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Good day and welcome to the WPP 2019 Third Quarter Trading Update Webcast and Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to WPP's CEO, Mark Read. Please go ahead, sir.
Thank you, operator, and good morning. So welcome to our third quarter trading update. I'm here with Paul Richardson, our CFO; and Andrew Scott, our COO; and other members of the team, and we'll take you through statements.So we have our safe harbor statement on Page 2. Turning to Page 3, I'll talk briefly through the highlights of the quarter, and then Paul will take you through the numbers. We have a relatively short presentation today I hope you welcome, and we'll have time for questions afterwards.So I think if you look at the third quarter, the most important number really is our like-for-like revenue less pass-through costs, which grew, excluding Kantar, at 0.5%, or including Kantar at 0.7%. For the presentation overall, we'll sort of refer to the continuing group. So to some extent, this quarter and the full year will be a transition, so we'll try to help you understand due to the migration of the business, including Kantar to excluding Kantar, by referring to both sets of numbers. But really, on an ongoing basis, the relevant number to look at is 0.5. The number to compare with the guidance, so consensus, is 0.7%.I think, pleasingly, although it is 1 quarter, and I don't want -- we have to look at it in the context of it being 1 quarter, the improvement was broad based both geographically and functionally. We saw a continuing improvement in the U.S. business from minus 5.9% to minus 3.5% in the third quarter. The U.K. held up well, and we had a number of questions at the first half about the business in China, where we said we felt it was an impact of strong comparative from the year before, some specific issues, and you'll see that Mainland China was really flat at minus 0.4%, flat for the quarter.Similarly, we're pleased that our Global Integrated Agencies grew like-for-like plus 1.7% in the third quarter. And as referred to in the statement, our VMLY&R, business that we brought together around this time last year, actually grew both in globally and in the United States. And as we said before, we're seeing a consistent set of client wins -- I wouldn't say anything enormous, but improved retention combining to gradually an improvement in the performance of our creative agencies and overall point out wins that took place during the quarter. The creative win at Mondelez, media win at eBay, the retention by Wunderman Thompson of its business with the U.S. Marine Corps and the win -- or extension of our business with Centrica that we had much of the business in the U.K., but not outside the U.K. It was a hotly contested account during the quarter.Yesterday, the Kantar transaction was approved by shareholders, we think, 99.98% approval. And we believe that makes sense for the company both strategically for the rest -- for WPP to focus on how we use data in our market, whether we own data. Financially, we had to put the company's balance sheet on a much stronger footing and give ourselves the financial resilience to operate throughout the whole business cycle. And we also believe that it's the right thing to do for Kantar to enable Kantar to make the necessary investments in technology and automation and that WPP shareholders will benefit through a 40% shareholding in Kantar. As I've pointed out at the beginning, the group results show Kantar as an asset held for sale at this point, and we're trying to help you understand what that means going forward. And the last point is we had a number of key hires throughout the quarter, including John Rogers, who will start as our new CFO, January 27. I'm here with Paul, and at the right time, we'll -- be the right time to say thank you to Paul. So Paul, turning to look at the more detailed numbers.
Okay. Thank you, Mark. So I'm on Slide 4, looking at the revenue growth and pass-through costs versus the prior year. So building it up hopefully in the third quarter. So the like-for-like growth for the group, including Kantar, was plus 0.7%. As Mark has mentioned, we're having to classify it as an asset held for sale, and that won't be in our consolidated numbers for the quarter nor for the first half. So actually, we are removing the revenues and profits from the reported numbers and showing it as a one line at the bottom of the P&L in the full year results. So all the stated numbers would end up being restated to remove Kantar from our numbers for the full 12 months 2019. So on that basis, for the third quarter, the group -- continuing operations grew at 0.5% on a like-for-like basis. There were no acquisitions in the quarter, but foreign exchange was positive by 3.2%, leading to reported growth of 3.7% for the quarter. Taking the same on a full year basis, the like-for-like growth, including Kantar, for the 9 months, we were down 1.1%. But