WPP plc
Q1 2013 Earnings Call Transcript

Published: 30 Aug 2013

[Martin S. Sorrell:]

Okay. Good morning, everybody. First half 2013, we've got quite a long presentation. We've got a first half on the results, which Paul will do; and then on the strategy, which I will cover. So Paul, do you want to kick off, so to speak?

[Paul W. G. Richardson:]

So good morning. I'll take you through the numbers on the first half year 2013. You should have hard copies and it should be on the web for those following online. So billings were up 5% to just under GBP 23 billion, and reportable revenues were up 7.1% to over GBP 5.3 billion. Like-for-like revenues were up 2.4%, with acquisitions adding just over 3% and the foreign exchange adding a further 1.6%. So on a gross margin basis, which is equivalent to revenues, it was also up 2.4% on a like-for-like basis. Headline PBIT, or profit before interest and tax, were up nearly 12% to GBP 637 million. And headline operating margins were up 0.5 margin point to 12% for the first half. Headline diluted earnings per share were up 10.1% to 28.4p, and the interim ordinary dividend was up 20% to 10.56p per share. The targeted dividend payout ratio was lifted from the current 40% payout ratio to 45% within 2 years, which I believe is a year ahead of market consensus in terms of reaching that 45% payout ratio. The strategic targets for each of faster growing markets and new media have been raised to 40% to 45% over the next 5 years from the current targets of 35% to 40%. So in terms of a summary of the headline results at a glance. As you know from the release, reported revenues were up 7.1%, and reported gross margin was also up just under 7% at 6.9%. Margins on a revenue basis were up 0.5 margin point to 12%; on a gross margin basis, were up 0.5 margin point to 13%. Diluted EPS was up 10%, and dividends per share were up 20%. In terms of the average net debt, it's running at just over GBP 3 billion, at GBP 3.1 billion. It's 8% higher than the average net debt a year ago. But the ratios of average net debt for the last 12 months to EBITDA remains constant at 1.8x, and interest cover remains strong at 5.6x. In terms of the average number of employees in the group, it's basically down 0.3% compared to the year before, and the closing rate is basically flat with June 2012. The enterprise value, the current value of the stock, is around a 20% higher valuation compared to the enterprise value at June 2012. In terms of results versus consensus, we've either bettered or equaled consensus across the range of revenues, profits, EBIT growth, margin improvement, EPS growth or dividends. In terms of the headline P&L statement, running through the numbers. So revenues on a reported basis were up 7%. Operating profits were up 12%, so either on pre-associates or post-associates level. Finance costs of GBP 113 million were up 10% compared to a year ago, and profit before tax were up 12% compared to a year ago of GBP 524 million. Tax remains consistent at around 22%. And profits after tax, therefore, were up 12.6% for the half year, and diluted earnings per share were up 10.1%. In terms of the reported income statement, there are a couple of items I need to draw your attention to. So a very similar shape to the top half, is that the revenues were up 7%, profits were up 12%, finance costs last year did include an IAS 39 charge of GBP 22 million compared to only a charge of GBP 1 million this year. So hence, they're actually low on a reported basis. And tax, we've broken out into 2 different lines, so we're showing here that underlying tax is approximately 21% on reported profits, leading to profits after underlying taxes of GBP 313 million, up 23%. And then the third tax credit, which is really very significant in 2012, was a credit of GBP 52 million, is only GBP 2 million this year. So hence, there was quite a difference in the actual tax rate when you combine the 2 together. So profits after tax and the deferred credits is GBP 315 million, up 3% compared to the year before at GBP 307 million. And diluted earnings per share are basically flat at 21.5p. So in terms of building up the revenues. So organic like-for-like revenue was 2.4%, acquisitions added just over 3%, to make constant currency rates at growth of 5.5%. Currency was positive and added 1.6% to the numbers, so in reported revenues, we grew at 7%, and reported profits, we grew at 12%. If we were a dollar-reporting company, our profits would have grown 8.5%. And if we were a euro-reporting company, our profits would have grown at 7% for the half year. In terms now of turning to revenues by discipline, just to remind you of how the shape of the revenues were last year. We started off strongly last year, with 4% in the first quarter and 3.2% in the second quarter. So a strong first half last year was 3.5%. Quarter 3 and quarter 4 were softer. Quarter 3 was 1.9%, and quarter 2 was 2.5%. So on a full year basis, 2012 had a revenue growth of 2.9%. So far, we started off with revenue growth on an organic basis of 2.4% in the first half, which is 2.1% in the first quarter organically and 2.7% in the second quarter. And also in the release, we have given you the like-for-like revenue growth for July, which is up 5%. And the full year forecast remains over 3% for the full year for 2013. And now turning to each discipline in terms of the like-for-like performance. So in advertising, media investment management, which represents just under 42% of our business, as you can see, it's strongest in terms of disciplined growth at 4.3% for the half year. The quarter 1 growth on a like-for-like basis was 3.9%, accelerating through to quarter 2 growth of 4.7%. And July was even stronger, stronger than average. The data investment management business, which is 23% of the group, grew revenues on a first half basis, like-for-like, of just under 1% at 0.9%, consistently growing in quarter 1 at 1% and quarter 2 at 0.8%. But on a gross margin basis, the first half data investment management revenues grew at 1.7%, being 0.9% in quarter 1 and 2.4% in quarter 2. So quite an acceleration on a GM basis and a like-for-like basis. The public relations and public affairs business, which is just under 9% of the group. On a like-for-like basis, revenues were down at 3.8%, having been down 4.1% in quarter 1 and 3.1% in quarter 2, and still down in July but less so. And in terms of branding, identity, health care and specialist communications, which represents 27% of the group, revenues grew overall in the first half on a like-for-like basis, 2.9%, but were boosted by acquisitions as you can see. So on the constant currency basis, we're growing at 11%. In the first quarter, on a like-for-like basis, growth was 2.4%. In the second quarter, it was 3.4%, accelerating through. And again in July, this discipline is growing faster than the average of the 5% in the month of July, really across all the disciplines in that category. Turning now to a little bit more of a description of our data investment management businesses by geographies. So this is for the first half. It maybe a little bit hard to read. So we've broken it up into about 6 different regions. The footnotes in the bottom tell you that the overall performance, just to remind you, on a like-for-like basis, was 0.9% on the revenues. And this is also on a revenue basis, this chart. So you can see here in the first half that the faster growing markets, which overall were growing at 8.4%, include Latin America, net growth of 5%; Middle East and Africa, up 12.6%; and developing Asia, as what it's called, is growing at 8%. And that's basically Asia excluding Japan and ANZ, which you see here is declining by 4.7%. Eastern Europe and Turkey is growing about 9.3%, whereas Continental Europe or Western Europe is down 3.7%. So if you look at the map in 2 particular cuts, is what we call mature markets, which is the U.S.A., U.K. and Western Continental Europe, ANZ and Japan, the business is down 1.7%; but all other markets, which are faster growing, are growing at 8.4%. Encouragingly, you can see here the U.S.A., one of its larger markets, is 2.6% growth in the first half. And that is a growth following a growth of 5% in the second quarter for the Kantar businesses overall in the U.S.A., quite a turnaround from what we've seen in the past. So in terms of now turning to geographies. North America represents 34.5% of our business. It's growing just under 1% on a like-for-like basis for the half year. It started the year softly at minus 1% in the first quarter, accelerating through in quarter 2 and growing at 2.4%. And again, July is above-average growth in North America. The strong quarter 2 really came through the Kantar business, as I mentioned, was growing at 5%. All our specialist businesses and stronger performance will pick up in our media businesses in July in the second quarter. And again, July is better still than the average, particularly in the advertising and the market research business in North America. The United Kingdom, which is just under 13% of our business, again, has had a number of acquisitions. So with acquisitions, grew in a constant currency basis by 13%. On a like-for-like basis, was still strong, growing at 4.6% on the revenues and 6% on gross margin. And breaking out those for revenue growth on a like-for-like basis, they were 3.7% in the first quarter, accelerating to 5.4% in the second quarter. Really strong across the advertising and media sectors, very strong, in fact, double-digit growth. The direct, digital and healthcare businesses were also very strong. In Western Continental Europe, which is approximately 24% of our business, it is tougher. Overall, the revenues were down 1%. In terms of the quarterly run rates, we were down 0.8% in quarter 1, and down minus 1% in quarter 2. We did have a stronger July, particularly in Germany, Italy and particularly in the media markets, which actually reversed that trend. But overall, in the first half, the strength came through. A positive growth came through