Good day, and welcome to the WPP Third Quarter Training Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to WPP CEO, Mark Read. Please go ahead, sir. .

Thank you, and it's good afternoon to people in Europe, and good morning to people in the U.S., North America. I'm here with Paul Richardson and with Andrew Scott, who's actually on the last call as well.

And really just to take you through, I think I'll do a brief introduction and then we'll take questions, which is the way we're going to round the quarterly -- the Q1 and the Q3 calls in the future..

So I think either to start -- it's right, it's difficult facing. It was a tough Q3 for us, and we saw in the top line slip more obviously than we expected the interim results.

And we know we go to the issues reflected primarily, I think, that we've identified previously the position of the creative agencies, the business in North America, we obviously did not expect them to worsen in Q3 in the way that they have.

I think that the performance in Q3 does reinforce our need to take decisive action and more radical thinking to address the issues that we face in the business. I'd like to just remind people that we did have our first quarter negative growth in Q2 2017 when it was minus 1.7%.

And we are working on really turning around the company of the -- an extended period of underperformance..

I think that what we need to do, and we'll come back to you with more detail in December, is set out the new strategy and vision for the group, but I think we have been outlining part of what that is, and December will be a more formal opportunity for us to do that.

But if I look back at where we started in April, we did immediately start to develop a new strategy for the group around how we can simplify the organization, better position the companies in the group, invest more in creative talent in where do we have strengths, but where I think we recognize we need to be much, much stronger really build a common data and technology strategy for the group and make it much easier for the clients to access the many strengths that we do have as a company in terms of functional expertise, in terms of technology skills and in terms of the very strong positions in markets like Brazil, India, China and many parts of the world..

And the heart of that would be a new vision for the group supported by a culture that brings us together and makes us a destination for the best talent that we have so that we can lead our industry again in the future as we have done in the past.

I think that the key actions really starting in April focused on things that we could do in the short term to strengthen the financial position of the company and then actions we need to take longer term to really strengthen the opportunity..

In terms of the financial position, we moved quickly to strengthen the balance sheet. Andrew and his team raised over GBP 700 million through 16 disposals. And together with the improvements made in working capital we accounted for positively an improvement in net debt, which is down by GBP 925 million compared to last year..

And then in the last 6 or 7 weeks, we haven't been able to move quickly with the establishment of VMLY&R, a brand experience agency. We announced yesterday a further simplification with the removal of a subholding company and the integration of our U.S. health care agencies into our creative agencies.

And our expectation is this would allow us to combine that very strong specialist health care expertise with creative, digital technology and broader expertise from those agencies and then really working on strengthening the management team with Andrew's formal appointment to COO, Lindsay Pattison becoming our Chief Client Officer and Stephan Pretorius becoming our Chief Technology Officer..

Turning briefly to Kantar, and we can address more in the questions.

I think that we have said that in emotionally we may prefer to keep Kantar as part of WPP, but rationally, given our other priorities, the right thing to do is to look at really turning Kantar into the world's leading data, insights and consulting company with a financial or strategic partner or perhaps a combination of those 2 elements.

And we have been working hard since April to get the process ready, so there's a significant amount of work that you can imagine to do that, and Andrew and his team have been doing that. So we haven't been standing still since April. We have been working on that.

But we thought it was right at this point to announce the start of the formal process, so we communicate that properly to our people, to our clients and also maximize interest in the business. So we have received a number of unsolicited expressions of interest..

The process is well underway. We don't expect it to conclude until next year. And we use the proceeds really to reduce our leverage and then also to look at share buybacks, and we'll have to come to what the right balance is between those 2 things during next year..

Touch just briefly on new business performance. And I think here we're focusing on pitches that the group has been involved in, not sort of the general run-of-mill businesses, one or lost, and major pitches. And I think if we go back to April, it was the case that we did have the most business at risk from publicly announced client reviews.

And in pitches we have lost business from a number of clients, and we also retained significant business from those clients, and where we've lost is primarily in media although some creative..

We have won at the same time, which has been a successfully definitive business with a number of other major clients, and we laid that out in the statement.

I think if I look where we've been successful, it is cases where we made it easier for clients to get the best talent and expertise seamlessly from across WPP, and we need to learn our lessons from that..