taking Kantar out for the 9 months, the group continuing operations declined by 1.5%. Turning that into reported numbers, acquisitions added 0.3% for the 9 months. Foreign exchange for the 9 months added 2.3%, and reported growth for the 9 months was 1.1%.So if I turn now to foreign exchange on Slide 5. Last year, it was a headwind of 2.8%. In the first half, we had a benefit of about 1.8% to 1.9%. In the third quarter, we saw a benefit, 3.2%. But now foreign exchange rates have moved quite considerably since the half year numbers where the pound/dollar was 1.22 and the pound/euro was 1.10. So when we projected what the full year impact would be at the interim statement, we thought the full year impact would be 2.8%. Now with the movement of the rates, the pound/dollar 1.29 and pound/euro 1.16, the full year effect will be plus 1.2% and actually a negative will come through in the final quarter this year.On Slide 6, we break out the business, showing you the quarterly run rate for those numbers that have been reported, which included Kantar, for the first half and the continuing operations for the group. So taking you through quarter by quarter, if I can. So you will have seen in your tables and your numbers, we'll have a like-for-like decline for the group in this first quarter of minus 2.8%. You'll recall that Kantar in that quarter grew at 0.3%. So the continuing operations in quarter 1 declined by 3.3%. Likewise, in quarter 2, the group reported a second quarter decline of minus 1.4%. The Kantar business in the second quarter grew at plus 0.5%. So the continuing operations, excluding Kantar, in the second quarter was down 1.7%.Likewise, for the first half, we reported a decline in revenue that's pass-through cost of 2%. In the half year, the first 6 months, Kantar did grow at 0.4%. And so the continuing operations in the first half when restated to exclude Kantar was down 2.5%. The first quarter, as Mark has already mentioned, including Kantar, the growth was 0.7%. Kantar had a strong quarter, growing at 1.6% in quarter 3, and the group had a strong quarter growing at 0.5%, excluding Kantar.So turning now to Slide 7 and looking at the third quarter in a bit more detail by geography. So North America now with GBP 1.034 billion of revenue less pass-through cost in the quarter after the total of continuing operations of GBP 2.7 billion, North America representing around 38% of the business. On a like-for-like basis, on the continuing operations, declined 3.5%. When I compared that including Kantar for third quarter, that would've been 3.2% down, which compared including Kantar at the first half, we reported down 6.9%. So considerable sequential improvement in the performance in North American business.The U.K., which is now 12% of the business at GBP 334 million of revenue less pass-through costs in the quarter. So a like-for-like on a continuing basis, growth of 3.1%. If we were to include Kantar in the quarter, the growth would have been 2.1%, which compared to growth in the first half in the U.K. of 0.2%.Western Continental Europe, which represents around 19% of the business now or GBP 518 million of revenue less pass-through costs, grew on a like-for-like basis 1.7%. If we were to include Kantar, the growth would've been 1.8%, which compared to a decline of 0.1% in the first half. In Asia Pacific, Latin America, Africa and Middle East and Central and Eastern Europe, which is 31% of the business now or GBP 839 million of revenue less pass-through costs, we saw growth on a like-for-like basis on a continuing operations of 4%. Including Kantar, that would've been 4.1%, which compared to first half growth of 1.7%.So totally for the group, on continuing operations, $2.7 billion -- sorry, GBP 2.7 billion of revenue less pass-through costs, growing on a like-for-like basis 0.5%, including Kantar growing at 0.7%. And on a half year basis, the same. We were declining at 2%. Down below, we note the asset for sale with Kantar, which has GBP 492 million of revenue less pass-through costs in the quarter, had good growth of 1.6% in the quarter. I'm pleased with the insights business, which had always traditionally grown in the fast-growing markets and have struggled in more mature markets, so good or improved performance in some of the mature markets like U.S.A. and returning to growth in France and Germany and also continue to be well performing in the BRIC markets, where its growth in the quarter was over 6%.So turning now to Slide 8, the same analysis on a year-to-date basis. So North America now, after 9 months, we see a like-for-like revenue less pass-through costs decline of 6.1%. The U.K. overall for the 9 months, we see growth of 1.9%. In Western Continental Europe, overall continuing operations, we see growth of 0.4%. And in Asia Pacific, Latin America, Africa and Middle East, overall for the 9 months, we see growth of 2.1%. But overall, for the group, after the 9 months, we see continuing operations decline of