in Germany, Holland, Russia and Turkey. But all other markets, including France and Southern European markets, were tough in the first half in Europe. In Asia Pacific and Latin America, which is just under 30% of our business, Africa, Middle East, Central and Eastern Europe overall, had a constant currency growth of just over 8% and like-for-like growth of 6.4%, growing at 7.8% in the first quarter and 5.2% in the second quarter. I think what is fair to say is that LatAm continued to be very strong in its growth. So quarter 1, Latin American growth was 12%, followed by 9% in quarter 2. Africa remained strong, and the BRICs overall were up at 9%. We did see some softening in some Southern Asian markets, particularly India, where the forecast for the full year do expect to return to high to mid single-digit growth for the whole of the region combined. So we are expecting a strong second half to come through in Asia Pacific; Latin America more consistent with what we've seen before in the 8% to 10% zone. In terms of margins by discipline, we broke them out, for the disciplines first and then the regions. So overall, the margin improvement is 0.5 margin point at 0.5%. You can see that the strongest margin coming through the advertising, media investment management, up at 0.5 margin point to 14.4%. Likewise, the good performance in data investment management has seen its margins improve from 7% to 7.5% on a revenue basis, or 9.7% to 10.4% on a gross margin basis. Public relations and public affairs, with the difficulties it had in terms of revenues has seen the margins declined by 0.5 margin point to 13%. And in terms of the branding, identity, healthcare, specialist businesses, margins improved by 0.8%, following good revenue growth from 11% to 11.8%. In terms of margins by region, again, good growth coming through overall of 0.5 margin point. So North America remains strong at 13.8%, just up 0.1 margin point from a year ago. U.K. remains solid at 12.7% compared to 12.3% the year before. Western Continental Europe, again, with the difficulties, margins, I think, is still very good, remained flat at 7.9%. And Asia Pacific, Latin America, Africa, Middle East, Central and Eastern Europe, overall our strongest margin improvement, with margins up 1.5 margin points from 11.2% to 12.7%, particular strength there in margin improvement coming out of ANZ and Southeast Asia. So turning now to countries. Again, we break this out on a like-for-like basis across the top 20 markets. The average in this chart is the 2.4% of the like-for-like growth. And you can see here some very strong performances coming through in the faster growing markets that we've traditionally quoted as Argentina, Thailand, Brazil, South Africa, for example; Greater China, Mainland China, India, all in the 5% to 10% growth brackets. And I mentioned before, those markets growing above-average in Europe, include Germany, Holland, Russia and the U.K. Other markets that are outside in terms of the top 20, who were also the faster growing, would include markets such as Turkey, Indonesia, Ghana and Nigeria. In terms of categories, of the major categories, I'd say that the strong categories growing above-average are the automotive and personal care and drugs, and that's coming through there in the average of 5% growth. The entertainment, drinks, government, oil are also significant but not as material in terms of size to the group as automotive and personal care and drugs. In terms of foreign exchange, so currency movements accounted for a 1.6% increase in revenue, largely reflecting the weaknesses of pound against the euro and dollar. You can see here that the U.S.A., against the dollar, we are 3% weaker compared to a year ago, and against the euro, also 3% weaker. In terms of net new business -- sorry, let me just finish on that one slide. Headline profits would have been GBP 530 million had sterling remained at the same level as '12. They were, in fact, reported slightly stronger at GBP 524 million. And in terms of foreign exchange for the second half year, we are expecting, if currency rates stay the same, FX to be approximately plus 2% to the group numbers in the second half of the year. In terms of trade estimates of net new business wins, we've had a very significant set of new business successes coming through. In the second quarter, there is a shading here as you can see. Those are the shaded, are in quarter 2. Comfortingly, there's a couple of very major creative wins coming through in the second quarter. As you see, they haven't all been reported in the press but some are very significant in size, followed also by a number of media wins as well. This extends to the second page in terms of wins for the half year and likewise, in terms of losses, a number coming through in the first half, a few in media in the second quarter as well. In terms of to summarize where we are in net new business wins. Overall, the billings growth had GBP 4.1 billion wins, net new business wins for the first half. This is quarter 1, about GBP 1.5 billion, quarter 2, GBP 2.6 billion, making GBP 4.1 billion for the estate pleasingly. There was a strong growth in creative wins in the first half. In terms of the interim results, or post interim results, trade estimates of major new business, wins and losses, a number have come through both in creative and media across various markets for the group. And obviously, pleasing to see there a fairly major win for JWT on a global basis. Likewise, now turning to cash flow. In terms of cash flow for the year, operating profits were strong. They were up GBP 59 million to GBP 540 million for the year. This is very good in terms of conversion. So after tax and interest, the net cash generation for the year was GBP 524 million or up GBP 81 million compared to the year before. How did we spend that GBP 524 million? You can see here in terms of the CapEx slightly running higher than last year, the GBP 151 million, acquisition payments in total were at GBP 98 million, running lower than last year. Share buybacks having brought in 1% of the share capital, costing GBP 133 million, had an average price of 10.58p; were stronger than we purchased in the first half of last year. But the net resultant was a net cash inflow of GBP 161 million compared to a year before of approximately the same, of GBP 169 million. In terms of average net debt, and we've had a number of questions on net debt averages and point-to-point. So I thought it was useful to break out the average and the point-to-point to show you the difference. So in terms of the averages, you can see here the first 2 columns on the reported and the constant currency basis, there is really no difference in terms of the currency impact at the moment on the year-to-date average in June. So it's around $3.1 billion, around 7% to 8% difference. As at July, we are seeing some improvement compared to a year ago. The averages are beginning to get tighter compared to a year ago and you'll see why in a second. The interest cover remains strong at 5.6x, as I mentioned on the highlights. And likewise, the rolling average net debt-to-EBITDA remains strong at 1.8x as well. So in point-to-point, we have made the, I suppose, the emphasis a few times that the month and net debt is impacted by the operating performance, the net working capital, obviously, currencies and the seasonality of media billings. So obviously, the balance sheet reports at month end, and the yearend balance sheet, you saw an outflow for us compared to December '11 of GBP 356 million at GBP 2.8 billion. As at June, we did have an improvement in the overall debt position, where it was GBP 144 million better than the year before, although this was assisted by GBP 390 million of conversions of the convertible bond into equity. So that reduced our net debt. However, at the end of July, the improvement was strong, at GBP 759 million stronger; obviously, both from the benefit of the convertible and improvements in the working capital trend for the first half -- the first month in the second quarter sales, so that was encouraging. In terms of overall, this is a chart that we have shown a number of times. Our targeted range for historical average net debt-to-EBITDA is in the 1.5x to 2x. They're currently trending at 1.8x, and we are expecting improvements on a full year basis, more towards the 1.5x as we begin to progress and reduce our average net debt on the full year. In terms of discretionary items at cash flow, you can see here where we are in terms of trying to give you an idea of what we have spent. So in acquisitions, last year, we spent GBP 500 million. We are targeting to spend on small- to medium-size acquisitions around GBP 300 million to GBP 400 million. On share buybacks, we are between 1% and 2%, expected to be purchased in the year. We have already purchased 1% year-to-date as I have mentioned. In terms of dividend, we had been strong in terms of the rates of dividend growth. At last year, overall dividends were up 16%. This year, the first half dividend growth is 20%. As we mentioned before, the dividend payout ratio is now targeted to be at 45% in 2 years' time, having ended last year at a ratio of 39%. And you can see then in terms of headroom, undrawn facilities and surplus cash, running around GBP 2.5 billion as at the end of June. So in terms of earnings performance, it's been strong over the last few years. And likewise, in the first half, earnings per share are up 10%. And finally, on the last 2 charts, I just wanted to bring up the ordinary shares, the basic and diluted headcount, obviously, because of the conversion of the convertible, the basic number of shares in issue has gone up approximately 5%. That has worked its way through to the average, which is higher by 1.4%. But this was taken account of in the diluted share count, so you can see overall, after the conversion of the convertible, the diluted share count is only up 0.7% compared to the year before. And with that, I'll hand over to Martin on the priorities.