I think on Ford, and people may have questions on that, again, that was a process that started back in November 2017.

While we're disappointed not to retain the creative part of the business, we have retained a significant proportion of the business that we do with Ford and Lincoln in the media, production, public relations, digital due to marketing and other areas..

And just really to end by focusing on the strategy update in December, we will come back to you and talk to you about really what the vision is for the group in terms of structure, investments in technology and talent and building our culture.

I would say that we had our top 150 people together in Brooklyn 2 weeks ago and really I think come away excited by the opportunity for WPP and by what they can contribute individually and collectively to our success..

But I think there's one last thing I need to mention or need to talk about before I hand over to questions is, first, we need to really say thank you to Paul on behalf of the board, myself and all of us here at WPP, for his contribution over the last 26 years with WPP, 22 of them as Group Finance Director, and he's the longest serving FTSE CFO.

As you read in the statement, he's decided to retire from the company during the course of next year, and he and I will work closely together to ensure a very smooth transition as we appoint his successor..

As you all know the company well, he has played a central role in the success of WPP and in building the company since 1992. He's been a great colleague, a friend to many of us around the world. And personally and probably everyone else, I'd like to thank him certainly firstly for his support over the last 6 months, which has not been an easy period..

So I think that's really to sum up where we are. And I think, as I said in the statement, we need to be realistic about what we need to do in the short term. But WPP is a great company with many strengths, many great people, fantastic client relationships. And when I talk to clients, they are committed and want WPP to be successful.

And there are many strong assets within the group, though there's still work to do to get us back to sustainable growth..

I think that's what I'd like to say by a way of introduction. And now we can turn it over to questions, which Paul and I will take. .

[Operator Instructions] We will take our first question from Dan Salmon. .

Paul, it sounds like we'll hear from you a little bit more, but congratulations on your retirement.

Maybe Mark, the thing that I think we'd like to dig into just a little bit more if you could expand just a little bit more on your plans for Kantar and just how that process might play out a little bit more? As you've noted here, you want to remain an equity holder.

Anything you can expand on whether that may be a majority position, a minority position? And then how, in particular, you'd think about commercial arrangements with any potential investor. Obviously, it remains an asset that you're interested in leveraging more.

And I just love it if you could take us a little step further on how some of the mechanics might -- in that area might play out?.

Yes. I think Kantar is around 15% of the group. It's around actually roughly the same margin as WPP. But over the last 10 years, it's grown slightly slower than WPP. I think if we look at the strategy for the group, as I said, emotionally, we probably want to keep Kantar inside WPP.

But I think given the priorities that we have to do, the best way to unlock value to shareholders from Kantar is to do that with a financial and/or strategic partner. And I think it's quite interesting opportunities in terms of strategic partnerships alongside financial partnerships with Kantar, but sort of worth thinking about.

I think the data, insights and consulting business is extremely valuable to our clients, but it's probably the area of our business that's most disrupted by many of the new technologies, the new ways of looking at the information and a lot of -- there's a tremendous amount of data available, much of it for free at the moment from the Internet, if you like, or from the interactions or the tracks on the Internet.

So I think from a group perspective, we need to focus our data initiatives in making sure that we use data most effectively to power the work that we do for our clients to generate insights and to target our work and to measure its effectiveness. And Kantar can be part of that, and it should be part of that in the future.

So I think it made sense to us given the scale of investment, the ability to really build a very strong Kantar to the benefit of its clients and people to do that with a partner. We'll work on that. The work is well underway.

And the formal process will launch shortly, and I think it should conclude in the first -- not necessarily early next year, but it should conclude next year. I think in terms of commercial arrangements, we'd like to have a strategic relationship with Kantar. Many of our clients in the rest of WPP are also clients with Kantar and vice versa.

And in many cases, we do integrate what Kantar does into our work, and we'd like the opportunity to continue to do that as would many of our clients. But I think the commercial arrangements by definition would be sort of on an arm's length basis. I think the goal would be for us to be a minority investor in Kantar.

I think that's probably what a partner would expect. And I think that gives us the maximum ability to reduce our leverage, which I think is also an important thing for us as part of this transaction, but it also gives our shareholders the opportunity to benefit from what we can do in terms of maximizing the value of the business.

