think that at the end of the day, though, as the Cambridge Analytica, Facebook events have shown, we have to be clear with consumers about what data we are collecting, how we use it and respect their privacy. And if we don't do that, the whole thing will stop, if you like. What's interesting is, in the U.S., there's now people talking about moving to a more -- to almost introducing GDPR in the U.S. But it always used to be Europe was about regulation and America was sort of, I don't want to say, innovation. But where you could do whatever you liked so long as you -- and imagine, you could do whatever you liked so long as you told consumers what you were doing with their information. I think the U.S. is going to move more towards the European view. Now actually, for parts of our business that help clients manage first-party data in some ways, that's an opportunity. So I think that as the industry matures, we need to mature with it in terms of regulation and business practices and clarity to consumers. I think that's a positive. Yes. Why don't we just work backwards because it's easy for the microphone -- or work forwards? Use the mic -- okay. Ian, you got there in the end.

[Ian Richard Whittaker, Head of European Media Research]

Ian Whittaker from Liberum, 3 questions. First of all, just in terms of -- just come back in terms of the guidance for the full year in terms of the net-net, the flat net sales. For me, your comments from the various geographies you've talked about India, mid- to high single-digit growth; you talked about China, you turned around, the situation there being positive; Germany being plus 2; the U.K. looks positive. Brazil looks as though it's been very strong. Yet you start to add those things up in aggregate, the question then becomes in terms of the balance of what's actually offsetting that and it would seem as though North America, the implication would seem to be that North America's probably down around 2% plus in terms of that's your view at the moment in terms of the net sales growth. First of all, does that sound correct? And then I guess, second of all, if that is the case, why is it, that things are not necessarily improving throughout the year? The second sort of question is just in terms of the -- I know you're not going to talk specifically in terms of where you are with market research. But I guess in terms of your clients, when you've had those conversations with your clients, when they talk about an integrated offering, sort of how many of them actually come back strongly and said that we think it's extremely important that Kantar is part of the offering moving forwards? Because there's an argument saying that if you look at the other major agency groups, so they don't have the same exposure to where you are. And third of all, just in terms of the internal processes and sort of -- as you said, sort of changing yourself to sort of be better aligned with the clients. Would you say, just looking on a broad view, that compared with the other agencies, you're perhaps behind the curve? Or do you think you're pretty similar with where the other major global agency groups are?

[Mark Read, CEO & Executive Director]

Okay, so why don't -- if I could just take that Kantar question first and then Paul can talk about guidance and Lindsay could talk about how we're doing with clients. I mean, just on the Kantar point, clearly, there are situations where having Kantar as a differentiator and strengthens and broadens our relationship. And there's other things we need to look at in the context. I think we need to weigh those things up in the balance really. Paul?

[Paul W. G. Richardson, Group Finance Director & Executive Director]

So obviously, the first quarter is our smallest quarter. So we are starting -- we have just received our first quarter preliminary forecast, which we'll be reviewing in the next 2 weeks in New York. But broadly, you're correct in the sense of -- in the budgets, as I said, we were expecting a better performance than last year where we're minus 0.9% through the improved performance in H2 with the Latin America, the faster-growing markets. So yes, tick, correct, I believe that is still to be the case. Continental Europe, I think our businesses are fundamentally strong, but off low rates of growth. U.K. we've had 3 strong years. And I think I'll be -- it would be unwise to expect a stronger performance at the U.K. in 2018 as we have done in 2016 and '17. But you are correct. We are still not seeing, in our case, a significantly improved performance coming out of North America. And I think that is the key what we have to focus on, and that's the key to turning around the top line performance of the business. So I think that is key. You're geographically sort of -- you are correct. I think at this stage, it's just too early to revise our numbers. Yes, quarter 1 last year was the strongest quarter and the second half was the weakest. So one would expect a modest improvement to come throughout the year, but I think it's just too early days, and obviously, we've got to sit down and determine our view of our business' performance in North America for the rest of this year, and that's what we're going to do in the next sort of few months to see what can be improved and that's, obviously, partly the client situations. We do have one major client where we have come in to review on forward, so we just have to be a little careful about that as well in our forecasts.