minus 1.5%. And if we were to include Kantar for the 9 months, the decline will be slightly less of minus 1.1%, which means that Kantar for the 9 months had overall growth of plus 0.8%. We do give you a very detailed breakdown in the appendix on Page 17, listing out the 7 sort of subregions. And the numbers we quote by quarter have been restated to show you the continuing operations like-for-like performance in each of the 7 subregions.Turning now to the revenue and pass-through costs for sectors. So the Global Integrated Agencies, which had GBP 2.036 billion or 75% of the continuing operations, saw a like-for-like growth of 1.7% in quarter 3 compared to the first half where they saw a decline of 1.8%. As Mark has already mentioned, we saw broad-based growth. We saw in the Global Integrated Agencies growth in North America. We improved performances in North America, U.K. and Continental Europe. We improved performance in Wunderman Thompson, VMLY&R and Grey. And pleasingly, global growth to VMLY&R, including growth in North America.Public relations, which is around GBP 225 million of revenue less pass-through costs in the quarter or approximately 8% of the continuing operations, saw a revenue decline of 0.9% in the quarter, which compared to a decline of 1.5% at the half year point. The specialist agencies, which represent 17% of the business or GBP 464 million of revenue less pass-through costs in the quarter, saw a decline of minus 3.4% in the quarter, which at the half year point was down 5.7%, so an improvement in the run rate. We did see an improvement in some of our specialist agencies coming through in the quarter, specifically Geometry and AKQA showing growth, along with better performance coming out of Commarco and the brand consulting businesses.So overall, the continuing businesses, as I mentioned, the quarterly growth was plus 0.5%, which on a similar basis for the half year we were minus 2.5%. Kantar, as I've mentioned, grew in the quarter 1.6% and the group, including Kantar, therefore for the quarter would have grown at 0.7%.Turning now to the same on a 9-month basis on Slide 10. So the continuing operations, the Global Integrated Agencies like-for-like growth for the 9 months is minus 0.6%. For the public relations, the 9-month decline is 1.3%. For the specialist agencies, the decline for 9 months is 5.3. So overall for the group, the continuing operations, the 9-month like-for-like decline is 1.5%. If you were to include Kantar, its growth for the 9 months is 0.8%, the group's number would be down 1.1%. Turning now to Slide 11, so the trade estimates of assignments won and lost in the third quarter, a pleasing number but a smaller number than prior year. This activity has been lower this year compared to some years with some pleasing wins, mainly of media businesses coming through and obviously pleased we had one creative win for Ogilvy in Mondelez, a global piece of business coming through for them. A couple of losses, one with the switch on the media business with Allergan, and a loss of our global business with Vodafone, Wavemaker, but retaining 3 key markets of Australia, India and the Netherlands.Turning now to net debt. So the average on a constant currency basis was GBP 4.4 billion, a GBP 625 million improvement or 12% lower than this time last year, the 9 months of GBP 5.1 billion. And on a point-to-point basis, the filler improvement, GBP 4.4 billion, at the 30th of September, an improvement of GBP 493 million or broadly 10% than the year ago where we were GBP 4.9 billion.On Slide 13, turning to the uses of free cash. We show on the right-hand column the full year 2018 numbers that show an acquisition. We spent GBP 288 million. And on disposals donated GBP 849 million. So net disposals over the last -- in full year '18 was GBP 561 million. When complying with the disposals year-to-date, the GBP 311 million, you can see where the GBP 849 million and the GBP 311 million, that's GBP 1.1 billion of disposals, add to that the consideration from the Kantar sale of a further GBP 2.5 billion, when it comes in, that will be basically GBP 3.5 billion, GBP 3.6 billion of disposal proceeds generated since the beginning of 2018. So year-to-date, as I mentioned, disposals of GBP 311 million, acquisitions fairly modest around GBP 44 million, no share buyback year-to-date and strong headroom on undrawn facilities in the -- on the banking side.On Slide 14, just to reiterate for the year, our 2019 financial guidance previously given, including Kantar, remains unchanged, both including and excluding the Kantar numbers as follows: on a like-for-like basis, revenue less pass-through costs we expect to be in the range of minus 1.5% to minus 2% and the headline operating margin to revenue less pass-through costs down around 1 margin point. On a constant-currency basis, excluding the impact of IFRS 16, which on a margin basis, is approximately positive by 0.5 margin point. And now I'd like to hand back to Mark.