[Martin S. Sorrell:]

Okay, so I just want to -- Paul's covered the numbers for the first half, which are quite pleasing. I just want to go through the strategic priorities, particularly in light of recent events. And as usual, we sort of split it into 2, the macro and the micro. We are seeing some signs of stabilization in Western Europe or Western Continental Europe. But the Eurozone issues are still depressing growth prospects, particularly across Southern Europe. Although, we do think Spain is bottoming out when you see investors, shrewd investors buying banks in Spain, when you see the restructuring that we've seen in a number of major companies in Spain, when you see, actually, increases in capacity in Spain out of France, for example, in the automobile industry into Spain. It makes you feel a little bit better about Spain, although, one has to underline that there's still socially unacceptable -- unacceptably high levels of unemployment, particularly amongst youth. But there's still uncertainty there. The second, and probably the most prominent feature currently, certainly, we've got questions about Syria incessantly this morning and quite rightly so, concerns not just about Syria but Egypt and other parts of the Middle East, and the impact of Middle East on oil price, inflation and more generally, in the political and social situation. And obviously, if you saw the interviews with President Obama last night, indeed, what Prime Minister Cameron had or couldn't do, had to do and couldn't do, or wanted to do and couldn't do, it obviously is a big issue, too. Questions remain about hard and soft landings on Brazil, China and India. We've seen severe depreciation of the currencies there. We've seen Brazilian Central Bank action to try and correct that. The rupee has been off substantially. India faces an election, and the result of that election may be a stalemate or a deadlock. So people, the Indian oligarchs, if I can put it like that way, are certainly concerned about what happens post, even post the election, pre the election and post the election. China seems to be as well-managed and well-planned as ever. The new regime, we are highly optimistic about. The new Politburo, it will take time for their policies to be implemented. But I think we feel pretty confident about China. And of course, Brazil has had its challenges as well, although our numbers for Brazil remain very strong, even through July. The sort of fourth gray swarm is the -- probably the most important one, just moving off the Middle East, and that is the deficit in America of $16 trillion, which still has not been resolved. And more importantly, the impact and timing of tapering. We can't live on the money drug forever, and it's a question about how and when it gets withdrawn and the markets get very nervous, obviously, when there's any suggestion of withdrawal. I think the next point is an interesting one, and in talking to clients as we are prone to do, this has sort of become a quite significant feature, particularly in amongst the FMCGs. And that is the investment by longer-term private equity companies. Often, these are family wealth offices, family offices, backed by aggressive management teams. The best examples are Heinz and the Brazilians, Jorge Lemann and 3G, sort of migrating from Anheuser Busch and Ambev into Burger King and into Heinz. And remember that Heinz is the first of many, according to Heinz, in a way as a sort of roll-up of FMCGs. And then where you have Lehman and Buffet, and then the D.E. Masters, you have the Benckiser family and the Santo Domingo family. So these people have very much longer-term horizons and of course, they've been backed by investors like Buffet, who have had access to unprecedented low-cost financing over long periods of time. We ourselves raised a 30-year bond, unprecedented in the advertising industry at just over 5% last year. Probably, if we waited a little bit, we probably could have even gotten it at a lower coupon, not so much now. But I think this marks a significant change in FMCG areas. And one of the drivers, I think, perhaps for POG, I'll come on to that in a minute, may well have been that Nelson Peltz is sitting on Omnicom's largest client, $360 million, if you work out the numbers, 2.6% of revenues. And Nelson Peltz is trying to push a split up of Pepsi. So I think this is a significant trend and has -- will have repercussions, particularly in the FMCG area. And we noticed that clients are shifting their strategies in response to these changes that are taking place. The next point is a more general one and there is a concern about trust of business. There is a concern about businesses' role. And of course, this has marked a significant increase in CSR activity not by just ourselves but by our competitors, too. And it's a focus on what our clients are doing. Every campaign virtually that we get involved in at a corporate level certainly is focused on these CSR issues. But also what our people are doing, and it's a tangible way of working with our people and things that they enjoy and get involved in. The next point is probably a little bit controversial, too, and as that's -- this is the pressure on traditional media. It's not just confined now to newspapers and magazines but free-to-air television. If some of you have been following the Nielsen ratings in the U.S. I mean, I would describe ourselves as the non-U.S. Nielsen in the sense that we do about 40 countries around the world in terms of TV audience measurement. But you will have noticed degradation amongst, particularly amongst young age groups of free-to-air television. And this is an issue that I think the networks are becoming increasingly focused on. It's -- up to now, it's been very much U.S.-led and it's driving, I think, a lot of their thinking. But it's been exacerbated but what you see in terms of Aereo, Barry Diller's backed, over-the-top television, Internet television-driven medium, distribution channel, and also the use of tablets and smartphones. And of course, Nielsen, for example, in America, has only gone to a plus 3 basis, i.e. capturing views on other screens 3 days after live programming. And there is an argument, I think quite a considerable argument for saying it should be plus 7 to capture all the audience that is obviously utilizing different screens. And that degradation of free-to-air amongst younger age groups is, to some extent, ameliorated by the fact these younger age groups are viewing programs on a delayed basis on these new screens. So it's not just about newspapers and magazines, it's about free-to-air television. The other macro point is about 2014. GDP forecast for this year, real or about 3%, nominal, 5%, to 2 [ph] percentage points for inflation next year. People are talking about 4% for GDP, with inflation slightly less. That might be optimistic but slightly less, 1.5%, 5.5%. And if you throw in Brazil, the World Cup, which despite the infrastructure challenges there, I think will be is a superb tournament. Sochi, obviously, weather will have -- there will be slow but probably the manufactured variety in Sochi given the weather. But the Russian government is now embarked on a series of events, which will culminate probably in the World Cup. There are rumors of another major sporting event in Russia in 2017. So you've got a whole series of these things and of course, would you do believe, we've got another election in America, the midterm congressional. So I think 2014 sort of looks interesting from that point of view. And then if you look even further forward, 2015 is election here as we -- and then there's the preparation for the Olympics in 2016, the European Cup in 2016 and of course, we have a presidential election, where maybe, we will see the first female President of the United States. So micro, our client comments are not indicating, at early reads, any significantly lowering of spend. There is concern about cost, I'll come on to that in a minute. The is the rise of procurement of finance, there is the issue about the balance between procurement and finance and marketing but essentially, clients are still committing and they are investing in fast growth markets, continuing to do so in capacity. And they are backing that with investment in brand. In the slow growth markets, their constraining capacity or where they can do it for political reasons that they can get away with it, they are reducing capacity and they are -- but they are investing in brand to maintain share. There are new investments being made in digital and there are redirected investment. Money is coming out of traditional media, for example, in newspapers and magazines, to support growth in digital, and that continues to be a feature the first half of this year. We're up about 8% in terms of digital versus overall, as you know, about 2.5% by the end of July, 2.8%. I mentioned clients are investing in the fast growth markets and less so in capacity in the slow growth markets. Efficiency and effectiveness is still key. There's recent brouhaha about payment terms, which has gotten a little bit more relaxed. I mean, it's -- as we push