[Lindsay Pattison]

So I guess, in terms of client -- what the clients want. So 67% of clients, according to ISBA, here in the U.K. want a deeper relationship with fewer suppliers. So the trend towards more integration is still there. And we launched the concept of horizontality, and we may, RIP that word, 15 years ago with our client team. So we have been leaders in that field. We have a really good track record. We understand what clients want. So the concept of horizontality is not dead. The idea of being a collective enterprise and offering an integrated approach is alive and kicking. They want strong integration reduced overlap efficiency, using data from an end-to-end basis. But what's changed is more fluidity in the model, so flexibility within a framework. And actually, that is a challenge to the model that we've had in the past because we used to work on a set scope with FTEs to vertical and brands and what clients want is access. I just want access to the best people, and we have to be more fluid in how we offer that, which means we need to be more agile in how we run P&Ls at a client level. So we are looking at a range of new models. Obviously, we adapt our models the whole time. So we see trends towards a smaller centralized core team and then capability, Centres of Excellence. We see trends towards either embedded or co-located teams with clients or within one of our operating companies or Shanghai campus or other campuses we're building around the world. And then obviously the most common factor is having a client based with a single tech spine at the center of it. So we're clear on where the models are heading and we're working on that with many of our existing clients already. I think where we are perhaps, if we are being hard on ourselves behind, is in the narrative around that.

[Adrien de Saint Hilaire, VP & Head of Media Research]

It's Adrien from Bank of America Merrill Lynch. So you mentioned in your presentation sometimes reference to competitors. I think one of the response that we've seen from your competitors is either to accept lower margin or to do a big M&A in the field of consulting. So where do you stand? What's your strategic view on this? The second thing is you mentioned in your release addressing underperforming areas. Does that mean reinvesting behind those businesses or selling them? And then the third question is a bit philosophical but would you rather sell businesses with -- would you rather sell businesses that are underperforming but at least you can improve the growth profile of the group or would you rather sell good businesses but where you feel there's hidden value?

[Mark Read, CEO & Executive Director]

So I mean, on margin, just to be clear, we lowered our guidance 2 months ago. I think it's too early for us to say one way or another where we are with margin. Our goal is -- or our intention is to hold revenues and margin in line with guidance for this year, and we'll look at that one way or another. So we're not changing anything at the moment. I think Andrew, you want [indiscernible] underperforming businesses and asset sales?

[Andrew Grant Balfour Scott, Chief Operating Officer]

Yes, I mean, the -- I mean on the asset sales, I was quite specific about we are going to have a look at the minorities portfolio. We're not sort of embarking on a sort of disposal program across the business, obviously. I think there's a sort of long tail factor on that. So in the smaller end, if you have a business that's a small business in China that's been underperforming for 5 years, losing money, do you just keep trying to turn it around? Or do you close it? Do you merge it? Do you dispose of it? So it's more that's really what I had more in mind on that.

[Mark Read, CEO & Executive Director]

I think we'd rather keep the faster-growing businesses and sell the badly performing ones than the other way around. Have you agree with it? Probably the right strategy.

[Christopher Anton Giles Collett, Research Analyst]

It's Chris Collett from Deutsche. Just a couple of questions. One was just on the acquisitions. I think part of the strategy has always been spending GBP 300 million to GBP 400 million on acquisitions. Are you going to stop that or dial down on that in order to help reduce some of the complexity and help the leverage targets? Second was just as you think about the strategic review, are there other aspects to it, perhaps not just through the M&A lens but also, for example, thinking about the separation between the creative and media businesses and whether or not there needs to be greater integration there? And then lastly, you talked about the need to be faster and more agile. Can a company with 200,000 employees, including your associates, ever be fast and agile?

[Mark Read, CEO & Executive Director]

So I mean, we start at the back and work forward, and Andrew can talk about acquisitions. I think the answer is yes, we can be faster and more agile even as a large organization. And we have lots of people who are very good, who run our companies. And I think that this is a degree of scale doing our business. And -- but I think we can be faster and more agile than we are today. In terms of the strategic review, I think we have to get our media and creative agencies to work more closely together. I don't think that, that means that we need to merge them. We need to get all parts of the group to work more closely together. And I'm not convinced that going back to the old way of doing it is necessarily the right way. So I think we need to look at ways we can get the group to collaborate more and that will address it. Andrew you want to do M&A business?