So I think we felt that given all the things we need to do on balance, it was the right thing to do and to announce at this point and really get on with it. .

Great. And maybe just one follow-up for Paul. I won't go digging too much just yet for views on 2019, and we'll wait for the strategy update for more insights there.

But you've been very helpful so far in the process of updating us on your view on selling some of the minority stakes in some of your targets there where you've been running a little bit ahead of schedule.

Any updates that you can provide there? And what the market is looking like for some of the things you may be still looking to divest?.

GBP 1 billion in investments and GBP 1 billion in associates each. And therefore, we could see a way to realizing GBP 750 million relatively quickly, which we're well on the way to achieving.

I think the process is very much now we will do what we can when opportunities come up, but we continue to look for the right opportunities to dispose of what are now sort of semi-illiquid assets, and therefore, it's more challenging, more time consuming, but I do feel we've broken the back of what we expected to do.

I'm also delighted to be quite frank, I'm relieved that the net debt is reducing at the speed it is, working capital is improving, and I can stand up and show you a GBP 925 million reduction on the point-to-point basis. So it is still very important to us. It's still probably our #1 priority.

But I think we've broken the back of the exercise that we'll continue to do so, especially in the challenging environment that we see in the next couple of years for the company. .

We will now take our next question from Tom Singlehurst of Citi. .

And yes, first things first, sorry to hear you're hanging up your boots, Paul. I think you'll be very much missed. But perhaps you'll squeeze in a better quarter or 2 before you actually leave. So kicking on with the questions, the first one is on the polarization in growth. I've asked you this before.

And I don't really understand why you won't tell us the split between what creative is doing and what media is doing. As I understand it, I think media is still in aggregate growing within the mix. But it would be really useful just to understand the magnitude of the declines, in particular, in U.S.

creative, are we talking minus 10%, minus 20%, just to get a sense of whether just how broadly spread the revenue pressure is? I appreciate, obviously, creative still very important and central to what you do. So this is not to make those guys feel bad, but some indication of just how significant the polarization of growth is would be helpful.

Second question was on business at risk. You mentioned that earlier on the year you had flagged businesses at risk as an issue. I wonder whether you still think there are meaningful businesses at risk.

And what reviews we should look out for because that's been a steady drift of negative news flow? So it'd be nice to know so you think are there anything particular business there.

And then very finally on the dividend, you've maintained the dividends, but there's a real sense amongst investors this morning that this is just stage 1 of the sort of 2-stage profit warning or rebates margin.

So the -- can you go over again why you decided to keep the dividend if we're going to have another rebate margin come December and the then percentage be, obviously, lower profitability and cash flow, et cetera, next year?.

So why don't I try and do. So I think we have been reluctant to make this because it's a way, these fits are semi-artificial. And partly the reason for that is very few of our competitors break out any of the details by discipline at all.

Just in our traditional media business for example, when we were going through it and, obviously, we got our main media brands -- companies GroupM that will announce, if you like, and the Mindshare and MediaCom, et cetera. Essence, which is principally now a media business, sits within our digital division.

So actually to get a proper sense of how our media business is doing, if I broke out the media numbers, it's really slightly inclined towards the traditional media where the Essence and that business sit in our digital assets in the brand consulting, health and wellness and specialist communications business.

So actually, it's still not a clear picture if I want to present the full picture, the full scope of media in its entirety of that. The truth is as we're doing more of these mergers, combinations, the distinction between the various disciplines is it's going to get even harder to disclose it to you and even less meaningful in one sense.

So it's partly the competitors don't do it, partly the information is still slightly misleading. I think we've given you directionally that media is doing well and creative is doing poorly. It is more pronounced in the markets that it's struggling. And I think at this stage, that's all I would really prefer or wish to do.

If the new management team wants to make a change in that disclosure, entirely up to them. But I think that's why we are reluctant to make that separate or make that break. In terms of dividends, I think it is terribly important that the company is very clear that it intends to maintain a 60p dividend payout.