back on that, I think people have understood that we are not a bank and neither do we have any desire to get into the banking business. And that this suggestion should be payment terms of 120 days or 90 days or even 60 days. And the forays in America issued a report showing that the average was around, what, 30 or 35 days, guys? About 30 to 35 days was average payment terms and that was the standard. So claims of anything different I think -- and in a way, it's related to that point about long-term private equity. The pressures inside the businesses are building for efficiency and effectiveness. Top line growth, I mean, most companies, most client companies have had pressure on the top line. They've lowered their estimates for top line growth. They've made their numbers. Sometimes they've even lowered their bottom line estimates, but by and large, they made their bottom line forecasts and satisfied analyst institutions on that but they haven't made the top line. So this pressure on the top line has resulted in trying to find efficiency and effectiveness. And of course, there's growing importance of horizontality, of getting our people to work in more effective ways for clients and the role of Big Data. And by the way, just to underline this point, we have a real Big Data business, not all this nonsense about the wonders of Big Data without people really understanding what Big Data means. We have a business which contributes -- actually, we own the data and we have access to the data. We don't buy third-party data. This is a real Big Data business. Next feature is the rise of e-commerce of Amazon. Amazon is seen as an opportunity. It's also the balance between manufacturers and retailers, traditional retailers, big-box retailers. Because it is the online and direct way of reaching the consumer. But Amazon also poses, I think, a threat to the manufacturers. I mean, it is a way of dealing with Carrefour and Tesco and Walmart on the one hand, but it also, because of its potential growth in size and because of the dynamics at work when an owner/founder controls a company like Jeff Bezos does, what you're seeing is, I think, some concern about Amazon. And I think that's an opportunity for us. So we're working very hard on that. And the final point is the industry consolidation, not just POG but Dentsu and Aegis and I'll come on to that in a second. So what does the world look like to sort of pre- and post-POG. I'd say pre-POG because we have a 6- to 9-month regulatory period, 43 jurisdictions, probably the most important are Washington, Brussels and Beijing. To our knowledge, before Congress recessed, there was some activity by lobbyists on behalf of Omnicom in Washington, making claims as to whether clients would approve it or not, which was interesting in and of itself. We were told that French politicians had approached the Competition Commission in Brussels prior to the announcement and in China, there has been, to our knowledge, no activity with MOFCOM either before the announcement or to date, actually interestingly. But those, I think, are the 3 big areas in terms of regulatory. And if one looks at the proposed POG deal, there are 5 things that come to mind from our point of view. The first is that it's a strategic 180-degree turn for both companies. Omnicom is basically a much more traditional advertising and North American company. And it's basically said, we're not interested for the last 10 years, probably post-Seneca. And some of you will be old enough in the tooth to know what I'm talking about when I say Seneca. But Seneca and the machinations around Seneca, which has resulted in litigation, which was settled, which was finished with post-Seneca, I think changed Omnicom's attitude to digital, certainly. And they didn't really get involved in the fast growth market scramble, if I can put it like that. So they took the position, they weren't going to get it involved significantly in acquisitions either in digital or in fast growth and passed on a number of acquisitions, passed on AKQA, passed on Rosetta, passed on Digitas, et cetera. Well, here they are actually now doing a giant roll-up, if you like, with Publicis, probably reversing that strategy. Publicis, on the other hand, has been very focused on fast growth markets and digital, I would claim that they copied our strategy but let's say they originated it for purposes of this presentation. And they now have reversed it because actually, if you look at of proportions of their business, the combined business that will come from fast growth markets and from digital, they sync to about 24% and 20% as opposed to the over 1/3 or around the 1/3 we have. So that's the first point. So it's evolved fast strategically. Secondly, it's structurally clunky. You have co-chairmen, you have co-CEOs, you have committees, you have a deadlocked Board. You actually have 3 generations of management that've been lined up, which from a governance point of view, having gone through governance issues of our own, I find somewhat extraordinary that the 2 CEOs have locked themselves together in a room for 6 months and come up with 3 generations of management, you be co-CEO, I'll be co-CEO, you be chairman and I'll be CEO, then we'll reverse that. And then when you retire, I'll become Chairman and I'll appoint a CEO. So it strikes me as being clunky and from a governance point of view, interesting. Third point, probably the most important point is client and people complex. And probably, the second is more important than the first. There's is a considerable amount of -- it's related to the fifth point but limited articulation of client benefits. There's been a very little or no communication. In fact, the only significant communication I've seen is an interview with a lawyer, who is involved in the transaction on Bloomberg Law a day or so ago, which was interesting because he explained the benefits of being registered. Actually he said located, headquartered and then checked himself and said registered in Amsterdam. The benefits of retirement benefits as a result being based in Holland and the benefits of taxation and moving, he described Amsterdam and Holland as the Delaware of Western Europe, which I thought was sort of quite interesting. So limited articulation, I don't think that's of interest to clients, and that reverberates with clients. Clients really want to be consulted. It's a courtesy, it's not a requirement, I would say but it's a courtesy to be consulted on things. It's their money, not our money. And therefore I think they think quite carefully about that. And of course, the vacuum has a dramatic impact on people. And we've seen, even the first 4 weeks, a very significant impact on the people and jockeying and juxtapositioning of people within -- I mentioned the regulatory issues, so those are the 5 areas. On the more positive side, what do we see? Well, there are economies of scales in our business, but as we said continuously to you for something like 25 years, it is really confined to one thing and one thing only, as the economies go, and there's media buy. There are diseconomies of scale elsewhere. There are diseconomies. The bigger our creative operation becomes, the more difficult it is to run. And take the parallel to the newspaper editorial department. If you double the size of the editorial department, it's 3x more difficult to manage. And so managing the diseconomies, so interesting, going back to that lawyer interview on Bloomberg, he said, all the companies in POG are going to remain autonomous and independent, which begs the question about what's the point of doing it? But it's interesting about that issue, about the economies of scale. You have this sort of paradox, that if you want to get efficiencies, there have to be economies of scale. But in our business generally, with the exception of media buying there's diseconomies. The one part of the world where there will be a significant difference will be in the United States, which we will address. But elsewhere in the world, in Asia, in Latin America and Africa and the Middle East and Central and Eastern Europe and Western Europe, no change to our leadership position. The second issue is consolidation and concentration. And that of course, raises a lot of issues amongst the analytical community, amongst the institutional company about what will WPP do. Somebody sent me an e-mail as Paul was making his presentation in the FT this morning that says, are we under estimating how much Martin Sorrell wants to be #1? And he pointed out to me that being #1 doesn't necessarily mean being the biggest, it means being the best. And on this issue of consolidation and concentration you've seen that we've been upped our game, partly accidentally but partly on purpose. Since the POG announcement, we made 10 small medium-sized acquisitions, basically in new markets, new media, data investment management. You can't really invest in horizontality from an acquisition point of view but you can provide the resources. Effectively, what we're doing is upping our strategy. Our strategic response is the same strategy, the same boring 4 things