[Andrew Grant Balfour Scott, Chief Operating Officer]

Yes, I mean we're not sort of closing business on M&A, so we've kept the range -- we haven't altered the range. We're -- could we come in at the lower end of that range? Quite conceivably. Could it be under that range? Could be. But we still feel it plays an important part on repositioning the group, getting some of the capabilities needed to sort of position us in the way that Mark described. So it's kind of still open for business. We're obviously being very, very focused. We always have tried to be focused, but we'll be I guess extremely focused on the...

[Mark Read, CEO & Executive Director]

Even more.

[Andrew Grant Balfour Scott, Chief Operating Officer]

Even more focused on not making an acquisition because a business unit really wanted it. We have to be very sort of ruthless about that and strategic, yes.

[Mark Read, CEO & Executive Director]

Okay. You can go ahead.

[Lisa Yang, Equity Analyst]

It's Lisa Yang from Goldman. My first question is on the industry growth, overall. I think we've seen 3 consecutive quarters of improvement to an average about 1.6%. So I'm just wondering are you busy seeing the industry bottoming out. Are we still way too early and how do you explain the change and can behavior change in any way? The second question is you talked a lot about the asset growing and performing. Is it possible to have a rough size of the percentage of the business today that you consider as underperforming or are performing for structural reasons? And the last one is on the net debt, which increased GBP 350 million in the first quarter. So just wondering if you could give us what drove that increase?

[Mark Read, CEO & Executive Director]

Yes, I think on growth, clearly, there appears to be some sort of bottoming out. I think the important thing for us is to get our growth rate up overall. So we're not happy with where we are now and we need to get it growing faster. So I think if we have some sort of tailwinds from the industry that's helpful, but I think we're not complacent of what we want to do. I don't think it's relevant to give a sort of structural percentage of the business that's challenged. I think all of our operating companies overall performed well, certainly, from a profitability perspective. And it's not you can't nail down a number on what that would be. And Paul, do you want to take the last?

[Paul W. G. Richardson, Group Finance Director & Executive Director]

So on net debt, I think we are still suffering from the item we explained at the full year, which is December to December, we saw about GBP 250 million outflow of nontrade working capital items on the balance sheet. That hasn't changed in the first quarter. The actual trade position from 31st of March 2017 to 2018 is only $67 million different. So actually, from a trade working capital, which is trade deficits, trade receivables with an accrued income, we're in a very similar position. When I look at the outflow from the 31st of December to the end of March, we're actually $200 million less than we were the previous December to 31st of March. So we're sort of managing cash flow better. We still have this issue with the nontrade working capital outflow we suffered at 31st December, it's still in our numbers at the end of March.

[Mark Read, CEO & Executive Director]

Okay. Go ahead.

[Matthew John Walker, Research Analyst]

It's Matthew Walker from Credit Suisse. First question is what is in your budget for account losses and what percentage of revenue are you defending this year? Second question is for the Chairman. Can you explain the board's rationale for not releasing the investigation, the results of the investigation into the previous CEO?

[Mark Read, CEO & Executive Director]

So in terms of the first question, we do our budget based on what we know at a particular point in time then we'll do our revised forecasts, our Q1RF, based on what we know at a particular point in time. I think it's always part of the businesses that are up for review. And I don't think that we are, notwithstanding the quantum of one of those reviews, I don't think we're at a noticeably different point than we would be at any other point in the year. In the reviews that are ongoing, I've spoken to the people on the client side who are leading the review and they've said to me, "What's happening?" What's happened at the top of WPP, if you like? What's happened with Martin doesn't impact their ability to award us the business is down to how well our teams do on the day. And I think ultimately, that's -- it will be the quality of the presentation, the idea that we present, the solutions that we give clients that will impact whether or not we win those pieces of business. So Roberto, can you take the second question?

[Roberto Quarta, Executive Chairman]

Yes, I'm happy to do so. For the umpteenth time. First of all, the -- I think once again, just to restate, Martin resigned. Martin was not terminated. This came about at the end of the investigation. When the results of the investigation were known, Martin decided to resign. Before the board had taken into consideration the outcome of the investigation and determine whether or not it was appropriate to take action, I think that's important for everybody to be clear on. We have no requirement to disclose or necessity to disclose. I think we made it also very clear very early on when The Wall Street Journal broke the story that as it relates to financial, that the financial impact on this personal misconduct allegation was not material to WPP earnings and that's very much the case. The matter surrounding personal misconduct, highlighting the word personal is really what we consider to be a matter of privacy and therefore, it's a matter for Martin. And hence, the reason why we did not disclose.