When we came to the policy of moving up towards a dividend payout ratio the last 5 years from 35% to 50% payout, obviously, the 60p was reached on a share price or an EPS of 120p. We also did flex quite considerably what the outlook would be if profits actually were to decline by 20% to 25% in our cash flow modeling for the future.

Unfortunately, the modeling turned out to be sort of more accurate than we expected. And so even if some of the analysts I see forecasting a price -- sorry, an EPS of around GBP 1 for 2019, a 50% payout is more than achievable with the cash generation that the business has.

So if you look at our cash generation sort of irrespective of margin and again our margin is relatively high to others in the industry but also playing out around 50% in dividend, there's no reason in my view if we have a good management of working capital, if we're careful about the capital discretion on M&A and share buyback that we shouldn't and won't continue and will continue to pay the 60p and that can only increase, in our view, when earnings return over 120p.

So that's the model we have laid out. That's the expression of commitment that we've given. And in this morning's call, we made the point that, yes, we will flex the acquisitions and the share buyback in order to accommodate that as required. So hopefully, those 2 things I hope you sort of understand our thinking. .

Yes, okay.

And the business at risk, are we done with major reviews where you guys have in defense?.

Well, I think we're never done with major reviews. But I do think that we went into summer as I think a number of you pointed out with more reviews than our competition.

And we have -- when you are the incumbent on a piece of business, it's often difficult to retain it because it's harder to make the changes that you need to make for emotional -- sometimes emotional reasons, sometimes rational reasons to make the changes that you need to make.

And it's sort of sometimes too easy to keep the existing team on the business and look at that in a complete dispassionate way. So I think that there is -- there's always business at risk. But I think that -- I did inquire of the businesses what we know is at risk, and it is substantially less today than it was 6 months ago.

I think it tends to be clients begin reviews sort of the beginning of the summer to implement for the following year tends to be how they think about things. So as I speak today, there are fewer reviews in the mix, but that doesn't mean that there were none or there won't be others, but it's been substantially less. .

We will now take our next question from Michael Nathanson of MoffettNathanson. .

Paul, I wish you the best, and you'll be missed clearly. So Mark, let me have -- I have 2 and then I'll ask one of Paul. The first is on the media side.

I wonder when you did a post-mortem on all the losses you've seen in the past year, what were the key reasons for those losses? Was it a capability issue, strategy? Or was pricing in terms a key factor? So what did you learn from reviewing the businesses that were lost in media?.

I think that from the conversations and when we go -- when we're not successful, we do spend a lot of time with clients understanding the reasons why we're not successful.

I think if I -- from the clients that I've spoken to, the reasons we've not been successful are, one, the structures we proposed have been too complicated to clients, and they haven't seen the degree of integration that they've needed between the teams.

So you've had very good teams in digital or very good teams in traditional or good teams in both, but they found other competitive offers have been simpler to buy.

I think the second reason is that they found some of the technology, sort of single view of the customer technology platforms from our competition easier to understand and more compelling than those that we have provided. I think the third -- and I now put them in that order. Then I think the third reason is price.

And although the business is, obviously, very price-competitive, I do think both in terms of with media, the pricing with which -- that we achieve, the payment terms that we're prepared to give, the penalties we're prepared to give for nondelivery of price and the fee which they pay us and there's all those elements involved.

I think that those are keenly foretold by our clients. But I think unless you win the first or the second, we don't get into a negotiation of the third. And I think that is rare that a client picks a partner solely based on price. I think the other thing to look at is, we also look at the pictures that we do well at and why we do well at those.

And often, it's for the opposite reason from the ones that we were not successful in. And when we win, it tends to be because the client feels that the team was strong and works together, they have an answer to that technology problems, and then the price is right.

So I think we have to look at both what we've lost and what we won to really understand what's going on. I think that's how I'd understand how we think about them. .

Okay. And let me ask you one on the creative U.S. side. Here, in the States, we talk to your competitors and we always bring up the creative pressures in the industry that we're aware of. But a couple of them have not seen the level of declines that you've talked about or hinted to.

And I wonder is it due maybe to your client roster that maybe is more under pressure than their client roster? Or do you feel you have to go out into the industry and almost acquire, re-hire or hire a new set of creatives from your competitors to kind of rebuild the momentum? So how much do you think it's based on your own talent or perhaps your client list?.