Thanks, Paul. So I'll just wrap up by making a few remarks on our strategic progress. I think we set out a 3-year plan on December 11 last year to return WPP to sustainable growth. And I think there were 2 key objectives in that, 1 or 2 key metrics. One was organic growth and the second was leverage. And I think you can see in these set of numbers and yesterday's approval of the Kantar transaction, good progress on both. And so we really remain on track to deliver our 3-year plan.So turning to each of the elements of it. In December, we set out a new vision and offer for the company, the vision to be a creative transformation company and a broader offer covering communications, experience, commerce and technology, a broader offer, better position to the faster-growing parts of our market and what a modern market that needs to grow and succeed in today's environment. And I think you can see in the wins in our business the improved retention of clients such as Centrica or the U.S. Marine Corps that, that is having some success and an increasingly integrated proposition is working with clients. The second task was really to have a much simpler structure for the group, importantly to eliminate this artificial distinction between sort of analog and digital or creative and digital and to integrate our activities to make it much simpler for clients to access the talent that we have inside the business and, frankly, make it easier for us to manage the group and so to cut down some of its sprawling nature. And I think that you can see in this quarter that we're demonstrating results. VMLY&R, as I mentioned before, grew positively in both the U.S. and globally in the third quarter. And Wunderman Thompson has shown improvements as well in its performance both globally and in the U.S. in the course of the year. It's a much larger company to bring together, and so I think it will take more time to see the results there. But I think the initial impact is positive. And certainly, we continue to believe in both of those cases, that it was the right thing to do, as was bringing our health care businesses together at the core agencies. We set out a goal of really building a stronger, more diverse leadership team, and I think we've had continued progress in building the team and attracting talent to the company. John Rogers, our new CFO, will start at the end of January. And we've made good progress in hiring creative talent in the company. Taras Wayner, we announced will join us as Chief Creative Officer of Wunderman Thompson in North America. And there's been a number of other key creative hires at VMLY&R, Grey in Europe in the last couple of months. In terms of the balance sheet, we really needed to get the company into a stronger financial position and to be resilient throughout the whole of the business cycle. And the approval of the Kantar transaction yesterday, I think, at 99.98% was very positive. And once the transaction is completed, it will take our leverage to the low end of our target range well ahead of time. We have raised GBP 3.6 billion through disposals since April last year. I'm pleased that we have done that. It puts the company in a much firmer financial footing and gives us the space that we need to reinvest in the company and confidence that we need for our clients. Now on guidance, and I'm sure we'll get questions on this from you during the Q&A, we are reiterating our guidance for 2019 of minus 1.5% to 2%, both including and excluding Kantar. I think that's an important distinction. We've discussed the reasons for that, but I think we felt that at this point, given where we are, we did not want to change the guidance. And so it made sense to hold it where it is. We don't see anything in our business that gives us cause for concern in Q4, but the comparatives are a little bit tougher compared to Q3. We felt the right thing to do was to hold it at this point. So easy to summarize, I think the positive growth in Q3 is encouraging. It is just 1 quarter. As we said in the statement, there will be twists and turns along the way. It's not going to be a straight line in where we started the year and necessarily the end of the year or indeed to 2021. But I think there's -- it's positive. It reflects the benefits and the actions that we've taken and the strategy remains on track.So I think that that's sort of the formal presentation, and we'll be happy to take questions from all of you on the call.
[Operator Instructions] We will now take our first question from Adrien de Saint Hilaire from Bank of America.
Well done on the improvement in Q3. I've got a few questions, please. First of all, in this quarter, we've seen a number of big advertisers in the consumer space producing disappointing growth, cutting guidance. Does that make you worry for this category into Q4 and 2020? That's the first question. The second question, Mark and Paul, in the release this morning, you've highlighted that VMLY&R returning to growth. Can you discuss a bit when you would expect Wunderman Thompson to turn positive? I saw they lost a bit of business from Johnson & Johnson recently. So does that have an impact for next year? And then sticking to functions, I think you highlighted a lot the improvements around the creative businesses, which is obviously good, but media and GroupM doesn't really get a mention in the release. Is that because it's slowing? Or is it just because you wanted to keep the release short and neat?
Yes. Okay. So I think on the first question, it relates to sort of consumer packaged goods. I think as I said in the last call, we do see something of a divergence in performance -- divergence in trends in consumer packaged goods. I think if you'd asked us a year ago, there was sort of pressure downwards for most of them. I'd say it's more mixed today and we see some with a more positive trend on budgets and some with a more negative trend. Look, I think that you saw -- if you saw P&G's results the other day. They covered an increase in marketing spend. So I think that I wouldn't draw anything particularly positively or negatively from the fact that some of them are finding growth tougher. I think it shows, as we found out from Kraft Heinz, that they need to increase their marketing investments. And so I'd be more concerned about the overall macro environment than I would be about specific packaged goods companies. On VMLY&R and Wunderman Thompson, I don't think we'd want to give a sort of a running commentary on sort of growth company by company. We pointed out the performance of VMLY&R because it was notable. I think that Wunderman Thompson, we've seen an improvement in the course of the year. I don't think these are 2 companies that have come together. They are collectively more than twice the size of VMLY&R, and they didn't have the close relationship that VMLY&R had historically. I think we'll see that it will take longer for them and that's what we expected at the time and they have a number of losses coming into the year from last year. I think they did lose 3 brands in the consumer space, Johnson & Johnson in the past couple of months, but I don't think that, that was particularly sizable. Certainly, it was not as sizable as some of the more dramatic headlines were in the press. And so I don't think that gives us a particular cause of concern in terms of when we can expect business to return to growth. And I think that it's really -- that's part and parcel of the day to day of the business. Then turning to your question on media and creative. I think it's really -- we've had a good performance from GroupM in the quarter. We haven't reported it out because really it's been in line with where it's been for the balance of the year. We're really focusing on some of those things, and the release had changed from one year to the next. If anything, it was marginally stronger in Q3 than it was in Q2, but marginally, so it wasn't something that we needed to call out.