[Mark Read, CEO & Executive Director]

Okay. We're done on that side of the room?

[Julien Roch, MD & European Media Analyst]

Julien Roch of Barclays. Coming back on one of your answers, Mark. You said that merging creative and media, going back to future, was not necessarily a good idea. But some of your competitors have decided it was a good idea, Publicis not to name them. Can you elaborate on why...

[Mark Read, CEO & Executive Director]

Merge creative and media?

[Julien Roch, MD & European Media Analyst]

Well they're merging everything in their 5 main countries. So where -- can you explain where you disagree with their assessment and why your solution is better? And that's my first question. The second one, again, coming back on one of your answers. Could you give us a bit more color on what part of Kantar is really, really useful for the rest of the business is my second question. And then a third question for the Chairman, if what's in the press is correct and someone made an offer for Kantar, which is in terms of multiple 20% above where WPP trades, even if management believes that keeping the business is the right thing to do, don't you have a duty to shareholders to look at that?

[Mark Read, CEO & Executive Director]

So I mean, on your first point, I mean, I don't want to criticize or endorse Publicis' strategy. That's not the business that we're in. But my observation would be I understand you have Publicis Media, that's run by Steve King. You have Publicis Communications that's run by somebody else, and they haven't merged those businesses. At a country level, the may work more closely together. So there's a new U.K. CEO that's starting, but they haven't merged those companies. So I don't know what we're doing, what I expressed is that dissimilar from what they're saying. I think we have to -- in many ways, you want media and digital to work more closely together, right? If you were going to say, it might make more sense to merge a GroupM agency with a digital agency than it would to merge it with a creative agency. So I think we need to be flexible in how we bring these things together for clients. So I don't think that's just slamming the media and creative agencies together, which implies something different is going to helpful. So I think that if we can get to a simpler structure with fewer points of coordination is going to be easier for people to collaborate. And I think that is the goal. And if you look at the Publicis structure, I think some of that is what they've done. In terms of what parts of Kantar are useful and not useful, I think it's all about degree. I think that there are sessions where insights that we get are extremely valuable in terms of pitches. I think there's times where we go to clients with strategic presentations based on what people at Kantar know about, a brand or category or industry that is extremely valuable. I think there are parts of the data business in terms of Worldpanel and their insights into what consumers are buying that can be applied to the media parts of our business. But it's also theoretically and practically possible to get those advances in different ways. So I think it's a balance between the benefits of integration, which increasingly we've been doing and having Kantar people in part of our team. But someone else made the observation, there are 3 other [ wholly-owned ] companies who don't have a big insight division. And we need to look at that in the round.

[Roberto Quarta, Executive Chairman]

So to your other question, the answer is we would, but that assumes you believe everything you read in the press.

[Mark Read, CEO & Executive Director]

Okay. One last question on the side and then we go back to the other side.

[Unknown Analyst]

[ Chris Whitehouse ], [indiscernible], from your experience at Wunderman, Mark, in terms of changing the model, how long do you think it will take to, if you like, tweak the model in terms of client service and over what time period would you expect that to show kind of positive results? And the second question really is more about current operations in terms of the U.S. Why is it do you think that the U.S. is underperforming and what steps can you take to address that? Or do you think it's just the natural client churn will improve?

[Mark Read, CEO & Executive Director]

So on the first question, I think there are some parallels between the situation at Wunderman and the situation at WPP. But obviously, WPP is a much more substantial business. Wunderman is a 10,000-person business today. WPP, as someone pointed out, is a lot bigger company. So I think we need to set out what we need to do and we can make some improvements quite quickly and some other things will take longer to do. I think the thing is not to wait, but to get going as quickly as you can. There are new business pitches coming up next month. Are there ways we could do more to win that new business? Yes. So I think there are some things that you can see that you can -- that can happen quite quickly. If we put a better team together, if we come up with a better solution, if we have a better idea, we can make progress, and that's something that Lindsay and I are working on, particularly on the new business front. So some things could have an impact more quickly. Other things will take longer.

[Lindsay Pattison]

I'll just build on that. We're continually reinventing the model anyway. We're not sitting and waiting to be asked to -- that old question, what's the agency of the future? We've been asked that for the last 3 years. So on those client teams, we've got 52 of them. We are continually changing the model, so we don’t [indiscernible] now to show over the last 3 years the old and new model. And as I said, there's 3 broad areas that we're changing towards that, that are consistently ask for buy our clients. So we're not waiting for a big ta-da. It's continual work that we're doing. And that will ladder up eventually into, I would imagine, the presentations that Andrew and Mark will get back to the board in terms of how it reflects back on our overall structure. But we're not waiting for structural change to change up what we offer to clients.

[Mark Read, CEO & Executive Director]

And then as regards to North America, I think, again, it's like a number of issues. Probably our creative agencies are more challenged structurally there. The same is true in the custom parts of Kantar, the more traditional parts of Kantar have been more badly hit in North America. So I think just the number of factors that make up the situation in North America which mean we need to give it more focus and more attention. There's not a -- there's nothing more to it than that. Okay, we start here and then...

[Thomas A Singlehurst, Director and Head of European Media Research]

It's Thomas Singlehurst from Citigroup. I actually had a couple of questions. I think the first one was for Andrew. You talked about decentralization. I think it was Andrew, anyway. But I was just wondering whether this was code for allowing margins to go down if there was a payback in terms of growth, so just specifically sort of decoding that decentralization point. The second question was on what's happening in the U.K. The U.K. should be and is a macro challenged environment but you performed incredibly well. And so it's always struck me at least that if you wanted to mount a structural defense of what you guys do, the performance in the U.K. is a nice example of that. But can you just talk about the factors that do distort U.K. growth? I mean, is there anything in there that's -- that means that what's happened in the U.K. over the last few years is, generally, not representative of what you can do as a sort of integrated holding company offering?

[Andrew Grant Balfour Scott, Chief Operating Officer]

I mean, on the margin, it wasn't a way of trying to say the margins are going to go down. The decentralization point is our clients are moving their businesses more local. We have -- we need to move our businesses to a more local model where you have a strong leader in a local market who can identify the right talent, pull together client teams and is empowered to do that. So it's more of a question of sort of empowering, we're not going to let all the controls go at the center. But sort of small changes in that balance can have a positive impact. And I think that there is a little bit of a direction of travel there. I mean, in the margins of the -- over the last 2 weeks, I've just looked at the margins of the businesses there. We're more similar to our competitors in margins. And once you adjust for associates, restructuring, amortization, I mean, if you actually do the exercise, some of the comments in margin are out there, sort of not representative of how the actual underlying operation -- operating margins of the businesses look excluding the impact of associates. So we're not sort of seeing it as a drop the margin strategy.

[Mark Read, CEO & Executive Director]

So in regards to the U.K., I mean, it's curious given everything else, I think one factor is actually talking to U.K. business leaders. In many industries, the U.K. is performing quite well. Outside of sort of consumer focused industries. Some of that, I think is clients centralizing activities that tend to be captured in the U.K., [indiscernible] where they may say we want to do everything in one location and not have it in 35 markets. I think the U.K. has historically benefited from those trends. I think secondly, we have probably made more investment in sort of technology and data-driven marketing in the U.K., where it's a [indiscernible] to its size than we have in other markets and I think we've had strong accounts wins in the U.K. If you look at British Airways, Walgreens Boots, the BT business, some shifted within the group but also Wunderman won more of the business. I think we've had strong account wins driven by the strategy. So I'd like that where you ended up the hypothesis, if you like. That could be the model for what we should do elsewhere, but I think that's part of the reason. But as Paul said, given the sort of headwinds that might be coming, we also need to be cognizant of those as well.

[Lindsay Pattison]

The other thing I'd add to that with my group hat on is we are very strong from a media perspective in the U.K. and the media market is very mature in terms of digital and the growth has come from digital where 60% of our spend is digital. And if you compare that to the States, it's far, far higher. So we're in the right place for growth in general.

[Patrick Thomas Wellington]

Patrick Wellington from Morgan Stanley. A couple of questions to the Chairman. Mark and Andrew have been given full responsibility for implementing strategy, but you could also get a new CEO who isn't one of those. So that would be too lots of strategy, potentially. So how do you balance that in timing terms between strategy with the existing management and strategy with what might be a future management?