I think it's -- I have to be careful in the comments on our creative business. I think that we do have some very strong creative agencies at WPP in North America. But I don't think that we have enough of them, and we always have the strongest creative talent in them. And so if I look at the business, there's a number of different issues.

Sometimes, in some of our agencies, we need to hire stronger creative leadership. And couple of our agencies have had well publicized departures to the roles that we need to fill from a creative leadership perspective, and that's one thing.

Secondly, I think there are clients -- I think our client mix, I don't want to -- I never want to blame clients, but our client mix in some cases is slightly different from some of our competition. I think the third thing is that it's rare today just even to see a creative pitch that sort of pitches the traditional advertising creative.

Clients are typically looking for integrated solution across creative, digital and often media. And again coming back to the last question where we went to win business together better and where we lose is where we've not done that. I'd just make another observation about like what I'd call sort of the Manhattan problem.

I think we need to have stronger creative resources in Manhattan but also across the rest of North America, and we do again have strong agencies like Swift in Portland or DAVID in Miami or Deeplocal in Philadelphia, and we have strong creative agencies in Toronto and in Canada.

And we have strong -- some of strong agencies in New York, but I think New York is no longer the kind of only place that which clients look for creative resource. And so I think that we need to make sure that we're sourcing and building strong creative networks across the whole of North America, not just in Manhattan but also in other places. .

Okay. And I guess one quick one for Paul, maybe this is a Manhattan problem too.

The question I have here is, if I was a financial buyer of Kantar, do you think it's a benefit or a cost to have WPP as a minority? So when thinking about potentially selling it to a nonstrategic, do you think it's a benefit to have you guys attached to it in someone else's hands?.

Yes, absolutely. I think they put a high value on that because a lot of the work or the offer that the Kantar provides is sort of wrapped in with the work the rest of WPP provides to the same client. So there are clients that Kantar is extremely important and integrated into the client teams that we work with.

So I think there is a sort of symbiotic relationship between the 2. So I think it would be partly expected. I think it's -- to be fair, the reverse would also be true. I think if we were not interested in only any -- into the minority interest, all the buyers would be suspicious as to why.

So I think we still see the value in the business and everyone to participate in that in the future. So I think it's right the way we say it is, and it will be odd if we were expecting to have a full disposal of the assets, in my opinion. .

We will now take our next question from Doug Arthur of Huber Research. .

I guess, on the glass half-full approach, is there -- are there any major pitches down the road in the next couple of months where you're not -- you don't have a lot to defend that could be an upside? Can you comment on anything in the pipeline?.

I mean, there are a number of automotive reviews that we're taking part in. There are a number of pitches. I prefer not to comment on specific client pitches. There are a number of pitches where we are involved. And I think where we are not the incumbent is much, as you point out, a much better place to be. .

It does seem to be quite, and probably I think as Mark said, I think it's people sort of start to rev up at the end of the year, beginning of the sort of financial year, which is still the calendar year in many cases.

And most pitches now that has not been concluded have been running for the best part of 6 to 9 months, and there's relatively few brand-new pitches starting off as of today. And I guess, we expect sort of cycle to start again early next year. So it is a little bit quieter traditionally at this time of the year anyway. .

Okay. And then just on sort of visibility of the business, I mean, I go back to, obviously, the operating assumption at the beginning of the year was that the comps or net organic would be little easier in the second half. And then when you updated guidance at the end of the second quarter, there was sort of a view of stability in the second half.

If I look at Slide 10 on the major markets, I mean, pretty significant deterioration in the 5 major markets that are highlighted there quarter-to-quarter.

I mean, it's a bit of a circular question, but was there -- we know about the losses recently, but can you comment on kind of what happened to your versus what you said in the second quarter about the second half and kind of where you came in, in the third quarter? What was sort of the big surprise there?.

So yes, I mean, you're right. I mean, everything was disappointing. So I think standing back for a minute and looking at it from your perspective, I'll be asking the same question in terms of we stood up with the half year numbers.

And if you remember, at the beginning of the year, in the budget, we said, look, the business is coming actually with quite a strong budget for the year. We sort of indicated sort of 1% to 1.5% growth. So we don't believe that because they have a disproportionately strong expectation in quarter 3.