[Unknown Executive:]

The email has gone now. You have a web link, which you can link on to.

[Martin S. Sorrell:]

This is not a divert you from asking questions. This is just to demonstrate what we can do in terms of -- hopefully, we'll have the results at the end of the Q&A session. We're asking you several questions. But the Lightspeed panel is very interesting. It's very interesting also because we own about 20%, I think, it is of e-rewards, which is for sale. And the price being talked about is about $600 million to $700 million. Interestingly, Lightspeed is a more comprehensive and more profitable model than e-rewards. And we've built this from scratch. The only acquisition that we made was last year of GMI. So it's a successful example of what Kantar and their syndicated research are doing and custom research we'll be doing. So we'll run that survey now. You should have received it. So please ask questions. So let's move onto the Q&A. Yes, we'll start at the front and then we'll move backwards, if that's all right with you people?

[Filippo Pietro Lo Franco:]

Filippo Lo Franco with JPMorgan. I have 3 questions please. So the first is on the industry and, in particular, if you expect further consolidation after the Publicis Omnicom deal? And if you think that you're going to be an actor in this consolidation?

[Martin S. Sorrell:]

An actor or a participant?

[Unknown Analyst:]

Not the passive [ph] one. It's the most diplomatic question I can ask. The second one is in terms of your target of more than 3%, over 3% organic growth, which imply an acceleration, obviously, in the second half. If you really can identify 2 drivers for this acceleration in the second half, what they would be eventually, if you want? Because I don't think it's just related with the 5% that you've done in July, I guess. And finally, I've been following, tracking in the last 12 months, what you've been doing Consumer Insight and I've been quite optimistic, and was happy about the performance there. But now, I'm starting to be worried a little bit on public relation and public affair, I know that Insight is smaller, but what's going on there?

[Martin S. Sorrell:]

Okay. All right. Well, on consolidation, I mean the -- you have to ask IPG and you have to ask Dentsu and you have to ask Havas what they think, all right? So you're going to have to ask them. Yes, I think it makes it more difficult for them. I mean in a sense, you've got a duopoly developing. What was very interesting, I think this is really interesting. So one client, and I wouldn't say which one, consolidated its business between Publicis Omnicom and ourselves some time ago. And we've had a very strong success with that client in terms of that consolidation. We were not a big player with that client. And after the POG announcement, we asked the client has 3 has gone to 2 or might go to 2, what do you think? Will you add another holding company to go back to 3 and they said no, 2 is sufficient. If you think about that, sort of logically for a minute, 1 plus 1 is equal to 1. You've got no advantage by doing that. So when you think about that and the implications of that, and in that particular case, IPG are not there, Havas are not there, Dentsu are not there. So I think it does raise questions for them as to what they can do. I mean if the 3 of them got together, you'd have a tripoly, or whatever you call it, triopoly, right? Oligopoly, whatever -- oligopoly. So I think it does raise -- that may not be in the short term, because what's really interesting, actually. There've been a couple of results recently, Hershey's goes to UM from OMD. There was another one, that is Emirates, went out of Starcom to Havas. I think it was to Havas. So you're seeing some results just recently that are quite interesting, the GC consolidation, where we picked up opening outside the U.S. and search, Starcom lost. There's another one coming down shortly, similar proportions. So I think it's interesting. So I would anticipate little short term, medium-term consolidations of the like you're talking about. It might be different longer-term. I mean I don't know how Dentsu feels now about Aegis, you'd have to ask them, given what's just happened or might happen. They may feel that they've made their move too early, I don't know. They had -- what they owned 15% of Publicis? 2 years ago? 3 years ago? I think they still own 3. I think they had 15 at one stage, and sold it down. So they may feel that was the right move or the wrong move, but again, you'd have to ask them. As it really -- we will be a participant in the sense of the strategy we've outlined here this morning. What we're doing is sticking to our last, a boring cobbler sticking to his last by doing it faster, okay? Being more aggressive and doing it faster, because we, again, I'll come back to the stuff comment, we have enough stuff. We've got GBP 23 billion of revenue we have access to, when you did the math. And actually, probably, that's an under. We have fully -- there will be a bigger number when we researched it even more comprehensively. It's very formidable array of resources. We don't need more resources. We've got more than enough. The issue for us is getting it to work together. And by the way, on the media buying thing, there's one thing I didn't mention, which is very important. We buy media at one buying point. POG doesn't. POG has 4.5 buying points. They have to consolidate and that is going to cause great stresses and strains. We know, because we've gone through them, great stresses and strains. And it's all very well saying adding numbers together and saying, bop [ph] , I've got this. But if what you got is 4.5 bps, you haven't got 1 bps, because we do all our buying through GroupM in every country. On the 3% plus, what are the drivers, I would say it's the improvement in the mature markets that's driving it. The faster growth markets are slower growth than they were, but they're still is significantly better than the slow growth markets. So I would say if I was going to pick out anything -- and then on the functional side, media continues to strengthen, and I think there are opportunities as a result of the industry consolidation for us. Digital continues to be strong, I said, 8% for the first half. S o I think, if you obviously can pick out 2 things, it would be the geographic, it's better balanced. We were not doing well enough in the U.S. We were not doing well enough with Consumer Insight. Both of those things have changed, I'll comment PR, Public Affairs in a second. So I think we've started to address by performance. I mean we've won a lot of business in the U.S. You take our 2 biggest wins in the first half of this year, Gilette and Nestlé, which are massive in the context of the U.S. market. And they've been very immediate as well. The final point is on Consumer Insight has improved, particularly at the gross margin level, and we feel better about that. And I think that's probably because of the dislocation in part that we've seen with Ipsos and Synovate, that's helped, but also the market is improved a bit. I think we've seen that better in the Nielsen results. On public relations and public affairs, we try to explain it in a statement which is that it's is a reflection of the focus on discretionary spending in mature markets. Again, you know the chart where we threw up about our Consumer Insight or data investment management on the different geographies. If we put it up for public relations and public affairs, it will be very similar. The pressure is very much on discretionary spending amongst in the mature markets. And I think that's what it's -- it will improve. It will get better. If anything because the comparatives will get easier, but it will improve.

[William Mairs:]

It's Will Mairs from Nomura. Just 2 questions, firstly, on your rest of the world division, where growth is slowed to 5.2% in the second quarter. I'm just wondering if you could give us some of the drivers behind that. You've touched on India, I imagine there are other areas perhaps which have slowed? And also if you can touch on China as well and how -- if you've seen acceleration in growth in the region? And then secondly, just on Big Data, so Publicis Omnicom has spoken about Big Data being one of the key drivers behind the deal, trying to get bigger scale...

[Martin S. Sorrell:]

Where's their Big Data business?

[William Mairs:]

In that area. But...

[Martin S. Sorrell:]

Where is that Big Data business? You tell me. They might buy a third-party data, but I haven't noticed they have a big data. I mean Hall & Partners sort of competes against -- tries to compete against Millward Brown, [indiscernible], but beyond that, what else? I think the growth, there's another data business they bought, Publicis hasn't gone -- Publicis said their research business wasn't something they wanted to get into. So I don't know what the Big Data business is other than noise to divert the regulator away from the half of the regulation problem, which is the impact on traditional media. That's where the regulation issue is going to be, in my view, the biggest issue. German publishers, U.S. networks, we'll see.

[William Mairs:]

But -- it will be good to have your view on where WPP's positioned relative to the new group as well within that?

[Martin S. Sorrell:]

On Big Data?

[William Mairs:]

Yes.

[Martin S. Sorrell:]

I've just said it. There was no Big Data business. Where is the Big Data business? It doesn't exist. It might exist in the figment of imagination above the Arc de Triomphe, but it's not -- where is it? Where is it? Where is the beef? Maybe the beef is going to come? I don't know. Maybe that's the intention. But in terms of the Big Data business, no. I can't see it, so I don't think there is a need to answer.

[William Mairs:]

And then in terms of the rest of the world division?

[Martin S. Sorrell:]

Yes, rest of the world. Well, it has grown more slowly. If I pick up -- if I look at China, China has slowed. It's running at around 6% to 7% depending on whether you include Taiwan and Hong Kong or not. Mainland China -- sorry, Brazil is still running well double digits, 13%. I'm talking to July now, by the way, including July. India is at 5%. So we're seeing a slowing of growth, but in comparison to what we've seen in the Western markets, still significantly better. The other thing to remember about the rest of the world number that I hate to phrase the rest of the world as it includes Japan, Australia/New Zealand. And if you exclude them, you're up into between 6% and 7%. So it's slower, but it's still significantly faster than you see in the slow-growth markets. Although the slow-growth markets, in relation to the first question, are growing better. We're doing better in the U.S., and we're doing better -- obviously, we've done well in the U.K. and Western Continental Europe, if you do the comparisons, we do very well competitively. And July actually in Western Continental Europe was an upside surprise, significant upside surprise. Whether that's a bellwether for the next 5 months, I don't know, but just I'd mention it. It came from Germany and Italy from, if I remember right. Yes.

[Paul W. G. Richardson:]

Yes.

[Patrick Kirby:]

Patrick Kirby at Deutsche Bank. Just 2 questions, please. Firstly, on programmatic buying in Xaxis, I think IPG have said that they want to move to 50% automated buying in how many years’ time. But a, how realistic do you think that is; and b, any read across as to what you should or might expect to be able to do in your own business? And then secondly, just on the CapEx and the cash flow, apologies if I missed this in your vet call [ph], but CapEx is up quite sharply in H1 than if this was behind that. And then sort of longer term, are there any CapEx or investment implications that drop out from upgrading your new media targets?

[Martin S. Sorrell:]

I think the answer is Columbus Circle. But you want to deal with...

[Paul W. G. Richardson:]

Martin's right, actually. It was the [indiscernible] of Columbus Circle that came through quite heavily in the first year. I think on a full-year basis, will be below GBP 300 million. I think from memory, we were GBP 330 million last year, but that did include the condo purchase part of the Columbus Circle. So basically the underlying spend was a little lumpy. So a little stronger in the first half. That will ease off in the second half. And overall CapEx there will be less than GBP 300 million IT and property.

[Martin S. Sorrell:]

Anything else you want to add?

[Unknown Executive:]

No.

[Martin S. Sorrell:]

Okay. So I think the answer on capital expenditures, if it's lumpy it's because of refits. The programmatic, I think it's very difficult, Patrick, to give a view. We are not -- going back to the very first question, IPG trying to position its media buying, planning buying, we can't do it on the size, so they'll do it on quality. And they'll do it on planning and they'll do it on different techniques in media buying. So I think that's an intelligent strategy. I think that makes a lot of sense. But I think it's impossible. All I can say to you is that Xaxis has got a lot of traction. We went for an opt-in basis just to remind you we discussed this before, we revised all our client contracts. I went to the clients with new contracts on media, for which Xaxis was a part. But it's very difficult. Other than to say it is gathering some momentum. It's still very small. I've seen figures of sort of like 3% to 4% or 4% to 5% in terms of percentage of total volumes in the U.S. and then people talk about 20%. I don't whether that's realistic or not. Maybe we should ask [indiscernible] or Dominic or others to review as to what they think it is. I think it's important. I mean I think it's like trading desks inside banks. It is becoming more and more important, and I think clients are getting more and more interested in it, particularly because of data. Going back to the previous question. Linking that to big data, and that's why that's what's motivating us to talk about media investment management and data investment management because we think the 2 are now starting to align. You could almost see a media and data investment management division as opposed to 2 separate.

[Charles Bedouelle:]

Charles Bedouelle from Exane. 2 questions. The first one is you have ambitious but-- and so far working plans to improve the margin overall for the group, you have the same thing if you believe them at POG. You guys are, as you say, almost a duopoly. There's the fact that now you now have 2 giants going really the same route makes your life easier in a way to reach those targets by efficiency, salaries, all kinds of things, so it does make your life easier in a way. And the second question still on margin but with a different angle is, Europe margins are flat, which is probably good given the environment, but let's say that Europe is a bit better without being stellar in the coming years, where do you think the margin should be actually compared to where they are today, just as a rough indication? Do think in a normalized environment, given all the restructuring you're doing, it could be 50, 100, 200 basis points higher? I mean what's your take here?

[Martin S. Sorrell:]

It's very difficult to say. I mean I -- let me just deal with the second one first or try to. Restructuring in Western Europe is still difficult. I mean for example in Spain, we tried to take advantage -- to be blunt, we tried to take advantage of the Rajoy reforms. We thought we kept to the Rajoy intent, and we weren't allowed to do it. Court found against us in terms of the cost. So what we thought was a reduced cost move turned out to be the same as before. Because you have to demonstrate your business is declining. You can take a business, and if the sales are down for 4 quarters or 5 quarters or whatever it is, then you can -- we thought we could do that. In 1 or 2 cases, you can. So it's very difficult. In France, as you know, it's exceptionally difficult. I mean one of the things I think the prime drivers of the POG is you get in and just look at that lawyer on Bloomberg, Law you go to Amsterdam, and it's the Delaware of Western Europe. So you get out of this, this thing. So I think it's still very difficult. Having said that, I think -- I do think that Western Continental Europe, I'm intrigued by what's happening in Spain. I'm intrigued by some of the people that are going into Spain to buy assets. I'm intrigued by Carlos Slim and KBM. We do know the private equity companies all of them

[Julien Roch:]

Julien Roch from Barclays. The first question is on M&A. You've summarized your strategy and simply put more and faster, but you've confirmed your M&A target, that 300 million to 400 million, which is less than last year, so can you give us when is it more and faster maybe early indication of next year, is the spend going to 500 million or 600 million?

[Martin S. Sorrell:]

Listen, if pushed, could it go to 400 million to 500 million? Yes. Could it go to 500 million to 600 million? Yes, but it's going to be in that zone. But it's a question about what we -- about pipeline, what we're doing, where we're doing it. But it's going to be -- the basic point is it's small to medium-sized acquisitions.

[Julien Roch:]

The second question is you renamed consumer insight to data investment management because you want to emphasize this. So shouldn't you start to dispose some of the business in that division that don't fit the Infosys' own data?

[Martin S. Sorrell:]

Which ones do you think they are?

[Julien Roch:]

About more traditional consumer market research?

[Martin S. Sorrell:]

No, I don't think so. No, because if you think about it from -- I mean, the basic -- there is a difference between custom and panel, right? Or custom and syndicated or semi-syndicated. But the custom gives you knowledge. I mean for example, I think we mentioned this before, Myanmar, we're up and running with 4 businesses there. I think it's now about 200 people. The first job that we did was TNS went in there and did a complete consumer survey of the 60, a sample of the 60 million consumers, so that FMCGs could know who, going to that marketplace, what -- Burmese or Myanmar consumers thought what their immediate consumption habits were or what they bought and what they didn't buy. So the data is about the knowledge, about the insight, as well as the nature of collection. There was a big speech that Eric Salama wanted us to make on Lightspeed, which I spared you. But yes, basically, then we're moving to more effective means of data collection, mobile, tablets, et cetera, which Lightspeed is doing. I mean a lot of the interrelation is not by e-mail anymore. It's certainly not by phone anymore, but it's by mobile, and it's by using tablets and smartphones. And I think that's the real change. So when we talk about data investment management, it's as much about the methods of collection. And that's why gross margin -- actually, we said in the statement gross margin becomes a much more important determinant of the margins in those businesses when looking at it as a proportion of revenue because the balance is changing. So I don't see that. What I see is the need to integrate it more, to integrate things inside Kantar more effectively and to integrate Kantar more effectively across our businesses. And then when you think that we do TV audience measurement and increasingly Internet audience measurement in 40 countries across the world, I mean that's a massive missed opportunity on our part that we have not integrated that more into our media thinking. So part of the reason for calling it data investment management is that we think there's tremendous opportunities to leverage our knowledge, not for our benefit, but for the benefit of clients, to link the 2 in a more effective way.

[Julien Roch:]

And the last question is in the statement you said your long-term target is to grow above industry revenue gross. Can we know what your benchmark is within that industry?

[Martin S. Sorrell:]

Well, I would say at the end of the day, for whatever the benchmark is, if you take nominal GDP growth, okay, and you adjust for our distribution of revenue versus GDP distribution and assume that advertising as a portion of GMP stays the same, that's your benchmark. That's how I would benchmark it because I think that's the effective way of doing it. So let's say for next year, you take the 5.5, you adjust for the fact that we're not as heavy in various markets like in Asia and you make a correction to that, that would be where I'd be. Because the other stuff is too flaky. Steven Craig Thomas Liechti - Investec Securities (UK), Research Division Steven Liechti from Investec. 2 questions, please. First of all, in terms of the budget that you suggested on the like-for-like sales growth, the first quarter was over 3%. It's now better than it was in the first quarter, but still over 3%. Can you give us any sort of, almost calibrate us a little bit more clearly on that?

[Martin S. Sorrell:]

No, I'll leave you to guess that. Steven Craig Thomas Liechti - Investec Securities (UK), Research Division But I mean -- are we talking 3.5% rather than a 3...

[Martin S. Sorrell:]

I'll leave you to guess it. Steven Craig Thomas Liechti - Investec Securities (UK), Research Division All right. I'll guess away.

[Martin S. Sorrell:]

Just estimate it carefully. Steven Craig Thomas Liechti - Investec Securities (UK), Research Division Yes, I'll carefully calculate. Second, in terms of your comments on Omnicom Publicis and your market share compared to them, the U.S. was the only one that it came out more. And you gave us throwaway comment, I think it was around -- we'll address that.

[Martin S. Sorrell:]

We'll address that. Steven Craig Thomas Liechti - Investec Securities (UK), Research Division And then you didn't sort of talk about it anymore.

[Martin S. Sorrell:]

That was a future-looking statement. There were forward-looking statement. It was not -- I'm not going to tell you today. I'll tell you, if -- the great phrase is if the stars align, isn't it? Isn't that the phrase that everybody uses now? If the stars align, yes, okay. Steven Craig Thomas Liechti - Investec Securities (UK), Research Division If the stars aligned at some point and -- I mean IPG we can discuss until the cows come home. The IMG perhaps arguably becomes a little bit more attractive.

[Martin S. Sorrell:]

IMG, you mean McCormack's company? Teddy Forstmann's company? Steven Craig Thomas Liechti - Investec Securities (UK), Research Division Yes.

[Martin S. Sorrell:]

I think the pricing on IMG is very high. I mean, when I say it, it's putative pricing. And it's also -- people are talking about GBP 2 billion for it. I think that's very high, very high. So I think that's probably fanciful. And I think IPG, IMG is GBP 1.35 billion of revenue, and people talk about GBP 170 million, and this has been in the press, I think GBP 170 million of EBITDA. That is pre the losses on the JVs. The JVs, that's the Batista and Barney, [ph] CCTV JVs, which lose GBP 20 million I think, so it's down to GBP 150 million reported EBITDA. I think they're talking about GBP 200 million I've seen in the press. So I think that's quite high. I mean my best bet on IMG would be Silver Lake plus WME, Ari Emanuel, that would be my bet, now that Ari is our competitor in the advertising business since he bought [indiscernible] with Silver Lake's backing. I would say that's probably the most likely home but that's a guess. I wouldn't want to compete with Ari.

[Alexander Christian DeGroote:]

It's Alex DeGroote from Panmure Gordon. Just looking at Slide 62, uses of free cash flow to enhance shareholder value. I'm looking on the orange block of GBP 133 million, which I think is the share purchases in the period. Was that for shares for cancellation or shares for the ESOP and...

[Paul W. G. Richardson:]

Yes, Treasury and ESOP.

[Alexander Christian DeGroote:]

Right. So was the intention therefore to deploy the full program and shares to cancellation going forward? Or is this about refilling the [indiscernible]? Or what's the sort of -- what's the driver there in terms of the commitment to the share repurchases?

[Paul W. G. Richardson:]

I guess, we are a little indifferent whether they cancel or go to the ESOP. Obviously, we do anticipate the draws on the ESOP from future payouts on the long-term incentive plans. And I think there's a certain -- we like to keep a buffer in terms of 1 to 2 years’ worth of potential draws from ESOP as a result of share plans paying out. Beyond that, obviously, the thing we might be willing just cancel in the marketplace. So I think it's a sort of a general combat factor not to be -- has to be pushed to purchase shares at short notice in the marketplace. Rather keep a buffer in place and then beyond that we'll be quite happy to cancel. There's no great rationale as to how we approach it apart from that one I've mentioned.

[Alexander Christian DeGroote:]

It's great. And then the second one is, is it much more top-down? I mean it sort of touches on what Steve said there, I think. But I mean to go from a run rate of 2.6, 2.7 to plus 5 at a time when people are talking to green shoots maybe domestically more than globally...

[Martin S. Sorrell:]

Well, domestic, to be fair, we've done very well. I mean it's not a -- I mean the U.K. we've been doing well for -- we go back 2, 3 years. I mean '09 was a tough year, but '10, we did well; '11, we've done well; '12 we've done well; '13 -- and we have -- somebody said to me, why are you doing so well in U.K.? It could be that we have very good people and very good businesses. Could be. Not beyond the realms of imagination, I think. And so I think U.K. has been good for us. And I think Germany is good for us. Italy, we do well. So there are -- the bookends of Europe for us, Germany and the U.K., we do well. Italy, of the 3 most challenged markets, France, Spain and Italy, Italy we do on balance pretty well. And France and Spain are being the toughest markets for us. And I think Spain is getting a little bit better. So I think in U.K., we more than soldier on. So I wouldn't interpret the green shoots in the U.K. -- and they are very small green shoots. We're talking about 1% growth sort of thing for the GDP. I think it's more emblematic of the fact that clients are investing in slow growth markets to maintain share or increase share. And the other thing is you do run out of road if you continually are hacking away at cost. I mean one of -- when I got off the plane this week, I shared a car with an investment banker, one of the global investment banks, and he said to me he thinks there will be a lot of M&A activity. I disagree with that because I don't think that clients or companies are willing to take the risk. I mean maybe our own industry is the one where people are willing to take that risk

[Lisa Hau:]

Lisa Hau from Liberum Capital. My question is on digital. Can you please disclose what the organic growth was in the second quarter? And how does this compare to...

[Martin S. Sorrell:]

In the second quarter. I don't think we're going to do the second quarter. It was 8.4% for the half year, I think.

[Lisa Hau:]

Okay. Well, was that an acceleration from the first quarter to the second quarter? I want to get an idea of...

[Martin S. Sorrell:]

? I honestly don't know. I think...

[Paul W. G. Richardson:]

We said we were over 8% in the first quarter, so I think we're basically trending the same, between 8% and 9%.

[Lisa Hau:]

Okay. And I guess the second part of the question is, do you see the same growth of pace in the second half ...

[Martin S. Sorrell:]

For digital?

[Lisa Hau:]

Yes. And what markets do you see driving this?

[Martin S. Sorrell:]

Where do we see the growth particularly?

[Lisa Hau:]

Yes.

[Martin S. Sorrell:]

I would think it will be very similar. I wouldn't differentiate between the markets really because what's interesting is the faster growth markets and we took out one of the slides, which had the -- our penetration of the BRICs markets for fast growth, for digital. I'll just give you one example. So China -- Hugo Shong is on our board, is one of the biggest, if not the biggest venture capitalist in China, has invested in Xiaomi, which is the MiPhone, which the It crowd [ph] sourced mobile, which is taking on Apple and Samsung, and there are 200 million smartphones I think in China. He thinks the tipping point in China is about 400 million, which should be achieved in fairly quick time, particularly when they have Xiaomi, which I think is a $299 handset, $299 a handset. So I think you're going to see just the significant growth in digital outside. That's why an OgilvyOne or a Wunderman -- Wunderman is a billion dollar business now. It's such a powerful tool because it does give us access across the world. I mean it's not flimflam. This is not just the U.S. or Western European businesses. This is -- it's in Latin America or it's in Asia or it's in Africa or the Middle East. So companies like Scangroup based in Nairobi and sort of dominating East Africa getting increasingly important in West Africa or North Africa and sub-Saharan Africa, so I wouldn't differentiate. So I would say you see it pretty much across-the-board. Okay. Anymore questions? We're here, or you can email us. Have we got the results?

[Unknown Executive:]

We just need to click on the screen.

[Martin S. Sorrell:]

Can you click on the screen? Can somebody click on the screen?

[Unknown Executive:]

They're doing it, and we'll see in a minute.

[Martin S. Sorrell:]

Do you want to take them through the answers, Chris?

[Unknown Executive:]

I hope so. So the answer is people feel more comfortable about the outlook.

[Martin S. Sorrell:]

Who is -- I want to know who is that? Our little gray spot of a line.

[Unknown Executive:]

Okay. How important is the -- being 30%, more than 30% in digital and in faster growing markets to growth? I think we can see important and critical together on the 80%, which is maybe no surprise. Luckily, we're there. Okay. Would anybody be interested to see more on horizontality? I think all WPP employees are instructed to put in yes here. No, actually, no WPP employees actually were on this, so this is the audience reflection. We maybe will address that. Is the dividend payout important? That's interesting for us actually.

[Martin S. Sorrell:]

Confirmation.

[Unknown Executive:]

Confirmation is what we've done.

[Martin S. Sorrell:]

[indiscernible] it should have gone to 50.

[Unknown Executive:]

Okay, next. Is the bolt-on strategy delivering value? Mainly, yes. Some I do not have enough data to make a judgment. Given what we've given here in the last 2 years, there's a fair amount of data included with...

[Martin S. Sorrell:]

What further data do you need?

[Unknown Executive:]

And what are peers giving as well before we give you more? Okay. Oh, yes. Excellent. I think we'll leave this one up a bit.

[Martin S. Sorrell:]

There's only 63%. We could do better.

[Unknown Executive:]

Yes. Okay, who's going to get to 16% first?

[Unknown Executive:]

We should have done this by nationality actually.

[Unknown Executive:]

Let's move on quickly. Most important. Yes, there's enough mathematicians here to go that Manchester's likely to be the more probable answer. And there's still a few Tottenham supporters, okay. But I think it shows. It shows what can be done with...

[Martin S. Sorrell:]

Yes, I mean the important point is here that this is a very effective tool. And going back to whether we should jettison -- I meant driving this is the sort of insights that we get across-the-board. So I think it's really good. Okay? Thank you very much. Thank you.