Okay. Very clear, Mark. And then since I have the opportunity to ask you about macro, you said you'd be more concerned about global macro than consumer goods. So can you give us your sense around the general turn of business as we enter the critical months?
Yes. Look, I think the -- since I started this job, people have been concerned about a global recession sort of 3 to 6 months out, and it's remained 3 months to 6 months out. So I think at this point it's right to be cautious coming into the year. As you know, the fourth quarter is the biggest, the most important quarter for our business. Our guidance relates both to revenue and to margin. And we didn't want to get into the process of sort of micro-targeting the guidance up or down. I think we got ourselves into some trouble doing that last year. So I think the right thing to do is to say that we will deliver what we said we would deliver at the beginning of the year, but we haven't seen any sort of macro deterioration. And if we thought we had, we would have remarked on it. I think it's notable that the U.K. has remained relatively resilient, although we did have a tough second half in the U.K. last year, so the comparatives for the U.K. in the second half of the year are a little bit easier as well.
I will now take our next question from the line of Lisa Yang from Goldman Sachs.
Congratulations on the results. My first question is on the U.S. Obviously, we continue to see a good improvement there. In Q2, I think there was quite a big impact from the account losses, impact, I would say, being a bit smaller than expected. Could you talk about Q3, how much of the incremental is account loss as opposed to the underlying improvement? Could we get maybe a growth rate ex the account losses? That's the first question. The second one is on your guidance. Obviously, you achieved minus 1.1% for the first 9 months including Kantar, so ahead of your full year target. So if you can help us understand like how you're thinking about Q4? Are you seeing a deterioration in any of your businesses? Or is there any phasing of client spending from Q4 to Q3? Or is it just because too early to revise the budget at this point of the year? And the last question is regarding your performance versus peers. So actually, in Q3, I think you outperformed the peers already. I mean we calculated about 0.2% growth for the peer group. So if we think about 2021 and your targets, obviously, the industry growth is very low to that 0.2%. So what gives you the confidence that the overall industry growth could improve as opposed to just WPP catching up with the peers?
Yes. So work my way through the questions. I think, look, in the U.S., it's very hard to split that out as easy as where you -- as you would like to. But I think the improvement is partially driven by some of the losses pulling out and partially driven by spending with existing clients, getting better. So it's not all one or all the other. It's a blend, and I'm looking at the list of clients in front of me now to try and give you a better answer. I think it's a little bit of both, which, I guess, is reassuring. It's a little bit improvement in the core business and a little bit the losses slacking out, but number of them do continue across the whole of the year and a number of clients we are seeing an improvement.On your second question on the guidance, I think we just felt -- we just didn't want to change it at this point, and therefore, we decided not to. And then on the question of growth in line with peers by 2021, I guess that we would hope it will be higher than 0.2%, as you pointed out. So I don't think we would declare that as victory. So I think there's a number of issues that we need to address as an industry. And I think, as I said before, I do think that this is an industry of structural changed, not structural decline. We need to reorientate our portfolio and our work towards the faster-growing parts of our business, which is what we're in the process of doing. And I think that would -- our goal would be -- and that would be our goal.
But just to follow up on the guidance. So just to confirm, you're not seeing any deterioration so far in Q4? So you didn't change just because -- I mean, it's your decision, but you're not -- it's not based on any underlying deterioration in the business right now?
We're not changing it. We're not changing it because we think things are going to get -- the economy is getting worse in Q4. We're just not changing it because we don't think that we should change it.
Our next question for today comes from the line of Omar Sheikh from Morgan Stanley.
It's actually Patrick Wellington from Morgan Stanley. A couple of questions. Firstly, just a follow-up on Lisa's point. I mean, if you take the Kantar -- the [indiscernible] Kantar guidance, minus 1.1% after 9 months. To get to minus 1.5% for the year, you'd have to do minus 2.7% in the fourth quarter. And I think what people want to hear is for you to say that you don't think you need minus 2.7% in the fourth quarter. So if that's a question, that's what it is.Secondly, Mark, if you were to put your happy hat on in relation to FMCG, there's a number of people in the industry who seem to think that actually it's all a bit more positive in FMCG and that you'd want FMCG customers at this stage of the cycle because they are getting more committed to spending on advertising and marketing. So could you interpret things that way? And then thirdly, your largest private shareholder and it's 1.4% of the company seems to think that after the success of the Kantar sale you should sell GroupM to a third party. You might think it's worth more to a third party than it is to WPP. So just to cue that one off, have you any such intention of so doing? And do you think there's matters of value in GroupM?