So we gave guidance that we're expecting to be broadly flat. We saw the first half come in sort of pretty much on trend where we're expecting. So I think the first quarter look good; second quarter, probably little softer than we were expecting, but actually it was still positive. So it came out for the half year with plus 0.3%.

So by the time the half year full concept come along, the third quarter had, as we expected, become much more normalized by sort of closed flat in its outlook, and the fourth quarter we're still expecting to see an uplift.

So when we stood up in -- with the June results and had seen 0.3% in the first half, our budgets were indicating 0.3% in this full year, and so we basically gave that guidance. Also, July was in line with trend, almost it's a touch softer, but September was considerably softer.

And when I look at where we have missed in the third quarter, surprisingly, it's more international than U.S. So the U.S. actually by performance being disappointing actually was more in line with what people thought it would be. Where we weakened and despite it being some of our stronger market was in Western Continental Europe.

Again, it was actually quite a significant miss in total. And some of the major European markets were considerably weaker than we had expected, such as Germany, such as France and to a certain degree Spain. And in Asia Pacific, whilst they're still doing well, again, they were weaker than they were expecting.

So the third quarter analysis by geography showed us that we were weaker internationally than in the U.S.A. And then of the disciplines, 3 of the 4 disciplines were weaker than they were forecasting in the third quarter. So that has given us some cause for concern. We've now looked at the reforecast for the fourth quarter.

It is quite a significant difference to what was then expected to grow. It's obviously going to be a negative number, pretty similar to what we saw in the third quarter and hence, had to bring the guidance down.

So long answer, but in simple terms it's our international business, which in the main is our better performing top line business that was softer in the third quarter than they were expecting and that has brought the numbers that are quite sharply down. I get it.

It does vary quarter-by-quarter, and some of those markets are expected to rebound quite nicely in quarter 4, but it's not a homogenic pitch in that sense. So quite difficult to be precise on it. .

We will now take our next question from Adrien de Saint Hilaire of Bank of America Merrill Lynch. .

I'm sorry to be back on the line, but obviously, many questions around today's release. Paul, I just wanted to come back on your margin guidance. And I know you haven't provided any for 2019. But if we look at your guidance for 2018, it would seem to imply that margins should come down by about 200 basis points in the second half of '18.

Do you think that's a good guide for 2019? Secondly, perhaps, Mark, can you tell us what the Plan B is in case the Kantar disposal doesn't go through on the terms that you expect? And thirdly, we've not talked a lot about consultant fees. But I'm just curious if you see more pressure from these guys coming or is it equal to the previous quarters.

It seems like they are bit more and more in traditional pitches. Again, sorry to be back on the line. .

No. Pleasure to have you back, Adrien. So I think you've got to remember that the business is quite quarterly in performance. So the weakest quarter in revenues and margins for us whilst so positive is quarter 1. The second weakest quarter in margins performance is quarter 3, i.e., the August to September quarter.

The next strongest quarter is quarter 2, and the very strong quarter for us always continues to be quarter 4. So now I don't think you can take the assumption of 200 basis points off in the second half being the likely outcome for 2019 because I think we are very sort of back-end weighted in terms of probability which is, say, good news and bad news.

So at the end of the day when you're running a relatively high margin in the business and revenue arise, you get very strong conversion in that final quarter.

Likewise, when revenue drops away in that final quarter, you get a very high negative conversion and hence, we are rather dependent on the flow of revenue into the fourth quarter, the conversion efficiency.

But it isn't a good indication of how the full year would turn out simply because of the different strength of each quarter in our business globally. So that would not be the assumption I'd be using if I was using my model for '19 at this stage. And I think don't forget, we are going to stand up in December.

We are going to try and give you some quite detailed coloring about what the costs we expect to be taking, which years they're going to have an impact, how much is going to be benefiting margin, how much is going to be reinvested in incentives and technology.

And I think if you can wait, it's much, much better to wait until our mid-December strategy presentation in a form of view. But that -- your analysis would not be analysis I'd be using in your shoes. That's all I can really say. .

We'll now take our next question from Richard Eary of UBS. .

And again, just so apologies to come back on the call just to ask a follow-up -- couple of follow-up questions.