[Roberto Quarta, Executive Chairman]

Well, as you well know, strategy is not just management's responsibility. Strategy is board's responsibility. And as markets developed over the last, say, 24 months, the board and management have had, I would say, lots of interaction. And what's you're seeing being rolled out here is basically the strategy that we believe is appropriate for what's happening now. Lots of things are happening. I think we're moving in a very fast environment. That does not preclude us for having to make adjustments time to time. And certainly, we shall see who will be the next CEO. But I think this is an evolutionary process rather than a revolutionary process.

[Patrick Thomas Wellington]

So when they are fully empowered to run the business and to implement strategy, but that's not to create strategy, it's to implement a strategy decided by the board when you're executive chairman, so is it your strategy?

[Roberto Quarta, Executive Chairman]

It is the combined strategy of the board and management that we're executing. That strategy will continue to evolve as the markets evolve. I mean, I think if we stand still at a point in time, right, we will not be successful. The point here is that we have to continually assess what's happening to market, what happens to our clients' needs and adjust accordingly. So at the moment, we are executing a strategy that we believe is appropriate for feedback that we're getting both from the market and with clients.

[Patrick Thomas Wellington]

So this, potentially, shows over 2 strategies. Tell us something about the timing of getting a new CEO in that it should be quicker rather than slower.

[Roberto Quarta, Executive Chairman]

I don't see why you're -- why are you saying 2 strategies? That's not what I said.

[Patrick Thomas Wellington]

It would be normal for an externally appointed CEO, presumably, to come in and say that they would like to have some influence over strategy. If we already saw, for instance, market research by that point, then some of the strategy options have gone.

[Roberto Quarta, Executive Chairman]

First of all, it assumes that it's going to be an outside person and that's much too early to predict. And secondly, I think that certainly, any CEO, and I've been there in my lifetime, has an opportunity to come in and give his or her view. And we will certainly be happy to listen to what they have to say. But that doesn't mean that there's going to be a second strategy. I think that might be an evolving strategy, which will benefit for input be it from inside or outside. So I'd like not to talk about 2 strategies.

[Mark Read, CEO & Executive Director]

Certainly, that's how I would see it.

[Roberto Quarta, Executive Chairman]

Good.

[Mark Read, CEO & Executive Director]

We put the foundations in place. And whoever, whether it's us or someone that comes after us, will build on what we've done in a sort of evolutionary way.

[Unknown Analyst]

Yes, [ Adrien ] from Intrinsic Value Investors. I have 3 questions, one is how can you realize value from your minority investments, sorry that's for Andrew. And then 2 for the Chairman. One is with the appointment of the -- upcoming appointment of a new CEO, will it also mean that you will have a different pay for the CEO? And given the change of leadership, it's often allows as well other change to make. So are you still happy with the composition of the current Board of Directors? Or do you think you may need some maybe extra skills on the board, which you don't have at the moment?

[Andrew Grant Balfour Scott, Chief Operating Officer]

So on the minorities, if I understand you correctly, I mean, we're going to look at the portfolio, as I've said, we've done very well on some of those investments. There's a lot of -- there'd be a lot of demand for our equity stake in some of those investments.

[Unknown Analyst]

[indiscernible] associates?

[Andrew Grant Balfour Scott, Chief Operating Officer]

No, I was talking about the minorities. So minorities by that, we mean where we own 7% of a company that may IPO. Yes, yes, okay.

[Roberto Quarta, Executive Chairman]

Okay, on the matter of pay, as you know, that was one of my objectives when I joined to try to get the pay more aligned with current practices. Certainly, U.K. best practices and I think we did that. With Martin's pay scheme that was announced and approved by a significant number of shareholders last year. And therefore, the pay for the new CEO will be very much in line with current best practices. And the current remuneration plan. As far as directors are concerned, in the course of time, we will have directors that will be stepping down. And that will give us an opportunity to be able to refresh the board in terms of bringing in those skill sets that we believe we could benefit from in the current environment. So yes, we should be seeing some changes as directors step down and new directors are appointed.

[Richard Eary]

Richard Eary from UBS. Just 2 questions. First one is a competitor of yours recently mentioned that consumer goods companies seem to be probably trending a little bit more positively than we had seen, historically. And given your position being probably more overweight than some, I just wonder whether you shared those views or whether you can just expand on some of those comments? The second question, you've talked in relationship to Ford a couple of times in terms of questions with Ford being your biggest account. Can you sort of just elaborate what parts of that account review is coming up for review? I mean, it's a 4% number, revenue number, which I think has been disclosed historically.

[Mark Read, CEO & Executive Director]

So in terms of consumer goods, I think IPG said they were up 10% in the U.S. and flat everywhere else or slightly better, not down everywhere else. I don't think we've seen shifts of that magnitude. What I would say is that packaged goods companies in general that invest more in marketing do better, and I think some of what we've seen is not -- if you talk to them not declines in what they spend, but shifts in how they spend. And it's incumbent on us to shift our offer to capture more of the where they're shifting their investments and less of where they put them in the past. So I think that will be our focus with the packaged goods companies, providing them with the right model to help them connect with customers in the future. If you look at where they want to grow, it's building direct relationships. It's getting further into Amazon. It's thinking more about how they sell direct online. It's building stronger positions as Andrew said in big local markets. So I think that's where we want to focus our efforts as it relates to packaged goods companies. And I think if you take those that have invested more, they've done better. On Ford, I think we made an announcement in November 28 that they were talking to us about the nature of the relationship going forward. So I think you should take that to be the nature of the whole relationship going forward. I think it's become clearer that the part of the business that they want to review is the global creative assignment. I think we said in an internal note that it did not include China. It did not include Lincoln. It did not include our deed of business, it did not include media or it did not include production or public affairs. So it does not include -- we were much clearer than we were in November that it didn't include a number of parts of the business. And we'll go out and do everything we can to win -- to retain and win the part of the business that we need to. They made it clear they want to work in a new and different way, and we will listen to them and provide them with what we need. As a competitive review, it will be competitive but we'll put our best foot forward and do everything we can. So I think that's all we can really say. I mean, I would point out that they're not the only car company to review their business, right? So VW have also launched a global creative review. I Understand there's another big automotive company that's been looking at the same thing. So it's an industry under a lot of pressure and you would expect them to think about how they wanted to do their marketing in the future. So we've just got to do a good job, that's what we're focused on.

[Richard Eary]

Certainly, some clients seem to be at the edges moving more programmatic buying in-house particularly on the display side. Where are we, if you like, in that cycle? Is there revenue that is -- at risk from this?

[Mark Read, CEO & Executive Director]

Lindsay, do you want to take that?

[Lindsay Pattison]

Yes. I mean, again, actually if you -- ISBA did a really interesting report published at the end of last year talking about the whole concept of in-housing and they actually found 100% certainly of media buying to remain within agencies. There is a small amount that is going in-house from a programmatic from an ad tech perspective. So we see 4 trends. One, and the majority is business as usual but with very clear and transparent contracts around martech and ad tech and how we are dealing with programmatic. Two, the advertisers taking full control of those contracts with marketing and Ad tech DSPs but actually being managed by the agency services provided by GroupM's agencies. Three, advertisers employing some people in-house to then operate parts of that technology stack. And then four, the smallest bit but talked about a lot in the press, full in-housing of programmatic media in-house. But there are very, very few of those that we see actually in any of our -- across any of our clients. What we do see a trend and we do believe that clients should have control and we should be advising on the contractual nature of advertising and marketing tech stacks.

[Mark Read, CEO & Executive Director]

Are you okay? No, he's got one more.

[Richard Eary]

There is one more. It may be sort of doing the whole thing of angels dancing on sort of on a pinhead. But just in terms, just come back to the comments from Andrew before in terms of M&A might be the low end of scale, might be the low expectations and so forth. You kept the 5% to 10% sort of net sort of EPS target moving forward. I mean, is there sort of an implicit message there that less of that 5% to 10% will come from M&A and perhaps a bit more will come from organic?

[Mark Read, CEO & Executive Director]

Well, I mean, we don't look at the M&A as an amount of money we need to spend to deliver some -- an amount of earnings. So the question is, do we find opportunities that fit where we want to take the group? So it's -- and can we negotiate a transaction that suits us in terms of returns for our shareholders, et cetera? So it's hard to sort of answer it. We're not setting out to spend an amount. We know we want to reposition the group and there are some interesting companies out there. So we want to give ourselves the resources to do that. And then the earnings impact of that will be what it is. Is that it? Well, thank you all very much, and thanks for the questions.

[Unknown Executive]

Thank you.