Okay. So to tackle this direct -- as directly as I can tackle your first question. I think what we would say is that we didn't -- we're not going to give a forecast quarter by quarter. And therefore, we don't want to change the guidance in a way that we're trying to give you the exact number for Q4, so we decided to keep the guidance where it is. That's the sort of precise a response as I can get. If I were to make the number exactly what we thought it would be then we've got ourselves into a different situation, right, in a different difficult situation. So I think we felt that the right thing to do was to hold it where it is. So it's not really -- not to answer your question directly one way or another, but I think that's as direct as we can get. Does that help?
Yes. No, that's fine. I think we've got the point. You don't want to fiddle around with your guidance, fair enough.
That's good. I think the second point to make is -- I agree. I mean, when the conversation we have with Mondelez was really interesting, and it's much more about a focus on creative work and the quality of the creative work on mass personalization or really think driving through an integrated sort of creative and media strategy in the work. And actually, I think if you look at Kantar's results, it does come off the back of a number of packaged goods companies deciding that they've cut their investment in research and insight. Part of -- actually, the part of Kantar that's performed better is the insight part of the businesses had been a very, very tough few years.I think if you look at our -- the packaged goods supply is in our top 30, 6 of them grew in the quarter and 3 of them declined. That's the way of helping you understand -- sort of understand where we are. Now this is 1 quarter. On your last question, I think you know the answer. I mean, normally, we say we don't respond to sort of speculation, but I don't think that, that makes any sense at all.
Excellent. Although GroupM is clearly a very valuable business and...
We think WPP is a very valuable business. So I think that -- I don't know whether any of the mathematics and what we're talking about is correct or not correct, but I think that we wanted to get our leverage to a level where it was sustainable and that's really what we've tried to do. So -- and I think that we are where we said we would be in the beginning, where we started in April, we made a remark. Every conversation we have with clients say they want to bring things close together, not split them further apart. So I don't think it makes sense to break up media from the rest of the business. I mean everyone talks about the integration of creative and media and technology, so how can it make sense to split that off from the rest of the business unit? Many of our most successful client wins have been through the integration of those things. And even when we're not winning both of them, the major topic on clients' minds is how we are integrating creative and data close together. And other people bang on about creative and data and everything else being together. I think that that's true in WPP's case as well as we need to be together. So I don't think that makes sense.
Our next question for today is from the line of Julien Roch from Barclays.
Yes. My first question is, have you decided on how you will return the Kantar cash to shareholders? Most of the investors I speak to favor a buyback. Second question again on Kantar. How much did Kantar raise in millions overall? At what coupon? And on this basis, assuming flat operating profit, what will be the associated contribution in 2020? And lastly, specialist agencies have become the trouble spot at WPP with the larger decline in Q3. Can you explain why and what are the biggest agencies in there so we get more color on that division?
I'll take the third -- I'll take the last question and Kantar will take the 2 questions -- sorry, Andrew will take the 2 questions on Kantar. So in terms of the specialist agencies, there was one notable client loss last year, the creative business at Ford. And while Ford remains WPP's single largest client by some way, the impact of that is mainly felt through the specialist agency line. I think this brings it more -- looking at it this way brings it more closely into focus and enables you to better understand what's going on. We did have some pressure in our shopper marketing business. And we've had some pressure on the event side of the business. And both of those come through the specialist agency lines. So that's really where it is. I mean, it comprises really [ TTVR ], specialists operating in Ford, Geometry, AKQA which has had a good year and a number of other sort of events in specialist marketing companies and our branding and identity companies and some of our international health care marketing business. So Andrew, let's also...
So on the shareholder return, I mean, I think we are okay. We can sort of confirm what you said. I think having spoken to investors, there is a preference for share buyback versus dividends, so I think we'll be going in that direction. I don't think we want to get into today talking about precise details on amounts and timing, but we'll communicate that at the right time.And then on the financing, the terms are still -- the terms are within the range that they and the banks had anticipated. Obviously, the loan markets are stronger in Europe than in the U.S. And I think there was a sort of -- I think they shifted a few of the tranches to Europe. But they're comfortable with where they ended up on that. It's a process being led by banks. And in terms of forecasting, we'll come back -- I mean, obviously, we built in our analysis of where we think the business will be next year and the associated income and that's all baked into the -- what we communicated on EPS or the likely impact that we can mitigate at the time of the deal. I don't want to give you a number for the associate income from that business on the call. And I guess the team can come back to you in terms of what we want to communicate, how precise we can communicate that.
Yes. I think it's a bit early to get it. There a lot of adjustment at the year-end to our balance sheet, obviously, taking Kantar out, making adjustments to the pro forma debt as a result of the consideration coming in and the interest adjustment, there's not going to be a share count reduction, a function, timing and amount also being brought in on a pro forma basis. So there's a lot of elements we have to communicate to you. I think, on the year-end numbers, adjusting the P&L for 2020 on a continuing operations basis and the impact of both the cash proceeds for the equity side and the debt repayment where all have to flow through plus obviously whatever the associated income is on the joint venture for 2020, when they have their final budget, but I think it's the end of the year we give you all that update.
Our next question is from the line of Richard Eary from UBS.
Mark, first thing is can you talk about the health care and the PR repositioning and where we're at through that process and where we can see sort of a pathway through recovery as you've seen at sort of VML? That's the first question. The second question is on retention. It's nice to see that you've talked about retention growing within clients. I don't know then whether you can expand on that. I think, historically, at the Strategy Day, you called out 13 of your top 30 clients were only growing. You said now 6 in CPG were growing. Can you talk about the pathway in terms of how we can actually expand offerings and solutions within the top 30 as well? Third thing is just on China. It's good to see that we've seen a turnaround in China, which I think, Paul, you called out as well recently. How are we thinking about China into fourth quarter and whether there's any headwinds? And then just lastly on FX impacts. Paul, you called out what the impacts are going to be for this year. I'm just wondering if you roll forward the FX rates into next year, what would be the headwind for the full year at constant currency today?
Okay. So I think -- on the sort of first question, that health care and PR, I think the PR businesses had a tough year. So a tougher start to the year than they did last year. I think part of that is down to sort of specific business issues in one of the units in the U.S., not down to the overall -- just down to the overall strategy. And I think that we're pleased with where we are there. I point out that AnnaMaria DeSalva only started, I think, in the middle of May. So she's starting to get to grips with that. And Donna Imperato has done an excellent job there, a big task bringing Burson-Marsteller and Cohn & Wolfe together, and I think we'll work our way through that. And I think some of what you see in our PR businesses is just a little bit the result of some sort of deal-related activities, pluses and minuses on the deal-related activities, some of it related to M&A, but we have strengths in our financial PR businesses last year. And as you know, M&A activity has been lower this year, so I think we're seeing some of that. So I don't think there's a particular trend that I would read into the progress in the PR business. I think it's just some lumpiness quarter by quarter. On the health care business, we did have a lot of attrition with health care clients during 2018 running into 2019, and I think that, that will take some time to work its way through. We have seen an improving trend in a number of our health care clients in the U.S., which I'd say is positive. The international health care business has probably had a tougher year this year than it did last year, to give you some context and insight into that.I mean -- on the top 30 clients, I think -- you've got to remember this is just 1 quarter, so it's hard to extrapolate trends from 1 quarter to the next. And I think as people have pointed out, if we hit our guidance, we will not be growing in the fourth quarter. So given the comparatives, so that's where we are. So hence, we use the term twists and turns in the guidance. But I'd say, if you look at our top clients, they had a slightly better quarter in Q3 than they did in the first half of the year, which again I take as positive.What was the question on China? I mean, there was an observation...
China, what he's really asking is how what we're looking for the rest of the year. The current view of the business is actually we'll continue to grow in the fourth quarter despite a strong growth in the fourth quarter of last year. So across the business actually both the global integrated agencies and the specialist businesses, in particular actually specialist businesses, I'm looking for a strong fourth quarter and overall growth in China for the year just coming through because of that. So again, strong business, doing relatively well.And then finally on FX. I think we did run some numbers the other day and it's likely to be -- the current rate to be rolled forward for a year, a minus 1% impact on to that and '20 headwinds in foreign exchange if rates remain as they are today for the whole of 2020.
Our next question for today is from Tom Singlehurst from Citi.
It's Tom here from Citi. One question, I suppose. You mentioned P&G earlier on, very strong performance in the quarter on the face of it. As you mentioned, sort of decent overall trends in media investment. And also, I mean, it's an intriguing company because there's a CMO who's constantly going on the record sort of talking fairly positively about relationship with agencies and how important they are. Yet, at the same time, P&G not necessarily specifically, but companies like P&G are often flagged as being one of the main sources of attrition for the larger agency groups. So I suppose -- well, actually a 2-part question. One is, can you just try and reconcile all those different moving parts? They're growing better but they're spending less on agencies. How is that happening? And why is it happening? What does it mean in terms of sort of where the emphasis in terms of spend is? And then linked to that, attrition within your businesses, is this -- are you seeing that attrition stable as the quarters progress? Or is it -- is the drag from attrition within traditional FMCG, for example, just beginning to fade away?
Yes. I think on P&G and maybe less about them specifically and more about what we're trying to do generally, I don't think the clients, as they would attest, are spending less on marketing or perhaps indeed the services that agencies broadly define offer. I think that we've just, to some extent, serviced them in some of the categories. Our biggest market share with them has been in the parts of the business that have been most under pressure, the analog parts of advertising. And what we're trying to do with our -- with the new strategy and positioning and the types of people putting on the business is broaden it into the areas where they're growing their spend, leveraging the relationships that we've had traditionally. And I think part of the reason or a major reason that we brought VMLY&R together with Wunderman and JWT together was so that we could offer more easily and more straightforwardly an integrated solution to those clients across all of the channels in which they reach their consumers and make it easier for them to do that. I think in the cases where we've lost business, I think largely it's a result of historic inability to do that over a number of years. This resulted in them reevaluating the relationship.In terms of your second question on attrition, I think if you're referring to sort of the impact of losses over the year, I'd say it's relatively -- it's what we said at the beginning of the year. It's more weighted in the first half than the second half and I think that, that remains the case. We do always -- our business is one where we win business and lose business. But I think that we're now this year back in normal business, if you like. So I think the impact running into 2020 will be much more similar to what we've experienced normally and what our peers experienced normally, and really, it's up to us to position the business better and win those disproportionate share of the opportunities that we have.
[Operator Instructions] Our next is from the line of Simon Baker from Societe Generale.
Well done again on the quarter. Two questions, please. One is on the U.S. improvement that goes through into the third quarter. Certainly, a very -- a significant improvement versus Q1. Could you just sort of walk us through the action points that you now have on your agenda to continue that improvement towards the sort of 2021 sort of industry growth for the group? Should we think of it as a sort of more linear fashion from here as the impact of global integrated agencies and branding and account losses unwinding, et cetera, as its impact? So trajectory is the first question. Secondly, on the twists and turns in guidance that you referred to earlier, Mark. So this is less of a question about the fourth quarter but perhaps more one about the Q3. Is there anything that you sort of break out that made Q3 a little bit more positive favored maybe from what was going on in the background from Publicis or anything else?
Yes. So I think on the trajectory, I don't -- to be direct, if you're sort of bit looking at the numbers simply in the U.S. is minus 9, minus 6, minus 3, I would not necessarily draw the conclusion from that, that Q4 will be 0 or that we'll go directly from there to where we are in 2021. So I don't think that it's practical to expect that degree of improvement in the year -- that quickly in the year. And we do -- we are pleased with the leadership changes that we've made and the people that we've been able to hire, but we are a people business and both on the positive side, attracting new talent, working with clients on new opportunities takes time. And similarly, it takes time on the negative side dealing with the client losses and attrition to work through the system. So I would encourage people to be patient in that sense, but I think we had laid out a 3-year plan and there was a reason why it was 3 years.To your question about what was positive about Q3, I think that we called out the situation of VMLY&R specifically because there've been some commentary that perhaps they hadn't been successful, so we just wanted to be clear that it had been successful. But I think that we've seen an improvement really in all parts of the world and across most of the activities of the company. So now again, we know where we are in Q4, so we don't want to be in a position of sort of declaring victory in Q3 so that we're declaring defeat in Q4. I think we should look at the half overall. And most people at the beginning of the year was sort of minus 3 in the first half, minus 1 in the second half. I'm not saying that that's the forecast for the second half, but I'm saying we should look at the half overall and look for a better half in the second half than the first to set ourselves up for incrementally better performance in 2020 and to get where we need to get to by the end of 2021. So I think that that's sort of how we're thinking about that.
There are no further questions at this time. I would now hand the call over to Mark Read for further closing remarks.
Yes. So thank you very much. As I said at the beginning, it is an encouraging quarter, but the comment I just made, we're not declaring victory at this point. There's work to do and that's really what we're focused on. So thank you all for listening to us at WPP, and we'll speak to you soon. Thank you.
Thank you.
That will conclude today's conference. Thank you for your participation, ladies and gentlemen. You may now disconnect.