First one maybe for you, Paul, is just given now the changes in terms of the guidance and obviously -- your, obviously, comments about the improvements in working capital, where do you think net debt is actually going to fall out for the full year because I think if I look at the full year number from my numbers, it feels that it's going to come in above your targeted gearing range of 1.5 to 1.75.

And then if we move into 2019, again if growth is soft and we do have some pressure on margins and we have some cash restructuring cost coming through the business pre any sort of Kantar sale, I think, clearly that the gearing levels get stretched. I'm just trying to understand a little bit on the numbers and wonder if you can help us.

That's the first question. .

Okay. So I'll try, Richard. So first off, the figure we're quoting on the 1.5 to 1.75 is the average net debt over a 12-month period. So even when we stood up at beginning of the year -- actually April I think it was, it says we intend to bring the gearing ratio down in the next 12 to 18 months.

We are aiming to get to a GBP 750 million disposal program in place. Even if we did all that completed it by the 31st of December 2018, i.e., this year-end, you won't get the full impact of that rolling in the averages until 31st of December 2018. And if you do recall, our first material disposal was the Asatsu sale right at the end of last year.

So we got to have a full year impact. And actually, when we gave this slide out and showing the averages, and so if you look on the cash slide at the half year, where we had raised some disposable of proceeds at that point GBP 469 million, the average is at the half year rate was still GBP 270 million worse than the year ago.

Now we got into the third quarter and raised GBP 704 million. The average is actually a GBP 10 million difference. So the average for the 9-month ending '17 was 4.9, the average for the 9-month ending '18 is 4.9.

So whilst the averages will begin to improve, we won't achieve that ratio that we're targeting until 2019, if we carry on with the disposable program as we intend. So I was always expecting to have stood up there and basically said that we've completed the schedule. The point-to-point at year-end will be encouraging.

And now the averages will tail down in '19, but we're still be close to 2x ratio at the end of '18. So unfortunately because it's 12-month average, it will take 12 months and really sees its way through from the last disposable of material nature. But we are making good progress. I am pleased with the process so far as shown in the numbers. .

Yes. Adrien, this is Mark. Adrien, I'd tell you -- have you finished -- or carry on with Paul, sorry. .

I was going to say that within that target, Paul, was that including Kantar? So the improvement in '19 includes Kantar or not includes Kantar?.

No. So Kantar is a separate exercise. And basically, I think you can think about if we were fortunate to raise the sort of disposable proceeds we're hoping to that we would be deleveraging the balance sheet down to the lower end of that range, i.e., 1.5x net debt-to-EBITDA post any disposable proceeds from Kantar.

So I think the high end of the range is what we're aiming for sort of as is. The low end of the range is where we're aiming for post the disposal of Kantar. .

Rich, it's Andrew here. And we will carry on with looking at the associate investment portfolio. As we sit here today, the GBP 720 million investment still on the balance sheet with 875 of associates.

So we kind of done what we thought what we set out to do in terms of that GBP 700 million, but we're going to look at the right opportunities to -- with respect to that portfolio going forward. .

Just a follow-up. Paul, there was a question on earlier on the early call about guidance for associate income for this year, and how we think about a run rate into '19, given the disposals. I don't think you actually gave a number or I may have missed it. So I was just trying to follow-up on that. .

I think I had -- last year it's around GBP 110 million from my memory. If I'm guestimating, it's around GBP 80 million to GBP 85 million for this year. And that will have all these starts to impact in or have 9 months to the globe and impact in.

And so it's going to be sort of GBP 80 million to GBP 90 million range is kind of what I've got going in my head, and I think it's sort of GBP 90 million, close to GBP 90 million for '18 and close to GBP 80 million for '19 at the moment. GBP 80 million, GBP 80 million plus, GBP 85 million. .

Sorry just to hog the time. Just a follow-up for Mark. Just unclear, because, obviously, we're getting, again, inbound questions in terms of what's happening within your creative businesses. And obviously, there are creative pitches out there that are ongoing.

So can you just maybe give us some color in terms of what clients are saying about your creative proposition and what you're missing? Because obviously, there is a concern with now, but is it nearly -- that should probably nearly in the third year that where we've had sort of declines in creative and aggregate in WPP.

And the question now becomes is the -- does that continue to bleed? Or is there something that you can do to change it? And what can you do to change the pitches? So if you maybe just give us bit more color in terms of what clients are saying to your creative proposition?.

Brazil, Argentina, South Africa, Asia, India. In the main, we're not successful in North America or in the United States, with the possible exception of VML, it's actually the second most awarded creative agency in North America Cannes last year.

I think if awards are your metric, and they're not a bad metric as they do judge the best against the best objectively. I think we're saying that the work in North America is not strong enough creatively. I think we have had 2 of our creative networks in North America without creative leadership for a period of time.

So I think it's really about investing in -- part of it's about investing in stronger creative talent and really establishing those brands, strong vibrant brands.

I think the other part is about the breadth of services that they offer to one region to bring VML and Y&R together is to give clients easy access to a broader -- clients have a creative problem how do I market something. They don't have an analog version of that problem and a digital version of that problem. They have a problem, if you like.

And I think sometimes we've organized ourselves in an analog and a digital way, and that's not necessarily helpful. Clients want data-driven marketing or increasingly data-driven marketing and lots of our sort of more traditional creative agencies around ground building.

So I think it's worth looking at the proposition of the combined VMLY&R business, which combines sort of traditional brand experience with more sort of brand building expertise, and it integrates the passion, and I think in a way that's what clients need, and there's a number of ways that you can achieve it if you look at our competition in other words they can achieve it.

So I think it's a mixture of sort of raw creative talent and skills, reputation and organization.

And all of those are areas where we need to invest and there needs to be acquisitions that will strengthen what we're doing creatively because I think where we are creatively is important in overall to the group and overall to our reputation with clients.

Does that help?.

Yes, that helps. That helps. .

And before we go on, Adrien pointed out, I didn't answer his last 2 questions, which were what is the Plan B for Kantar, and do we see consultants competing more with us. I think actually, Paul, sort of in a way did answer the Plan B for Kantar, which is our aim is to get -- from a leverage perspective get the leverage down without doing Kantar.

And then the Plan B for Kantar would be that we will maximize the value of Kantar as part of WPP. And I think that that's something that we can do that we think that this is the proposed strategy is a better opportunity for us. But that's something that we're willing to take on. And actually, we're doing both pieces of work at the same time.

In terms of the consultant, I think there's marginally more competition from the consulting companies, and I think it's increased by an order of magnitude.

But I think increasingly the consultants are trying to become a little bit more like WPP and in some instances WPP is trying to become a little bit more like the consultants, if you like, with sort of converging on the same growth opportunities, which is really, I think, where we should focus.

And there we do need to become a little bit more like the consultant. So I think there is -- there are examples where we win work against them and there are also examples where they win work against us.

I think we have been quite disciplined in our acquisition spend and are really being focusing on a lot on some of the deeper systems integration capabilities that will help us and enable us to compete more against consulting firms.

And that is a strategy that goes back a number of years from the acquisition of Acceleration or Salmon or Verticurl or other businesses. And I think actually you've seen some of our peers also make acquisition in those areas recently as well.

So I think that we need to both deliver creatively and from a technological perspective to compete with the consulting companies. But I think that it's really a question of going after the growth opportunities in our businesses much than anything else. Thank you. .

There are no further questions at this time. I would now like to turn the call back to Mark Read for further closing remarks. .

So I think just to conclude the call, it was a tough quarter for us. But I think it reinforces the need, as I said in the statement, for decisive actions and radical approaches.

There are many strengths in WPP and in the company, particularly our geographic reach, some of the strengths that we do have in creative, some of our digital assets and many of our -- the work that we do from a technology and systems integration perspective.

And I think what we need to do is to make sure that it's easy for our clients to get access to those around the world. And that's really what we're focused on. But it is a -- is I think I said we have to be realistic about what we need to be -- what we need to do in the short term.

And I think we felt like this was the right time ahead of the strategy update to really make -- lay some of them out. And we'll come back to you in December with our plan to do that. And we're looking forward to doing that with you. So thank you very much for listening and for your questions. .

Thank you. .

Thank you. .

That would conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect..